Progress Energy 2007 Annual Report Download - page 89

Progress Energy Annual Report 2007
87
indefinitely. In the event we decide to abandon or cease
the use of a particular easement, an ARO would be
recorded at that time.
Our nonregulated AROs relate to our abandoned synthetic
fuels operations. The related asset retirement costs,
net of accumulated depreciation, totaled $1 million at
December 31, 2006, and none at December 31, 2007.
The following table presents the changes to the AROs
during the years ended December 31, 2007 and 2006.
Revisions to prior estimates of the PEC regulated ARO
are related to remeasuring the nuclear decommissioning
costs of irradiated plants to take into account updated
site-specific decommissioning cost studies, which are
required by the NCUC every five years. Revisions to prior
estimates of the PEF regulated ARO are related to the
updated cost estimate for nuclear decommissioning
described above.
E. Insurance
The Utilities are members of Nuclear Electric Insurance
Limited (NEIL), which provides primary and excess
insurance coverage against property damage to
members’ nuclear generating facilities. Under the primary
program, each company is insured for $500 million at each
of its respective nuclear plants. In addition to primary
coverage, NEIL also provides decontamination, premature
decommissioning and excess property insurance with
limits of $1.750 billion on each nuclear plant.
Insurance coverage against incremental costs of
replacement power resulting from prolonged accidental
outages at nuclear generating units is also provided
through membership in NEIL. Both PEC and PEF are
insured under NEIL, following a 12-week deductible
period, for 52 weeks in the amount of $4 million per
week at the Brunswick, Harris and Robinson plants, and
$5 million per week at the Crystal River Plant. An additional
110 weeks of coverage is provided at 80 percent of the
above weekly amounts. For the current policy period,
the companies are subject to retrospective premium
assessments of up to approximately $34 million with
respect to the primary coverage, $37 million with respect
to the decontamination, decommissioning and excess
property coverage, and $24 million for the incremental
replacement power costs coverage, in the event covered
losses at insured facilities exceed premiums, reserves,
reinsurance and other NEIL resources. Pursuant to
regulations of the NRC, each company’s property damage
insurance policies provide that all proceeds from such
insurance be applied, first, to place the plant in a safe
and stable condition after an accident and, second,
to decontaminate, before any proceeds can be used
for decommissioning, plant repair or restoration. Each
company is responsible to the extent losses may exceed
limits of the coverage described above.
Both of the Utilities are insured against public liability for a
nuclear incident up to $10.760 billion per occurrence. Under
the current provisions of the Price Anderson Act, which
limits liability for accidents at nuclear power plants, each
company, as an owner of nuclear units, can be assessed
for a portion of any third-party liability claims arising from
an accident at any commercial nuclear power plant in
the United States. In the event that public liability claims
from each insured nuclear incident exceed the primary
level of coverage provided by American Nuclear Insurers,
each company would be subject to pro rata assessments
of up to $100 million for each reactor owned for each
incident. Payment of such assessments would be made
over time as necessary to limit the payment in any one
year to no more than $15 million per reactor owned per
incident. Both the maximum assessment per reactor and
the maximum yearly assessment are adjusted for inflation
at least every five years. The next scheduled adjustment
is due on or before August 31, 2008.
Under the NEIL policies, if there were multiple terrorism
losses occurring within one year, NEIL would make
available one industry aggregate limit of $3.200 billion for
non-certified acts, along with any amounts it recovers
from reinsurance, government indemnity or other sources
up to the limits for each claimant. If terrorism losses
occurred beyond the one-year period, a new set of limits
and resources would apply.
The Utilities self-insure their transmission and distribution
lines against loss due to storm damage and other natural
disasters. PEF maintains a storm damage reserve pursuant
to a regulatory order and may defer losses in excess of
the reserve (See Note 7C).
(in millions) Regulated Nonregulated
Asset retirement obligations at
January 1, 2006 $1,239 $–
Accretion expense 72 –
Remediation (2) 1
Revisions to prior estimates (6) –
Asset retirement obligations at
December 31, 2006 1,303 1
Accretion expense 75 –
Remediation – (1)
Asset retirement obligations at
December 31, 2007 $1,378 $–