Vectren 2013 Annual Report Download - page 40

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38
Electric Utility Margin (Electric utility revenues less Cost of fuel & purchased power)
Electric utility margin and volumes sold by customer type follows:
Year Ended December 31,
(In millions) 2013 2012 2011
Electric utility revenues $ 619.3 $ 594.9 $ 635.9
Cost of fuel & purchased power 202.9 192.0 240.4
Total electric utility margin $ 416.4 $ 402.9 $ 395.5
Margin attributed to:
Residential & commercial customers $ 255.8 $ 255.8 $ 251.2
Industrial customers 108.7 108.5 105.3
Other 4.8 1.6 4.3
Regulatory expense recovery mechanisms 10.5 4.9 5.1
Subtotal: retail $ 379.8 $ 370.8 $ 365.9
Wholesale power & transmission system margin 36.6 32.1 29.6
Total electric utility margin $ 416.4 $ 402.9 $ 395.5
Electric volumes sold in GWh attributed to:
Residential & commercial customers 2,722.1 2,731.7 2,827.2
Industrial customers 2,735.2 2,710.5 2,744.8
Other customers 21.8 22.6 22.8
Total retail volumes sold 5,479.1 5,464.8 5,594.8
Retail
Electric retail utility margins were $379.8 million for the year ended December 31, 2013 and, compared to 2012, increased by
$9.0 million. Electric results are not protected by weather normalizing mechanisms. Cooling degree days in 2013 were 103
percent of normal compared to 130 percent of normal in 2012, resulting in lower small customer margin of $1.2 million, largely
offset by an increase in customers. Large customer margins for 2013 were relatively flat when compared to 2012. Other margin
was higher in 2013 by $3.2 million, due in part to $2.6 million in refunds to customers during 2012 resulting from statutory net
operating income limits. Margin from regulatory expense recovery mechanisms increased $5.6 million in 2013 compared to
2012, driven by a corresponding increase in operating expenses associated with the electric state-mandated conservation
programs.
In 2012, electric retail utility margins were $370.8 million for the year compared to 2011, an increase of $4.9 million. The impact
year over year of new retail base rates that were effective May 3, 2011 was an increase in margin in 2012 of approximately
$10.0 million. Offsetting a portion of the increase was a decline in small customer usage that lowered margin by $2.6 million in
2012 as a result of energy conservation, net of an approved lost margin recovery mechanism. Weather also impacted margin
and, compared to normal temperatures, increased results $2.7 million and $3.0 million, in 2012 and 2011, respectively. Due in
part to the favorable weather in both periods, the Company provided refunds to customers in 2012 totaling $2.6 million pursuant
to the statutory net operating income limits. Indiana regulation includes a statutory mechanism that can limit a utility's rolling
twelve month net operating income to that authorized in its last general rate order, as adjusted for previous net operating income
levels that were below authorized levels. Should weather or other factors continue to increase net operating income in future
periods, the full benefit of those favorable impacts on the Company's electric utility may continue to be limited by the statutory
earnings test. Finally, though volumes sold to large customers during 2012 decreased compared to the prior year, the impact on
margin was small as certain large customers have rate structures that include both a daily peak usage component, as well as a
volumetric component.
On December 3, 2013, SABIC Innovative Plastics (SABIC), a large industrial utility customer of the Company, announced its
plans to build a cogeneration (cogen) facility to be operational in mid-2016, in order to generate power to meet a significant
portion of its ongoing power needs. Electric service is currently provided to SABIC by the Company under a long-term contract
that expires in 2016, which coincides with the expected completion of the new cogen facility. SABIC's historical peak electric
usage has been 120 megawatts (MW). The cogen facility is expected to provide 80 MW of capacity. Therefore, the Company
will continue to provide all of SABIC's power requirements above the 80 MW capacity of the cogen, which is projected to be