Exelon 2002 Annual Report Download - page 41

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The changes in Energy Delivery’s revenue, net of purchased
power and fuel expense, for 2002 compared to 2001, included
the following:
– increases in weather normalized volumes of $171 million as a
result of increases in the number of customers and additional
average usage per customer, primarily residential customers,
– positive weather impacts of $84 million, primarily the results
of warmer than usual summer weather,
– changes in customer rates resulting in a $54 million decrease
to revenue, net of purchased power and fuel expense,
– favorable changes due to customer choice of $30 million,
including customers returning to PECO as their energy sup-
plier, or ComEd’s customers electing to purchase energy from
alternative energy suppliers or electing ComEd’s PPO, under
which non-residential customers can purchase power from
ComEd at a market-based rate,
– increases in PJM ancillary charges of $41 million, which
decreased revenue,net of purchased power and fuel expense,
– an $18 million increase in 2002 purchased power expense for
ComEd due to an increase in the weighted average on-peak/
off-peak cost of electricity,
– a 2001 reversal of a reserve for revenue refunds of $15 million
related to certain ComEd municipal customers as a result of a
favorable FERC ruling, and
– an increase in revenue, net of purchased power and fuel
related to a settlement of CTCs by a large customer of PECO in
the amount of $11 million in 2001.
The changes in operating income for 2002 compared to 2001,
included the following:
– reduction in amortization expense of $126 million as a result
of the discontinuance of goodwill amortization upon the
adoption of SFAS No. 142 on January 1, 2002,
– additional gross receipts tax expense of $72 million related
to additional revenues and an increase in the gross receipt
tax rate on electric revenue effective January 1, 2002 (gross
receipts taxes are recorded in Revenues and Taxes Other Than
Income and have no impact on net income),
– reduction in depreciation expense of $48 million due to
the impact of lower depreciation rates at ComEd effective
July 1, 2002,
– increased depreciation expense in 2002 of $34 million due to
higher plant in service balances,
– increase in regulatory asset amortization of $30 million in
2002, primarily attributable to additional amortization of
PECO’s CTCs,
– reduction in 2002 in the allowance for uncollectible accounts
related to a change in accounting estimate of $28 million,
– higher corporate allocations, pension and postretirement
benefit costs, and executive severance costs totaling $22 mil-
lion in 2002, and
– lower employee severance costs at PECO of $18 million in 2001
associated with the Merger.
The changes in income before income taxes for 2002 compared
to 2001, included the following:
– a decrease in interest expense of $119 million primarily attrib-
utable to less outstanding debt and refinancing of existing
debt at lower interest rates,
– lower interest income of $74 million resulting from lower
interest rates which is primarily attributable to a note receiv-
able from Unicom Investments, Inc., an Exelon subsidiary, and
– the establishment of a reserve of $12 million in 2002 for a
probable plant disallowance resulting from an audit per-
formed in conjunction with ComEd’s delivery service rate case.
Energy Delivery’s effective income tax rate was 37.6% for 2002,
compared to 40.8% for 2001. This decrease in the effective tax
rate was primarily attributable to a reduction in state income
taxes and the discontinuation of goodwill amortization as
of January 1, 2002, which was not deductible for income tax
purposes in 2001.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
exelon corporation and subsidiary companies
Energy Delivery 2002 2001 Variance % Change
Operating Revenues $10,457 $ 10,171 $ 286 2.8%
Revenue, net of Purchased Power & Fuel Expense 5,855 5,699 156 2.7%
Operating Income 2,860 2,593 267 10.3%
Income Before Income Taxes 2,033 1,725 308 17.9%
Net Income 1,268 1,022 246 24.1%