ComEd 2006 Annual Report Download - page 100

(b) Reflects the following factors, all of which increased expense in 2006 as compared to 2005: (i) higher average accounts
receivable balances in 2006 compared to 2005 resulting from increased revenues; (ii) changes in PAPUC-approved
regulations related to customer payment terms; and (iii) an increase in the number of low-income customers participating in
customer assistance programs, which allow for the forgiveness of certain receivables.
(c) Reflects increased stock-based compensation expense of $11 million primarily due to the adoption of SFAS No. 123-R on
January 1, 2006.
(d) Represents a settlement related to one Superfund site in the first quarter of 2006. See Note 18 of the Combined Notes to
Consolidated Financial Statements for additional information.
Depreciation and Amortization Expense. The changes in depreciation and amortization
expense for 2006 compared to 2005 consisted of the following:
Increase
(decrease)
CTC amortization (a) ............................................................ $146
Accelerated amortization of PECO billing system (b) .................................. (4)
Other depreciation and amortization expense ...................................... 2
Increase in depreciation and amortization expense .................................. $144
(a) PECO’s additional amortization of the CTC is in accordance with its original settlement under the Pennsylvania Competition
Act.
(b) In January 2005, as part of a broader systems strategy at PECO associated with the proposed merger with PSEG, Exelon’s
Board of Directors approved the implementation of a new customer information and billing system at PECO. The approval of
this new system required the accelerated amortization of PECO’s existing system through 2006 and the recognition of
additional amortization expense of $13 million and $9 million in 2005 and 2006, respectively. The new system was
implemented in the fourth quarter 2006.
Taxes Other Than Income. The changes in taxes other than income for 2006 compared to 2005
consisted of the following:
Increase
(decrease)
Taxes on utility revenues (a) ..................................................... $14
State franchise tax adjustments in 2006 and 2005 (b) ................................. 10
Real estate tax adjustment in 2005 (c) ............................................. 6
Sales and use tax adjustments in 2006 and 2005 ................................... (2)
Other ....................................................................... 3
Increase in taxes other than income .............................................. $31
(a) As these taxes were collected from customers and remitted to the taxing authorities and included in revenues and expenses,
the increase in tax expense was offset by a corresponding increase in revenues.
(b) Represents the reduction of tax accruals in 2006 of $7 million following settlements related to prior year tax assessments
and the $17 million reduction of an accrual in 2005 related to prior years.
(c) Represents the reduction of a real estate tax accrual in 2005 following settlements related to prior year tax assessments.
Interest Expense, Net. The decrease in interest expense, net for 2006 compared to 2005 was
primarily due to scheduled payments on long-term debt owed to PECO Energy Transition Trust
(PETT), partially offset by an increase in interest expense associated with the September 2006
issuance of $300 million First Mortgage Bonds, higher interest rates on variable rate long-term debt
and an increased amount of commercial paper outstanding at higher rates.
Other, Net. The increase in other, net for 2006 compared to 2005 was primarily due to interest
income associated with an investment tax credit refund of $11 million and interest income associated
with a research and development credit refund of $10 million in 2006. See Note 19 of the Combined
Notes to the Consolidated Financial Statements for further details of the components of other, net. See
Note 18 of the Combined Notes to the Consolidated Financial Statement for additional information
regarding the investment tax credit and research and development credit refunds.
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