1.0.0.3false6030 - REGULATORY MATTERSfalse1$falsefalseu000Standardhttp://www.xbrl.org/2003/iso4217USDiso42170u001Standardhttp://www.xbrl.org/2003/instancesharesxbrli0u002Dividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli020pgn_RegulatoryMatterspgnfalsenadurationstringNo definition available.falsefalsefalsefalsefalsetruefalsefalsefalse1falsefalse00falsefalseNo definition available.false31us-gaap_PublicUtilitiesDisclosureTextBlockus-gaaptruenadurationstringNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalse00<div><div><table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><tr valign="top"><td style="WIDTH: 30px; TEXT-ALIGN: left"><div style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.  </font></div></td>
<td width="1367"><div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; TEXT-DECORATION: underline">REGULATORY MATTERS</font></font></div></td></tr></table></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div><table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><tr valign="top"><td style="WIDTH: 29px; TEXT-ALIGN: left"><div style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A.  </font></div></td>
<td width="1368"><div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PEC RETAIL RATE MATTERS</font></div></td></tr></table></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">FUEL COST RECOVERY</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On May 7, 2009, PEC filed with the SCPSC for a decrease in the fuel rate charged to its South Carolina ratepayers. On May 28, 2009, PEC jointly filed a settlement agreement with the South Carolina Office of Regulatory Staff (ORS) and Nucor Steel. Under the terms of the settlement agreement, the parties agreed to PEC’s proposed rate reductionof approximately $13 million. A hearing on the matter was held by the SCPSC on June 11, 2009, and on June 19, 2009, the SCPSC approved the settlement agreement. The decrease is effective July 1, 2009, and decreases residential electric bills by $2.08 per 1,000 kilowatt-hours (kWh), or 2.0 percent, for fuel cost recovery.</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On June 4, 2009, PEC filed with the NCUC for a decrease in the fuel rate charged to its North Carolina ratepayers. PEC is asking the NCUC to approve a $5 million decrease in the fuel rates driven by declining fuel prices. If approved, the decrease would take effect December 1, 2009, and would decrease residential electric bills by $0.17
per 1,000 kWh, or 0.2 percent, for fuel cost recovery. A hearing on the matter has been scheduled by the NCUC for September 15, 2009. We cannot predict the outcome of this matter.</font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">DEMAND-SIDE MANAGEMENT AND ENERGY-EFFICIENCY COST RECOVERY</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See Note 7B in the 2008 Form 10-K for discussion of North Carolina’s comprehensive energy legislation, which became law on August 20, 2007. As a result of the legislation, PEC has implemented a series of demand-side management (DSM) and energy-efficiency programs and will continue to pursue additional programs. These programs must be approved
by the NCUC and we cannot predict the outcome of the DSM and energy-efficiency filings currently pending approval by the NCUC or whether the implemented programs will produce the expected operational and economic results.</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On June 6, 2008, and as subsequently amended, PEC filed an application with the NCUC for approval of a DSM and energy-efficiency rider to recover all program costs, including the recovery of appropriate incentives for investing in such programs. On November 14, 2008, the NCUC issued an order allowing PEC to implement the rates requestedin PEC’s November 14, 2008 revision to its initial application. The new rates, subject to true-up to the final order, were implemented on December 1, 2008, increasing residential electrical bills by $0.74 per 1,000 kWh, or 0.8 percent. On December 9, 2008, the North Carolina Public Staff filed an Agreement and Stipulation of Partial Settlement with PEC and some of the other parties to the proceedings. The NCUC held a hearing on the matter on January 7, 2009. On June 15, 2009, the NCUC issued an order approving
the Agreement and Stipulation of Partial Settlement, subject to certain modifications. PEC estimates the year-to-date impact of these modifications to be immaterial. On July 13, 2009, PEC filed a motion asking the NCUC to reconsider certain provisions of the June 15, 2009 order and stay the requirements for PEC to revise its cost-recovery filings in accordance with the decisions approved in the order. On July 20, 2009, the NCUC issued an order requesting comments on the motion and allowed the motion forstay, pending a ruling on the motion for reconsideration, on a portion of PEC’s request. Reply comments are due August 7, 2009. We cannot predict the outcome of this matter.</font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On June 4, 2009, PEC filed with the NCUC for a decrease in the DSM and energy-efficiency rate charged to its North Carolina ratepayers. PEC is asking the NCUC to approve a $3 million decrease in the DSM and energy-efficiency rates. If approved, the decrease would take effect December 1, 2009, and would decrease residential electric billsby $0.19 per 1,000 kWh, or 0.2 percent, for DSM and energy-efficiency cost recovery. A hearing on the matter has been scheduled by the NCUC for September 16, 2009. We cannot predict the outcome of this matter.</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PEC filed a petition on November 30, 2007, with the SCPSC seeking authorization to create a deferred account for DSM and energy-efficiency expenses. On December 21, 2007, the SCPSC issued an order granting PEC’s petition. On June 27, 2008, PEC filed an application with the SCPSC to establish procedures that encourage investment in cost-effective
energy-efficient technologies and energy conservation programs and approve the establishment of an annual rider to allow recovery for all costs associated with such programs, as well as the recovery of appropriate incentives for investing in such programs. On January 23, 2009, PEC filed a Stipulation Agreement between PEC and some of the other parties to the proceeding. On May 6, 2009, the SCPSC approved the Stipulation Agreement and issued a directive requiring PEC to file for approval of all proposed DSM andenergy-efficiency programs. On May 11, 2009, in accordance with the SCPSC directive, PEC filed its programs for approval and an application for a </font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> </font></div>
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<div style="WIDTH: 100%; TEXT-ALIGN: center"><hr style="COLOR: red" noshade size="2"></div></div><div id="HDR"><div id="GLHDR" style="WIDTH: 100%" align="right"> </div></div></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> </font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">cost-recovery rider for PEC’s DSM and energy-efficiency programs. On June 10, 2009, SCPSC approved the proposed DSM and energy-efficiency programs and the cost-recovery rider application, on a provisional basis pending a review of the cost-recovery rider by the ORS. The rate increase was effective July 1, 2009, and increased residential
electric bills by $0.79 per 1,000 kWh or 0.8 percent, for DSM and energy-efficiency cost recovery. We cannot predict the outcome of this matter.</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">RENEWABLE ENERGY AND ENERGY EFFICIENCY PORTFOLIO STANDARD COST RECOVERY</font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On June 4, 2009, PEC filed with the NCUC for an increase in the Renewable Energy and Energy Efficiency Portfolio standard (NC REPS) rate charged to its North Carolina ratepayers. PEC is asking the NCUC to approve a $6 million increase in the NC REPS rates. If approved, the increase would take effect December 1, 2009, and would increase
residential electric bills by $0.26 per month, or 0.2 percent, for REPS cost recovery. A hearing on the matter has been scheduled by the NCUC for September 16, 2009. We cannot predict the outcome of this matter.</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div><table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><tr valign="top"><td style="WIDTH: 31px; TEXT-ALIGN: left"><div style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">B.  </font></div></td>
<td width="1366"><div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PEF RETAIL RATE MATTERS</font></div></td></tr></table></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">BASE RATE FILING</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As a result of a base rate proceeding in 2005, PEF is party to a base rate settlement agreement that was effective with the first billing cycle of January 2006 and will remain in effect through the last billing cycle of December 2009.</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On March 20, 2009, in anticipation of the expiration of its current base rate settlement agreement, PEF filed with the FPSC a proposal for an increase in base rates effective January 1, 2010. In its filing, PEF requested the FPSC to approve calendar year 2010 as the projected test period for setting new base rates and approve annual raterelief for PEF of $499 million, which includes PEF’s petition for a combined $76 million of new base rates in 2009 as discussed below. The request for increased base rates is based, in part, on investments PEF is making in its generating fleet and in its transmission and distribution systems.</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Included within the base rate proposal is a request for an interim base rate increase of $13 million. Additionally, on March 20, 2009, PEF petitioned the FPSC for a limited proceeding to include in base rates revenue requirements of $63 million for the repowered Bartow power plant, which began commercial operations in June 2009. On May19, 2009, the FPSC approved both the annualized interim base rate increase and the cost recovery for the repowered Bartow power plant subject to refund with interest effective July 1, 2009. These increases are expected to result in additional revenues of approximately $70 million in 2009. The changes increased residential bills by approximately $4.52 per 1,000 kWh, or 3.7 percent. On July 2, 2009, Florida’s Office of Public Counsel (OPC), the Florida Industrial Power Users Group, the Attorney General,the Florida Retail Federation and PCS Phosphate filed a petition protesting portions of the FPSC approval. A hearing on the matter will not be held until after the annual rate relief hearings are concluded. We cannot predict the outcome of this matter.</font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If PEF’s remaining rate request is approved by the FPSC as filed by PEF, the new base rates would increase residential bills by approximately $9.66 per 1,000 kWh, or 7.6 percent, effective January 1, 2010. The FPSC has scheduled hearings on the remaining annual rate relief filing beginning September 21, 2009. A ruling by the FPSC is expectedin November 2009. We cannot predict the outcome of this matter.</font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">FUEL COST RECOVERY</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On March 17, 2009, PEF received approval from the FPSC to reduce its 2009 fuel cost-recovery factors by an amount sufficient to achieve a $206 million reduction in fuel charges to retail customers as a result of effective fuel purchasing strategies and lower fuel prices. The approval reduces residential customers’ fuel charges by $6.90per 1,000 kWh, or 5.0 percent, starting with the first billing cycle of April 2009. Commercial and industrial customers will see similar reductions.</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In 2006, OPC filed a petition with the FPSC asking that the FPSC require PEF to refund to ratepayers $135 million, plus interest, of alleged excessive past fuel recovery charges and sulfur dioxide (SO<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: sub">2</font>) allowance costs during the period 1996 to 2005. The OPC claimed
that although Crystal River Unit 4 and Crystal River Unit 5 (CR4 and CR5) were designed to burn a blend of coals, PEF failed to act to lower ratepayers’ costs by purchasing the most economical blends of coal. During the period specified in the petition, PEF’s costs recovered through fuel recovery clauses were annually reviewed for prudence and approval by the FPSC. On October 10, 2007, the FPSC issued its order rejecting most of the OPC’s contentions. However, the FPSC found that PEF had not been prudent in </font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> </font></div>
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<div style="WIDTH: 100%; TEXT-ALIGN: center"><hr style="COLOR: red" noshade size="2"></div></div><div id="HDR"><div id="GLHDR" style="WIDTH: 100%" align="right"> </div></div></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> </font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">purchasing a portion of its coal requirements during the period from 2003 to 2005. Accordingly, the FPSC ordered PEF to refund its ratepayers $14 million, inclusive of interest, over a 12-month period beginning January 1, 2008. The refund was returned to ratepayers through a reduction of prior year under-recovered fuel costs. The FPSC alsoordered PEF to address whether it was prudent in its 2006 and 2007 coal purchases for CR4 and CR5. On October 4, 2007, PEF filed a motion to establish a separate docket on the prudence of its coal purchases for CR4 and CR5 for the years 2006 and 2007. On October 17, 2007, the FPSC granted that motion. On February 2, 2009, the OPC filed direct testimony in this hearing alleging that during 2006 and 2007, PEF collected excessive fuel costs and SO<font style="DISPLAY: inline; FONT-SIZE: 70%; VERTICAL-ALIGN: sub">2</font> allowancecosts of $61 million before interest. The OPC claimed that these excessive costs were attributed to PEF’s ongoing practice of not blending the most economical sources of coal at its CR4 and CR5 plants. A hearing on PEF’s 2006 and 2007 coal purchases was held April 13-15, 2009. During the hearing, the OPC reduced the alleged excessive fuel costs to $33 million before interest. On June 30, 2009, the FPSC approved a refund of $8 million to PEF’s ratepayers to be paid over a 12-month period beginning January 1, 2010,and ordered PEF to file a report by September 2009 regarding the prospective application of PEF’s coal procurement plan and the prudence of PEF’s coal procurement actions. For the three months ended June 30, 2009, PEF recorded a pre-tax other operating expense of $8 million plus an immaterial amount of interest and an associated regulatory liability for the disallowed fuel costs and interest. PEF is evaluating its options, including a request for reconsideration and an appeal of the FPSC’s order to the FloridaSupreme Court. We cannot predict the outcome of this matter.</font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">NUCLEAR COST RECOVERY</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On March 17, 2009, PEF received approval from the FPSC to defer until 2010 the recovery of $198 million of nuclear pre-construction costs for PEF’s proposed nuclear plant in Levy County, Florida (Levy), which the FPSC had authorized to be collected in 2009. The approval reduced residential customers’ nuclear cost-recovery charge by $7.80per 1,000 kWh, or 5.7 percent, starting with the first billing cycle of April 2009. Commercial and industrial customers experienced similar reductions.</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On May 1, 2009, pursuant to the FPSC nuclear cost-recovery rule, PEF filed a petition to recover $446 million, which consists of pre-construction and carrying costs incurred or anticipated to be incurred during 2009 and the projected 2010 costs associated with the Levy and Crystal River Unit 3 (CR3) uprate projects. In an effort to help
mitigate the initial price impact on its customers, as part of its filing, PEF has proposed collecting certain costs over a five-year period, with associated carrying costs. The deferral would result in a nuclear cost-recovery charge of $6.69 per 1,000 kWh for residential customers, which is approximately half of the amount PEF is eligible to recover in 2010 under the nuclear cost-recovery rule. If approved, the charges would begin with the first billing cycle of January 2010. The FPSC has scheduled hearingsin this matter beginning September 8, 2009, with a decision expected in October 2009. We cannot predict the outcome of this matter.</font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-STYLE: italic; FONT-FAMILY: Times New Roman">OTHER MATTERS</font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On March 20, 2009, PEF filed a petition with the FPSC for expedited approval of the deferral of $53 million in 2009 pension expense and the authorization to charge $33 million in estimated 2009 storm hardening expenses to its storm damage reserve. PEF requested that the deferral of pension expense continue until the recovery of these costs
is provided for in FPSC-approved base rates. On June 16, 2009, the FPSC denied PEF’s request related to the storm hardening expenses, but approved the deferral of the retail portion of actual 2009 pension expense. As a result of the order, during the three months ended June 30, 2009, PEF deferred $16 million of pension expense that had been recognized year to date and established a deferred pension regulatory asset. PEF will not earn a carrying charge on the deferred pension regulatory asset. The retail portionof subsequent pension expense will be deferred as incurred during the remainder of 2009. The deferral of pension expense will not result in a change in PEF’s 2009 retail rates or prices. In accordance with the order, subsequent to 2009 PEF will amortize the deferred pension regulatory asset to the extent that annual pension expense is less than the allowance provided for in the base rates established in the 2010 base rate proceeding. In the event such amortization is insufficient to fully amortize the regulatoryasset, PEF can seek recovery of the remaining unamortized amount in a base rate proceeding no earlier than 2015.</font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div><table cellpadding="0" cellspacing="0" id="list" width="100%" style="FONT-SIZE: 10pt; FONT-FAMILY: times new roman; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><tr valign="top"><td style="WIDTH: 29px; TEXT-ALIGN: left"><div style="TEXT-ALIGN: left"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">C.  </font></div></td>
<td width="1368"><div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-WEIGHT: bold; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">OTHER RATE MATTERS</font></div></td></tr></table></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> </div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On May 15, 2009 and May 29, 2009, PEC and PEF filed updates to their Open Access Transmission Tariffs (OATT) with the FERC. For PEC, the updates increased the transmission rate charged to wholesale customers by 18 percent effective June 1, 2009, and by an additional 1 percent effective August 1, 2009. The impact to PEC’s 2009 revenue isexpected to be an increase of $4 million. For PEF, the updates increased the transmission rate charged to </font></div><div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> </font></div>
<div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt"><div id="FTR"><div id="GLFTR" style="WIDTH: 100%" align="left"> </div></div>
<div id="PN" style="PAGE-BREAK-AFTER: always"><div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">27</font></div>
<div style="WIDTH: 100%; TEXT-ALIGN: center"><hr style="COLOR: red" noshade size="2"></div></div><div id="HDR"><div id="GLHDR" style="WIDTH: 100%" align="right"> </div></div></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> </font></div>
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">wholesale customers by 11 percent, effective June 1. The impact to PEF’s 2009 revenue is expected to be an increase of $2 million. The rates are subject to wholesale customers filing a formal challenge with the FERC. Any challenge could result in a refund or adjustment. We cannot predict the outcome of this matter.</font></div></div>4.  
REGULATORY MATTERS
 A.  
PEC RETAIL RATE MATTERS FUEL COST RECOVERY On May 7, 2009, PEC filed with the SCPSC for afalsefalseNo definition available.No authoritative reference available.falsefalse12falseUnKnownUnKnownUnKnownfalsetrue