Gas segment gross margin (gas revenues less cost of gas sold and transported) decreased in 2012 by approximately $2.4 million compared to 2011. Revenues declined approximately $6.6 million in the 2012 period due primarily to the effect on sales of milder weather when compared to 2011.
Electric operating expense increased approximately $8.8 million in 2012 compared to 2011. Pension and healthcare costs were approximately $3.8 million higher in 2012. Power operating expense increased $2.0 million in 2012, driven by a full year’s recognition of expense at our Iatan 2 and Plum Point generating stations. Electric transmission and distribution system operating expenses increased approximately $1.7 million, due primarily to increased transmission expense incurred to deliver power to our system. An increase in professional service expenses totaling approximately $2.1 million was offset by decreases in customer account expenses, injuries and damages reserve, and line of credit fees. Overall maintenance expenses related to our generating fleet and transmission and distribution system decreased slightly during the 2012 period. Gas segment operating expense increased slightly year over year.
Depreciation expense declined $3.1 million during 2012 compared to 2011. Increased depreciation due to higher levels of electric plant in service was more than offset by a reduction of approximately $6.6 million in regulatory amortization which ended June 15, 2011 with the implementation of new electric customer rates from our most recent Missouri electric rate case. Taxes decreased approximately $0.6 million during the 2012 period.
Interest and other expenses decreased approximately $1.4 million in 2012 compared to the 2011 period, primarily due to an increase in the Allowance for Funds Used During Construction (“AFUDC”). Reduced interest expense from debt refinancing activity during the first half of 2012 and a reduction in deferred carrying charges related to our Iatan 2 and Plum Point generating stations were largely offsetting.Consolidated net income improved approximately $0.8 million during the 2012 period.
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