ComEd 2006 Annual Report Download - page 98

The increase in electric retail revenue associated with customer choice reflected customers from all
customer classes returning to PECO as their electric supplier as a result of rising wholesale energy prices
and a number of competitive electric generation suppliers exiting the market during 2005 and 2006.
Unbilled revenue—change in estimate. In the fourth quarter of 2006, PECO recorded a $35 million
increase to unbilled electric revenues associated with a change in estimate in the amount of revenue
recognized, although unbilled, at the end of 2006. As discussed under Critical Accounting Policies and
Estimates, the nature of the unbilled revenue calculation is inherently an estimation process. As a
result of Exelon’s integration efforts associated with its then-pending merger with PSEG, analyses
received from a third-party consultant, and PECO’s implementation of a new customer information
management system in the fourth quarter 2006, PECO received new information with which to better
analyze the data underlying its unbilled revenue calculation. This amount is partially offset by a $14
million increase in purchased power expense as noted below.
Volume. The increase in electric revenues was primarily as a result of higher delivery volume,
exclusive of the effects of weather and customer choice, primarily due to an increased number of
customers in the residential and small commercial and industrial classes. The decrease in gas
revenues attributable to lower delivery volume, exclusive of the effects of weather, was primarily due to
decreased customer usage, which is consistent with rising gas prices.
Weather. The demand for electricity and gas is affected by weather conditions. With respect to the
electric business, very warm weather in summer months and, with respect to the electric and gas
businesses, very cold weather in other months are referred to as “favorable weather conditions”
because these weather conditions result in increased sales of electricity and gas. Conversely, mild
weather reduces demand. Revenues were lower due to unfavorable weather conditions in PECO’s
service territory, where heating and cooling degree days were 18% and 15% lower, respectively, than
the prior year.
Other rate changes and mix. The decrease in electric revenues attributable to other rate changes
and mix was primarily due to increased large commercial and industrial sales, which are billed at lower
rates relative to other customer classes, and lower rates for certain large commercial and industrial
customers whose rates reflect wholesale energy prices, which were lower in the latter part of 2006
relative to 2005.
Wholesale and miscellaneous revenues. The increase in electric revenues was primarily due to
increased PJM transmission revenue and increased sales of energy into the PJM spot market. If
PECO’s energy needs are less than the daily amount scheduled, the excess is sold into the PJM spot
market. Revenues from these sales are reflected as adjustments to the billings under PECO’s PPA
with Generation. The decrease in gas revenues was due to decreased off-system sales.
Purchased Power and Fuel Expense.The changes in PECO’s purchased power and fuel
expense for 2006 compared to 2005 consisted of the following:
Electric Gas
Total
increase
(decrease)
Prices ......................................................... $ 94 $127 $221
Customer choice ................................................ 62 — 62
PJM transmission ............................................... 31 — 31
Unbilled revenue—change in estimate .............................. 14 — 14
Weather ....................................................... (39) (107) (146)
Volume ........................................................ 4 (13) (9)
Other ......................................................... 20 (6) 14
Increase in purchased power and fuel expense ....................... $186 $ 1 $ 187
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