ComEd 2006 Annual Report Download - page 284

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)
insurance for each station for losses resulting from damage to its nuclear plants. In the event of an
accident, insurance proceeds must first be used for reactor stabilization and site decontamination. If
the decision is made to decommission the facility, a portion of the insurance proceeds will be allocated
to a fund, which Generation is required by the NRC to maintain, to provide for decommissioning the
facility. Generation is unable to predict the timing of the availability of insurance proceeds to
Generation and the amount of such proceeds that would be available. Under the terms of the various
insurance agreements, Generation could be assessed up to $173 million for losses incurred at any
plant insured by the insurance companies. In the event that one or more acts of terrorism cause
accidental property damage within a twelve-month period from the first accidental property damage
under one or more policies for all insured plants, the maximum recovery for all losses by all insureds
will be an aggregate of $3.2 billion plus such additional amounts as the insurer may recover for all such
losses from reinsurance, indemnity and any other source, applicable to such losses. The $3.2 billion
maximum recovery limit is not applicable, however, in the event of a “certified act of terrorism” as
defined in the Terrorism Risk Insurance Act of 2002, as extended, as a result of government indemnity.
Generally, a “certified act of terrorism” is defined in the Terrorism Risk Insurance Act to be any act,
certified by the U.S. government, to be an act of terrorism committed on behalf of a foreign person or
interest.
Additionally, NEIL provides replacement power cost insurance in the event of a major accidental
outage at a nuclear station. The premium for this coverage is subject to assessment for adverse loss
experience. Generation’s maximum share of any assessment is $46 million per year. Recovery under
this insurance for terrorist acts is subject to the $3.2 billion aggregate limit and secondary to the
property insurance described above. This limit would also not apply in cases of certified acts of
terrorism under the Terrorism Risk Insurance Act, as extended, as described above.
In addition, Generation participates in the Master Worker Program, which provides coverage for
worker tort claims filed for bodily injury caused by a nuclear energy accident. This program was
modified, effective January 1, 1998, to provide coverage to all workers whose “nuclear-related
employment” began on or after the commencement date of reactor operations. Generation will not be
liable for a retrospective assessment under this new policy; however, in the event losses incurred
under the small number of policies in the old program exceed accumulated reserves, a maximum
retroactive assessment of up to $50 million could apply.
For its insured losses, Exelon is self-insured to the extent that losses are within the policy
deductible or exceed the amount of insurance maintained. Such losses could have a material adverse
effect on Exelon’s financial condition, results of operations and liquidity.
Energy Commitments
Generation’s wholesale operations include the physical delivery and marketing of power obtained
through its generation capacity, and long-, intermediate- and short-term contracts. Generation
maintains a net positive supply of energy and capacity, through ownership of generation assets and
power purchase and lease agreements, to protect it from the potential operational failure of one of its
owned or contracted power generating units. Generation has also contracted for access to additional
generation through bilateral long-term PPAs. These agreements are firm commitments related to
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