Progress Energy 2004 Annual Report Download - page 30

PEF’s electric energy sales and the percentage change
by year and by customer class are as follows:
PEF’s revenues, excluding recoverable fuel and other
pass-through revenues of $2.007 billion and $1.692 billion
for 2004 and 2003, respectively, increased $58 million. This
increase was due primarily to favorable customer growth,
which increased revenues $34 million. PEF has 37,000
additional retail customers compared to prior year.
Revenues were also favorably impacted by a reduction in
the provision for revenue sharing of $24 million. Results for
2003 included an additional refund of $18 million related to
the 2002 revenue sharing provision as ordered by the
Florida Public Service Commission (FPSC) in July 2003. In
addition, improved wholesale sales increased revenues
by $11 million. Included in fuel revenues is the recovery of
depreciation and capital costs associated with the Hines
Unit 2, which was placed into service in December 2003
and contributed $36 million in additional revenues in 2004.
The recovery of the Hines Unit 2 costs through the fuel
clause is in accordance with the 2002 rate stipulation (See
Note 8C). These increases were partially offset by the
reduction in revenues related to customer outages for
Hurricanes Charley, Frances and Jeanne of approximately
$12 million and the impact of milder weather in the current
year of $10 million.
PEF’s revenues, excluding recoverable fuel and other
pass-through revenues of $1.692 billion and $1.602 billion in
2003 and 2002, respectively, were unchanged from 2002
to 2003. Revenues were favorably impacted by $49 million
in 2003, primarily as a result of customer growth
(approximately 36,000 additional customers). In addition,
other operating revenues were favorable by $16 million due
primarily to higher wheeling and transmission revenues
and higher service charge revenues (resulting from
increased rates allowed under the 2002 rate settlement).
These increases were offset by the negative impact of the
rate settlement, which decreased revenues, lower
wholesale sales and the impact of unfavorable weather.
The provision for revenue sharing increased
$12 million in 2003 compared to the $5 million provision
recorded in 2002. Revenues in 2003 were also impacted by
the final resolution of the 2002 revenue sharing provisions,
as the FPSC issued an order in July 2003 that required PEF
to refund an additional $18 million to customers related to
2002. The 9.25% rate reduction from the settlement
accounted for an additional $46 million decline in revenues.
The 2003 impact of the rate settlement was partially offset
by the absence of the prior year interim rate refund of
$35 million. Lower wholesale revenues (excluding fuel
revenues) of $17 million and the $8 million impact of milder
weather also reduced base revenues during 2003.
EXPENSES
Fuel and Purchased Power
Fuel and purchased power costs represent the costs of
generation, which include fuel purchases for generation,
as well as energy purchased in the market to meet
customer load. Fuel and purchased power expenses are
recovered primarily through cost recovery clauses, and,
as such, changes in these expenses do not have a
material impact on earnings. The difference between fuel
and purchased power costs incurred and associated fuel
revenues that are subject to recovery is deferred for
future collection or refund to customers.
Fuel and purchased power expenses were $1.742 billion in
2004, which represents a $306 million increase compared
to 2003. This increase is due to increases in fuel used in
electric generation and purchased power expenses of
$305 million and $1 million, respectively. Higher system
requirements and increased fuel costs in the current year
account for $87 million of the increase in fuel used in
electric generation. The remaining increase is due to the
recovery of fuel expenses that were deferred in the prior
year, partially offset by the deferral of current year
underrecovered fuel expenses. In November 2003, the
FPSC approved PEF’s request for a cost adjustment in its
annual fuel filing due to the rising costs of fuel. The new
rates became effective January 2004.
Fuel used in generation and purchased power expenses
were $1.436 billion in 2003, which represents an
$87 million increase compared to the prior year. Higher
costs to generate electricity and higher purchased
power costs as a result of an increase in volume due to
system requirements and higher natural gas prices
resulted in a $229 million increase partially offset by the
deferral of 2003 underrecovered fuel and purchased
power expense of $142 million.
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Management’s Discussion and Analysis
(in thousands of MWh)
Customer Class 2004 % Change 2003 % Change 2002
Residential 19,347 (0.4) 19,429 3.6 18,754
Commercial 11,734 1.6 11,553 1.2 11,420
Industrial 4,069 1.7 4,000 4.3 3,835
Governmental 3,044 2.4 2,974 4.4 2,850
Total retail
energy sales 38,194 0.6 37,956 3.0 36,859
Wholesale 5,101 18.0 4,323 3.4 4,180
Unbilled 358 – 233 – 5
Total MWh sales 43,653 2.6 42,512 3.6 41,044