Allegheny Power 2011 Annual Report Download - page 36

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The following tables summarize the price and volume factors contributing to changes in revenues from generation sales:
Source of Change in Direct and Governmental Aggregation
Direct Sales:
Effect of increase in sales volumes
Change in prices
Governmental Aggregation:
Effect of increase in sales volumes
Change in prices
Net Increase in Direct and Government Aggregation Revenues
Increase
(Decrease)
(In millions)
$ 1,034
(75)
959
319
14
333
$ 1,292
Source of Change in POLR and Structured Revenues
Effect of decrease in sales volumes
Change in prices
Source of Change in Wholesale Revenues
Effect of decrease in sales volumes
Change in prices
Increase
(Decrease)
(In millions)
$ (1,800)
155
$ (1,645)
Increase
(Decrease)
(In millions)
$ (182)
242
$ 60
Operating Expenses —
Total operating expenses increased $1.5 billion in 2011. Excluding the Allegheny companies, total operating expenses decreased
$98 million compared to 2010, due to the following factors:
• Fuel costs decreased $177 million in 2011 compared to 2010 primarily due to cash received from assigning a substantially
below-market, long-term fossil contract to a third party. In connection with its merger integration initiatives and risk
management strategy, FirstEnergy continues to evaluate opportunities with respect to its commodity contracts. As a result
of the assignment, FirstEnergy entered into a new long-term contract with another supplier for replacement fuel based on
current market prices. Excluding the assignment, fuel costs decreased $54 million in 2011 compared to 2010 due to
decreased volumes consumed ($115 million), partially offset by higher unit prices ($61 million). The decrease in fossil fuel
expense reflects lower generation needed to satisfy sales requirements. Lower fossil fuel expenses were partially offset
by a $22 million increase in nuclear fuel costs, which rose principally due to higher nuclear fuel unit prices following the
refueling outages that occurred in 2010 and 2011.
• Purchased power costs decreased $382 million as lower volumes ($649 million) were partially offset by higher unit prices
($267 million). The decrease in volume primarily relates to the expiration at the end of 2010 of a 1,300 MW third party
contract associated with serving Met-Ed and Penelec.
• Fossil operating costs increased $36 million due primarily to higher labor, contractor and material costs resulting from an
increase in planned and unplanned outages, which were partially offset by reduced losses from the sale of excess coal.
• Nuclear operating costs increased $53 million primarily due to Perry and Beaver Valley Unit 2 refueling outages in 2011.
While Davis-Besse had a refueling outage in 2010 and an outage in 2011 to replace the reactor vessel head, the work
performed on both outages was largely capital-related.
• Transmission expenses increased $249 million due primarily to higher congestion, network and line loss expenses.
• Depreciation expense increased $20 million principally due to the completion of the Sammis projects at the end of 2010.
• General taxes increased $36 million due to an increase in revenue-related taxes.