Exelon 2015 Annual Report Download - page 49

Table of Contents
between shareholders and customers. Purchased power and natural gas prices fluctuate based on their relevant supply and demand. Significantly
higher rates related to purchased power and natural gas could result in declines in customer usage, lower revenues and potentially additional
uncollectible accounts expense for ComEd, PECO and BGE. In addition, any challenges by the regulators or ComEd, PECO and BGE as to the
recoverability of these costs could have a material effect on the Registrants’ results of operations or cash flows. Also, ComEd’s, PECO’s and
BGE’s cash flows could be affected by differences between the time period when electricity and natural gas are purchased and the ultimate
recovery from customers.
Further, the impacts of economic downturns on ComEd, PECO and BGE customers and purchased natural gas costs for PECO and BGE
customers, such as unemployment for residential customers and less demand for products and services provided by commercial and industrial
customers, and the related regulatory limitations on residential service terminations, could result in an increase in the number of uncollectible
customer balances, which would negatively impact ComEd’s, PECO’s and BGE’s results of operations or cash flows. Generation’s customer-
facing energy delivery activities face economic downturn risks similar to Exelon’s utility businesses, such as lower volumes sold and increased
expense for uncollectible customer balances. As Generation increases its customer-facing energy delivery activities, economic downturn impacts
could negatively affect Generation’s results of operations or cash flows. See ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK for further discussion of the Registrants’ credit risk.
The effects of weather could impact the Registrants’ results of operations or cash flows. (Exelon, Generation, ComEd, PECO and BGE)
Weather conditions directly influence the demand for electricity and natural gas and affect the price of energy commodities. Temperatures
above normal levels in the summer tend to increase summer cooling electricity demand and revenues, and temperatures below normal levels in
the winter tend to increase winter heating electricity and gas demand and revenues. Moderate temperatures adversely affect the usage of energy
and resulting revenues at ComEd and PECO. Due to revenue decoupling, BGE recognizes revenues at MDPSC-approved levels per customer,
regardless of what actual distribution volumes are for a billing period, and is not affected by actual weather with the exception of major storms.
Extreme weather conditions or damage resulting from storms could stress ComEd’s, PECO’s and BGE’s transmission and distribution systems,
communication systems and technology, resulting in increased maintenance and capital costs and limiting each company’s ability to meet peak
customer demand. These extreme conditions could have detrimental effects on ComEd’s, PECO’s and BGE’s results of operations or cash flows.
First and third quarter financial results, in particular, are substantially dependent on weather conditions, and could make period comparisons less
relevant.
Generation’s operations are also affected by weather, which affects demand for electricity as well as operating conditions. To the extent that
weather is warmer in the summer or colder in the winter than assumed, Generation could require greater resources to meet its contractual
commitments. Extreme weather conditions or storms could affect the availability of generation and its transmission, limiting Generation’s ability to
source or send power to where it is sold. In addition, drought-like conditions limiting water usage could impact Generation’s ability to run certain
generating assets at full capacity. These conditions, which cannot be accurately predicted, could have an adverse effect by causing Generation to
seek additional capacity at a time when wholesale markets are tight or to seek to sell excess capacity at a time when markets are weak.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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