ComEd 2015 Annual Report Download - page 96

Table of Contents
reliability, to reduce energy production costs as a result of more efficient operations and to reduce the need for out of market energy payments to
suppliers. Generation participated actively in PJM’s stakeholder process through which PJM developed the proposal and also actively participated
in the FERC proceeding including filing comments. On June 9, 2015, FERC approved PJM’s filing largely as proposed by PJM, including
transitional auction rules for delivery years 2016/2017 through 2017/2018. As a result of this and several related orders, PJM hosted its 2018/2019
Base Residual Auction (results posted on August 21, 2015) and its transitional auction for delivery year 2016/2017 (results posted on August 31,
2015) and its transitional auction for delivery years 2017/2018 (results posted on September 9, 2015).
MISO Capacity Market Results. On April 14, 2015, the Midcontinent Independent System Operator (MISO) released the results of its
capacity auction covering the June 2015 through May 2016 delivery year. As a result of the auction, capacity prices for the zone 4 region in
downstate Illinois increased to $150 per MW per day beginning in June 2015, an increase from the prior pricing of $16.75 per MW per day that was
in effect from June 2014 to May 2015. Generation had an offer that was selected in the auction. However, due to Generation’s ratable hedging
strategy, the results of the capacity auction have not had a material impact on Exelon’s and Generation’s consolidated results of operations and
cash flows.
Additionally, in late May and June 2015, separate complaints were filed at the FERC by each of the State of Illinois, the Southwest Electric
Cooperative, Public Citizens, Inc., and the Illinois Industrial Energy Consumers challenging the results of this MISO capacity auction for the
2015/2016 delivery in MISO delivery zone 4. The complaints allege generally that 1) the results of the capacity auction for zone 4 are not just and
reasonable, 2) the results should be suspended, set for hearing and replaced with a new just and reasonable rate, 3) a refund date should be
established and that 4) certain alleged behavior by one of the market participants other than Exelon or Generation, be investigated.
On October 1, 2015, the FERC announced that it was conducting a non-public investigation (that does not involve Exelon or Generation) into
whether market manipulation or other potential violations occurred related to the auction. On December 31, 2015, the FERC issued a decision that
certain of the rules governing the establishment of capacity prices in downstate Illinois are “not just and reasonable” on a prospective basis. The
FERC ordered that certain rules must be changed for the next auction scheduled for April 2016 that will set capacity prices beginning June 1,
2016. In response to this order, MISO must file certain rule changes with the FERC within 30 days and certain other changes within 90 days. The
FERC continues to conduct its non-public investigation to determine if the April 2015 auction results were manipulated and, if so, whether refunds
are appropriate. The FERC did establish May 28, 2015, the day the first complaint was filed, as the date from which refunds (if ordered) would be
calculated, and it also made clear that the findings in the December 31, 2015 order do not prejudge the investigation or related proceedings.
Generation cannot predict the impact the FERC order may ultimately have on future auction results, capacity pricing or decisions related to the
potential early retirement of the Clinton nuclear plant, however, such impacts could be material to Generation’s future results of operations and
cash flows. See Note 9—Implications of Potential Early Plant Retirements of the Combined Notes to the Consolidated Financial Statements for
additional information on the impacts of the MISO announcement.
MISO has acknowledged the need for capacity market design changes in the zone 4 region and stated that reforms to its capacity market
process may be required to drive future investment and that it plans to engage stakeholders to consider such reforms. The FERC has also
encouraged such efforts.
Subsidized Generation. The rate of expansion of subsidized generation, including low-carbon generation such as wind and solar energy, in
the markets in which Generation’s output is sold can negatively impact wholesale power prices, and in turn, Generation’s results of operations.
89
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.