Progress Energy 2008 Annual Report Download - page 80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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intended to produce future benefits and authorizes the
NCUC to approve other forms of financial incentives to
the utility for DSM and energy-efficiency programs. DSM
programs include, but are not limited to, any program
or initiative that shifts the timing of electricity use from
peak to nonpeak periods and includes load management,
electricity system and operating controls, direct load
control, interruptible load and electric system equipment
and operating controls. PEC has begun implementing
a series of DSM and energy-efficiency programs and,
as of December 31, 2008, has deferred $8 million of
implementation and program costs for future recovery.
In 2008, PEC filed for NCUC approval of multiple DSM and
energy-efficiency programs. The majority of the programs
has been approved by the NCUC or is pending further
review. We cannot predict the outcome of the DSM and
energy-efficiency filings pending further approval by the
NCUC or whether the programs will produce the expected
operational and economic results.
On June 6, 2008, and as subsequently amended, PEC filed
an application with the NCUC for approval of a DSM and
energy-efficiency clause to recover the costs of these
programs and a return on the costs. Although the NCUC
is not expected to make a decision on this filing until first
quarter 2009, on November 14, 2008, the NCUC approved
PEC collecting the DSM and energy-efficiency related
costs beginning December 1, 2008. On December 9, 2008,
the North Carolina Public Staff filed an Agreement and
Stipulation of Partial Settlement with PEC and some of
the other parties to the proceedings. The NCUC held a
hearing on the matter on January 7, 2009. If the rates
being collected as of December 1, 2008, are approved,
residential electric bills would increase by $0.74 per
1,000 kWh, or 0.8 percent. The increase in rates is subject
to true-up in future proceedings. We cannot predict the
outcome of this matter.
PEC filed a petition on November 30, 2007, with the SCPSC
seeking authorization to create a deferred account for
DSM and energy-efficiency expenses. On December 21,
2007, the SCPSC issued an order granting PEC’s petition.
As a result, PEC has deferred $1 million of implementation
and program costs for future recovery in the South Carolina
jurisdiction. On June 27, 2008, PEC filed an application
with the SCPSC to establish procedures that encourage
investment in cost-effective energy-efficient technologies
and energy conservation programs and approve the
establishment of an annual rider to allow recovery for
all costs associated with such programs, as well as the
recovery of appropriate incentives for investing in such
programs. On January 23, 2009, PEC filed a Stipulation
Agreement between PEC and some of the other parties
to the proceeding. A hearing on this matter was held
on February 12, 2009. We cannot predict the outcome of
this matter.
RENEWABLE ENERGY AND ENERGY EFFICIENCY PORT-
FOLIO STANDARD COST RECOVERY
On February 29, 2008, the NCUC issued an order
adopting final rules for implementing North Carolina’s
comprehensive energy legislation. These rules provide
filing requirements associated with the legislation. The
order required PEC to submit its first annual Renewable
Energy and Energy Efficiency Portfolio Standard (NC
REPS) compliance plan as part of its integrated resource
plan, which was filed on September 2, 2008. Under the
new rules, beginning in 2009, PEC will also be required to
file an annual NC REPS compliance report demonstrating
the actions it has taken to comply with the NC REPS
requirement. The rules measure compliance with the NC
REPS requirement via renewable energy certificates (REC)
earned after January 1, 2008. The NCUC will pursue a third-
party REC tracking system, but will not develop or require
participation in a REC trading platform at this time. Rates
for the NC REPS clause will be set based on projected
costs with true-up provisions. On June 6, 2008, and as
amended on August 22, 2008, PEC filed an application with
the NCUC for approval of a NC REPS clause to recover the
costs of this program. On November 14, 2008, the NCUC
approved a monthly charge per customer rather than a
usage-based rate. Effective December 1, 2008, residential
electric bills increased $0.36 per month.
OTHER MATTERS
The NCUC and the SCPSC approved proposals to
accelerate cost recovery of PEC’s nuclear generating
assets beginning January 1, 2000, and continuing
through 2009. The North Carolina aggregate minimum and
maximum amounts of cost recovery are $415 million and
$585 million, respectively, with flexibility in the amount of
annual depreciation recorded, from none to $150 million
per year. Accelerated cost recovery of these assets
resulted in additional depreciation expense of $52 million
and $37 million for the years ended December 31, 2008 and
2007, respectively. No additional depreciation expense
from accelerated cost recovery was recorded in 2006.
Through December 31, 2008, PEC recorded cumulative
accelerated depreciation of $415 million for the North
Carolina jurisdiction. The South Carolina aggregate
minimum and maximum amounts of cost recovery are
$115 million and $165 million, respectively. No additional
depreciation expense from accelerated cost recovery
was recorded in 2008, 2007 or 2006. Through December 31,
2008, PEC recorded cumulative accelerated depreciation
of $77 million for the South Carolina jurisdiction.