Progress Energy 2010 Annual Report Download - page 21

17
Progress Energy Annual Report 2010
of฀ Clean฀ Smokestacks฀ Act฀ amortization฀ recognized฀
in 2008, partially offset by the $21 million impact of
depreciable asset base increases. The North Carolina
jurisdictional aggregate minimum amount of accelerated
cost recovery has been met, and the South Carolina
jurisdictional obligation was terminated by the SCPSC.
PEC does not anticipate recording additional accelerated
depreciation in the North Carolina jurisdiction, but will
record depreciation over the remaining useful lives of
the assets. In accordance with a regulatory order, PEC
ceased฀to฀amortize฀Clean฀Smokestacks฀Act฀compliance฀
costs, but will record depreciation over the useful lives
of the assets.
Taxes Other Than on Income
Taxes other than on income was $218 million for 2010,
which represents an $8 million increase compared to
2009. This increase was primarily due to an increase in
gross receipts taxes due to higher operating revenues.
Taxes other than on income was $210 million for 2009,
which represents a $12 million increase compared to
2008. The increase was primarily due to an increase in
gross receipts taxes due to higher operating revenues
and higher property tax rates. Gross receipts taxes are
collected from customers and recorded as revenues and
then remitted to the applicable taxing authority. Therefore,
these taxes have no material impact on earnings.
Other
Other operating expense was an expense of $8 million
in 2010 and income of $5 million in 2008. The $8 million
expense in 2010 was primarily due to the $7 million
impairment of certain miscellaneous investments. The
$5 million income in 2008 was primarily due to gain on
land sales. Management does not consider impairments
to be representative of PEC’s fundamental core earnings.
Therefore, the impacts of impairments are excluded in
computing PEC’s Ongoing Earnings.
Total Other Income, Net
Total other income, net was $67 million for 2010, which
represents a $47 million increase compared to 2009. This
increase was primarily due to favorable AFUDC equity of
$31 million resulting from increased construction project
costs and a $16 million cumulative prior period adjustment
charge recorded in 2009 related to certain employee life
insurance benefits. The prior period adjustment is not
material to 2009 or previously issued financial statements.
Management determined that the adjustment should be
an exclusion from PEC’s 2009 Ongoing Earnings.
Total other income, net was $20 million for 2009, which
represents a $23 million decrease compared to 2008. This
decrease was primarily due to the previously discussed
$16 million cumulative prior period adjustment related to
certain employee life insurance benefits as well as lower
interest income resulting from lower average eligible
deferred fuel balances.
Total Interest Charges, Net
Total interest charges, net was $186 million, $195 million
and $207 million for 2010, 2009 and 2008, respectively.
The $9 million decrease in 2010 compared to 2009 was
primarily due to $7 million favorable AFUDC debt related
to increased construction project costs. The $12 million
decrease in 2009 compared to 2008 was primarily due to
lower interest rates on variable rate debt, partially offset
by higher interest as a result of higher average debt
outstanding.
Income Tax Expense
Income tax expense was $350 million, $277 million and
$298 million in 2010, 2009 and 2008, respectively. The
$73 million increase in 2010 compared to 2009 was
primarily due to the $64 million impact of higher pre-tax
income and the $12 million impact of the change in the tax
treatment of the Medicare Part D subsidy resulting from
federal health care reform enacted earlier in 2010 (See
Note 16). Management does not consider the change in
the tax treatment of the Medicare Part D subsidy to be
representative of PEC’s fundamental core earnings, and
therefore, the amount is excluded in computing PEC’s
Ongoing Earnings. The $21 million income tax expense
decrease in 2009 compared to 2008 was primarily due
to the impact of lower pre-tax income and the $5 million
favorable tax benefit related to a deduction triggered
by the transfer of previously funded amounts from
nonqualified NDT funds to qualified NDT funds.
Progress Energy Florida
PEF contributed net income available to parent totaling
$451 million, $460 million and $383 million in 2010, 2009
and 2008, respectively. The decrease in net income
available to parent for 2010 as compared to 2009 was
primarily due to unfavorable AFUDC equity and higher
O&M expenses, partially offset by the favorable impact
of weather and higher clause-recoverable regulatory
returns. The increase in net income available to parent
for 2009 compared to 2008 was primarily due to higher
clause-recoverable regulatory returns, the favorable
impact of interim and limited base rate relief and the