Allegheny Power 2010 Annual Report Download - page 41

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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 $ 58
Change due to increased volumes 312
370
Purchases from FES:
Change due to increased unit costs 583
Change due to decreased volumes (725)
(142)
Increase in NUG costs deferred (148)
Net Increase in Purchased Power Costs $ 80
• Transmission expenses were lower by $481 million in 2009, reflecting the change in the transmission
tariff under the Ohio Companies' CBP, reduced transmission volumes and lower congestion costs.
• Intersegment cost reimbursements related to the Ohio Companies’ nuclear generation leasehold
interests increased by $114 million in 2009. Prior to 2009, a portion of OE’s and TE’s leasehold costs
were recovered through customer transition charges. Effective January 1, 2009, these leasehold costs
are reimbursed from the competitive energy services segment.
• Labor and employee benefit expenses decreased by $39 million reflecting changes to Energy Delivery's
organizational and compensation structure and increased resources dedicated to capital projects,
partially offset by higher pension expenses resulting from reduced pension plan asset values at the end
of 2008.
• Storm-related costs were $16 million lower in 2009 compared to the prior year.
• An increase in other operating expenses of $40 million resulted from the recognition of economic
development and energy efficiency obligations in accordance with the PUCO-approved ESP.
• Uncollectible expenses were higher by $12 million in 2009 principally due to increased bankruptcies.
• A $102 million increase in the amortization of regulatory assets was due primarily to the ESP-related
impairment of CEI’s regulatory assets ($216 million) and MISO/PJM transmission cost amortization in
2009, partially offset by the cessation of transition cost amortization for OE and TE.
• A $180 million decrease in the deferral of new regulatory assets was principally due to the absence in
2009 of PJM transmission cost deferrals and RCP distribution cost deferrals, partially offset by the
PUCO-approved deferral of purchased power costs for CEI.
• Depreciation expense increased $28 million due to property additions since 2008.
• General taxes decreased $5 million due primarily to lower revenue-related taxes in 2009.
Other Expense –
Other expense increased $93 million in 2009 compared to 2008. Lower investment income of $32 million resulted
primarily from repaid notes receivable from affiliates. Higher interest expense (net of capitalized interest) of $61 million
resulted from a net increase in debt of $1.8 billion by the Utilities and ATSI during 2009.
Competitive Energy Services – 2009 Compared to 2008
Net income increased to $517 million in 2009 compared to $472 million in the same period of 2008. The increase in net
income includes FGCO's gain from the sale of a 9% participation interest in OVEC, increased sales margins, and an
increase in investment income, offset by a mark-to-market adjustment relating to purchased power contracts for delivery
in 2010 and 2011.