ComEd 2006 Annual Report Download - page 93

Operating and Maintenance Expense. The changes in operating and maintenance expense for
2006 compared to 2005 consisted of the following:
Increase
(decrease)
ICC rate order (a) .............................................................. $(201)
Fringe benefits (b) ............................................................. 43
Severance-related expenses .................................................... 17
Wages and salaries ........................................................... 17
Customers’ Affordable Reliable Energy (CARE) program (c) ........................... 9
Environmental costs ........................................................... 5
Rent and lease expense ....................................................... 5
Storm costs .................................................................. 4
PSEG merger integration costs .................................................. 2
Other ....................................................................... 11
Decrease in operating and maintenance expense ................................... $ (88)
(a) As a result of the July 2006 ICC rate order and the December 2006 ICC order on rehearing, ComEd recorded one-time
benefits associated with reversing previously incurred expenses, including MGP costs, severance costs and procurement
case costs. See Notes 4 and 18 of the Combined Notes to Consolidated Financial Statements for additional information.
(b) Reflects increases in various fringe benefits, including increased stock-based compensation expense of $24 million primarily
due to the adoption of SFAS No. 123-R on January 1, 2006 and increased pension and other postretirement benefits costs
of $14 million.
(c) See Note 4 of the Combined Notes to the Consolidated Financial Statements for additional information.
Impairment of Goodwill. ComEd performs an assessment of goodwill for impairment at least
annually, or more frequently, if events or circumstances indicate that goodwill might be impaired. The
assessment compares the carrying value of goodwill to the estimated fair value of goodwill as of a
point in time. The estimated fair value incorporates management’s assessment of current events and
expected future cash flows. See Note 8 of the Combined Notes to the Consolidated Financial
Statements for additional information. During the third quarter of 2006, ComEd completed an interim
assessment of goodwill for impairment purposes to reflect the adverse affects of the ICC’s July 2006
rate order. The test indicated that ComEd’s goodwill was impaired and a charge of $776 million was
recorded. ComEd’s 2006 annual goodwill impairment assessment (performed in the fourth quarter)
resulted in no additional impairment. After reflecting the impairment, ComEd had approximately $2.7
billion of remaining goodwill as of December 31, 2006.
During the fourth quarter of 2005, ComEd completed the annually required assessment of goodwill
for impairment purposes. The 2005 test indicated that ComEd’s goodwill was impaired and a charge of
$1.2 billion was recorded. The 2005 impairment was driven by changes in the fair value of ComEd's
PPA with Generation, the upcoming end of ComEd's transition period and related transition revenues,
regulatory uncertainty in Illinois as of November 1, 2005, anticipated increases in capital expenditures
in future years and decreases in market valuations of comparable companies that are utilized to
estimate the fair value of ComEd.
Depreciation and Amortization Expense. The changes in depreciation and amortization
expense for 2006 compared to 2005 consisted of the following:
Increase
(decrease)
Depreciation expense associated with higher plant balances .......................... $12
Other amortization expense ..................................................... 5
Increase in depreciation and amortization expense .................................. $17
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