ComEd 2006 Annual Report Download - page 264

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)
Balance Sheets, of approximately $36 million and $26 million, respectively, offset by equivalent
increases in ComEd’s and PECO’s regulatory liabilities (these changes are also reflected in
regulatory liabilities in Exelon’s Consolidated Balance Sheet); and
• The recognition of other operating income totaling $149 million (pre-tax), which is included in
operating and maintenance expense in Exelon’s and Generation’s Consolidated Statements of
Operations and Comprehensive Income, representing the reduction in the ARO in excess of
the existing ARC balance for the AmerGen units.
The net decrease in the ARO for the former ComEd units, the former PECO units and the
AmerGen units was approximately $219 million, $183 million and $202 million, respectively. As of
December 31, 2006, the ARO balances for the former ComEd, the former PECO and the AmerGen
units totaled approximately $2,172 million, $912 million and $449 million, respectively.
During the second quarter of 2005, Generation recorded a $281 million net decrease to the ARO
resulting from revisions to estimated future nuclear decommissioning cash flows. This update also
resulted in a corresponding decrease to the ARC of approximately $251 million, included in property,
plant and equipment. The balance of the decrease to the ARO related primarily to the retired units,
which have no remaining useful life and, likewise, no existing ARC to offset. The decrease related to
these retired units totaled approximately $30 million and was recorded as a credit to income. However,
since there was no impact to net income for the decommissioning of the former ComEd and PECO
units, the $30 million credit to income was equally offset with a charge to operating income and an
adjustment to the intercompany payable to ComEd and PECO of approximately $21 million and $9
million, respectively, at Generation, and an adjustment to the regulatory liabilities at Exelon, ComEd
and PECO of $30 million, $21 million and $9 million, respectively. Both the credit to income and the
offsetting charge to operating income are included in operating and maintenance expense in Exelon’s
and Generation’s Consolidated Statements of Operations and Comprehensive Income.
The net decrease to the ARO resulted primarily from a year-over-year decline in the cost
escalation factors used to estimate future undiscounted costs, which was partially offset by an increase
resulting from updated decommissioning cost studies received for two nuclear stations. Both the
updated escalation factors and the updated cost estimates were provided by independent third-party
appraisers. Cost studies are generally updated every three to five years in accordance with NRC
regulations and industry practice. The net decrease in the ARO for the former ComEd units, the former
PECO units and the AmerGen units resulting from revisions to estimated cash flows during 2005 was
$207 million, $40 million and $34 million, respectively. As of December 31, 2005, the ARO balances for
the former ComEd, the former PECO and the AmerGen units totaled approximately $2,267 million,
$1,041 million and $613 million, respectively.
Spent Nuclear Fuel
Under the Nuclear Waste Policy Act of 1982 (NWPA), the U.S. Department of Energy (DOE) is
responsible for the development of a repository for the disposal of spent nuclear fuel (SNF) and high-
level radioactive waste. As required by the NWPA, Generation is a party to contracts with the DOE
(Standard Contracts) to provide for disposal of SNF from its nuclear generating stations. In accordance
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