ComEd 2006 Annual Report Download - page 16

For a number of years, FERC has been encouraging the voluntary formation of RTOs, such as
PJM, to provide transmission service across multiple transmission systems. The intended benefits of
establishing these entities include regional planning, managing transmission congestion, developing
larger wholesale markets for energy and capacity, maintaining reliability, market monitoring and the
elimination or reduction of redundant transmission charges imposed by multiple transmission providers
when wholesale customers take transmission service across several transmission systems. See
Transmission Services below for a further discussion.
To date, PJM, the Midwest Independent System Operator, Inc. (MISO), ISO-NE and Southwest
Power Pool, have been approved as RTOs. Because of some states’ opposition to imposition of
centralized energy and capacity markets, FERC is seeking to obtain some of the benefits of RTOs by
means of making more effective rules governing open-access transmission in regions that do not have
RTOs or independent system operators.
FERC issued a final rule establishing standardized generator interconnection policies and
procedures. Under this interconnection policy generators will benefit from not having to deal on a
case-by-case basis with different and sometimes inconsistent requirements of various transmission
providers.
The Energy Policy Act of 2005. The Energy Policy Act, which was signed into law on August 8,
2005, implements several significant changes intended to improve electric reliability, promote
investment in the transmission infrastructure, streamline electric regulation, improve wholesale
competition, address problems identified in the western energy crisis and Enron collapse, promote fuel
diversity and cleaner fuel sources, and promote greater efficiency in electric generation, delivery and
use.
The Energy Policy Act, through amendment of the Federal Power Act, also transferred to FERC
certain additional authority. FERC was granted new authority to review the acquisition or merger of
generating facilities, along with the responsibility to address more explicitly cross-subsidization issues
in these situations. Additionally, FERC now has the authority to approve siting of electric transmission
facilities located in national interest electric transmission corridors if states cannot or will not act in a
timely manner to approve siting. The Energy Policy Act also creates a self-regulating electric reliability
organization with FERC oversight to enforce reliability rules. On July 20, 2006, pursuant to the Energy
Policy Act, FERC certified the North American Electric Reliability Corporation (NERC) as the nation’s
Electric Reliability Organization. As a result, owners and operators of the bulk power transmission
system, including Generation, ComEd and PECO, will be subject to mandatory reliability standards
promulgated by NERC and enforced by FERC.
See Note 4 of the Combined Notes to Consolidated Financial Statements for further information on
the Energy Policy Act of 2005 and its impact on the Registrants.
Market-Based Rates Matters
Currently, Exelon’s entities have been approved by FERC to sell power at market-based rates. On
May 19, 2006, FERC issued a Notice of Proposed Rule Making (NOPR) on Market-Based Rates for
Wholesale Sales of Electric Energy, Capacity and Ancillary Services by Public Utilities, which would
modify the tests that Exelon and other market participants must satisfy to be entitled to sell at market-
based rates. Exelon currently expects that FERC will rule on the NOPR in the first or second quarter of
2007 and Exelon is not certain as to the impact of any new rules that are promulgated as a result of
FERC’s future ruling with respect to the NOPR. Also, triggered by the expiration of the full-
requirements PPA between Generation and ComEd and the resulting increase in Generation’s
uncommitted capacity, on December 15, 2006, Exelon made a Change in Status (CIS) filing with
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