Exelon 2003 Annual Report Download - page 49

47Management’s Discussion and Analysis of Financial Condition and Results of Operations
EXELON CORPORATION AND SUBSIDIARY COMPANIES
Operating Revenues. The changes in Enterprises’ operating
revenues for 2003 compared to 2002 consisted of the
following:
Enterprises Variance
InfraSource $(359)
Exelon Services (60)
Exelon Energy Company 137
Other 6
Decrease in operating revenues $(276)
InfraSource. Operating revenues decreased $256 million at
InfraSource due to the sale of the majority of the InfraSource
businesses in the third quarter of 2003. For the remaining
InfraSource businesses, operating revenues decreased $103
million as a result of the closing of certain businesses and
the reduction of new business as a result of wind-down ef-
forts and margin deterioration for these businesses.
Exelon Services. Operating revenues decreased $79 million at
Exelon Services due to poor economic conditions in the con-
struction market. This decrease was partially offset by im-
proved performance contracting activities of $19 million.
Exelon Energy Company. Operating revenues increased $97
million at Exelon Energy Company due to higher gas prices in
2003. In addition, customer growth in the gas and electric
markets increased operating revenues by $69 million and $40
million, respectively. These increases were partially offset by the
discontinuance of retail sales in the PJM region of $40 million
and the wind-down of the Northeast operations of $29 million.
Purchased Power and Fuel Expense. Purchased power and
fuel expense increased primarily due to increased fuel costs
at Exelon Energy Company due to higher gas prices and in-
creased customer volume. Higher gas prices accounted for
$92 million of the overall increase and increases in customer
growth in the gas and electric markets accounted for $67
million and $35 million, respectively. In addition, purchased
power and fuel expense increased $31 million from the im-
pact of mark-to-market accounting. These increases were
partially offset by reduced costs from the discontinuance of
retail sales in the PJM region of $46 million and the wind-
down of the Northeast operations of $8 million.
Operating and Maintenance Expense. The changes in Enter-
prises’ operating and maintenance expense for 2003 com-
pared to 2002 consisted of the following:
Enterprises Variance
InfraSource $(267)
Exelon Energy Company (10)
Exelon Services (6)
Other 3
Decrease in operating and maintenance expense $(280)
InfraSource. Operating and maintenance expense decreased
$222 million at InfraSource primarily due to the sale of the
majority of the InfraSource businesses in the third quarter of
2003. For the remaining InfraSource businesses, operating
and maintenance expense decreased $80 million as a result
of wind-down efforts for these businesses. These decreases
were partially offset by increased expense of $30 million due
to margin deterioration on various construction projects.
During 2003, Enterprises recorded a net charge to operat-
ing and maintenance expense of $4 million (before income
taxes and minority interest) associated with the sale of the
majority of the InfraSource businesses. Pursuant to the sales
agreement, certain working capital adjustments to the pur-
chase price will be made in 2004.
Exelon Energy Company. Operating and maintenance ex-
pense decreased at Exelon Energy Company primarily due to
lower general and administrative costs from the dis-
continuance of retail sales in the PJM region and the wind-
down of Northeast operations of $9 million.
Exelon Services. Operating and maintenance expense de-
creased $56 million at Exelon Services due primarily to delays
on mechanical construction projects resulting from poor
economic conditions in the construction market. This de-
crease was partially offset by additional costs from increased
performance contracting activities of $13 million, a goodwill
impairment charge of $24 million and other asset impair-
ments of $15 million.
Effective Income Tax Rate. The effective income tax rate was
37.5% for 2003 compared to 50.4% for 2002. This decrease in
the effective tax rate was primarily attributable to the AT&T
Wireless sale and tax adjustments resulting from various
income tax related items of $21 million during 2002.