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10-Q
ALABAMA POWER CO filed this Form 10-Q on 11/01/2017
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GULF POWER COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

provisions include fuel expenses, the energy component of purchased power costs, purchased power capacity costs, the difference between projected and actual costs and revenues related to energy conservation and environmental compliance, and a credit for certain wholesale revenues as a result of the 2017 Rate Case Settlement Agreement. See Note 3 to the financial statements of Gulf Power under "Retail Regulatory Matters – Cost Recovery Clauses" in Item 8 of the Form 10-K for additional information regarding cost recovery clauses and Note (B) to the Condensed Financial Statements under "Regulatory MattersGulf PowerRetail Base Rate Cases" herein for additional information regarding the 2017 Rate Case Settlement Agreement.
Wholesale Revenues – Non-Affiliates
Third Quarter 2017 vs. Third Quarter 2016
 
Year-to-Date 2017 vs. Year-to-Date 2016
(change in millions)
 
(% change)
 
(change in millions)
 
(% change)
$(3)
 
(17.6)
 
$(4)
 
(8.3)
Wholesale revenues from sales to non-affiliates consist of long-term sales agreements to other utilities in Florida and Georgia and short-term opportunity sales. Capacity revenues from long-term sales agreements represent the greatest contribution to net income. The energy is generally sold at variable cost. Short-term opportunity sales are made at market-based rates that generally provide a margin above Gulf Power's variable cost of energy. Wholesale energy revenues from sales to non-affiliates will vary depending on fuel prices, the market prices of wholesale energy compared to the cost of Gulf Power's and the Southern Company system's generation, demand for energy within the Southern Company system's electric service territory, and the availability of the Southern Company system's generation.
In the third quarter 2017, wholesale revenues from sales to non-affiliates were $14 million compared to $17 million for the corresponding period in 2016. The decrease was primarily due to a 28.4% decrease in KWH sales attributable to decreased market demand for energy as a result of milder weather.
For year-to-date 2017, wholesale revenues from sales to non-affiliates were $44 million compared to $48 million for the corresponding period in 2016. The decrease was primarily due to a 20.9% decrease in capacity revenues resulting from the expiration of a Plant Scherer Unit 3 long-term sales agreement in 2016.
Wholesale Revenues – Affiliates
Third Quarter 2017 vs. Third Quarter 2016
 
Year-to-Date 2017 vs. Year-to-Date 2016
(change in millions)
 
(% change)
 
(change in millions)
 
(% change)
$5
 
21.7
 
$16
 
27.1
Wholesale revenues from sales to affiliated companies will vary depending on demand and the availability and cost of generating resources at each company. These affiliate sales are made in accordance with the IIC, as approved by the FERC. These transactions do not have a significant impact on earnings since the revenue related to these energy sales generally offsets the cost of energy sold.
In the third quarter 2017, wholesale revenues from sales to affiliates were $28 million compared to $23 million for the corresponding period in 2016. The increase was primarily due to a 24.1% increase in KWH sales resulting from outages of affiliate generation resources.
For year-to-date 2017, wholesale revenues from sales to affiliates were $75 million compared to $59 million for the corresponding period in 2016. The increase was primarily due to a 19.5% increase in KWH sales as a result of the availability of lower-cost Gulf Power generation resources.

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