There have been many SEC 10Q y2k utility progress reports recently printed on this forum. Most reports have given us the bad news that these utilities won't finish their remediation and testing until the end of the second quarter of 1999. Florida Progress Corporation (which owns Florida Power) has just reported that they won't be ready with remediation and testing until the end of the third quarter of 1999!

YEAR 2000

Florida Progress is in the process of addressing Year 2000 ("Y2K") issues and mitigating its risks. Y2K issues exist because, historically, many computer systems have used two digits to represent a year. With the change of the century, a two digit year may present calculation or sequencing errors in computer software and embedded technology.

Florida Progress has taken a comprehensive approach in developing its Y2K plans, which emphasizes the testing of every system, to the extent possible, dedicating resources and developing contingency plans. Florida Progress expects that preparations for Y2K issues, including contingency plans, will be completed by the end of the third quarter of 1999 for Florida Power and during the fourth quarter of 1999 for Electric Fuels. The following is a more detailed description of the methodology, priorities and planning to address Y2K concerns, as required by Securities and Exchange Commission Rules.

Florida Progress' methodology for identification and remediation of Y2K issues is a five step process which includes: (1) awareness (i.e., the communication of Y2K issues and their importance); (2) inventory (i.e., the itemized tabulation of all Y2K suspect software, infrastructure and embedded systems); (3) assessment and prioritization (i.e., performing an evaluation of all technology components, obtaining compliance certifications from suppliers, product vendors, and other third parties, to the extent possible, with which Florida Progress conducts business, reviewing interfaces, and categorizing identified issues as mission critical or not); (4) remediation and verification (i.e., correcting or upgrading systems and components and where possible, end-to-end testing); and (5) contingency planning.

All areas of Florida Progress are involved in identifying and addressing software, infrastructure and embedded technology issues. The Information Technology ("IT") focus is on application and operating software, data storage capabilities and technology infrastructure (workstations, servers, voice and data networks, and communications equipment). Embedded systems are internal components used to control, monitor, or assist the operation of equipment, machinery, or plants. They are integral parts of systems, and in many cases their presence is not obvious. There are several categories of embedded systems, including microprocessors found in such devices as temperature sensors, circuit breakers, flow controllers, switchgear, telephone exchanges, and computer systems used in manufacturing or process control, where the computer is connected to plant or machinery in order to control it.

Florida Power began planning for Y2K in 1996, by inventorying and assessing traditional IT supported applications and infrastructure. In 1997, the scope was expanded to encompass embedded microprocessors within its power generation, delivery, and customer service areas. The scope has been further expanded in 1998 to include verifying the readiness of the transmission grid, vendors, suppliers and customers.

Florida Progress has identified mission critical processes that have been given the highest level of priority and is currently focusing its efforts on verifying the Y2K readiness of those systems. These are the systems or processes that provide for the generation and delivery of energy. Systems that provide for the monitoring and control of the electric grid, generating plant output and safety have been given the highest priority. Additional systems that have been given a critical status are the plant process control activities, security and telecommunications. The customer service system has also been given a priority status.

Florida Power has completed the inventory and assessment of all IT and the mission critical embedded technology, with the remainder of the embedded technology to be completed by the end of the first quarter 1999. The generation, distribution, and customer service embedded systems are currently in the assessment and remediation phases. Electric Fuels' IT, as well as coal, marine and rail embedded systems, are currently in the inventory and assessment phases.

Remediation, verification, and contingency planning for all Florida Power systems is anticipated to be completed by the end of the third quarter 1999, and for Electric Fuels by the end of the fourth quarter of 1999.

The Florida Progress Y2K effort is overseen by the Vice President, Information Technology of Florida Power, who provides status reports to the Board of Directors and outside regulatory agencies and other entities such as the FPSC, the Nuclear Regulatory Commission ("NRC"), and the North American Electric Reliability Council ("NERC").

Florida Progress is in the process of developing corporate-wide contingency plans and incorporating assumptions consistent with similar businesses within its region. Due to the speculative nature of contingency planning, however, Florida Progress cannot insure the extent to which such plans will in fact mitigate the risk of material impacts on Florida Progress' operations due to Y2K issues.

Florida Progress is in the process of identifying and assessing third party vulnerabilities. Highest vulnerabilities from third party vendors for Florida Power exist in the fuel supply and telecommunications industries. Florida Power has begun a program of working with these vendors to try to determine potential risks and Y2K readiness. Also, Florida Power is working with industry groups such as the Florida Reliability Coordinating Council, Nuclear Energy Institute / Nuclear Utility Software Management Group, and Electric Power Research Institute to ensure the safety and reliability of power generation and the integrity of the transmission grid. In addition, Florida Power has initiated and participated in utility sharing strategy sessions to identify issues with third parties. Florida Power has also begun to request status information from significant vendors to determine potential third party Y2K risk.

Florida Progress' current estimate of the total costs of addressing Y2K issues, including expenses to remedy both embedded systems and computer information systems, is between $15 million and $25 million. No Florida Progress systems were replaced on an accelerated basis due to the Y2K issue. To date, no material IT projects have been postponed. Through the third quarter of 1998, Florida Progress has spent a total of approximately $3 million to remedy the Y2K issue. These costs have been expensed as incurred. Florida Progress expects to incur approximately an additional $2 million, to address Y2K issues, through the end of 1998. Comparatively, the estimate of $25 million is equal to approximately 75% of the typical yearly Florida Progress IT budget excluding Y2K costs. Costs associated with the Y2K project are currently, and are expected to continue to be, funded from general corporate funds. As Florida Progress continues to address its systems and as the remediation and contingency planning phases of its compliance efforts progress, the estimated costs of Y2K compliance may increase.

In the electric utility industry, there are many computers and software programs that may have Y2K issues, as well as a multitude of individual computer chips within equipment that may have Y2K implications. Computers and computer chips are used in power plants that generate electricity, in systems that handle billing and customer information, and in many other common devices such as telephones, security systems, and building elevators. While the potential effects could be widespread, the exact nature of those effects is unknown, Florida Progress does not expect the potential effect to be severe or widespread. Florida Progress is making every effort to remediate issues and provide contingency plans for the possibility of any disruption that could occur. Nevertheless, achieving Y2K readiness is subject to various risks and uncertainties, many of which are described above. It is difficult to provide a detailed, meaningful description of the most reasonably likely worst case Y2K scenarios. Florida Progress is not able to predict all of the factors that could cause actual results to differ materially from its current expectations as to its Y2K readiness. If Florida Progress or third parties with whom it has significant business relationships, fail to achieve Y2K readiness with respect to critical systems, there could be a material adverse impact on Florida Progress' financial position, results of operations, and cash flows. However, based on the milestones that have been achieved to date and the planned completion of the Y2K project, Florida Progress is confident that it is taking the necessary steps to minimize the impact of Y2K.

-- Anonymous, November 18, 1998

Answers

Oh good, they will have spent 1/5 of their projected Y2K budget by the end of this year. They're ahead of my utility, Niagara Mohawk, which has spent 4.8 million out a projected 40 million remediation budget. At least Florida won't finish last in the pack. Time to break out another box of tissues and stack some more wood for the stove.

-- Anonymous, November 19, 1998