Dominion Power 2005 Annual Report Download - page 35

Dominion 2005 33
Analysis of Consolidated Operations
Presented below are selected amounts related to our results of
operations:
Year Ended December 31, 2005 $ Change 2004 $ Change 2003
(millions)
Operating Revenue $18,041 $4,050 $13,991 $1,896 $12,095
Operating Expenses
Electric fuel and energy
purchases 4,713 2,551 2,162 495 1,667
Purchased electric capacity 505 (82) 587 (20) 607
Purchased gas 3,941 1,014 2,927 752 2,175
Other energy-related
commodity purchases 1,391 402 989 543 446
Other operations and
maintenance 3,058 292 2,766 (181) 2,947
Depreciation, depletion
and amortization 1,412 107 1,305 89 1,216
Other taxes 582 63 519 43 476
Other income (loss) 168 1 167 207 (40)
Interest and related charges 991 52 939 (36) 975
Income tax expense 582 (118) 700 103 597
Income (loss) from discontinued
operations, net of tax 520(15) 627 (642)
Cumulative effect of changes in
accounting principles, net of tax (6) (6) — (11) 11
An analysis of our results of operations for 2005 compared to
2004 and 2004 compared to 2003 follows.
2005 vs. 2004
Operating Revenue increased 29% to $18.0 billion, primarily
reflecting:
•A $1.9 billion increase in nonregulated electric sales primarily
due to a $1.1 billion increase attributable to the addition of
Dominion New England and Kewaunee and a full year of com-
mercial operations at our Fairless Energy power station (Fair-
less), which began operating in June 2004. The increase also
reflects a $730 million increase related to the designation of
certain commodity derivative contracts as held for non-trading
purposes effective January 1, 2005. These contracts were previ-
ously held for trading purposes as discussed in Note 28 to our
Consolidated Financial Statements. The impact of this change in
classification on Operating Revenue was offset by similar
changes in Other operations and maintenance expense and
Electric fuel and energy purchases expense;
•An $863 million increase in nonregulated gas sales largely
reflecting a $588 million increase from gas aggregation activities
and nonregulated retail energy marketing operations primarily
due to higher prices, a $110 million increase due to higher nat-
ural gas prices related to market-based services for the optimiza-
tion of transportation and storage assets, partially offset by the
effect of unfavorable price changes on unsettled contracts and a
$110 million increase in sales of gas purchased by exploration
and production operations to facilitate gas transportation and
satisfy other agreements. The increases in revenue from gas
aggregation activities, nonregulated retail energy marketing oper-
ations and exploration and production operations were largely
offset by corresponding increases in Purchased gas expense;
•A $400 million increase in other energy-related commodity
sales reflecting a $276 million increase in nonutility coal sales
resulting from higher coal prices ($171 million) and increased
sales volumes ($105 million), an $87 million increase in sales of
purchased oil by exploration and production operations and a
$37 million increase in sales of emissions allowances held for
resale primarily due to higher prices. This increase was largely
offset by a corresponding increase in Other energy-related
commodity purchases expense;
•A $363 million increase in regulated electric sales reflecting a
$153 million increase in sales to wholesale customers, a $99
million increase due to the impact of a comparatively higher
fuel rate for non-Virginia jurisdictional customers, a $77 million
increase primarily due to the impact of favorable weather on
customer usage and a $59 million increase from customer
growth associated with new customer connections, partially off-
set by a $25 million decrease due to variations in seasonal rate
premiums and discounts. The increase resulting from a compar-
atively higher fuel rate was more than offset by an increase in
Electric fuel and energy purchases expense; and
•A $341 million increase in regulated gas sales primarily related
to the recovery of higher gas prices. The effect of this increase
was offset by a comparable increase in Purchased gas expense.
Operating Expenses
Electric fuel and energy purchases expense increased
118% to $4.7 billion, primarily reflecting the combined effects of:
•A $1.2 billion increase related to the designation of certain
commodity derivative contracts as held for non-trading purposes
effective January 1, 2005, which were previously held for trading
purposes as discussed in Operating Revenue;
•A $796 million increase related to utility operations primarily
resulting from higher commodity prices including purchased
power and congestion costs associated with PJM; and
•A $556 million increase due to the addition of Dominion New
England and Kewaunee and a full year of commercial operations
at Fairless.
Purchased electric capacity expense decreased 14% to
$505 million, as a result of the termination of several long-term
power purchase agreements in connection with the purchase of the
related generating facilities in 2005 and 2004.
Purchased gas expense increased 35% to $3.9 billion, princi-
pally resulting from a $522 million increase associated with gas
aggregation activities and nonregulated retail energy marketing
operations, a $305 million increase associated with regulated gas
distribution operations and a $124 million increase related to
exploration and production, all of which are discussed in
Operating Revenue.
Other energy-related commodity purchases expense
increased 41% to $1.4 billion, primarily reflecting a $263 million
increase in the cost of coal purchased for resale, a $91 million
increase related to purchases of oil by exploration and production
operations, and a $47 million increase in emissions allowances pur-
chased for resale, all of which are discussed in Operating Revenue.
Other operations and maintenance expense increased 11%
to $3.1 billion, resulting from:
•A $423 million loss related to the discontinuance of hedge
accounting for certain gas and oil hedges resulting from an
interruption of gas and oil production in the Gulf of Mexico
caused by Hurricanes Katrina and Rita;
•A $361 million increase due to the addition of Dominion New
England and Kewaunee and a full year of commercial operations
at Fairless;