Progress Energy 2006 Annual Report Download - page 52

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
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We currently expect to file the application for the COL
for PEC’s Harris site in 2007. We have selected for PEC
the Westinghouse Electric AP-1000 reactor design as the
technology upon which to base the potential application
submission. On December 12, 2006, we announced that
PEF selected a site in Levy County, Fla., to evaluate for
possible future nuclear expansion, and PEF expects to file
the application for the COL in 2008. We have not selected
the reactor design technology upon which to base the PEF
potential application submission. If we receive approval
from the NRC and applicable state agencies, and if the
decisions to build are made, construction activities
could begin as early as 2010, and new plants could be
online in late 2016. The NRC estimates that it will take
approximately three to four years to review and process
the COL applications.
On January 16, 2007, the U.S. Supreme Court declined to
hear an appeal of a Ninth Circuit U.S. Court of Appeals’
decision in which the Ninth Circuit held that the NRC is
required to consider the environmental impacts of terrorist
attacks under the National Environmental Policy Act in
authorizing an independent spent fuel storage installation.
Similar cases, including cases involving operating license
renewals, are pending in seven other jurisdictions. The
NRC is considering the scope and import of the Ninth
Circuit’s decision in reviewing its operating license
renewal program. The extent and timing of the NRC’s
application of the case is unclear at this time, and the
impact, if any, on PEC’s pending Harris operating license
renewal application or any future PEC or PEF operating
licensing proceedings cannot be predicted at this time.
A new nuclear plant may be eligible for the federal
production tax credits and risk insurance provided by
EPACT. EPACT provides an annual tax credit of 1.8 cents
per kWh for nuclear facilities for the first eight years of
operation. The credit is limited to the first 6,000 MW of
new nuclear generation in the United States and has an
annual cap of $125 million per 1,000 MW of national MW
capacity limitation allocated to the unit. In April 2006,
the IRS provided interim guidance that the 6,000 MW of
production tax credits generally will be allocated to new
nuclear facilities that file license applications with the
NRC by December 31, 2008, had poured safety-related
concrete prior to January 1, 2014, and were placed in
service before January 1, 2021. There is no guarantee
that the interim guidance will be incorporated into the
final regulations governing the allocation of production
tax credits. Multiple utilities have announced plans to
pursue new nuclear plants. There is no guarantee that
any nuclear plant we construct would qualify for these
or other incentives. We cannot predict the outcome of
this matter.
In accordance with provisions of Florida’s comprehensive
energy bill discussed above, in December 2006, the FPSC
ordered new rules that would allow investor-owned
utilities such as PEF to request partial recovery of the
planning and construction costs of a nuclear power
plant prior to commercial operation. The FPSC issued
a final rule on February 13, 2007, under which utilities
will be allowed to recover prudently incurred siting,
preconstruction costs and AFUDC on an annual basis
through the capacity cost-recovery clause. Such amounts
will not be included in a utility’s rate base when the plant
is placed in commercial operation. In addition, the rule will
require the FPSC to conduct an annual prudence review
of the reasonableness and prudence of all such costs,
including construction costs, and such determination
shall not be subject to later review except upon a finding
of fraud, intentional misrepresentation or the intentional
withholding of key information by the utility. Also, on
February 1, 2007, the FPSC amended its power plant bid
rules to, among other things, exempt nuclear power plants
from existing bid requirements.
Environmental Matters
We are subject to regulation by various federal, state and
local authorities in the areas of air quality, water quality,
control of toxic substances and hazardous and solid
wastes, and other environmental matters. We believe that
we are in substantial compliance with those environmental
regulations currently applicable to our business and
operations and believe we have all necessary permits
to conduct such operations. Environmental laws and
regulations frequently change and the ultimate costs of
compliance cannot always be precisely estimated.
HAZARDOUS AND SOLID WASTE MANAGEMENT
The provisions of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended (CERCLA), authorize the EPA to require the
cleanup of hazardous waste sites. This statute imposes
retroactive joint and several liabilities. Some states,
including North Carolina, South Carolina and Florida, have
similar types of statutes. We are periodically notified by
regulators, including the EPA and various state agencies,
of our involvement or potential involvement in sites that
may require investigation and/or remediation. There are
presently several sites with respect to which we have
been notified of our potential liability by the EPA, the
state of North Carolina or the state of Florida. Various