ComEd 2006 Annual Report Download - page 132

effective February 8, 2006, the SEC’s financing jurisdiction under PUHCA for ComEd’s and PECO’s
short-term financings and Generation’s financings reverted to FERC and Exelon’s financings are no
longer subject to regulatory approvals.
In February 2006, ComEd and PECO received orders from FERC approving their requests for
short-term financing authority with FERC in the amounts of $2.5 billion and $1.5 billion, respectively,
effective February 8, 2006 through December 31, 2007.
Generation currently has blanket financing authority that it received from FERC with its market-
based rate authority in November 2000 and that became effective again with the repeal of PUHCA.
See Note 4 of the Combined Notes to Consolidated Financial Statements for further information.
Under applicable law, Generation, ComEd and PECO can pay dividends only from retained,
undistributed or current earnings. A significant loss recorded at Generation, ComEd or PECO may limit
the dividends that these companies can distribute to Exelon. At December 31, 2006, Exelon had
retained earnings of $3.4 billion, including Generation’s undistributed earnings of $1.8 billion, ComEd’s
retained deficit of $(193) million consisting of an unappropriated retained deficit of $(1.6) billion partially
offset by $1.4 billion of retained earnings appropriated for future dividends, and PECO’s retained
earnings of $584 million.
Investments in Synthetic Fuel-Producing Facilities
Exelon, through three separate wholly owned subsidiaries, owns interests in two limited liability
companies and one limited partnership that own synthetic fuel-producing facilities. Section 45K
(formerly Section 29) of the Internal Revenue Code provides tax credits for the sale of synthetic fuel
produced from coal. However, Section 45K contains a provision under which the tax credits are phased
out (i.e., eliminated) in the event crude oil prices for a year exceed certain thresholds. On April 11,
2006, the IRS published the 2005 oil Reference Price and it did not exceed the beginning of the
phase-out range. Consequently, there was no phase-out of tax credits for calendar year 2005.
The following table (in dollars) provides the estimated phase-out ranges for 2006 and 2007 based
on the per barrel price of oil as of December 31, 2006. The table also contains the annual average
New York Mercantile Exchange, Inc. index (NYMEX) prices per barrel at December 31, 2006 based on
actual prices for the year ended December 31, 2006 and the estimated average futures prices for the
year ended December 31, 2007.
2006 2007
Beginning of Phase-Out Range (a) ............................................... $60 $62
End of Phase-Out Range (a) .................................................... 76 77
Annual Average NYMEX ...................................................... 66 64
(a) The estimated 2006 and 2007 phase-out ranges are based upon the actual 2005 phase-out range. The actual 2005
phase-out range was determined using the inflation adjustment factor published by the IRS in April 2006. The actual 2005
phase-out range was increased by 2% per year (Exelon’s estimate of inflation) to arrive at the estimated 2006 and 2007
phase-out ranges.
Exelon and the operators of the synthetic fuel-producing facilities in which Exelon has interests
idled the facilities in May 2006. The decision to suspend synthetic fuel production was primarily driven
by the level and volatility of oil prices. In addition, the proposed Federal legislation that would have
provided certainty that tax credits would exist for 2006 production was not included in the Tax Increase
Prevention and Reconciliation Act of 2005. Due to the reduction in oil prices during the third quarter of
2006, the operators resumed production at their synthetic fuel-producing facilities in September 2006
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