Mail Stop 3561
July 27, 2005
By Facsimile and U.S. Mail
Mr. Robert McGehee
Chief Executive Officer
Progress Energy Inc.
410 South Wilmington Street
Raleigh, NC 27601-1748
Re: Progress Energy Inc.
Form 10-K for the year ended December 31, 2004
Filed March 16, 2005
File No. 1-15929
Carolina Power and Light Company
Form 10-K for the year ended December 31, 2004
Filed March 16, 2005
File No. 1-03382
Florida Power Corp
Form 10-K for the year ended December 31, 2004
Filed March 16, 2005
File No. 1-03274
Florida Progress Corp
Form 10-K for the year ended December 31, 2004
Filed March 16, 2005
File No. 1-08349
Dear Mr. McGehee:
We have reviewed your filings and have the following
comments.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
Please be as detailed as necessary in your explanation. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Progress Energy Inc. Form 10-K for the Year Ended December 31,
2004
and,
Caroline Power and Light Company Form 10-K for the Year Ended
December 31, 2004
Retail Rate Matters, page 17
1. Explain to us why you have not had a rate case since 1988. In
this regard, explain to us if you believe the cause and effect
relationship still exists under paragraph 57 to SFAS no. 71. In
particular, please specifically explain how the requirements of
paragraph 5(b) with respect to PEC`s specific costs of providing
service are met. Please be detailed in your response.
Synthetic Fuels Tax Credits, page 24
2. Explain to us the type of synthetic fuel you produce and the
IRS`s
position on the synfuel tax credit including compliance with the
"in
service date". Tell us whether any action has been taken by the
Service to date. Advise as to whether you have recorded any
allowance against the deferred tax assets or a tax cushion for
benefits taken in light of the adverse IRS field auditors`
position
or whether any amounts have been specifically disallowed.
Finally,
explain how an adverse outcome could impact your future regulatory
proceedings or the market value of the CVO`s. Tell us the
probability of recovery from ratepayers for any disallowed credits
and the basis for your probability assessment. We may have
further
comment.
Competitive Commercial Operations, page 24
3. Please explain to us what consideration you gave to possible
impairment any of your CCO gas generation plants in light of high
natural gas prices; which tend to reduce spark spreads. In
particular, explain to us whether any of the CCO facilities are
under
long-term power contracts with similar long-term fixed price fuel
arrangements. Please provide to us the results of any impairment
testing performed. Supplement your response with the financial
models used to estimate future cash flows. If none of the plants
were tested for impairment, explain why. In this regard, we
assume
impairment testing would be done at the individual plant location.
If otherwise, please justify. We may have further comment.
Non-regulated Businesses, page 44
4. You state you are a majority owner in five of six tax credit
generating entities that own facilities that produce synthetic
fuel.
Explain to us your consolidation policy with respect to your
ownership interests in the entities and/or the facilities that
produce the synfuel credits. Please also tell us the legal
structure
of the project and the type of synthetic fuel produced. If other
than a wholly owned corporate subsidiary, tell us the identity of
the
owners and whether the entity is a variable interest.
Goodwill, page 59
5. We note that during 2002, you completed the acquisition of
Walton
County Power, LLC and Washington County Power, LLC which resulted
in
goodwill of $64 million and was included in the CCO segment.
Please
explain in detail why this acquisition was accounted for as a
business combination as opposed to an asset acquisition. In
addition, tell us what constitutes a reporting unit for your
annual
goodwill impairment test of the CCO segment. If your reporting
unit
for the CCO segment is one level below the operating segment, then
provide us a summary of your goodwill impairment testing for the
acquired projects since it appears the purchase of such projects
resulted in the creation of the CCO segment`s goodwill.
Consolidated Statement of Cash Flows, page 86
6. Explain to us what comprises other operating cash flows
totaling
$167 million for the year ended December 31, 2004. In this
regard,
it appears the majority of the amount is unrelated to PEC or PEF.
Please ensure your description addresses the nature, amount and
entity.
Note 1. Organization and Summary of Significant Accounting
Policies
B. Basis of Presentation, page 88
7. Explain to us in detail why you have not provided any of the
disclosure required by SFAS no. 115 with respect to investments
held
by your nuclear decommissioning trust. We may have further
comment.
Note 4. Divestitures, page 95
8. Provide to us the calculations you performed to determine that
the
sale of your gas producing properties significantly altered the
ongoing relationship between capitalized costs and remaining
proved
reserves. Furthermore, describe the allocation method used to
allocate costs between reserves sold and reserves retained. If
you
utilized relative fair value, explain to us how the fair value was
calculated. Lastly, provide us the details of the calculation of
the
$56 million gain.
Note 8. Regulatory Matters
Asset Retirement Obligations, page 101
9. Explain in detail why you increased accumulated depreciation by
$345 million. Please specifically explain how the reduction of
estimated removal costs resulted from the depreciation studies in
2004. Please also provide us the accounting entries that were
made
and the rationale for such entries.
Energy Delivery Capitalization Practice, page 108
10. Explain to us the changed methodology used to conclude that a
revision to the amount of work capitalized was required. Also,
confirm to us that your capitalization policies are consistent
among
each utility. Furthermore, tell us the extent to which your
external
auditors had any concerns related to amounts that were previously
capitalized in your historical financial statements. In this
regard,
we presume the methodology to previously calculate non-
capitalizable
costs was used in your last rate case while the new method will be
used in your next rate case. Please advise if our understanding
is
not correct.
Note 17. Benefit Plans - A. Post Retirement Benefits, page 120
11. Tell us the method and length of time over which you are
amortizing the gain associated with the adoption of FSP 106-2. In
this regard, explain how you determine the average remaining
service
period of active participants and correlate that period to the
reduction in pension expense relative to the decrease in the
benefit
obligation.
Note 21. Other Income and Other Expense, page 128
12. Please explain to us what comprises non-regulated energy and
delivery services income and expense, and why you believe it is
appropriate to include such amounts in other income and expense as
opposed to diversified business expense.
Carolina Power and Light Company Financial Statements
13. Please address the above comments, as applicable.
Note 4.C Joint Ownership of Generating Facilities, page 155
14. Please tell us why you have not reflected the SFAS no. 90
disallowances on the Harris Plant in your SAB 10:C disclosure.
Schedule II, Page 182
15. Please explain the nature of the "Fossil dismantlement
reserve".
To the extent it represents amounts expensed due to collection in
rates of an amount for closure costs of fossil fuel generating
units,
explain why it has not been classified as a regulatory liability
pursuant to B73 of SFAS no. 143. Similarly, tell us the nature
and
classification of the "Nuclear refueling outage reserve".
Florida Power Corporation Inc. Form 10-K for the Year Ended
December
31, 2004
16. Please address the above comments, as applicable.
Consolidated Statements of Income, page 39
17. Explain to us what comprises other diversified operating
expenses
of $134 million for the year ended December 31, 2004. Contrast
the
composition of this line item to what is included in the same
category for Progress Energy, Inc.
Consolidated Balance Sheets, page 40
18. Tell us whether there are any restrictions on the use of
customer
deposits that were received in cash and totaled $135 million as of
December 31, 2004. If so, note the requirements of Rule 5-02.1 of
Regulation S-X.
Florida Progress Corporation Form 10-K for the Year Ended December
31, 2004
19. Please address the above comments, as applicable.
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respond to these comments within 10 business days or tell us when
you
will provide us with a response. Please furnish a letter with
your
responses to our comments and provide any requested supplemental
information. Please understand that we may have additional
comments
after reviewing your responses to our comments. Please file your
response letter on EDGAR as a correspondence file.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please provide, in
writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in our review of your filing
or
in response to our comments on your filing.
If you have any questions regarding this comment, please
direct them to Robert Babula, Staff Accountant, at (202) 551-3339
or,
in his absence, to the undersigned at (202) 551-3849. Any other
questions regarding disclosures issues may be directed to H.
Christopher Owings, Assistant Director at (202) 551-3725.
Sincerely,
Jim Allegretto
Senior Assistant Chief Accountant
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Mr. Robert McGehee
Progress Energy Inc
July 27, 2005
Page 6