ComEd 2013 Annual Report Download - page 53

FERC Order No. 1000 Compliance (ComEd, PECO and BGE). InFERCOrder No.1000,theFERCrequiredpublic utility
transmission providersto enhancetheir transmission planningproceduresandtheircost allocation methods applicable to certain
newregional andinterregional transmission projects. Aspart ofthechangesto the transmission planningprocedures, theFERC
requiredremoval fromall FERC-approvedtariffs andagreementsarightoffirstrefusal to buildcertainnewtransmission facilities. In
compliancewiththeregional transmission planningrequirementsofOrder No.1000, PJM asthe transmission provider submitteda
compliancefilingto FERCon October 25, 2012.Onthesameday, certainofthePJM transmission ownersincludingComEd, PECO
and BGE (collectively, thePJM Transmission Owners) submittedafilingassertingthat theircontractual rightsembodiedinthePJM
governingdocumentscontinue to justify theirrightoffirstrefusal to constructnewreliability(andrelated) transmission projectsand
that theFERCshouldnot be allowedto overridesuch rightsabsent a showingthat itis inthepublic interesttodosounder the
FERC’s “Mobile-Sierra”standardofreview. This is aheightenedstandardofreview which thePJM Transmission Ownersargued
couldnot besatisfiedbasedon thefactsapplicable to them. OnMarch 22,2013,FERC issuedan order on thePJM Compliance
FilingandthefilingofthesePJM Transmission Owners(1)rejectingtheargumentsofsuch PJM Transmission Ownersthat thePJM
governingdocumentswere entitledto reviewunder theMobile-Sierra standard, (2)acceptingmostofthePJM filing, removingthe
right-of-firstrefusal fromthePJM tariffs; and(3)directing PJM to removecertainexceptionsthat itincludedinitscompliancefiling
that FERCfound did not complywithOrder No.1000.FERC’s order couldenable thirdpartiesto seekto buildcertainregional
transmission projectsthat hadpreviouslybeen reservedfor thePJM Transmission Owners, potentiallyreducingComEd’s, PECO’s
and BGE’s financial return on newinvestmentsin energy transmission facilities. NumerouspartiessoughtrehearingoftheFERC’s
March 22,2013 order,includingthePJM Transmission OwnerswhosoughtrehearingoftheFERC’s rejection oftheirMobile-Sierra
andrelatedarguments. ThecompliancefilingwasmadeonJuly22,2013.OnJanuary16, 2014, FERC issuedan order statingthat
PJM’s filing while subjecttofurther orders, is effectiveasofJanuary1,2014.
FERC Transmission Complaint. OnFebruary27, 2013,consumer advocatesandregulatorsfromtheDistrictofColumbia,New
Jersey, Delaware andMaryland, andtheDelaware Electric Municipal Cooperatives(the parties), filedacomplaint at FERCagainst
BGE andthePepcoHoldings, Inc. companiesrelatingto theirrespective transmission formula rates. AsofDecember 31,2013, BGE
cannot predictthelikelihoodor a reasonable estimate oftheamount ofachange,ifany, inthe allowedbase return on equity, or a
reasonable estimate oftherefundperiodstart date. While BGE cannot predictthe outcomeofthis matter,ifFERCordersareduction
of BGE’s base return on equityto 8.7%, the annual impactwouldbeareduction inrevenuesofapproximately$10 million.
See Note 3—RegulatoryMattersoftheCombinedNotesto ConsolidatedFinancial Statementsfor additional information.
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. Under thenewlaw, followinga proceedingbefore theMDPSC andwiththeMDPSC’s approval oftheeligible
infrastructure replacement projectsalongwithacorrespondingsurcharge, BGE couldbegincharginggascustomersamonthly
surchargefor infrastructure costsincurredafter June 1,2013.OnAugust2,2013, BGE fileditsinfrastructure replacement plan and
associatedsurcharge.Thenewsurcharge ratesare expectedto takeeffectinthefirstquarter of2014. BGE cannot predictthe
outcomeofthis proceedingor howmuch oftherequestedplan andrelatedsurchargetheMDPSC will approve.TheMDPSC held
evidentiaryhearings on BGE’s proposedplan andsurchargeonNovember 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
takeeffectinthesecondquarter of2014. Inaddition, BGE will besubject to an annual independent audittoreviewplan performance
andprogress. See Note 3—RegulatoryMattersoftheCombinedNotesto ConsolidatedFinancial Statementsfor additional
information.
Critical Accounting Policies and Estimates
The preparation offinancial statementsinconformitywithGAAPrequiresthat management applyaccountingpoliciesandmake
estimatesandassumptionsthat affectresultsofoperationsandtheamountsofassetsandliabilitiesreportedinthefinancial
statements. Management discussesthese policies, estimatesandassumptionswithitsaccountingand disclosure governance
committee on a regular basis andprovidesperiodic updateson management decisionsto theauditcommittee oftheExelon boardof
directors. Management believesthat theaccountingpoliciesdescribedbelowrequire significant judgment intheir application,or
estimatesandassumptionsthat are inherentlyuncertainandthat maychangeinsubsequent periods. Additional discussion ofthe
application oftheseaccountingpoliciescan befoundintheCombinedNotesto ConsolidatedFinancial Statements.
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