Exelon 2014 Annual Report Download - page 149

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
3. Regulatory Matters
The following matters below discuss the current status of Exelon’s material regulatory and legislative proceedings.
Illinois Regulatory Matters
Energy Infrastructure Modernization Act
Background
Since 2011, ComEd’s distribution rates are established through a performance-based rate formula, pursuant to EIMA. EIMA also
provides a structure for substantial capital investment by utilities to modernize Illinois’ electric utility infrastructure. Participating
utilities are required to file an annual update to the performance-based formula rate tariff on or before May 1, with resulting rates
effective in January of the following year. This annual formula rate update is based on prior year actual costs and current year
projected capital additions. The update also reconciles any differences between the revenue requirement(s) in effect for the prior
year and actual costs incurred for that year. Throughout each year, ComEd records regulatory assets or regulatory liabilities and
corresponding increases or decreases to operating revenues for any differences between the revenue requirement(s) in effect and
ComEd’s best estimate of the revenue requirement expected to be approved by the ICC for that year’s reconciliation. As of
December 31, 2014, and December 31, 2013, ComEd had a regulatory asset associated with the distribution formula rate of $371
million and $463 million, respectively. The regulatory asset associated with distribution true-up is amortized to Operating revenues
as the associated amounts are recovered through rates.
Annual Reconciliation
2014 Filing. On April 16, 2014, ComEd filed its annual distribution formula rate to request a total increase to the revenue requirement
of $269 million. On December 11, 2014, the ICC issued its final order which increased the revenue requirement by $232 million,
reflecting an increase of $160 million for the initial revenue requirement for 2014 and an increase of $72 million related to the annual
reconciliation for 2013. Approximately $23 million of the total $37 million revenue requirement disallowance is recoverable through
other rider-based mechanisms. The rate increase was set using an allowed return on capital of 7.06% (inclusive of an allowed return
on common equity of 9.25% for 2014 less a performance metrics penalty of 5 basis points for the 2013 reconciliation). The rates took
effect in January 2015. ComEd and intervenors requested a rehearing on specific issues, which was denied by the ICC on
January 28, 2015.
2013 Filing. On April 29, 2013, ComEd filed its annual distribution formula rate, which was updated in August 2013, to request a total
increase to the revenue requirement of $353 million. On December 19, 2013, the ICC issued its final order which increased the
revenue requirement by $341 million, reflecting an increase of $160 million for the initial revenue requirement for 2013 and an
increase of $181 million for the annual reconciliation for 2012. The final revenue requirement reflected the impacts of Senate Bill 9,
which became effective in May 2013 and clarified the intent of EIMA on three issues: an allowed return on ComEd’s pension asset;
the use of year-end rather than average rate base and capital structure in the annual reconciliation; and the use of ComEd’s
weighted average cost of capital interest rate rather than a short-term debt rate to apply to the annual reconciliation. The rate
increase was set using an allowed return on capital of 6.94% (inclusive of an allowed return on common equity of 8.72%). The rates
took effect in January 2014. ComEd requested a rehearing on specific issues, which was denied by the ICC. ComEd also filed an
appeal, which was subsequently withdrawn.
2012 Filing. On April 30, 2012, ComEd filed its annual distribution formula rate. On December 20, 2012, the ICC, issued its final
order, which increased the revenue requirement by $73 million, reflecting an increase of $80 million for the initial revenue
requirement for 2012 and a decrease of $7 million for the annual reconciliation for 2011. The rate increase was set using an allowed
return on capital of 7.54% (inclusive of an allowed return on common equity of 9.81%). The rates took effect in January 2013.
ComEd and intervenors requested a rehearing on specific issues, which was denied by the ICC. ComEd and intervenors also filed
appeals with the Illinois Appellate Court. The Illinois Appellate Court upheld the ICC’s decision on the issues on appeal. On May 30,
2013, ComEd updated its revenue requirement allowed in the December 2012 Order to reflect the impacts of Senate Bill 9, which
resulted in a reduction to the current revenue requirement in effect of $14 million. The rates took effect in July 2013. ComEd and
intervenors requested a rehearing on specific issues, which was denied by the ICC. ComEd and intervenors also filed appeals with
the Illinois Appellate Court. The Illinois Appellate Court reaffirmed the ICC’s order.
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