Exelon 2014 Annual Report Download - page 34

Illinois utilities are required to procure cost-effective renewable energy resources in amounts that equal or exceed 2% of the total
electricity that each electric utility supplies to its eligible retail customers. ComEd is also required to acquire amounts of renewable
energy resources that will cumulatively increase this percentage to at least 10% by June 1, 2015, with an ultimate target of at least
25% by June 1, 2025. All goals are subject to rate impact criteria set forth by Illinois legislation. As of December 31, 2014, ComEd
had purchased sufficient renewable energy resources or equivalents, such as RECs, to comply with the Illinois legislation. ComEd
currently retires all RECs upon transfer and acceptance. ComEd is permitted to recover procurement costs of RECs from retail
customers without mark-up through rates. See Note 3—Regulatory Matters of the Combined Notes to Consolidated Financial
Statements for additional information on ComEd’s procurement plans. See Note 22—Commitments and Contingencies of the
Combined Notes to Consolidated Financial Statements for information regarding ComEd’s future commitments for the procurement
of RECs.
The AEPS Act became effective for PECO on January 1, 2011. During 2014, PECO was required to supply approximately 4.5% of
electric energy generated from Tier I (including solar, wind power, low-impact hydropower, geothermal energy, biologically derived
methane gas, fuel cells, biomass energy, coal mine methane and black liquor generated within Pennsylvania) through May 31, 2014
and subsequently 5.0% beginning June 1, 2014 and continuing through May 31, 2015. PECO was also required to supply 6.2% of
electric energy generated from Tier II (including waste coal, demand-side management, large-scale hydropower, municipal solid
waste, generation of electricity utilizing wood and by-products of the pulping process and wood, distributed generation systems and
integrated combined coal gasification technology) alternative energy resources, as measured in AECs. The compliance
requirements will incrementally escalate to 8.0% for Tier I and 10.0% for Tier II by 2021. In order to comply with these requirements,
PECO entered into agreements with varying terms with accepted bidders, including Generation, to purchase non-solar Tier I, solar
Tier 1 and Tier II AECs. PECO also purchases AECs through its DSP Program full requirement contracts.
Section 7-703 of the Public Utilities Article in Maryland sets forth the RPS requirement, which applies to all retail electricity sales in
Maryland by electricity suppliers. The RPS requirement requires that suppliers obtain a specified percentage of the electricity it sells
from Tier 1 sources (solar, wind, biomass, methane, geothermal, ocean, fuel cell, small hydroelectric, and poultry litter) and Tier 2
sources (hydroelectric, other than pump storage generation, and waste-to-energy). The RPS requirement began in 2006, requiring
that suppliers procure 1.0% and 2.5% from Tier 1 and Tier 2 sources, respectively, escalating in 2022 to 22.0% from Tier 1 sources,
including at least 2.0% from solar energy, and a phase out of Tier 2 resource options by 2022. In 2014, 10.3% was required from
Tier 1 renewable sources, including at least 0.35% derived from solar energy, and 2.5% from Tier 2 renewable sources. BGE is
subject to requirements established by the Public Utilities Article in Maryland related to the use of alternative energy resources;
however, the wholesale suppliers that supply power to BGE through SOS procurement auctions have the obligation, by contract with
BGE, to meet the RPS requirements.
Similar to ComEd, PECO and BGE, Generation’s retail electric business must source a portion of the electric load it serves in many
of the states in which it does business from renewable resources or approved equivalents such as RECs. Potential regulation and
legislation regarding renewable and alternative energy resources could increase the pace of development of wind and other
renewable/alternative energy resources, which could put downward pressure on wholesale market prices for electricity in some
markets where Exelon operates generation assets. At the same time, such developments may present some opportunities for sales
of Generation’s renewable power, including from wind, solar, hydroelectric and landfill gas.
See Note 3—Regulatory Matters and Note 22—Commitments and Contingencies of the Combined Notes to Consolidated Financial
Statements for additional information.
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