ComEd 2015 Annual Report Download - page 247

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Amortization of income tax related regulatory assets and liabilities is generally recorded to Income tax expense. With the exception of the
regulatory assets and liabilities discussed above, when the recovery period is more than one year, the amortization is generally recorded to
Depreciation and amortization in the Registrants’ Consolidated Statements of Operations and Comprehensive Income.
See Note 3—Regulatory Matters and Note 24—Supplemental Financial Information for additional information regarding Generation’s nuclear
fuel, Generation’s ARC and the amortization of ComEd’s, PECO’s and BGE’s regulatory assets.
Asset Retirement Obligations (Exelon, Generation, ComEd, PECO and BGE)
The authoritative guidance for accounting for AROs requires the recognition of a liability for a legal obligation to perform an asset retirement
activity even though the timing and/or method of settlement may be conditional on a future event. To estimate its decommissioning obligation
related to its nuclear generating stations, Generation uses a probability-weighted, discounted cash flow model which, on a unit-by-unit basis,
considers multiple outcome scenarios that include significant estimates and assumptions, and are based on decommissioning cost studies, cost
escalation rates, probabilistic cash flow models and discount rates. Generation generally updates its ARO annually during the third quarter, unless
circumstances warrant more frequent updates, based on its review of updated cost studies and its annual evaluation of cost escalation factors and
probabilities assigned to various scenarios. Decommissioning cost studies are updated, on a rotational basis, for each of Generation’s nuclear
units at least every five years unless circumstances warrant more frequent updates (such as a change in assumed operating life for a nuclear
plant). As part of the annual cost study update process, Generation evaluates newly assumed costs or substantive changes in previously
assumed costs to determine if the cost estimate impacts are sufficiently material to warrant application of the updated estimates to the AROs
across the nuclear fleet outside of the normal five-year rotating cost study update cycle. The liabilities associated with Exelon’s non-nuclear AROs
are adjusted on an ongoing rotational basis, at least once every five years. Changes to the recorded value of an ARO result from the passage of
new laws and regulations, revisions to either the timing or amount of estimates of undiscounted cash flows, and estimates of cost escalation
factors. AROs are accreted throughout each year to reflect the time value of money for these present value obligations through a charge to
Operating and maintenance expense in the Consolidated Statements of Operations and Comprehensive Income or, in the case of the majority of
ComEd’s, PECO’s, and BGE’s accretion, through an increase to regulatory assets. See Note 16—Asset Retirement Obligations for additional
information.
Capitalized Interest and AFUDC (Exelon, Generation, ComEd, PECO and BGE)
During construction, Exelon and Generation capitalize the costs of debt funds used to finance non-regulated construction projects.
Capitalization of debt funds is recorded as a charge to construction work in progress and as a non-cash credit to interest expense.
Exelon, ComEd, PECO and BGE apply the authoritative guidance for accounting for certain types of regulation to calculate AFUDC, which is
the cost, during the period of construction, of debt and equity funds used to finance construction projects for regulated operations. AFUDC is
recorded to construction work in progress and as a non-cash credit to AFUDC that is included in interest expense for debt-related funds and other
income and deductions for equity-related funds. The rates used for capitalizing AFUDC are computed under a method prescribed by regulatory
authorities.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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