Exelon 2009 Annual Report Download - page 29

PECO฀had฀a฀slight฀increase฀of฀$16฀million฀in฀its฀revenue฀net฀of฀purchased฀power฀and฀fuel฀expense฀primarily฀due฀to฀increased฀gas฀distribution฀rates฀effective฀January฀1,฀
2009,฀resulting฀from฀the฀settlement฀of฀2008฀rate฀case,฀which฀provided฀$77฀million฀of฀additional฀revenues฀in฀2009.฀PECO’s฀increased฀revenues฀also฀reected฀the฀impact฀of฀
lower฀electric฀distribution฀rates฀in฀2008฀of฀$22฀million฀primarily฀due฀to฀the฀refund฀of฀the฀2007฀Pennsylvania฀Public฀Realty฀Tax฀Act฀settlement฀(which฀was฀completely฀offset฀
in฀charges฀recorded฀in฀taxes฀other฀than฀income).฀Similar฀to฀ComEd,฀these฀increases฀were฀partially฀offset฀by฀the฀impact฀of฀current฀economic฀conditions฀and฀unfavorable฀
weather,฀which฀reduced฀PECO’s฀load฀resulting฀in฀lower฀revenue฀net฀of฀purchased฀power฀and฀fuel฀expense฀of฀$69฀million฀and฀$21฀million,฀respectively.
Exelon’s฀2009฀results฀ were฀also฀affected฀by฀higher฀ operating฀and฀maintenance฀expense฀at฀ Generation.฀In฀March฀2009,฀Generation฀ re-evaluated฀ the฀fair฀value฀of฀ the฀
Handley฀and฀Mountain฀Creek฀stations฀due฀to฀the฀continued฀decline฀in฀forward฀energy฀prices,฀which฀resulted฀in฀a฀$223฀million฀impairment฀charge.฀In฀December฀2009,฀
Generation฀ announced฀ that฀ it฀ had฀ notied฀ PJM฀ of฀ its฀ intention฀ to฀ permanently฀ retire฀ four฀ fossil-red฀ generation฀ units฀ in฀ Pennsylvania฀ because฀ they฀ are฀ no฀ longer฀
economic฀to฀operate฀and฀are฀not฀required฀to฀meet฀demand฀for฀electricity฀in฀the฀region.฀In฀connection฀with฀the฀announced฀retirements,฀Generation฀recorded฀a฀charge฀of฀
$24฀million฀related฀to฀exit฀costs฀as฀well฀as฀$32฀million฀of฀accelerated฀depreciation.฀฀
Additionally,฀Exelon’s฀pension฀and฀other฀postretirement฀benets฀expense฀increased฀by฀$160฀million฀in฀2009฀due฀to฀lower฀than฀expected฀pension฀and฀postretirement฀plan฀
asset฀returns฀in฀2008.฀There฀was฀also฀a฀scheduled฀increase฀in฀Competitive฀Transition฀Charge฀(CTC)฀amortization฀expense฀at฀PECO฀of฀$90฀million฀in฀accordance฀with฀its฀
1998฀restructuring฀settlement฀and฀increased฀depreciation฀of฀$69฀million฀across฀the฀Registrants฀due฀to฀ongoing฀capital฀expenditures.฀฀
In฀response฀to฀current฀market฀and฀economic฀conditions,฀Exelon฀implemented฀a฀cost฀savings฀program฀in฀2009.฀This฀initiative฀included฀job฀reductions,฀for฀which฀Exelon฀
recorded฀a฀$34฀million฀charge฀related฀to฀severance฀expenses,฀and฀a฀$350฀million฀discretionary฀contribution฀to฀Exelon’s฀largest฀pension฀fund,฀which฀is฀expected฀to฀reduce฀
pension฀expense฀over฀the฀next฀ten฀years.฀PECO฀generated฀additional฀cost฀savings฀through฀enhancements฀to฀credit฀processes฀and฀increased฀collection฀and฀termination฀
activities฀initiated฀in฀2008,฀which฀reduced฀uncollectible฀accounts฀expense฀by฀$97฀million.฀In฀addition,฀ComEd’s฀and฀PECO’s฀incremental฀storm-related฀costs฀decreased฀
operating฀and฀maintenance฀expense฀by฀$40฀million฀and฀$9฀million,฀respectively.
Exelon’s฀interest฀expense฀decreased฀by฀$140฀million฀primarily฀due฀to฀lower฀outstanding฀debt฀at฀ComEd฀and฀PECO฀and฀lower฀interest฀rates฀on฀Generation’s฀Spent฀Nuclear฀
Fuel฀ obligation.฀ Additionally,฀ Exelon฀ was฀ able฀ to฀ capitalize฀ on฀ favorable฀ capital฀ market฀ conditions฀ in฀ its฀ renancing฀ of฀ $1.2฀ billion฀ of฀ debt฀ at฀ Exelon฀ and฀ Generation฀
originally฀scheduled฀to฀mature฀in฀2011.฀Although฀this฀debt฀offering฀resulted฀in฀$120฀million฀in฀debt฀extinguishment฀costs,฀it฀decreased฀Exelon’s฀average฀cost฀of฀debt฀while฀
also฀extending฀the฀maturities฀of฀the฀debt.
Exelon’s฀2009฀results฀were฀also฀signicantly฀affected฀by฀nuclear฀decommissioning฀trust฀fund฀(NDT)฀realized฀and฀unrealized฀gains฀of฀$256฀million฀in฀2009฀compared฀to฀
realized฀and฀unrealized฀losses฀of฀$308฀million฀in฀2008฀for฀the฀former฀AmerGen฀ nuclear฀generating฀units฀and฀portions฀of฀the฀Peach฀Bottom฀nuclear฀generating฀ units฀฀
(Non-Regulatory฀Agreement฀Units)฀as฀a฀result฀of฀improved฀market฀performance.
Finally,฀ Exelon฀ reassessed฀ anticipated฀ apportionment฀ of฀ its฀ income,฀ resulting฀ in฀ a฀ change฀ in฀ state฀ deferred฀ income฀ tax฀ rates,฀ and฀ ComEd฀ remeasured฀ income฀ tax฀
uncertainties฀related฀to฀its฀1999฀sale฀of฀fossil฀generating฀assets.฀These฀two฀actions฀resulted฀in฀an฀aggregate฀non฀cash฀gain฀of฀$83฀million.
Discussion฀of฀Financial฀Results฀-฀Exelon
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