Progress Energy 2007 Annual Report Download - page 117

Progress Energy Annual Report 2007
115
20. OTHER INCOME AND OTHER EXPENSE
Other income and expense includes interest income and
other income and expense items as discussed below.
Nonregulated energy and delivery services include power
protection services and mass market programs such as
surge protection, appliance services and area light sales,
and delivery, transmission and substation work for other
utilities. AFUDC equity represents the estimated equity costs
of capital funds necessary to finance the construction of new
regulated assets. The components of other, net as shown
on the accompanying Consolidated Statements of Income
for the years ended December 31 were as follows:
21. ENVIRONMENTAL MATTERS
We are subject to regulation by various federal, state and
local authorities in the areas of air quality, water quality,
control of toxic substances and hazardous and solid wastes,
and other environmental matters. We believe that we are in
substantial compliance with those environmental regulations
currently applicable to our business and operations and
believe we have all necessary permits to conduct such
operations. Environmental laws and regulations frequently
change and the ultimate costs of compliance cannot always
be precisely estimated.
A. Hazardous and Solid Waste
The provisions of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
(CERCLA), authorize the United States Environmental
Protection Agency (EPA) to require the cleanup of hazardous
waste sites. This statute imposes retroactive joint and
several liabilities. Some states, including North Carolina,
South Carolina and Florida, have similar types of statutes.
We are periodically notified by regulators, including the EPA
and various state agencies, of our involvement or potential
involvement in sites that may require investigation and/or
remediation. There are presently several sites with respect
to which we have been notified of our potential liability by
the EPA, the state of North Carolina, the state of Florida, or
potentially responsible party (PRP) groups as described
below in greater detail. Various materials associated with
the production of manufactured gas, generally referred to as
coal tar, are regulated under federal and state laws. PEC and
PEF are each PRPs at several manufactured gas plant (MGP)
sites. We are also currently in the process of assessing
potential costs and exposures at other sites. These costs are
eligible for regulatory recovery through either base rates or
cost-recovery clauses. Both PEC and PEF evaluate potential
claims against other PRPs and insurance carriers and plan
to submit claims for cost recovery where appropriate. The
outcome of these potential claims cannot be predicted. No
material claims are currently pending. A discussion of sites
by legal entity follows.
We record accruals for probable and estimable costs
related to environmental sites on an undiscounted
basis. We measure our liability for these sites based on
available evidence including our experience in investigating
and remediating environmentally impaired sites. The
process often involves assessing and developing cost-
sharing arrangements with other PRPs. For all sites, as
assessments are developed and analyzed, we will accrue
costs for the sites to the extent our 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
(in millions) 2007 2006 2005
Other income
Nonregulated energy and delivery
services income $36 $41 $32
DIG Issue C20 amortization (Note 17A) 45 7
Contingent value obligation unrealized
gain (Note 15) 2– 6
Gain on sale of Level 3 stock(a) –32 –
Investment gains 94 4
Income from equity investments 21 1
AFUDC equity 51 21 16
Reversal of indemnification liability
(Note 21B) –29 –
Other 15 13 16
Total other income 119 146 82
Other expense
Nonregulated energy and delivery
services expenses 24 27 23
Donations 22 20 18
Contingent value obligation unrealized
loss (Note 15) 425 –
Investment losses 4– 1
Loss from equity investments 53 7
Loss on debt redemption(b) –59 –
FERC audit settlement –– 7
Indemnification liability (Note 21B) –13 16
Other 16 15 11
Total other expense 75 162 83
Other, net $44 $(16) $(1)
(a) Other income includes pre-tax gains of $32 million for the year ended December 31,
2006, from the sale of approximately 20 million shares of Level 3 stock received as
part of the sale of our interest in PT LLC (See Note 3E). These gains are prior to the
consideration of minority interest.
(b) On November 27, 2006, Progress Energy redeemed the entire outstanding
$350 million principal amount of its 6.05% Senior Notes due April 15, 2007, and the
entire outstanding $400 million principal amount of its 5.85% Senior Notes due
October 30, 2008. On December 6, 2006, Progress Energy repurchased, pursuant
to a tender offer, $550 million, or 44.0 percent, of the aggregate principal amount
of its 7.10% Senior Notes due March 1, 2011. We recognized a total pre-tax loss of
$59 million in conjunction with these redemptions.