Allegheny Power 2014 Annual Report Download - page 31

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16
• The 2013 impairment of long-lived assets of $322 million reflects MP's charge to reduce the net book value of the Harrison
plant to the amount permitted to be included in rate base as part of the October 2013 Harrison/Pleasants asset transfer.
Other Expense —
Other expense increased $64 million in 2014 primarily due to higher interest expense at MP resulting from new debt issuances of
$580 million associated with the financing of the October 2013 Harrison/Pleasants asset transfer, a new debt issuance of $500
million in August 2013 at JCP&L and lower capitalized financing costs related primarily to a decrease in the rate used for borrowed
funds.
Income Taxes —
Regulated Distribution’s effective tax rate was 32.8% and 37.5% for 2014 and 2013, respectively. The decrease in the effective tax
rate primarily resulted from changes in state apportionment factors, an increase in state flow through income tax benefits and other
realized tax benefits. In 2015, the Regulated Distribution segment anticipates an effective tax rate of approximately 37% to 38%.
Regulated Transmission — 2014 Compared with 2013
Net income increased $9 million in 2014 compared to 2013. Higher Transmission revenues and capitalized financing costs associated
with Regulated Transmission's Energizing the Future investment plan were partially offset by higher operating costs and interest
expense.
Revenues —
Total revenues increased $38 million principally due to higher revenue requirements at ATSI and TrAIL, reflecting incremental cost
of service and rate base recovery resulting from their annual rate filings effective June 2013 and June 2014.
Revenues by transmission asset owner are shown in the following table:
For the Years Ended
December 31, Increase
Revenues by Transmission Asset Owner 2014 2013 (Decrease)
(In millions)
ATSI $ 242 $ 209 $ 33
TrAIL 214 207 7
PATH 13 20 (7)
Utilities 300 295 5
Total Revenues $ 769 $ 731 $ 38
Operating Expenses —
Total operating expenses increased $40 million principally due to higher property taxes, depreciation and other operating expenses.
Other Expenses —
Total other expenses decreased $3 million principally due to higher capitalized financing costs of $41 million related to increased
construction work in progress balances associated with the Energizing the Future investment plan, partially offset by increased
interest expense resulting from new debt issuances of $1.0 billion at FET and $400 million at ATSI.
Income Taxes —
Regulated Transmission’s effective tax rate was 35.2% and 37.6% for 2014 and 2013, respectively. The decrease in the effective
tax rate primarily resulted from an increase in AFUDC equity flow through. In 2015, the Regulated Transmission segment anticipates
an effective tax rate of approximately 37% to 38%.
CES — 2014 Compared with 2013
Operating results decreased $117 million in 2014 compared to 2013. Lower impairment charges of $473 million associated with
the deactivation of the Hatfield and Mitchell generating units and lower losses on debt redemptions of $141 million were partially
offset with higher Pension and OPEB mark-to-market adjustments of $434 million. Excluding the impact of these changes, year
over year earnings were impacted by lower sales volumes, reflecting CES’ change in selling efforts discussed below and an increase
in costs incurred to serve contract sales due to extreme market conditions in January 2014. Partially offsetting these items were
lower operating expenses due to lower retail-related costs, lower generation costs resulting from plant deactivations and asset