Carolina Power & Light Company
NOTES TO FINANCIAL STATEMENTS
1. Except as described in Note 2 below, these interim financial
statements are prepared in conformity with the accounting
principles reflected in the financial statements included in
the Company's 1993 Annual Report to Shareholders and the 1993
Annual Report on Form 10-K. These are interim financial
statements, and because of temperature variations between
seasons of the year and the timing of outages of electric
generating units, especially nuclear-fueled units, the amounts
reported in the Statements of Income for periods of less than
twelve months are not necessarily indicative of amounts
expected for the year.
Certain amounts for 1993 have been reclassified to conform to
the 1994 presentation.
2. In January 1994, the Company implemented Statement of Position
(SOP) 93-6, "Employers' Accounting for Employee Stock
Ownership Plans," on a prospective basis. This SOP requires
the following changes in accounting for the Company's
leveraged employee stock ownership plan (ESOP): 1) ESOP shares
that have not been committed to be released are no longer
considered outstanding for the determination of earnings per
common share; 2) dividends on unallocated ESOP shares are no
longer recognized for financial statement purposes; 3) all tax
benefits of ESOP dividends are now recorded to non-operating
income tax expense, whereas previously a portion of the tax
benefits was recorded directly to retained earnings; 4)
interest income related to the qualified ESOP loan is no
longer recognized; and 5) the difference between the
acquisition and allocation prices of ESOP shares, which was
previously recorded as other income, net, is now recorded
directly to common stock. In addition, ESOP loan transactions
between the Company and the Stock Purchase-Savings Plan (SPSP)
Trustee are no longer reflected in the Statements of Cash
Flows.
The implementation of SOP 93-6 resulted in an increase in
earnings per common share of approximately $.01 for the first
quarter of 1994.
Selected pro forma statistics, which eliminate the significant
capital structure-related impacts of the ESOP feature of the
SPSP, are included in Financial Statistics.
3. Contingencies existing as of the date of these statements are
described below. No significant changes have occurred since
December 31, 1993, with respect to the commitments discussed
in Note 9 of the financial statements included in the
Company's 1993 Annual Report to Shareholders.
a) In the Company's retail jurisdictions, provisions for
nuclear decommissioning costs are approved by the North
Carolina Utilities Commission and the South Carolina
Public Service Commission and are based on site-specific
estimates that included the costs for removal of all
radioactive and other structures at the site. In the
wholesale jurisdiction, the provisions for nuclear
decommissioning cost are based on amounts agreed upon in
applicable rate settlements. Accumulated decommissioning
cost provisions, which are included in accumulated
depreciation, were $230.2 million at March 31, 1994, and
$193.8 million at March 31, 1993, and include amounts
funded internally and amounts funded in an external
decommissioning trust. Based on current earnings and
inflation rate assumptions, provisions for nuclear
decommissioning costs are currently adequate to provide
for decommissioning of the Company's nuclear facilities.
The Company's most recent site-specific estimates of
decommissioning costs were developed in 1993 and are
based on prompt dismantlement decommissioning, which
reflects the cost of removal of all radioactive and other
structures currently at the site. These estimates, in
1993 dollars, are $257.7 million for Robinson Unit No. 2,
$284.3 million for the Harris Plant, $235.4 million for
Brunswick Unit No. 1 and $221.4 million for Brunswick
Unit No. 2. These estimates are subject to change based
on a variety of factors including, but not limited to,
inflation, changes in technology applicable to nuclear
decommissioning, and changes in federal, state or local
regulations. The cost estimates exclude the portion
attributable to North Carolina Eastern Municipal Power
Agency, which holds an undivided ownership interest in
certain of the Company's generating facilities.
b) There are several manufactured gas plant (MGP) sites to
which the Company and certain entities that were later
merged into the Company may have had some connection. In
this regard, the Company is participating in the North
Carolina MGP Group (Group), a group of entities alleged
to be former owners or operators of MGP sites. The
Group was formed in response to an initiative launched by
the North Carolina Department of Environment, Health
and Natural Resources, Division of Solid Waste Management
(DSWM), to encourage the voluntary assessment and,
where necessary, the remediation of MGP sites. The Group
and DSWM have entered into a Memorandum of Understanding
relative to the establishment of a uniform program and
framework for addressing MGP sites for which DSWM has
contended that members of the Group have potential
responsibility. It is anticipated that the investigation
and remediation of specific MGP sites will be addressed
pursuant to one or more Administrative Orders on Consent
between DSWM and individual potentially responsible
parties. In addition, a current owner of property that
was the site of one MGP site owned by Tidewater Power
Company, which merged into the Company in 1952, and the
Company have entered into an agreement to share the cost
of investigation and remediation of this site. Due to the
lack of information with respect to the operation of MGP
sites and the uncertainty concerning questions of
liability and potential environmental harm, the extent
and cost of required remedial action, if any, and the
extent to which liability may be asserted against the
Company or against others are not currently determinable.
The Company cannot predict the outcome of these matters
or the extent to which other former MGP sites may become
the subject of inquiry.
PAUL S. BRADSHAW
Vice President and Controller
RALEIGH, N.C. 27602
April 20, 1994