ComEd 2006 Annual Report Download - page 223

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)
results of operations and cash flows. However, ComEd anticipates that all impacts of any rate design
changes effective after December 31, 2006 should be recoverable through retail rates. With the
expiration of PECO’s transmission and distribution rate caps on December 31, 2006, PECO has the
right to file with the PAPUC for a change in retail rates to reflect the impact of any change in wholesale
transmission rates.
Customer Choice (Exelon, ComEd and PECO). All of ComEd’s retail customers are eligible to
choose a competitive electric generation supplier and most non-residential customers may also buy
electricity from ComEd at market-based prices under the PPO. One competitive electric generation
supplier was granted approval to serve residential customers in the ComEd service territory. However,
as of December 31, 2006, they are not currently supplying electricity to any of ComEd’s residential
customers. As of December 31, 2006, approximately 20,300 non-residential customers, or 28% of
ComEd’s annual retail kWh sales, had elected either the PPO or a competitive electric generation
supplier. Customers who receive energy from a competitive electric generation supplier continue to pay
a delivery charge.
All PECO customers may choose to purchase energy from a competitive electric generation
supplier. As of December 31, 2006, approximately 34,400 customers, representing approximately 2%
of PECO’s annual kWh sales, had elected to purchase their electric energy from a competitive electric
generation supplier. Customers who receive energy from a competitive electric generation supplier
continue to pay delivery charges and CTCs.
Initial Illinois Auction (Exelon and Generation). As described in the “Initial ComEd Auction”
section above, Generation participated and won portions of the ComEd and Ameren auctions. The
results and clearing prices of the ComEd auction are described above. In the Ameren auction,
Generation won 10 tranches, or 27% of the annual 17-month product, with clearing prices of $84.95
per MWh.
Post-2006 Summary (Exelon and Generation). Generation’s PPA with ComEd expired at the
end of 2006. In September 2006, Generation participated in and won portions of the ComEd and
Ameren auctions. As a result of the expiration of the PPA and the results of the auctions, beginning in
2007, Generation will sell more power through bilateral agreements with other new and existing
counterparties. Generation has credit risk associated with counterparty performance on energy
contracts which includes, but is not limited to, the risk of financial default or slow payment; therefore,
Generation’s credit risk profile is anticipated to change based on the credit worthiness of the new and
existing counterparties, including ComEd and Ameren. Additionally, due to the possibility of rate freeze
legislation in Illinois affecting both ComEd and Ameren, Generation may be subject to the risk of
default and, in the event of a bankruptcy filing by ComEd or Ameren, a risk that the bankruptcy may
result in rejection of contracts for the purchase of power. A default by ComEd or Ameren on contracts
for purchase of electricity, or a rejection of those contracts in a bankruptcy proceeding, could result in a
disruption in the wholesale power markets.
Market-Based Rates Matters (Exelon and Generation). On July 5, 2005, FERC issued an order
conditionally approving Exelon’s entities’ continued sales of power at market-based rates. As part of
that order, FERC instituted a Section 206 proceeding on the basis that Exelon had not addressed the
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