Exelon 2014 Annual Report Download - page 161

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
In April 2014, ComEd filed its annual 2014 formula rate update with the FERC, reflecting an increased revenue requirement of $22
million, including an increase of $36 million for the initial revenue requirement, offset by a decrease of $14 million related to the
annual reconciliation. The filing established the revenue requirement used to set rates that took effect in June 2014. ComEd’s 2014
formula transmission rate provides for a weighted average debt and equity return on transmission rate base of 8.62%, inclusive of an
allowed return on common equity of 11.50%, a decrease from the 8.70% average debt and equity return previously authorized. The
time period for any challenges to ComEd’s annual 2014 formula rate update expired in October 2014 with no challenges submitted.
In April 2013, ComEd filed its annual 2013 formula rate update with the FERC, reflecting an increased revenue requirement of $68
million, including an increase of $38 million for the initial revenue requirement and an increase of $30 million related to the annual
reconciliation. The filing established the revenue requirement used to set rates that took effect in June 2013. ComEd’s 2013 formula
transmission rate provides for a weighted average debt and equity return on transmission rate base of 8.70%, inclusive of an allowed
return on common equity of 11.50%, a decrease from the 8.91% average debt and equity return previously authorized. The time
period for any challenges to ComEd’s annual 2013 formula rate update expired in October 2013 with no challenges submitted.
As part of the FERC-approved settlement of ComEd’s 2007 transmission rate case, the rate of return on common equity is 11.50%
and the common equity component of the ratio used to calculate the weighted average debt and equity return for the transmission
formula rate is currently capped at 55%.
In April 2014, BGE filed its 2014 formula rate update with the FERC reflecting an increased revenue requirement of $14 million,
including an increase of $9 million for the initial revenue requirement and an increase of $5 million related to the annual
reconciliation. The annual update established the revenue requirement used to set rates that took effect in June 2014. The time
period for any challenges to BGE’s annual update expired in October 2014 with no challenges submitted.
BGE’s 2014 formula transmission rate provides for a weighted average debt and equity return on transmission rate base of 8.53%,
an increase from the 8.35% average debt and equity return previously authorized. As part of the FERC-approved settlement of
BGE’s 2005 transmission rate case in 2006, the rate of return on common equity for BGE’s electric transmission business for new
transmission projects placed in service on and after January 1, 2006 is 11.3%, inclusive of a 50 basis point incentive for participating
in PJM.
FERC Transmission Complaint. On February 27, 2013, consumer advocates and regulators from the District of Columbia, New
Jersey, Delaware and Maryland, and the Delaware Electric Municipal Cooperatives (the parties), filed a complaint at FERC against
BGE and the Pepco Holdings, Inc. companies relating to their respective transmission formula rates. BGE’s formula rate includes a
10.8% base rate of return on common equity (ROE) and a 50 basis point incentive for participating in PJM (the latter of which is
conditioned upon crediting the first 50 basis points of any incentive ROE adders). The parties seek a reduction in the base return on
equity to 8.7% and changes to the formula rate process. FERC docketed the matter and set April 3, 2013 as the deadline for
interventions, protests and answers. Under FERC rules, the revenues subject to refund are limited to a fifteen month period and the
earliest date from which the base ROE could be adjusted and refunds required is the date of the complaint. On March 19, 2013,
BGE filed a motion to dismiss or sever the complaint.
On August 21, 2014, FERC issued an order in the BGE and PHI companies’ proceeding, which established hearing and settlement
judge procedures for the complaint, and set a refund effective date of February 27, 2013. BGE, the PHI companies and the parties
began settlement discussions under the guidance of a FERC administrative law judge on September 23, 2014. On November 24,
2014, the Settlement Judge informed FERC and the Chief Judge that the parties had reached an impasse and determined that a
settlement was not possible. On November 26, 2014, the Chief Judge issued an order terminating the settlement proceeding,
designating a presiding judge at the hearings and directing that an initial decision be issued by November 25, 2015.
On December 8, 2014, various state agencies in Delaware, Maryland, New Jersey, and D.C. filed a second complaint against BGE
regarding the base ROE of the transmission business seeking a reduction from 10.8% to 8.8%. The filing of the second complaint
creates a second refund window. By order issued on February 9, 2015, FERC established a hearing on the second complaint with
the complainants’ requested refund effective date of December 8, 2014.
Based on the current status of the complaint filings, BGE believes it is probable that BGE’s base ROE rate will be adjusted, and that
a refund to customers of transmission revenue for the two maximum fifteen month periods will be required. However, BGE is unable
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