Exelon 2014 Annual Report Download - page 120

certain weather restrictions, at any time of year, under the Illinois Public Utilities Act. ComEd will monitor the impact of its
disconnection practices and will make any necessary adjustments to the provision for uncollectible accounts. ComEd did not have
any customers representing over 10% of its revenues as of December 31, 2014. See Note 3—Regulatory Matters of the Combined
Notes to Consolidated Financial Statements for additional information regarding ComEd’s recently approved tariffs to adjust rates
annually through a rider mechanism to reflect increases or decreases in annual uncollectible accounts expense.
ComEd’s power procurement contracts provide suppliers with a certain amount of unsecured credit. The credit position is based on
forward market prices compared to the benchmark prices. The benchmark prices are the forward prices of energy projected through
the contract term and are set at the point of supplier bid submittals. If the forward market price of energy exceeds the benchmark
price, the suppliers are required to post collateral for the secured credit portion after adjusting for any unpaid deliveries and
unsecured credit allowed under the contract. The unsecured credit used by the suppliers represents ComEd’s net credit exposure.
ComEd’s counterparty credit risk is mitigated by its ability to recover realized energy costs through customer rates. As of
December 31, 2014, ComEd’s credit exposure to energy suppliers was immaterial.
PECO
Credit risk for PECO is managed by credit and collection policies, which are consistent with state regulatory requirements. PECO is
currently obligated to provide service to all retail electric customers within its franchised territory. PECO records a provision for
uncollectible accounts to provide for the potential loss from nonpayment by these customers. See Note 1—Significant Accounting
Policies of the Combined Notes to Consolidated Financial Statements for the allowance for uncollectible accounts policy. In
accordance with PAPUC regulations, after November 30 and before April 1, an electric distribution utility or natural gas distribution
utility shall not terminate service to customers with household incomes at or below 250% of the Federal poverty level. PECO’s
provision for uncollectible accounts will continue to be affected by changes in prices as well as changes in PAPUC regulations.
PECO did not have any customers representing over 10% of its revenues as of December 31, 2014.
PECO’s supplier master agreements that govern the terms of its DSP Program contracts, which define a supplier’s performance
assurance requirements, allow a supplier to meet its credit requirements with a certain amount of unsecured credit. The amount of
unsecured credit is determined based on the supplier’s lowest credit rating from the major credit rating agencies and the supplier’s
tangible net worth. The credit position is based on the initial market price, which is the forward price of energy on the day a
transaction is executed, compared to the current forward price curve for energy. To the extent that the forward price curve for energy
exceeds the initial market price, the supplier is required to post collateral to the extent the credit exposure is greater than the
supplier’s unsecured credit limit. As of December 31, 2014, PECO had no net credit exposure with suppliers.
PECO does not obtain cash collateral from suppliers under its natural gas supply and asset management agreements. As of
December 31, 2014, PECO had credit exposure of $8 million under its natural gas supply and asset management agreements with
investment grade suppliers.
BGE
Credit risk for BGE is managed by credit and collection policies, which are consistent with state regulatory requirements. BGE is
currently obligated to provide service to all electric customers within its franchised territory. BGE records a provision for uncollectible
accounts to provide for the potential loss from nonpayment by these customers. BGE will monitor nonpayment from customers and
will make any necessary adjustments to the provision for uncollectible accounts. See Note 1—Significant Accounting Policies of the
Combined Notes to Consolidated Financial Statements for uncollectible accounts policy. MDPSC regulations prohibit BGE from
terminating service to residential customers due to nonpayment from November 1 through March 31 if the forecasted temperature is
32 degrees or below for the subsequent 72 hour period. BGE is also prohibited by the Public Utilities Article of the Annotated Code
of Maryland and MDPSC regulations from terminating service to residential customers due to nonpayment if the forecasted
temperature is 95 degrees or above for the subsequent 72 hour period. BGE did not have any customers representing over 10% of
its revenues as of December 31, 2014.
BGE’s full requirement wholesale electric power agreements that govern the terms of its electric supply procurement contracts,
which define a supplier’s performance assurance requirements, allow a supplier, or its guarantor, to meet its credit requirements with
a certain amount of unsecured credit. The amount of unsecured credit is determined based on the supplier’s lowest credit rating from
the major credit rating agencies and the supplier’s tangible net worth, subject to an unsecured credit cap. The credit position is
based on the initial market price, which is the forward price of energy on the day a transaction is executed, compared to the current
forward price curve for energy. To the extent that the forward price curve for energy exceeds the initial market price, the supplier is
required to post collateral to the extent the credit exposure is greater than the supplier’s unsecured credit limit. The seller’s credit
exposure is calculated each business day. As of December 31, 2014, BGE had no net credit exposure with suppliers.
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