Exelon 2014 Annual Report Download - page 21

ComEd’s retail service territory has an area of approximately 11,400 square miles and an estimated population of 9 million. The
service territory includes the City of Chicago, an area of about 225 square miles with an estimated population of 2.7 million. ComEd
has approximately 3.8 million customers.
ComEd’s franchises are sufficient to permit it to engage in the business it now conducts. ComEd’s franchise rights are generally
nonexclusive rights documented in agreements and, in some cases, certificates of public convenience issued by the ICC. With few
exceptions, the franchise rights have stated expiration dates ranging from 2015 to 2066. ComEd anticipates working with the
appropriate governmental bodies to extend or replace the franchise agreements prior to expiration.
ComEd’s kWh deliveries and peak electricity load are generally higher during the summer and winter months, when temperature
extremes create demand for either summer cooling or winter heating. ComEd’s highest peak load occurred on July 20, 2011, and
was 23,753 MWs; its highest peak load during a winter season occurred on January 6, 2014, and was 16,515 MWs.
Retail Electric Services
Electric revenues and purchased power expense are affected by fluctuations in customers’ purchases from competitive electric
generation suppliers. All ComEd customers have the ability to purchase electricity from a competitive electric generation supplier.
The number of retail customers participating in customer choice programs was 2,426,921, 2,630,185 and 1,627,150 at
December 31, 2014, 2013 and 2012, respectively, representing 63.0%, 68% and 43% of total retail customers, respectively. Retail
energy purchased from competitive electric generation suppliers represented 80%, 81% and 65% of ComEd’s retail kWh sales for
the years ended December 31, 2014, 2013 and 2012, respectively.
The customers’ choice activity affects revenue collected from customers related to supplied energy; however, that activity has no
impact on electric revenue net of purchased power expense or ComEd’s financial position. ComEd’s cost of electric supply is passed
without markup directly through to those customers not served by a competitive electric generation supplier and those rates are
subject to adjustment monthly to recover or refund the difference between ComEd’s actual cost of electricity delivered and the
amount included in rates. For those customers that choose a competitive electric generation supplier, ComEd acts as the billing
agent but does not record revenues or expenses related to the electric supply. ComEd remains the distribution service provider for
all customers in its service territory and charges a regulated rate for distribution service.
See Note 24—Segment Information of the Combined Notes to Consolidated Financial Statements for additional information on
revenues from external customers, net income and total assets.
Under Illinois law, ComEd is required to deliver electricity to all customers within ComEd’s service territory. ComEd’s obligation to
provide generation supply service, which is referred to as a POLR obligation, primarily varies by customer size. ComEd’s obligation
to provide such service to residential customers and other small customers with demands of under 100 kWs continues for all
customers who do not choose a competitive electric generation supplier or who choose to return to ComEd after taking service from
a competitive electric generation supplier. ComEd does not have a fixed-price generation supply service obligation to most of its
largest customers with demands of 100 kWs or greater, as this group of customers has previously been declared competitive.
Customers with competitive declarations may still purchase power and energy from ComEd, but only at hourly market prices.
Energy Infrastructure Modernization Act (EIMA). 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 over a ten-year
period to modernize Illinois’ electric utility infrastructure. In addition, as long as ComEd is subject to EIMA, ComEd will fund customer
assistance programs for low-income customers, which amounts will not be recoverable through rates.
EIMA is scheduled to sunset, ending ComEd’s performance based rate formula and investment commitment, at December 31, 2017,
unless approved to continue through 2022 by the Illinois General Assembly. During the fourth quarter of 2014, the Illinois House and
Senate each passed House Bill 3975 which extends the date of the EIMA sunset from 2017 to 2019. The bill was presented to the
Governor on February 11, 2015. The Governor can either act on the bill or, after 60 days, the bill will automatically become law.
ComEd files an annual reconciliation of the revenue requirement in effect in a given year to reflect the actual costs that the ICC
determines are prudently and reasonably incurred for such year. ComEd’s allowed rate of return on common equity is the annual
average rate on 30-year treasury notes plus 580 basis points, subject to a (collar) of plus or minus 50 basis points. The collar,
therefore limits favorable and unfavorable impacts of weather and load on distribution revenue. In addition, ComEd’s allowed rate of
return on common equity is subject to reduction if ComEd does not deliver the reliability and customer service benefits, as defined, it
has committed to over the ten-year life of the investment program. See Note 3—Regulatory Matters of the Combined Notes to
Consolidated Financial Statements for additional information.
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