Progress Energy 2007 Annual Report Download - page 86

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
84
Generally, electric utility plant at PEC and PEF, other than
nuclear fuel, is pledged as collateral for the first mortgage
bonds of PEC and PEF, respectively (See Note 12C).
AFUDC represents the estimated costs of capital funds
necessary to finance the construction of new regulated
assets. As prescribed in the regulatory uniform systems
of accounts, AFUDC is charged to the cost of the plant
for certain projects in accordance with the regulatory
provisions for each jurisdiction. The equity funds portion
of AFUDC is credited to other income, and the borrowed
funds portion is credited to interest charges. Regulatory
authorities consider AFUDC an appropriate charge for
inclusion in the rates charged to customers by the Utilities
over the service life of the property. The composite AFUDC
rate for PEC’s electric utility plant was 8.8%, 8.7% and
5.6% in 2007, 2006 and 2005, respectively. The composite
AFUDC rate for PEF’s electric utility plant was 8.8%, 8.8%
and 7.8% in 2007, 2006 and 2005, respectively.
Our depreciation provisions on utility plant, as a percent
of average depreciable property other than nuclear
fuel, were 2.4%, 2.3% and 2.2% in 2007, 2006 and 2005,
respectively. The depreciation provisions related to utility
plant were $560 million, $533 million and $477 million in
2007, 2006 and 2005, respectively. In addition to utility plant
depreciation provisions, depreciation and amortization
expense also includes decommissioning cost provisions,
ARO accretion, cost of removal provisions (See Note 5D),
regulatory approved expenses (See Notes 7 and 21) and
Clean Smokestacks Act amortization (See Note 7B).
Amortization of nuclear fuel costs, including disposal
costs associated with obligations to the U.S. Department
of Energy (DOE) and costs associated with obligations to
the DOE for the decommissioning and decontamination
of enrichment facilities, for the years ended December 31,
2007, 2006 and 2005 was $139 million, $140 million and
$136 million, respectively. This amortization expense
is included in fuel used for electric generation in the
Consolidated Statements of Income.
PEC’s depreciation provisions on utility plant, as a
percent of average depreciable property other than
nuclear fuel, were 2.1% for 2007, 2006 and 2005. The
depreciation provisions related to utility plant were
$303 million, $294 million and $286 million in 2007, 2006 and
2005, respectively. In addition to utility plant depreciation
provisions, depreciation and amortization expense
also includes decommissioning cost provisions, ARO
accretion, cost of removal provisions (See Note 5D),
regulatory approved expenses (See Note 7B) and Clean
Smokestacks Act amortization (See Note 7B).
PEF’s depreciation provisions on utility plant, as a percent
of average depreciable property other than nuclear
fuel, were 2.7%, 2.7% and 2.3% in 2007, 2006 and 2005,
respectively. The depreciation provisions related to utility
plant were $257 million, $239 million and $191 million in
2007, 2006 and 2005, respectively. In addition to utility plant
depreciation provisions, depreciation and amortization
expense also includes decommissioning cost provisions,
ARO accretion, cost of removal provisions (See Note 5D)
and regulatory approved expenses (See Notes 7 and 21).
Amortization of nuclear fuel costs, including disposal
costs associated with obligations to the DOE and
costs associated with obligations to the DOE for the
decommissioning and decontamination of enrichment
facilities, for the years ended December 31, 2007, 2006
and 2005 was $110 million, $109 million and $107 million,
respectively, for PEC and $29 million, $31 million and
$29 million, respectively, for PEF. These costs were
included in fuel used for electric generation in the
Statements of Income.
B. Diversified Business Property
Net diversified business property is included in
miscellaneous other property and investments on the
Consolidated Balance Sheets. Diversified business
property excludes amounts reclassified as assets to be
divested (See Note 3I).
The balances of diversified business property at
December 31 are listed below, with a range of depreciable
lives for each:
Diversified business depreciation expense was $3 million,
$2 million and $4 million for the years ended December 31,
2007, 2006 and 2005, respectively.
(in millions) 2007 2006
Equipment (3-25 years) $6 $10
Land and mineral rights –1
Buildings and plants (5-40 years) 947
Accumulated depreciation (9) (50)
Diversified business property, net $6 $8