Exelon 2002 Annual Report Download - page 45

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The changes in Generation’s revenue,net of purchased power and
fuel expense, for 2002 compared to 2001, included the following:
– lower margins on market sales attributable to lower average
market energy prices,
– increased net trading portfolio losses of $36 million due to
lower trading margins primarily resulting from lower pur-
chased power and transmission costs, together with lower
wholesale market prices,
– weather-related increases in sales to affiliates,
– lower average supply costs, and
– increased market sales volumes.
The changes in operating income for 2002 compared to 2001,
included the following:
– costs incurred for five additional refueling outages of $80 million,
– higher allocated corporate costs,including executive severance,
– increase in 2002 in the allowance for uncollectible accounts
related to a change in accounting estimate of $6 million,
– decrease in depreciation and decommissioning expense of
$42 million reflecting the extension by Generation in 2001 of
the estimated service lives of its generating stations,
– additional depreciation expense of $32 million on generating
plants placed in service, including two generating plants that
were acquired in April 2002 and a peaking facility placed in
service in July 2002,
– costs related to additional security measures of $9 million,
– reduction in Generation’s severance accrual of $10 million,
– decrease in expenses of $8 million related to fewer employees,and
– cost reductions related to the Cost Management Initiative.
The changes in income before income taxes for 2002 compared
to 2001, included the following:
– improved decommissioning trust investment income during
2002 to $58 million, compared to losses of $60 million in
2001,and
– net decrease in interest expense due to:
– increased long-term debt resulting in a $21 million increase and
– reduction in the variable interest rate on the spent nuclear
fuel obligation resulting in a decrease of $19 million.
Generation’s effective income tax rate was 35.9% for 2002
compared to 39.0% for 2001.This decrease was primarily attrib-
utable to tax-exempt interest deductions in 2002 and other tax
benefits recorded in 2002.
Cumulative effect of changes in accounting principles
recorded in 2002 and 2001 included income of $13 million,net of
income taxes, recorded in 2002 related to the adoption of SFAS
No.141 “Business Combinations”(SFAS No. 141) and SFAS No. 142,
and income of $12 million,net of income taxes,recorded in 2001
related to the adoption of SFAS No. 133. See Note 4 of the Notes
to Consolidated Financial Statements for further discussion of
these effects.
Generation Operating Statistics
Generation’s sales and the supply of these sales, excluding the
trading portfolio,were as follows:
Sales (in GWhs) 2002 2001 % Change
Energy Delivery 118,473 116,917 1.3%
Exelon Energy 5,502 6,876 (20.0%)
Market Sales 83,565 72,333 15.5%
Total Sales 207,540 196,126 5.8%
Supply of Sales (in GWhs) 2002 2001 % Change
Nuclear Generation(1) 115,854 116,839 (0.8%)
Purchases—non-trading portfolio(2) 78,710 67,942 15.8%
Fossil and Hydro Generation 12,976 11,345 14.4%
Total Supply 207,540 196,126 5.8%
(1) Excluding AmerGen.
(2) Including purchased power agreements with AmerGen.
Trading volume of 69,933 GWhs and 5,754 GWhs for 2002 and
2001, respectively, is not included in the table above.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
exelon corporation and subsidiary companies
Generation 2002 2001 Variance % Change
Operating Revenues $ 6,858 $ 6,826 $ 32 0.5%
Revenue, net of Purchased Power & Fuel Expense 2,605 2,831 (226) (8.0%)
Operating Income 509 872 (363) (41.6%)
Income Before Income Taxes and Cumulative
Effect of Changes in Accounting Principles 604 839 (235) (28.0%)
Income Before Cumulative Effect of
Changes in Accounting Principles 387 512 (125) (24.4%)
Net Income 400 524 (124) (23.7%)