Allegheny Power 2014 Annual Report Download - page 29

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14
The following table summarizes the price and volume factors contributing to the $415 million increase in generation revenues in
2014 compared to 2013:
Source of Change in Generation Revenues Increase
(In millions)
Retail:
Effect of increase in sales volumes $ 14
Change in prices 70
84
Wholesale:
Effect of increase in sales volumes 166
Change in prices 79
Capacity revenue 86
331
Increase in Generation Revenues $ 415
The increase in retail generation sales volume was primarily due to weather-related usage, as described above, and improving
economic conditions, partially offset by increased customer shopping in Pennsylvania. The increase in retail generation prices
reflects higher Pennsylvania PTC prices, the completion of marginal transmission loss refunds to ME and PN customers in the
second quarter of 2013 and a higher generation rate at WP, which includes the recovery of transmission costs effective June 2013.
Additionally, the impact on retail generation prices of MP's Temporary Transaction Surcharge (TTS) associated with the October
2013 Harrison/Pleasants asset transfer was offset by a rate reduction associated with the recovery of deferred energy costs. As
part of the TTS, MP earns a return on and of the Harrison plant costs.
The increase in wholesale generation revenues of $331 million in 2014 resulted from increased volume and energy prices associated
with market conditions related to extreme weather events in January 2014 and increased capacity revenue related to the October
2013 Harrison/Pleasants asset transfer whereby MP acquired from AE Supply 1,476 MWs of net capacity. During January 2014,
unprecedented customer demand associated with prolonged periods of bitterly cold temperatures and unit unavailability across the
PJM footprint resulted in severe market price volatility for electricity and natural gas throughout PJM. Eight of the ten highest winter
demands for electricity on the PJM system occurred in January 2014. The difference between wholesale generation revenues,
primarily associated with MP's regulated generation, and certain energy costs are deferred for future recovery, with no material
impact to earnings.
The increase in transmission revenues of $52 million reflects higher PJM revenues at MP associated with market conditions related
to extreme weather events described above and an increase in the Ohio Companies' NMB transmission rider revenues, partially
offset by the termination of WP's network transmission rider effective June 2013 as discussed above. Network transmission costs
are now recovered through WP's generation rate.
Other revenues decreased $17 million primarily due to less customer requested work in 2014 compared to 2013.
Operating Expenses —
Total operating expenses increased $428 million primarily due to the following:
• Fuel expense was $190 million higher in 2014 primarily related to increased generation as a result of the October 2013
Harrison/Pleasants asset transfer.
• Purchased power costs were $77 million higher in 2014 primarily due to increased unit prices and capacity expense
reflecting higher auction clearing prices, partially offset by a decrease in purchased volumes required.