Allegheny Power 2013 Annual Report Download - page 44

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• Transmission expenses increased $115 million during 2012 compared to 2011. The increase is primarily due to network
integration transmission service expenses that, prior to June 2011, were incurred by the generation supplier, and are now
being recovered through the NMB transmission rider referred to above.
• Other operation and maintenance expenses increased $197 million primarily due to higher labor, professional contractor
and material costs to repair storm-related damage.
• Energy Efficiency program costs, which are recovered through rates, increased by $16 million.
• Other costs decreased due to the absence of a provision for excess and obsolete material of $13 million that was recognized
in 2011 relating to revised inventory practices adopted in conjunction with the Allegheny merger.
• Merger-related costs decreased $60 million in 2012 compared to 2011.
• Pension and OPEB mark-to-market charges increased $87 million, reflecting lower discount rates to measure related
obligations in 2012.
• Depreciation expense increased by $27 million due to a higher asset base.
• Deferral of storm costs increased by $186 million primarily related to storm restoration expenses associated with Hurricane
Sandy and the "derecho" wind storm.
• Net regulatory asset amortization decreased $162 million primarily due to the scheduled suspension of the Ohio rider
recovering deferred distribution costs in December 2011 and the rate reduction for JCP&L's NUG deferred cost recovery
in March of 2012, partially offset by the recovery in Ohio of residential generation credits for electric heating discounts,
which began in September 2011.
• General taxes decreased by $28 million primarily due to a decrease in revenue-related taxes.
Operating expenses for the Allegheny Utilities are summarized in the following table:
For the Years Ended
December 31, Increase
Operating Expenses - Allegheny(1) 2012 2011 (Decrease)
(In millions)
Purchased Power $ 1,170 $ 1,146 $ 24
Fuel 263 268 (5)
Transmission 180 184 (4)
Deferral of storm costs (49) (10) (39)
Amortization of other regulatory assets, net (14) (13) (1)
Pensions and OPEB mark-to-market adjustment 91 76 15
Other operating expenses 273 240 33
General taxes 130 113 17
Depreciation 152 144 8
Impairment of long-lived assets(2) — 87 (87)
Total Operating Expenses $ 2,196 $ 2,235 $ (39)
(1) Allegheny results include 12 months in 2012 and 10 months in 2011.
(2) Deactivation of three regulated coal-fired fossil generating plants in West Virginia.
Other Expense —
Other expense increased $23 million in 2012 primarily due to higher interest expense on debt of the Allegheny Utilities and lower
investment income on OE's and TE's NDT assets and the PNBV and Shippingport trusts.
Regulated Transmission — 2012 Compared with 2011
Net income increased by $32 million in 2012 compared to 2011 primarily due to two additional months of earnings in 2012 associated
with TrAIL, PATH, and the Allegheny Utilities' transmission assets that were acquired in the merger.