ComEd 2006 Annual Report Download - page 24

PECO has a PPA with Generation under which PECO obtains substantially all of its electric supply
from Generation through 2010. The price for this electricity is essentially equal to the energy revenues
earned from customers as specified by PECO’s 1998 settlement of its restructuring case mandated by
the Competition Act. Subsequent to 2010, PECO expects to procure all of its supply from market
sources, which could include Generation.
Regulations applicable to all Pennsylvania electric utilities’ POLR obligations are being developed
by the PAPUC. PECO and Generation will continue to monitor the developments of these regulations.
In November 2004, Pennsylvania adopted Act 213, the Alternative Energy Portfolio Standards Act
of 2004. For more information, see “Environmental Regulation—Renewable and Alternative Energy
Portfolio Standards” below.
Transmission Services
ComEd and PECO provide wholesale and unbundled retail transmission service under rates
established by FERC. FERC has used its regulation of transmission to encourage competition for
wholesale generation services and the development of regional structures to facilitate regional wholesale
markets. Under FERC’s open access transmission policy promulgated in Order No. 888, ComEd and
PECO, as owners of transmission facilities, are required to provide open access to their transmission
facilities under filed tariffs at cost-based rates. Under FERC’s Order No. 889, ComEd and PECO are
required to comply with FERC’s Standards of Conduct regulation, as amended, governing the
communication of non-public information between the transmission owner’s transmission employees and
wholesale merchant employees or the employees of any energy affiliate of the transmission owner.
PJM is the independent system operator and the FERC-approved RTO for the Mid-Atlantic and
Midwest regions. PJM is the transmission provider under, and the administrator of, the PJM Open
Access Transmission Tariff (PJM Tariff), operates the PJM Interchange Energy Market and Capacity
Credit Markets, and through central dispatch, controls the day-to-day operations of the bulk power
system for the PJM region. ComEd and PECO are members of PJM and provide regional transmission
service pursuant to the PJM Tariff. ComEd, PECO and the other transmission owners in PJM have
turned over control of their transmission facilities to PJM, and their transmission systems are currently
under the dispatch control of PJM. Under the PJM Tariff, transmission service is provided on a region-
wide, open-access basis using the transmission facilities of the PJM members at rates based on the
costs of transmission service.
In November 2004, FERC issued two orders authorizing ComEd and PECO to recover amounts
for a limited time during a specified transitional period as a result of the elimination of through and out
(T&O) rates for transmission service scheduled out of, or across, their respective transmission systems
and ending within pre-expansion territories of PJM or MISO. The new rates, known as Seams
Elimination Charge/Cost Adjustment/Assignment (SECA), were collected from load-serving entities and
paid to transmission owners within PJM and MISO over a transitional period from December 1, 2004
through March 31, 2006, subject to refund, surcharge and hearing. See Note 4 of the Combined Notes
to Consolidated Financial Statements for further detail.
On May 31, 2005, FERC issued an order creating an evidentiary hearing process to examine the
existing PJM transmission rate design. An administrative law judge (ALJ) order related to this process
was issued on July 13, 2006, which, if adopted by FERC, would result in a change to the existing rate
design. See Note 4 of the Combined Notes to Consolidated Financial Statements for further detail.
Gas
PECO’s gas sales and gas transportation revenues are derived pursuant to rates regulated by the
PAPUC. PECO’s purchased gas cost rates, which represent a portion of total rates, are subject to
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