Exelon 2014 Annual Report Download - page 54

Exposure to Worldwide Financial Markets. Exelon has exposure to worldwide financial markets including European banks.
Disruptions in the European markets could reduce or restrict the Registrants’ ability to secure sufficient liquidity or secure liquidity at
reasonable terms. As of December 31, 2014, approximately 29%, or $2.5 billion, of the Registrants’ aggregate total commitments
were with European banks, excluding the unsecured bridge facility to provide financing for the proposed PHI acquisition. The credit
facilities include $8.5 billion in aggregate total commitments of which $7.3 billion was available as of December 31, 2014, due to
outstanding letters of credit. There were no borrowings under the Registrants’ credit facilities as of December 31, 2014. See Note
13—Debt and Credit Agreements of the Combined Notes to the Consolidated Financial Statements for additional information on the
credit facilities.
Tax Matters
See Note 14—Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information.
Environmental Legislative and Regulatory Developments.
Exelon supports the promulgation of certain environmental regulations by the U.S. EPA, including air, water and waste controls for
electric generating units. See discussion below for further details. The air and waste regulations will have a disproportionate adverse
impact on fossil-fuel power plants, requiring significant expenditures of capital and variable operating and maintenance expense, and
will likely result in the retirement of older, marginal facilities. Due to their low emission generation portfolios, Generation and CENG
will not be significantly directly affected by these regulations, representing a competitive advantage relative to electric generators that
are more reliant on fossil-fuel plants. Various bills have been introduced in the U.S. Congress that would prohibit or impede the U.S.
EPA’s rulemaking efforts. The timing of the consideration of such legislation is unknown.
Air Quality. In recent years, the U.S. EPA has been implementing a series of increasingly stringent regulations under the Clean Air
Act relating to NAAQS for conventional air pollutants (e.g., NOx, SO2 and particulate matter) as well as stricter technology
requirements to control HAPs (e.g., acid gases, mercury and other heavy metals) from electric generation units. The U.S. EPA
continues to review and update its NAAQS with a tightened particulate matter NAAQS issued in December 2012 and a tightened
ozone NAAQS, to be finalized in late 2015, proposed for public comment in December 2014. These recently finalized or proposed
updates will potentially result in more stringent emissions limits on fossil-fuel electric generating stations. There continues to be
opposition among fossil-fuel generation owners to the potential stringency and timing of these air regulations.
In July 2011, the U.S. EPA published CSAPR and in June 2012, it issued final technical corrections. CSAPR requires 28 upwind
states in the eastern half of the United States to significantly improve air quality by reducing power plant emissions that cross state
lines and contribute to ground-level ozone and fine particle pollution in downwind states. On August 21, 2012, a three-judge panel of
the D.C. Circuit Court held that the U.S. EPA had exceeded its authority in certain material aspects with respect to CSAPR and
vacated the rule and remanded it to the U.S. EPA for further rulemaking consistent with its decision. The Court also ordered that
CAIR remain in effect pending finalization of CSAPR on remand. Numerous entities challenged the CSAPR in the D.C. Circuit Court.
On August 21, 2012, the D.C. Circuit Court of Appeals held that the U.S. EPA has exceeded its authority in certain material aspects
of the CSAPR and vacated the rule and remanded it to the U.S. EPA for further rulemaking consistent with its decision. On April 29,
2014, the U.S. Supreme Court reversed the D.C. Circuit Court decision and upheld CSAPR, and remanded the case to the D.C.
Circuit Court to resolve the remaining implementation issues On November 21, 2014, the U.S. EPA issued an Interim Final Rule in
which the Agency announced that it was tolling the effective dates for the CSAPR. The first phase of the CSAPR program started on
January 1, 2015, with the second phase starting January 1, 2017. Also released on November 21, 2014, was a Notice of Data
Availability under which the Agency proposed CSAPR allowance allocations to generating units for the first five years of the program,
2015-2020; these were identical to those previously identified in prior final rules related to the CSAPR.
On December 16, 2011, the U.S. EPA signed a final rule to reduce emissions of toxic air pollutants from power plants and signed
revisions to the NSPS for electric generating units. The final rule, known as MATS, requires coal-fired electric generation plants to
achieve high removal rates of mercury, acid gases and other metals. To achieve these standards, coal units with no pollution control
equipment installed (uncontrolled coal units) will have to make capital investments and incur higher operating expenses. It is
expected that owners of smaller, older, uncontrolled coal units will retire the units rather than make these investments. Coal units
with existing controls that do not meet the MATS rule may need to upgrade existing controls or add new controls to comply. Owners
of oil units not currently meeting the proposed emission standards may choose to convert the units to light oils or natural gas, install
control technologies, or retire the units. The MATS rule requires generating stations to meet the new standards three years after the
rule takes effect, April 16, 2015, with specific guidelines for an additional one or two years in limited cases. Numerous entities
challenged MATS in the D.C. Circuit Court, and Exelon intervened in support of the rule. On April 15, 2014, the D.C. Circuit Court
issued an opinion upholding MATS in its entirety.
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