ComEd 2013 Annual Report Download - page 241

theU.S. EPA’s current,periodic review schedule.InDecember 2012,theU.S. EPAissueditsfinal revisionsto theAgency’s
particulate matter (PM) NAAQS. Initsfinal rule,theU.S. EPAloweredthe annual PM2.5 standard, but declinedto issue a new
secondaryNAAQS to improveurban visibility. TheU.S. EPAindicatedinitsfinal rule that by 2020 itexpectsmost areasofthe
countrywill bein attainment ofthenewPM2.5 NAAQS basedon currentlyexpectedregulations, such astheMATS regulation.Itis
unclear if thevacatur oftheCSAPR,one oftheregulationsthat theU.S. EPAis relyingon to assistwithfuture PM reduction,would
alter theU.S. EPA’s viewsinceeither CAIRorafinalizedCSAPRregulation wouldbeineffect leadingup to 2020.InMarch 2013,a
number ofindustrycoalitionsfiledajoint lawsuitchallengingthenewPM2.5 standard. Alsoduringearly2013,theD.C. Circuit
remandedseveral rulesfor implementation ofearlier PM2.5 NAAQS to theU.S. EPAfor revision ofcertainaspectsofthe rules, with
arequirement that theU.S. EPAre-promulgate regulationsinconformancewiththecorrectsubpartsoftheClean AirAct.
Inaddition to theseNAAQS, theU.S. EPAalsofinalizednonattainment designationsfor certain areasintheUnitedStatesfor the
2010 one-hour SO2standardon August5, 2013,andindicatedthat additional nonattainment areaswill bedesignatedinafuture
rulemaking. U.S. EPAwill require statesto submitstate implementation plans (SIPs) for nonattainment areasbyApril 2015. With
regardto TexasandMaryland, no nonattainment areaswere identifiedinU.S. EPA’s final designation rule.Withregardto Illinois and
Pennsylvania,several counties, or portionsofcounties, ineach state were identifiedasnonattainment.TheU.S. EPAwill followthe
approach outlinedinaFebruary2013 U.S. EPAstrategy document that establishesa process andtimeline for theAgency to
address additional designationsinstates’ countiesunder a future rulemaking. Nonattainment countycompliancewiththe one-hour
SO2standardisrequiredbyOctober 2018. While significant SO2reductionswill occur asaresult ofMATS compliancein 2015,
Exelon is unable to predicttherequirementsofpendingstates’ SIPs to further reduceSO2emissionsinsupport ofattainment ofthe
one hour SO2standard.
Notices and Finding of Violations and Midwest Generation Bankruptcy. InDecember 1999, ComEd soldseveral generating
stationsto MidwestGeneration, LLC (MidwestGeneration), asubsidiaryof Edison Mission Energy (EME). Under the terms ofthe
sale agreement, MidwestGeneration and EME assumedresponsibilityfor environmental liabilitiesassociatedwiththeownership,
occupancy, useandoperation ofthestations, includingresponsibilityfor complianceby thestationswithenvironmental laws before
their purchaseby MidwestGeneration. MidwestGeneration and EME additionallyagreedto indemnify andholdComEd andits
affiliatesharmless fromclaims, fines, penalties, liabilitiesandexpensesarisingfromthird-partyclaims againstComEd resultingfrom
or arisingout oftheenvironmental liabilitiesassumed by MidwestGeneration and EME under the terms oftheagreement governing
thesale.Inconnection withExelon’s 2001 corporate restructuring, Generation assumedComEd’s rightsandobligationswithrespect
to itsformer generation business, includingitsrightsandobligationsunder thesale agreement with MidwestGeneration and EME.
OnDecember 17, 2012 (Petition Date), EME andcertainofitssubsidiaries, including MidwestGeneration,filedfor protection under
Chapter 11 oftheU.S. Bankruptcy Code.
In 2012,theBankruptcy Court approvedtherejection ofacoal railcar leaseunder which MidwestGeneration hadagreedto
reimburseComEd for all obligations. Therejection leftGeneration asthe partyresponsible to makeremainingpaymentsunder the
lease.InJanuary2013,Generation madethefinal $10 million payment due under the leaseagreement which hadbeen accruedat
December 31,2012.
Duringthesecondquarter of2013,Exelon filedproofs ofclaim of$21 million withtheBankruptcy Court for amountsowed by EME
and MidwestGeneration for thecoal railcar lease,ComEd utilitypaymentsandcertainlegal costs. Further,Exelon filedan
environmental claim withan unspecifiedamount that listedtheindemnificationsthat were in place pre-Petition Date andother factors
associatedwiththeremediation.AsofDecember 31,2013,Exelon hasnot recordedareceivable for thefiledproofs ofclaim
becauserecoveryofanyamount cannot beassuredat this point inthebankruptcy. Exelon will not recordclaim recoveriesunless
anduntiltheyare realized.
Certainenvironmental laws andregulationssubjectcurrent andprior ownersofpropertiesor generatorsofhazardoussubstancesat
such propertiesto liabilityfor remediation costsofenvironmental contamination.Asaprior owner ofthegeneratingstations, ComEd
(andGeneration,through itsagreement inExelon’s 2001 corporate restructuringto assumeComEd’s rightsandobligations
associatedwithitsformer generation business) couldfaceliability(alongwithanyother potentiallyresponsible parties) for
environmental conditionsat thestationsrequiringremediation,withthedetermination ofthe allocation amongthe partiessubjectto
manyuncertainfactors, includingtheimpactof MidwestGeneration’s bankruptcy. OnJanuary17, 2014, MidwestGeneration fileda
plan supplement to itsbankruptcy filingthat includedarequesttorejectthesale agreement,includingtheenvironmental indemnity.
ComEd andGeneration havereviewedavailable public information asto potential environmental exposuresregardingtheMidwest
Generation station sites. MidwestGeneration publicly disclosedinitsquarter endingSeptember 30,2013 Form10-Q that (i) ithas
accrueda probable amount ofapproximately$8million for estimatedenvironmental investigation andremediation costsunder
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