Progress Energy 2007 Annual Report Download - page 74

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72
In this report, Progress Energy (which includes
Progress Energy, Inc. holding company [the Parent]
and its regulated and nonregulated subsidiaries on
a consolidated basis) is at times referred to as “we,”
“us” or “our.” Additionally, we may collectively refer
to our electric utility subsidiaries, Progress Energy
Carolinas (PEC) and Progress Energy Florida (PEF), as
the “Utilities.”
1. ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
A. Organization
The Parent is a holding company headquartered in
Raleigh, N.C. As such, we are subject to regulation by
the Federal Energy Regulatory Commission (FERC) under
the regulatory provisions of the Public Utility Holding
Company Act of 2005 (PUHCA 2005).
Our reportable segments are PEC and PEF, both of which
are primarily engaged in the generation, transmission,
distribution and sale of electricity. The Corporate and
Other segment primarily includes amounts applicable
to the activities of the Parent and Progress Energy
Service Company, LLC (PESC) and other miscellaneous
nonregulated businesses that do not separately meet
the quantitative disclosure requirements as a separate
business segment.
PEC and PEF are regulated public utilities primarily
engaged in the generation, transmission, distribution
and sale of electricity. PEC is subject to the regulatory
provisions of the North Carolina Utilities Commission
(NCUC), Public Service Commission of South Carolina
(SCPSC), the United States Nuclear Regulatory
Commission (NRC) and the FERC. PEF is subject to
the regulatory provisions of the Florida Public Service
Commission (FPSC), the NRC and the FERC.
See Note 19 for further information about our segments.
B. Basis of Presentation
These financial statements have been prepared in
accordance with accounting principles generally
accepted in the United States of America (GAAP) and
include the activities of the Parent and our majority-
owned and controlled subsidiaries. The Utilities are
subsidiaries of Progress Energy, and as such their
financial condition and results of operations and cash
flows are also consolidated, along with our nonregulated
subsidiaries, in our consolidated financial statements.
Noncontrolling interests in subsidiaries along with the
income or loss attributed to these interests are included
in minority interest in both the Consolidated Balance
Sheets and in the Consolidated Statements of Income. The
results of operations for minority interest are reported on
a net of tax basis if the underlying subsidiary is structured
as a taxable entity.
Unconsolidated investments in companies over which
we do not have control, but have the ability to exercise
influence over operating and financial policies (generally
20 percent to 50 percent ownership), are accounted
for under the equity method of accounting. These
investments are primarily in limited liability corporations
and limited liability partnerships, and the earnings from
these investments are recorded on a pre-tax basis (See
Note 20). Other investments are stated principally at cost.
These equity and cost method investments are included
in miscellaneous other property and investments in the
Consolidated Balance Sheets. See Note 13 for more
information about our investments.
Significant intercompany balances and transactions
have been eliminated in consolidation except as permitted
by Statement of Financial Accounting Standards (SFAS)
No. 71, “Accounting for the Effects of Certain Types of
Regulation” (SFAS No. 71), which provides that profits
on intercompany sales to regulated affiliates are not
eliminated if the sales price is reasonable and the future
recovery of the sales price through the ratemaking
process is probable.
These combined notes accompany and form an integral
part of our consolidated financial statements.
Certain amounts for 2006 and 2005 have been reclassified
to conform to the 2007 presentation. In addition, our 2007
presentation of operating, investing and financing cash
flows combines the respective cash flows from our
continuing and discontinued operations as permitted
under SFAS No. 95, “Statement of Cash Flows.” Previously,
we had provided separate disclosure of cash flows from
continuing operations and discontinued operations.
These changes in cash flow presentations had no impact
on total cash and cash equivalents, net change in cash
and cash equivalents, or results of operations.
C. Consolidation of Variable Interest Entities
We consolidate all voting interest entities in which we
own a majority voting interest and all variable interest
entities for which we are the primary beneficiary in
accordance with Financial Accounting Standards Board
(FASB) Interpretation No. 46R, “Consolidation of Variable
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS