Progress Energy 2006 Annual Report Download - page 71

Progress Energy Annual Report 2006
69
In this report, Progress Energy [which includes Progress
Energy, Inc. holding company (the Parent) and its regulated
and nonregulated subsidiaries on a consolidated basis] is
at times referred to as “we,” “us” or “our.” Additionally, we
may collectively refer to our electric utility subsidiaries,
Progress Energy Carolinas (PEC) and Progress Energy
Florida (PEF), as the “Utilities.”
1. ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
A. Organization
The Parent is a holding company headquartered in
Raleigh, N.C. As such, we are subject to regulation by
the Federal Energy Regulatory Commission (FERC) under
the regulatory provisions of the Public Utility Holding
Company Act of 2005 (PUHCA 2005). Prior to February 8,
2006, the Parent was subject to regulation by the Securities
and Exchange Commission (SEC) under the Public
Utility Holding Company Act of 1935 (PUHCA 1935), as
amended.
Our reportable segments are: PEC, PEF and Coal and
Synthetic Fuels. Our PEC and PEF segments are primarily
engaged in the generation, transmission, distribution and
sale of electricity. Our Coal and Synthetic Fuels segment
is primarily engaged in the production and sale of coal-
based solid synthetic fuels as defined under the Internal
Revenue Code (the Code), the operation of synthetic fuels
facilities for third parties, and coal terminal services. Our
Corporate and Other segment (Corporate and Other) is
comprised of the activities of the Parent and Progress
Energy Service Company (PESC) as well as nonregulated
businesses, which do not separately meet the disclosure
requirements as a business segment.
PEC and PEF are regulated public utilities. PEC is subject
to the regulatory provisions of the North Carolina Utilities
Commission (NCUC), the Public Service Commission
of South Carolina (SCPSC), the United States Nuclear
Regulatory Commission (NRC) and the FERC. PEF is
subject to the regulatory provisions of the Florida Public
Service Commission (FPSC), the NRC and the FERC.
See Note 19 for further information about our segments.
B. Basis of Presentation
These financial statements have been prepared in
accordance with accounting principles generally
accepted in the United States of America (GAAP) and
include the activities of the Parent and our majority-
owned and controlled subsidiaries. The Utilities are
subsidiaries of Progress Energy and as such their
financial condition and results of operations and cash
flows are also consolidated, along with our nonregulated
subsidiaries, in our consolidated financial statements.
Noncontrolling interests in subsidiaries along with the
income or loss attributed to these interests are included
in minority interest in both the Consolidated Balance
Sheets and in the Consolidated Statements of Income.
The results of operations for minority interest are
reported on a net of tax basis if the underlying subsidiary
is structured as a taxable entity.
Unconsolidated investments in companies over which
we do not have control, but have the ability to exercise
influence over operating and financial policies (generally
20 percent to 50 percent ownership), are accounted
for under the equity method of accounting. These
investments are primarily in limited liability corporations
and limited liability partnerships, and the earnings from
these investments are recorded on a pre-tax basis (See
Note 20). Other investments are stated principally at cost.
These equity and cost method investments are included
in miscellaneous other property and investments in the
Consolidated Balance Sheets. See Note 13 for more
information about our investments.
Diversified business revenues and expenses represent
the operating activities of our consolidated nonregulated
operations, primarily the Coal and Synthetic Fuels
segment. These operations are separate and distinct
businesses from the Utilities.
Significant intercompany balances and transactions have
been eliminated in consolidation except as permitted by
Statement of Financial Accounting Standards (SFAS)
No. 71, “Accounting for the Effects of Certain Types of
Regulation” (SFAS No. 71), which provides that profits
on intercompany sales to regulated affiliates are not
eliminated if the sales price is reasonable and the future
recovery of the sales price through the ratemaking
process is probable.
These notes accompany and form an integral part of our
consolidated financial statements.
Certain amounts for 2005 and 2004 have been reclassified
to conform to the 2006 presentation.
C. Consolidation of Variable Interest Entities
We consolidate all voting interest entities in which we
own a majority voting interest and all variable interest
entities for which we are the primary beneficiary in
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S