Progress Energy 2004 Annual Report Download - page 76

At December 31, the balances of regulatory assets
(liabilities) were as follows:
Except for portions of deferred fuel costs and deferred
storm costs, all regulatory assets earn a return or the
cash has not yet been expended, in which case the
assets are offset by liabilities that do not incur a carrying
cost. The Company expects to fully recover these assets
and refund the liabilities through customer rates under
current regulatory practice.
B. PEC Retail Rate Matters
As of December 31, 2004, PEC’s North Carolina retail fuel
costs were underrecovered by $145 million. This amount
is comprised of $117 million eligible for recovery in 2005
and $28 million deferred from a 2001 order from the NCUC
that cannot be collected during 2005, and has therefore
been classified as a long-term asset. PEC intends to
collect this amount by October 31, 2007.
On October 15, 2004, the SCPSC approved PEC’s request
to leave fuel rates unchanged. The deferred fuel balance
at December 31, 2004, is $23 million. This amount is eligible
for recovery in PEC’s 2005 South Carolina fuel review.
PEC obtained SCPSC and NCUC approval of fuel factors
in annual fuel-adjustment proceedings. The NCUC
approved an annual increase of $62 million, $20 million
and $46 million by orders issued in September 2004, 2003
and 2002, respectively. The SCPSC approved PEC’s
petition each year and the changes were insignificant.
PEC filed with the SCPSC seeking permission to defer
expenses incurred from the first quarter 2004 winter
storm. 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.
In October 2003, PEC filed with the NCUC seeking
permission to defer 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
ice storm and amortize them over a period of five years.
PEC charged approximately $24 million in 2003 from
Hurricane Isabel and from ice storms to the deferred
account. PEC recognized $5 million and $3 million of NC
storm amortization during 2004 and 2003, respectively.
The NCUC and SCPSC have 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. Accelerated cost recovery of these assets
resulted in no additional expense in 2004 and 2003 and
additional depreciation expense of approximately
$53 million in 2002. Total accelerated depreciation
recorded through December 31, 2004, was $403 million.
The North Carolina Clean Smokestacks Act enacted in
June 2002 (NC Clean Air) requires state utilities to reduce
emissions of nitrogen oxide (NOx) and sulfur dioxide
(SO2) from coal-fired plants. The NCUC has allowed the
utilities to amortize and recover the costs associated
with meeting the new emission standards over a seven-
year period beginning January 1, 2003. The legislation
provides for significant flexibility in the amount of annual
amortization recorded, which allows the utilities to vary
the amount amortized within certain limits. This flexibility
provides a utility with the opportunity to consider the
impacts of other factors on its regulatory return on equity
when setting the amortization amount for each year. PEC
recognized $174 million and $74 million of clean air
amortization during 2004 and 2003, respectively. This
legislation freezes PEC’s base rates in North Carolina for
five years, subject to certain conditions (See Note 22).
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Notes to Consolidated Financial Statements
(in millions) 2004 2003
Deferred fuel cost – current (Note 8B and 8C) $229 $270
Deferred fuel cost – long-term (Note 8B and 8C) 107 47
Deferred impact of ARO – PEC (Note 1D) 305 291
Income taxes recoverable through future rates
(Note 15) 84 75
Loss on reacquired debt (Note 1D) 53 55
Deferred DOE enrichment facilities-related costs 16 24
Storm deferral (Notes 3 and 8B) 316 21
Postretirement benefits (Note 17) 74 9
Other 109 76
Total long-term regulatory assets $1,064 $598
Deferred energy conservation cost – current (8) (7)
Non-ARO cost of removal (Note 6D) (1,881) (2,118)
Deferred impact of ARO (Note 1D) (221) (212)
Net nuclear decommissioning trust
unrealized gains (Note 6D) (224) (204)
Postretirement benefits (Note 17B) (45) (211)
Storm reserve (Note 3) –(41)
Clean air compliance (Note 8B) (248) (74)
Other (35) (19)
Total long-term regulatory liabilities (2,654) (2,879)
Net regulatory liabilities $(1,369) $(2,018)