Investor Owned Utility Revenues and Expenses 1998-2009
January 24, 2011
Major investor-owned utilities in the U.S. experienced significant changes in the revenues and expenses between 1998 and 2009, but rising revenues had little impact on the net operating income according to the data from the Energy Information Administration. When placed on a common size basis, net operating income declined from 14.4% of total revenues in 1998 to 11.5% in 2009 for major investor-owned utilities. The first chart shows revenues, expenses, and operating income in nominal dollars. Both revenues and expenses are rising, but the constant gap between revenues and expenses indicates profits (operating income) remain level. Income is represented by the flat green line at the bottom of the chart.
Chart 2 provides a breakdown of total utility revenues between revenues from electric utility operations and other revenue sources. Chart 3 portrays operating income since 1998. Except for the decline in 2000, operating income has been relatively stable, despite rising total revenues. Chart 4 breaks down the production components of operating expenses. Nearly all expense components are trending upward.
Perhaps the most interesting chart concerns transmission and distribution expenses. Transmission expenses are rising faster than distribution costs. Exactly what is contributing to the increase needs further exploration. After bottoming in 2002, most administrative, general and customer service expenses are on the rise as shown in Chart 6. Other expenses and taxes account for the largest increases.
The remainder of the chart series are in common-size format which allows for comparison of all yearly data as a percentage of total revenue. Chart 7 shows net utility operating income declining throughout the timeframe when measured as a percent of revenue. In other words, major investor-owned utilities in the U.S. are working harder just to keep profits constant. However, when compared as a percentage of total revenue, operating income is declining. Chart 8 compares various expenses, while Charts 9 and 10 examine distribution, maintenance, and administrative expenses as a percent of total revenue.
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Data Source: U.S. Energy Information Administration, January 2011