Vectren 2010 Annual Report Download - page 38

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36
The rate design approved by the PUCO on January 7, 2009, and initially implemented on February 22, 2009, allowed for the
phased movement toward a straight fixed variable rate design, which places substantially all of the fixed cost recovery in the
monthly customer service charge. This rate design mitigates most weather risk as well as the effects of declining usage, similar
to the company’s lost margin recovery mechanism in place in the Indiana natural gas service territories and the mechanism in
place in Ohio prior to this rate order. Since the straight fixed variable rate design was fully implemented in February 2010,
nearly 90 percent of the combined residential and commercial base rate gas margins were recovered through the customer
service charge. As a result, some margin previously recovered during the peak delivery winter months was more ratably
recognized throughout the year. In addition in 2010, the Company began recognizing a return on and of investments made to
replace distribution risers and bare steel and cast iron infrastructure per a PUCO order.
Electric Utility Margin (Electric utility revenues less Cost of fuel & purchased power)
Electric utility margin and volumes sold by customer type follows:
(In millions) 2010 2009 2008
Electric utility revenues 608.0$ 528.6$ 524.2$
Cost of fuel & purchased power 235.0 194.3 182.9
Total electric utility margin 373.0$ 334.3$ 341.3$
Margin attributed to:
Residential & commercial customers 241.2$ 224.7$ 218.0$
Industrial customers 97.1 81.7 83.4
Municipals & other customers 8.5 7.2 7.4
Subtotal: Retail 346.8$ 313.6$ 308.8$
Wholesale margin 26.2 20.7 32.5
Total electric utility margin 373.0$ 334.3$ 341.3$
Electric volumes sold in GWh attributed to:
Residential & commercial customers 2,964.0 2,760.8 2,850.5
Industrial customers 2,630.3 2,258.9 2,409.1
Municipals & other 22.6 20.0 63.8
Total retail & firm wholesale volumes sold 5,616.9 5,039.7 5,323.4
Year Ended December 31,
Retail
Electric retail utility margins were $346.8 million for the year ended December 31, 2010, and compared to 2009 increased $33.2
million. Management estimates the impact of warmer than normal weather to have increased residential and commercial
margin $14.2 million year over year. Management also estimates industrial margins, net of the impacts of regulatory initiatives
and recovery of tracked costs, to have increased approximately $12.8 million year to date due primarily to increased volumes.
Margin among the customer classes associated with returns on pollution control investments increased $3.4 million, and margin
associated with tracked costs such as recovery of MISO and pollution control operating expenses increased $4.1 million.
Electric retail utility margin was $313.6 million for the year ended December 31, 2009, and compared to 2008 increased $4.8
million. Increased margin among the customer classes associated with returns on pollution control equipment and other
investments totaled $4.5 million year over year, and margin associated with tracked costs such as recovery of MISO and
pollution control operating expenses increased $10.3 million. Management estimates weather, driven primarily by cooling
weather 10 percent milder than the prior year, decreased residential and commercial margin $5.2 million compared to 2008.
Industrial margins, net of the impacts of regulatory initiatives and recovery of tracked costs, decreased approximately $4.9
million due primarily to the weak economy. The industrial decreases were due primarily to lower usage.