Progress Energy 2008 Annual Report Download - page 110

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
108
(in millions) 2008 2007
PEC
MGP and other sites(a) $16 $16
PEF
Remediation of distribution and substation transformers 22 31
MGP and other sites 15 17
Total PEF environmental remediation accruals(b) 37 48
Total Progress Energy environmental remediation accruals $53 $64
(a) Expected to be paid out over one to five years.
(b) Expected to be paid out over one to 15 years.
In addition to the Utilities’ sites, discussed under “PEC” and
“PEF” below, we incurred indemnity obligations related
to certain pre-closing liabilities of divested subsidiaries,
including certain environmental matters (See discussion
under Guarantees in Note 22C).
PEC
In 2006, the NCUC and the SCPSC authorized PEC to defer
and amortize certain environmental remediation expenses.
Remediation expenses not authorized to be deferred are
included in operation and maintenance expense.
Including the Ward Transformer site located in Raleigh,
N.C. (Ward), and MGP sites discussed below, for the year
ended December 31, 2008, PEC accrued approximately
$8 million, of which $2 million was deferred, and spent
approximately $8 million. These amounts primarily relate
to the Ward site. For the year ended December 31, 2007,
including the Carolina Transformer site, the Ward site
and MGP sites discussed below, PEC’s accrual was
reduced by a net amount of approximately $2 million and
PEC spent approximately $4 million. For the year ended
December 31, 2006, PEC accrued approximately $21 million
and spent approximately $6 million. The 2006 accrual included
$12 million for the minimum estimated total remediation
cost for all of PEC’s remaining MGP sites based upon newly
available data for several of PEC’s MGP sites, which had
individual site remediation costs ranging from approximately
$2 million to $4 million.
PEC has recorded a minimum estimated total remediation
cost for all of its remaining MGP sites based upon its
historical experience with remediation of several of its MGP
sites. The maximum amount of the range for all the sites
cannot be determined at this time as one of the remaining
sites is significantly larger than the sites for which we have
historical experience. Actual experience may differ from
current estimates, and it is probable that estimates will
continue to change in the future.
During the fourth quarter of 2004, the EPA advised PEC that
it had been identified as a PRP at the Ward site. The EPA
offered PEC and a number of other PRPs the opportunity
to negotiate the removal action for the Ward site and
reimbursement to the EPA for the EPA’s past expenditures
in addressing conditions at the Ward site. Subsequently,
PEC and other PRPs signed a settlement agreement, which
requires the participating PRPs to remediate the Ward site.
During 2007, the PRP agreement was amended to include
an additional participating PRP, which reduced, on an
interim basis, PEC’s proportionate responsibility for
funding the remediation. During 2008, PEC increased its
accrual due to an increase in the estimated scope of work.
At December 31, 2008 and 2007, PEC’s recorded liability
for the site was approximately $7 million and $6 million,
respectively. Actual experience may differ from current
estimates, and it is probable that estimates will continue
to change in the future. On September 12, 2008, PEC filed
a complaint seeking contribution for and recovery of
costs incurred in remediating the Ward site, as well as
a declaratory judgment that defendants are jointly and
severally liable for response costs at the site. The complaint
names 28 parties that did not sign a tolling agreement with
PEC, which was entered into by over 200 PRPs. The tolling
agreement suspends the running of the statute of limitations
for determination of cost recovery from PRPs at the Ward
site. The litigation has been stayed to allow the parties to
explore private settlements. The outcome of these matters
cannot be predicted.
On September 30, 2008, the EPA issued a Record of Decision
for the operable unit for stream segments downstream from
the Ward site (Ward OU1) and advised 61 parties, including
PEC, of their identification as PRPs for Ward OU1 and for the
operable unit for further investigation at the Ward facility
and certain adjacent areas (Ward OU2). The EPA’s estimate
for the selected remedy for Ward OU1 is approximately
$6 million. The EPA offered PEC and the other PRPs the
opportunity to negotiate implementation of a response action
for Ward OU1 and a remedial investigation and feasibility
study for Ward OU2, as well as reimbursement to the EPA
of approximately $1 million for the EPA’s past expenditures
in addressing conditions at the site. On January 19, 2009,
PEC and several of the other participating PRPs at the Ward
site submitted a letter containing a good faith response to
the EPA’s September 30, 2008 letter. Another group of PRPs
separately submitted a good faith response to the EPA’s
September 30, 2008 letter. Although a loss is considered
probable, an agreement among the PRPs for these matters
has not been reached; consequently, it is not possible at
this time to reasonably estimate the total amount of PEC’s
obligation for Ward OU1 and Ward OU2.