ComEd 2006 Annual Report Download - page 296

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)
On June 12, 2006, the five named plaintiffs filed an amended complaint and a motion seeking
certification of a class comprising all white male employees of Exelon, its subsidiaries, affiliates and
operating units. On behalf of the class, the plaintiffs sought to enjoin certain of Exelon’s diversity efforts
that they claim resulted in racially discriminatory hiring, promotion, retention, termination and
compensation practices, but no monetary damages. On June 29, 2006, Exelon, PECO and Generation
filed an answer to the amended complaint again denying all liability.
On September 14, 2006, the court denied the plaintiffs’ request for class certification. In October
2006, PECO and Generation reached a settlement with all parties to this matter. The amount of the
settlement was paid in December 2006 and did not have a material impact on Exelon’s, PECO’s or
Generation’s financial condition, results of operations or cash flows.
PJM Billing Dispute. In December 2004, Exelon filed a complaint with FERC against PJM and
PPL Electric (PPL) alleging that PJM had overcharged Exelon from April 1998 through May 2003 as a
result of a billing error. Specifically, the complaint alleges that PJM mistakenly identified PPL’s Elroy
substation transformer as belonging to Exelon and that, as a consequence, during times of congestion,
Exelon’s bills for transmission congestion from PJM erroneously reflected energy that PPL took from
the Elroy substation and used to serve PPL load.
On September 14, 2005, Exelon and PPL filed a proposed settlement of this matter with FERC. If
the settlement was approved by FERC, Exelon would have received a total of $40 million, plus interest,
over the next four years from two funding sources: (a) $33 million from PPL and (b) $7 million from
PJM market participants. In an order issued March 21, 2006, FERC rejected the proposed settlement
and set the matter for hearing, primarily because the proposed settlement would have required PJM
market participants to bear $7 million of the $40 million settlement, plus interest. The order found that
PPL should pay for energy received that was billed to other parties, but allows PPL and the market
participants to question what portion of the settlement PJM might bear and what offsetting deductions
might be made in reducing the payment.
On March 30, 2006, Exelon and PPL filed with FERC a second proposed settlement agreement,
superceding the first, under which Exelon would receive a total of $40 million, plus interest, over the
next five years through credits provided by PJM, which would be funded through a surcharge imposed
by PJM through its tariff solely on PPL, with no amount being paid by other PJM participants.
On November 9, 2006, FERC issued an order accepting the second proposed settlement
agreement, with modifications related to the characterization of the PJM charge to PPL as a
transmission charge. On December 11, 2006, PPL and Exelon made a compliance filing accepting the
modifications in FERC’s order and altering both the settlement amount and the timing of payment. In
this third settlement agreement, PPL agreed to directly pay Exelon approximately $42 million in a lump
sum payment (comprised of $38 million of erroneous charges, plus interest of $4 million), which will not
be characterized as a transmission charge. It is anticipated that approximately 75% and 25% of the
proposed settlement amount will be received by Generation and PECO, respectively. FERC approval
is required for this third settlement agreement to become effective. FERC established a comment
period that ended January 11, 2007. FERC will issue an order either accepting, accepting with
modifications, or rejecting the third settlement agreement sometime after the expiration of the comment
period.
291