ComEd 2015 Annual Report Download - page 342

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
benchmark prices are the forward prices of energy projected through the contract term and are set at the point of supplier bid submittals. If the
forward market price of energy exceeds the benchmark price, the suppliers are required to post collateral for the secured credit portion after
adjusting for any unpaid deliveries and unsecured credit allowed under the contract. The unsecured credit used by the suppliers represents
ComEd’s net credit exposure. As of December 31, 2015, ComEd’s net credit exposure to suppliers was immaterial.
ComEd is permitted to recover its costs of procuring energy through the Illinois Settlement Legislation. ComEd’s counterparty credit risk is
mitigated by its ability to recover realized energy costs through customer rates. See Note 3—Regulatory Matters for additional information.
PECO’s supplier master agreements that govern the terms of its electric supply procurement contracts, which define a supplier’s
performance assurance requirements, allow a supplier to meet its credit requirements with a certain amount of unsecured credit. The amount of
unsecured credit is determined based on the supplier’s lowest credit rating from the major credit rating agencies and the supplier’s tangible net
worth. The credit position is based on the initial market price, which is the forward price of energy on the day a transaction is executed, compared
to the current forward price curve for energy. To the extent that the forward price curve for energy exceeds the initial market price, the supplier is
required to post collateral to the extent the credit exposure is greater than the supplier’s unsecured credit limit. The unsecured credit used by the
suppliers represents PECO’s net credit exposure. As of December 31, 2015, PECO had no net credit exposure to suppliers.
PECO is permitted to recover its costs of procuring electric supply through its PAPUC-approved DSP Program. PECO’s counterparty credit
risk is mitigated by its ability to recover realized energy costs through customer rates. See Note 3—Regulatory Matters for additional information.
PECO’s natural gas procurement plan is reviewed and approved annually on a prospective basis by the PAPUC. PECO’s counterparty credit
risk under its natural gas supply and asset management agreements is mitigated by its ability to recover its natural gas costs through the PGC,
which allows PECO to adjust rates quarterly to reflect realized natural gas prices. PECO does not obtain collateral from suppliers under its natural
gas supply and asset management agreements. As of December 31, 2015, PECO’s credit exposure under its natural gas supply and asset
management agreements with investment grade suppliers was immaterial.
BGE is permitted to recover its costs of procuring energy through the MDPSC-approved procurement tariffs. BGE’s counterparty credit risk
is mitigated by its ability to recover realized energy costs through customer rates. See Note 3—Regulatory Matters for additional information.
BGE’s full requirement wholesale electric power agreements that govern the terms of its electric supply procurement contracts, which define
a supplier’s performance assurance requirements, allow a supplier, or its guarantor, to meet its credit requirements with a certain amount of
unsecured credit. The amount of unsecured credit is determined based on the supplier’s lowest credit rating from the major credit rating agencies
and the supplier’s tangible net worth, subject to an unsecured credit cap. The credit position is based on the initial market price, which is the
forward price of energy on the day a transaction is executed, compared to the current forward price curve for energy. To the extent that the forward
price curve for energy exceeds the initial market price, the supplier is required to post collateral to the extent the credit exposure is greater than
the supplier’s unsecured credit limit. The unsecured credit used by the suppliers represents BGE’s net credit exposure. The seller’s credit
exposure is calculated each business day. As of December 31, 2015, BGE had no net credit exposure to suppliers.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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