Progress Energy 2010 Annual Report Download - page 43

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Progress Energy Annual Report 2010
OTHER MATTERS
Regulatory Environment
The Utilities’ operations in North Carolina, South Carolina
and Florida are regulated by the NCUC, the SCPSC and
the FPSC, respectively. The Utilities are also subject to
regulation by the FERC, the NRC and other federal and
state agencies common to the utility business. As a result
of regulation, many of the fundamental business decisions,
as well as the rate of return the Utilities are permitted the
opportunity to earn, are subject to the approval of one or
more of these governmental agencies.
To our knowledge, there is currently no enacted or
proposed legislation in North Carolina, South Carolina
or Florida that would give retail ratepayers the right to
choose their electricity provider or otherwise restructure
or deregulate the electric industry. We cannot anticipate
if any of these states will move to increase retail
competition in the electric industry.
Current retail rate matters affected by state regulatory
authorities are discussed in Notes 7B and 7C. This
discussion identifies specific retail rate matters, the
status of the issues and the associated effects on our
consolidated financial statements.
On April 28, 2010, we accepted a grant from the United
States Department of Energy (DOE) for $200 million in
federal matching infrastructure funds. In addition to
providing the Utilities real-time information about the
state of their electric grids, the smart grid transition will
enable customers to better understand and manage their
energy use, and will provide for more efficient integration
of renewable energy resources. Supplementing the DOE
grant, the Utilities will invest more than $300 million in
smart grid projects, which include enhancements to
distribution equipment, installation of 160,000 additional
smart meters and additional public infrastructure for
plug-in electric vehicles. Projects funded by the grant
must be completed by April 2013.
Through December 31, 2010, we have incurred $107 million
of allowable, 50 percent reimbursable, smart grid project
costs, and have submitted to the DOE requests for
reimbursement of $47 million, of which we have received
$34 million reimbursement.
Concerns about climate change and oil price volatility
have led to proposed and enacted legislation at the
federal and state levels to increase renewable energy
and reduce GHG emissions.
The North Carolina Renewable Energy and Energy
Efficiency Portfolio Standard (NC REPS) requires PEC
to file an annual compliance report with the NCUC
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 earned after January 1, 2008. North Carolina
electric power suppliers with a renewable energy
compliance obligation, including PEC, are participating in
the renewable energy certificate tracking system, which
came online July 1, 2010. North Carolina law mandates
that utilities achieve a targeted amount of energy from
specified renewable energy resources or implementation
of energy-efficiency measures beginning with a 3 percent
requirement in 2012 escalating to 12.5 percent in 2021.
PEC expects to be in compliance with this requirement.
In 2007, the governor of Florida issued executive orders to
address reduction of GHG emissions. The executive orders
include adoption of a maximum allowable emissions
level of GHGs for Florida utilities, which will require, at
a minimum, the following three reduction milestones: by
2017, emissions not greater than Year 2000 utility sector
emissions; by 2025, emissions not greater than Year 1990
utility sector emissions; and by 2050, emissions not greater
than 20 percent of Year 1990 utility sector emissions. The
executive orders also requested that the FPSC initiate a
rulemaking that would (1) require Florida utilities to produce
at least 20 percent of their electricity from renewable
sources; (2) reduce the cost of connecting solar and other
renewable energy technologies to Florida’s power grid by
adopting uniform statewide interconnection standards for
all฀utilities;฀and฀(3)฀authorize฀a฀uniform,฀statewide฀method฀
to enable residential and commercial customers who
generate electricity from onsite renewable technologies
of up to 1 MW in capacity to offset their consumption over
a billing period by allowing their electric meters to turn
backward when they generate electricity (net metering).
In response to the executive orders, Florida energy law
enacted in 2008 includes provisions that required the FPSC
to develop a renewable portfolio standard that the FPSC
would present to the legislature for ratification and also
includes provisions that direct the Florida Department
of Environmental Protection (FDEP) to develop rules
establishing a cap-and-trade program to regulate GHG
emissions that the FDEP would present to the legislature
no earlier than January 2010 for ratification. To date,
the Florida legislature has not ratified or enacted any
renewable portfolio standard or cap-and-trade rules or
programs.฀ Until฀ these฀ agency฀ actions฀ are฀ finalized,฀ we฀
cannot predict the outcome of this matter.