Allegheny Power 2010 Annual Report Download - page 40

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The decrease in distribution deliveries by customer class is summarized in the following table:
Electric Distribution KWH Deliveries
Residential (3.3)%
Commercial (4.4)%
Industrial (14.7)%
Total Distribution KWH Deliveries (7.3)%
The lower revenues from distribution services were driven primarily by the reductions in sales volume associated with
milder weather and economic conditions. The decrease in residential deliveries reflected reduced weather-related usage
compared to 2008, as cooling degree days and heating degree days decreased by 17% and 1%, respectively. The
decreases in distribution deliveries to commercial and industrial customers were primarily due to economic conditions in
FirstEnergy's service territory. In the industrial sector, KWH deliveries declined to major automotive customers by 20.2%
and to steel customers by 36.2%. Reduced revenues from transition charges for OE and TE that ceased with the full
recovery of related costs effective January 1, 2009 and the transition rate reduction for CEI effective June 1, 2009, were
offset by PUCO-approved distribution rate increases (see Regulatory Matters – Ohio).
The following table summarizes the price and volume factors contributing to the $218 million decrease in generation
revenues in 2009 compared to 2008:
Source of Change in Generation Revenues
Increase
(Decrease)
(In millions)
Retail:
Effect of 10.5% decrease in sales volumes $ (603)
Change in prices 595
(8)
Wholesale:
Effect of 14.9% decrease in sales volumes (143)
Change in prices (67)
(210)
Net Decrease in Generation Revenues $ (218)
The decrease in retail generation sales volumes from 2008 was primarily due to the weakened economic conditions and
milder weather described above. Retail generation prices increased for JCP&L and Penn during 2009 as a result of their
power procurement processes. For the Ohio Companies, average prices increased primarily due to the higher fuel cost
recovery riders that were effective from January through May 2009. In addition, effective June 1, 2009, the Ohio Companies’
transmission tariff ended and transmission costs became a component of the generation rate established under the CBP.
Wholesale generation sales decreased principally as a result of JCP&L selling less available power from NUGs due to the
termination of a NUG purchase contract in October 2008. The decrease in wholesale prices reflected lower spot market
prices in PJM.
Transmission revenues decreased $245 million primarily due to the termination of the Ohio Companies’ current transmission
tariff and lower MISO and PJM transmission revenues, partially offset by higher transmission rates for Met-Ed and Penelec
resulting from the annual updates to their TSC riders (see Regulatory Matters). The difference between transmission
revenues accrued and transmission costs incurred are deferred, resulting in no material effect on current period earnings.
Expenses –
Total expenses increased by $215 million due to the following:
• Purchased power costs were $80 million higher in 2009 due to higher unit costs, partially offset by an
increase in volumes combined with higher NUG cost deferrals. The increased purchased power costs
from non-affiliates was due primarily to increased volumes for the Ohio Companies as a result of their
CBP, partially offset by lower volumes for Met-Ed and Penelec due to the termination of a third-party
supply contract in December 2008 and for JCP&L due to the termination of a NUG purchase contract in
October 2008. Decreased purchased power costs from FES were principally due to lower volumes for the
Ohio Companies following their CBP, partially offset by increased volumes for Met-Ed and Penelec under
their fixed-price partial requirements PSA with FES. Higher unit costs from FES, which included a
component for transmission under the Ohio Companies’ CBP, partially offset the decreased volumes.