Progress Energy 2004 Annual Report Download - page 27

Progress Energy Carolinas Electric
PEC Electric contributed segment profits of $464 million,
$515 million and $513 million in 2004, 2003 and 2002,
respectively. The decrease in profits for 2004 as compared
to 2003 is primarily due to higher O&M charges and lower
wholesale revenues partially offset by the favorable
impact of weather, increased revenues from customer
growth and a reduction in investment losses and
impairment charges compared to the prior year. The slight
increase in profits in 2003, when compared to 2002, was
primarily due to customer growth, strong wholesale sales
during the first quarter of 2003, lower Service Company
allocations and lower interest costs, which were offset by
unfavorable weather in 2003, higher depreciation expense
and increased benefit-related costs.
REVENUES
PEC Electric’s electric revenues and the percentage
change by year and by customer class are as follows:
PEC Electric’s electric energy sales and the percentage
change by year and by customer class are as follows:
PEC Electric’s revenues, excluding recoverable fuel
revenues of $933 million and $901 million for 2004 and
2003, respectively, increased $7 million. The increase in
revenues was due primarily to increased retail revenues
of $35 million as a result of favorable weather, with cooling
degree days 16% above prior year. Retail customer
growth contributed an additional $55 million in revenues in
2004. PEC Electric’s retail customer base increased as
approximately 26,000 new customers were added in 2004.
The increase in retail revenues was offset partially
by lower wholesale revenues. Wholesale revenues
decreased $86 million when compared to $393 million in
2003. The decrease in PEC Electric’s wholesale revenues
in 2004 from 2003 is primarily the result of reduced excess
generation sales. Revenues for 2003 included strong sales
to the northeastern United States as a result of favorable
market conditions. In addition, lower contracted capacity
compared to 2003 further reduced wholesale revenues.
The remaining reduction in wholesale revenues is
attributable to an inelastic power market. While the cost
of fuel continues to rise, the power market prices have not
responded as quickly to the fuel increases. The
differential between fuel cost and market price limited
opportunities to enter the market. PEC monitors its
wholesale contract portfolio on a regular basis. During
2003 and 2004, several contracts expired or were
renegotiated at lower prices. Due to the slightly
depressed wholesale market and increased competition,
this trend could continue as contracts are renewed in the
upcoming years. The expiration and renegotiation of
wholesale contracts is a normal business activity. PEC
actively manages its portfolio by seeking to sign new
contracts to replace expiring arrangements.
PEC Electric’s revenues, excluding recoverable fuel
revenues of $901 million and $851 million in 2003 and 2002,
respectively, were unchanged from 2002 to 2003. Milder
weather in 2003, when compared to 2002, accounted for
a $61 million retail revenue reduction. While heating
degree days in 2003 were 4.8% above prior year, cooling
degree days were 25.2% below prior year. However, the
more severe weather in the northeast region of the
United States during the first quarter of 2003 drove a
$19 million increase in wholesale revenues. Additionally,
retail customer growth in 2003 generated an additional
$42 million of revenues in 2003. PEC Electric’s retail
customer base increased as approximately 23,000 new
customers were added in 2003.
Downturns in the economy during 2002 and 2003 impacted
energy usage within the industrial customer class. Total
industrial revenues, excluding fuel revenues, declined
during 2003 when compared to 2002 by $13 million, as
sales to industrial customers decreased due to a general
industrial slowdown. Decreases in the textile industry and
the chemical industry were among the largest. This
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Progress Energy Annual Report 2004
(in millions)
Customer Class 2004 % Change 2003 % Change 2002
Residential $1,324 5.2 $1,259 1.5 $1,241
Commercial 888 4.5 850 2.2 832
Industrial 659 3.6 636 (1.4) 645
Governmental 82 3.8 79 1.3 78
Total retail
revenues 2,953 4.6 2,824 1.0 2,796
Wholesale 575 (16.3) 687 5.5 651
Unbilled 10 – (6) – 15
Miscellaneous 90 7.1 84 9.1 77
Total electric
revenues $3,628 1.1 $3,589 1.4 $3,539
(in thousands of MWh)
Customer Class 2004 % Change 2003 % Change 2002
Residential 16,003 4.7 15,283 0.3 15,239
Commercial 13,019 3.7 12,557 0.7 12,468
Industrial 13,036 2.3 12,749 (2.6) 13,089
Governmental 1,431 1.6 1,408 (2.0) 1,437
Total retail
energy sales 43,489 3.6 41,997 (0.6) 42,233
Wholesale 13,222 (14.8) 15,518 3.3 15,024
Unbilled 91 – (44) – 270
Total MWh sales 56,802 1.2 57,471 (0.1) 57,527