ComEd 2013 Annual Report Download - page 55

accountingguidancerequiredGeneration to establish an AROat fairvalue at thetimeoftheinitial adoption ofthecurrent accounting
standard. Subsequent to theinitial adoption,theAROisadjustedfor changesto estimatedcosts, timingoffuture cash flows and
modificationsto decommissioningassumptions, asdescribedabove.
Under thecurrent accountingframework, theAROisnot requiredor permittedto bere-measuredfor changesintheCARFRthat
occur inisolation. This differsfromtheaccountingrequirementsfor other long-datedobligations, such aspension andother post-
employment benefitsthat are requiredto bere-measuredasandwhen corresponding discount rateschange.IfGeneration’s future
nominal cash flows associatedwiththeAROwere to bediscountedat current prevailingCARFRs, theobligation wouldincrease
fromapproximately $4.9 billion to approximately $5.5 billion.The ultimate decommissioningobligation will befundedbytheNDTs.
TheNDTs are recordedon Exelon’s andGeneration’s ConsolidatedBalanceSheetsat December 31,2013 at fairvalue of
approximately $8.1billion andhaveanestimatedtargetedannual pre-taxreturn of 5.9 % to 6.7 %.
Toillustrate thesignificant impactthat changesintheCARFR,when combinedwithchangesin projectedamountsandexpected
timingofcash flows, can haveonthevaluation oftheARO: i) hadGeneration usedthe 2012 CARFRsrather than the 2013 CARFRs
in performingitsthirdquarter 2013 AROupdate,Generation wouldhavereducedtheARObyapproximately$10 million as
comparedto theactual decreasetotheAROof$140million;and ii) if theCARFRusedin performingthethirdquarter 2013 ARO
update (which alsoreflectedincreasesintheamountsandchangesto thetimingofprojectedcash flows) wasincreasedor
decreasedby100 basis points, theAROwouldhavedecreasedby$300 million andincreased$40million,respectively, as
comparedto theactual decreaseof$140million.
ARO Sensitivities. Changesintheassumptionsunderlyingtheforegoingitems couldmateriallyaffectthedecommissioning
obligation.TheimpacttotheAROofachangeinanyone oftheseassumptions is highlydependent on howtheother assumptions
will changeaswell.Asan example,Exelon hadahistorical increaseofapproximately $670million inthevalue oftheARO which
wasdriven by Generation modifyingtheassumedtimingoftheDOE acceptanceof SNF for disposal from2020 to 2025. The
modification oftheassumed DOE acceptancedate affectedthecalculation oftheAROinisolation asfollows; i) thechangeinthe
timingof DOE acceptanceof SNF increasedthe total number ofyearsinwhich decommissioningactivitiesare estimatedto occur,
by fiveyearson average,thereby increasingthe total expectednominal cash flows requiredto decommission theunits; ii) the
nominal cash flows were subjectedto additional escalation asaresult oftheextension ofthedecommissioningperiodincreasingthe
total estimatedcostsrequiredto decommission theunits; and iii) theescalatedcash flows were discountedat thethen current
CARFRs which haddramaticallydecreasedduringthat time period.
Thefollowingtable illustratestheeffectsofchangingcertainAROassumptions, discussedabove, while holdingall other
assumptionsconstant (dollarsinmillions):
Change in ARO Assumption
Increase (Decrease) to
ARO at
December 31, 2013
Cost escalation studies
Uniformincreaseinescalation ratesof25basis points ............................................. $560
Probabilistic cash flow models
Increasethelikelihoodofthehigh-costscenarioby 10 percentagepointsanddecreasethelikelihoodofthe
low-costscenarioby 10 percentagepoints ..................................................... $190
IncreasethelikelihoodoftheDECON scenarioby 10 percentagepointsanddecreasethelikelihoodofthe
SAFSTORscenarioby 10 percentagepoints ................................................... $290
Increasethelikelihoodofoperatingthrough current licensel
ivesby10 percentagepointsanddecreasethe
likelihoodofoperatingthrough anticipatedlicense renewalsby10 percentagepoints .................. $430
Extendtheestimateddate for DOE acceptanceof SNF to 2030 ...................................... $ 50
Extendtheestimateddate for DOE acceptanceo
f SNF to 2030 coupledwithan increaseindiscount ratesof
100 basis points ........................................................................... $(230)
Extendtheestimateddate for DOE acceptanceof SNF to 2030 coupledwithadecreaseindiscount ratesof
100 basis points ........................................................................... $600
For more information regardingaccountingfor nuclear decommissioningobligations, see Notes1and15oftheCombinedNotesto
ConsolidatedFinancial Statements.
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