Progress Energy 2008 Annual Report Download - page 113

111
Progress Energy Annual Report 2008
FUEL AND PURCHASED POWER
Through our subsidiaries, we have entered into various
long-term contracts for coal, oil, gas and nuclear fuel. Our
payments under these commitments were $3.078 billion,
$2.360 billion and $1.628 billion for 2008, 2007 and 2006,
respectively.
In December 2008, PEF entered into a nuclear fuel
fabrication contract for the planned Levy nuclear units.
(See discussion under Construction Obligations below.) This
$355 million contract (fuel plus related core components)
is for the period from 2014 through 2027 and contains exit
provisions with termination fees that vary based on the
circumstance.
Both PEC and PEF have ongoing purchased power contracts
with certain co-generators (primarily QFs) with expiration
dates ranging from 2009 to 2028. These purchased power
contracts generally provide for capacity and energy
payments.
PEC has a long-term agreement for the purchase of
power and related transmission services from Indiana
Michigan Power Company’s Rockport Unit No. 2 (Rockport).
The agreement provides for the purchase of 250 MW
(19 percent of net output) of capacity through 2009 with
an estimated remaining 2009 payment of approximately
$29 million, representing capital-related capacity costs.
Total purchases (including energy and transmission use
charges) under the Rockport agreement amounted to
$90 million, $77 million and $80 million for 2008, 2007 and
2006, respectively.
PEC executed two long-term tolling agreements for the
purchase of all of the power generated from Broad River
LLC’s Broad River facility (Broad River). One agreement
provides for the purchase of approximately 500 MW
of capacity through May 2021 with average minimum
annual payments of approximately $25 million, primarily
representing capital-related capacity costs. The second
agreement provides for the additional purchase of
approximately 335 MW of capacity through February
2022 with average annual payments of approximately
$26 million representing capital-related capacity costs. Total
purchases for both capacity and energy under the Broad
River agreements amounted to $44 million, $39 million and
$45 million in 2008, 2007 and 2006, respectively.
In 2007, PEC executed long-term agreements for the
purchase of power from Southern Power Company. The
agreements provide for capacity purchases of 305 MW
(68 percent of net output) for 2010, 310 MW (30 percent of
net output) for 2011 and 150 MW (33 percent of net output)
annually thereafter through 2019. Estimated payments for
capacity under the agreements are $23 million for 2010,
$24 million for 2011 and $16 million annually thereafter
through 2019.
PEC has various pay-for-performance contracts with QFs,
including renewable energy, for approximately 200 MW
of firm capacity expiring at various times through 2028. In
most cases, these contracts account for 100 percent of the
net generating capacity of each of the facilities. Payments
for both capacity and energy are contingent upon the QFs’
ability to generate. Payments made under these contracts
were $55 million, $95 million and $182 million in 2008, 2007
and 2006, respectively.
PEF has long-term contracts for approximately 489 MW
of purchased power with other utilities, including a
contract with Southern Company for approximately
414 MW (19 percent of net output) of purchased power
annually through 2016. Total purchases, for both energy
and capacity, under these agreements amounted to
$178 million, $161 million and $162 million for 2008, 2007
and 2006, respectively. Minimum purchases under these
contracts, representing capital-related capacity costs,
are approximately $70 million, $65 million, $56 million,
$48 million and $42 million for 2009 through 2013,
respectively, and $102 million payable thereafter.
PEF has ongoing purchased power contracts with certain
QFs for 786 MW of firm capacity with expiration dates
ranging from 2009 to 2025. Energy payments are based on
the actual power taken under these contracts. Capacity
payments are subject to the QFs meeting certain contract
performance obligations. In most cases, these contracts
account for 100 percent of the net generating capacity
of each of the facilities. All ongoing commitments have
been approved by the FPSC. Total capacity purchases
(in millions) 2009 2010 2011 2012 2013 Thereafter
Fuel $3,186 $2,532 $1,938 $1,532 $1,167 $6,669
Purchased power 422 432 447 436 419 3,477
Construction obligations 1,098 1,458 1,532 1,433 1,511 2,418
Other purchase obligations 53 68 40 33 24 168
Total $4,759 $4,490 $3,957 $3,434 $3,121 $12,732