Progress Energy's CEO Discusses Q3 2011 Results - Earnings Call Transcript

| About: Duke Energy (DUK)

Progress Energy (PGN) Q3 2011 Earnings Call November 3, 2011 10:00 AM ET

Executives

Beau Pratt -

William D. Johnson - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Mark F. Mulhern - Chief Financial Officer and Senior Vice President of Finance

Analysts

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Jonathan P. Arnold - Deutsche Bank AG, Research Division

Greg Gordon - ISI Group Inc., Research Division

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division

Unknown Analyst -

Operator

Good morning, and welcome the Progress Energy's Third Quarter 2011 Earnings Conference Call. [Operator Instructions] For opening remarks and introductions, I'd like the turn the conference over to Mr. Beau Pratt from Progress Energy. Please go ahead, sir.

Beau Pratt

Thank you, Charlotte. Good morning, and welcome to everyone. Joining me this morning are Bill Johnson, Chairman, President and Chief Executive Officer; Mark Mulhern, Chief Financial Officer; and other members of our senior management team. We are currently being webcast from our Investor Relations page at progress-energy.com/webcast, where we've also included a set of slides which accompany our speakers' prepared remarks.

Today we will be making forward-looking statements, as well as reviewing historical information. There are numerous factors that may cause future actual results to differ materially from these statements and we outlined these in our earnings release, Form 10-K, 10-Q and other SEC filings, as well as the risk factor discussion also found in our Forms 10-K and 10-Q. For your information, we plan to file our Form 10-Q early next week.

This morning, following opening comments from Bill and Mark, we will open the phone lines to address your questions. Now I'll turn the call over to Bill Johnson.

William D. Johnson

Thanks, Beau. Good morning, everyone. I know it's another busy day on the earnings calendar, so we appreciate your participation this morning. I've managed to acquire a cold just in time for this call, so I'll apologize in advance for any sniffing, sneezing or coughing that you might hear.

So as Slide 3 indicates, I'll provide highlights of the third quarter and year-to-date financial results, along with updates on our proposed merger with Duke Energy, the Crystal River 3 containment building repair and a couple of other items of interest. Then Mark will provide more details on our financial results.

So let's start with ongoing earnings on Slide 4. For the third quarter, we reported ongoing earnings of $344 million compared to $361 million for the same quarter a year ago. On a per share basis, we're down $0.07 from the third quarter in 2010. As Mark will review later, the results require a little explanation here.

This quarter's ongoing earnings include a negative $0.08 for the impact of storm costs and replacement power disallowances in the Carolinas. Net of a positive litigation award related to spent nuclear fuel. This favorable litigation was our successful claim against the U.S. Department of Energy for failure to abide by a contract for federal disposition of nuclear spent fuel. As a result, during the third quarter we recorded a $92 million award as an offset for past spent fuel storage costs, including $27 million in O&M expense.

So when you consider these various one-time items, both positive and negative, we're in line with last year's results for the third quarter and slightly ahead of last year's results on a year-to-date basis. Based on our performance for the first 3 quarters and our expectations for the remainder of the year, we are reaffirming our previously announced 2011 ongoing earnings guidance range of $3 to $3.20 per share.

Now let's turn to where we stand on the regulatory approvals of the Duke-Progress merger. There have been several developments in recent months, and you can see the updated merger scorecard on Slide 5. Both companies have made all the required filings. We're still targeting a closing by the end of this year, and both companies are working hard to have the necessary infrastructure in place. The actual closing date, of course, will ultimately be determined by the timing of regulatory approvals, including by the FERC and the state commissions in North and South Carolina.

I'll comment on a couple of noteworthy events in the approval process. Both companies held shareholder meetings on August 23 to vote on the merger. And the shareholders overwhelmingly approved the merger, more than 90% for each company. We're very pleased with this strong response. It's a sign that Duke and Progress shareholders recognize the value of this strategic combination.

In late September, we appeared before the North Carolina Utilities Commission and reviewed the advantages of this combination for customers. The commission is expected to rule later this year.

Then on September 30 the FERC conditionally approved our merger application, expressing what they perceive to be adverse affects on wholesale competition in the Carolinas. In its order, the FERC described a number of different ways we could address their market power concerns, and final approval is subject to FERC's acceptance of our mitigation plan.

On October 17, our 2 companies filed a plan to address FERC's concerns. We proposed a virtual divestiture whereby Progress Energy and Duke Energy will offer up to a specified amount of power in the wholesale markets during the summer and winter peak periods. Progress Energy Carolinas will offer up to 500 megawatts during each summer hour, and Duke Energy Carolinas will offer up to 300 megawatts during each summer hour and 225 megawatts during each winter hour. The FERC set a 30-day comment period on our mitigation plan and that clock will run out in mid-November, then FERC will rule on our mitigation plan sometime after that.

In South Carolina, we were originally scheduled to appear before the state's Public Service Commission last week for a review of our joint dispatch agreement, which is the focus of South Carolina's review. But in light of the FERC ruling, the South Carolina commission will now begin hearings the week of December 12. Last week in Kentucky, we received the commission's final approval of the merger. As you might recall, they had given conditional approval earlier.

Meanwhile, we continue to make significant progress in our plans for integrating the Duke and Progress organizations and staffing the new combined company. We announced the full executive leadership team in September, and our business units are now beginning to announce the next level of managers. Next week we will open up the voluntary severance program for employees in certain targeted areas.

I'm also pleased with how well the senior leaders of the new company are working together. This senior leadership team was named at the time of the merger announcement in January, and we've been meeting regularly to discuss and decide the many issues associated with a merger of this size. Again, much work needs to be done here, but the integration process has gone extremely well. We're looking forward to the value we will create for customers, shareholders and employees as a new combined company.

Now let's turn to the containment building repair effort at our Crystal River Nuclear Plant in Florida. As you might recall, we suspended repair work on the containment building in mid-March after identifying additional concrete delamination in the building. We conducted a thorough engineering analysis and reviewed the structure and evaluated a wide range of repair options.

On June 27, we presented our findings to the Florida Public Service Commission, including our preliminary recommendation to repair the structure and return the plant to service. In July, we filed a preliminary cost estimate for this repair between $900 million and $1.3 billion, with a projected return to service in 2014.

We continue to believe repairing the plant is better for our Florida customers than retiring and replacing it. But as I said in June, we are approaching this situation in a very disciplined structured way and continue to assess cost and feasibility at every step.

In August, the Florida Public Service Commission established a plan to review the prudence and costs related to the outage, including replacement power cost. The commission divided the docket into 3 phases. The first phase will focus on the events and decisions leading up to the delamination event on October 2, 2009. A hearing is scheduled for June 2012, and we filed initial supporting testimony last month.

The second phase will review the decision whether to repair rather than decommission the unit, and the third phase will include a review of the decisions and events subsequent to the October 2009 event and leading up to the March 2011 delamination and ultimate repair of the containment building.

Slide 6 presents cost data for the repair and replacement power cost through September 30. We are still continuing to refine our engineering analysis and developing bid repair documents, as well as continuing to prepare the plant's infrastructure for the repair work.

You can see some details on insurance coverage on the bottom half of Slide 6. As you know, we maintain insurance coverage against incremental cost of replacement power resulting from prolonged accidental outages through NEIL.

We've had ongoing discussions within NEIL, NEIL representatives as they systematically review this claim. NEIL has retained outside engineering consultants, and we are working closely with them as they perform their due diligence. This is a complex matter, and it's in our best interest to work cooperatively with NEIL to provide them with all the information they need to make their coverage decisions.

Now I want to spend a few moments discussing several issues listed on Slide 7. This quarter, we resolved the lawsuit with a large holder of the contingent value obligations that were associated with 4 of our synthetic coal fuel plants.

As part of that settlement, we agreed to purchase the holder's CVOs for $0.75 per unit. We also announced earlier this week that we're going to tender for the balance of the outstanding CVOs at the same $0.75 per unit. This action triggered a pretax mark-to-market accounting adjustment of $63 million which we recorded in the third quarter. As it's been our practice, CVO mark-to-market adjustments are not included in ongoing earnings.

You might recall that we issued $98.6 million of these securities in connection with our merger with Florida Progress in 2000, and it makes sense to redeem them in advance of the merger with Duke.

Also during the third quarter, we encountered the fury of Hurricane Irene. This was a significant event for us in late August, and we appreciate the long hours our employees, contractors and other utilities put in to restore power. We incurred O&M damages of $24 million or $0.05 per share associated with the repairs. As a side note, we've sent about 200 Progress and contract personnel to help with service restoration after the weekend's snowstorms to the north of us.

Now before Mark goes over to the financials, I want to mention a couple of recent milestones in our fleet modernization program which involves retiring older coal-fired plants and building advanced new gas-fired units. On October 1, we retired the 170-megawatt Weatherspoon coal-fired plant near Lumberton, North Carolina. The 3 coal units at that site entered service between 1949 and 1952.

And on September 22, we had a ceremony renaming our Richmond County energy complex near Rockingham, North Carolina. This facility has 1,900 megawatts of capacity fueled by natural gas. And it's the second-largest station in our Carolinas fleet. The site's latest unit began service in June.

This Richmond County facility is now called the Sherwood H. Smith Jr. Energy Complex. So those of you who are around the industry any time during the 1980s or 1990s will remember the outstanding leadership Sherwood provided this company, including serving for 17 years as CEO.

Now Mark will provide a little more detail on the numbers for the quarter.

Mark F. Mulhern

Thank you, Bill, and good morning. I will cover the topics outlined on Slide 8. Slide 9 shows our third quarter ongoing earnings and for the third quarter 2011, we reported $1.16 per share versus $1.23 last year.

The Progress Energy Carolinas was down $0.11, Progress Energy Florida was up $0.08 and then the Corporate and Other was $0.04 unfavorable.

The main drivers for the quarter were less favorable weather than 2010, disallowances on replacement power costs in the Carolinas, partially offset by lower O&M, lower amortization expenses in Florida and lower interest costs.

Slide 10 shows our waterfall chart for the third quarter, and we've identified the major drivers in the key variances. On the positive side, we had the impact of higher costs or removal amortization in Florida, improved O&M performance, which includes the negative impact of storm costs with an offsetting positive for the spent nuclear fuel litigation award that Bill described, lower interest expense in 2010 reflecting the lower rate environment and the impact of resolving the 2004 and 2005 income tax audits. And on the negative side, weather compared to a very strong 2010 accounted for $0.06 of negativity and then we had $0.08 of replacement power disallowances at Progress Energy Carolinas.

This item relates to the challenging nuclear performance we experienced in 2010. You will recall we had a number of unplanned outages in our Carolinas nuclear fleet last year. We have taken significant remediation steps to improve performance here, and the early signs of progress have shown up in the 2011 operating statistics for our nuclear fleet. So this kind of regulatory compromise happens infrequently but in a regulated utility, sharing the impact of operating challenges between the company and customers was appropriate in this situation.

So overall the variance from 2010 can be primarily attributed to the replacement power disallowance. And when that is considered, our earnings are effectively in line with the third quarter of 2010.

So now I'll turn to Slide 11 which is our year-to-date waterfall chart and again, several brief points on the larger items here. Year-to-date, we have utilized a total of $205 million in cost of removal amortization in Florida versus $60 million utilized through 3 quarters in 2010.

The very strong weather we had in 2010 accounts for the negative $0.25 item in the year-over-year comparison. The wholesale variance on a year-to-date basis is $0.09 which as you'll recall, we had anticipated coming into 2011 due primarily to several wholesale contracts at PEF that were expiring.

So to close my comments on the waterfall charts, I'd repeat the point from the third quarter discussion in that if you consider the $0.08 of replacement power disallowance with the $2.56 year-to-date earnings, we're slightly ahead of 2010's results through 9 months.

Slide 12 shows our weather-adjusted retail sales, and there are 3 key points on this slide. The first one relates to the very significant impacts of whether on retail sales at both utilities. So as we said, 2010 was a strong weather year at both utilities and as you can see, weather is 2.6% of the total 3% negative variance at PEC and essentially the full variance in total retail sales at PEF.

Second point is recognition that our growth and usage numbers are still trailing our forecast through 9 months of the year. So we're behind our plan by 1.3% at Progress Energy Carolinas and 0.6% behind at PEF. So lower-than-expected customer growth has been the larger variance, with the usage being closer to our expectations.

And the third and final point is we did see positive movement in growth and usage in both jurisdictions in the quarter. So we expect the full year to be a little weaker than our forecast with a return to more normal sales growth still further down the road.

As I mentioned last quarter, our industrial customers showed a strong recovery in 2010 and carry over into early 2011. But starting in the second quarter of this year, our customers began reporting increasing inventories and excess capacity and some have instituted shorter operating hours. This softness carried into the third quarter as well.

On a positive note, we are encouraged by a series of recent economic development announcements in our service territories. Most notably with the announcement that Continental Tire would build a large facility Sumter, South Carolina that will ultimately employee over 1,500 workers. So our service territories continue to be attractive places for relocation and expansion, and this should be a positive for our long-term growth.

Now I'll turn to Slide 13, which is our standard slide on customer growth and low usage accounts. Both the Carolinas and Florida continue to show positive customer growth compared to a year ago. Both appear to have leveled out over the last several quarters, with Florida showing in net addition of 8,000 customers year-over-year and the Carolinas adding 6,000 customers year-over-year.

So next I'll turn to the major capital projects on Slide 14, which just gives you a brief update on the major capital projects we have underway, primarily our 2 new combined cycle plants that are scheduled for completion in 2013 along with our Smart Grid program. As Bill noted in his comments, the retirement of older coal units to be replaced by these new combined cycles continues to be executed effectively and is going very well.

In Slide 15, I just wanted to highlight a number of points that you should consider regarding our results for the full year of 2011. On a trailing 12-month basis, our ongoing earnings are $3.01, but that includes the $0.08 negative item for replacement power disallowance.

In 2010, our fourth quarter earnings were $0.45. For the cost of removal amortization at PEF, as I said we've amortized $205 million through 9 months. There is $294 million remaining to be amortized under our settlement over the next 15 months. So this gives us flexibility going into the fourth quarter and into 2012.

On the O&M front, we have completed our planned nuclear refueling outages for 2011, and in 2010 we had 85 outage days in Q4, which hopefully should not recur providing us an opportunity for more favorable O&M comparisons to 2010. So when we consider the flexibility these items provide us, and some of the unusual items I have noted for the third quarter, we felt it was appropriate to maintain our guidance range in the $3 to $3.20 range.

So before I turn it back over to Bill for questions, let me note that the substantial integration planning and regulatory work related to the merger with Duke has not impacted our focus on execution and delivering results.

Our nuclear performance has shown significant improvement. The regulatory flexibility in Florida continues to help offset weather variances, and we are carefully and deliberately addressing our challenges at Crystal River 3. So consistency in performance is what you have come to expect, but it is especially noteworthy in light of these significant merger activities.

So now, I'll turn the call back over to Bill for Q&A.

William D. Johnson

Thanks, Mark. And before we take your questions, please turn to Slide 16. We remain focused on the fundamentals to excel in our core mission of serving customers and to achieve our 2011 earnings targets. And we are making steady progress on our major projects and initiatives.

I'm very pleased with the commitment of our management team and workforce. And I want to say a particular thank you to our employees who did such a good job of maintaining a reliable system this summer. They have remained focused on operational excellence in the midst of what could be a distracting time. It's a real credit to the great workforce we have and to their dedication of the vital service we provide, so thanks to them. And now your questions.

Question-and-Answer Session

Operator

[Operator Instructions] We'll have our first question from Jonathan Arnold, Deutsche Bank.

Jonathan P. Arnold - Deutsche Bank AG, Research Division

A quick question on Crystal River and NEIL, we noticed that you haven't actually received any replacement power insurance coverage in the third quarter, whereas in previous quarters you've been taking up every quarter. Any reason for that?

Mark F. Mulhern

Jonathan, it's Mark. As Bill described, I think that NEIL is going through a very deliberate process. They hired some outside help to evaluate the claim, and I think they're really just doing their work to make sure that they completely understand the work that we've done and the plan we have. So I wouldn't read anything into that other than we're just working with them on determining their coverage decisions.

Jonathan P. Arnold - Deutsche Bank AG, Research Division

But they were reimbursing replacement power and now they're not, is that correct?

Mark F. Mulhern

That's correct. What I would say -- Jonathan, let me just clarify that. I would say we haven't received any payments. We think they are still going to reimburse for replacement power.

Jonathan P. Arnold - Deutsche Bank AG, Research Division

Okay. Is it just timing? Or is it more related to this kind of overall review?

William D. Johnson

Speaking to both of those, and I think they are entirely focused now on the due diligence involved with this claim. But as Mark said, I wouldn't read anything significant into that other than that they and we are working hard on making sure they have everything they need to get to a determination.

Jonathan P. Arnold - Deutsche Bank AG, Research Division

Okay. And so for example they-- is there a specific issue they have to determine, look at one event or 2 or anything like that would determine whether there is ongoing? So we thought that the replacement power coverage is going to run into next year comfortably anyway.

William D. Johnson

Yes, I don't think it will be much assistance for us to get into the details of what we're talking about other than to say we are working through the due diligence. They're working through their process. They have a special committee of their board, and we're just working through it.

Jonathan P. Arnold - Deutsche Bank AG, Research Division

Okay. And then one other question we have, I mean in your original guidance for this year, I think there was clauses and other margin. You would have $0.15 item coming from there. And it's only been about $0.03 year-to-date. Is the rest of that showing up in the fourth quarter? Or where is it being made up?

Mark F. Mulhern

Jonathan, I anticipated that somebody smart like you would ask this question. What happened is really it is showing up in lower depreciation because if you recall, what we had anticipated going into the year was that we would have Crystal River 3 back into service so that we would begin collecting to the clauses. The steam generator replacement issue, the power operate issue at Crystal River 3, so it's really -- what is happening is those items have stayed in CWIP and are still in construction work in progress, so you see a lower depreciation number. So you won't see that clause in other margin make up in Q4, but you do see an offsetting positive number and lower depreciation and amortization.

Operator

[Operator Instructions]

We'll have our next question from Ashar Khan [ph], Visium Asset Management.

Unknown Analyst -

Can I just ask you, when do we expect this NEIL review to finish?

William D. Johnson

So we are expecting to have a determination from them by the end of this year.

Unknown Analyst -

Okay. So Bill, there would be a determination on everything, purchase power cost, whether it's one event, 2 event, whether it is --whether they agree with our assessment of spending nearly $1 billion. Is that correct? That will be an all-inclusive report by them.

William D. Johnson

I don't think I can give you that much detail. I think what we are expecting -- and really the basic question here is a coverage determination of whether it's a covered event. There's a lot of subsidiary pieces to that, that you've just mentioned. But I think the main point is a coverage determination.

Unknown Analyst -

Okay. Could you amplify what is coverage -- what do you mean by coverage determination?

William D. Johnson

Is this a covered event for insurance purposes or not.

Unknown Analyst -

Okay, okay. So that is -- and then is there any -- do they have any leeway in terms of deciding how much dollars to give for our repairs or no? Or who decides that?

William D. Johnson

There is a per-occurrence limit in the policy of $2.25 billion, I think. So that's the cap. And what happens below that cap is part of the determination and the process that we're going through with them.

Unknown Analyst -

Okay, okay. And then based on the results you get -- if the base on those results you get, you will then make a determination how to proceed with the Crystal River next year. Is that correct? So nothing can happen until we get NEIL's final answers?

William D. Johnson

So let me give a little color around that. What we're doing now is essentially setting the conditions for conducting a repair, including all of the design work. One of the things that we have learned is the importance of having a lot of design work done and so we're focusing on that, focusing on bid packages. When at some point we will have to make a determination about signing contracts and those kind of things, but the heavy lifting on this will come after there's a determination from NEIL.

Unknown Analyst -

Okay, okay. And that you said you expect it by -- in December?

William D. Johnson

Yes.

Operator

[Operator Instructions] We'll go next to Paul Ridzon, KeyBanc.

Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division

In the event that NEIL determines this is not a covered event, would they claw back the proceeds you've already received?

William D. Johnson

I'm not going to entertain the notion that they don't think it's a covered event. So we haven't given any thought at all to the question you've asked.

Operator

We'll go next to Michael Lapides with Goldman Sachs.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

One question on demand and if you could talk about it in North Carolina separate from Florida. Just curious. What do you expect to see, if at all, a little bit of an inflection in demand? And a while what you're seeing, can you talk a little bit about residential demand characteristics or trends, not just usage per customer but how much is economic, how much is energy efficiency?

Mark F. Mulhern

Michael, it's Mark. If you look at our Slide 12 in the material that we've put out, we have had some lagging to our forecast in both locations. And we really have had 2 pretty unusual weather years, so 2010 was a very significant anomaly in weather. In 2011 we've had, again, a deviation from normal weather. And so some of that has skewed the numbers a little bit. I think in a residential, what you see kind of on a weather-normalized basis for the year-to-date numbers on that chart on 12 is 0.7% or so change from the prior year, in Carolinas down and Florida actually a little bit up. It's hard to really put your finger on efficiency and how much impact it's had on the numbers. But we absolutely believe the economy, the state of play in terms of that has had some impact on usage and on how -- especially in the residential area, how much we've deviated from forecast. You see our commercial and our industrial numbers kind of flat or may be slightly down in commercial year-over-year. But longer term, our belief continues to be that we will see growth return to our territories in some significant way, especially in the Carolinas and Florida. We believe both of them have longer-term dynamics that will be helpful and should grow maybe not to the levels we had experienced in the boom periods, but again pretty good growth. We're seeing a little bit of progress in housing in both locations, in the Carolinas and in Florida, but not to the robust way that it had been at one time obviously. So I think we're just going to slug through a little bit. I don't see anything dramatic that you can put your finger on that would explain some of these things.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Got it. Bill, one question just looking at some of the rate case dockets that are underway in North Carolina right now, not necessarily yours but some of your peers. Do you think North Carolina is being -- North Carolina historically was known as a very good, very solid, like large parts of the Southeast regulatory environment. Do you think North Carolina is being set up for a little mean reversion in the wrong direction if you're regulated utility with ROEs coming way in, public staff and one of the rate cases came out with what I would call a pretty big delta between the bid and the ask of what the company requested for in rate cases. Just curious for your overall sense of the regulatory environment there.

William D. Johnson

Michael, I've long ago stopped trying to divine what regulators will do, but I will give you my sense of this. I think the historic norm here of being reasonable regulators based on the law and the facts will continue. I am aware of the situation where the -- that you mentioned with the lower ROE proposal. But that's a proposal from one party and that's why you have rate cases and you have proceedings, so you can put the other evidence in front of them. I think that's probably a reflection of the economic times and other things like that. But I wouldn't draw any adverse conclusions at all based on that. We recently had a week of hearings before the North Carolina commission on the merger. And it was similar to the hearings I've been going to for 30 years down there. So I don't anticipate any movement in the wrong direction as you described.

Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Okay. And can you refresh what are your intentions of when you would conceivably file for Progress Carolinas, the next rate case?

William D. Johnson

Probably '13. We have combined cycles in Progress that we're putting some capital in the ground that we will have to have a case on, but I would anticipate that will be in '13.

Operator

We'll go next to Greg Gordon, ISI Group.

Greg Gordon - ISI Group Inc., Research Division

I apologize if you addressed this, but I hopped on the call a smidge late; busy day, as you know. Where are you in the process of setting your purchase power replacement fuel or recovery for the Crystal River power costs that are outside the deductible -- outside the insurance period at the Florida commission? And when will we know with certainty that you think those costs are going to be passed through the customers?

Mark F. Mulhern

Greg, it's Mark. We have filed our fuel case in Florida, which has in it the projected replacement power costs that we would anticipate for 2012, and so we haven't gotten a decision on that particular proceeding yet. But that will be shortly here.

Greg Gordon - ISI Group Inc., Research Division

Okay. And is there sort of a feedback loop as it pertains to -- is the commission looking to NEIL to see that this is in fact a covered event so that they can then determine that these are recoverable costs? Or are they on 2 separate independent tracks?

William D. Johnson

I think, Greg, that they're on 2 independent tracks. I mean the commission has a regular cycle of having these proceedings, and they make their decisions. And they have a procedural schedule now for Crystal River broken down into 3 phases. So I think they're really on 2 separate tracks here, and the commission is just following its usual procedures.

Greg Gordon - ISI Group Inc., Research Division

Okay. So whether or not -- and I know you're not entertaining this presumption as prudently answer to a prior question, but whether or not NEIL fully covers, partially covers or does not cover the second repair does not therefore, from your perspective, influence the decision on the fuel recovery?

William D. Johnson

I think in this case, it does not. But you may have some finding that some of this is subject to refunding later proceedings. Right? So I don't think it will be affect at this time, but there may be some reconciliation in the future.

Operator

We'll go next to Vidulah Merji [ph] with CDP Capital.

Unknown Analyst -

In terms of the 2012 replacement power, can you remind what that number is you filed for?

William D. Johnson

I'm looking around $178 million, Vidulah.

Unknown Analyst -

Okay. And how much was it for this year?

William D. Johnson

$130 million, up numbers.

Unknown Analyst -

Now you currently -- just so I'm reminded, you've been currently collecting this in cash? Or this has been kind of accumulated and deferred in terms of -- on a cash basis?

Mark F. Mulhern

Vidulah, we've been collecting it. Again as Bill said, subject to refund. But yes, that has been in the customer rates.

Unknown Analyst -

Okay. So then the idea would be then that assuming the insurance covers this and once you receive those proceeds and they go back -- it goes back to customers again or something like that?

Mark F. Mulhern

Yes.

Operator

We have no further questions in the queue at this time. I'll turn the conference back over to Mr. Bill Johnson to offer additional or closing remarks.

William D. Johnson

Just again thanks for being of the call and showing interest in our company, and have a good rest of the day.

Operator

That concludes today's conference. Thank you for your participation.

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