Progress Energy 2007 Annual Report Download - page 27

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Progress Energy Annual Report 2007
25
Other
Other operating expenses consisted of gains of $2 million
and $10 million in 2007 and 2005, respectively, primarily
due to land sales. There were no gains from land sales
in 2006.
Total Other Income (Expense)
Total other income (expense) was $37 million of income for
2007, which represents a $13 million decrease compared
to 2006. This decrease is primarily due to the 2006
reclassification of $16 million of indemnification liability
expenses incurred in 2005 for estimated capital costs
associated with the Clean Smokestacks Act expected to
be incurred in excess of the maximum billable costs to
the joint owner. This expense was reclassified to Clean
Smokestacks Act amortization and had no impact on 2006
earnings (See Note 21B). This decrease is partially offset
by $6 million favorable AFUDC equity related to costs
associated with certain large construction projects.
Total other income (expense) was $50 million of income for
2006, which represents a $57 million increase compared
to 2005. This increase is primarily due to the $32 million
impact of reclassifying $16 million of indemnification
liability expenses incurred in 2005 for estimated capital
costs associated with the Clean Smokestacks Act
expected to be incurred in excess of the maximum billable
costs to the joint owner. This expense was reclassified to
Clean Smokestacks Act amortization and had no impact on
2006 earnings (See Note 21B). Interest income increased
$17 million for 2006 compared to 2005 primarily due to
investment interest and interest on under-recovered fuel
costs. In addition, the change in other income (expense)
includes a $4 million favorable impact related to recording
an audit settlement with the FERC in 2005.
Total Interest Charges, Net
Total interest charges, net were $210 million for 2007,
which represents a $5 million decrease compared to 2006.
This decrease is primarily due to the $5 million impact
of a decrease in average long-term debt and $3 million
favorable AFUDC debt related to costs associated with
certain large construction projects, partially offset by
$2 million higher interest related to higher variable rates
on pollution control obligations.
Total interest charges, net were $215 million for 2006,
which represents a $23 million increase compared to 2005.
This increase is primarily due to the $20 million impact of
a net increase in average long-term debt.
Income Tax Expense
Income tax expense was $295 million, $265 million and
$239 million in 2007, 2006 and 2005, respectively. The
$30 million income tax expense increase in 2007 compared
to 2006 is primarily due to the impact of higher pre-tax
income. The $26 million income tax expense increase in
2006 compared to 2005 is primarily due to the allocation
of $23 million of the Parent’s tax benefit not related to
acquisition interest expense in 2005 that was suspended
in 2006. See Corporate and Other below for additional
information on the change in the tax benefit allocation
in 2006.
Progress Energy Florida
PEF contributed segment profits of $315 million,
$326 million and $258 million in 2007, 2006 and 2005,
respectively. The decrease in profits for 2007 as compared
to 2006 is primarily due to higher O&M expenses related to
plant outage and maintenance costs and employee benefit
costs, higher interest expense, higher other operating
expenses and higher depreciation and amortization
expense excluding recoverable storm amortization, partially
offset by favorable AFUDC and higher wholesale sales.
The increase in profits for 2006 as compared to 2005 is
primarily due to the impact of postretirement and severance
costs incurred in 2005, favorable retail customer growth
and usage, an increase in rental and other miscellaneous
service revenues and the impact of the 2005 write-off of
unrecoverable storm costs. These were partially offset by
the 2005 gain on the sale of the utility distribution assets
serving Winter Park, the unfavorable impact of weather on
revenues and the impact of suspending the allocation of
the Parent’s tax benefit not related to acquisition interest
expense. See Corporate and Other below for additional
information on the change in the tax benefit allocation
in 2006.
The revenue tables below present the total amount and
percentage change of revenues excluding fuel and other
pass-through revenues. Revenues excluding fuel and
other pass-through revenues is defined as total electric
revenues less fuel and other pass-through revenues. We
consider revenues excluding fuel and other pass-through
revenues a useful measure to evaluate PEF’s electric
operations because fuel and other pass-through revenues
primarily represent the recovery of fuel, purchased power
and other pass-through expenses through cost-recovery
clauses and, therefore, do not have a material impact
on earnings. We have included the analysis below as a
complement to the financial information we provide in
accordance with GAAP. However, revenues excluding fuel