Exelon 2003 Annual Report Download - page 48

46 Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXELON CORPORATION AND SUBSIDIARY COMPANIES
Trading volumes of 32,584 GWhs and 69,933 GWhs for 2003
and 2002, respectively, are not included in the table above.
The decrease in trading volume is a result of reduced volu-
metric and VAR trading limits in 2003, which are set by the
Risk Management Committee (RMC) and approved by the
Exelon Board of Directors.
Generation’s average revenue for the years ended De-
cember 31, 2003 and 2002 were as follows:
($/MWh)(a) 2003 2002 % Change
Average revenue
Energy Delivery and Exelon
Energy Company $34.38 $33.98 1.2%
Market sales 35.99 31.01 16.1%
Total–excluding the
trading portfolio 35.15 32.78 7.2%
(a) One megawatthour (MWh) is the equivalent of one thousand kWhs.
2003 2002
Nuclear fleet capacity factor(a) 93.4% 92.7%
Nuclear fleet production cost per MWh(a) $ 12.53 $ 13.00
Average purchased power cost for wholesale
operations per MWh(b) $43.29 $41.85
(a) Including AmerGen and excluding Salem, which is operated by Public Service
Enterprise Group Incorporated (PSE&G).
(b) Including PPAs with AmerGen.
Generation’s supply mix changed as a result of:
– increased nuclear generation due to a lower number of
refueling and unplanned outages during 2003 as com-
pared to 2002,
– increased fossil generation due to the Exelon New England
plants acquired in November 2002, including plants under
construction which became operational in the second and
third quarters of 2003 and account for an increase of 8,426
GWhs, and
– additional purchase power of 3,320 GWhs from the addi-
tion of Exelon New England, a new PPA with AmerGen
which increased purchased power by 3,049 GWhs in the
second quarter of 2003, as well as 11,989 GWhs of other
miscellaneous power purchases which more than offset a
14,208 GWh reduction in purchased power from Midwest
Generation.
The higher nuclear capacity factor and decreased production
costs are primarily due to 56 fewer planned refueling outage
days, resulting in a $36 million decrease in refueling outage
costs, including a $6 million decrease related to AmerGen, in
2003 as compared to 2002. The years ended December 31,
2003 and 2002 included 30 and 26 unplanned outages, re-
spectively, resulting in a $2 million increase in non-refueling
outage costs in 2003 as compared to 2002.
Results of Operations–Enterprises
Enterprises 2003 2002 Variance % Change
Operating revenues $ 1,757 $2,033 $ (276) (13.6%)
Purchased power and fuel expense 834 658 176 26.7%
Operating and maintenance expense 1,047 1,327 (280) (21.1%)
Operating income (loss) (162) (14) (148) n.m.
Income (loss) before income taxes and cumulative effect of changes in
accounting principles (216) 134 (350) n.m.
Income (loss) before cumulative effect of changes in accounting principles (135) 65 (200) n.m.
Net income (loss) (136) (178) 42 (23.6%)
n.m.—not meaningful.
Net Income (Loss). The decrease in Enterprises’ net income
(loss) before cumulative effect of changes in accounting
principles in 2003 was primarily due to a decrease in operat-
ing revenues and an increase in purchased power and fuel
expense, partially offset by a decrease in operating and
maintenance expense. Depreciation and amortization ex-
pense decreased $29 million before income taxes from 2002
to 2003 primarily as a result of property, plant and equip-
ment classified as held for sale in 2003 and accelerated asset
depreciation in the PJM region in 2002. In 2003, Enterprises
recorded impairment charges of investments of $46 million
before income taxes due to other-than-temporary declines
in value and an impairment charge of $8 million before in-
come taxes for its equity method investment in a district
cooling business joint venture, partially offset by 2002
charges for impairment of investments of $41 million before
income taxes and a net impairment of other assets of $4 mil-
lion before income taxes. In 2002, Enterprises recorded a pre-
tax gain of $198 million on the sale of its investment in AT&T
Wireless. The adoption of SFAS No. 143 reduced 2003 net in-
come by $1 million, net of income taxes. The adoption of SFAS
No. 142 reduced 2002 net income by $243 million, net of in-
come taxes. See Note 1 of the Notes to Consolidated Financial
Statements for further discussion of the adoptions of SFAS
No. 143 and SFAS No. 142.