ComEd 2013 Annual Report Download - page 143

OnMay4,2012, BGE fileda petition intheCircuitCourt for Anne Arundel County, Maryland, seekingjudicial reviewoftheMDPSC
order under state law. That petition wassubsequentlytransferredto theCircuitCourt for Baltimore Cityandconsolidatedwith similar
appealsthat havebeen filedbyother interestedparties. OnOctober 1,2013,theCircuitCourt JudgeissuedaMemorandumOpinion
andOrder findingthedecisionsoftheMDPSC were withinitsstatutoryauthorityunder Marylandlaw. This decision is separate from
thejudgment inthefederal litigation that theMDPSC Order is unconstitutional andtheCfD is unenforceable under federal law. The
federal judgment,ifupheld, wouldprevent enforcement oftheCfD even if theCircuitCourt decision stands. OnOctober 29, 2013,
BGE andthetwoother MarylandutilitiesappealedtheCircuitCourt’s rulingto theMarylandCourt ofSpecial Appeals.
Dependingon the ultimate outcomeofthe pendingstate andfederal litigation,on theeventual market conditions, andon themanner
ofcostrecoveryasoftheeffectivedate oftheagreement,theCfD couldhaveamaterial impactonExelon and BGE’s resultsof
operations, cash flows andfinancial positions.
Exelon believesthat this andother states’ projectsmayhave artificiallysuppressedcapacitypricesinPJM andmaycontinue to do
soinfuture auctionsto thedetriment ofExelon’s market driven position.Inaddition to this litigation,Exelon is workingwithother
market participantsto implement market rulesthat will appropriatelylimitthemarket suppressingeffectofsuch state activities.
MDPSC Derecho Storm Order FollowingtheJune 2012 Derechostorm which hitthemid-Atlantic region interruptingelectrical
servicetoasignificant portion oftheState ofMaryland, theMDPSC issuedan order on February27, 2013 requiring BGE andother
Marylandutilitiesto file several comprehensive reportswithshort-termandlong-termplansto improve reliabilityandgrid resiliency
that were due at varioustimesbefore August30,2013.
OnSeptember 3,2013, BGE filedacomprehensive longtermassessment examiningpotential alternativesfor improvingthe
resiliency ofthe electric grid andastaffinganalysis reviewing historical staffinglevelsaswell asforecastingstaffinglevelsnecessary
under variousstormscenarios. BGE currentlycannot predictthe outcomeofthese proceedings, which mayresult inincreased
capital expendituresandoperatingcosts.
The Maryland Strategic Infrastructure Development and Enhancement Program InFebruary2013,theMarylandGeneral
Assemblypassedlegislation intendedto accelerate gasinfrastructure replacementsinMarylandbyestablishingamechanism for
gascompaniesto promptlyrecover reasonable andprudent costsofeligible infrastructure replacement projectsseparate frombase
rate proceedings. OnMay2,2013,theGovernor ofMaryland signedthelegislation into law; which tookeffectJune 1,2013.Under
thenewlaw, followinga proceedingbefore theMDPSC andwiththeMDPSC’s approval oftheeligible infrastructure replacement
projectsalongwithacorrespondingsurcharge, BGE couldbegincharginggascustomersamonthlysurchargefor infrastructure
costsincurredafter June 1,2013.Thelegislation includescapson themonthlysurchargesto residential andnon-residential
customers, andwouldrequire an annual true-up ofthesurchargerevenuesagainstactual expenditures. Investment levelsinexcess
ofthecap wouldberecoverable inasubsequent gasbase rate proceedingat which time all costsfor theinfrastructure replacement
projectswouldbe rolledinto gas distribution rates. Irrespectiveofthecap, BGE is requiredto file a gasrate caseevery fiveyears
under this legislation.OnAugust2,2013, BGE fileditsinfrastructure replacement plan andassociatedsurcharge.TheMDPSC held
evidentiaryhearings on BGE’s proposedplan andsurchargefromNovember 12,2013 through November 14, 2013.OnJanuary29,
2014, theMDPSC issuedadecision conditionallyapprovingthefirstfiveyearsof BGE’s plan andsurcharge. BGE mustsubmitalist
detailingspecific projectsplannedfor 2014to theMDPSC for approval within30days ofthedecision.Upon approval ofthe project
listby theMDPSC, BGE will beable to implement thesurcharge rateson gascustomers’ bills. Thenewsurchargesare expectedto
takeeffectinsecondquarter of2014. Inaddition, BGE will besubject to an annual independent audittoreviewplan performance
andprogress.
Federal Regulatory Matters
Transmission Formula Rate ComEd’s and BGE’s transmission ratesare each establishedbasedon a FERC-approvedformula.
ComEd’s mostrecent annual formula rate update filedin April 2013 reflects2012 actual costsplusforecasted2013 capital additions.
Theupdate resultedinarevenue requirement of $488 million plusa$25million adjustment relatedto thereconciliation of2012
actual costsfor a net revenue requirement of$513 million. This comparesto theMay2012 updatedrevenue requirement of $450
million offset by a$5 million reduction relatedto thereconciliation of2011 actual costsfor a net revenue requirement of $445 million.
Theincreaseintherevenue requirement wasprimarilydriven by increasedcapital investment, higher pension andpost-retirement
healthcare costs, and higher operatingandmaintenancecosts. The 2013 net revenue requirement becameeffectiveJune 1,2013,
andisbeingrecoveredover the periodextendingthrough May31,2014. Theregulatoryasset associatedwiththe true-up is being
amortizedastheassociatedamountsare recoveredthrough rates.
137