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MANAGEMENT’S DISCUSSION AND ANALYSIS
26
and other pass-through revenues are not defined under
GAAP, and the presentation may not be comparable to other
companies’ presentation or more useful than the GAAP
information provided elsewhere in this report.
REVENUES
PEF’s electric revenues and the percentage change by
year and by customer class were as follows:
(in millions)
Customer Class 2007 % Change 2006 % Change 2005
Residential $2,363 0.1 $2,361 18.0 $2,001
Commercial 1,153 0.1 1,152 21.5 948
Industrial 318 (8.1) 346 21.8 284
Governmental 304 1.0 301 24.4 242
Revenue sharing
refund −− 1 – (1)
Total retail
revenues 4,138 (0.6) 4,161 19.8 3,474
Wholesale 434 36.1 319 (7.3) 344
Unbilled 4−(5) –(6)
Miscellaneous 173 5.5 164 14.7 143
Total electric
revenues 4,749 2.4 4,639 17.3 3,955
Less: Fuel and
other pass-
through
revenues (3,109) −(3,038) –(2,385)
Revenues
excluding
fuel and other
pass-through
revenues $1,640 2.4 $1,601 2.0 $1,570
PEF’s electric energy sales and the percentage change by
year and by customer class were as follows:
(in thousands of MWh)
Customer Class 2007 % Change 2006 % Change 2005
Residential 19,912 (0.5) 20,021 0.6 19,894
Commercial 12,183 1.7 11,975 0.3 11,945
Industrial 3,820 (8.2) 4,160 0.5 4,140
Governmental 3,367 2.8 3,276 2.4 3,198
Total retail
energy sales 39,282 (0.4) 39,432 0.7 39,177
Wholesale 5,930 30.8 4,533 (17.0) 5,464
Unbilled 88 −(234) –(205)
Total MWh sales 45,300 3.6 43,731 (1.6) 44,436
PEF’s revenues, excluding fuel and other pass-through
revenues of $3.109 billion and $3.038 billion for 2007 and
2006, respectively, increased $39 million. The increase
in revenues is primarily due to increased wholesale
revenues, favorable retail customer growth and usage
and other miscellaneous service revenues. Wholesale
revenues increased $29 million primarily due to the
$21 million impact of increased capacity under contract
with a major customer. The favorable retail customer
growth and usage impact of $7 million was driven by
an approximate average net increase in the number of
customers of 23,000 as of December 31, 2007, compared
to December 31, 2006, partially offset by lower average
usage per customer. Other miscellaneous service
revenues increased primarily due to increased electric
property rental revenues of $6 million.
Industrial electric energy revenues and sales decreased
in 2007 compared to 2006 primarily due to a change in the
terms of an agreement with a major customer.
PEF’s revenues, excluding fuel and other pass-through
revenues of $3.038 billion and $2.385 billion for 2006 and
2005, respectively, increased $31 million. The increase in
revenues is due to a favorable retail customer growth and
usage impact of $25 million and a $21 million increase in
rental and other miscellaneous service revenues partially
offset by a $13 million unfavorable impact of weather. The
favorable retail customer growth and usage was driven
by an approximate increase in the average number of
customers of 35,000 as of December 31, 2006, compared to
December 31, 2005. The weather impact is primarily due to
a 16 percent decrease in heating degree days compared
to 2005.
EXPENSES
Fuel and Purchased Power
Fuel and purchased power costs represent the costs of
generation, which include fuel purchased for generation,
as well as energy and capacity purchased in the market
to meet customer load. Fuel, purchased power and
capacity 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 from or refund
to customers.
Fuel and purchased power expenses were $2.646 billion in
2007, which represents a $45 million increase compared
to 2006. Purchased power expense increased $116 million
to $882 million compared to 2006. This increase is primarily
due to a $123 million increase in current year purchased
power costs partially offset by a $6 million decrease in
the recovery of deferred capacity costs. The increased