Dominion Power 2007 Annual Report Download - page 44

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Management’s Discussion and Analysis of Financial Condition and Results of Operations, Continued
Dominion Generation
Presented below are operating statistics related to Dominion
Generation’s operations:
Year Ended December 31, 2007 % Change 2006 % Change 2005
Electricity supplied
(million mwhrs):
Utility 84.7 6% 79.7 (2)% 81.4
Merchant 46.0 11 41.5 1 41.2
Degree days (electric
utility service area):
Cooling 1,794 15 1,557 (9) 1,707
Heating 3,500 10 3,178 (16) 3,784
Presented below, on an after-tax basis, are the key factors impact-
ing Dominion Generation’s net income contribution:
2007
VS
. 2006
Increase (Decrease)
Amount EPS
(millions, except EPS)
Merchant generation margin(1) $211 $ 0.30
Unrecovered Virginia fuel expenses(2) 120 0.17
Regulated electric sales:
Weather 37 0.05
Customer growth 20 0.03
Ancillary service revenue 27 0.04
Outage costs(3) (61) (0.09)
Salaries, wages and benefits expense (51) (0.07)
Sales of emissions allowances (34) (0.05)
Depreciation and amortization(4) (32) (0.05)
Interest expense (9) (0.01)
Other (9) (0.01)
Share accretion — 0.08
Change in net income contribution $219 $ 0.39
(1) Primarily reflects higher realized prices for our New England nuclear
and fossil generating assets and higher volumes and capacity revenue for
other fossil generation operations. Higher prices include the
implementation of new capacity markets in ISO New England and
PJM.
(2) Primarily reflects the reapplication of deferred fuel accounting effective
July 1, 2007 for the Virginia jurisdiction of our utility generation oper-
ations; this benefit is partially offset by increased consumption of fossil
fuel and higher purchased power costs during the first six months of
2007.
(3) Primarily reflects higher scheduled outage costs for both utility and mer-
chant generation operations.
(4) Principally attributable to increased expense from capital additions and
revised depreciation rates for our utility generation assets resulting from a
new depreciation study implemented during the fourth quarter of 2007.
2006
VS
. 2005
Increase (Decrease)
Amount EPS
(millions, except EPS)
Merchant generation margin(1) $215 $ 0.32
Unrecovered Virginia fuel expenses 40 0.06
Regulated electric sales:
Customer growth 24 0.04
Weather (64) (0.09)
Sales of emissions allowances (40) (0.06)
Energy supply margin(2) (27) (0.04)
Outage costs(3) (20) (0.03)
Salaries, wages and benefits expense (13) (0.02)
2005 North Carolina rate case settlement (10) (0.01)
Other 16 0.02
Share dilution — (0.03)
Change in net income contribution $121 $ 0.16
(1) Primarily reflects higher realized prices.
(2) Primarily reflects a reduced benefit from FTRs in excess of congestion
costs at our utility operations.
(3) Primarily due to an increase in the duration of scheduled outage days for
both utility and merchant generation operations.
Corporate and Other
Presented below are the Corporate and Other segment’s after-tax
results:
Year Ended December 31, 2007 2006 2005
(millions, except EPS amounts)
Specific items attributable to operating
segments $ (618) $ (10) $ (133)
Discontinued operations (8) (150) 6
Net benefit from sale of U.S. non-
Appalachian E&P businesses 1,426 (5) —
U.S. non-Appalachian E&P divested
operations 252 625 163
Peoples and Hope 49 (72) 43
Other corporate operations (120) (303) (202)
Total net benefit (expense) 981 85 (123)
Earnings per share impact $ 1.50 $0.12 $(0.18)
S
PECIFIC
I
TEMS
A
TTRIBUTABLE
T
O
O
PERATING
S
EGMENTS
Corporate and Other includes specific items attributable to our
primary operating segments that are not included in profit meas-
ures evaluated by executive management in assessing the seg-
ments’ performance or allocating resources among the segments.
See Note 29 to our Consolidated Financial Statements for dis-
cussion of these items.
D
ISCONTINUED
O
PERATIONS
The decrease in the loss from the discontinued operations for
2007 as compared to 2006, as well as the increase in the loss for
2006 as compared to 2005, reflects a $164 million after-tax
charge in 2006 associated with the impairment of the Peaker
facilities that were sold in 2007.
N
ET
B
ENEFIT
F
ROM
S
ALE OF
U.S.
NON
-A
PPALACHIAN
E&P B
USINESS
The net benefit from the sale of our U.S. non-Appalachian E&P
business reflects the $2.1 billion after-tax gain recognized in 2007
on the sale, partially offset by charges related to the divestitures as
42 Dominion 2007 Annual Report