ComEd 2013 Annual Report Download - page 58

See Note 8oftheCombinedNotesto ConsolidatedFinancial Statementsfor a discussion ofasset impairment evaluationsmadeby
Exelon.
Depreciable Lives of Property, Plant and Equipment
TheRegistrantshavesignificant investmentsin electric generation assetsandelectric andnatural gastransmission and distribution
assets. Depreciation oftheseassetsisgenerallyprovidedover theirestimatedserviceliveson a straight-line basis usingthe
composite method. Theestimation ofservicelivesrequiresmanagement judgment regardingthe periodoftimethat theassetswill
beinuse.Ascircumstanceswarrant,theestimatedservicelivesare reviewedto determine if anychangesare needed. Depreciation
ratesincorporate assumptionson interim retirementsbasedon actual historical retirement experience.Totheextent interim
retirement patternschange,this couldhaveasignificant impactontheamount ofdepreciation expenserecordedintheincome
statement.Changesto depreciation estimatesresultingfromachangeintheestimatedendofservicelivescouldhaveasignificant
impactontheamount ofdepreciation expenserecordedintheincomestatement.See Note 1 oftheCombinedNotesto
ConsolidatedFinancial Statementsfor information regardingdepreciation andestimatedservicelivesofthe property, plant and
equipment oftheRegistrants.
Theestimatedservicelivesofthenuclear generatingfacilitiesare basedon theestimateduseful livesofthestations, which assume
a20-year license renewal extension ofthe operatinglicensesfor all ofGeneration’s operatingnuclear generatingstationsexcept for
Oyster Creek. While Generation hasreceivedlicense renewalsfor certainfacilities, andhasappliedfor or expectsto applyfor and
obtain approval oflicense renewalsfor theremainingfacilities, circumstancesmayarisethat wouldprevent Generation from
obtainingadditional license renewals. Generation alsoevaluatesannuallytheestimatedservicelivesofitsgeneratingfacilitiesbased
on feasibilityassessmentsaswell aseconomic andcapital requirements. Theestimatedservicelivesof hydroelectric facilitiesare
basedon theremaininguseful livesofthestations, which assumealicense renewal extension oftheConowingoandMuddy Run
operatinglicenses. Achangeindepreciation estimatesresultingfromGeneration’s extension or reduction oftheestimatedservice
livescouldhaveasignificant effectonGeneration’s resultsofoperations. Generation completedadepreciation rate study duringthe
firstquarter of2010, which resultedintheimplementation ofnewdepreciation rateseffectiveJanuary1,2010.Constellation
completedadepreciation rate study duringthefourthquarter of2010, which resultedintheimplementation ofnewdepreciation rates
effectiveduringthefourthquarter of2010.
ComEd is requiredto file a depreciation rate study at leastevery fiveyearswiththeICC. ComEd completedadepreciation study in
2014andfiledtheupdateddepreciation rateswithbothFERCandtheICC inJanuary2014. This is expectedto result inthe
implementation ofnewdepreciation rateseffectivefirstquarter 2014.
PECO is requiredto file a depreciation rate study at leastevery fiveyearswiththePAPUC. In April 2010, PECO filedadepreciation
rate study withthePAPUC for bothitselectric andgasassets, which resultedintheimplementation ofnewdepreciation rates
effectiveJanuary1,2010 for electric transmission assetsandJanuary1,2011 for electric distribution andgasassets.
TheMDPSC doesnot mandate thefrequency or timingof BGE’s depreciation studies. InDecember 2006, BGE filedrevised
depreciation rateswiththeMDPSC for bothitselectric distribution andgasassets. Revisionsto depreciation ratesfromthis filing
were finalizedJuly1,2010.
Defined Benefit Pension and Other Postretirement Benefits
Exelon sponsorsdefinedbenefit pension plansandother postretirement benefit plansfor substantiallyall Generation,ComEd,
PECO, BGE and BSC employees. See Note 16—Retirement BenefitsoftheCombinedNotesto ConsolidatedFinancial Statements
for additional information regardingtheaccountingfor thedefinedbenefit pension plansandother postretirement benefit plans.
Themeasurement ofthe plan obligationsandcostsofprovidingbenefitsunder Exelon’s definedbenefit pension andother
postretirement benefit plansinvolvesvariousfactors, includingthedevelopment ofvaluation assumptionsandaccountingpolicy
elections. When developingtherequiredassumptions, Exelon considers historical information aswell asfuture expectations. The
measurement ofbenefitobligationsandcostsisaffectedbyseveral assumptionsincludingthediscount rate appliedto benefit
obligations, the long-termexpectedrate ofreturn on plan assets, the anticipatedrate ofincreaseofhealthcare costs, Exelon’s
expectedlevel ofcontributionsto the plans, theincidenceofparticipant mortality, theexpectedremainingservice periodofplan
participants, thelevel ofcompensation andrate ofcompensation increases, employee age,lengthofservice,andthe long-term
expectedinvestment rate creditedto employeesofcertain plans, amongothers. Theassumptionsare updatedannuallyandupon
anyinterim remeasurement ofthe plan obligations. Theimpactofassumption changesor experiencedifferent fromthat assumedon
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