Progress Energy 2007 Annual Report Download - page 55

Progress Energy Annual Report 2007
53
We previously announced that we are pursuing
development of COL applications to potentially construct
new nuclear plants in North Carolina and Florida. Filing
of a COL is not a commitment to build a nuclear plant but
is a necessary step to keep open the option of building
a plant or plants. The NRC estimates that it will take
approximately three to four years to review and process
the COL applications.
On January 23, 2006, we announced that PEC selected
a site at Harris to evaluate for possible future nuclear
expansion. We have selected the Westinghouse Electric
AP1000 reactor design as the technology upon which
to base PEC’s application submission. On February 19,
2008, PEC filed its COL application with the NRC for two
additional reactors at Harris. If we receive approval
from the NRC and applicable state agencies, and if the
decisions to build are made, the new plant would not
be online until at least 2018 (See “Increasing Energy
Demand” above).
On December 12, 2006, we announced that PEF selected
a site in Levy County, Fla., to evaluate for possible future
nuclear expansion. We have selected the Westinghouse
Electric AP1000 reactor design as the technology upon
which to base PEF’s application submission. PEF expects
to file the application for the COL in 2008. If we receive
approval from the NRC and applicable state agencies,
and if the decision to build is made, safety-related
construction activities could begin as early as 2012, and a
new plant could be online in 2016 (See “Increasing Energy
Demand” above). In 2007, PEF completed the purchase of
approximately 5,000 acres for the Levy County site and
associated transmission needs. PEF anticipates filing a
Determination of Need petition with the FPSC in 2008.
In 2007, both the Levy County Planning Commission
and the Board of Commissioners voted unanimously in
favor of PEF’s requests to change the comprehensive
land use plan. The Florida Department of Community
Affairs (FDCA) reviewed the proposed changes to the
comprehensive land use plan and in their report, the
FDCA expressed concerns related to the intensity of use
and environmental suitability for some of the proposed
amendments impacting PEF’s proposed Levy County
nuclear site. We anticipate that the Levy County Planning
Commission will resolve the FDCA’s concerns without
impact to the potential project schedule. We cannot
predict the outcome of this matter.
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 enacted in 2006, the FPSC ordered new rules in
December 2006 that would allow investor-owned utilities
such as PEF to request recovery of certain 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. The nuclear cost-recovery rule also
has a provision to recover costs should the project be
abandoned once the utility receives a final order granting
a Determination of Need. These costs include any
unrecovered construction work in progress at the time of
abandonment and any other prudent and reasonable exit
costs. 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.
In 2007, the South Carolina legislature ratified new
energy legislation, which includes provisions for cost-
recovery mechanisms associated with nuclear baseload
generation. The North Carolina legislature ratified new
energy legislation, which authorizes the NCUC to allow
annual prudence reviews of baseload generating plant