Progress Energy 2004 Annual Report Download - page 102

In December 2003, the EPA released its proposed Interstate
Air Quality Rule, currently referred to as the Clean Air
Interstate Rule (CAIR). The final rule was released on March
10, 2005. The EPA’s rule requires 28 states and the District of
Columbia, including North Carolina, South Carolina, Georgia
and Florida, to reduce NOx and SO2emissions in order to
attain preset state NOx and SO2 emissions levels. The
Company is reviewing the final rule. Installation of additional
air quality controls is likely to be needed to meet the CAIR
requirements. Compliance plans and cost to comply with
the rule will be determined once the Company completes its
review. The air quality controls already installed for
compliance with the NOx SIP Call and currently planned by
the Company to comply with the NC Clean Air legislation will
reduce the costs required to meet the CAIR requirements
for the Company’s North Carolina units.
In March 2004, the North Carolina Attorney General filed
a petition with the EPA under Section 126 of the Clean Air
Act, asking the federal government to force coal-fired
power plants in 13 other states, including South Carolina,
to reduce their NOx and SO2emissions. The state of
North Carolina contends these out-of-state emissions
interfere with North Carolina’s ability to meet national air
quality standards for ozone and particulate matter. The
EPA has agreed to make a determination on the petition
by August 1, 2005. The Company cannot predict the
outcome of this matter.
Water Quality
As a result of the operation of certain control equipment
needed to address the air quality issues outlined above,
new wastewater streams may be generated at the
affected facilities. Integration of these new wastewater
streams into the existing wastewater treatment
processes may result in permitting, construction and
treatment requirements imposed on PEC and PEF in the
immediate and extended future.
After many years of litigation and settlement negotiations,
the EPA adopted regulations in February 2004 to implement
Section 316(b) of the Clean Water Act. These regulations
became effective September 7, 2004. The purpose of these
regulations is to minimize adverse environmental impacts
caused by cooling water intake structures and intake
systems. Over the next several years these regulations will
impact the larger base load generation facilities and may
require the facilities to mitigate the effects to aquatic
organisms by constructing intake modifications or
undertaking other restorative activities. The Company
currently estimates that from 2005 through 2009 the range
of its expenditures to meet the Section 316(b)
requirements of the Clean Water Act will be $85 million to
$115 million. The range includes $20 million to $30 million at
PEC and $65 million to $85 million at PEF.
Other Environmental Matters
The Kyoto Protocol was adopted in 1997 by the United
Nations to address global climate change by reducing
emissions of carbon dioxide and other greenhouse
gases. In 2004, Russia ratified the Protocol, and the treaty
went into effect on February 16, 2005. The United States
has not adopted the Kyoto Protocol, and the Bush
administration has stated it favors voluntary programs. A
number of carbon dioxide emissions control proposals
have been advanced in Congress. Reductions in carbon
dioxide emissions to the levels specified by the Kyoto
Protocol and some legislative proposals could be
materially adverse to the Company’s consolidated
financial position or results of operations if associated
costs of control or limitation cannot be recovered from
customers. The Company favors the voluntary program
approach recommended by the administration and
continually evaluates options for the reduction,
avoidance and sequestration of greenhouse gases.
However, the Company cannot predict the outcome of
this matter.
Progress Energy has announced its plan to issue a report
on the Company’s activities associated with current and
future environmental requirements. The report will
include a discussion of the environmental requirements
that the Company currently faces and expects to face in
the future, as well as an assessment of potential
mandatory constraints on carbon dioxide emissions. The
report will be issued by March 31, 2006.
23. COMMITMENTS AND CONTINGENCIES
A. Purchase Obligations
At December 31, 2004, the following table reflects
Progress Energy’s contractual cash obligations and other
commercial commitments in the respective periods in
which they are due:
100
Notes to Consolidated Financial Statements
(in millions) 2005 2006 2007 2008 2009 Thereafter
Fuel $2,219 $1,473 $663 $229 $252 $1,270
Purchased power 473 473 479 449 416 4,614
Construction
obligations 51 – – – – –
Other purchase
obligations 100 70 64 41 39 268
Total $2,843 $2,016 $1,206 $ 719 $ 707 $ 6,152