Exelon 2015 Annual Report Download - page 59

Table of Contents
disasters could be destructive, which could result in increased costs, including supply chain costs. An extreme weather event within the
Registrants’ service areas can also directly affect their capital assets, causing disruption in service to customers due to downed wires and poles
or damage to other operating equipment. An example of such an event was the February 5, 2014 ice storm, which interrupted electric service
delivery to customers in PECO’s service territory and resulted in significant restoration costs.
Another example of such an event includes the 9.0 magnitude earthquake and ensuing tsunami experienced by Japan on March 11, 2011,
that seriously damaged the nuclear units at the Fukushima Daiichi Nuclear Power Station, which are operated by Tokyo Electric Power Co. Natural
disasters and other significant events increase the risk to Generation that the NRC or other regulatory or legislative bodies may change the laws or
regulations governing, among other things, operations, maintenance, licensed lives, decommissioning, SNF storage, insurance, emergency
planning, security and environmental and radiological aspects. In addition, natural disasters could affect the availability of a secure and
economical supply of water in some locations, which is essential for Generation’s continued operation, particularly the cooling of generating units.
Additionally, natural disasters and other events that have an adverse effect on the economy in general may adversely affect the Registrants’
operations and their ability to raise capital.
Exelon does not know the impact that potential terrorist attacks could have on the industry in general and on Exelon in particular. As owner-
operators of infrastructure facilities, such as nuclear, fossil and hydroelectric generation facilities and electric and gas transmission and distribution
facilities, the Registrants face a risk that their operations would be direct targets or indirect casualties of, an act of terror. Any retaliatory military
strikes or sustained military campaign could affect their operations in unpredictable ways, such as changes in insurance markets and disruptions
of fuel supplies and markets, particularly oil. Furthermore, these catastrophic events could compromise the physical or cyber security of Exelon’s
facilities, which could adversely affect Exelon’s ability to manage its business effectively. Instability in the financial markets as a result of
terrorism, war, natural disasters, pandemic, credit crises, recession or other factors also may result in a decline in energy consumption, which may
adversely affect the Registrants’ results of operations and its ability to raise capital. In addition, the implementation of security guidelines and
measures has resulted in and is expected to continue to result in increased costs.
The Registrants would be significantly affected by the outbreak of a pandemic. Exelon has plans in place to respond to a pandemic.
However, depending on the severity of a pandemic and the resulting impacts to workforce and other resource availability, the ability to operate its
generating and transmission and distribution assets could be affected, resulting in decreased service levels and increased costs.
In addition, Exelon maintains a level of insurance coverage consistent with industry practices against property and casualty losses subject
to unforeseen occurrences or catastrophic events that could damage or destroy assets or interrupt operations. However, there can be no
assurance that the amount of insurance will be adequate to address such property and casualty losses.
Generation’s financial performance could be negatively affected by matters arising from its ownership and operation of nuclear facilities.
(Exelon and Generation)
Nuclear capacity factors. Capacity factors for generating units, particularly capacity factors for nuclear generating units, significantly affect
Generation’s results of operations. Nuclear plant operations involve substantial fixed operating costs but produce electricity at low variable costs
due to nuclear fuel costs typically being lower than fossil fuel costs. Consequently, to be successful, Generation must consistently operate its
nuclear facilities at high capacity factors. Lower capacity
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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