Progress Energy 2007 Annual Report Download - page 54

MANAGEMENT’S DISCUSSION AND ANALYSIS
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Prior to the effective date of mandatory compliance
with the reliability standards, PEC self-reported
two noncompliances and PEF self-reported three
noncompliances. Entities responsible for enforcement of
mandatory reliability standards have proposed that entities
that self-reported noncompliance prior to the effective
date and pursue aggressive mitigation plans will not be
assessed fines. Subsequent to the effective date, PEC self-
reported three noncompliances with voluntary standards
and PEF self-reported one noncompliance with voluntary
standards and one noncompliance with a mandatory
standard. PEC and PEF have submitted mitigation plans
to address the self-reported noncompliance. The costs of
executing the mitigation plans are not expected to have a
significant effect on our results of operations or liquidity.
Legal
We are subject to federal, state and local legislation and
court orders. These matters are discussed in detail in Note
22D. This discussion identifies specific issues, the status
of the issues, accruals associated with issue resolutions
and our associated exposures.
Increasing Energy Demand
Meeting the anticipated growth within the Utilities’
service territories will require a balanced approach.
The three main elements of this balanced solution
are: (1) expanding our energy-efficiency programs;
(2) investing in the development of alternative energy
resources for the future; and (3) operating state-of-
the-art plants that produce energy cleanly and
efficiently by modernizing existing plants and pursuing
options for building new plants and associated
transmission facilities.
We are actively pursuing expansion of our energy-
efficiency and conservation programs as energy efficiency
is one of the most effective ways to reduce energy costs,
offset the need for new power plants and protect the
environment. Our energy-efficiency program provides
simple, low-cost ways for residential customers to reduce
energy use, promotes home energy checks, provides
tools and programs for large and small businesses to
minimize their energy use and provides an interactive
internet Web site with online calculators, programs and
efficiency tips.
We are actively engaged in a variety of alternative energy
projects, including solar, hydrogen, biomass and landfill-
gas technologies. We are evaluating the feasibility of
producing electricity from hog waste and other plant or
animal sources.
In the coming years, we will continue to invest in
existing plants and consider plans for building new
generating plants. Due to the anticipated growth in our
service territories, we estimate that we will require new
generation facilities in both Florida and the Carolinas
toward the end of the next decade, and we are evaluating
the best available options for this generation, including
advanced design nuclear and gas technologies. At this
time, no definitive decisions have been made to construct
new nuclear plants. While we pursue expansion of
energy-efficiency and conservation programs, PEC has
announced a two-year moratorium on constructing new
coal-fired plants and that if PEC goes ahead with a new
nuclear plant, the new plant would not be online until at
least 2018 (see “Nuclear” below).
As authorized under EPACT, on October 4, 2007, the
United States Department of Energy (DOE) published final
regulations for the disbursement of up to $13 billion in loan
guarantees for clean-energy projects using innovative
technologies. The guarantees, which will cover up to
100 percent of the amount of any loan for no more than
80 percent of the project cost, are expected to spur
development of nuclear, clean-coal and ethanol projects.
Congress has approved $4 billion in loan guarantees, with
the DOE seeking an additional $9 billion in loan guarantees
in its fiscal 2008 budget request. Initial applications for
loan guarantees were for non-nuclear projects but it is
expected that approval of additional funding could result
in guarantees being available for nuclear generation
projects. We cannot predict the outcome of this matter.
NUCLEAR
Nuclear generating units are regulated by the NRC. In
the event of noncompliance, the NRC has the authority to
impose fines, set license conditions, shut down a nuclear
unit or take some combination of these actions, depending
upon its assessment of the severity of the situation, until
compliance is achieved.
On November 14, 2006, PEC filed an application with
the NRC for a 20-year extension of the Harris operating
license. The license renewal application for Harris
is currently under review by the NRC with a decision
expected in 2008.
Our nuclear units are periodically removed from service
to accommodate normal refueling and maintenance
outages, repairs and certain other modifications (See
Notes 5 and 22D).