Progress Energy 2010 Annual Report Download - page 50

46
MANAGEMENT’S DISCUSSION AND ANALYSIS
and estimated costs to comply with the CAVR. The FDEP
finalized฀ a฀ Regional฀ Haze฀ implementation฀ rule฀ that฀ goes฀
beyond BART by requiring sources significantly impacting
visibility in Class I areas to install additional controls by
December 31, 2017. However, in the spring of 2010 the EPA
indicated that the Reasonable Further Progress portion of
the฀Regional฀Haze฀implementation฀rule฀is฀not฀approvable.฀
In August 2010, the FDEP amended the rule by removing
the Reasonable Further Progress provision, including the
December 31, 2017, deadline for installation of additional
controls, and instead will rely on current federal programs
to achieve improvement in visibility. The outcome of these
matters cannot be predicted.
Compliance Strategy
Both PEC and PEF have been developing an integrated
compliance strategy to meet the requirements of the
CAIR, the CAVR, mercury regulation and related air
quality regulations. The air quality controls installed to
comply with NOx requirements under certain sections of
the CAA and the Clean Smokestacks Act, as well as PEC’s
plan to replace a portion of its coal-fired generation with
natural gas-fueled generation, resulted in a reduction of
the costs to meet PEC’s CAIR requirements.
PEC’s environmental compliance projects under the first
phase of Clean Smokestacks Act emission reductions
have been placed in service. PEF’s environmental
compliance projects have also been placed in service.
The FPSC approved PEF’s petition to develop and
implement an Integrated Clean Air Compliance Plan to
comply with the CAIR, CAMR and CAVR and for recovery
of prudently incurred costs necessary to achieve this
strategy through the ECRC (see discussion previously
regarding the vacating of the CAMR and remanding
of the CAIR and its potential impact on CAVR). PEF’s
April 1, 2010 filing with the FPSC for true-up of final 2009
environmental costs included a review of the Integrated
Clean Air Compliance Plan, which reconfirmed the
efficacy of the recommended plan and included an
estimated total project cost of approximately $1.1 billion
to be spent through 2016, to plan, design, build and install
pollution control equipment at the Anclote Plant, CR4
and CR5. The majority of the $1.1 billion estimated total
project cost related to CR4 and CR5 projects, which have
been placed in service. Additional costs may be incurred
if pollution controls are required in order to comply with
the requirements of the CAVR, as discussed previously,
or to meet compliance requirements of the final Transport
Rule. Subsequent rule interpretations, increases in
the underlying material, labor and equipment costs,
equipment availability, or the unexpected acceleration
of compliance dates, among other things, could result
in significant increases in our estimated costs to comply
and acceleration of some projects. The outcome of this
matter cannot be predicted.
Environmental Compliance Cost Estimates
Costs to comply with environmental laws and regulations
are eligible for regulatory recovery through either base
rates or cost-recovery clauses. The outcome of future
petitions for recovery cannot be predicted. Our estimates of
capital expenditures to comply with environmental laws and
regulations are subject to periodic review and revision and
may vary significantly. PEC is continuing to evaluate various
design, technology and new generation options that could
change expenditures required to maintain compliance
with the Clean Smokestacks Act limits subsequent to 2013.
Additional compliance plans for PEC and PEF to meet the
requirements of the Transport Rule will be determined
upon฀ finalization฀ of฀ the฀ rule.฀ As฀ a฀ result฀ of฀ the฀ decision฀
remanding the CAIR, compliance plans and costs to meet
the requirements of the CAVR are being reassessed and we
cannot predict the impact that the EPA’s further proceedings
will have on our compliance with the CAVR requirements.
Compliance plans to meet the requirements of a revised
or new implementing rule for mercury will be determined
upon฀finalization฀of฀the฀rule.฀Compliance฀plans฀to฀meet฀the฀
requirements of a revised or new implementing rule under
Section 316(b) of the Clean Water Act (Section 316(b)), as
discussed฀below,฀will฀be฀determined฀upon฀finalization฀of฀the฀
rule. The timing and extent of the costs for future projects
will depend upon final compliance strategies. However, we
believe that future costs to comply with new or subsequent
rule interpretations could be significant.
North Carolina Attorney General Petition under
Section 126 of the Clean Air Act
In 2004, the North Carolina attorney general filed a
petition with the EPA, under Section 126 of the CAA,
asking the federal government to force fossil fuel-fired
power plants in 13 other states, including South Carolina,
to reduce their NOx and SO2 emissions. The state of North
Carolina contends these out-of-state emissions interfere
with North Carolina’s ability to meet National Ambient
Air฀Quality฀Standards฀(NAAQS)฀for฀ozone฀and฀particulate฀
matter. In 2006, the EPA issued a final response denying
the petition, and the North Carolina attorney general
filed a petition in the D.C. Court of Appeals seeking a
review of the agency’s denial. In 2009, the D.C. Court of
Appeals remanded the EPA’s denial to the agency for
reconsideration. The outcome of the remand proceeding
cannot be predicted.