ComEd 2015 Annual Report Download - page 92

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judicial review filed by the OPC, the Sierra Club, the Chesapeake Climate Action Network (CCAN) and Public Citizen, Inc. On January 19, 2016,
the OPC filed a notice of appeal to the Maryland Court of Special appeals, and on January 21, Sierra Club and CCAN filed a notice of appeal. In
the ordinary course this appeal would be resolved no earlier than third quarter 2016.
On August 27, 2015, the District of Columbia Public Service Commission (DCPSC) issued an Opinion and Order denying approval of the
merger, concluding that the merger as presented was not in the public interest. Exelon and PHI filed an Application for Reconsideration with the
DCPSC on September 28, 2015. On October 6, 2015, Exelon, PHI, the District of Columbia Government, the Office of Peoples Counsel, the
District of Columbia Water and Sewer Authority, the National Consumer Law Center, National Housing Trust and National Housing Trust—
Enterprise Preservation Corporation, and the Apartment and Office Building Association of Metropolitan Washington (collectively, Settling Parties)
entered into a Nonunanimous Full Settlement Agreement and Stipulation (Settlement Agreement) with respect to the merger. Exelon and PHI
subsequently filed a motion of joint applicants requesting the DCPSC to reopen the approval application to allow for consideration of the
Settlement Agreement and granting additional requested relief. The new package of benefits totals $78 million and includes commitments to
provide relief of residential customer base rate increases of $26 million, one-time direct bill credits of $14 million, low-income energy assistance of
$16 million, improved reliability, a cleaner and greener D.C. through funding energy efficiency programs and development of renewable energy, and
investment in local jobs and the local economy through workforce development of $5 million. It also guarantees charitable contributions totaling
$19 million over 10 years.
On October 28, 2015, the DCPSC agreed to reopen the approval application to allow for consideration of the Settlement Agreement. Since
then, parties supporting and opposing the Settlement filed testimony, participated in formal hearings and, on December 23, 2015, submitted final
briefs to the DCPSC. The parties now await a formal decision from the DCPSC. The Merger Agreement provides that either Exelon or PHI may
terminate the Merger Agreement if the merger is not completed by October 28, 2015. Pursuant to a Letter Agreement related to the Settlement
Agreement, Exelon and PHI have agreed, among other things, that they will not exercise their rights to terminate the Merger Agreement before
March 4, 2016, except under limited circumstances. If the DCPSC does not approve the Settlement Agreement by March 4, 2016, either Exelon or
PHI may terminate the Settlement Agreement.
The settlements reached and commission orders received to date in Delaware, Maryland and New Jersey include a “most favored nation”
provision which, generally speaking, requires allocation of merger benefits proportionately across all the jurisdictions. When applying the most
favored nation provision to the settlement terms and other conditions established in the merger approvals received to date, and as proposed in the
Settlement Agreement filed with the DCPSC, Exelon and PHI currently estimate direct benefits of $430 million or more on a net present value
basis (excluding charitable contributions and renewable generation commitments) will be provided, including rate credits, funding for energy
efficiency programs and other required commitments. Exelon and PHI anticipate substantially all of such amounts will be charged to earnings at
the time of merger close and will be paid by the end of 2017. An additional $53 million will be charged to earnings for charitable contributions,
which are required to be paid over a period of 10 years. Commitments to develop renewable generation, which are expected to be primarily capital
in nature, will be recognized as incurred. Upon completion of the merger, the actual nature, amount, timing and financial reporting treatment for
these commitments may be materially different from the current projection.
Exelon has been named in suits filed in the Delaware Chancery Court alleging that individual directors of PHI breached their fiduciary duties
by entering into the proposed merger transaction and Exelon aided and abetted the individual directors’ breaches. The suits seek to enjoin PHI
from completing the merger or seek rescission of the merger if completed. In addition, they also seek unspecified damages and costs. Exelon was
also named in a federal court suit making similar claims. In September 2014, the parties reached a proposed settlement that would resolve all
claims, which is
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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