Allegheny Power 2015 Annual Report Download - page 32

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16
RegulatedDistribution—2015Comparedwith2014
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RegulatedDistribution'snetincomeincreased$153millionin2015comparedto2014,includinga$327milliondecreaseinits
PensionandOPEBmarktomarketadjustment.Excludingtheimpactofthisadjustment,yearoveryearearningswereimpactedby
increasedoperatingexpenses,includinghigherreliabilitymaintenanceexpenses,higherbenefitcosts,andhigherdepreciation
associated with increased capital investments, and a higher effective tax rate, partially offset by a net increase in new rates
implementedin2015atcertainoperatingcompanies.
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Revenues—
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The$523millionincreaseintotalrevenuesresultedfromthefollowingsources:

FortheYearsEnded
December31,
Increase
RevenuesbyTypeofService
2015
2014
(Decrease)
(Inmillions)
Distributionservices
$
3,993
$

3,694
$
299
Generationsales:
Retail
4,303
4,043
260
Wholesale
508
661
(153
)
Totalgenerationsales
4,811
4,704
107
Transmissionsales:
Retail
513
352
161
Wholesale 112

148
(36
)
Totaltransmissionsales
625
500
125
Other
196
204
(8
)
TotalRevenues
$
9,625
$

9,102
$
523

Distribution services revenues increased $299 million primarily resulting from approved base distributionrate increases in
Pennsylvania,effectiveMay3,2015,andforMPandPEinWestVirginia,effectiveFebruary25,2015,partiallyoffsetbyadistribution
ratedecreaseatJCP&L,includingtherecoveryof2011and2012stormcosts,effectiveApril1,2015.Additionally,distribution
servicesrevenuesincreasedresultingfromtheOhioCompanies'RiderDCRandhighercostrecoveryforabovemarketNUGcosts
andcertainenergyefficiencyprogramsforthePennsylvaniaCompanies,whichwasimpactedbyarateincreasein2015.Partially
offsettingtheseitemsweretheimpactsoflowerresidentialandindustrialcustomerusageasdescribedbelow.Distributiondeliveries
bycustomerclassaresummarizedinthefollowingtable:
FortheYearsEnded
December31,
Increase
ElectricDistributionMWHDeliveries
2015
2014
(Decrease)
(Inthousands)
Residential
54,466
54,766
(0.5
)%
Commercial
43,091
42,925
0.4
%

Industrial
50,269
51,276
(2.0
)%
Other
585
586
(0.2
)%
TotalElectricDistributionMWHDeliveries
148,411
149,553
(0.8
)%

Lowerdeliveriestoresidentialcustomers,reflectdecliningweatheradjustedaveragecustomerusagedue,inpart,toincreasing
energyefficiencymandatesaswellasheatingdegreedaysthatwere10.8%belowthesameperiodin2014and2.8%belownormal,
partiallyoffsetbycoolingdegreedaysthatwere32%above2014and17%abovenormal.Commercialsalesincreasedyearover
yearfromtheincreaseincoolingdegreedays,partiallyoffsetbythelowerheatingdegreedaysaswellasdecreasedweather
adjustedusagedue,inpart,toincreasingenergyefficiencymandates.Deliveriestoindustrialcustomersdecreased2%,asthe
increasefromshaleandpetroleumcustomerusagewasmorethanoffsetbyadecreasefromsteelandminingcustomerusage.
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17
Thefollowingtablesummarizesthepriceandvolumefactorscontributingtothe$107millionincreaseingenerationrevenuesin2015
comparedto2014:
SourceofChangeinGenerationRevenues
Increase
(Decrease)
(Inmillions)
Retail:
Effectofincreaseinsalesvolumes $ 146
Changeinprices114
260
Wholesale:
Effectofdecreaseinsalesvolumes(133)
Changeinprices(75)
Capacityrevenue55
(153)
IncreaseinGenerationRevenues $ 107
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TheincreaseinretailgenerationsalesvolumewasprimarilyduetolowercustomershoppinginOhio,Pennsylvania,andNewJersey
andanincreaseinweatherrelatedusage,partiallyoffsetbytheimpactsofenergyefficiencyasdescribedabove.Totalgeneration
providedbyalternativesuppliersasapercentageoftotalMWHdeliveriesdecreasedto80%from81%fortheOhioCompanies,65%
from67%forthePennsylvaniaCompaniesand50%from52%forJCP&L.Theincreaseinpricesprimarilyresultedfromhigher
defaultserviceauctionresults.

Wholesalegenerationrevenuesdecreased$153millionin2015comparedto2014,primarilyreflectingdecreasedvolumeassociated
withtheterminationofcertainNUGcontractsatJCP&LandPNandlowereconomicdispatchoffossilgeneratingunitsassociated
withlowspotmarketenergyprices.Partiallyoffsettingthedecreasewasanincreaseincapacityrevenueresultingfromhigher
capacityprices.Thedifferencebetweencurrentwholesalegenerationrevenuesandcertainenergycostsincurredaredeferredfor
futurerecovery,withnomaterialimpactonearnings.

The increase in retail transmission revenues of $161 million was primarily due to an increase in the Ohio Companies' NMB
transmissionriderrevenues.TheNMBriderrecoversnetworktransmissionintegrationservicecostsfromalldistributioncustomersat
theOhioCompanies,withnomaterialimpacttoearnings.Thedecreaseinwholesaletransmissionrevenuesof$36millionprimarily
relatestolowercongestionrevenueresultingfromtheimpactofmarketconditionsassociatedwiththeextremeweatherandmarket
conditionsin2014.

OperatingExpenses—

Totaloperatingexpensesincreased$255millionprimarilyduetothefollowing:

•Fuelexpensedecreased$34millionin2015primarilyrelatedtolowereconomicdispatchresultingfromlowspotmarket
energyprices.

•Purchasedpowercostswere$163millionhigherin2015primarilyduetoincreasedvolumesreflectinglowercustomer
shoppingas describedabove,higherunitcosts relatedtohigherdefaultserviceauctionresults,and highercapacity
expenseatMP,partiallyoffsetbylowerpurchasesresultingfromtheterminationofcertainNUGcontractsatJCP&LandPN.