Allegheny Power 2015 Annual Report Download - page 44
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OtherExpense—
Otherexpenseincreased$64millionin2014primarilyduetohigherinterestexpenseatMPresultingfromnewdebtissuancesof
$580millionassociatedwiththefinancingoftheOctober2013Harrison/Pleasantsassettransfer,anewdebtissuanceof$500million
inAugust2013atJCP&Landlowercapitalizedfinancingcostsrelatedprimarilytoadecreaseintherateusedforborrowedfunds.
IncomeTaxes—
RegulatedDistribution'seffectivetaxratewas32.8%and37.5%for2014and2013,respectively.Thedecreaseintheeffectivetax
rateprimarilyresultedfromchangesinstateapportionmentfactors,anincreaseinstateflowthroughincometaxbenefitsandother
realizedtaxbenefits.
RegulatedTransmission—2014Comparedwith2013
Netincomeincreased$9millionin2014comparedto2013.HigherTransmissionrevenuesassociatedwithincreasedcapital
investmentsandhighercapitalizedfinancingcostswerepartiallyoffsetbyhigheroperatingexpensesandinterestexpense.
Revenues—
Totalrevenuesincreased$38millionprincipallyduetohigherrevenueatATSIandTrAIL,reflectingrecoveryofincrementaloperating
expensesandahigherratebaseasincludedintheirannualratefilingseffectiveJune2013andJune2014.
Revenuesbytransmissionassetownerareshowninthefollowingtable:
FortheYearsEnded
December31,
RevenuesbyTransmissionAssetOwner20142013
Increase
(Decrease)
(Inmillions)
ATSI $ 242 $ 209 $ 33
TrAIL214207 7
PATH1320(7)
Utilities300295 5
TotalRevenues $ 769 $ 731 $ 38
OperatingExpenses—
Totaloperatingexpensesincreased$40millionprincipallyduetohigherpropertytaxes,depreciationandotheroperatingexpenses.
OtherExpenses—
Totalotherexpensesdecreased$3millionprincipallyduetohighercapitalizedfinancingcostsof$41millionrelatedtoincreased
constructionworkinprogressbalancesassociatedwiththeEnergizingtheFutureinvestmentplan,partiallyoffsetbyincreased
interestexpenseresultingfromnewdebtissuancesof$1.0billionatFETand$400millionatATSI,theproceedsofwhich,inpart,
paidoffshorttermborrowings.
IncomeTaxes—
RegulatedTransmission'seffectivetaxratewas35.2%and37.6%for2014and2013,respectively.Thedecreaseintheeffectivetax
rateprimarilyresultedfromanincreaseinAFUDCequityflowthrough.
CES—2014Comparedwith2013
Operatingresultsdecreased$113millionin2014,comparedto2013.Lowerimpairmentchargesof$473millionassociatedwiththe
deactivationoftheHatfieldandMitchellgeneratingunitsandalowerlossondebtredemptionsof$141millionwerepartiallyoffset
withhigherPensionandOPEBmarktomarketadjustmentsof$434million.Excludingtheimpactofthesecharges,yearoveryear
earningswereimpactedbylowersalesvolumes,reflectingCES'sellingeffortsdiscussedbelowandanincreaseinpurchasedpower
andtransmissioncostsincurredtoservecontractsalesduetomarketconditionsassociatedwiththeextremeweathereventsin
January2014.Partiallyoffsettingtheseitemswereloweroperatingexpensesduetolowerretailrelatedcosts,lowergenerationcosts
resultingfromplantdeactivationsandassettransfers,andhighercapacityrevenuesfromhigherauctionprices.Additionally,operating
resultswereimpactedbya$78millionaftertaxgainonthesaleofcertainhydrofacilitiesinFebruary2014.
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SourceofChangeinPurchasedPower
Increase
(Decrease)
(Inmillions)
Purchasesfromnonaffiliates:
Changeduetoincreasedunitcosts
$
127
Changeduetodecreasedvolumes
(134
)
(7
)
Purchasesfromaffiliates:
Changeduetoincreasedunitcosts
39
Changeduetoincreasedvolumes
2
41
Capacityexpense
58
Increaseincostsdeferred
(15
)
IncreaseinPurchasedPowerCosts
$
77
Otheroperatingexpensesincreased$308millionprimarilydueto:
•Highertransmissionexpensesof$130millionprimarilyduetoPJMtransmissioncostsassociatedwithhigher
congestionratesatMPasaresultofmarketconditionsrelatedtoextremeweathereventsinJanuary2014and
higherPJMtransmissioncostsresultingfromtheOctober2013Harrison/Pleasantsassettransfer.Thedifferences
betweencurrenttransmissionrevenuesandtransmissioncostsincurredaredeferredforfuturerecovery,resulting
innomaterialimpactoncurrentperiodearnings.
• Higherdistributionoperatingandmaintenanceexpensesof$75millionresultingfromhighermaintenanceactivities
andstormrelatedrestorationexpenses,including$26millionofstormexpensesdeferredforfuturerecovery.
•HighervegetationmanagementexpensesinWestVirginiaof$33million,whichweredeferredforfuturerecovery
perauthorizationoftheWVPSC.
•Higherretirementbenefitcostsof$33millionprimarilyreflectinghighernetperiodicbenefitcostsbeforethe
pensionandOPEBmarktomarketadjustmentsdiscussedbelow.
•Increasedregulatedgenerationoperatingandmaintenanceexpensesof$23million,reflectingincreasedcosts
associatedwiththeOctober2013Harrison/PleasantsassettransferandaplannedoutageatFortMartin.
•PensionandOPEBmarktomarketadjustmentsincreased$655millionto$506million,primarilyreflectingalowerdiscount
rateandrevisionstomortalityassumptionsextendingtheexpectedlifeinkeydemographicsusedtomeasurerelated
obligationsin2014.
•Depreciationexpenseincreased$52millionduetoahigherassetbase,including$22millionatMPassociatedwiththe
October2013Harrison/Pleasantsassettransfer.
•Netregulatoryassetamortizationdecreased$528millionprimarilydueto:
•Impairmentchargesonregulatoryassetsof$305millionassociatedwiththerecoveryofmarginaltransmission
lossesatMEandPN($254million)andtherecoveryofRECsfortheOhioCompanies($51million)thatoccurred
in2013,
•Decreasedenergyefficiencyamortizationreflectingaratedecreaseassociatedwithcertainprogramsforthe
PennsylvaniaCompanies($67million),
•LowerdefaultgenerationserviceandNUGcostsrecoveryinPennsylvania($48million),
•Increased deferral of West Virginia vegetation management expenses ($33 million) and customer refunds
associatedwiththegainonthePleasantsplantresultingfromtheOctober2013Harrison/Pleasantsassettransfer
($36million),and
•Higherstormcostdeferrals($26million).
•Generaltaxesdecreased$4millionprimarilyduetolowerrevenuerelatedtaxes,partiallyoffsetbyhigherpropertytaxes
andanincreaseintheWestVirginiabusinessandoccupationtaxasaresultoftheOctober2013Harrison/Pleasantsasset
transfer.
•The2013impairmentoflonglivedassetsof$322millionreflectsMP'schargetoreducethenetbookvalueoftheHarrison
planttotheamountpermittedtobeincludedinratebaseaspartoftheOctober2013Harrison/Pleasantsassettransfer.