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Progress Energy Annual Report 2006
111
costs for the sites to the extent our liability is probable
and the costs can be reasonably estimated. Because the
extent of environmental impact, allocation among PRPs
for all sites, remediation alternatives (which could involve
either minimal or significant efforts), and concurrence of
the regulatory authorities have not yet reached the stage
where a reasonable estimate of the remediation costs
can be made, we cannot determine the total costs that
may be incurred in connection with the remediation of all
sites at this time. It is probable that current estimates will
change and additional losses, which could be material,
may be incurred in the future.
The following table contains information about accruals
for environmental remediation expenses described
below. Accruals for probable and estimable costs related
to various environmental sites, which were included in
other liabilities and deferred credits on the Balance
Sheets, at December 31 were:
(in millions) 2006 2005
PEC
MGP and other sites(a) $22 $7
PEF
Remediation of distribution and substation transformers 43 20
MGP and other sites 18 18
Total PEF environmental remediation accruals(b) 61 38
Progress Energy nonregulated operations 33
Total Progress Energy environmental remediation accruals $86 $48
(a) Expected to be paid out over one to five years.
(b) Expected to be paid out over one to fifteen years.
In addition to the Utilities’ sites, discussed under “PEC”
and “PEF” below, our environmental sites include the
following related to our nonregulated operations.
In 2001, we, through our Progress Fuels subsidiary,
established an accrual to address indemnities and
retained an environmental liability associated with the
sale of our Inland Marine Transportation business. At
December 31, 2006 and 2005, the remaining accrual
balance was approximately $3 million. Expenditures
related to this liability were not material during 2006
and 2005.
On March 24, 2005, we completed the sale of our Progress
Rail subsidiary. In connection with the sale, we incurred
indemnity obligations related to certain pre-closing
liabilities, including certain environmental matters (See
discussion under Guarantees in Note 22C).
PEC
There are currently eight former MGP sites and a
number of other sites associated with PEC that have
required or are anticipated to require investigation and/
or remediation. Three of these sites are in the long-term
monitoring phase.
For the year ended December 31, 2006, including the Ward
Transformer site and MGP sites discussed below, PEC
accrued approximately $21 million and spent approximately
$6 million. For the year ended December 31, 2005, PEC
accrued approximately $4 million and spent approximately
$6 million. In October 2006, PEC received orders from
the NCUC and SCPSC to defer and amortize certain
environmental remediation expenses (See Note 7B).
In September 2005, the EPA advised PEC that it had been
identified as a PRP at the Carolina Transformer site located
in Fayetteville, N.C. The EPA offered PEC and a number of
other PRPs the opportunity to share in the reimbursement
to the EPA of past expenditures in addressing conditions
at the site, which are currently approximately $32 million.
In May 2006, a meeting was called by the EPA to discuss
a settlement proposal among the PRPs. An agreement
among PRPs has not been reached; consequently, it is not
possible at this time to reasonably estimate the amount
of PEC’s share of the reimbursement for remediation of
the Carolina Transformer site. The outcome of this matter
cannot be predicted.
During the fourth quarter of 2004, the EPA advised PEC that
it had been identified as a PRP at the Ward Transformer
site located in Raleigh, N.C. The EPA offered PEC and
a number of other PRPs the opportunity to negotiate
cleanup of the site and reimbursement to the EPA for
EPA’s past expenditures in addressing conditions at the
site. In September 2005, PEC and other PRPs signed a
settlement agreement, which requires the participating
PRPs to remediate the site. For the year ended
December 31, 2005, PEC accrued approximately
$3 million for its portion of the EPA’s estimated
remediation costs and the EPA’s past costs. For the
year ended December 31, 2006, based upon continuing
assessment work performed at the site, PEC recorded an
additional $9 million accrual for its portion of the estimated
remediation costs. At December 31, 2006, after cumulative
expenditures for the Ward site of approximately $3 million,
PEC’s recorded liability for the site was approximately
$9 million. Actual experience may differ from current
estimates, and it is probable that estimates will continue
to change in the future. The outcome of this matter cannot
be predicted.