Dominion Power 2002 Annual Report Download - page 39

other taxes decreased in 2001 because its utility operations in
Virginia became subject to state income taxes in lieu of gross
receipts taxes effective January 2001. In addition, Dominion
recognized higher effective rates for foreign earnings and higher
pretax income in relation to non-conventional fuel tax
credits realized.
Dominion Energy
2002 2001 2000
(millions, except per share amounts)
Operating revenue $5,940 $6,144 $4,894
Operating expenses 4,520 4,749 3,939
Net income contribution 770 723 489
Earnings per share contribution $ 2.72 $ 2.86 $ 2.07
Electricity supplied* (million mwhrs) 101 95 83
Gas transmission throughput (bcf) 597 553 567
*Amounts presented are for electricity supplied by utility and merchant
generation operations.
Operating Results— 2002
Dominion Energy contributed $2.72 per diluted share on net
income of $770 million for 2002, a net income increase of $47
million and an earnings per share decrease of $0.14 over 2001.
Net income for 2002 reflected lower operating revenue ($204
million), operating expenses ($229 million) and other income
($27 million). Interest expense and income taxes, which are
discussed on a consolidated basis, decreased $50 million over
2001. The earnings per share decrease reflected share dilution.
Regulated electric sales revenue increased $179 million.
Favorable weather conditions, reflecting increased cooling and
heating degree-days, as well as customer growth, are estimated
to have contributed $133 million and $41 million, respectively.
Fuel rate recoveries increased approximately $65 million for
2002. These recoveries are generally offset by increases in elec-
tric fuel expense and do not materially affect income. Partially
offsetting these increases was a net decrease of $60 million due
to other factors not separately measurable, such as the impact
of economic conditions on customer usage, as well as variations
in seasonal rate premiums and discounts.
Nonregulated electric sales revenue increased $9 million.
Sales revenue from Dominion’s merchant generation fleet
decreased $21 million, reflecting a $201 million decline due to
lower prices partially offset by sales from assets acquired and
constructed in 2002 and the inclusion of Millstone operations
for all of 2002. Revenue from the wholesale marketing of utility
generation decreased $74 million. Due to the higher demand of
utility service territory customers during 2002, less production
from utility plant generation was available for profitable sale in
the wholesale market. Revenue from retail energy sales increased
$71 million, reflecting primarily customer growth over the prior
year. Net revenue from Dominion’s electric trading activities
increased $33 million, reflecting the effect of favorable price
changes on unsettled contracts and higher trading margins.
Nonregulated gas sales revenue decreased $351 million.
The decrease included a $239 million decrease in sales by
Dominion’s field services and retail energy marketing opera-
tions, reflecting to a large extent declining prices. Revenue
associated with gas trading operations, net of related cost of
sales, decreased $112 million. The decrease included $70 mil-
lion of realized and unrealized losses on the economic hedges of
natural gas production by the Dominion Exploration & Pro-
duction segment. As described below under Selected Information
— Energy Trading Activities, sales of natural gas by the Dominion
Exploration & Production segment at market prices offset these
financial losses, resulting in a range of prices contemplated by
Dominion’s overall risk management strategy. The remaining
$42 million decrease was due to unfavorable price changes on
unsettled contracts and lower overall trading margins. Those
losses were partially offset by contributions from higher trading
volumes in gas and oil markets.
Gas transportation and storage revenue decreased $44
million, primarily reflecting lower rates.
Electric fuel and energy purchases expense increased $94
million which included an increase of $66 million associated
with Dominion’s energy marketing operations that are not sub-
ject to cost-based rate regulation and an increase of $28 million
associated with utility operations. Substantially all of the
increase associated with non-regulated energy marketing opera-
tions related to higher volumes purchased during the year. For
utility operations, energy costs increased $66 million for pur-
chases subject to rate recovery, partially offset by a $38 million
decrease in fuel expenses associated with lower wholesale mar-
keting of utility plant generation.
Purchased gas expense decreased $245 million associated
with Dominion’s field services and retail energy marketing oper-
ations. This decrease reflected approximately $162 million asso-
ciated with declining prices and $83 million associated with
lower purchased volumes.
Liquids, pipeline capacity and other purchases decreased
$64 million, primarily reflecting comparably lower levels of rate
recoveries of certain costs of transmission operations in the cur-
rent year period. The difference between actual expenses and
amounts recovered in the period are deferred pending future
rate adjustments.
Other operations and maintenance expense decreased $14
million, primarily reflecting an $18 million decrease in outage
costs due to fewer generation unit outages in the current year.
Depreciation expense decreased $11 million, reflecting
decreases in depreciation associated with changes in the esti-
mated useful lives of certain electric generation property, par-
tially offset by increased depreciation associated with State Line
and Millstone operations.
Other income decreased $27 million, including a $14 mil-
lion decrease in net realized investment gains in the Millstone
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Dominion ’02 Annual Report