Exelon 2014 Annual Report Download - page 262

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
22. Commitments and Contingencies
Nuclear Insurance
Generation is subject to liability, property damage and other risks associated with major incidents at any of its nuclear stations,
including the CENG nuclear stations. Generation has mitigated its financial exposure to these risks through insurance and other
industry risk-sharing provisions.
The Price-Anderson Act was enacted to ensure the availability of funds for public liability claims arising from an incident at any of the
U.S. licensed nuclear facilities and also to limit the liability of nuclear reactor owners for such claims from any single incident. As of
December 31, 2014, the current liability limit per incident was $13.6 billion and is subject to change to account for the effects of
inflation and changes in the number of licensed reactors. An inflation adjustment must be made at least once every 5 years and the
last inflation adjustment was made effective September 10, 2013. In accordance with the Price-Anderson Act, Generation maintains
financial protection at levels equal to the amount of liability insurance available from private sources through the purchase of private
nuclear energy liability insurance for public liability claims that could arise in the event of an incident. As of January 1, 2013, the
amount of nuclear energy liability insurance purchased is $375 million for each operating site. Additionally, the Price-Anderson Act
requires a second layer of protection through the mandatory participation in a retrospective rating plan for power reactors (currently
104 reactors) resulting in an additional $13.2 billion in funds available for public liability claims. Participation in this secondary
financial protection pool requires the operator of each reactor to fund its proportionate share of costs for any single incident that
exceeds the primary layer of financial protection. Under the Price-Anderson Act, the maximum assessment in the event of an
incident for each nuclear operator, per reactor, per incident (including a 5% surcharge), is $127.3 million, payable at no more than
$19 million per reactor per incident per year. Exelon’s maximum liability per incident is approximately $2.7 billion, including CENG’s
related liability.
In addition, the U.S. Congress could impose revenue-raising measures on the nuclear industry to pay public liability claims
exceeding the $13.6 billion limit for a single incident.
As part of the execution of NOSA on April 1, 2014, Generation executed an Indemnity Agreement pursuant to which Generation
agreed to indemnify EDF and its affiliates against third-party claims that may arise from any future nuclear incident (as defined in the
Price-Anderson Act) in connection with the CENG nuclear plants or their operations. Exelon guarantees Generation’s obligations
under this indemnity. See Note 5—Investment in Constellation Energy Nuclear Group, LLC for additional information on Generation’s
operations relating to CENG.
Generation is required each year to report to the NRC the current levels and sources of property insurance that demonstrates
Generation possesses sufficient financial resources to stabilize and decontaminate a reactor and reactor station site in the event of
an accident. The property insurance maintained for each facility is currently provided through insurance policies purchased from
NEIL, an industry mutual insurance company of which Generation is a member.
NEIL may declare distributions to its members as a result of favorable operating experience. In recent years NEIL has made
distributions to its members, but Generation cannot predict the level of future distributions or if they will continue at all. NEIL declared
a distribution for 2014 and 2013, of which Generation’s portion was $18.3 million and $18.5 million respectively. No distributions
were declared in 2012. The distributions were recorded as a reduction to Operating and maintenance expense within Exelon and
Generation’s Consolidated Statements of Operations and Comprehensive Income. Premiums paid to NEIL by its members are
subject to assessment for adverse loss experience (the retrospective premium obligation). NEIL has never exercised this
assessment since its formation in 1973, and while Generation cannot predict the level of future assessments, or if they will be
imposed at all, as of December 31, 2014, the current maximum aggregate annual retrospective premium obligation for Generation is
approximately $319 million. NEIL requires its members to maintain an investment grade credit rating or to ensure collectability of
their annual retrospective premium obligation by providing a financial guarantee, letter of credit, deposit premium, or some other
means of assurance.
NEIL provides “all risk” property damage, decontamination and premature decommissioning insurance for each station for losses
resulting from damage to its nuclear plants, either due to accidents or acts of terrorism. If the decision is made to decommission the
facility, a portion of the insurance proceeds will be allocated to a fund, which Generation is required by the NRC to maintain, to
provide for decommissioning the facility. In the event of an insured loss, Generation is unable to predict the timing of the availability
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