Progress Energy 2010 Annual Report Download - page 111

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Progress Energy Annual Report 2010
22. COMMITMENTS AND CONTINGENCIES
A. Purchase Obligations
In most cases, our purchase obligation contracts contain
provisions for price adjustments, minimum purchase
levels and other financial commitments. The commitment
(in millions) 2011 2012 2013 2014 2015 Thereafter Total
Fuel(a) $2,407 $2,365 $1,985 $1,441 $1,224 $6,719 $16,141
Purchased power 475 457 440 382 389 3,461 5,604
Construction obligations(a) 507 230 122 51 55 14 979
Other purchase obligations 122 72 66 41 69 697 1,067
Total $3,511 $3,124 $2,613 $1,915 $1,737 $10,891 $23,791
(a) PEF signed an engineering, procurement and construction (EPC) agreement on December 31, 2008, with Westinghouse Electric Company
LLC and Stone & Webster, Inc. for two approximately 1,100-MW Westinghouse AP1000 nuclear units planned for construction at Levy.
Due to uncertainty regarding the ultimate magnitude and timing of obligations under the EPC agreement and the Levy nuclear fabrication
contract, the table includes only the obligations related to the selected components of long lead time equipment as discussed under “Fuel
and Purchased Power” and “Construction Obligations”.
amounts presented below are estimates and therefore
will likely differ from actual purchase amounts.
At December 31, 2010, the following table reflects
contractual cash obligations and other commercial
commitments in the respective periods in which they
are due:
FUEL AND PURCHASED POWER
Through our subsidiaries, we have entered into various
long-term contracts for coal, oil, gas and nuclear fuel
as well as transportation agreements for the related
fuel. Our purchases under these commitments were
$2.890 billion, $2.921 billion and $3.078 billion for 2010,
2009 and 2008, respectively. Essentially all fuel and
certain purchased power costs incurred by PEC and PEF
are eligible for recovery through their respective cost-
recovery clauses.
In December 2008, PEF entered into a nuclear fuel
fabrication contract for the planned Levy nuclear
units. The construction schedule and startup dates
were subsequently revised. (See discussion following
under “Construction Obligations.”) This approximately
$400 million contract (for fuel plus related core
components), which is excluded from the previous table,
is for the period from 2019 through 2033, and contains exit
provisions with termination fees that vary based on the
circumstance.
Both PEC and PEF have ongoing purchased power
contracts, including renewable energy contracts, with
certain co-generators, primarily qualified facilities
(QFs), with expiration dates ranging from 2011 to 2030.
These purchased power contracts generally provide for
capacity and energy payments or bundled capacity and
energy payments.
PEC executed two long-term tolling agreements for the
purchase of all of the power generated from Broad River
LLC’s Broad River facility. One agreement provides for the
purchase of approximately 500 MW of capacity through
May 2021 with average minimum annual payments of
approximately $24 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 $24 million representing
capital-related capacity costs. Total purchases for both
capacity and energy under the Broad River LLC’s Broad
River facility agreements amounted to $115 million,
$46 million and $44 million in 2010, 2009 and 2008,
respectively.
In 2007, PEC executed long-term agreements for the
purchase of power from Southern Power Company. The
agreements provide for firm unit capacity and energy
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 approximately $25 million for 2011 and $12 million
annually thereafter through 2019. Total purchases for
both capacity and energy under the agreements were
$92 million in 2010.
PEC has various pay-for-performance contracts with
QFs, including renewable energy, for approximately 31
MW of firm capacity expiring at various times through
2030. 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 $8 million, $24 million
and $55 million in 2010, 2009 and 2008, respectively.