Progress Energy 2010 Annual Report Download - page 22

18
MANAGEMENT’S DISCUSSION AND ANALYSIS
favorable impact of weather, partially offset by the
unfavorable impact of retail customer growth and usage,
higher฀base฀depreciation฀and฀amortization฀expense,฀and฀
higher O&M.
PEF contributed Ongoing Earnings of $462 million,
$460 million and $383 million in 2010, 2009 and 2008,
respectively. The 2010 Ongoing Earnings adjustments to
net income available to parent were due to PEF recording
a $10 million charge for the change in the tax treatment of
the Medicare part D subsidy and a $1 million impairment
of other assets, net of tax. Management does not consider
these charges to be representative of PEF’s fundamental
core earnings and excluded these charges in computing
PEF’s Ongoing Earnings. There were no Ongoing Earnings
adjustments in 2009 or 2008.
REVENUES
The revenue tables that follow present the total amount
and percentage change of total operating revenues
and its components. “Base Revenues” is a non-GAAP
measure and is defined as operating revenues excluding
clause-recoverable regulatory returns, miscellaneous
revenues and fuel and other pass-through revenues. We
consider Base Revenues a useful measure to evaluate
PEF’s electric operations because fuel and other pass-
through revenues primarily represent the recovery of
fuel, applicable portions of purchased power and other
pass-through expenses through cost-recovery clauses
and, therefore, do not have a material impact on earnings.
Clause-recoverable regulatory returns include the
revenues associated with the return on asset component
of nuclear cost-recovery and ECRC revenues. We have
included the reconciliation and analysis that follows as
a complement to the financial information we provide in
accordance with GAAP.
A reconciliation of Base Revenues to GAAP operating
revenues, including the percentage change by customer
class and by year follows:
(in millions)
Customer Class 2010 % Change 2009 % Change 2008
Residential $1,045 10.5 $946 5.9 $893
Commercial 359 5.6 340 3.7 328
Industrial 75 4.2 72 (5.3) 76
Governmental 92 5.7 87 6.1 82
Unbilled 17 – 9 – (1)
Total retail base
revenues 1,588 9.2 1,454 5.5 1,378
Wholesale base
revenues 160 (22.7) 207 5.1 197
Total Base
Revenues 1,748 5.2 1,661 5.5 1,575
Clause-recoverable
regulatory
returns 173 98.9 87 690.9 11
Miscellaneous 216 14.3 189 6.2 178
Fuel and other
pass-through
revenues 3,117 – 3,314 – 2,967
Total operating
revenues $5,254 0.1 $5,251 11.0 $4,731
PEF’s total Base Revenues were $1.748 billion and
$1.661 billion for 2010 and 2009, respectively. The
$87 million increase in Base Revenues was due primarily
to the $88 million favorable impact of weather and
the $50 million impact of increased retail base rates
associated with the repowered Bartow Plant, partially
offset by $47 million lower wholesale base revenues and
the $5 million unfavorable impact of net retail customer
growth and usage. The favorable impact of weather was
driven by 89 percent higher heating-degree days than
2009. Additionally, heating-degree days were 124 percent
higher than normal. The lower wholesale base revenues
were primarily due to an amended contract with a major
customer. The unfavorable impact of net retail customer
growth and usage was driven by a decrease in the
average usage per retail customer, partially offset by a
net 4,000 increase in the average number of customers
for 2010 compared to 2009.
PEF’s clause-recoverable regulatory returns increased
$86 million in 2010 primarily due to higher returns on
ECRC assets due to placing approximately $1 billion of
Clean Air Interstate Rule (CAIR) projects into service in
late 2009 and May 2010.