Progress Energy 2006 Annual Report Download - page 115

Progress Energy Annual Report 2006
113
the Clean Smokestacks Act to approximately $38 million.
PEC recorded a related liability for the joint owner’s share
of estimated costs in excess of the contract amount.
At December 31, 2006, the amount of the liability was
$29 million and had increased from $16 million at
December 31, 2005, based upon the respective current
estimates for Clean Smokestacks Act compliance. Because
PEC has taken a systemwide compliance approach,
its North Carolina retail customers have significantly
benefited from the strategy of focusing emission reduction
efforts on the jointly owned units, and, therefore, PEC
believes that any costs in excess of the joint owner’s share
should be recovered from North Carolina retail customers,
consistent with other capital expenditures associated
with PEC’s compliance with the Clean Smokestacks
Act. On November 2, 2006, PEC notified the NCUC of its
intent to record these estimated excess costs as part
of the $569 million amortization required to be recorded
by December 31, 2007, and subsequently reclassified
$29 million of indemnification expense to Clean
Smokestacks Act amortization (See Note 20).
22. COMMITMENTS AND CONTINGENCIES
A. Purchase Obligations
At December 31, 2006, the following table reflects
contractual cash obligations and other commercial
commitments in the respective periods in which they
are due:
FUEL AND PURCHASED POWER
Through our subsidiaries, we have entered into various
long-term contracts for coal, oil, gas and nuclear
fuel. Our payments under these commitments were
$3.168 billion, $3.071 billion and $2.033 billion for 2006, 2005
and 2004, respectively.
Both PEC and PEF have ongoing purchased power
contracts with certain cogenerators (primarily QFs)
with expiration dates ranging from 2007 to 2033. These
purchased power contracts generally provide for capacity
and energy payments.
Pursuant to the terms of the 1981 Power Coordination
Agreement, as amended, between PEC and Power
Agency, PEC is obligated to purchase a percentage of
Power Agency’s ownership capacity of, and energy from,
Harris. In 1993, PEC and Power Agency entered into an
agreement to restructure portions of their contracts
covering power supplies and interests in jointly owned
units. Under the terms of the 1993 agreement, PEC
increased the amount of capacity and energy purchased
from Power Agency’s ownership interest in Harris, and
the buyback period was extended six years through
2007. The estimated minimum annual payments for these
purchases, which reflect capacity and energy costs, total
approximately $34 million. These contractual purchases
totaled $38 million, $37 million and $39 million for 2006,
2005 and 2004, respectively.
PEC has a long-term agreement for the purchase of power
and related transmission services from Indiana Michigan
Power Company’s Rockport Unit No. 2 (Rockport). The
agreement provides for the purchase of 250 MW of
capacity through 2009 with estimated minimum annual
payments of approximately $42 million, representing
capital-related capacity costs. Total purchases (including
energy and transmission use charges) under the Rockport
agreement amounted to $80 million, $71 million and
$62 million for 2006, 2005 and 2004, respectively.
PEC executed two long-term agreements for the purchase
of power from Broad River LLC’s Broad River facility
(Broad River). One agreement provides for the purchase
of approximately 500 MW of capacity through 2021 with
an original minimum annual payment of approximately
$16 million, primarily representing capital-related
capacity costs. The second agreement provided for the
additional purchase of approximately 335 MW of capacity
through 2022 with an original minimum annual payment
of approximately $16 million representing capital-related
capacity costs. Total purchases for both capacity and
energy under the Broad River agreements amounted to
$40 million, $44 million and $42 million in 2006, 2005 and
2004, respectively.
(in millions) 2007 2008 2009 2010 2011 Thereafter
Fuel $2,128 $1,514 $1,057 $509 $390 $1,251
Purchased power 485 454 422 377 381 4,165
Construction obligations 393 197 8 3 – –
Other purchase obligations 86 71 23 22 15 74
Total $3,092 $2,236 $1,510 $911 $786 $5,490