ComEd 2006 Annual Report Download - page 19

2007 for its energy marketing portfolio. This hedge ratio represents the percentage of forecasted
aggregate annual generation supply that is committed to firm sales, including sales to ComEd and
PECO. A portion of Generation’s hedge may be accomplished with fuel products based on assumed
correlations between power and fuel prices, which routinely change in the market. The hedge ratio is
not fixed and will vary from time to time depending upon market conditions, demand, energy market
option volatility and actual loads. The trading portfolio is subject to a risk management policy that
includes stringent risk management limits including volume, stop-loss and value-at-risk limits to
manage exposure to market risk. Additionally, the corporate risk management group and Exelon’s Risk
Management Committee (RMC) monitor the financial risks of the power marketing activities. Power
Team also uses financial and commodity contracts for proprietary trading purposes but this activity
accounts for only a small portion of Power Team’s efforts.
At December 31, 2006, Generation’s long-term commitments relating to the purchase and sale of
energy, capacity and transmission rights from and to unaffiliated utilities and others were as follows:
(in millions)
Net Capacity
Purchases (a)
Power Only
Sales
Power Only Purchases
from Non-Affiliates
Transmission Rights
Purchases (b)
2007 ......................... $ 468 $5,401 $1,499 $ 6
2008 ......................... 425 1,900 475 —
2009 ......................... 398 647 194 —
2010 ......................... 417 100 194 —
2011 ......................... 417 — 106 —
Thereafter ..................... 2,960 — 249 —
Total ......................... $5,085 $8,048 $2,717 $ 6
(a) Net capacity purchases include tolling agreements that are accounted for as operating leases. Amounts presented in the
commitments represent Generation’s expected payments under these arrangements at December 31, 2006. Expected
payments include certain capacity charges which are conditional on plant availability.
(b) Transmission rights purchases include estimated commitments in 2007 for additional transmission rights that will be required
to fulfill firm sales contracts.
In connection with the 2001 corporate restructuring, Generation entered into a PPA, as amended,
with ComEd under which Generation agreed to supply all of ComEd’s load requirements through 2006.
Under the ComEd PPA, prices for energy varied depending upon the time of day and month of
delivery. Beginning January 2007, ComEd is procuring all of its supply from market sources pursuant
to the ICC-approved procurement auction, which includes 35% from Generation. See Note 4 of the
Combined Notes to Consolidated Financial Statements for further detail on the impact of ComEd’s
procurement process on Generation. Generation has a PPA with PECO under which Generation has
agreed to supply PECO with substantially all of PECO’s electric supply needs through 2010.
Generation supplies electricity to PECO from its portfolio of generation assets, PPAs and other market
sources. Subsequent to 2010, PECO expects to procure all of its electricity from market sources, which
could include Generation.
Capital Expenditures
Generation’s business is capital intensive and requires significant investments in energy
generation and in other internal infrastructure projects. Generation’s estimated capital expenditures for
2007 are as follows:
(in millions)
Production plant ................................................ $ 754
Nuclear fuel .................................................... 599
Total ...................................................... $1,353
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