Exelon 2014 Annual Report Download - page 58

on capital of 7.06% (inclusive of an allowed return on common equity of 9.25% for 2014 less a performance metrics penalty of 5
basis points for the 2013 reconciliation). The rates took effect in January 2015. ComEd and intervenors requested a rehearing on
specific issues, which was denied by the ICC on January 28, 2015.
Grand Prairie Gateway Transmission Line. On December 2, 2013, ComEd filed a request to obtain the ICC’s approval to
construct a 60-mile overhead 345kV transmission line that traverses Ogle, DeKalb, Kane and DuPage Counties in Northern
Illinois. On May 28, 2014, in a separate proceeding, FERC issued an order granting ComEd’s request to include 100% of the capital
costs recorded to construction work in progress during construction of the line in ComEd’s transmission rate base. If the project is
cancelled or abandoned for reasons beyond ComEd’s control, FERC approved the ability for ComEd to recover 100% of its prudent
costs incurred after May 21, 2014 and 50% of its costs incurred prior to May 21, 2014 in ComEd’s transmission rate base. On
October 22, 2014, the ICC issued an order approving ComEd’s Grand Prairie Gateway Project over the objection of numerous
landowners and the City of Elgin. Four parties filed timely applications for rehearing before the ICC. On November 25, 2014, the ICC
denied the rehearing application filed by the Forest Preserve District of Kane County, but granted rehearing on the application of
certain landowners who requested that the ICC consider an alternate route for a three-mile segment of the line in Kane County. The
rehearing proceeding is currently pending and , the ICC must enter a final order on rehearing by April 24, 2015. On December 10,
2014, the ICC denied the remaining two applications for rehearing. On January 15, 2015, those two parties, the City of Elgin and the
SKP landowner group and Utility Risk Management Corporation (collectively, the SKP/URMC party), each filed a Notice of Appeal
with the Second District Appellate Court. On February 3, 2015, the ICC filed motions with the Second District Appellate Court
seeking to extend the time for the ICC to file the record on appeal until after the ICC issues its Order on rehearing. The ICC also filed
a motion to consolidate those appeals. ComEd expects to begin construction of the line in the second quarter of 2015 with an in-
service date expected in the second quarter of 2017.
FERC Ameren Order. In July 2012, FERC issued an order to Ameren Corporation (Ameren) finding that Ameren had improperly
included acquisition premiums/goodwill in its transmission formula rate, particularly in its capital structure and in the application of
AFUDC. FERC also directed Ameren to make refunds for the implied increase in rates in prior years. Ameren filed for rehearing of
the July 2012 order, which was denied in June 2014. FERC and Ameren are in the process of determining the amount of any
potential refund. ComEd believes that the FERC order authorizing its transmission formula rate is distinguishable from the
circumstances that led to the July 2012 FERC order in the Ameren case. However, if ComEd were required to exclude acquisition
premiums/goodwill from its transmission formula rate, the impact could be material to ComEd’s results of operations and cash flows.
FERC Order No. 1000 Compliance. In FERC Order No. 1000, the FERC required public utility transmission providers to enhance
their transmission planning procedures and their cost allocation methods applicable to certain new regional and interregional
transmission projects. As part of the changes to the transmission planning procedures, the FERC required removal from all FERC-
approved tariffs and agreements of a right of first refusal to build certain new transmission facilities. In compliance with the regional
transmission planning requirements of Order No. 1000, PJM as the transmission provider submitted a compliance filing to FERC on
October 25, 2012. On the same day, certain of the PJM transmission owners, including ComEd, PECO and BGE (collectively, the
PJM Transmission Owners), submitted a filing asserting that their contractual rights embodied in the PJM governing documents
continue to justify their right of first refusal to construct new reliability (and related) transmission projects and that the FERC should
not be allowed to override such rights absent a showing that it is in the public interest to do so under the FERC’s “Mobile-Sierra”
standard of review. This is a heightened standard of review which the PJM Transmission Owners argued could not be satisfied
based on the facts applicable to them. On March 22, 2013, FERC issued an order on the PJM Compliance Filing and the filing of
these PJM Transmission Owners (1) rejecting the arguments of those PJM Transmission Owners that changes to the PJM governing
documents were entitled to review under the Mobile-Sierra standard, (2) accepting most of the PJM filing, removing the right-of-first
refusal from the PJM tariffs, and (3) directing PJM to remove certain exceptions that it included in its compliance filing that FERC
found did not comply with Order No. 1000. FERC’s order could enable third parties to seek to build certain regional transmission
projects that had previously been reserved for the PJM Transmission Owners, potentially reducing ComEd’s, PECO’s and BGE’s
financial return on new investments in energy transmission facilities. Numerous parties sought rehearing of the FERC’s March 22,
2013 order, including the PJM Transmission Owners who sought rehearing of the FERC’s rejection of their Mobile-Sierra and related
arguments. PJM’s compliance filing was made on July 22, 2013. On May 15, 2014, FERC denied the rehearing requests except with
respect to one issue on when PJM could consider state and local laws in evaluating projects. FERC generally accepted the July 22,
2013, Compliance Filing but required several minor additional changes. FirstEnergy and at least one other party filed an appeal of
the May 15, 2014, Order upholding PJM’s right of first refusal language in the DC Circuit. Exelon has intervened in the FirstEnergy
appeal. Several parties have filed requests for rehearing or clarification concerning the changes set forth in the May 15, 2014, Order.
On December 18, 2014, FERC issued an order conditionally accepting part of the PJM-MISO interregional Order No. 1000
compliance filing, rejecting a MISO proposal concerning cost allocation for cross-border reliability projects and directing a further
compliance filing by PJM and MISO.
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