Progress Energy 2006 Annual Report Download - page 84

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
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Our decommissioning cost provisions, which are
included in depreciation and amortization expense, were
$31 million each in 2006, 2005 and 2004. Management
believes that decommissioning costs that have been and
will be recovered through rates by PEC and PEF will be
sufficient to provide for the costs of decommissioning.
Expenses recognized for the disposal or removal of
utility assets that are not SFAS No. 143 asset retirement
obligations, which are included in depreciation and
amortization expense, were $123 million, $168 million and
$160 million in 2006, 2005 and 2004, respectively.
During 2005, PEF performed a depreciation study as
required by the FPSC no less than every four years.
Implementation of the depreciation study decreased the
rates used to calculate cost of removal expense with a
resulting decrease of approximately $55 million in 2006.
The Utilities recognize removal, nonirradiated
decommissioning and dismantlement of fossil generation
plant costs in regulatory liabilities on the Consolidated
Balance Sheets (See Note 7A). At December 31, such
costs consisted of:
The NCUC requires that PEC update its cost estimate for
nuclear decommissioning every five years. PEC’s most
recent site-specific estimates of decommissioning costs
were developed in 2004, using 2004 cost factors, and
are based on prompt dismantlement decommissioning,
which reflects the cost of removal of all radioactive and
other structures currently at the site, with such removal
occurring after operating license expiration. These
decommissioning cost estimates also include interim
spent fuel storage costs associated with maintaining
spent nuclear fuel on site until such time that it can
be transferred to a DOE facility (See Note 22D). These
estimates, in 2004 dollars, were $569 million for Unit No.
2 at Robinson Nuclear Plant (Robinson), $418 million
for Brunswick Nuclear Plant (Brunswick) Unit No. 1,
$444 million for Brunswick Unit No. 2, and $775 million
for Harris. The estimates are subject to change based
on a variety of factors including, but not limited to, cost
escalation, changes in technology applicable to nuclear
decommissioning and changes in federal, state or local
regulations. The cost estimates exclude the portion
attributable to North Carolina Eastern Municipal Power
Agency (Power Agency), which holds an undivided
ownership interest in Brunswick and Harris. Extended NRC
operating licenses held by PEC currently expire in July
2030, December 2034 and September 2036 for Robinson
and Brunswick Units No. 2 and No. 1, respectively. An
application to extend the licenses 20 years for the
Brunswick units was approved in June 2006. The NRC
operating license held by PEC for Harris currently expires
in October 2026. An application to extend this license
20 years was submitted in the fourth quarter of 2006.
Based on updated assumptions, in 2005 PEC reduced its
asset retirement cost net of accumulated depreciation
and its ARO liability by approximately $14 million and
$49 million, respectively.
The FPSC requires that PEF update its cost estimate for
nuclear decommissioning every five years. PEF filed a
new site-specific estimate of decommissioning costs
for the Crystal River Unit No. 3 (CR3) with the FPSC on
April 29, 2005, as part of PEF’s base rate filing. PEF’s estimate
is based on prompt dismantlement decommissioning and
includes interim spent fuel storage costs associated with
maintaining spent nuclear fuel on site until such time that
it can be transferred to a DOE facility (See Note 22D). The
estimate, in 2005 dollars, is $614 million and is subject
to change based on a variety of factors including, but
not limited to, cost escalation, changes in technology
applicable to nuclear decommissioning and changes
in federal, state or local regulations. The cost estimate
excludes the portion attributable to other co-owners
of CR3. The NRC operating license held by PEF for CR3
currently expires in December 2016. An application to
extend this license 20 years is expected to be submitted
in the first quarter of 2009. As part of this new estimate
and assumed license extension, PEF reduced its asset
retirement cost net of accumulated depreciation and its
ARO liability by approximately $36 million and $94 million,
respectively. In addition, we reduced PEF-related asset
retirement costs, net of accumulated depreciation, by an
additional $53 million at Progress Energy. Retail accruals
on PEF’s reserves for nuclear decommissioning were
previously suspended through December 2005 under the
terms of a previous base rate agreement, and the base
rate agreement resulting from a base rate proceeding in
2005 continues that suspension. In addition, the wholesale
accrual on PEF’s reserves for nuclear decommissioning
was suspended retroactive to January 2006, following a
FERC accounting order issued in November 2006.
(in millions) 2006 2005
Removal costs $1,341 $1,316
Nonirradiated decommissioning costs 137 132
Dismantlement costs 124 123
Non-ARO cost of removal $1,602 $1,571