Exelon 2014 Annual Report Download - page 176

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
The following costs were recognized after the closing of the merger and are included in Exelon’s, Generation’s and BGE’s
Consolidated Statements of Operations and Comprehensive Income for the year ended December 31, 2012:
Description
Payment
Period Exelon
Statement of Operations
Location
BGE rate credit of $100 per residential customer (a) ........................ Q22012 $113 Revenues
Customer investment fund to invest in energy efficiency and low-income energy
assistance to BGE customers ........................................ 2012 to 2014 114 O&M Expense
Contribution for renewable energy, energy efficiency or related projects in
Baltimore ........................................................ 2012 to 2014 2 O&M Expense
Charitable contributions at $7 million per year for 10 years .................. 2012 to 2021 70 O&M Expense
State funding for offshore wind development projects ...................... Q22012 32 O&M Expense
Miscellaneous tax benefits ............................................ Q22012 (2) Taxes Other Than Income
Total .......................................................... $329
(a) Exelon made a $66 million equity contribution to BGE in the second quarter of 2012 to fund the after-tax amount of the rate credit as directed in the MDPSC order
approving the merger transaction.
The direct investment estimate includes $95 million to $120 million relating to the construction of a headquarters building in
Baltimore for Generation’s competitive energy businesses. On March 20, 2013, Generation signed a 20 year lease agreement that
was contingent upon the developer obtaining all required approvals, permits and financing for the construction of a building in
Baltimore, Maryland. The operating lease became effective during the second quarter of 2014 when these outstanding contingencies
were met by the developer. See Note 22—Commitments and Contingencies for further information regarding Generation’s total
commitments under the lease agreement.
The direct investment estimate also includes $600 million to $650 million for Exelon’s and Generation’s commitment to develop or
assist in development of 285—300MWs of new generation in Maryland, expected to be completed over a period of 10 years. The
MDPSC order contemplates various options for complying with the new generation development commitments, including building or
acquiring generating assets, making subsidy or compliance payments, or in circumstances in which the generation build is delayed
or certain specified provisions are elected, making liquidated damages payments. Exelon and Generation expect that the majority of
these commitments will be satisfied by building or acquiring generating assets and, therefore, will be primarily capital in nature and
recognized as incurred. However, during the third quarter of 2014, the conditions associated with one of the generation development
commitments changed such that Exelon and Generation now believe that the most likely outcome will involve making subsidy
payments and/or liquidated damages payments rather than constructing the specified generating plant. As a result, Exelon and
Generation recorded a pre-tax $44 million loss contingency related to this generation development commitment which is included in
Operating and maintenance expense in Exelon’s and Generation’s Consolidated Statements of Operations and Comprehensive
Income. While this $44 million loss contingency represents Generation’s best estimate of the future obligation, it is reasonably
possible that Exelon and Generation could ultimately be required to make cumulative subsidy payments of up to a maximum of
approximately $105 million over a 20-year period dependent on actual generating output from a successfully constructed generating
plant.
To date, Generation has placed into service 40MW and has commenced development of 150MW of new generation in Maryland
towards the 300MW commitment. In July 2013, Generation executed an engineering procurement and construction contract to
expand its Perryman, Maryland site with at least 120MW of natural gas-fired generation to satisfy one of the commitments to
Maryland with achievement of commercial operation expected in 2015. In December 2013, Generation entered into contracts
associated with the construction of the 40MW Fourmile Wind project, which was placed in service in December 2014. In December
2014, Generation entered into contracts associated with the construction of the 30MW Fair Wind project in western Maryland with
achievement of commercial operations expected in 2015. The wind projects will satisfy a portion of the 125MW Tier I land-based
renewables commitment. See Note 22—Commitments and Contingencies for additional information. Exelon’s and Generation’s
consolidated financial statements include $185 million and $24 million of capitalized expenditures within Property, plant and
equipment, net as of December 31, 2014 and 2013, respectively, and $3 million and $6 million of development costs within
Operating and maintenance expense for the periods ended December 31, 2014 and 2013, respectively, associated with the pursuit
of these commitments for new generation in the State of Maryland.
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