Progress Energy 2007 Annual Report Download - page 94

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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its October 10, 2007 order asserting that the FPSC erred in
not ordering a larger refund. PEF filed its opposition to the
OPC’s request on November 1, 2007. On February 12, 2008,
the FPSC denied the OPC’s request for reconsideration.
PEF is also evaluating its options, including an appeal to
the Florida Supreme Court of the FPSC’s October 10, 2007
order. We cannot predict the outcome of this matter. The
FPSC also ordered PEF to address whether it was prudent
in its 2006 and 2007 coal purchases for CR4 and CR5. On
October 4, 2007, PEF filed a motion to establish a separate
docket on the prudence of its coal purchases for CR4 and
CR5 for the years 2006 and 2007. On October 17, 2007,
the FPSC granted that motion. The OPC filed testimony
in support of its position to require PEF to refund at least
$14 million for alleged excessive fuel recovery charges for
2006 coal purchases. PEF believes its coal procurement
practices have been prudent. We cannot predict the
outcome of this matter.
On September 22, 2006, PEF filed a petition with the
FPSC for Determination of Need to uprate CR3, bid rule
exemption and recovery of the revenue requirements
of the uprate through PEF’s fuel recovery clause. To the
extent the expenditures are prudently incurred, PEF’s
investment in the CR3 uprate is eligible for recovery
through base rates. PEF’s petition would allow for more
prompt recovery. The multi-stage uprate will increase
CR3’s gross output by approximately 180 MW by 2012.
PEF received NRC approval for a license amendment
and implemented the first stage’s design modification on
January 31, 2008, and will apply for the required license
amendment for the third stage’s design modification.
The petition filed with the FPSC included estimated
project costs of approximately $382 million. These cost
estimates may continue to change depending upon the
results of more detailed engineering and development
work and increased material, labor and equipment
costs. On February 8, 2007, the FPSC issued an order
approving the need certification petition and bid rule
exemption. The request for recovery through PEF’s fuel
recovery clause was transferred to a separate docket filed
on January 16, 2007. On February 2, 2007, intervenors filed a
motion to abate the cost-recovery portion of PEF’s request.
On February 9, 2007, PEF requested that the FPSC deny the
intervenors’ motion as legally deficient and without merit.
On March 27, 2007, the FPSC denied the motion to abate
and directed the staff of the FPSC to conduct a hearing to
determine whether the revenue requirements of the uprate
should be recovered through the fuel recovery clause. On
May 4, 2007, PEF filed amended testimony clarifying the
scope of the project. The FPSC held a hearing on this matter
on August 7 and 8, 2007. The staff of the FPSC recommended
that PEF be allowed to recover prudent and reasonable
costs of Phase 1, estimated at $6 million, through the
fuel clause. The staff of the FPSC recommended that the
costs of all other phases, estimated at $376 million, be
considered in a base rate proceeding. On October 19,
2007, PEF filed a notice of withdrawal of its cost-recovery
petition with the FPSC. On November 21, 2007, PEF filed a
petition with the FPSC seeking cost recovery under Florida’s
comprehensive energy bill enacted in 2006, and the FPSC’s
new nuclear cost-recovery rule. On February 13, 2008, PEF
filed a notice of withdrawal of its cost-recovery petition
with the FPSC. PEF will proceed with cost recovery under
Florida’s comprehensive energy bill and the FPSC’s nuclear
cost-recovery rule based on the regulatory precedence
established by a FPSC order to an unaffiliated Florida
utility for a nuclear uprate project. We cannot predict the
outcome of this matter.
STORM COST RECOVERY
On July 14, 2005, the FPSC issued an order authorizing PEF
to recover $232 million over a two-year period, including
interest, of the costs it incurred and previously deferred
related to PEF’s restoration of power associated with the
four hurricanes in 2004. The ruling allowed PEF to include
a charge of approximately $3.27 on the average residential
monthly customer bill of 1,000 kWh beginning August 1,
2005. The ruling by the FPSC approved the majority of
PEF’s requests with two exceptions: the reclassification
of $8 million of previously deferred costs to utility plant
and the reclassification of $17 million of previously
deferred costs as O&M expense, which was expensed
in the second quarter of 2005. The amount included in the
original November 2004 petition requesting recovery of
$252 million was an estimate. On September 12, 2005, PEF
filed a true-up to the original amount comprised primarily
of an additional $19 million of costs partially offset by
$6 million of adjustments resulting from allocating a
higher portion of the costs to the wholesale jurisdiction
and refining the FPSC adjustments. On November 9, 2005,
the recovery of this difference was administratively
approved by the FPSC, subject to audit by the FPSC staff.
The net impact was included in customer bills beginning
January 1, 2006. In 2007, 2006 and 2005, PEF recorded
amortization of $75 million, $122 million and $50 million,
respectively, associated with the recovery of these storm
costs. The retail portion of storm restoration costs were
fully recovered at December 31, 2007.
On April 25, 2006, PEF entered into a settlement agreement
with certain intervenors in its storm cost-recovery
docket that would allow PEF to extend its then-current
two-year storm surcharge, which equals approximately