Progress Energy 2007 Annual Report Download - page 120

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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expenditures associated with PEC’s compliance with the
Clean Smokestacks Act. In 2006, PEC notified the NCUC of
its intent to record these estimated excess costs as part
of the $569 million amortization required to be recorded
by December 31, 2007, and accordingly, recorded the
indemnification expense to Clean Smokestacks Act
amortization. In a settlement agreement provisionally
approved by the NCUC on December 20, 2007, eligible
compliance costs in excess of the joint owner’s share will
be treated in the same manner as PEC’s Clean Smokestacks
Act compliance costs in excess of the original estimated
compliance costs, as ultimately approved by the NCUC
(See Note 7A).
22. COMMITMENTS AND CONTINGENCIES
A. Purchase Obligations
At December 31, 2007, the table below reflects contractual
cash obligations and other commercial commitments in the
respective periods in which they are due.
FUEL AND PURCHASED POWER
Through our subsidiaries, we have entered into various
long-term contracts for coal, oil, gas and nuclear fuel. Our
payments under these commitments were $2.360 billion,
$1.628 billion and $1.470 billion for 2007, 2006 and 2005,
respectively.
Both PEC and PEF have ongoing purchased power contracts
with certain cogenerators (primarily QFs) with expiration dates
ranging from 2008 to 2030. These purchased power contracts
generally provide for capacity and energy payments.
PEC has a long-term agreement for the purchase of power
and related transmission services from Indiana Michigan
Power Company’s Rockport Unit No. 2 (Rockport). The
agreement provides for the purchase of 250 MW of capacity
through 2009 with estimated minimum annual payments
of approximately $42 million, representing capital-related
capacity costs. Total purchases (including energy and
transmission use charges) under the Rockport agreement
amounted to $77 million, $80 million and $71 million for 2007,
2006 and 2005, respectively.
PEC executed two long-term agreements for the purchase
of power from Broad River LLC’s Broad River facility
(Broad River). One agreement provides for the purchase
of approximately 500 MW of capacity through 2021 with
an original minimum annual payment of approximately
$16 million, primarily representing capital-related capacity
costs. The second agreement provided for the additional
purchase of approximately 335 MW of capacity through 2022
with an original minimum annual payment of approximately
$16 million representing capital-related capacity costs. Total
purchases for both capacity and energy under the Broad
River agreements amounted to $39 million, $40 million and
$44 million in 2007, 2006 and 2005, respectively.
In 2007, PEC executed a long-term agreement for the
purchase of power from Southern Power Company. The
agreement provides for capacity purchases of 305 MW
for 2010, 310 MW for 2011 and 150 MW annually thereafter
through 2019. Estimated payments for capacity and energy
under the agreement are $22 million for 2010, $33 million
for 2011 and $14 million annually thereafter through 2019.
PEC has various pay-for-performance contracts with QFs
for approximately 195 MW of capacity expiring at various
times through 2014. Payments for both capacity and energy
are contingent upon the QFs’ ability to generate. Payments
made under these contracts were $95 million, $182 million
and $112 million in 2007, 2006 and 2005, respectively.
PEF has long-term contracts for approximately 489 MW of
purchased power with other utilities, including a contract
with The Southern Company for approximately 414 MW of
purchased power annually through 2016. Total purchases,
for both energy and capacity, under these agreements
amounted to $161 million, $162 million and $175 million for
2007, 2006 and 2005, respectively. Minimum purchases
under these contracts, representing capital-related
capacity costs, are approximately $70 million annually
through 2011, $50 million for 2012 and $32 million annually
thereafter through 2016.
PEF has ongoing purchased power contracts with certain
QFs for 965 MW of capacity with expiration dates ranging
from 2008 to 2030. Energy payments are based on the actual
(in millions) 2008 2009 2010 2011 2012 Thereafter
Fuel $2,018 $1,745 $1,202 $1,001 $675 $5,103
Purchased power 455 422 409 443 415 3,756
Construction obligations 714 211 42 – – –
Other purchase obligations 94 39 32 16 16 64
Total $3,281 $2,417 $1,685 $1,460 $1,106 $8,923