Allegheny Power 2015 Annual Report Download - page 36
Download and view the complete annual report
Please find page 36 of the 2015 Allegheny Power annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.
20
Thedecreaseintotalrevenuesresultedfromthefollowingsources:
FortheYearsEnded
December31,
Increase
(Decrease)
RevenuesbyTypeofService
2015
2014
(Inmillions)
ContractSales:
Direct
$
1,269
$
2,359
$
(1,090
)
GovernmentalAggregation
1,012
1,184
(172
)
MassMarket
265
452
(187
)
POLR
712
902
(190
)
StructuredSales
558
522
36
TotalContractSales
3,816
5,419
(1,603
)
Wholesale
1,225
461
764
Transmission
138
220
(82
)
Other
205
189
16
TotalRevenues
$
5,384
$
6,289
$
(905
)
FortheYearsEnded
December31,
Increase
(Decrease)
MWHSalesbyChannel
2015
2014
(Inthousands)
ContractSales:
Direct
23,585
44,012
(46.4
)%
GovernmentalAggregation
15,443
19,569
(21.1
)%
MassMarket
3,878
6,773
(42.7
)%
POLR
11,950
15,708
(23.9
)%
StructuredSales
12,902
12,814
0.7
%
TotalContractSales
67,758
98,876
(31.5
)%
Wholesale
7,326
680
977.4
%
TotalMWHSales
75,084
99,556
(24.6
)%
Thefollowingtablessummarizethepriceandvolumefactorscontributingtochangesinrevenues:
SourceofChangeinRevenues
Increase(Decrease)
MWHSalesChannel:
Sales
Volumes
Prices
Gainon
Settled
Contracts
Capacity
Revenue
Total
(Inmillions)
Direct
$
(1,095
)
$
5
$
—
$
—
$
(1,090
)
GovernmentalAggregation
(249
)
77
—
—
(172
)
MassMarket
(193
)
6
—
—
(187
)
POLR
(216
)
26
—
—
(190
)
StructuredSales
3
33
—
—
36
Wholesale
197
(8
)
107
468
764
LowersalesvolumesintheDirect,GovernmentalAggregationandMassMarketsaleschannelsprimarilyreflectCES'effortstomore
effectivelyhedgeitsgenerationbyreducingexposuretoweathersensitiveload.Althoughunitpricingwashigheryearoveryearin
theDirect,GovernmentalAggregation,andMassMarketchannels,theincreasewasprimarilyattributabletohighercapacityexpense
asdiscussedbelow,whichisacomponentoftheretailprice,partiallyoffsetbyalowerenergycomponentoftheretailpriceresulting
21
fromloweryearoveryearmarketprices.TheDirect,GovernmentalAggregationandMassMarketcustomerbasewas1.6millionas
ofDecember31,2015,comparedto2.1millionasofDecember31,2014.
ThedecreaseinPOLRsalesof$190millionwasduetolowervolumes,partiallyoffsetbyhigherratesassociatedwithrecentPOLR
auctions.StructuredSalesincreased$36millionduetolowmarketpricesthatincreasedthegainsonvariousstructuredfinancial
salescontractsandhigherstructuredtransactionvolumes.
Wholesalerevenuesincreased$764millionprimarilyduetoanincreaseincapacityrevenuefromhighercapacityprices,increasein
shortterm(nethourlyposition)transactions,andhighernetgainsonfinanciallysettledcontracts,partiallyoffsetbylowerspotmarket
energypriceswhichlimitedadditionalwholesalesales.
Transmission revenue decreased $82 million primarily due to lower congestion revenue resulting from the market conditions
associatedwiththeextremeweathereventsin2014.
Otherrevenueincreased$16millionprimarilyduetohigherleaserevenuesfromadditionalequityinterestsinaffiliatedsaleand
leasebacksrepurchasedinNovember2014.CESearnsleaserevenueassociatedwiththeequityinterestsitpurchased.
OperatingExpenses—
Totaloperatingexpensesdecreased$1,747millionin2015duetothefollowing:
•Fuelcostsdecreased$391millionprimarilyduetolowereconomicdispatchoffossilunitsresultingfromlowspotmarket
energypricesandlowernuclearunitprices,resultingfromthesuspensionoftheDOEnucleardisposalfee,effectiveMay
16,2014.Additionally,fuelcostswereimpactedbyadecreaseinsettlementandterminationcostsrelatedtocoaland
transportationcontracts.Theimpactofterminationsandsettlementsofcoalandtransportationcontractsresultedinapre
taxlossof$67millionand$166millionin2015and2014,respectively.
•Purchasedpowercostsdecreased$694millionduetolowervolumes($888million),partiallyoffsetbyhigherunitprices
($39 million) and higher capacity expenses ($155 million). Lower volumes were primarily due to decreased load
requirementsresultingfromlowersalesasdiscussedabove,partiallyoffsetbylowerfossilgenerationasdiscussedabove.
Thehigherunitpricesareprimarilyduetohigherlossesonfinanciallysettledcontracts,partiallyoffsetbylowermarket
pricesin2015ascomparedto2014.Theincreaseincapacityexpense,whichisacomponentofCES'retailprice,was
primarilytheresultofhighercapacityratesassociatedwithCES'retailsalesobligations.
•Nuclearoperatingcostsincreased$84millionasaresultofhigherplannedoutagecostsandhigheremployeebenefit
expenses.Therewerethreeplannedrefuelingoutagesin2015ascomparedtotwoplannedoutagesin2014.
•Transmissionexpensesdecreased$273millionprimarilyduetoloweroperatingreserveandmarketbasedancillarycosts
associatedwithmarketconditionsresultingfromtheextremeweathereventsin2014.
•Generaltaxesdecreased$31millionprimarilyduetolowergrossreceiptstaxesassociatedwithdecreasedretailsales
volumes.
•PensionandOPEBmarktomarketadjustmentdecreased$267millionto$60million,whichwasimpactedbylowerthan
expectedassetreturns,partiallyoffsetbyanincreaseinthediscountrateusedtomeasurebenefitobligations.
•Otheroperatingexpensesdecreased$212millionprimarilyduetoa$141milliondecreaseinmarktomarketexpenseson
commoditycontractpositionsreflectinglowermarketpricesanda$71milliondecreaseinretailrelatedcosts.
•Impairmentsoflonglivedassetsincreased$34millionduetoimpairmentchargesassociatedwithnoncoreassets.
OtherExpense—
Totalotherexpenseincreased$63millionin2015comparedto2014primarilyduetohigherOTTIonNDTinvestments,partiallyoffset
bytheabsenceofan$8millionlossondebtredemptionsincurredin2014.
DiscontinuedOperations—
Therewerenodiscontinuedoperationsin2015.In2014,discontinuedoperationsprimarilyincludedapretaxgainofapproximately
$142million($78millionaftertax)associatedwiththesaleofcertainhydroelectricassetsonFebruary12,2014.
IncomeTaxes(Benefits)—
CES'effectivetaxratewas36.0%and34.8%for2015and2014,respectively.Theincreaseintheeffectivetaxrateresultedfrom
changesinstateapportionmentfactorsandrealizedtaxbenefitsrecognizedin2014.