Executive Vice President, Chief Financial Officer at Evergy
Thanks, David, and good morning, everyone. I'll start with results for the quarter on Slide 10. For the third quarter of 2021, Evergy delivered adjusted earnings of $455 million or $1.98 per share compared to $393 million or $1.73 per share in the third quarter of 2020. The 14% increase in third quarter adjusted EPS was driven by the following items as shown on the chart from left to right.
First, there were significantly more cooling degree days this past quarter as compared to the third quarter of 2020, resulting in $0.20 of favorable contribution from weather. Adjusting for milder than normal weather experienced in the third quarter of 2020, the third quarter of this year saw $0.13 of EPS versus normal weather assumed in our original plan. The strong favorable weather impact this quarter was partially offset by a 1.2% decline in weather-normalized demand or approximately $0.06 per share. Higher transmission revenue resulting from our ongoing investments to enhance our transmission infrastructure drove about $0.06 per share.
Other income increased $0.04 per share, driven by higher investment earnings from some of our investments in early-stage energy solution companies. Income tax-related items, which include the impact of Kansas income tax rate exemption effective this year and higher amortization of excess deferred income taxes, partially offset by the timing of tax credit recognition to maintain our effective income tax rate for the year drove a net increase of $0.04 per share. And finally, other items, which consist primarily of higher depreciation and amortization and property tax expense as well as the impact of shares issued to BlueScape in April were partially offset by lower O&M, which, when combined, represent a net $0.03 decrease.
I'll turn next to year-to-date results, which you'll find on Slide 11. For the nine months ended September 30, 2021, adjusted earnings were $775 million or $3.38 per share compared to $642 million or $2.82 per share for the same period last year. Again, moving from left to right on the slide, our year-to-date adjusted EPS drivers versus 2020 include the following: favorable weather from the first half of the year when combined with the warm weather in the third quarter contributed $0.25 year-to-date. When compared to normal weather assumed in our original 2021 plan, weather was $0.18 favorable. And although weather-normalized demand increased about 1% year-to-date, the margin impact of higher commercial and industrial sales was more than offset by an estimated 2% decline in residential sales, resulting in about $0.01 of lower margin versus the first nine months of 2020.
As expected, higher transmission revenues driven by our FERC transmission investments resulted in a $0.12 increase. Other income was also $0.12 higher, driven primarily by an increase in investment earnings due to a realized gain from the monetization of an investment in the first half of the year combined with investment gains in the third quarter as well as higher AFUDC. The impact from the Kansas income tax exemption and higher amortization of excess deferred income taxes contributed $0.11 of favorability year-to-date. And finally, higher depreciation and amortization, property taxes and a slight increase in share count were partially offset by lower O&M and interest expense, leading to a net decrease of $0.03 per share.
Turning next to Slide 12. I'll provide a brief update on recent sales and customer trends. Weather-normalized retail sales decreased 1.2% during the third quarter compared to last year. This was primarily driven by lower residential sales, down 3% compared to last year, with fewer customers working from home compared to 2020. Weather normalized commercial sales were up slightly, reflecting the slow, steady return to normal. Industrial sales were flat with some puts and takes from multiple sectors. The Ford plant in our jurisdiction is still experiencing headwinds from chip shortages, which have slowed down production, and in turn electricity usage.
On the positive side, extensive oil refineries and pipelines in our jurisdictions are seeing a surge in usage as the commodity market was driven higher in demand for their product. The pandemic recovery continues to be slower than we originally planned and year-to-date weather-normalized demand has only increased about 1% compared to our original full year expectations of around 2%. And as I mentioned during our Investor Day in September, we adjusted our demand expectations for the balance of 2021, as likely due to the impact of the resurgence of COVID-19 over the summer, we now expect some of the recovery to more normal demand and mix to take place in 2022.
Turning next to Slide 13. I'll provide greater details on the drivers of our increased and narrowed guidance range for 2021. Starting with our previous guidance range, the left of the slide and moving again from left to right. Due to the shift in expected demand recovery from 2021 to 2022, the earnings contribution of weather-normalized sales is about $0.14 per share lower versus our original expectations. However, favorable weather through the first three quarters, which as I mentioned earlier, we estimate contributed $0.18, has more than offset the delay in normalized demand recovery.
The net of these two items is a positive $0.04 in total sales compared to our original plan. Continuing across the chart, the remaining positive drivers of our revised guidance include: $0.09 from income tax benefits driven by higher excess deferred income tax amortization, $0.07 from higher AFUDC and lower interest expense. And finally, our revised guidance includes the impact of the amount by which we expect our nonregulated businesses to exceed our original 2021 plan.
Specifically, Evergy Ventures, the entity through which we make investments in early-stage energy solution companies as well as our power marketing business are on track to contribute greater than normal earnings in 2021, partially offset by the timing and phasing of certain costs, resulting in a net increase of $0.05 versus our prior guidance. Together, these items lead to our revised 2021 adjusted EPS guidance of $3.50 to $3.60 per share. Of note, although as I mentioned, our Evergy Ventures business outperformance is one of our contributing factors to our revised guidance. This outperformance is primarily based on year-to-date results.
In October, an equity investment in which we own a minority state, went public through an acquisition by a special purpose acquisition company, or SPAC, and Evergy received shares in the public company at closing subject to a lockup. As a result, we expect to record an unrealized gain on this investment in the fourth quarter. Although this fourth quarter item is not yet reflected in our revised guidance, we expect this impact to be positive. And depending upon the fair value of accounting for the investment, it could cause our results for the year to even exceed our updated guidance range.
However, we consider any potential gain from this investment, which we expect to monetize in 2022 when the lockup expires, the additional nonrecurring earnings for the year relative to our ongoing expectations for this part of our business. Lastly, we also recognize our updated 2021 guidance implies a lower fourth quarter compared to last year. So on the right-hand side of the slide, we've included the key drivers which will impact the expected year-over-year fourth quarter results. These drivers include the following: first, given our strong year-to-date and expected earnings, we've made a few changes in the timing and phasing of certain cost items, which are expected to drive about $0.06 per share in the quarter.
Second, although we've seen favorable bad debt expense in 2021, largely due to lower write-offs resulting from the extended moratorium on disconnections, which expired in May, we've now begun to see write-offs increase and believe this temporary trend is likely to continue, resulting in the realization of write-offs later in the year than we originally expected. As a result, we expect to make a change in our receivable reserve calculation in the fourth quarter, which will lead to about $0.03 of additional bad debt expense. These two factors combined with other items, including the expiry of certain tax credits in 2021, lead to the implied difference in expected fourth quarter earnings versus 2020.
And finally, turning to our affirmed 2022 adjusted EPS guidance on Slide 14. We've updated the bridge from our revised 2021 adjusted EPS guidance range of $3.50 to $3.60 to our 2022 adjusted EPS guidance range of $3.43 to $3.63. Starting on the left-hand side of the slide with our 2021 guidance, we normalized $0.18 of favorable weather and a roughly $0.05 of earnings primarily from power marketing in Evergy Ventures. Although we expect these businesses to continue to contribute earnings going forward, this adjustment is merely associated with the outperformance in 2021, leaving their expected run rate contribution in our 2022 guidance.
After adjusting for these items, the drivers of our 2022 guidance midpoint are largely unchanged from the walk we provided on Investor Day and include $0.12 of increased retail demand, about 2/3 of which reflects the realization of more normal demand in 2022, which we originally expected to occur in this year. And this shift is due to the observed delay in returning to normal demand mix due to lingering COVID effects in 2021. The remaining portion or about 1/3 of this $0.12 demand impact reflects normal year-over-year load growth in '22.
We expect approximately $0.09 of additional earnings from transmission revenue as we continue to make investments to improve transmission infrastructure. Next, additional O&M savings are expected to add around $0.05 as we continue to progress toward Tier one cost efficiency and our more robust long-term O&M savings objective, now representing an over 25% reduction in O&M from 2018 to 2025. The remaining drivers include the impact of expiring merger-related bill credits and a slight increase in interest savings and AFUDC equity, all of which are offset by depreciation expense not yet reflected in rates and $0.01 of other items.
With that, I'll hand the call back to David.