Progress Energy 2007 Annual Report Download - page 88

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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The NCUC requires that PEC update its cost estimate for
nuclear decommissioning every five years. PEC’s most
recent site-specific estimates of decommissioning costs
were developed in 2004, using 2004 cost factors, and
are based on prompt dismantlement decommissioning,
which reflects the cost of removal of all radioactive and
other structures currently at the site, with such removal
occurring after operating license expiration. These
decommissioning cost estimates also include interim
spent fuel storage costs associated with maintaining
spent nuclear fuel on site until such time that it can
be transferred to a DOE facility (See Note 22D). These
estimates, in 2004 dollars, were $569 million for Unit No.
2 at Robinson Nuclear Plant (Robinson), $418 million
for Brunswick Nuclear Plant (Brunswick) Unit No. 1,
$444 million for Brunswick Unit No. 2 and $775 million
for Harris. The estimates are subject to change based
on a variety of factors including, but not limited to, cost
escalation, changes in technology applicable to nuclear
decommissioning and changes in federal, state or local
regulations. The cost estimates exclude the portion
attributable to North Carolina Eastern Municipal Power
Agency (Power Agency), which holds an undivided
ownership interest in Brunswick and Harris. NRC
operating licenses held by PEC currently expire in July
2030, December 2034 and September 2036 for Robinson
and Brunswick Units No. 2 and No. 1, respectively. The
NRC operating license held by PEC for Harris currently
expires in October 2026. An application to extend this
license 20 years was submitted in the fourth quarter of
2006. Based on updated assumptions, in 2005 PEC further
reduced its asset retirement cost net of accumulated
depreciation and its ARO liability by approximately
$14 million and $49 million, respectively.
The FPSC requires that PEF update its cost estimate for
nuclear decommissioning every five years. PEF filed a
new site-specific estimate of decommissioning costs
for the Crystal River Unit No. 3 (CR3) with the FPSC on
April 29, 2005, as part of PEF’s base rate filing. PEF’s estimate
is based on prompt dismantlement decommissioning and
includes interim spent fuel storage costs associated
with maintaining spent nuclear fuel on site until such
time that it can be transferred to a DOE facility (See
Note 22D). The estimate, in 2005 dollars, is $614 million
and is subject to change based on a variety of factors
including, but not limited to, cost escalation, changes in
technology applicable to nuclear decommissioning and
changes in federal, state or local regulations. The cost
estimate excludes the portion attributable to other co-
owners of CR3. The NRC operating license held by PEF
for CR3 currently expires in December 2016. We expect to
submit an application requesting a 20-year extension of
this license in the first quarter of 2009. As part of this new
estimate and assumed license extension, PEF reduced its
asset retirement cost net of accumulated depreciation and
its ARO liability by approximately $36 million and $94 million,
respectively. In addition, we reduced PEF-related asset
retirement costs, net of accumulated depreciation, by an
additional $53 million at Progress Energy. Retail accruals
on PEF’s reserves for nuclear decommissioning were
previously suspended through December 2005 under the
terms of a previous base rate agreement, and the base
rate agreement resulting from a base rate proceeding in
2005 continues that suspension. In addition, the wholesale
accrual on PEF’s reserves for nuclear decommissioning
was suspended retroactive to January 2006, following a
FERC accounting order issued in November 2006.
The FPSC requires that PEF update its cost estimate for
fossil plant dismantlement every four years. PEF filed
an updated fossil dismantlement study with the FPSC
on April 29, 2005, as part of its base rate filing. PEF’s
reserve for fossil plant dismantlement was approximately
$146 million and $145 million at December 31, 2007 and
2006, including amounts in the ARO liability for asbestos
abatement, discussed below. Retail accruals on PEF’s
reserves for fossil plant dismantlement were previously
suspended through December 2005 under the terms
of PEF’s previous base rate agreement. The base rate
agreement resulting from a base rate proceeding in
2005 continued the suspension of PEF’s collection from
customers of the expenses to dismantle fossil plants (See
Note 7C).
Upon implementation of FIN 47 as of December 31, 2005,
the Utilities recognized additional ARO liabilities for
asbestos abatement costs (See Note 1D).
We have identified but not recognized AROs
related to electric transmission and distribution and
telecommunications assets as the result of easements
over property not owned by us. These easements are
generally perpetual and require retirement action only
upon abandonment or cessation of use of the property
for the specified purpose. The ARO is not estimable for
such easements, as we intend to utilize these properties
(in millions) 2007 2006
Removal costs $1,410 $1,341
Nonirradiated decommissioning costs 141 137
Dismantlement costs 125 124
Non-ARO cost of removal $1,676 $1,602