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NEWS RELEASE | 701 Ninth Street NW Washington, DC 20068 www.pepcoholdings.com NYSE: POM |
FOR IMMEDIATE RELEASE October 29, 2009 | Media Contact: Robert Dobkin 202-872-2680 Investor Contact: Brian Shivery 302-429-3591 |
Pepco Holdings Reports Third-Quarter 2009 Earnings;
Conference Call Scheduled
Pepco Holdings, Inc. (NYSE: POM) today reported third quarter 2009 consolidated earnings of $124 million, or 56 cents per share, compared to $119 million, or 59 cents per share, in the third quarter of 2008. Excluding special items (as described below), earnings for the third quarter of 2009 would have been $97 million, or 44 cents per share. There were no special items in the third quarter of 2008. The weighted average number of basic shares outstanding for the third quarter of 2009 was 221 million compared to 202 million for the third quarter of 2008.
The earnings decrease for the third quarter of 2009, as compared to the 2008 quarter, excluding special items, was driven by lower Power Delivery and Conectiv Energy earnings. The lower Power Delivery earnings were due to higher operation and maintenance expense primarily as the result of increased pension expense and higher interest expense driven by the debt financing completed late last year. The lower Conectiv Energy earnings were primarily due to lower generation output, reduced spark spreads and dark spreads, and the performance of economic fuel hedges. Partially offsetting these decreases were higher earnings at Pepco Energy Services driven by favorable electric supply costs and lower losses on energy derivative contracts.
“During the quarter, the energy markets continued to be challenging,” said Joseph M. Rigby, Chairman, President and Chief Executive Officer. “Generation output was down 16 percent and energy margins were down 57 percent.” Rigby also noted that excluding the increase in pension expense, Power Delivery operation and maintenance expense would have been relatively flat, demonstrating the continued focus on managing controllable costs.
Rigby also cited progress during the third quarter on several key value creation initiatives that the company believes will position it for growth over the longer-term. “We filed two additional distribution rate cases, bringing the total number of cases underway to four, and the District of Columbia Public Service Commission adopted the revenue decoupling mechanism proposed by Pepco. With the implementation of this mechanism in the District of Columbia on Nov. 1, approximately 60 percent of our distribution revenue will be decoupled from electric sales, providing for more predictable utility revenues and aligning the interests of our utilities with those of our customers in terms of energy efficiency programs. I am also very pleased with the recently announced DOE federal stimulus funds award of $168 million, allowing us to accelerate the delivery of Smart Grid benefits to our customers.”
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For the nine months ended Sept. 30, 2009, consolidated earnings were $194 million, or 88 cents per share, compared to $233 million, or $1.16 per share, for the same period in the prior year. Excluding special items (as described below), earnings for the nine months ended Sept. 30, 2009, would have been $159 million, or 72 cents per share, compared to $326 million, or $1.62 per share, for the first nine months of 2008. The weighted average number of basic shares outstanding for the nine months ended Sept. 30, 2009 was 220 million compared to 201 million for the same period in the prior year.The decrease in earnings for the nine months ended Sept. 30, 2009, compared to earnings for the same period in the prior year, excluding special items, was driven by essentially the same factors that drove the quarterly results.
Third-Quarter Highlights
Operations
| · | Power Delivery electric sales were 13,709 gigawatt hours (GWh) in the third quarter of 2009 compared to 14,050 GWh for the same period last year. Cooling degree days (electric service territory) were 11% lower for the three months ended Sept. 30, 2009, compared to the same period in 2008. Weather-adjusted electric sales were 13,782 GWh in the third quarter of 2009 compared to 13,816 GWh for the same period last year. |
| · | Conectiv Energy's gross margin from Merchant Generation and Load Service was $74 million in the third quarter of 2009, compared to $113 million in the third quarter of 2008. The decrease resulted primarily from lower generation output, reduced spark spreads and dark spreads, and the combined performance of economic fuel hedges and default electricity supply contracts. An offsetting factor was higher capacity gross margins. |
| · | Conectiv Energy's total generation output was 1,549 GWh in the third quarter of 2009, compared to 1,851 GWh in the third quarter of 2008. The 16% decrease was due to decreased demand for electricity related to the economic recession and milder weather. |
| · | Pepco Energy Services' gross margin from retail energy supply was $42 million in the third quarter of 2009, compared to $14 million in the third quarter of 2008. The increase was driven by lower electric and gas supply costs, lower losses on energy derivative contracts, lower reliability pricing model (RPM) capacity charges, and higher RPM capacity revenues. |
| · | Pepco Energy Services had retail electric sales of 4,619 GWh in the third quarter of 2009, compared to 5,614 GWh in the third quarter of 2008. This 18% decrease primarily reflects the continuing expiration of existing retail contracts. |
Regulatory Matters
| · | On Sept. 28, the District of Columbia Public Service Commission (DCPSC) approved effective Nov. 1 the revenue decoupling rate structure proposed by Pepco. In connection with the approval, the DCPSC ordered a reduction of 50 basis points to Pepco’s return on equity, reducing the authorized return on |
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| equity to 9.5%. On May 22, Pepco filed a distribution base rate case in the District of Columbia. The filing seeks approval of an annual rate increase of $50 million, based on a requested return on equity of 11.25%, which assumed the approval of a revenue decoupling mechanism. A decision is expected from the DCPSC in early 2010. |
| · | On Sept.18, Delmarva Power filed an electric distribution base rate case in Delaware. The filing seeks approval of an annual rate increase of $28 million, based on a requested return on equity of 10.75%. The proposed rate design incorporates the revenue decoupling rate structure as approved in concept by the Delaware Public Service Commission (DPSC). The filing also proposes the use of a three-year average of pension, OPEB, and bad debt expense with recovery through a surcharge mechanism. The difference between the three-year rolling average of the costs and the currently incurred amounts would be deferred for future recovery in the case of an under-recovery, or deferred for future refund to customers in the case of an over-recovery. If approved, the surcharge proposal would lower the requested annual rate increase by $7 million. Delmarva Power intends to put an increase of $2.5 million annually into effect on a temporary basis on Nov. 17, 2009, subject to refund and pending final DPSC approval, which is expected in April 2010. |
| · | On Aug. 14, Atlantic City Electric filed a distribution base rate case in New Jersey. The filing seeks approval of an annual rate increase of $54 million, based on a requested return on equity of 11.50% (if the Bill Stabilization Adjustment mechanism is approved, the requested rate increase would be reduced to $52 million, based on a requested return on equity of 11.25%). The filing also proposes the use of a three-year average of pension, OPEB, and bad debt expense with recovery through a surcharge mechanism. The difference between the three-year rolling average of the costs and the currently incurred amounts would be deferred for future recovery in the case of an under-recovery, or deferred for future refund to customers in the case of an over-recovery. If approved, the surcharge proposal would lower the requested annual rate increase by $8 million. |
| · | In Nov. 2008, Pepco filed proposals with the DCPSC and the Maryland Public Service Commission (MPSC) to share with customers the remaining balance of the proceeds from the Mirant bankruptcy settlement. On March 5, 2009, the DCPSC approved Pepco’s proposal for the sharing of the District of Columbia portion of the proceeds. After giving effect to the sharing arrangement, Pepco recorded a pre-tax gain of $14 million in the first quarter of 2009. On July 2, 2009, the MPSC approved a settlement agreement providing for the sharing of the Maryland portion of the proceeds. As a result, Pepco recorded a pre-tax gain of $26 million in the third quarter of 2009. |
| Other |
| · | On Oct. 27, 2009, the U.S. Department of Energy announced that Pepco Holdings Inc. was awarded $168 million in federal stimulus funds to help build Smart Grid projects in the District of Columbia, Maryland and New Jersey. |
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| · | On Nov. 7, 2008, Pepco Holdings entered into a 364-day credit facility, which has aggregate commitments of $400 million and had a Nov. 6, 2009 termination date. In Oct. 2009, the termination date was extended to Oct. 15, 2010. This credit facility is in addition to the $1.5 billion multi-year credit facility that is in effect until May 2012. |
| · | As noted in the 10-Q, in the last several years, IRS challenges to certain cross-border lease transactions have been the subject of litigation. On October 21, 2009, the U.S. Court of Federal Claims issued a decision in favor of a taxpayer regarding a lease-in lease-out cross border lease transaction. The transaction that is the subject of the ruling is similar in many respects to PHI’s cross border energy lease investments. PHI is currently evaluating the implications of this decision. |
| · | In October 2009, PHI filed a claim with the IRS requesting a Federal income tax refund of approximately $138 million, a substantial portion of which is associated with PHI’s utility subsidiaries. The refund results from the carry back of a 2008 net operating loss for tax reporting purposes that reflected, among other things, significant tax deductions related to accelerated depreciation, the pension plan contributions paid in 2009 (which were deductible for 2008) and the cumulative effect of adopting a new method of tax reporting for certain repairs. The timing of receipt of the refund is uncertain, however, after a 45-day period, interest would begin to accrue on the amount of the refund. |
Further details regarding changes in consolidated earnings between 2009 and 2008 can be found in the following schedules. Additional information regarding financial results and recent regulatory events can be found in the Pepco Holdings, Inc. Form 10-Q for the quarter ended Sept. 30, 2009 as filed with the Securities and Exchange Commission, which is available at www.pepcoholdings.com/investors.
Reconciliation of GAAP Earnings to Earnings Excluding Special Items
Management believes the special items shown below are not representative of the company’s ongoing business operations.
| Net Earnings – millions of dollars | Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | ||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
| Reported (GAAP) Net Earnings | $ | 124 | $ | 119 | $ | 194 | $ | 233 | ||||
| Special Items: | ||||||||||||
| · | Mirant bankruptcy damage claims settlement | (16) | - | (24) | - | |||||||
| · | Maryland income tax benefit | (11) | - | (11) | - | |||||||
| · | Adjustment to the equity value of the cross-border energy lease investments | - | - | - | 86 | |||||||
| · | Interest accrued on the income tax obligations from the adjustment to the equity value of the cross-border energy lease investments | - | - | - | 7 | |||||||
| Net Earnings, Excluding Special Items | $ | 97 | $ | 119 | $ | 159 | $ | 326 | ||||
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| Earnings per Share | Three Months Ended Sept. 30, | Nine Months Ended Sept. 30, | ||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
| Reported (GAAP) Earnings per Share | $ | 0.56 | $ | 0.59 | $ | 0.88 | $ | 1.16 | ||||
| Special Items: | ||||||||||||
| · | Mirant bankruptcy damage claims settlement | (0.07) | - | (0.11) | - | |||||||
| · | Maryland income tax benefit | (0.05) | - | (0.05) | - | |||||||
| · | Adjustment to the equity value of the cross-border energy lease investments | - | - | - | 0.43 | |||||||
| · | Interest accrued on the income tax obligations from the adjustment to the equity value of the cross-border energy lease investments | - | - | - | 0.03 | |||||||
| Earnings per Share, Excluding Special Items | $ | 0.44 | $ | 0.59 | $ | 0.72 | $ | 1.62 | ||||
CONFERENCE CALL FOR INVESTORS
Pepco Holdings Inc. will host a conference call to discuss third quarter results on Friday, Oct. 30 at 11:00 a.m. E.T. Investors, members of the media and other interested persons may access the conference call on the Internet at http://www.pepcoholdings.com/investors or by calling 1-866-700-7441 before 10:55 a.m. The pass code for the call is 45195428. International callers may access the call by dialing 1-617-213-8839, using the same pass code, 45195428. An on-demand replay will be available for seven days following the call. To hear the replay, dial 1-888-286-8010 and enter pass code 77223380. International callers may access the replay by dialing 1-617-801-6888 and entering the same pass code, 77223380. An audio archive will be available at PHI's Web site, http://www.pepcoholdings.com/investors.
Note: If any non-GAAP financial information (as defined by the Securities and Exchange Commission in Regulation G) is used during the quarterly earnings conference call, a presentation of the most directly comparable GAAP measure and a reconciliation of the differences will be available at http://www.pepcoholdings.com/investors.
About PHI: Pepco Holdings, Inc., headquartered in Washington, D.C., delivers electricity and natural gas to about 1.9 million customers in Delaware, the District of Columbia, Maryland and New Jersey, through its subsidiaries Pepco, Delmarva Power and Atlantic City Electric. PHI also provides competitive wholesale generation services through Conectiv Energy and retail energy products and services through Pepco Energy Services.
Forward-Looking Statements: Except for historical statements and discussions, the statements in this news release constitute "forward-looking statements" within the meaning of federal securities law. These statements contain management's beliefs based on information currently available to management and on various assumptions concerning future events. Forward-looking statements are not a guarantee of future performance or events. They are subject to a number of uncertainties and other factors, many of which are outside the company's control. Factors that could cause actual results to differ materially from those in the forward-looking statements herein include general economic, business and financing conditions; availability and cost of capital; changes in laws, regulations or regulatory policies; weather conditions; competition; governmental actions; and other presently unknown or unforeseen factors. These uncertainties and factors could cause actual results to differ materially from such statements. PHI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This information is presented solely to provide additional information to further understand the results and prospects of PHI.
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| SELECTED FINANCIAL INFORMATION | ||||||||||
Pepco Holdings, Inc. Earnings Per Share Variance 2009 / 2008 | ||||||||||
3rd Quarter | ||||||||||
| Competitive Energy | ||||||||||
Power Delivery | Conectiv Energy | Pepco Energy Services | Other Non Regulated | Corporate & Other | Total PHI | |||||
| 2008 Net Income/(Loss) (GAAP) 1/ | $ 0.38 | $ 0.24 | $ 0.01 | $ 0.02 | $ (0.06) | $ 0.59 | ||||
| Change from 2008 Net Income/(Loss) | ||||||||||
| Regulated Operations | ||||||||||
| · | Distribution Revenue | |||||||||
| - | Weather (estimate) 2/ | (0.01) | - | - | - | - | (0.01) | |||
| - | Other Distribution Revenue Margin (driven by customer sales/rate mix) | 0.03 | - | - | - | - | 0.03 | |||
| · | ACE Basic Generation Service (primarily unbilled revenue) | 0.03 | - | - | - | - | 0.03 | |||
| · | Network Transmission | (0.01) | - | - | - | - | (0.01) | |||
| · | Operation & Maintenance (primarily higher pension expense) | (0.03) | - | - | - | - | (0.03) | |||
| · | Other, net | (0.02) | - | - | - | - | (0.02) | |||
| Conectiv Energy | ||||||||||
| · | Margins (operating revenue less cost of goods sold) | |||||||||
| - | Merchant Generation & Load Service | - | (0.11) | - | - | - | (0.11) | |||
| - | Energy Marketing | - | (0.03) | - | - | - | (0.03) | |||
| · | Operating costs, net | - | 0.01 | - | - | - | 0.01 | |||
| Pepco Energy Services | ||||||||||
| · | Retail Energy Supply | - | - | 0.08 | - | - | 0.08 | |||
| · | Energy Services | - | - | (0.01) | - | - | (0.01) | |||
| Other Non-Regulated | - | - | - | - | - | - | ||||
| Corporate & Other | - | - | - | - | - | - | ||||
| Capital Costs | (0.02) | (0.01) | (0.02) | 0.01 | - | (0.04) | ||||
| Income Tax Adjustments | - | - | - | - | 0.01 | 0.01 | ||||
| Dilution | (0.04) | (0.01) | - | - | - | (0.05) | ||||
| 2009 Net Income/(Loss) excluding Special Items | 0.31 | 0.09 | 0.06 | 0.03 | (0.05) | 0.44 | ||||
2009 Special Items 3/ | ||||||||||
| · | Mirant Settlement, net of customer sharing - MD jurisdiction | 0.07 | - | - | - | - | 0.07 | |||
| · | MD Income Tax benefit | 0.05 | - | - | - | - | 0.05 | |||
| 2009 Net Income/(Loss) (GAAP) 4/ | $ 0.43 | $ 0.09 | $ 0.06 | $ 0.03 | $ (0.05) | $ 0.56 | ||||
_______________
Notes:
| 1/ | The 2008 weighted average number of basic shares outstanding was 201,794,635. | ||
| 2/ | The effect of weather in 2009 compared with the 20 year average weather is estimated to have no earnings impact. | ||
| 3/ | Management believes the special items are not representative of the company's ongoing business operations. | ||
| 4/ | The 2009 weighted average number of basic shares outstanding was 220,919,643. |
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Pepco Holdings, Inc. Earnings Per Share Variance 2009 / 2008 | ||||||||||
| September Year-to-Date | ||||||||||
| Competitive Energy | ||||||||||
Power Delivery | Conectiv Energy | Pepco Energy Services | Other Non Regulated | Corporate & Other | Total PHI | |||||
| 2008 Net Income/(Loss) (GAAP) 1/ | $ 0.99 | $ 0.59 | $ 0.14 | $ (0.34) | $ (0.22) | $ 1.16 | ||||
2008 Special Items 2/ | ||||||||||
| Cross Border Leases | ||||||||||
| · | Re-evaluation Adjustment | - | - | - | 0.43 | - | 0.43 | |||
| · | Related Interest on Tax Obligation | - | - | - | 0.03 | - | 0.03 | |||
| 2008 Net Income/(Loss) excluding Special Items | 0.99 | 0.59 | 0.14 | 0.12 | (0.22) | 1.62 | ||||
| Change from 2008 Net Income/(Loss) excluding Special Items | ||||||||||
| Regulated Operations | ||||||||||
| · | Distribution Revenue | |||||||||
| - | Weather (estimate) 3/ | (0.01) | - | - | - | - | (0.01) | |||
| Rate Order Impact (Pepco/DC) | 0.01 | - | - | - | - | 0.01 | ||||
| - | Other Distribution Revenue Margin (primarily lower customer usage) | (0.01) | - | - | - | - | (0.01) | |||
| Network Transmission | (0.01) | - | - | - | - | (0.01) | ||||
| · | Standard Offer Service Margin (Pepco/Delmarva) | (0.02) | - | - | - | - | (0.02) | |||
| · | Operation & Maintenance (primarily higher pension expense) | (0.09) | - | - | - | - | (0.09) | |||
| · | Depreciation | (0.03) | - | - | - | - | (0.03) | |||
| · | Other, net | (0.02) | - | - | - | - | (0.02) | |||
| Conectiv Energy | ||||||||||
| · | Margins (operating revenue less cost of goods sold) | |||||||||
| - | Merchant Generation & Load Service | - | (0.52) | - | - | - | (0.52) | |||
| - | Energy Marketing | - | (0.02) | - | - | - | (0.02) | |||
| · | Operating costs, net | - | 0.03 | - | - | - | 0.03 | |||
| Pepco Energy Services | ||||||||||
| · | Retail Energy Supply | - | - | 0.10 | - | - | 0.10 | |||
| · | Energy Services | - | - | (0.02) | - | - | (0.02) | |||
| Other Non-Regulated | ||||||||||
| · | Financial investment portfolio | - | - | - | (0.03) | - | (0.03) | |||
| Corporate & Other | - | - | - | - | - | - | ||||
| Capital Costs | (0.08) | (0.02) | (0.06) | 0.01 | 0.01 | (0.14) | ||||
| Income Tax Adjustments | (0.06) | - | - | - | 0.02 | (0.04) | ||||
| Dilution | (0.07) | - | (0.01) | (0.01) | 0.01 | (0.08) | ||||
| 2009 Net Income/(Loss) excluding Special Items | 0.60 | 0.06 | 0.15 | 0.09 | (0.18) | 0.72 | ||||
2009 Special Items 2/ | ||||||||||
| · | Mirant Settlement, net of customer sharing | 0.11 | - | - | - | - | 0.11 | |||
| · | MD Income Tax benefit | 0.05 | - | - | - | - | 0.05 | |||
| 2009 Net Income/(Loss) (GAAP) 4/ | $ 0.76 | $ 0.06 | $ 0.15 | $ 0.09 | $ (0.18) | $ 0.88 | ||||
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Notes:
| 1/ | The 2008 weighted average number of basic shares outstanding was 201,375,841. | ||
| 2/ | Management believes the special items are not representative of the company's ongoing business operations. | ||
| 3/ | The effect of weather in 2009 compared with the 20 year average weather is estimated to have decreased earnings by $.01 per share. | ||
| 4/ | The 2009 weighted average number of basic shares outstanding was 220,066,766. |
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SEGMENT INFORMATION
| Three Months Ended September 30, 2009 | |||||||||||||||||
| (millions of dollars) | |||||||||||||||||
Competitive Energy Segments | |||||||||||||||||
Power Delivery | Conectiv Energy | Pepco Energy Services | Other Non- Regulated | Corporate & Other (a) | PHI Cons. | ||||||||||||
Operating Revenue | $ | 1,428 | $ | 581 | (b) | $ | 611 | $ | 13 | $ | (94) | $ | 2,539 | ||||
Operating Expense (c) | 1,235 | (b)(d) | 539 | 584 | — | (96) | 2,262 | ||||||||||
Operating Income | 193 | 42 | 27 | 13 | 2 | 277 | |||||||||||
Interest Income | — | — | — | 1 | (1) | — | |||||||||||
Interest Expense | 53 | 9 | 6 | 4 | 21 | 93 | |||||||||||
Other Income | 3 | 1 | — | 1 | — | 5 | |||||||||||
Preferred Stock Dividends | — | — | — | 1 | (1) | — | |||||||||||
Income Tax Expense (Benefit) | 49 | 13 | 7 | 3 | (7) | 65 | |||||||||||
Net Income (Loss) | 94 | (e) | 21 | 14 | 7 | (12) | 124 | ||||||||||
Total Assets | 10,181 | 1,978 | 699 | 1,552 | 1,420 | 15,830 | |||||||||||
Construction Expenditures | $ | 138 | $ | 57 | $ | 2 | $ | — | $ | 10 | $ | 207 | |||||
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Notes: |
| (a) | Includes unallocated Pepco Holdings’ (parent company) capital costs, such as acquisition financing costs, and the depreciation and amortization expense related to purchase accounting adjustments for the fair value of Conectiv assets and liabilities as of the August 1, 2002 acquisition date. Additionally, the Total Assets line item in this column includes Pepco Holdings’ goodwill balance. Corporate & Other includes intercompany amounts of $(94) million for Operating Revenue, $(92) million for Operating Expense, $(17) million for Interest Income, $(17) million for Interest Expense, and $(1) million of Preferred Stock Dividends. |
| (b) | Power Delivery purchased electric energy and capacity and natural gas from Conectiv Energy in the amount of $75 million for the three months ended September 30, 2009. |
| (c) | Includes depreciation and amortization expense of $103 million, consisting of $84 million for Power Delivery, $10 million for Conectiv Energy, $4 million for Pepco Energy Services, and $5 million for Corporate & Other. |
| (d) | Includes $26 million ($16 million after-tax) gain related to settlement of Mirant bankruptcy claims. |
| (e) | Includes $11 million after-tax state income tax benefit, net of fees, related to a change in the tax reporting for the disposition of certain assets in prior years. |
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SEGMENT INFORMATION – Continued
| Three Months Ended September 30, 2008 | |||||||||||||||||
| (millions of dollars) | |||||||||||||||||
Competitive Energy Segments | |||||||||||||||||
Power Delivery | Conectiv Energy | Pepco Energy Services | Other Non- Regulated | Corporate & Other (a) | PHI Cons. | ||||||||||||
Operating Revenue | $ | 1,668 | $ | 783 | (b) | $ | 716 | $ | 14 | $ | (121) | $ | 3,060 | ||||
Operating Expense (c) | 1,495 | (b) | 694 | 713 | 2 | (119) | 2,785 | ||||||||||
Operating Income | 173 | 89 | 3 | 12 | (2) | 275 | |||||||||||
Interest Income | 2 | 1 | 1 | 1 | (1) | 4 | |||||||||||
Interest Expense | 48 | 6 | 1 | 5 | 22 | 82 | |||||||||||
Other Income (Expense) | 3 | — | — | (1) | — | 2 | |||||||||||
Preferred Stock Dividends | — | — | — | 1 | (1) | — | |||||||||||
Income Tax Expense (Benefit) | 53 | 35 | — | 1 | (9) | 80 | |||||||||||
Net Income (Loss) | 77 | 49 | 3 | 5 | (15) | 119 | |||||||||||
Total Assets | 9,875 | 2,047 | 708 | 1,465 | 1,477 | 15,572 | |||||||||||
Construction Expenditures | $ | 151 | $ | 31 | $ | 6 | $ | — | $ | 7 | $ | 195 | |||||
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Notes:
| (a) | Includes unallocated Pepco Holdings’ (parent company) capital costs, such as acquisition financing costs, and the depreciation and amortization expense related to purchase accounting adjustments for the fair value of Conectiv assets and liabilities as of the August 1, 2002 acquisition date. Additionally, the Total Assets line item in this column includes Pepco Holdings’ goodwill balance. Corporate & Other includes intercompany amounts of $(121) million for Operating Revenue, $(120) million for Operating Expense, $(14) million for Interest Income, $(14) million for Interest Expense and $(1) million for Preferred Stock Dividends. |
| (b) | Power Delivery purchased electric energy and capacity and natural gas from Conectiv Energy in the amount of $113 million for the three months ended September 30, 2008. |
| (c) | Includes depreciation and amortization expense of $99 million, consisting of $84 million for Power Delivery, $9 million for Conectiv Energy, $4 million for Pepco Energy Services, and $2 million for Corporate & Other. |
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SEGMENT INFORMATION – Continued
| Nine Months Ended September 30, 2009 | |||||||||||||||||
| (millions of dollars) | |||||||||||||||||
Competitive Energy Segments | |||||||||||||||||
Power Delivery | Conectiv Energy | Pepco Energy Services | Other Non- Regulated | Corporate & Other (a) | PHI Cons. | ||||||||||||
Operating Revenue | $ | 3,895 | $ | 1,625 | (b) | $ | 1,828 | $ | 40 | $ | (264) | $ | 7,124 | ||||
Operating Expense (c) | 3,488 | (b)(d) | 1,587 | 1,757 | 2 | (269) | 6,565 | ||||||||||
Operating Income | 407 | 38 | 71 | 38 | 5 | 559 | |||||||||||
Interest Income | 2 | 1 | 1 | 3 | (4) | 3 | |||||||||||
Interest Expense | 159 | 24 | 22 | 11 | 63 | 279 | |||||||||||
Other Income | 9 | 1 | 1 | 1 | 1 | 13 | |||||||||||
Preferred Stock Dividends | — | — | — | 2 | (2) | — | |||||||||||
Income Tax Expense (Benefit) | 92 | 5 | 19 | 8 | (22) | 102 | |||||||||||
Net Income (Loss) | 167 | (e) | 11 | 32 | 21 | (37) | 194 | ||||||||||
Total Assets | 10,181 | 1,978 | 699 | 1,552 | 1,420 | 15,830 | |||||||||||
Construction Expenditures | $ | 419 | $ | 148 | $ | 8 | $ | - | $ | 20 | $ | 595 | |||||
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Notes:
| (a) | Includes unallocated Pepco Holdings’ (parent company) capital costs, such as acquisition financing costs, and the depreciation and amortization expense related to purchase accounting adjustments for the fair value of Conectiv assets and liabilities as of the August 1, 2002 acquisition date. Additionally, the Total Assets line item in this column includes Pepco Holdings’ goodwill balance. Corporate & Other includes intercompany amounts of $(264) million for Operating Revenue, $(257) million for Operating Expense, $(61) million for Interest Income, $(59) million for Interest Expense, and $(2) million for Preferred Stock Dividends. |
| (b) | Power Delivery purchased electric energy and capacity and natural gas from Conectiv Energy in the amount of $220 million for the nine months ended September 30, 2009. |
| (c) | Includes depreciation and amortization expense of $294 million, consisting of $242 million for Power Delivery, $29 million for Conectiv Energy, $13 million for Pepco Energy Services, $1 million for Other Non-Regulated, and $9 million for Corporate & Other. |
| (d) | Includes $40 million ($24 million after-tax) gain related to settlement of Mirant bankruptcy claims. |
| (e) | Includes $11 million after-tax state income tax benefit, net of fees, related to a change in the tax reporting for the disposition of certain assets in prior years. |
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SEGMENT INFORMATION – Continued
| Nine Months Ended September 30, 2008 | |||||||||||||||||
| (millions of dollars) | |||||||||||||||||
Competitive Energy Segments | |||||||||||||||||
Power Delivery | Conectiv Energy | Pepco Energy Services | Other Non- Regulated | Corporate & Other (a) | PHI Cons. | ||||||||||||
Operating Revenue | $ | 4,260 | $ | 2,395 | (b) | $ | 1,968 | $ | (73) | (d) | $ | (331) | $ | 8,219 | |||
Operating Expense (c) | 3,830 | (b) | 2,178 | 1,926 | 4 | (331) | 7,607 | ||||||||||
Operating Income | 430 | 217 | 42 | (77) | — | 612 | |||||||||||
Interest Income | 11 | 2 | 2 | 3 | (2) | 16 | |||||||||||
Interest Expense | 142 | 18 | 2 | 14 | 67 | 243 | |||||||||||
Other Income (Expense) | 10 | — | 2 | (4) | 1 | 9 | |||||||||||
Preferred Stock Dividends | — | — | — | 2 | (2) | — | |||||||||||
Income Tax Expense (Benefit) | 110 | 83 | 16 | (25) | (d) | (23) | 161 | ||||||||||
Net Income (Loss) | 199 | 118 | 28 | (69) | (d) | (43) | 233 | ||||||||||
Total Assets | 9,875 | 2,047 | 708 | 1,465 | 1,477 | 15,572 | |||||||||||
Construction Expenditures | $ | 433 | $ | 90 | $ | 23 | $ | — | $ | 15 | $ | 561 | |||||
_______________
Notes:
| (a) | Includes unallocated Pepco Holdings’ (parent company) capital costs, such as acquisition financing costs, and the depreciation and amortization expense related to purchase accounting adjustments for the fair value of Conectiv assets and liabilities as of the August 1, 2002 acquisition date. Additionally, the Total Assets line item in this column includes Pepco Holdings’ goodwill balance. Corporate & Other includes intercompany amounts of $(331) million for Operating Revenue, $(327) million for Operating Expense, $(43) million for Interest Income, $(40) million for Interest Expense, and $(2) million for Preferred Stock Dividends. |
| (b) | Power Delivery purchased electric energy and capacity and natural gas from Conectiv Energy in the amount of $298 million for the nine months ended September 30, 2008. |
| (c) | Includes depreciation and amortization expense of $283 million, consisting of $239 million for Power Delivery, $28 million for Conectiv Energy, $9 million for Pepco Energy Services, $1 million for Other Non-Regulated, and $6 million for Corporate & Other. |
| (d) | Included in operating revenue is a pre-tax charge of $124 million ($86 million after-tax) related to the adjustment to the equity value of cross-border energy lease investments, and included in income taxes is a $7 million after-tax charge for the additional interest accrued on the related tax obligations. |
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PEPCO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||
| (millions of dollars, except per share data) | |||||||||||||
| Operating Revenue | |||||||||||||
| Power Delivery | $ $ | 1,428 1, | $ | 1,668 | $ | 3,895 | $ | 4,260 | |||||
| Competitive Energy | 1,099 | 1,379 | 3,196 | 4,036 | |||||||||
| Other | 12 | 13 | 33 | (77) | |||||||||
| Total Operating Revenue | 2,539 | 3,060 | 7,124 | 8,219 | |||||||||
| Operating Expenses | |||||||||||||
| Fuel and purchased energy | 1,784 | 2,124 | 5,162 | 5,774 | |||||||||
| Other services cost of sales | 92 | 209 | 270 | 569 | |||||||||
| Other operation and maintenance | 240 | 241 | 713 | 691 | |||||||||
| Depreciation and amortization | 103 | 99 | 294 | 283 | |||||||||
| Other taxes | 101 | 100 | 282 | 273 | |||||||||
| Deferred electric service costs | (32) | 12 | (116) | 20 | |||||||||
| Effect of settlement of Mirant bankruptcy claims | (26) | - | (40) | - | |||||||||
| Gain on sale of assets | - | - | - | - | (3) | ||||||||
| Total Operating Expenses | 2,262 | 2,785 | 6,565 | 7,607 | |||||||||
| Operating Income | 277 | 275 | 559 | 612 | |||||||||
| Other Income (Expenses) | |||||||||||||
| Interest and dividend income | - | 4 | 3 | 16 | |||||||||
| Interest expense | (93) | (82) | ( | (279) | (243) | ||||||||
| Gain (Loss) from equity investments | 1 | (1) | 2 | (3) | |||||||||
| Other income | 4 | 4 | 12 | 14 | |||||||||
| Other expenses | - - | (1) | (1) | (2) | |||||||||
| Total Other Expenses | (88) | (76) | (263) | (218) | |||||||||
| Income Before Income Tax Expense | 189 | 199 | 296 | 394 | |||||||||
| Income Tax Expense | 65 | 80 | 102 | 161 | |||||||||
| Net Income | 124 | 119 | 194 | 233 | |||||||||
| Retained Earnings at Beginning of Period | 1,222 | 1,198 | 1,271 | 1,193 | |||||||||
| Dividends Paid on Common Stock | (59) | (54) | (178) | (163) | |||||||||
| Retained Earnings at End of Period | $ $ | 1,287 | $ | 1,263 | $ | 1,287 | $ | 1,263 | |||||
| Basic and Diluted Share Information | |||||||||||||
| Weighted average shares outstanding | 221 | 202 | 220 | 201 | |||||||||
| Earnings per share of common stock | $ $ | .56 | $ $ | .59 | $ | .88 | $ | 1.16 | |||||
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PEPCO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) | ||
September 30, 2009 | December 31, 2008 | |
| (millions of dollars) | ||
| ASSETS | ||
| CURRENT ASSETS | ||
Cash and cash equivalents | $ 20 | $ 384 |
Restricted cash equivalents | 11 | 10 |
| Accounts receivable, less allowance for uncollectible accounts of $46 million and $37 million, respectively | 1,184 | 1,392 |
Inventories | 286 | 333 |
Derivative assets | 62 | 98 |
Prepayments of income taxes | 365 | 294 |
Prepaid expenses and other | 111 | 87 |
Total Current Assets | 2,039 | 2,598 |
| INVESTMENTS AND OTHER ASSETS | ||
Goodwill | 1,411 | 1,411 |
Regulatory assets | 1,951 | 2,088 |
Investment in finance leases held in trust | 1,376 | 1,335 |
Income taxes receivable | 128 | 23 |
Restricted cash equivalents | 4 | 108 |
Assets and accrued interest related to uncertain tax positions | 12 | 32 |
Derivative assets | 27 | 9 |
Other | 208 | 215 |
Total Investments and Other Assets | 5,117 | 5,221 |
| PROPERTY, PLANT AND EQUIPMENT | ||
Property, plant and equipment | 13,476 | 12,926 |
Accumulated depreciation | (4,802) | (4,612) |
Net Property, Plant and Equipment | 8,674 | 8,314 |
TOTAL ASSETS | $ 15,830 | $ 16,133 |
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PEPCO HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) | ||
September 30, 2009 | December 31, 2008 | |
| (millions of dollars, except shares) | ||
| LIABILITIES AND EQUITY | ||
| CURRENT LIABILITIES | ||
Short-term debt | $ 493 | $ 465 |
Current maturities of long-term debt and project funding | 534 | 85 |
Accounts payable and accrued liabilities | 634 | 847 |
Capital lease obligations due within one year | 7 | 6 |
Taxes accrued | 58 | 62 |
Interest accrued | 93 | 71 |
Liabilities and accrued interest related to uncertain tax positions | 1 | 47 |
Derivative liabilities | 125 | 144 |
Other | 289 | 275 |
Total Current Liabilities | 2,234 | 2,002 |
| DEFERRED CREDITS | ||
Regulatory liabilities | 662 | 893 |
Deferred income taxes, net | 2,505 | 2,269 |
Investment tax credits | 37 | 40 |
Pension benefit obligation | 399 | 626 |
Other postretirement benefit obligations | 451 | 461 |
| Income taxes payable | 1 | 8 |
Liabilities and accrued interest related to uncertain tax positions | 110 | 17 |
Derivative liabilities | 63 | 59 |
Other | 155 | 184 |
Total Deferred Credits | 4,383 | 4,557 |
| LONG-TERM LIABILITIES | ||
Long-term debt | 4,470 | 4,859 |
Transition bonds issued by ACE Funding | 378 | 401 |
Long-term project funding | 17 | 19 |
Capital lease obligations | 96 | 99 |
Total Long-Term Liabilities | 4,961 | 5,378 |
| COMMITMENTS AND CONTINGENCIES | ||
| EQUITY | ||
| Common stock, $.01 par value, 400,000,000 shares authorized, 221,592,782 shares and 218,906,220 shares outstanding, respectively | 2 | 2 |
Premium on stock and other capital contributions | 3,215 | 3,179 |
Accumulated other comprehensive loss | (258) | (262) |
Retained earnings | 1,287 | 1,271 |
Total Shareholders’ Equity | 4,246 | 4,190 |
Noncontrolling interest | 6 | 6 |
Total Equity | 4,252 | 4,196 |
TOTAL LIABILITIES AND EQUITY | $ 15,830 | $ 16,133 |
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| POWER DELIVERY SALES AND OPERATING REVENUES | |||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
| Power Delivery Sales (GWh) | 2009 | 2008 | 2009 | 2008 | |||||||||
| Regulated T&D Electric Sales | |||||||||||||
| Residential | 4,997 | 5,165 | 13,219 | 13,324 | |||||||||
| Commercial and industrial | 8,653 | 8,826 | 23,965 | 24,783 | |||||||||
| Other | 59 | 59 | 185 | 185 | |||||||||
| Total Regulated T&D Electric Sales | 13,709 | 14,050 | 37,369 | 38,292 | |||||||||
| Default Electricity Supply Sales | |||||||||||||
| Residential | 4,804 | 5,005 | 12,770 | 12,901 | |||||||||
| Commercial and industrial | 2,144 | 2,909 | 6,764 | 7,854 | |||||||||
| Other | 23 | 22 | 71 | 72 | |||||||||
| Total Default Electricity Supply Sales | 6,971 | 7,936 | 19,605 | 20,827 | |||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
Power Delivery Electric Operating Revenue (Millions of dollars) | 2009 | 2008 | 2009 | 2008 | |||||||||
| Regulated T&D Electric Revenue | |||||||||||||
| Residential | $ | 190 | $ | 193 | $ | 464 | $ | 460 | |||||
| Commercial and industrial | 229 | 228 | 611 | 598 | |||||||||
| Other | 63 | 81 | 188 | 244 | |||||||||
| Total Regulated T&D Electric Revenue | $ | 482 | $ | 502 | $ | 1,263 | $ | 1,302 | |||||
| Default Supply Revenue | |||||||||||||
| Residential | $ | 619 | $ | 622 | $ | 1,519 | $ | 1,461 | |||||
| Commercial and industrial | 247 | 378 | 739 | 928 | |||||||||
| Other | 35 | 96 | 121 | 269 | |||||||||
| Total Default Supply Revenue | $ | 901 | $ | 1,096 | $ | 2,379 | $ | 2,658 | |||||
| Other Electric Revenue | $ | 17 | $ | 17 | $ | 54 | $ | 48 | |||||
| Total Electric Operating Revenue | $ | 1,400 | $ | 1,615 | $ | 3,696 | $ | 4,008 | |||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
| Power Delivery Gas Sales and Operating Revenue | 2009 | 2008 | 2009 | 2008 | |||||||||
| Regulated Gas Sales (Bcf) | |||||||||||||
| Residential | 1 | - | 6 | 5 | |||||||||
| Commercial and industrial | 1 | 1 | 4 | 4 | |||||||||
| Transportation and other | 1 | 1 | 4 | 5 | |||||||||
| Total Regulated Gas Sales | 3 | 2 | 14 | 14 | |||||||||
| Regulated Gas Revenue (Millions of dollars) | |||||||||||||
| Residential | $ | 11 | $ | 9 | $ | 103 | $ | 86 | |||||
| Commercial and industrial | 7 | 7 | 60 | 54 | |||||||||
| Transportation and other | 2 | 2 | 6 | 6 | |||||||||
| Total Regulated Gas Revenue | $ | 20 | $ | 18 | $ | 169 | $ | 146 | |||||
| Other Gas Revenue | $ | 8 | $ | 35 | $ | 30 | $ | 106 | |||||
| Total Gas Operating Revenue | $ | 28 | $ | 53 | $ | 199 | $ | 252 | |||||
| Total Power Delivery Operating Revenue | $ | 1,428 | $ | 1,668 | $ | 3,895 | $ | 4,260 | |||||
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WEATHER DATA - CONSOLIDATED ELECTRIC SERVICE TERRITORY | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
| 2009 | 2008 | 2009 | 2008 | ||||
| Heating Degree Days | 20 | 12 | 2,866 | 2,498 | |||
| 20 Year Average | 33 | 34 | 2,728 | 2,765 | |||
| Percentage Difference from Average | -39% | -65% | 5% | -10% | |||
| Percentage Difference from Prior Year | 67% | 15% | |||||
| Cooling Degree Days | 894 | 1,009 | 1,240 | 1,426 | |||
| 20 Year Average | 922 | 923 | 1,278 | 1,271 | |||
| Percentage Difference from Average | -3% | 9% | -3% | 12% | |||
| Percentage Difference from Prior Year | -11% | -13% | |||||
CONECTIV ENERGY
| Quarter Ended: | ||||||||||||||
September 30, 2009 | June 30, 2009 | March 31, 2008 | December 30, 2008 | September 30, 2008 | ||||||||||
| Gigawatt Hour Supply (GWh) | ||||||||||||||
| Base-Load (1) | 99 | 107 | 304 | 340 | 437 | |||||||||
| Mid-Merit (Combined Cycle) (2) | 1,231 | 374 | 309 | 344 | 1,318 | |||||||||
| Mid-Merit (Oil Fired) (3) | 11 | (3) | 34 | 9 | - | |||||||||
| Peaking | 22 | 6 | 2 | 3 | 31 | |||||||||
| Tolled Generation | 186 | 126 | 180 | 16 | 65 | |||||||||
| Generation Output | 1,549 | 610 | 829 | 712 | 1,851 | |||||||||
| Load Service Volume (4) | 1,503 | 1,485 | 2,010 | 2,454 | 2,907 | |||||||||
Around-the-clock Market Prices ($/MWh) PJM - East (5) | $ | 35.89 | $ | 35.35 | $ | 54.89 | $ | 56.45 | $ | 89.62 | ||||
| On Peak Market Prices ($/MWh) PJM - East (5) | $ | 43.70 | $ | 40.68 | $ | 60.81 | $ | 65.72 | $ | 107.66 | ||||
| Gas Price - M3 (Market Area) ($/MMBtu) (5) | $ | 3.41 | $ | 4.04 | $ | 6.28 | $ | 7.37 | $ | 9.71 | ||||
| Average Power Sales Price ($/MWh) (6) | ||||||||||||||
| Generation | $ | 44.21 | $ | 41.34 | $ | 71.91 | $ | 70.93 | $ | 117.50 | ||||
| Other | $ | 88.52 | $ | 83.38 | $ | 88.60 | $ | 93.40 | $ | 101.70 | ||||
Merchant Generation and Load Service Gross Margin Key Drivers ($ millions) | ||||||||||||||
| Physical Energy and Ancillary Services | $ | 15 | $ | (9) | $ | 4 | $ | 7 | $ | 59 | ||||
| Fuel & Power Hedges of Generation Activities (7) | $ | (24) | $ | (6) | $ | 3 | $ | (5) | $ | 21 | ||||
| PJM Capacity Margin for Generation Activities | $ | 60 | $ | 44 | $ | 35 | $ | 35 | $ | 37 | ||||
| Load Service and Load Hedges | $ | 23 | $ | (11) | $ | 1 | $ | 4 | $ | (4) | ||||
Notes:
| (1) | Edge Moor Units 3 and 4 and Deepwater Unit 6. |
| (2) | Hay Road and Bethlehem, all units. |
| (3) | Edge Moor Unit 5 and Deepwater Unit 1. Generation output for these units was negative for the three months ended June 30, 2009 because of station service consumption. |
| (4) | Includes all default electricity supply sales. |
| (5) | Daily average. |
| (6) | Calculated from data reported in Conectiv Energy's Electric Quarterly Report filed with the FERC; does not include capacity or ancillary services revenue. Prices may differ from those originally reported in prior periods due to normal load true-ups requiring EQR filing amendments. |
| (7) | Financial contracts used to economically hedge fuel inputs and power output. |
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CONECTIV ENERGY - (continued) | ||||||||||
Operating Summary (Millions of dollars) | ||||||||||
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||
| Gigawatt Hour Supply (GWh) | ||||||||||
| Generation Output | 1,549 | (3) | 1,851 | 2,988 | (3) | 3,894 | ||||
| Load Service Volumes | 1,503 | (4) | 2,907 | 4,997 | (4) | 8,176 | ||||
| Operating Revenue: | ||||||||||
| Merchant Generation and Load Service (1) | $ | 459 | $ | 442 | $ | 1,170 | $ | 1,436 | ||
| Energy Marketing (2) | 122 | 341 | 455 | 959 | ||||||
| Total | 581 | 783 | 1,625 | 2,395 | ||||||
| Cost of Goods Sold: | ||||||||||
| Merchant Generation and Load Service (1) | 385 | 329 | 1,035 | 1,123 | ||||||
| Energy Marketing (2) | 115 | 324 | 421 | 919 | ||||||
| Total | 500 | 653 | 1,456 | 2,042 | ||||||
| Gross Margin: | ||||||||||
| Merchant Generation and Load Service (1) | 74 | (5) | 113 | 135 | (5) | 313 | ||||
| Energy Marketing (2) | 7 | (6) | 17 | 34 | (6) | 40 | ||||
| Total | 81 | 130 | 169 | 353 | ||||||
| Operating and Maintenance Expenses | 28 | (7) | 30 | 98 | (7) | 105 | ||||
| Depreciation | 10 | 10 | 29 | 28 | ||||||
| Taxes Other Than Income Taxes | 1 | 1 | 3 | 3 | ||||||
| Other Operating Expenses | - | - | 1 | - | ||||||
| Total | 39 | 41 | 131 | 136 | ||||||
| Operating (Loss) Income | $ | 42 | $ | 89 | $ | 38 | $ | 217 | ||
Notes:
| (1) | Merchant Generation and Load Service consists primarily of electric power, capacity, and ancillary services sales from Conectiv Energy's generating plants; tolling arrangements entered into to sell energy and other products from Conectiv Energy's generating plants and entered into to purchase energy and other products from other companies' generating plants; hedges of power, capacity, fuel and load; the sale of excess fuel (primarily natural gas) and emission allowances; electric power, capacity, and ancillary services sales pursuant to competitively bid contracts entered into with affiliated and non-affiliated companies to fulfill their default electricity supply obligations; and fuel switching activities made possible by the multi-fuel capabilities of some of Conectiv Energy's generating plants. |
| (2) | Energy Marketing consists primarily of power origination, which primarily represents the fixed margin component of structured power transactions such as default electricity supply service, wholesale natural gas marketing, fuel oil marketing, and the activities of the short-term power desk which generates margin by identifying and capturing price differences between power pools, and locational and timing differences within a power pool. |
| (3) | Lower generating plant output during 2009 compared to 2008 was primarily due to decreased demand for electricity related to the economic recession and mild weather. Coal generation experienced the sharpest decline because low natural gas prices caused more flexible natural gas units to replace coal generation in the dispatch order. |
| (4) | Lower load service volumes during 2009 compared to 2008 was primarily due to the expiration of certain load service contracts and the decreased demand for electricity related to the economic recession, and mild weather during the summer of 2009. |
| (5) | Lower Merchant Generation and Load Service gross margins during 2009 compared to 2008 were driven by lower generation output, lower spark spreads and dark spreads, and decreased mark-to-market and settled gains on derivative instruments, primarily natural gas and coal; partially offset by higher capacity prices. |
| (6) | Lower Energy Marketing gross margins during 2009 compared to 2008 were primarily due to lower power and natural gas sales and margins. |
| (7) | Lower Operating and Maintenance Expenses in 2009 compared to 2008 were primarily due to postponed plant maintenance projects because of lower run-time, the elimination of incentive accruals, and other cost-saving measures. |
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PEPCO ENERGY SERVICES | ||||||||||||
Operating Summary (millions of dollars) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
| Retail Electric Sales (GWh) | 4,619 | 5,614 | 14,007 | 15,205 | ||||||||
| Operating Revenue | $ | 611 | $ | 716 | $ | 1,828 | $ | 1,968 | ||||
| Cost of Goods Sold | 555 | 686 | 1,674 | 1,852 | ||||||||
| Gross Margin | 56 | 30 | 154 | 116 | ||||||||
| Gross Margin Detail: | ||||||||||||
| Retail Energy Supply (1) | 42 | (2) | 14 | 113 | (3) | 72 | ||||||
| Energy Services | 14 | 16 | 41 | 44 | ||||||||
| Total | 56 | 30 | 154 | 116 | ||||||||
| Operation and Maintenance Expenses | 24 | 22 | 68 | 62 | ||||||||
| Depreciation | 4 | 4 | 13 | 10 | ||||||||
| Other Taxes | 1 | 1 | 2 | 2 | ||||||||
| Operating Expenses | 29 | 27 | 83 | 74 | ||||||||
| Operating Income | $ | 27 | $ | 3 | $ | 71 | $ | 42 | ||||
| Notes: | |
| (1) | Includes power generation. |
| (2) | Retail Energy Supply gross margin increased due to lower electric and gas supply costs, lower losses on energy derivative contracts, lower RPM capacity charges, and higher RPM capacity revenues. |
| (3) | Retail Energy Supply gross margin increased due to lower electric supply costs. |
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