ComEd 2015 Annual Report Download - page 106

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projects. As part of the changes to the transmission planning procedures, the FERC required removal from all FERC-approved tariffs and
agreements of a right of first refusal to build certain new transmission facilities. On October 25, 2012, certain of the PJM transmission owners,
including ComEd, PECO and BGE (collectively, the PJM Transmission Owners), submitted a filing asserting that their contractual rights embodied
in the PJM governing documents continue to justify their right of first refusal to construct new reliability (and related) transmission projects and that
the FERC should not be allowed to override such rights absent a showing that it is in the public interest to do so under the FERC’s “”
standard of review. This is a heightened standard of review which the PJM Transmission Owners argued could not be satisfied based on the facts
applicable to them. On March 22, 2013, FERC issued an order that, among other things, rejected the arguments of the PJM Transmission Owners
that changes to the PJM governing documents were entitled to review under the  standard. The FERC’s March 22, 2013 order could
enable third parties to seek to build certain regional transmission projects that had previously been reserved for the PJM Transmission Owners,
potentially reducing ComEd PECO and BGE’s financial return on new investments in energy transmission facilities.
Numerous parties sought rehearing of the FERC’s March 22, 2013 order, including the PJM Transmission Owners. On May 15, 2014, FERC
denied the PJM Transmission Owners rehearing request. Several parties filed an appeal of the FERC’s May 15, 2014, Order which upheld PJM’s
right of first refusal language in the D.C. Circuit. The ultimate outcome of this proceeding cannot be predicted at this time, however, it could be
material to Exelon, ComEd, PECO and BGE’s results of operations and cash flows.
FERC Transmission Complaint (Exelon and BGE). On February 27, 2013, consumer advocates and regulators from the District of
Columbia, New Jersey, Delaware and Maryland, and the Delaware Electric Municipal Cooperatives (the parties), filed a complaint at FERC against
BGE and the PHI companies relating to their respective transmission formula rates. BGE’s formula rate includes a 10.8% base rate of return on
common equity (ROE) and a 50 basis point incentive for participating in PJM (and certain additional incentive basis points on certain projects). The
parties sought a reduction in the base return on equity to 8.7% and changes to the formula rate process. Under FERC rules, any revenues subject
to refund are limited to a fifteen month period and the earliest date from which the base ROE could be adjusted and refunds required is the date of
the complaint.
On August 21, 2014, FERC issued an order in the BGE and PHI companies’ proceeding, which established hearing and settlement judge
procedures for the complaint, and set a refund effective date of February 27, 2013.
On December 8, 2014, various state agencies in Delaware, Maryland, New Jersey, and D.C. filed a second complaint against BGE regarding
the base ROE of the transmission business seeking a reduction from 10.8% to 8.8%. The filing of the second complaint created a second refund
window. By order issued on February 9, 2015, FERC established a hearing on the second complaint with the complainants’ requested refund
effective date of December 8, 2014. On February 20, 2015, the Chief Judge issued an order consolidating the two complaint proceedings and
established an Initial Decision issuance deadline of February 29, 2016.
On November 6, 2015, BGE and the PHI companies and the complainants filed a settlement with FERC covering the issues raised in the
complaints. The settlement provides for a 10% base ROE, effective March 8, 2016, which will be augmented by the PJM incentive adder of 50
basis points, and refunds to BGE customers of $13.7 million. The settlement also provides a moratorium on any change in the ROE until June 1,
2018. On December 16, 2015, the Presiding Administrative Law Judge submitted a Certification of the Uncontested Settlement to the FERC
Commissioners. The settlement remains subject to FERC approval. See Note 3—Regulatory Matters of the Combined Notes to Consolidated
Financial Statements for additional information.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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