Exelon 2014 Annual Report Download - page 45

capacity prices related to the Reliability Pricing Model (RPM) for the PJM Interconnection, LLC (PJM) market, and favorable
portfolio management activities in the New England and South regions; partially offset by higher procurement costs for
replacement power related to the extreme cold weather in the first quarter of 2014 and lower realized energy prices related to
executing Generation’s ratable hedging strategy;
• Increase of $365 million at Generation related to the reduction in amortization of in-the-money energy contracts recorded at fair
value at the Constellation merger date and an increase related to the amortization of out-of-the money energy contracts
recorded at fair value upon the consolidation of CENG;
• Increase of $30 million at ComEd primarily reflecting higher transmission revenue due to increased capital investment and an
increase of $93 million as a result of increased cost recovery associated with energy efficiency programs and uncollectible
accounts expense (both offset below in operating and maintenance expense);
• Increase of $33 million at PECO primarily due to increased recovery from regulatory programs (offset below primarily in
operating and maintenance expense); and
• Increase of $104 million at BGE primarily due to increased distribution revenue as a result of the 2013 and 2014 electric and
natural gas distribution rate case orders issued by the Maryland PSC, increased cost recovery for energy efficiency and demand
response programs (offset below in depreciation and amortization expense), and increased transmission revenue pursuant to
increased rates effective June 2014.
The year-over-year increase in operating revenue net of purchased power and fuel expense was partially offset by the following
unfavorable factors:
• Decrease of $1,095 million at Generation due to mark-to-market losses of $591 million in 2014 from economic hedging activities
compared to $504 million in mark-to-market gains in 2013.
• Decrease of $16 million at ComEd due to unfavorable weather in the ComEd service territory.
Operating and maintenance expense increased by $1,298 million as compared to 2013 primarily due to the following unfavorable
factors:
• Increase in Generation’s labor, contracting and materials costs of $361 million primarily due to the inclusion of CENG’s results
from April 1, 2014 through December 31, 2014, an increase of $44 million resulting from expenses recorded for a Constellation
merger commitment, an increase of $54 million as a result of an increase in the number of planned nuclear refueling outage
days at Generation, primarily related to the inclusion of CENG’s plants beginning April 1, 2014, and an increase of $16 million in
the reserve for future asbestos-related bodily injury claims;
• Increase in labor, contracting and materials costs of $56 million at ComEd associated with EIMA smart meter projects and $22
million at BGE due to increased maintenance activities;
• Increase in Generation’s accretion expense of $78 million primarily due to the inclusion of CENG’s results from April 1, 2014
through December 31, 2014;
• Long-lived asset impairments at Generation of $663 million in 2014 compared to $157 million in 2013.
• Increased storm costs at PECO and BGE of $100 million and $21 million, respectively;
• Increased spending on energy and efficiency programs and increased uncollectible accounts expense at ComEd of $93 million;
and
• Increased uncollectible accounts expense at BGE of $17 million.
The year-over-year increase in operating and maintenance expense was partially offset by the following favorable factor:
• A reduction in pension and non-pension postretirement benefits expense of $178 million primarily at Exelon, Generation, and
ComEd, resulting from plan design changes for certain OPEB plans and the favorable impact of higher actuarially assumed
pension and OPEB discount rates for 2014, partially offset by the inclusion of CENG’s pension and non-pension postretirement
benefits expense from April 1, 2014 through December 31, 2014.
Depreciation and amortization expense increased by $161 million primarily as a result of the inclusion of CENG’s results from April 1,
2014 through December 31, 2014, increased depreciation expense across the operating companies for ongoing capital
expenditures, and higher regulatory asset amortization related to energy efficiency and demand response expenditures.
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