Exelon 2014 Annual Report Download - page 20

capacity based upon a simulated dispatch model that makes assumptions regarding future market conditions, which are calibrated to
market quotes for power, fuel, load following products, and options. Equivalent sales represent all hedging products, which include
economic hedges and certain non-derivative contracts, including sales to ComEd, PECO and BGE to serve their retail load. A
portion of Generation’s hedging strategy may be implemented through the use of fuel products based on assumed correlations
between power and fuel prices, which routinely change in the market. The corporate risk management group and Exelon’s RMC
monitor the financial risks of the wholesale and retail power marketing activities. Generation also uses financial and commodity
contracts for proprietary trading purposes, but this activity accounts for only a small portion of Generation’s efforts. The proprietary
trading portfolio is subject to a risk management policy that includes stringent risk management limits, including volume, stop-loss
and value-at-risk limits, to manage exposure to market risk. See QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK for additional information.
At December 31, 2014, Generation’s short and long-term commitments relating to the purchase of energy and capacity from and to
unaffiliated utilities and others were as follows:
(in millions)
Net Capacity
Purchases (a)
REC
Purchases (b)
Transmission Rights
Purchases (c) Total
2015 ....................................................... $ 418 $152 $ 20 $ 590
2016 ....................................................... 283 228 15 526
2017 ....................................................... 222 121 15 358
2018 ....................................................... 112 29 16 157
2019 ....................................................... 117 5 16 138
Thereafter .................................................. 279 1 35 315
Total ....................................................... $1,431 $536 $117 $2,084
(a) Net capacity purchases include PPAs and other capacity contracts including those that are accounted for as operating leases. Amounts presented in the
commitments represent Generation’s expected payments under these arrangements at December 31, 2014, net of fixed capacity payments expected to be received
(“Capacity offsets”) by Generation under contracts to resell such acquired capacity to third parties under long-term capacity sale contracts. As of December 31, 2014,
capacity offsets were $132 million, $133 million, $136 million, $137 million,$138 million, and $591 million for years 2015, 2016, 2017, 2018, 2019, and thereafter,
respectively. Expected payments include certain fixed capacity charges which may be reduced based on plant availability.
(b) The table excludes renewable energy purchases that are contingent in nature.
(c) Transmission rights purchases include estimated commitments for additional transmission rights that will be required to fulfill firm sales contracts.
Capital Expenditures
Generation’s business is capital intensive and requires significant investments in nuclear fuel and energy generation assets and in
other internal infrastructure projects. Generation’s estimated capital expenditures for 2015 are as follows:
(in millions)
Nuclear fuel (a) ......................................................................... $1,250
Production plant ....................................................................... 1,800
Renewable energy projects .............................................................. 225
Maryland commitments ................................................................. 225
Other ................................................................................ 125
Total ................................................................................. $3,625
(a) Includes Generation’s share of the investment in nuclear fuel for the co-owned Salem plant.
ComEd
ComEd is engaged principally in the purchase and regulated retail sale of electricity and the provision of electricity distribution and
transmission services to a diverse base of residential, commercial and industrial customers in northern Illinois. ComEd is a public
utility under the Illinois Public Utilities Act subject to regulation by the ICC related to distribution rates and service, the issuance of
securities, and certain other aspects of ComEd’s business. ComEd is a public utility under the Federal Power Act subject to
regulation by FERC related to transmission rates and certain other aspects of ComEd’s business. Specific operations of ComEd are
also subject to the jurisdiction of various other Federal, state, regional and local agencies. Additionally, ComEd is subject to NERC
mandatory reliability standards.
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