Vectren 2012 Annual Report Download - page 39

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37
Gas Utility Margin (Gas utility revenues less Cost of gas sold)
Gas utility margin and throughput by customer type follows:
Year Ended December 31,
(In millions) 2012 2011 2010
Gas utility revenues $ 738.1 $ 819.1 $ 954.1
Cost of gas sold 301.3 375.4 504.7
Total gas utility margin $ 436.8 $ 443.7 $ 449.4
Margin attributed to:
Residential & commercial customers $ 369.5 $ 375.2 $ 384.7
Industrial customers 56.7 56.4 52.2
Other 10.6 12.1 12.5
Sold & transported volumes in MMDth attributed to:
Residential & commercial customers 90.2 99.9 106.2
Industrial customers 105.8 97.0 90.8
Total sold & transported volumes 196.0 196.9 197.0
Gas utility margins were $436.8 million for year ended December 31, 2012, and compared to 2011, decreased $6.9 million. The
impact of low natural gas prices and mild weather on revenue taxes, late and reconnect fees, and volumetric pass through costs
decreased gas utility margin $10.9 million in 2012 compared to 2011. Returns generated on investments in infrastructure
replacement in Ohio increased margins $2.9 million in 2012 compared to the prior year. Excluding the impact of regulatory
initiatives and pass through costs, large customer margins increased $1.0 million on increasing volumes. With rate designs that
substantially limit the impact of weather on margin, heating temperatures in 2012 that were 79 percent of normal in Indiana and
88 percent of normal in Ohio had a significant impact on small volumes sold, but only a slightly negative impact on margin,
reducing margin $0.6 million year over year. Large customer volumes in 2012 compared to 2011 significantly increased due to
natural gas transported to a natural gas fired power plant that was recently placed into service in the Vectren South service
territory. Volumes delivered to this customer are based on a monthly fixed charge and began in 2010 when service was initiated.
For the year ended December 31, 2011, gas utility margins decreased $5.7 million compared to 2010. Margin decreased $8.0
million year over year due to lower revenue taxes and operating costs recovered in margin. Management estimates a decrease
of $3.5 million due to Ohio rate design changes, as described below. Returns generated on investments in infrastructure
replacement in Ohio increased margins $2.2 million year over year. Large customer margin, net of the impacts of regulatory
initiatives and pass through costs, increased by $3.8 million due primarily to ethanol producers.
The rate design approved by the PUCO on January 7, 2009, and initially implemented on February 22, 2009, allowed for the
phased movement toward a straight fixed variable rate design. This rate design places substantially all of the fixed cost
recovery in the monthly customer service charge. Since the straight fixed variable rate design was fully implemented for
residential base rates in February 2010, nearly 90 percent of the combined residential and commercial base rate gas margins
were recovered through the customer service charge since that date. Margin recognized in 2011 reflects the full implementation
of the rate design which resulted in a decrease in margin in 2011 compared to 2010. In 2010, there was volumetric recovery
during the peak delivery periods of January and February.