ComEd 2006 Annual Report Download - page 216

Exelon Corporation and Subsidiary Companies
Exelon Generation Company, LLC and Subsidiary Companies
Commonwealth Edison Company and Subsidiary Companies
PECO Energy Company and Subsidiary Companies
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
costs of that energy to ComEd’s customers through a transparent market mechanism. The energy
price that resulted from the first auction is locked in until June 2008. The reverse-auction competitive
bidding process is administered by an independent auction manager, with oversight by the ICC staff.
On December 6, 2006, the ICC staff released its report on the auction, which generally spoke favorably
of the process and the outcome. The report recommended the continued use of the reverse-auction for
future electric power procurement. In order to mitigate the effects of changes in future prices, electricity
to serve residential and commercial customers with loads less than 400kW will be procured through
staggered contracts.
The ICC will subsequently review on an annual basis the prudence of ComEd’s electricity
purchases, but compliance with the ICC-approved reverse-auction process will establish a rebuttable
presumption of prudence. Various parties, including governmental and consumer representatives and
ComEd, have filed petitions for review of portions of the order with the Illinois Appellate Court. While
ComEd is generally supportive of the order in the Procurement Case, ComEd has objected to the
requirement for an after-the-fact prudence review. On June 2, 2006, the Illinois Attorney General filed a
petition with the Illinois Supreme Court asking the Supreme Court to hear the matter on direct appeal,
to grant expedited review of the pending appeals, and to stay implementation of the auction pending
appeal. On August 4, 2006, the Illinois Supreme Court denied this petition. The Illinois Attorney
General filed a petition with the Illinois Appellate Court asking for a stay of implementation of the ICC
order in the Procurement Case pending the Illinois Appellate Court’s decision on the appeals. That
request was denied on August 23, 2006. On December 29, 2006, the Illinois Appellate Court denied
the Illinois Attorney General’s request for a stay of implementation of the ICC order in the Procurement
Case. On January 11, 2007, the Illinois Supreme Court denied the Illinois Attorney General’s motion for
a stay. The appeals before the Illinois Appellate Court are still pending.
Initial ComEd Auction (Exelon and ComEd). The first procurement auction for ComEd’s entire
load took place during September 2006 for electricity to be delivered beginning in January 2007.
Auction participants bid on several different products including 17-, 29- and 41-month contracts that will
be “blended” together and used to serve residential and small commercial customers, a 17-month
“annual” product that will be used to serve larger non-residential customers, and a variably priced
“hourly” product that would be used to serve customers who either select hourly service or are not
eligible to receive fixed price service. The ICC accepted the auction results related to the blended and
annual products but rejected the auction results for the hourly product. Under ComEd’s tariffs,
electricity that would have been procured through the hourly auction is currently being purchased in the
PJM Interconnection, LLC (PJM) administered wholesale electricity markets.
ComEd has entered into supplier forward contracts with all of those who have won shares of the
ComEd products through the auction. Suppliers were limited to winning no more than 35% in either the
fixed price section or the hourly price section of the auction (for either the ComEd or the Ameren
Corporation (Ameren) auctions). In the ComEd auction, Generation won 35% of the fixed price auction.
The following table presents the clearing prices for each product set in the first auction for ComEd:
Price per MWh
Product 17-month contract 29-month contract 41-month contract
Annual ................................... $90.12 N/A N/A
Blended ................................. $63.96 $64.00 $63.33
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