Exelon 2014 Annual Report Download - page 275

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
accounting impact as ComEd previously established a liability in connection with the June 5, 2013 ICC ruling discussed below.
ComEd has asked the Illinois Supreme Court to hear the matter. There is no set time in which the Court must decide whether it will
take the case.
As a result of the ICC’s June 5, 2013 ruling, ComEd established a liability, which was not material, for potential reimbursements for
actual damages incurred by the 34,559 customers covered by the ICC’s June 5, 2013 Order. The liability recorded represents the
low end of a range of potential losses given that no amount within the range represents a better estimate. ComEd’s ultimate liability
will be based on actual claims eligible for reimbursement as well as the outcome of the appeal. Although reimbursements for actual
damages will differ from the estimated accrual recorded, at this time ComEd does not expect the difference to be material to
ComEd’s results of operations or cash flows.
ComEd has not recorded an accrual for reimbursement of local governmental emergency and contingency expenses as a range of
loss, if any, cannot be reasonably estimated at this time, but may be material to ComEd’s results of operations and cash flows.
Telephone Consumer Protection Act Lawsuit
On November 19, 2013, a class action complaint was filed in the Northern District of Illinois on behalf of a single individual and a
presumptive class that would include all customers that ComEd enrolled in its Outage Alert text message program. The complaint
alleges that ComEd violated the Telephone Consumer Protection Act (“TCPA”) by sending approximately 1.2 million text messages
to customers without first obtaining their consent to receive such messages. The complaint seeks certification of a class along with
statutory damages, attorneys’ fees, and an order prohibiting ComEd from sending additional text messages. Such statutory damages
could range from $ 500 to $ 1,500 per text. ComEd intends to contest the allegations of this suit. In February 2014, ComEd filed a
motion to dismiss this class action complaint, which was denied in June 2014. As of December 31, 2014, ComEd has a reserve,
which is not material, representing its best estimate of probable loss associated with this class action complaint. As ComEd is unable
to predict the ultimate outcome of this proceeding, actual damages may differ from the estimated amount recorded, which may be
material to ComEd’s results of operations, cash flows, and financial position.
Fund Transfer Restrictions
Under applicable law, Exelon may borrow or receive an extension of credit from its subsidiaries. Under the terms of Exelon’s
intercompany money pool agreement, Exelon can lend to, but not borrow from the money pool.
The Federal Power Act declares it to be unlawful for any officer or director of any public utility “to participate in the making or paying
of any dividends of such public utility from any funds properly included in capital account.” What constitutes “funds properly included
in capital account” is undefined in the Federal Power Act or the related regulations; however, FERC has consistently interpreted the
provision to allow dividends to be paid as long as: (1) the source of the dividends is clearly disclosed; (2) the dividend is not
excessive; and (3) there is no self-dealing on the part of corporate officials. While these restrictions may limit the absolute amount of
dividends that a particular subsidiary may pay, Exelon does not believe these limitations are materially limiting because, under these
limitations, the subsidiaries are allowed to pay dividends sufficient to meet Exelon’s actual cash needs.
Under Illinois law, ComEd may not pay any dividend on its stock unless, among other things, “[its] earnings and earned surplus are
sufficient to declare and pay same after provision is made for reasonable and proper reserves,” or unless it has specific authorization
from the ICC. ComEd has also agreed in connection with financings arranged through ComEd Financing III that it will not declare
dividends on any shares of its capital stock in the event that: (1) it exercises its right to extend the interest payment periods on the
subordinated debt securities issued to ComEd Financing III; (2) it defaults on its guarantee of the payment of distributions on the
preferred trust securities of ComEd Financing III; or (3) an event of default occurs under the Indenture under which the subordinated
debt securities are issued.
PECO’s Articles of Incorporation prohibit payment of any dividend on, or other distribution to the holders of, common stock if, after
giving effect thereto, the capital of PECO represented by its common stock together with its retained earnings is, in the aggregate,
less than the involuntary liquidating value of its then outstanding preferred securities. On May 1, 2013, PECO redeemed all
outstanding preferred securities. As a result, the above ratio calculation is no longer applicable. Additionally, PECO may not declare
dividends on any shares of its capital stock in the event that: (1) it exercises its right to extend the interest payment periods on the
271