Progress Energy 2007 Annual Report Download - page 92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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settlement on the grounds that the NCUC did not have
the statutory authority to establish fuel rates for more
than one year. On October 24, 2007, CUCA filed a motion
to withdraw their appeal. On November 7, 2007, the
North Carolina Tenth District Court of Appeals granted
CUCA’s motion. At December 31, 2007, PEC’s North
Carolina deferred fuel balance was $241 million, of which
$114 million is expected to be collected after 2008 and has
been classified as a long-term regulatory asset.
STORM COST RECOVERY
In February 2004, PEC filed with the SCPSC seeking
permission to defer expenses incurred from the first
quarter 2004 winter storm. In September 2004, the SCPSC
approved PEC’s request to defer the costs and amortize
them ratably over five years beginning in January 2005.
Approximately $9 million related to storm costs was
deferred in 2004. For the years ended December 31, 2007,
2006 and 2005, PEC recognized $2 million of South Carolina
storm amortization.
In October 2003, PEC filed with the NCUC seeking
permission to defer approximately $24 million of expenses
incurred from Hurricane Isabel and the February 2003
winter storms. In December 2003, the NCUC approved
PEC’s request to defer the costs associated with
Hurricane Isabel and the February 2003 winter storms and
amortize them over a period of five years. For the years
ended December 31, 2007, 2006 and 2005, PEC recognized
$5 million of North Carolina storm amortization.
OTHER MATTERS
PEC filed petitions on September 14, 2006, and
September 22, 2006, with the SCPSC and NCUC,
respectively, seeking authorization to defer and amortize
the respective jurisdictional portion of $18 million of
previously recorded operation and maintenance (O&M)
expense relating to certain environmental remediation
sites (See Note 21A). On October 11, 2006, the SCPSC
granted PEC’s petition to defer its jurisdictional
amount, totaling $3 million, and amortize it over
a five-year period beginning January 1, 2007.
On October 19, 2006, the NCUC granted PEC’s
petition to defer its jurisdictional amount, totaling
$15 million, and amortize it over a five-year period.
However, the NCUC order directed that amortization begin
in 2006, with an amortization expense of $3 million. As a
result, during the fourth quarter of 2006, PEC reversed
$18 million of O&M expense, established a regulatory
asset and recorded $3 million of amortization expense.
During the year ended December 31, 2007, PEC recorded
$3 million of amortization expense. Additionally, PEC
reduced the regulatory asset by $2 million during the
year ended December 31, 2007, based on newly available
data regarding certain remediation sites and insurance
proceeds (See Note 21A).
The NCUC and SCPSC approved proposals to accelerate
cost recovery of PEC’s nuclear generating assets
beginning January 1, 2000, and continuing through 2009.
The aggregate minimum and maximum amounts of cost
recovery are $530 million and $750 million, respectively,
with flexibility in the amount of annual depreciation
recorded, from none to $150 million per year. Accelerated
cost recovery of these assets resulted in additional
depreciation expense of $37 million in 2007. No additional
depreciation expense from accelerated cost recovery
was recorded in 2006 or 2005. Through December 31,
2007, PEC recorded total accelerated depreciation of
$440 million, of which $363 million was recorded for the
North Carolina jurisdiction and $77 million was recorded
for the South Carolina jurisdiction.
During 2007, the North Carolina legislature passed
comprehensive energy legislation, which became law
on August 20, 2007. Among other provisions, the law
allows the utility to recover the costs of new demand-
side management (DSM) and energy-efficiency programs
through an annual DSM clause. The law allows PEC
to capitalize those costs that are intended to produce
future benefits and authorizes the NCUC to approve
other forms of financial incentives to the utility for
DSM and energy-efficiency programs. DSM programs
include any program or initiative that shifts the timing
of electricity use from peak to nonpeak periods and
includes load management, electricity system and
operating controls, direct load control and interruptible
load. PEC has begun implementing a series of DSM and
energy-efficiency programs and deferred $2 million of
implementation and program costs through December 31,
2007, for future recovery.
PEC filed a petition on November 30, 2007, with the SCPSC
seeking authorization to create a deferred account for
DSM and energy-efficiency expenses. On December 21,
2007, the SCPSC issued an order granting PEC’s petition.
As a result, PEC has deferred an immaterial amount of
implementation and program costs through December 31,
2007, for future recovery in the South Carolina jurisdiction.
PEC anticipates applying for a DSM and energy-efficiency
clause to recover the costs of these programs in 2008. We
cannot predict the outcome of this matter.