Progress Energy 2008 Annual Report Download - page 76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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Unit No. 2 and $775 million for Harris. The estimates are
subject to change based on a variety of factors including,
but not limited to, cost escalation, changes in technology
applicable to nuclear decommissioning and changes in
federal, state or local regulations. The cost estimates
exclude the portion attributable to North Carolina Eastern
Municipal Power Agency (Power Agency), which holds
an undivided ownership interest in Brunswick and Harris.
NRC operating licenses held by PEC currently expire in
July 2030, December 2034, September 2036 and October
2046 for Robinson, Brunswick Units No. 2 and No. 1 and
Harris, respectively. On December 17, 2008, Harris received
a 20-year extension from the NRC on its operating license,
which extends the operating license through 2046. Based
on updated assumptions, in 2005 PEC further reduced its
asset retirement cost net of accumulated depreciation
and its ARO liability by approximately $14 million and
$49 million, respectively. In 2009, PEC will be required to
file an updated nuclear decommissioning study.
The FPSC requires that PEF update its cost estimate for
nuclear decommissioning every five years. PEF received
a new site-specific estimate of decommissioning costs for
Crystal River Unit No. 3 (CR3) in October 2008, which PEF
will file with the FPSC in 2009 as part of PEF’s planned base
rate filing (See Note 7C). PEF’s estimate is based on prompt
dismantlement decommissioning and includes interim
spent fuel storage costs associated with maintaining
spent nuclear fuel on site until such time that it can be
transferred to a DOE facility (See Note 22D). The estimate,
in 2008 dollars, is $751 million and is subject to change
based on a variety of factors including, but not limited
to, cost escalation, changes in technology applicable to
nuclear decommissioning and changes in federal, state
or local regulations. The cost estimate excludes the
portion attributable to other co-owners of CR3. The NRC
operating license held by PEF for CR3 currently expires in
December 2016. PEF submitted an application requesting
a 20-year extension of this license on December 18, 2008.
PEF expects a decision from the NRC in 2011. As part
of this new estimate and assumed license extension,
PEF increased its asset retirement cost and its ARO
liability by approximately $19 million. Retail accruals
on PEF’s reserves for nuclear decommissioning were
previously suspended through December 2005 under the
terms of a previous base rate agreement, and the base
rate agreement resulting from a base rate proceeding in
2005 continues that suspension. PEF expects to continue
this suspension based on its planned 2009 base rate filing.
In addition, the wholesale accrual on PEF’s reserves for
nuclear decommissioning was suspended retroactive to
January 2006, following a FERC accounting order issued
in November 2006.
The FPSC requires that PEF update its cost estimate for
fossil plant dismantlement every four years. PEF received
an updated fossil dismantlement study estimate in 2008,
which PEF will file with the FPSC in 2009 as part of PEF’s
planned base rate filing. PEF’s reserve for fossil plant
dismantlement was approximately $145 million and
$144 million at December 31, 2008 and 2007, including
amounts in the ARO liability for asbestos abatement,
discussed below. Retail accruals on PEF’s reserves for
fossil plant dismantlement were previously suspended
through December 2005 under the terms of PEF’s previous
base rate agreement. The base rate agreement resulting
from a base rate proceeding in 2005 continued the
suspension of PEF’s collection from customers of the
expenses to dismantle fossil plants.
The Utilities have recognized ARO liabilities related to
asbestos abatement costs (See Note 1D). In 2008, we
reduced the ARO liabilities related to asbestos abatement
costs for the fossil plants by $12 million due to an updated
study. An additional ARO liability of $7 million was
recognized in 2008 for landfill capping costs.
We have identified but not recognized AROs
related to electric transmission and distribution and
telecommunications assets as the result of easements
over property not owned by us. These easements are
generally perpetual and require retirement action only
upon abandonment or cessation of use of the property
for the specified purpose. The ARO is not estimable for
such easements, as we intend to utilize these properties
indefinitely. In the event we decide to abandon or cease
the use of a particular easement, an ARO would be
recorded at that time.
The following table presents the changes to the AROs
during the years ended December 31, 2008 and 2007.
Revisions to prior estimates of the regulated ARO
are related to the updated cost estimates for nuclear
decommissioning and asbestos described above.
(in millions) Regulated Nonregulated
Asset retirement obligations at
January 1, 2007 $1,303 $1
Accretion expense 75 –
Remediation –(1)
Asset retirement obligations at
December 31, 2007 1,378 –
Additions 7 –
Accretion expense 79 –
Revisions to prior estimates 7 –
Asset retirement obligations at
December 31, 2008 $1,471 $–