ComEd 2003 Annual Report Download - page 110

108 Notes to Consolidated Financial Statements
EXELON CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets with a corresponding offset
recorded to the liability in accumulated depreciation. Under
common regulatory practices, the deposit of funds into the
decommissioning trust accounts plus the financial activity
reflected in nuclear decommissioning trust funds in Exelon’s
Consolidated Balance Sheets would have, over time, estab-
lished a corresponding liability in accumulated depreciation
reflecting the cost to decommission the nuclear generating
stations previously owned by PECO.
Regulatory accounting practices for the nuclear generat-
ing stations previously owned by ComEd were discontinued
as a result of an ICC order capping ComEd’s ultimate recov-
ery of decommissioning costs. The difference between the
decommissioning cost estimate and the decommissioning
liability recorded in accumulated depreciation for the former
ComEd operating stations was being amortized to deprecia-
tion expense on a straight-line basis over the remaining lives
of the stations. The decommissioning cost estimate
(adjusted annually to reflect inflation) for the former ComEd
retired units recorded in deferred credits and other liabilities
was accreted to depreciation expense. Financial activity of
the decommissioning trust related to Exelon’s nuclear gen-
erating stations no longer accounted for under common
regulatory practices (e.g., investment income and realized
and unrealized gains and losses on trust investments) was
reflected in nuclear decommissioning trust funds in Exelon’s
Consolidated Balance Sheets with a corresponding gain or
expense recorded in Exelon’s Consolidated Statements of
Income or in other comprehensive income. The offset to the
financial activity in the decommissioning trust funds is
summarized as follows:
– Interest income was recorded in other income and de-
ductions,
– Realized gains and losses were recorded in other income
and deductions,
– Unrealized gains and losses were recorded in other
comprehensive income, and
– Trust fund operating expenses were recorded in operation
and maintenance expense.
Spent Nuclear Fuel
Under the Nuclear Waste Policy Act of 1982 (NWPA), the U.S.
Department of Energy (DOE) is responsible for the selection
and development of repositories for, and the disposal of,
spent nuclear fuel (SNF) and high-level radioactive waste.
ComEd and PECO, as required by the NWPA, each signed
contracts with the DOE (Standard Contract) to provide for
disposal of SNF from their respective nuclear generating sta-
tions. In accordance with the NWPA and the Standard Con-
tract, ComEd and PECO pay the DOE one mill ($.001) per
kilowatt-hour of net nuclear generation for the cost of nu-
clear fuel long-term storage and disposal. This fee may be
adjusted prospectively in order to ensure full cost recovery.
The NWPA and the Standard Contract required the DOE to
begin taking possession of SNF generated by nuclear
generating units by no later than January 31, 1998. The DOE,
however, failed to meet that deadline and its performance
will be delayed significantly. The DOE’s current estimate for
opening a SNF facility is 2010. This extended delay in SNF
acceptance by the DOE has led to Exelon’s adoption of dry
storage at its Dresden, Quad Cities and Peach Bottom Units
and its consideration of dry storage at other units.
In July 1998, ComEd filed a complaint against the United
States Government (Government) in the United States Court
of Federal Claims (Court) seeking to recover damages caused
by the DOE’s failure to honor its contractual obligation to
begin disposing of SNF in January 1998. In August 2001, the
Court granted ComEd’s motion for partial summary judg-
ment for liability on ComEd’s breach of contract claim. In
November 2001, the Government filed two partial summary
judgment motions relating to certain damage issues in the
case as well as two motions to dismiss claims other than
ComEd’s breach of contract claim. On June 10, 2003, the
Court denied the Government’s summary judgment mo-
tions and set the case for trial on damages for November
2004. Also on June 10, 2003, the Court granted the Gov-
ernment’s motion to dismiss claims other than the breach of
contract claims. Generation assumed the Standard Contract,
as amended, in the 2001 corporate restructuring. Generation
is now engaged in pre-trial document and deposition
discovery on the damages claims.
In July 2000, PECO entered into an agreement
(Amendment) with the DOE relating to PECO’s Peach Bottom
nuclear generating unit to address the DOE’s failure to begin
removal of SNF in January 1998 as required by the Standard
Contract (Amendment). Under the Amendment, the DOE
agreed to provide PECO with credits against PECO’s future
contributions to the Nuclear Waste Fund over the next ten
years to compensate PECO for SNF storage costs incurred as
a result of the DOE’s breach of the contract. The Amendment
also provided that, upon PECO’s request, the DOE will take
title to the SNF and the interim storage facility at Peach Bot-
tom provided certain conditions are met. Generation as-
sumed this contract in the 2001 corporate restructuring.
In November 2000, eight utilities with nuclear power
plants filed a Joint Petition for Review against the DOE with
the United States Court of Appeals for the Eleventh Circuit
seeking to invalidate that portion of the Amendment provid-
ing for credits to PECO against nuclear waste fund payments
on the ground that such provision is a violation of the NWPA.
PECO intervened as a defendant in that case, and Generation
assumed the claim in the 2001 corporate restructuring. On
September 24, 2002, the United States Court of Appeals for
the Eleventh Circuit ruled that the fee adjustment provision