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Favourable
-- Rate base growth, due to continued investment in energy infrastructure-- Higher gas transportation volumes to industrial customers-- Lower effective income taxes Factors Contributing to Annual Earnings Variance
Favourable
-- Rate base growth, due to continued investment in energy infrastructure-- Higher gas transportation volumes to industrial customers-- Lower-than-expected operating and maintenance expenses during 2012-- Lower effective income taxes
Unfavourable
-- Lower-than-expected customer additions in 2012-- Lower capitalized AFUDC, for the same reason discussed above for the quarter
REGULATED ELECTRIC UTILITIES - CANADIAN
FORTISALBERTA
----------------------------------------------------------------------------Financial Highlights (Unaudited) Quarter AnnualPeriods Ended December 31 2012 2011 Variance 2012 2011 Variance--------------------------------------------------------------------------------------------------------------------------------------------------------Energy Deliveries (gigawatt hours ("GWh")) 4,365 4,232 133 16,799 16,367 432Revenue ($ millions) 113 102 11 448 408 40Earnings ($ millions) 23 16 7 96 74 22-------------------------------------------------------------------------------------------------------------------------------------------------------- Factors Contributing to Quarterly and Annual Energy Deliveries VariancesFavourable
-- Higher average consumption by oilfield and commercial customers, due to increased activity-- Higher average consumption by residential customers, driven by cooler temperatures in the fourth quarter, which increased heating load-- Growth in the number of customers, mainly in the residential and commercial sectors, with the total number of customers increasing by approximately 9,000 year over year, driven by favourable economic conditions
As a significant portion of FortisAlberta's distribution revenue is derived from fixed or largely fixed billing determinants, changes in quantities of energy delivered are not entirely correlated with changes in revenue. Revenue is a function of numerous variables, many of which are independent of actual energy deliveries.
Factors Contributing to Quarterly Revenue Variance
Favourable
-- An increase in customer electricity distribution rates, effective January 1, 2012, driven primarily by ongoing investment in energy infrastructure and forecasted certain higher expenses recoverable from customers-- Net transmission revenue of approximately $2 million recognized in the fourth quarter of 2012. In its April 2012 distribution revenue requirements decision, the regulator did not approve the continuation in 2012 of the deferral of transmission volume variances associated with FortisAlberta's Alberta Electric System Operator ("AESO") charges deferral account. In the absence of full deferral, FortisAlberta was subject to volume risk in 2012 on actual transmission costs relative to those charged to customers based on forecast volumes and prices. Transmission volumes are influenced by many factors, which may result in actual transmission volumes varying from those forecasted. The deferral of transmission volume variances was reinstated, effective January 1, 2013, as approved by the regulator and, therefore, such variances will not impact earnings in 2013.-- Growth in the number of customers-- The cumulative impact on revenue, from January 1, 2011, of the decrease in the allowed ROE to 8.75%, effective for both 2011 and 2012, from 9.00% for 2010 was recognized during the fourth quarter of 2011, when the regulatory decision was received. As a result, an approximate $2 million rate revenue reduction was accrued during the fourth quarter of 2011, of which approximately $1.5 million related to the first three quarters of 2011.-- An increase in franchise fee revenue of approximately $1 million Factors Contributing to Annual Revenue Variance
