Allegheny Power 2015 Annual Report Download - page 37
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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)
POLR712
902
(190)
StructuredSales 558
522
36
TotalContractSales 3,816
5,419
(1,603)
Wholesale1,225
461
764
Transmission 138
220
(82)
Other 205
189
16
TotalRevenues $ 5,384
$ 6,289
$ (905)
FortheYearsEnded
December31,Increase
(Decrease)
MWHSalesbyChannel20152014
(Inthousands)
ContractSales:
Direct 23,585
44,012
(46.4)%
GovernmentalAggregation15,443
19,569
(21.1)%
MassMarket 3,878
6,773
(42.7)%
POLR 11,950
15,708
(23.9)%
StructuredSales12,902
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
VolumesPrices
Gainon
Settled
Contracts
Capacity
RevenueTotal
(Inmillions)
Direct $ (1,095) $ 5
$ —
$ —
$(1,090)
GovernmentalAggregation(249) 77
—
—
(172)
MassMarket(193) 6
—
—
(187)
POLR(216) 26
—
—
(190)
StructuredSales 3
33
—
—
36
Wholesale197
(8) 107
468
764
LowersalesvolumesintheDirect,GovernmentalAggregationandMassMarketsaleschannelsprimarilyreflectCES'effortstomore
effectivelyhedgeitsgenerationbyreducingexposuretoweathersensitiveload.Althoughunitpricingwashigheryearoveryearin
theDirect,GovernmentalAggregation,andMassMarketchannels,theincreasewasprimarilyattributabletohighercapacityexpense
asdiscussedbelow,whichisacomponentoftheretailprice,partiallyoffsetbyalowerenergycomponentoftheretailpriceresulting
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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.