ComEd 2015 Annual Report Download - page 55

Table of Contents
Changes in ComEd’s, PECO’s and BGE’s respective terms and conditions of service, including their respective rates, are subject to
regulatory approval proceedings and/or negotiated settlements that are at times contentious, lengthy and subject to appeal, which lead
to uncertainty as to the ultimate result and which could introduce time delays in effectuating rate changes. (Exelon, ComEd, PECO and
BGE)
ComEd, PECO and BGE are required to engage in regulatory approval proceedings as a part of the process of establishing the terms and
rates for their respective services. These proceedings typically involve multiple parties, including governmental bodies and officials, consumer
advocacy groups and various consumers of energy, who have differing concerns but who have the common objective of limiting rate increases or
even reducing rates. The proceedings generally have timelines that may not be limited by statute. Decisions are subject to appeal, potentially
leading to additional uncertainty associated with the approval proceedings. The potential duration of such proceedings creates a risk that rates
ultimately approved by the applicable regulatory body may not be sufficient for ComEd, PECO or BGE to recover its costs by the time the rates
become effective. Established rates are also subject to subsequent prudency reviews by state regulators, whereby various portions of rates could
be adjusted, including recovery mechanisms for costs associated with the procurement of electricity or gas, bad debt, MGP remediation, smart
grid infrastructure, and energy efficiency and demand response programs.
In certain instances, ComEd, PECO and BGE may agree to negotiated settlements related to various rate matters, customer initiatives or
franchise agreements. These settlements are subject to regulatory approval.
ComEd, PECO and BGE cannot predict the ultimate outcomes of any settlements or the actions by Illinois, Pennsylvania, Maryland or
Federal regulators in establishing rates, including the extent, if any, to which certain costs such as significant capital projects will be recovered or
what rates of return will be allowed. Nevertheless, the expectation is that ComEd, PECO and BGE will continue to be obligated to deliver electricity
to customers in their respective service territories and will also retain significant default service obligations, referred to as POLR, DSP and SOS
for ComEd, PECO and BGE, respectively, to provide electricity and natural gas to certain groups of customers in their respective service areas
who do not choose an alternative supplier. The ultimate outcome and timing of regulatory rate proceedings have a significant effect on the ability of
ComEd, PECO and BGE, as applicable, to recover their costs and could have a material adverse effect on ComEd’s, PECO’s and BGE’s results
of operations, cash flows and financial position. See Note 3—Regulatory Matters of the Combined Notes to the Consolidated Financial Statements
for information regarding rate proceedings.
Federal or additional state RPS and/or energy conservation legislation, along with energy conservation by customers, could negatively
affect the results of operations or cash flows of Generation, ComEd, PECO and BGE. (Exelon, Generation, ComEd, PECO and BGE)
Changes to current state legislation or the development of Federal legislation that requires the use of renewable and alternate fuel sources,
such as wind, solar, biomass and geothermal, could significantly impact Generation, ComEd, PECO and BGE, especially if timely cost recovery is
not allowed. The impact could include increased costs for RECs and purchased power and increased rates for customers.
Federal and state legislation mandating the implementation of energy conservation programs that require the implementation of new
technologies, such as smart meters and smart grid, have increased capital expenditures and could significantly impact ComEd, PECO and BGE,
if timely cost recovery is not allowed. Furthermore, regulated energy consumption reduction targets and declines in customer energy consumption
resulting from the implementation of new energy conservation technologies could
48
Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.