ComEd 2013 Annual Report Download - page 150

Debt costs. Consistent withrate recoveryfor ratemakingpurposes, ComEd’s, PECO’s and BGE’s recoverable losseson reacquired
long-termdebt relatedto regulatedoperationsare deferredandamortizedto interestexpenseover thelifeofthenewdebtissuedto
financethedebtredemption or over thelifeoftheoriginal debtissuanceif thedebtis not refinanced. Interest-rate swap settlements
are deferredandamortizedover the periodthat the relateddebtis outstandingor thelifeoftheoriginal issuance retired. Thesedebt
costsare usedinthedetermination oftheweightedcostofcapital appliedto rate baseinthe rate-makingprocess. ComEd and BGE
are not earninga return on therecoveryofthesecosts, while PECO is earninga return on the premiumofthecostofthe reacquired
debtthrough base rates.
Fair value of BGE long-term debt. Theseamountsrepresent theregulatoryasset recordedat Exelon for thedifferenceinthefair
value ofthe long-termdebtof BGE asofthemerger date basedon theMDPSC practice to allow BGE to recover itsdebtcosts
through rates. Exelon is amortizingtheregulatoryasset andtheassociatedfairvalue over thelifeoftheunderlyingdebt.
Fair value of BGE supply contract. Theseamountsrepresent theregulatoryasset recordedat Exelon representingthefairvalue of
BGE’s supplycontractsasofthecloseofthemerger date basedon theMDPSC practice to allow BGE to recover itssupply
contractsthrough rates. Exelon is amortizingtheregulatoryasset andtheassociatedfairvalue over a periodofapproximatelythree
years.
Severance. For ComEd, thesecostsrepresent previouslyincurredseverancecoststhat ComEd wasgrantedrecoveryofinthe
December 20,2006, ICC rehearingrate order andtheMay24, 2011, ICC order inComEd’s 2010 rate case.Therecoveryperiods
are through June 30,2014, andMay31,2014, respectively. ComEd is not earninga return on thesecosts. For BGE, thesecosts
represent deferredseverancecoststhat BGE haspreviouslybeen grantedrecoveryofin rates. Costsincludethe portion ofcosts
associatedwitha 2008workforcereduction that relate to BGE’s gasbusiness which were deferredin 2009asaregulatoryasset in
accordancewiththeMDPSC’s ordersinprior rate casesandare beingamortizedover a 5-year periodthat began inJanuary2009.
Alsoincludedare costsassociatedwitha 2010 workforcereduction that were deferredasaregulatoryasset andare being
amortizedover a 5-year periodthat began inMarch 2011 inaccordancewiththeMDPSC’s March 2011 rate order.Finally, costs
associatedwiththe 2012 BGE voluntaryworkforcereduction were deferredin 2012 asaregulatoryasset inaccordancewiththe
MDPSC’s ordersinprior rate casesandare beingamortizedover a 5-year periodthat began inJuly2012. BGE is earninga
regulatedreturn on theregulatoryasset includedinbase rates.
Asset retirement obligations. Thesecostsrepresent future legallyrequiredremoval costsassociatedwithexistingasset retirement
obligations. PECO will begin to earn a return on,andarecoveryof, thesecostsoncetheremoval activitieshavebeen performed.
ComEd and BGE will recover thesecoststhrough future depreciation ratesandwill earn a return on thesecostsoncetheremoval
activitieshavebeen performed. See Note 15—Asset Retirement Obligationsfor additional information.
MGP remediation costs.Recoveryoftheseitems wasgrantedto ComEd intheJuly26, 2006, ICC rate order.For PECO, these
costsare recoverable through ratesasaffirmedinthe 2010 approvednatural gas distribution rate casesettlement. While BGE does
not havearider for MGP clean-up costs, BGE has historicallyreceivedrecoveryofactual clean-up costson a site-specific basis in
distribution rates. The periodofrecoveryfor bothComEd and PECO will dependon thetimingoftheactual expenditures. ComEd
and PECO are not earninga return on therecoveryofthesecosts. For BGE, $5 million ofclean-up costsincurredduringthe period
fromJuly2000 through November 2005andan additional $1million fromDecember 2005through November 2010 are recoverable
through ratesinaccordancewith MDPSC orders. Thesecostsare beingamortizedover 10-year periods that began inJanuary2006
andDecember 2010,respectively. BGE is earninga return on this regulatoryasset.See Note 22—CommitmentsandContingencies
for additional information.
RTO start-up costs. RecoveryoftheseRTO start-up costswasapprovedbyFERC. Therecoveryperiodisthrough March 31,
2015. ComEd is earninga return on thesecosts.
Under (Over)-recovered universal service fund costs. Theuniversal servicefundcostis arecoverymechanism that allows
PECO to recover discounts issuedto electric andgascustomersenrolledinassistance programs. AsofDecember 31,2013, PECO
wasover-recoveredfor bothitselectric andgasprograms. PECO earnsinterestonunder-recoveredcostsandpays interestonover-
recoveredcoststo customers.
Financial swap with Generation. Tofulfill a requirement oftheIllinois Settlement Legislation,ComEd enteredinto a five-year
financial swap contractwithGeneration that expiredon May31,2013.Sincetheswap contractwasdeemedprudent by theIllinois
Settlement Legislation,ensuringComEd offull recoveryin rates, thechangesinfairvalue each periodwere recordedbyComEd as
well asan offsettingregulatoryasset or liability. ComEd did not earn (pay) a return on theregulatoryasset (liability). Thebasis for
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