Progress Energy 2004 Annual Report Download - page 99

negotiate cleanup of the site and reimbursement of less
than $2 million to the EPA for EPA’s past expenditures in
addressing conditions at the site. Although a loss is
considered probable, an agreement among PRPs has not
been reached; consequently, it is not possible at this time
to reasonably estimate the total amount of PEC’s
obligation for remediation of the Ward Transformer site.
At December 31, 2004, and 2003, PEC’s accruals for
probable and estimable costs related to various
environmental sites, which are included in other liabilities
and deferred credits and are expected to be paid out over
many years, were:
PEC received insurance proceeds to address costs
associated with environmental liabilities related to its
involvement with some sites. All eligible expenses
related to these are charged against a specific fund
containing these proceeds. PEC spent approximately
$2 million related to environmental remediation in 2004.
PEC is unable to provide an estimate of the reasonably
possible total remediation costs beyond what is currently
accrued because investigations have not been
completed at all sites.
This accrual has been recorded on an undiscounted
basis. PEC measures its liability for these sites based on
available evidence including its experience in
investigating and remediating environmentally impaired
sites. The process often involves assessing and
developing cost-sharing arrangements with other PRPs.
PEC will accrue costs for the sites to the extent its liability
is probable and the costs can be reasonably estimated.
Because the extent of environmental impact, allocation
among PRPs for all sites, remediation alternatives (which
could involve either minimal or significant efforts), and
concurrence of the regulatory authorities have not yet
reached the stage where a reasonable estimate of the
remediation costs can be made, PEC cannot determine
the total costs that may be incurred in connection with
the remediation of all sites at this time. It is anticipated
that sufficient information will become available for
several sites during 2005 to allow a reasonable estimate
of PEC’s obligation for those sites to be made.
PEF
At December 31, 2004, and 2003, PEF’s accruals for
probable and estimable costs related to various
environmental sites, which are included in other liabilities
and deferred credits and are expected to be paid out over
many years, were:
PEF has received approval from the FPSC for recovery of
costs associated with the remediation of distribution and
substation transformers through the Environmental Cost
Recovery Clause (ECRC). Under agreements with the
Florida Department of Environmental Protection (FDEP),
PEF is in the process of examining distribution
transformer sites and substation sites for potential
equipment integrity issues that could result in the need
for mineral oil impacted soil remediation. Through 2004
PEF has reviewed a number of distribution transformer
sites and substation sites. PEF expects to have
completed its review of distribution transformer sites by
the end of 2007 and has completed the review of
substation sites in 2004. Should further sites be identified,
PEF believes that any estimated costs would also be
recovered through the ECRC clause. In 2004, PEF accrued
an additional $19 million due to identification of additional
sites requiring remediation, and spent approximately
$4 million related to the remediation of transformers. PEF
has recorded a regulatory asset for the probable
recovery of these costs through the ECRC.
The amounts for MGP and other sites, in the table above,
relate to two former MGP sites and other sites
associated with PEF that have required or are
anticipated to require investigation and/or remediation.
In 2004, PEF received approximately $12 million in
insurance claim settlement proceeds and recorded a
related accrual for associated environmental expenses.
The proceeds are restricted for use in addressing costs
associated with environmental liabilities. Expenditures
for the year were less than $1 million.
These accruals have been recorded on an undiscounted
basis. PEF measures its liability for these sites based on
available evidence including its experience in
investigating and remediating environmentally impaired
sites. This process often includes assessing and
developing cost-sharing arrangements with other PRPs.
Because the extent of environmental impact, allocation
among PRPs for all sites, remediation alternatives (which
could involve either minimal or significant efforts), and
concurrence of the regulatory authorities have not yet
advanced to the stage where a reasonable estimate of
97
Progress Energy Annual Report 2004
(in millions) 2004 2003
Remediation of distribution and substation transformers $27 $12
MGP and other sites 18 6
Total accrual for environmental sites $45 $18
(in millions) 2004 2003
Insurance fund $7 $9
Transferred from NCNG at time of sale 22
Total accrual for environmental sites $9 $11