ComEd 2015 Annual Report Download - page 42

Table of Contents
generation oversight committee of the Exelon board of directors evaluates risks related to the generation business. The risk factors discussed
below could adversely affect one or more of the Registrants’ results of operations or cash flows and the market prices of their publicly traded
securities. Each of the Registrants has disclosed the known material risks that affect its business at this time. However, there may be further
risks and uncertainties that are not presently known or that are not currently believed by a Registrant to be material that could adversely affect its
performance or financial condition in the future.
Exelon’s financial conditions and results of operations are affected to a significant degree by: (1) Generation’s position as a predominantly
nuclear generator selling power into competitive energy markets with a concentration in select regions, and (2) the role of ComEd, PECO and BGE
as operators of electric transmission and distribution systems in three of the largest metropolitan areas in the United States. Factors that affect
the financial condition and results of operations of the Registrants fall primarily under the following categories, all of which are discussed in further
detail below:
• Market and Financial Factors. Exelon’s and Generation’s results of operations are affected by price fluctuations in the energy markets.
Power prices are a function of supply and demand, which in turn are driven by factors such as (1) the price of fuels, in particular the
price of natural gas, which affects the prices that Generation can obtain for the output of its power plants, (2) the presence of other
generation resources in the markets in which Generation’s output is sold, (3) the demand for electricity in the markets where the
Registrants conduct their business, and (4) the impacts of on-going competition in the retail channel.
• Regulatory and Legislative Factors. The regulatory and legislative factors that affect the Registrants include changes to the laws and
regulations that govern competitive markets and utility cost recovery, and that drive environmental policy. In particular, Exelon’s and
Generation’s financial performance could be affected by changes in the design of competitive wholesale power markets or Generation’s
ability to sell power in those markets. In addition, potential regulation and legislation, including legislation or regulation regarding climate
change and renewable portfolio standards, could have significant effects on the Registrants. Also, returns for ComEd, PECO and BGE
are influenced significantly by state regulation and regulatory proceedings.
• Operational Factors. The Registrants’ operational performance is subject to those factors inherent in running the nation’s largest fleet of
nuclear power reactors and large electric and gas distribution systems. The safe and effective operation of the nuclear facilities and the
ability to effectively manage the associated decommissioning obligations as well as the ability to maintain the availability, reliability and
safety of its energy delivery systems are fundamental to Exelon’s ability to protect and grow shareholder value. Additionally, the
operating costs of ComEd, PECO and BGE, and the opinions of their customers and regulators, are affected by those companies’ ability
to maintain the reliability and safety of their energy delivery systems.
• Risks Related to the Pending Merger with PHI. There are various risks and uncertainties associated with the merger agreement
announced with PHI on April 29, 2014.
A discussion of each of these risk categories and other risk factors is included below.
Market and Financial Factors
Generation is exposed to depressed prices in the wholesale and retail power markets, which could negatively affect its results of
operations or cash flows. (Exelon and Generation)
Generation is exposed to commodity price risk for the unhedged portion of its electricity generation supply portfolio. Generation’s earnings
and cash flows are therefore subject to variability as spot and forward market prices in the markets in which it operates rise and fall.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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