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 to participants'
accounts 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 six
months ended June 30, 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 $240.5 million at
June 30, 1994, and $201.1 million at June 30, 1993, and
include amounts funded internally and amounts funded in an
external decommissioning trust. Based on an assumed after-tax
earnings rate of 8.5% and an assumed cost escalation rate of
4%, 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.