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For a discussion of the nature of regulation and material regulatory decisions and applications pertaining to the Corporation's regulated utilities, refer to the "Regulatory Highlights" section of this MD&A. A discussion of the financial results of the Corporation's reporting segments is as follows.
REGULATED GAS UTILITIES - CANADIAN
FORTISBC ENERGY COMPANIES (1)
----------------------------------------------------------------------------Financial Highlights (Unaudited) Quarter Ended March 31 2013 2012 Variance--------------------------------------------------------------------------------------------------------------------------------------------------------Gas Volumes (petajoules ("PJ")) 71 72 (1)Revenue ($ millions) 492 548 (56)Earnings ($ millions) 85 82 3--------------------------------------------------------------------------------------------------------------------------------------------------------(1) Includes FortisBC Energy Inc. ("FEI"), FortisBC Energy (Vancouver Island) Inc. ("FEVI") and FortisBC Energy (Whistler) Inc. ("FEWI")Factors Contributing to Gas Volumes Variance
Unfavourable
-- Lower average gas consumption by residential and commercial customers, due to warmer temperatures
Favourable
-- Higher average gas transportation volumes to industrial customers
As at March 31, 2013, the total number of customers served by the FortisBC Energy companies was approximately 948,000. Net customer additions were 3,000 during the first quarter of 2013 compared to 1,000 during the first quarter of 2012.
The FortisBC Energy companies earn approximately the same margin regardless of whether a customer contracts for the purchase and delivery of natural gas or only for the delivery of natural gas. As a result of the operation of regulator-approved deferral mechanisms, changes in consumption levels and the commodity cost of natural gas from those forecasted to set residential and commercial customer gas rates do not materially affect earnings.
Seasonality has a material impact on the earnings of the FortisBC Energy companies as a major portion of the gas distributed is used for space heating. Most of the annual earnings of the FortisBC Energy companies are realized in the first and fourth quarters.
Factors Contributing to Revenue Variance
Unfavourable
-- Lower commodity cost of natural gas charged to customers-- Lower average gas consumption by residential and commercial customers-- Lower-than-expected customer additions
Favourable
-- An increase in the delivery component of customer rates, effective January 1, 2013, mainly due to ongoing investment in energy infrastructure and forecasted higher expenses recoverable from customers as reflected in the 2012/2013 revenue requirements decision received in April 2012-- Higher average gas transportation volumes to industrial customers
Factors Contributing to Earnings Variance
Favourable
-- Rate base growth, due to continued investment in energy infrastructure-- Higher average gas transportation volumes to industrial customers
Unfavourable
-- Lower-than-expected customer additions-- Higher effective income taxes, due to differences in the deductions for income tax purposes compared to accounting purposes quarter over quarter
