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Decreased gas revenues also reflect the reduced requirement for the company to buy gas for resale because of an increase in the purchase of gas by customers from other suppliers. 

Gas operating income increased by $1 million in 2002 com- pared with 2001, due primarily to higher net revenues and lower operations and maintenance expenses, offset in part by lower late payment charge revenues and higher depreciation. 

## Other Operations and Maintenance 

Other operations and maintenance expense increased $2 mil- lion in 2002 compared with 2001. The increase was attributa- ble primarily to higher electric transmission and distribution expenditures, partially offset by lower customer bad debt and collections expense. 

## Taxes Other Than Income Taxes 

Taxes other than income taxes decreased by $2 million in 2002 compared with 2001. The decrease was primarily the result of lower New York State revenue taxes of $3 million, which resulted from reduced tax rates and lower energy costs billed to customers. Partially offsetting this decrease were higher property taxes of $1 million. 

The principal components of, and variations in, taxes, other than income taxes were: 

<img src='content_image/85609.jpg'>

(a) Including sales tax on customers’ bills, total taxes other than income taxes, billed to 

(a) customers in 2002 and 2001 were $71 and $66 million, respectively. 

## Net Interest Charges 

Interest charges increased by $4 million in 2002 compared with 2001, primarily as a result of a change by the NJBPU in the carrying charges allowed on O&R’s deferred purchased power balance in New Jersey ($5 million) and lower allowance for borrowed funds used during construction ($1 million). These expenses were offset in part by lower net financing costs of $1 million that resulted from lower average debt balances and interest rates in 2002. 

## Income Taxes 

Income taxes decreased by $1 million in 2002 compared with 2001, reflecting primarily lower state income taxes. State income taxes decreased primarily as a result of a 0.5 percent reduction in the New York State tax rate. Excluding certain 

taxes in New York that are reconciled to amounts included in rates, income taxes increased by $2 million due primarily to higher operating income in 2002. 

## Unregulated Subsidiaries and Other 

Earnings for the unregulated subsidiaries decreased $14 million in 2002 compared with 2001, reflecting a non-cash, after-tax charge in 2002 of $22 million for changes in accounting princi- ples (see Notes L, P and T to the financial statements) and continued start-up losses in the company’s wholesale telecom- munications business, including a non-cash, after-tax charge in 2002 of $5 million for a write-down of an investment in Neon Communications, Inc. (NEON). The decrease in earnings was offset, in part, by higher electric retail sales volumes and gross margins, the capitalization of previously expensed project development costs on generation assets ($4 million after tax) and unrealized mark-to-market gains on derivative instruments ($7 million after tax). 

