ComEd 2013 Annual Report Download - page 32

Exelon doesproduceGHG emissions, primarilyat itsfossilfuel-firedgeneratingplants; CO2,methane andnitrousoxide are all
emittedinthis process, withCO
2representingthe largest portion oftheseGHG emissions. GHG emissionsfromcombustion offossil
fuelsrepresent themajorityofExelon’s directGHG emissionsin 2013,although onlyasmall portion ofExelon’s electric supplyis
fromfossilgeneratingplants. Other GHG emission sourcesat Exelon include natural gas(methane)leakageonthe natural gas
systems, sulfur hexafluoride(SF6)leakageinitselectric transmission and distribution operationsandrefrigerant leakagefromits
chillingandcoolingequipment aswell asfossilfuel combustion initsmotor vehiclesandusageofelectricityat itsfacilities. Despite
itsfocuson low-carbon generation,Exelon believesitsoperationscouldbesignificantlyaffectedbythepossible physical risks of
climate changeandbymandatoryprograms to reduceGHG emissions. See ITEM 1A.RISK FACTORSofExelon’s 2013 Form10-K
for information regardingthemarket andfinancial,regulatoryandlegislative,andoperational risks associatedwithclimate change.
Climate Change Regulation. Exelon is, or maybecome,subjecttoclimate changeregulation or legislation at theFederal,regional
andstate levels.
International Climate Change Regulation. At theinternational level,theUnitedStateshasnot yet ratifiedtheUnitedNationsKyoto
Protocol, which wasextendedat the 2012 meetingoftheUnitedNationsFrameworkon Climate ChangeConferenceoftheParties
(COP 18). TheKyoto Protocol nowrequiresparticipatingdevelopedcountriesto cap GHG emissionsat certainlevelsuntil 2020,
when thenewglobal agreement on emissionsreduction is scheduledto becomeeffective. This newglobal agreement for GHG
emissionsreductionswasagreedto onlyinconcept duringtheCOP18, withatimeline for establishingtheglobal targetsby2015. On
November 22,2013,at the 2013 COP 19heldinWarsaw, Poland, participatingcountriesfurther agreedto providetheir“intended
nationallydeterminedcontributions” by thefirstquarter of2015in preparation for formallysettingglobal target in 2015. Theother
major issues discussedat COP 19were demands fromdevelopingcountriesfor increasedclimate finance,andfor a new
mechanism to help especiallyvulnerable nationscope withunavoidable “loss anddamage”resultingfromclimate change.
Developedcountries, which hadpreviouslypromisedto mobilize a total of$100 billion a year by 2020,refusedto set a quantified
interim goal for rampingup climate finance.
Federal Climate Change Legislation and Regulation. Variousstakeholders, includingExelon,legislatorsandregulators, shareholders
andnon-governmental organizations, aswell asother companiesinmanybusiness sectorsare consideringways to address the
climate changeissue,includingthe enactment offederal climate changelegislation.Itis highlyuncertainwhether Federal legislation
to reduceGHG emissionswill be enacted. If such legislation is adopted, Exelon mayincur costseither to further limitoroffset the
GHG emissionsfromitsoperationsor to procure emission allowancesor credits. InJune 2013,theWhite House releasedthe
President’s Climate Action Plan which consistsofawidevarietyofexecutiveactionstargeting GHG reductions, preparingfor the
impactsofclimate changeandshowingleadershipinternationally; but the plan did not directlytrigger anynewrequirementsor
legislativeaction.
TheU.S. EPAis addressingtheissue ofcarbon dioxide(CO2)emissionsregulation for newandexistingelectric generatingunits
through theNewSourcePerformanceStandards (NSPS) under Section 111 oftheClean AirAct.Pursuant to President Obama’s
June 25, 2013 memorandumto U.S. EPA,theAgency re-proposedaSection 111(b) regulation for newunitsinSeptember 2013 that
mayresult inmaterial costsofcompliancefor CO2emissionsfor newfossil-fuel electric generatingunits, particularlycoal-firedunits.
Under thePresident’s memorandum, theU.S. EPAis alsorequiredto proposeaSection 111(d) rule no later than June 1,2014to
establish CO2emission regulationsfor existingstationarysources.
Regional and State Climate Change Legislation and Regulation. After a two-year programreview, thenine northeastand mid-
Atlantic statescurrentlyparticipatingintheRegional GreenhouseGasReduction Initiative(RGGI) releasedan updatedRGGI Model
Rule andProgramReviewRecommendationsSummaryon February7,2013.Under theupdatedRGGI program, which mustbe
approvedpursuant to the applicable legislativeand/or regulatoryprocess ineach RGGI state,theregional RGGI CO2budget would
bereduced, startingin 2014, fromitscurrent 165 million ton level to 91million tons, witha2.5 percent reduction inthecap level each
year between 2015-2020.Includedinthenewprogramare provisionsfor costcontainment reserve(CCR)allowances, which will
becomeavailable if the total demandfor allowances, abovetheCCRtrigger price,exceeds thenumber ofCO2 allowancesavailable
for purchaseatauction. (CCRtrigger pricesare $4 in 2014, $6 in 2015, $8 in 2016and$10 in 2017, rising2.5 percent thereafter to
account for inflation). Such an outcomecouldput modestupwardpressure on wholesale power prices; however,thespecifics are
currentlyuncertain.
At thestate level,theIllinois Climate ChangeAdvisoryGroup,createdbyExecutiveOrder 2006-11 on October 5, 2006, madeits
final recommendationson September 6, 2007to meet theGovernor’s GHG reduction goals. At this time,the onlyrequirements
imposedbythestate ofIllinois are the energy efficiency andrenewable portfoliostandards intheIllinois Power Actthat applyto
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