Allegheny Power 2010 Annual Report Download - page 34

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19
The increase in wholesale generation revenues reflected higher prices and increased capacity sales for Met-Ed and
Penelec in the PJM market.
Transmission revenues decreased $195 million primarily due to the termination of the Ohio Companies’ transmission
tariff effective June 1, 2009; transmission costs are now a component of the cost of generation established under the
May 2009 Ohio CBP.
Expenses –
Total expenses decreased by $1.5 billion due to the following:
• Purchased power costs were $1.3 billion lower in 2010, largely due to lower volume requirements. The
decrease in volumes from non-affiliates resulted principally from the termination of a third-party supply
contract for Met-Ed and Penelec in January 2010 and from the increase in customer shopping in the Ohio
Companies’ service territories. The decrease in purchases from FES also resulted from the increase in
customer shopping in Ohio.
• An increase in purchased power unit costs from non-affiliates in 2010 resulted from higher capacity
prices in the PJM market for Met-Ed and Penelec. A decrease in unit costs for purchases from FES was
principally due to the lower weighted average unit price per KWH established under the May 2009 CBP
auction for the Ohio Companies effective June 1, 2009.
The following table summarizes the sources of changes in purchased power costs:
Source of Change in Purchased Power
Increase
(Decrease)
(In millions)
Purchases from non-affiliates:
Change due to increased unit costs $ 619
Change due to decreased volumes (1,489)
(870)
Purchases from FES:
Change due to decreased unit costs (257)
Change due to decreased volumes (250)
(507)
Decrease in costs deferred 83
Net Decrease in Purchased Power Costs $ (1,294)
• Transmission expenses increased $70 million primarily due to higher PJM network transmission
expenses and congestion costs for Met-Ed and Penelec, partially offset by lower MISO network
transmission expenses that are reflected in the generation rate established under the May 2009 Ohio
CBP. Met-Ed and Penelec defer or amortize the difference between revenues from their transmission
rider and transmission costs incurred with no material effect on earnings.
• Energy efficiency program costs, which are also recovered through rates, increased $41 million in 2010
compared to 2009.
• Labor and employee benefit expenses decreased by $34 million due to lower pension and OPEB
expenses, lower payroll costs resulting from staffing reductions implemented in 2009, and restructuring
expenses recognized in 2009.
• Expenses for economic development commitments related to the Ohio Companies’ ESP were lower by
$11 million in 2010 compared to 2009.
• Depreciation expense increased $6 million due to property additions since 2009.
• Amortization of regulatory assets decreased $433 million due primarily to the absence of the $216 million
impairment of CEI’s regulatory assets in 2009, reduced net MISO and PJM transmission cost
amortization and reduced CTC amortization for Met-Ed and Penelec, partially offset by increased
amortization associated with the accelerated recovery of deferred distribution costs in Ohio and a $35
million regulatory asset impairment in 2010 associated with the Ohio Companies’ ESP.