ComEd 2013 Annual Report Download - page 149

Deferred income taxes. Thesecostsrepresent thedifferencebetween themethod by which theregulator allows for therecoveryof
incometaxesandhowincometaxeswouldberecordedunder GAAP. Regulatoryassetsandliabilitiesassociatedwithdeferred
incometaxes, recordedincompliancewiththe authoritativeguidancefor accountingfor certaintypesofregulation andincometaxes,
includethedeferredtaxeffectsassociatedprincipallywithaccelerateddepreciation accountedfor inaccordancewiththe ratemaking
policiesoftheICC, PAPUC and MDPSC, aswell astherevenue impactsthereon,andassumecontinuedrecoveryofthesecostsin
future transmission and distribution rates. For ComEd and BGE, this amount includestheimpactsofareduction inthedeductibility,
for Federal incometaxpurposes, ofcertain retiree healthcare costspursuant to theMarch 2010 HealthCare ReformActs. ComEd
wasgrantedrecoveryoftheseadditional incometaxeson May24, 2011 intheICC’s 2010 Rate Caseorder.Therecoveryperiodfor
thesecostsisthrough May31,2014. For BGE, theseadditional incometaxesare beingamortizedover a 5-year periodthat began in
March 2011 inaccordancewiththeMDPSC’s March 2011 rate order.See Note 14—IncomeTaxesandNote 16—Retirement
Benefitsfor additional information.ComEd, PECO and BGE are not earninga return on theregulatoryasset inbase rates.
AMI programs. For ComEd, this amount representsoperatingandmaintenanceexpensesandmeter costsassociatedwith
ComEd’s AMI pilot programapprovedintheMay24, 2011, ICC order inComEd’s 2010 rate case.Therecoveryperiods for
operatingandmaintenanceexpensesandmeter costsare through May31,2014, andJanuary1,2020,respectively. Asof
December 31,2013,ComEd hadregulatoryassetsof$35million relatedto accelerateddepreciation costsresultingfromthe early
retirementsofnon-AMI meters, which will beamortizedover an average ten year periodpursuant to theICC approvedAMI
Deployment plan.ComEd is earninga return on themeter costs. For PECO, this amount representsaccelerateddepreciation and
filingandimplementation costsrelatingto thePAPUC-approvedSmart Meter Procurement andInstallation Plan aswell asthe return
on theun-depreciatedinvestment,taxes, andoperatingandmaintenanceexpenses. The approvedplan allows for recoveryoffiling
andimplementation costsincurredthrough December 31,2012.Inaddition,the approvedplan providesfor recoveryofprogram
costs, which includesdepreciation on newequipment placedinservice,beginninginJanuary2011 on full andcurrent basis, which
includesinterestincomeorexpenseontheunder or over recovery. The approvedplan also providesfor recoveryofaccelerated
depreciation on PECO’s non-AMI meter assetsover a 10-year periodendingDecember 31,2020.For BGE, this amount represents
smart grid pilot programcostsaswell astheincremental costsassociatedwithimplementingfull deployment ofasmart grid
program. Pursuant to a MDPSC order,pilot programcostsof$11 million were deferredinaregulatoryasset,and, beginningwiththe
MDPSC’s March 2011 rate order,isearning BGE’s mostcurrent authorizedrate ofreturn.InAugust 2010,theMDPSC approveda
comprehensivesmart grid initiativefor BGE, authorizing BGE to establish aseparate regulatoryasset for incremental costsincurred
to implement theinitiative,includingthe net depreciation andamortization costsassociatedwiththemeters, andan authorizedrate
ofreturn on thesecosts, a portion of which is not recognizedunder GAAPuntilcostrecoverybegins. Additionally, theMDPSC order
requiresthat BGE provethecost-effectiveness ofthe entire smart grid initiativeprior to seekingrecoveryofthecostsdeferredin
theseregulatoryassets. Therefore,thecommencement andtimingoftheamortization ofthesedeferredcostsiscurrentlyunknown.
BGE’s AMI regulatoryasset excludescostsfor non-AMI metersbeingreplacedbyAMI meters, astheMDPSC hasorderedthat the
costrecoveryfor non-AMI meterswill beconsideredinafuture depreciation proceeding.
AMI Meter Events. This amount representstheremainingcostvalue oftheoriginal smart meters, net ofaccumulateddepreciation,
DOE reimbursementsandamountsrecoveredfromthevendor,ofsmart meter deployment that will no longer beused, including
installation andremoval costs. PECO intendedto seekthrough regulatoryrate recoveryinafuture filingwiththePAPUC, any
amountsno recoveredfromthevendor. PECO believedtheamountsincurredfor theoriginal metersandrelatedinstallation and
removal costswere probable ofrecoverybasedon applicable caselawandpast precedent on reasonablyandprudentlyincurred
costs. Assuch, PECO hasdeferredthesecostson Exelon’s and PECO’s ConsolidatedBalanceSheet. PECO will not earn a return
on therecoveryofthesecosts.
Under-recovered distribution services costs. Under EIMA, which becameeffectiveinthefourthquarter of2011,ComEd is
allowedrecoveryof distribution servicescoststhrough aformula rate tariff. Thelegislation providesfor an annual reconciliation ofthe
revenue requirement ineffecttoreflecttheactual coststhat theICC determinesare prudentlyandreasonablyincurredinagiven
year.Theover recoveryassociatedwiththe 2011 reconciliation wasrecoveredthrough ratesover a one-year period, that began in
January2013.Theunder recoveryassociatedwiththe 2012 reconciliation will berecoveredthrough ratesover a one-year period
beginninginJanuary2014. ComEd is earninga return on thesecosts. Theregulatoryasset alsoincludescostsassociatedwith
certain one-timeevents, such aslargestorms, which will berecoveredover a five-year period. AsofDecember 31,2013,the
regulatoryasset wascomprisedof$377 million for the annual reconciliation and $86 million relatedto significant one-timeevents. In
addition to $58 million indeferredstormcosts, net ofamortization,theDecember 31,2013 balance relatedto significant one-time
eventscontains$28million ofmerger andintegration relatedcosts, net ofamortization,incurredasaresult ofthemerger.Asof
December 31,2012,theregulatoryasset wascomprisedof$125million for the annual reconciliation and $84 million relatedto
significant one-timeevents. Inaddition to $58 million indeferredstormcosts, net ofamortization,theDecember 31,2012 balance
relatedto significant one-timeeventscontains$26million ofmerger andintegration relatedcosts, net ofamortization,incurredasa
result ofthemerger.See Note 4—MergersandAcquisitionsfor additional information.
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