8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant To Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of report (Date of earliest event reported): March 20, 2006

(Commission File Number)	Exact names of registrants as specified in their charters, address of principal executive offices, telephone number and state of incorporation	(IRS Employer Identification No.)
1-15929	PROGRESS ENERGY, INC.	56-2155481
	410 S. Wilmington Street
	Raleigh, North Carolina 27601-1748
	Telephone: (919) 546-6111
	State of Incorporation: North Carolina
1-3382	CAROLINA POWER & LIGHT COMPANY	56-0165465
	d/b/a Progress Energy Carolinas, Inc.
	410 S. Wilmington Street
	Raleigh, North Carolina 27601-1748
	Telephone: (919) 546-6111
	State of Incorporation: North Carolina
1-3274	FLORIDA POWER CORPORATION	59-0247770
	d/b/a Progress Energy Florida, Inc.
	100 Central Avenue
	St. Petersburg, Florida 33701-3324
	State of Incorporation: Florida

None

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

This combined Form 8-K is filed separately by three registrants: Progress Energy, Inc., Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc. and Florida Power Corporation d/b/a Progress Energy Florida, Inc. Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf, and is not, and shall not, be deemed to be filed or disclosed by any other registrant.

SECTION 5 - Corporate Governance and Management

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

On March 20, 2007, the Organization and Compensation Committee (the “Committee”) of the Board of Directors of Progress Energy, Inc. (the “Company”) took the actions described below with respect to the Company’s executive officers, including those officers that would be considered “named executive officers” for Securities and Exchange Commission reporting purposes for the Company and its registered subsidiaries, Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc. ("PEC") and Florida Power Corporation d/b/a Progress Energy Florida, Inc.  ("PEF").  Progress Energy’s executive officers serve as officers and/or directors of various Progress Energy subsidiaries. They have multiple responsibilities within and provide various services to Progress Energy and its subsidiaries.

2007 COMPENSATION DECISIONS

Reduced Long-Term Incentive Awards for 2007

At its March 20, 2007 meeting, the Committee adjusted the named executive officers’ long-term incentive award targets downward to reflect a compensation philosophy shift from compensating executive officers at the 75^th percentile to compensating executive officers at the 50^th percentile of the Company's competitive peer group. Under the Committee’s new philosophy, compensation program targets would begin to move toward approximately the 50^th percentile for target performance, with each executive officer having the opportunity to earn above-median, or to receive below-median, compensation if actual performance was better or worse, respectively, than target performance.

The following table compares the named executive officers’ 2006 long-term incentive targets with the reduced 2007 long-term incentive targets. For purposes of the table, targets are expressed as a percentage of base salary.

Name and Position of NEO	2006 Target Long-Term Incentive Award*	2007 Target Long-Term Incentive Award*
Robert B. McGehee, Chairman and Chief Executive Officer	435%	350%
William D. Johnson, President and Chief Operating Officer	300%	275%
Peter M. Scott III, Executive Vice President and Chief Financial Officer	250%	250%**
Fred N. Day IV, President and Chief Executive Officer, Progress Energy Carolinas, Inc.	200%	175%
C.S. Hinnant, Senior Vice President and Chief Nuclear Officer	165%	150%
John R. McArthur, Senior Vice President, Corporate Secretary and General Counsel	165%	150%

* Reflects target percentages for awards. The 2007 long-term incentive awards were comprised of 1/3 restricted stock units and 2/3 performance shares.Under the terms of the PSSP and the 2007 PSSP, the amount of the actual payout opportunity for the performance shares ranges from 0% to 200% based on Company performance.

 **  Mr. Scott’s long-term incentive target for 2007 is fixed pursuant to his 2005 Amended Employment Agreement.

Restricted Stock Units

At its March 20, 2007 meeting, the Committee chose to begin using restricted stock units rather than restricted stock for the restricted stock component of the long-term incentives. Similar to previous restricted stock awards, the annual grants of restricted stock units to the named executive officers will vest at the discretion of the Committee, but generally in annual one-third increments beginning on the third anniversary date following the grant. Additionally, quarterly cash dividend equivalents will be paid to grantees to the extent that dividends are paid on the Company’s common stock. A copy of the Form of Restricted Stock Unit Award Agreement is attached hereto as Exhibit 10.1. At the March 20, 2007 meeting, the Committee also awarded Mr. McArthur a special grant of 9,000 restricted stock units. This special grant follows the general terms described above, except that all units fully vest in three years.

Performance Share Sub-Plan Redesign

In 2007, the Committee, along with its compensation advisor, concluded that the performance share component of long-term incentive compensation has failed to meet the primary objectives of the executive compensation philosophy. The Committee recognized that management has both preserved and grown shareholder value since the 2000 merger of Carolina Power & Light and Florida Progress that created Progress Energy. The Committee also recognized that management has successfully executed the Company's strategy to divest of non-core businesses. Finally, the Committee recognized that management has positioned the Company well to focus on delivering future value to investors through the profitable growth of its two primary subsidiaries, PEF and PEC. The Committee observed that previously issued performance share grants have not been effective at linking these significant achievements to long-term compensation. As such, the Committee concluded that the performance share metrics have had and will continue to have little relevance in motivating and measuring management’s performance in executing the Company's business strategy and in producing value for its investors. In an effort to overcome the ineffectiveness of the previous performance metrics, the Committee redesigned the PSSP by adopting new performance metrics for the performance shares and by adopting a transition plan. The redesigned PSSP is intended to be competitive for retention purposes and to better motivate, align and measure management’s performance. The remainder of this section provides a discussion of the redesigned PSSP and the transition plan.

Background

The PSSP was designed and implemented in 1997. At the time, the electric utility industry consisted primarily of vertically integrated state-regulated entities, that owned generation, transmission and distribution assets and had prices (rates) that were generally set by state regulatory commissions.

Against this backdrop, the Committee adopted the total shareholder return performance metrics related to the PSSP. In 1999, the Committee added performance metrics related to EBITDA growth. Both the total shareholder return and EBITDA growth metrics were measured in part on an absolute basis and in part in comparison to the average of the Company’s Peer Group in order to determine relative performance.

As the 1990s progressed, many regulated utilities began pursuing diversification strategies, and some began participating in processes that would eventually lead to the deregulation of generation assets (meaning that the vertically integrated regulated business model would be replaced).

As deregulation and diversification strategies continued into the early 2000s, it became clear that the vertically integrated regulated business model was evolving into various business models. In states where new regulatory policies were enacted, companies reacted by pursuing some of the following diverging strategies:

·   selling their generation assets and becoming distribution focused;

·   spinning off their generation assets into non-state-regulated subsidiaries and retaining the regulated distribution business as well;

·   focusing on acquiring generation assets in competitive markets and creating unregulated subsidiaries to go along with their still vertically integrated regulated utilities; or

·   continuing to operate in the traditional vertically integrated and primarily state regulated mode.

In summary, there was a significant restructuring of the utility business over this time frame.

In 2001, what is generally known as the California energy crisis essentially halted state deregulation activities. The crisis also initiated a credit crisis that resulted in many companies with large trading operations receiving substantial equity devaluations. Several of such companies entered bankruptcy. The impact of this industry transformation was dramatic.

The Company, since its merger with Florida Progress in December of 2000, had remained committed to a primarily vertically integrated state regulated business model. It had also been focused on divesting unrelated non-energy businesses that had come with the acquisition of Florida Progress.

Since 2000, the Committee has observed a high degree of volatility in the performance metrics of the PSSP peer companies. Peer companies with poor (in some cases catastrophic) performance one year often demonstrated significant positive returns as they rebounded from historical lows. This volatility dramatically impacted the way the Company’s relative performance was assessed in terms of PSSP metrics. In addition to the unstable performance results by the peer group companies, the Committee observed that the companies included in the peer group were significantly changing on a regular basis as a result of merger activity or severe financial distress. For example, more than 30% of the companies included in the original peer group ceased to exist by the end of the first three-year PSSP performance period.

In 2004, the Committee began discussing with its compensation consultant the degree to which the PSSP was (i) effectively measuring and rewarding Company performance and (ii) aligned with the Company’s strategy and business model. In 2005, the Committee revised the PSSP peer group evaluation process in an attempt to address the volatility in financial results that was being observed in the electric utility industry. In 2006, in response to continued observations of volatility in financial results of the Company’s then-recognized peer groups, the Committee authorized its new compensation consultant to undertake a redesign of the PSSP. The redesigned PSSP program, effective for grants beginning in 2007, is described under “New PSSP Performance Metrics” below.

New Performance Share Sub-Plan Performance Metrics

On March 20, 2007, the Committee adopted a new PSSP (referred to as the “2007 PSSP”), attached hereto as Exhibit 10.2, to provide that, beginning with the 2007 grants, performance shares issued under the 2007 PSSP would utilize total shareholder return as the sole metric for determining the amount of an award upon vesting. In order to ensure that the performance metrics are not unduly affected by price to earnings ratio changes that are largely out of management’s control, the Committee designed the total shareholder return performance metrics to be calculated assuming a constant price to earnings ratio, which would be set at the beginning of each grant’s performance period. The performance metric also uses core ongoing earnings as the earnings component for performance measurement purposes. The 2007 PSSP was adopted by the Committee to support its desire to better align the long-term performance metrics with the interests of the Company’s shareholders and to emphasize the Company’s focus on sustained growth of its dividend and earnings per share. As a result of this change, peer groups will continue to be used for setting compensation amounts for executives but will not be used in a relative performance metric.

Performance shares issued under the 2007 PSSP continue to comprise two-thirds of a named executive officer’s long-term incentive compensation, with the balance consisting of restricted stock units.

Transitional Performance Share Sub-Plan

In addition to redesigning the performance metrics associated with the PSSP, the Committee also concluded that, due to the way the currently outstanding PSSP’s performance metrics are structured, payouts to management under the PSSP would not be effective at measuring past performance and would likely not reflect achievement of the Company’s financial goals during the three-year transition period prior to performance share payouts under the redesigned PSSP program. Therefore, the Committee requested that the compensation consultant also assist in designing a transition plan to bridge the old plan and the new plan. This transition plan would be consistent with the objectives behind the new performance metrics and would better align pay with performance in the context of the Company’s strategic plan. In making this decision, the Committee considered:

·   that the participants have been successful in positioning the Company to meet the long-term challenges that lie ahead;

·   that, over the past few years, it has been reviewing the performance metrics utilized under the PSSP and is satisfied that the outstanding PSSP grants were not effective at measuring the Company’s performance over the grant term; and

·   that it desired to motivate participants’ future performance and reward the participants’ efforts in financial and operational achievement during the transition period, including the Company’s achievement of the desired total shareholder return targets for each year in the performance period.

To address these issues, the Committee awarded interim grants of performance units to the Company’s officers (the “Transitional Grants”) in addition to the annual PSSP grant under the 2007 PSSP. The Transitional Grants were made by the Committee to address Committee concerns about the effectiveness of the previous PSSP performance metrics and to focus the Company’s officers on consistent performance metrics over the two interim years prior to the 2007 PSSP’s metrics (solely based on total shareholder return as described below) being measured and awarded. Under the 2007 PSSP, the Transitional Grants set total shareholder return as the sole metric for determining the amount of the award and assume a fixed price to earnings ratio for the Company as described in “New PSSP Performance Metrics” above. Any award from the Transitional Grants will be reduced by awards, if any, from the currently outstanding performance shares vesting in the same year.

The Transitional Grants consist of two separate grants with one vesting in 2008 and one vesting in 2009. The amount of each grant to the named executive officers was equal to such officers’ revised PSSP long-term incentive target for 2007. The Transitional Grants to named executive officers follow: Mr. McGehee - 60,766 shares vesting in 2008 and 60,766 shares vesting in 2009; Mr. Johnson - 29,456 shares vesting in 2008 and 29,456 shares vesting in 2009; Mr. Scott - 22,693 shares vesting in 2008 and 22,693 shares vesting in 2009; Mr. Day - 9,893 shares vesting in 2008 and 9,893 shares vesting in 2009; Mr. Hinnant - 10,391 shares vesting in 2008 and 10,391 shares vesting in 2009; and Mr. McArthur - 8,863 shares vesting in 2008 and 8,863 shares vesting in 2009. Under the terms of the Transitional Grants, the amount of the actual payout opportunity ranges from 0% to 200% of the grant amount, based on Company performance.

SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS.

Item 9.01 Financial Statements and Exhibits.

(c)   Exhibits

10.1Form of Restricted Stock Unit Award Agreement

10.2Performance Share Sub-Plan for Senior Executive and Key Managers (For Award Years Beginning 2007)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.

	PROGRESS ENERGY, INC.,
	CAROLINA POWER & LIGHT COMPANY,
	d/b/a PROGRESS ENERGY CAROLINAS, INC. and
	FLORIDA POWER CORPORATION
	d/b/a PROGRESS ENERGY FLORIDA, INC.
	Registrants
By:	/s/ Jeffrey M. Stone
	Jeffrey M. Stone
	Chief Accounting Officer

Date: March 26, 2006

EX-10.1

Exhibit 10.1

Progress Energy, Inc.

RESTRICTED STOCK UNIT AWARD AGREEMENT

Non-transferable

GRANT TO

_______________________

(“Grantee”)

by Progress Energy, Inc. (the “Sponsor”) of ____________

Restricted Stock Units (the “Units”) representing the right to earn, on a one-for-one basis, shares of the Sponsor’s common stock (“Stock”), pursuant to and subject to the provisions of the Progress Energy, Inc. Amended and Restated 2002 Equity Incentive Plan (the “Plan”) and to the terms and conditions set forth on the following pages of this award agreement (“Agreement”). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Plan.

By accepting this award, Grantee shall be deemed to have agreed to the terms and conditions of this Agreement and the Plan. Unless vesting is accelerated as provided in section 2 of the Terms and Conditions or otherwise in the discretion of the Sponsor’s Committee on Organization and Compensation (“Committee”), the Units shall vest in full (become non-forfeitable) in accordance with the following schedule:

Continued Employment after Grant Date	Percent of Units Vested
3 years	33%
4 years	66%
5 years	100%

IN WITNESS WHEREOF, Progress Energy, Inc. has caused this Agreement to be executed as of the Grant Date, as indicated below.

PROGRESS ENERGY, INC.

By: _________________________________________

Grant Date: __________________________________

TERMS AND CONDITIONS

1. Grant of Units. Each Unit represents the right to receive one share of the Sponsor’s Stock on the terms set forth in this Agreement.

2. Vesting of Units. The Units have been credited to a bookkeeping account on behalf of Grantee. The Units will vest and become non-forfeitable on the earliest to occur of the following (the “Vesting Date”):

(a) As to the percentages of the Units specified on page 1 hereof, on the respective dates specified on page 1 hereof;

(b) As to all of the Units, the termination of Grantee’s employment with the Company due to death or disability at least one year following the Grant Date;

(c) As to all of the Units, the termination of Grantee’s employment with the Company due to Divestiture;

(d) As to all of the Units, upon the occurrence of a Change in Control, if the Units are not assumed by the surviving company or equitably converted or substituted;

(e) As to all of the Units, upon termination of Grantee’s employment without Cause at any time after a Change in Control; or

(f) Upon Grantee’s Retirement, a prorata percentage of the then-unvested Units, if any, will vest based upon the number of full months elapsed between the Grant Date and the date of Retirement, divided by 60.

If Grantee’s employment terminates prior to the Vesting Date for any reason other than as described in (b), (c) or (e) or (f) above, Grantee shall forfeit all right, title and interest in and to the then unvested Units as of the date of such termination and the unvested Units will be reconveyed to the Sponsor without further consideration or any act or action by Grantee.

3. Conversion to Stock. Unless the Units are forfeited prior to the Vesting Date as provided in Section 2 above, the Units will be converted to Shares on the later of (i) the Vesting Date, or (ii) if required to comply with Code Section 409A and Treasury regulations and guidance with respect to such law, the six-month anniversary of Grantee’s separation from service (the “Conversion Date”). Such Shares will be registered on the books of the Sponsor in Grantee’s name as of the Conversion Date and delivered to Grantee as soon as practical thereafter, in certificated or uncertificated form, as the Participant shall direct.

4.Dividend Equivalents. If and when cash dividends or other cash distributions are paid with respect to the Stock while the Units are outstanding, the dollar amount of such dividends or distributions with respect to the number of Shares then underlying the Units will be paid to Grantee at or about the same time that dividends are paid to shareholders of the Sponsor.

5. Rights as Stockholder. Except for the right to receive Dividend Equivalents as provided in Section 4 above, Grantee shall not have any rights as a stockholder of the Sponsor with respect to the Units, including voting rights, until conversion of the Units to shares of Stock. Upon conversion of the Units into shares of Stock, Grantee will obtain full voting and other rights as a stockholder of the Sponsor.

6. Restrictions on Transfer. The Units may not be sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise encumbered to or in favor of any party other than the Company, or be subjected to any lien, obligation or liability of Grantee to any other party other than the Company.

7. No Right of Continued Employment. Nothing in this Agreement shall interfere with or limit in any way the right of the Company to terminate Grantee’s employment at any time, nor confer upon Grantee any right to continue in the employ of the Company.

8. Payment of Taxes. The Company has the authority and the right to deduct or withhold, or require Grantee to remit to the employer, an amount sufficient to satisfy federal, state, and local taxes (including Grantee’s FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of the vesting or settlement of the Units. The obligations of the Sponsor under this Agreement will be conditional on such payment or arrangements, and the Sponsor, and, where applicable, its Affiliates will, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to Grantee. Grantee hereby authorizes the Company to instruct a third party broker or plan administrator to sell Shares earned by Grantee upon settlement of the Units in an amount sufficient to satisfy the amount required to be withheld for tax purposes, and to remit the cash proceeds from such sale to the Company.

9. Amendment. The Committee may amend, modify or terminate this Agreement without approval of Grantee; provided, however, that such amendment, modification or termination shall not, without Grantee’s consent, reduce or diminish the value of this award determined as if it had been fully vested (i.e., as if all restrictions on the Units hereunder had expired) on the date of such amendment or termination.

10. Plan Controls. The terms contained in the Plan are incorporated into and made a part of this Agreement and this Agreement shall be governed by and construed in accordance with the Plan. In the event of any actual or alleged conflict between the provisions of the Plan and the provisions of this Agreement, the provisions of the Plan shall be controlling and determinative.

11. Successors. This Agreement shall be binding upon any successor of the Sponsor, in accordance with the terms of this Agreement and the Plan.

12. Severability. If any one or more of the provisions contained in this Agreement is invalid, illegal or unenforceable, the other provisions of this Agreement will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.

13. Notice. Notices and communications under this Agreement must be in writing and either personally delivered or sent by registered or certified United States mail, return receipt requested, postage prepaid. Notices to the Sponsor must be addressed to:

Progress Energy, Inc.

410 South Wilmington Street

Raleigh, NC 27601

Attn: General Counsel

or any other address designated by the Sponsor in a written notice to Grantee. Notices to Grantee will be directed to the address of Grantee then currently on file with the Sponsor, or at any other address given by Grantee in a written notice to the Sponsor.

EX-10.2

Exhibit 10.2

EXHIBIT C

TO

2002 EQUITY INCENTIVE PLAN

EXECUTIVE AND KEY MANAGER 2007 PERFORMANCE SHARE SUB-PLAN

This Executive and Key Manager 2007 Performance Share Sub-Plan (“Sub-Plan”) sets forth rules and regulations adopted by the Committee for issuance of Performance Share Awards under Section 10 of the 2002 Equity Incentive Plan (“Plan”). This Sub-Plan shall apply to Awards granted effective on and after January 1, 2007. In addition, the rules and regulations relating to the deferral of Awards set forth in this Sub-Plan shall apply to any Awards which become vested on or after January 1, 2005. Capitalized terms used in this Sub-Plan that are not defined herein shall have the meaning given in the Plan. In the event of any conflict between this Sub-Plan and the Plan, the terms and conditions of the Plan shall control. No Award Agreement shall be required for participation in this Sub-Plan.

Section 1. Definitions

When used in this Sub-Plan, the following terms shall have the meanings as set forth below, and are in addition to the definitions set forth in the Plan.

1.1 “Account” means the account used to record and track the number of Performance Shares granted to each Participant as provided in Section 2.4.

1.2 “Award” as used in this Sub-Plan means each aggregate award of Performance Shares as provided in Section 2.2.

1.3 “Early Vesting Event” with respect to a Performance Award means the Participant’s death, Retirement, or termination as a result of a Divestiture, or any of the vesting events provided in Section 3.2 in connection with a Change in Control.

1.4 “Performance Period” for purposes of this Sub-Plan means three consecutive Years beginning with the Year in which an Award is granted; provided, however that there shall be two phase-in Performance Periods, one of which is calendar year 2007 only and one of which is calendar years 2007 and 2008.

1.5 “Performance Schedule” means Attachment 1 to this Sub-Plan, which sets forth the Performance Measures applicable to this Sub-Plan.

1.6 “Performance Share” for purposes of this Sub-Plan means each unit of an Award granted to a Participant, the value of which is equal to the value of Company Stock as hereinafter provided.

1.7 “Prorated Total Shareholder Return” for purposes of this Sub-Plan means the weighted average of the Total Shareholder Return over a Performance Period calculated for the period between the first day of the Performance Period and the date of the applicable Early Vesting Event (other than Retirement).

1.8 “Retire” or “Retirement” means Separation from Service on or after:

(a) becoming 65 years old with at least 5 years of service;

(b) becoming 55 years old with at least 15 years of service; or

(c) achieving at least 35 years of service, regardless of age.

1.9 “Salary” means the regular base rate of compensation payable by the Company to a Participant on an annual basis. Salary does not include bonuses, if any, or incentive compensation, if any. Such compensation shall not be reduced by any deferrals made under any other plans or programs maintained by the Company.

1.10 “Section 409A” means Section 409A of the Code, or any successor section under the Code, as amended and as interpreted by final or proposed regulations promulgated thereunder from time to time.

1.11 “Separation from Service” means the death, Retirement or other separation from service with the Company as defined for purposes of Section 409A of the Code.

1.12 “Total Shareholder Return” means the total percentage return realized by the owner of a share of stock during a relevant Year or any part thereof. Total Shareholder Return is equal to the appreciation or depreciation in value of the stock (which is equal to the average closing value of the stock over the last ten trading days of the relevant period minus the average closing value of the stock over the last ten trading days of the preceding Year) plus the dividends declared during the relevant period, divided by the average closing value of the stock over the last ten trading days of the preceding Year. For purposes of this Plan, Total Shareholder Return is calculated using (i) an adjusted end-of-period stock price based on a constant price to earnings ratio, which is equal to the average of the price to earnings ratio over the last ten trading days of the Year preceding the Year in which a grant takes place; and (ii) an earnings amount equal to the Company’s ongoing earnings (excluding non-core earnings) for the Year preceding the Year in which a grant takes place.

1.13 “Year” means a calendar year.

Section 2. Sub-Plan Participation and Awards

2.1Participant Selection. Participants under this Sub-Plan shall be selected by the Committee in its sole discretion as provided in Section 4.2 of the Plan.

2.2Awards. The Compensation Committee may, in its sole discretion, grant Awards to some or all of the Participants in the form of a specific number of Performance Shares. Except as described below, the target and maximum value of any Award granted to any Participant in any calendar Year will be based upon the following:

Participant	Target Award	Maximum Award
CEO*	233% of Salary	291.25% of Salary
COO*	184% of Salary	230% of Salary
CFO*	133% of Salary	166.25% of Salary
Presidents*/Executive VPs*	117% of Salary	146.25% of Salary
Senior VPs*	100% of Salary	125% of Salary
VP/Department Heads** Level I Level II	80% of Salary 67% of Salary	100% of Salary 83.75% of Salary
Key Managers	67% of Salary	83.75% of Salary

* Senior Management Committee level position

**Levels shall be determined in the sole discretion of the Committee

Notwithstanding the above limitation, the Committee may grant Awards in an amount up to three times the Maximum Award in 2007, with vesting to occur ratably in 2008, 2009 and 2010.

2.3Award Valuation at Grant. In calculating the value of an Award for purposes of Section 2.2, the value of each Performance Share shall be equal to the closing price of a share of Stock on the last trading day of the Year before the Performance Period begins. The Participant’s Salary shall be determined as of the January 1 preceding the date the Award is granted, or such other time as is determined in the discretion of the Committee. Each Award is deemed to be granted on the day that it is approved by the Committee.

2.4Accounting and Adjustment of Awards. The number of Performance Shares awarded to a Participant shall be recorded in a separate Account for each Participant. The number of Performance Shares recorded in a Participant’s Account shall be adjusted to reflect any splits or other adjustments in the Stock in accordance with Section 6.4 of the Plan. If any cash dividends are paid on the Stock, the number of Performance Shares in each Participant’s Account shall be increased by a number equal to (i) the dividend multiplied by the number of Performance Shares in each Participant’s Account, divided by (ii) the closing price of a share of Stock on the payment date of the dividend. No adjustment shall be made to any outstanding Awards of a Retired Participant for cash dividends paid on Stock during the Performance Period following the Retirement of the Participant.

2.5Performance Schedule and Calculation of Awards.

(a)The Committee shall, as soon as practicable after the end of the Performance Period, but in no event later than April 15 of the first Year immediately following expiration of the Performance Period, certify as to (i) the Company’s average Total Shareholder Return over the Performance Period, and (ii) the applicable percentage of the Performance Shares vesting in accordance with the Performance Schedule contained in Attachment 1 hereto.

(b)Notwithstanding the Company’s average Total Shareholder Return over the Performance Period, or the Prorated Total Shareholder Return, as the case may be:

(i) with respect to any Participant holding an Award for the 2005-2007 Performance Period, the number of Performance Shares earned by that Participant with respect to his or her Award for the 2007 Performance Period shall be reduced to reflect the value of any Performance Shares earned or received with respect to the 2005-2007 Performance Share Award; and

(ii) with respect to any Participant holding an Award for the 2006-2008 Performance Period, the number of Performance Shares earned by that Participant with respect to his or her Award for the 2007-2008 Performance Period shall be reduced to reflect the value of any Performance Shares earned or received with respect to the 2006-2008 Performance Share Award; and

(iii) the Committee may in its sole discretion, with respect to any or all Participants, elect to vest fewer Performance Shares than indicated by the Performance Schedule. This subsection 2.5(b)(iii) shall cease to apply upon the occurrence of a Change in Control.

(c)Except with respect to the adjustments required or permitted by subsection (b) above, the Performance Measures and the Performance Schedule will not change during any Performance Period with regard to any Awards that have already been granted. The Committee reserves the right to modify or adjust the Performance Measures and/or the Performance Schedule in the Committee’s sole discretion with regard to future grants.

(d) Except in the case of an Early Vesting Event, each Award shall become vested on January 1 immediately following the end of the applicable Performance Period. In no event shall such “normal” vesting date be construed to be earlier than January 1 immediately following the end of the applicable Performance Period.

2.6Payment of Awards. Except as provided in Section 3, Awards shall be paid after expiration of the Performance Period. The Company will issue one share of Stock in payment for each vested Performance Share (rounded to the nearest whole Performance Share) credited to the Account of the Participant. Payment shall be made as follows:

(a)Normal Payment. Unless deferred as provided below, 100% of the vested Performance Shares for a Performance Period shall be converted to shares of Stock no later than April 15 of the Year immediately following expiration of the Performance Period and will be delivered to Participants as soon as practical thereafter, in certificated or uncertificated form, as the Participant shall direct.

(b)Deferred Payment. Any Participant who is employed as a Department Head or in a higher position as of the beginning of a Performance Period may elect to defer the conversion and payment of his or her Performance Shares for that Performance Period by executing a deferral election substantially in the form attached hereto as Attachment 2, and returning it to the Vice President, Human Resources Department no later than the end of the first Year of the Performance Period. Once made, this election shall be irrevocable except as may be permitted by rules promulgated under Section 409A and allowed by the Committee.

2.7Grantor Trust. In the case of a Change in Control, the Company shall, subject to the restrictions in this Section 2.7 and Section 13.12 of the Plan, irrevocably set aside shares of Stock or cash in one or more such grantor trusts in an amount that is sufficient to pay each Participant employed by such Company (or Designated Beneficiary), the net present value as of the date on which the Change in Control occurs, of the earned benefits to which Participants (or their Designated Beneficiaries) would be entitled pursuant to the terms of the Plan if the value of their deferral account (if any) established pursuant to section 2.6(b) would be paid in a lump sum upon the Change in Control. Any such trust shall be subject to the claims of the general creditors of the Sponsor or Company in the event of bankruptcy or insolvency of the Sponsor or Company. Notwithstanding the foregoing provisions of this Section 2.7, the Company shall establish no such trust if the assets thereof shall be includable in the income of Participants thereby pursuant to Section 409A(b).

Section 3. Early Vesting and Forfeiture

3.1Retirement, Death or Divestiture. If the Participant Retires or dies prior to expiration of the Performance Period, or terminates employment as the result of a Divestiture during a Performance Period, any outstanding Awards of the Participant for any unexpired Performance Period shall vest as of the date of such Early Vesting Event. In the event of the death of the Participant (whether before or after Retirement), or termination of employment as the result of a Divestiture during a Performance Period, the Participant’s outstanding Awards shall be calculated on the basis of the Prorated Total Shareholder Return. In each such case, the early-vesting Awards shall be paid in accordance with Section 3.3.

3.2Change in Control. In the event of a Change in Control prior to the expiration of the Performance Period, any outstanding Award of the Participant for any unexpired Performance Period shall be treated as follows:

(a)Awards Assumed by Acquiror. If the Award is assumed by the successor to the Sponsor as of the date of the Change in Control, each outstanding Award not previously forfeited shall continue to vest and shall be paid pursuant to the terms of this Sub-Plan; provided, however, that in the event the employment of the Participant is terminated by the Company without Cause following the Change in Control, any outstanding Award shall become vested as of the termination date, and the aggregate value of the Award shall be paid in accordance with Section 3.3.

(b)Awards Not Assumed by Acquiror. If the Award is not assumed by the successor to the Sponsor as of the date of the Change in Control, any outstanding Award shall become vested as of the date of the Change in Control, and the aggregate value of the Award shall be paid in accordance with Section 3.3.

3.3Payment of Awards Due to Early Vesting Event. Any Award that is vested prior to the end of the Performance Period due to an Early Vesting Event shall be paid as follows:

(a)Retirement. In the event of the Retirement of the Participant, the Participant’s outstanding Awards shall be paid in accordance with Section 2.6 following the end of the Performance Period for the Award; provided, that if the Participant has elected to defer payment until a specified date certain and Retires before the date specified in the deferral election, the Company will commence distribution of the Deferred Award as soon as practicable on or after the later of: (i) the April 1 following the first anniversary of the date of Retirement, or (ii) the April 1 of the year following the end of the Performance Period, even though said date is earlier than the date specified in the deferral election. If the Participant dies following Retirement but prior to the expiration of the Performance Period, the Participant’s outstanding vested Awards shall be paid to the Participant’s Designated Beneficiary within a reasonable time after the Participant’s death.

(b)Death. In the event of the death of the Participant, payment shall be made to the Participant’s Designated Beneficiary within a reasonable time after the Participant’s death, notwithstanding any election to defer the payment of any Award under Section 2.6(b).

(c)Divestiture. In the event of the termination of employment of the Participant as a result of a Divestiture, payment shall be made within a reasonable time after the date of termination, notwithstanding any election to defer the payment of any Award under Section 2.6(b).

(d)Change in Control. If the Award vests pursuant to Section 3.2(b) or by reason of a termination of employment without Cause following a Change in Control pursuant to Section 3.2(a), the Award shall be paid within a reasonable time after the date of vesting, notwithstanding any election to defer the payment of any Award under Section 2.6(b).

(e)409A Delay. Notwithstanding subsections (a), (c) or (d) above, if the Participant is a “key employee” as defined in Section 416(i) of the Code (but determined without regard to paragraph 5 thereof or the 50 employee limit on the number of officers treated as key employees), then payment shall not be made before the date that is six months after the date of Separation from Service (or, if earlier, the date of death of the Participant) and the amount of any payment made in cash (i.e., with respect to Awards granted prior to January 1, 2005) shall be based upon the value of the Performance Shares as determined by reference to the closing price of the Stock on the trading day occurring on or next following the date that is six months after the date of Separation from Service of the Participant (or, if earlier the date of death of the Participant).

3.4Other Termination of Employment. In the event that a Participant’s employment with the Company terminates for any reason other than as provided in this Section 3, any Award made to the Participant that has not vested as provided in Section 2 or Section 3 shall be forfeited.

Section 4. Payment of Taxes

The Company has the authority and the right to deduct or withhold, or require a Participant to remit to the employer, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any taxable event arising as a result of the vesting or settlement of the Performance Shares. The obligations of the Sponsor under this Sub-Plan will be conditional on such payment or arrangements, and the Sponsor, and, where applicable, its Affiliates will, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. By participating in this Sub-Plan, each Participant thereby authorizes the Company to instruct a third party broker or plan administrator to sell Shares earned by the Participant upon settlement of the Performance Shares in an amount sufficient to satisfy the amount required to be withheld for tax purposes, and to remit the cash proceeds from such sale to the Company.

Section 5. Non-Assignability of Awards

The Awards and any right to receive payment under the Plan and this Sub-Plan may not be anticipated, alienated, pledged, encumbered, or subject to any charge or legal process, and if any attempt is made to do so, or a Participant becomes bankrupt, then in the sole discretion of the Committee, any Award made to the Participant which has not vested as provided in Sections 2 and 3 shall be forfeited.

Section 6. Amendment and Termination

This Sub-Plan shall be subject to amendment, suspension, or termination as provided in the Plan. No action to amend, suspend or terminate this Sub-Plan shall permit the acceleration of the time or schedule of the payment of any Award granted under this Sub- Plan (except as provided in regulations under Section 409A).

Section 7. Section 409A

This Sub-Plan shall be administered in compliance with Section 409A.

IN WITNESS WHEREOF, this instrument has been executed this ______ day of __________, 2007.

PROGRESS ENERGY, INC.

By:______________________________

Robert B. McGehee

Chief Executive Officer

ATTACHMENT 1

PERFORMANCE SCHEDULE

PERFORMANCE SHARE CALCULATION

for the 2007, 2007-2008, and 2007-2009 Performance Periods

Total Shareholder Return(1)(2)	<5%	5%	8%	10.5% or >
% of Target Award Earned(2)	0%	50%	100%	200%

¹ For purposes of Section 3 of the Sub-Plan, the Prorated Total Shareholder Return shall be used.

² Straight line interpolation between points

PERFORMANCE SHARE CALCULATION

for Post-2007 Performance Awards

Total Shareholder Return(1)(2)	<__(3)__%	___(3)__%	___(3)__%	__(3)_% or >
% of Target Award Earned(2)	0%	50%	100%	200%

¹ For purposes of Section 3 of the Sub-Plan, the Prorated Total Shareholder Return shall be used.

² Straight line interpolation between points

³ Total Shareholder Return performance metrics to be established by the Committee on an annual basis

Committee Discretion. Unless a Change in Control shall have occurred, the Committee retains the sole discretion to reduce the number of Performance Shares earned, with respect to any or all Participants, if the formula would result in payouts that the Committee deems to be disproportionate to Company performance or other circumstances merit a reduction in the amounts earned.

Payment of Awards. The number of Performance Shares earned shall be paid in accordance with the provisions of Section 2.6 or 3.3 of the Sub-Plan, as appropriate.

ATTACHMENT 2

PERFORMANCE SHARE SUB-PLAN

200_ DEFERRAL ELECTION FORM

As a Participant in the Performance Share Sub-Plan of the 2002 Equity Incentive Plan ("Sub-Plan"), I hereby elect to defer payment of my Award otherwise payable to me by the Company and attributable to services to be performed by me during the Performance Period beginning on January __, 200__. This election shall apply to [CHECK ONE]:

[ ]100% of the Award[ ] 50% of the Award

[ ]75% of the Award[ ] 25% of the Award

Upon vesting, I understand that my Award shall continue to be recorded in my Account as Performance Shares as described in the Sub-Plan and adjusted to reflect the payment and reinvesting of the Company’s common stock dividends over the deferral period, until paid in full.

I hereby elect to defer receipt (or commencement of receipt) of my Award until the date specified below, or as soon as practical thereafter [CHECK ONE]:*

[ ]a specific date certain at least 5 years from expiration

of the Performance Period:                                                                                              4/1/           

(month/day/year)

[ ]the April 1 following the date of Retirement, or if later, the date which is six months after the date of my Separation from Service for any reason (including Retirement), if I am a “key employee” as defined in Section 416(i) of the Code (but determined without regard to paragraph 5 thereof or the 50 employee limit on the number of officers treated as key employees).

[ ]the April 1 following the first anniversary of my date of Retirement

* Notwithstanding any election above, if I elect a date certain distribution and I Retire before that date certain, I understand that the Company will commence distribution of my Account as soon as practicable on or after the later of: (i) the April 1 following the first anniversary of the date of Retirement, or (ii) the April 1 of the year following the end of the Performance Period, even though said date is earlier than 5 years from the expiration of the Performance Period.

I hereby elect to be paid as described in the Sub-Plan in the form of [CHECK ONE]:

[ ]a single payment

[ ] annual payments commencing on the date set forth above and payable on the anniversary date thereof over:

[ ] a two year period [ ] a three year period

[ ] a four year period [ ] a five year period

I understand that I will receive “earnings” on those deferred amounts when they are paid to me.

I understand that the election made as indicated herein is irrevocable and that all deferral elections are subject to the provisions of the Sub-Plan, including provisions that may affect timing of distributions.

I understand that this deferral election is subject to the requirements of Section 409A of Code, and regulations and other guidance issued thereunder. The Company makes no representation or guarantee that any tax treatment, including, but not limited to, federal, state and local income, or estate and gift tax treatment, will be applicable with respect to the amounts deferred. The Company shall have no responsibility for the tax consequences that I may incur as a result of Section 409A, regulations or guidance issued thereunder, or any other provision of the Internal Revenue Code. I understand it is my responsibility to consult a legal or tax advisor regarding the tax effects of this deferral election. I further acknowledge and agree that the Company may (but shall not be required to) modify this election as necessary to comply with Section 409A and any guidance or regulations issued thereunder. I further agree to cooperate in any manner necessary to ensure that this election is in compliance with Section 409A and any guidance or regulations issued thereunder.

I understand and acknowledge that my interests herein and my rights to receive distribution of the deferred amounts may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process, and if any attempt is made to do so, or I become bankrupt, my interest may be terminated by the Committee, in its sole discretion, may cause the same to be held or applied for the benefit of one or more of my dependents or make any other disposition of such interests that it deems appropriate. I further understand that nothing in the Sub-Plan shall be interpreted or construed to require the Company in any manner to fund any obligation to me, or to my beneficiary(ies) in the event of my death.

(Signature)(Date)

(Print Name)(Company Location)

Received:

Agent of Chief Executive Officer

                                                (Signature)(Date)