Progress Energy 2004 Annual Report Download - page 72

provisions (See Note 6D), regulatory approved expenses
(See Note 8 and Note 22) and NC Clean Air Legislation
amortization (See Note 8B).
During 2004, PEC met the requirements of both the
NCUC and the SCPSC for the implementation of two
depreciation studies that allowed the utility to reduce the
rates used to calculate depreciation expense. The annual
reduction in depreciation expense is approximately
$82 million. The reduction is due primarily to extended
lives at each of PEC’s nuclear units. The new depreciation
rates were effective January 1, 2004.
Amortization of nuclear fuel costs, including disposal costs
associated with obligations to the U.S. Department of Energy
(DOE) and costs associated with obligations to the DOE for
the decommissioning and decontamination of enrichment
facilities, for the years ended December 31, 2004, 2003 and
2002 were $140 million, $143 million and $141 million,
respectively, and are included in fuel used for electric
generation in the Consolidated Statements of Income.
B. Diversified Business Property
The balances of diversified business property at
December 31 are listed below, with a range of
depreciable lives for each:
The synthetic fuel facilities are being depreciated through
2007 when the Section 29 tax credits will expire. The
Company’s nonregulated businesses capitalize interest
costs under SFAS No. 34, “Capitalization of Interest Costs.”
During the years ended December 31, 2004, 2003 and 2002,
respectively, the Company capitalized $7 million,
$20 million and $38 million, respectively, of its interest cost
of $660 million, $655 million and $679 million. Capitalized
interest for 2004 is related to the expansion of Fuels’ gas
operations. Capitalized interest in 2003 and 2002 is related
to the expansion of its nonregulated generation portfolio at
PVI. Capitalized interest is included in diversified
business property, net on the Consolidated Balance
Sheets. Diversified business depreciation expense
was $148 million, $120 million and $85 million for
December 31, 2004, 2003 and 2002, respectively.
C. Joint Ownership of Generating Facilities
PEC and PEF hold ownership interests in certain jointly
owned generating facilities. Each is entitled to shares of
the generating capability and output of each unit equal to
their respective ownership interests. Each also pays its
ownership share of additional construction costs, fuel
inventory purchases and operating expenses. PEC’s and
PEF’s share of expenses for the jointly owned facilities
is included in the appropriate expense category. The
co-owner of Intercession City Unit P11 (P11) has
exclusive rights to the output of the unit during the
months of June through September. PEF has that right for
the remainder of the year. PEC’s and PEF’s ownership
interests in the jointly owned generating facilities are
listed on the following table with related information at
December 31 ($ in millions):
70
Notes to Consolidated Financial Statements
(in millions) 2004 2003
Equipment (3-25 years) $383 $246
Nonregulated generation plant and equipment
(3-40 years) 1,302 1,299
Land and mineral rights 107 93
Buildings and plants (5-40 years) 131 125
Oil and gas properties (units-of-production) 336 412
Telecommunications equipment (5-20 years) 80 63
Rail equipment (3-20 years) 29 125
Marine equipment (3-35 years) 87 83
Computers, office equipment and software
(3-10 years) 36 36
Construction work in progress 26 13
Accumulated depreciation (507) (400)
Diversified business property, net $2,010 $ 2,095