Exelon 2001 Annual Report Download - page 60

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58
Revenues
Operating revenues are generally recorded as service is rendered or energy is delivered to customers. At the end of each
month, Exelon accrues an estimate for the unbilled amount of energy delivered or services provided to its electric and gas
customers. Exelon recognizes contract revenues and profits on certain long-term fixed-price contracts from its services
businesses under the percentage-of-completion method of accounting based on costs incurred as a percentage of estimated
total costs of individual contracts.
Purchased Gas Adjustment Clause
PECO’s natural gas rates are subject to a fuel adjustment clause designed to recover or refund the difference between the
actual cost of purchased gas and the amount included in base rates. Differences between the amounts billed to customers
and the actual costs recoverable are deferred and recovered or refunded in future periods by means of prospective quarterly
adjustments to rates.
Nuclear Fuel
The cost of nuclear fuel is capitalized and charged to fuel expense using the unit of production method. Estimated costs of
nuclear fuel storage and disposal at operating plants are charged to fuel expense as the related fuel is consumed.
Depreciation, Amortization and Decommissioning
Depreciation is provided over the estimated service lives of property, plant and equipment on a straight line basis. Annual
depreciation provisions for financial reporting purposes,expressed as a percentage of average service life for each asset category
are presented in the table below. See Note 23 for information on service life extensions for certain nuclear generating stations.
Asset Category 2001 2000 1999
Electric-Transmission and Distribution 3.97% 4.16% 1.83%
Electric-Generation 3.11% 5.02% 5.12%
Gas 2.34% 2.39% 2.36%
Common-Gas and Electric 6.26% 5.09% 4.45%
Other Property and Equipment 9.53% 8.11% 8.61%
Amortization of regulatory assets is provided over the recovery period as specified in the related regulatory agreement. Goodwill
associated with the Merger was amortized on a straight line basis over 40 years in 2000 and 2001. Goodwill associated with other
acquisitions was amortized over periods from 10 to 20 years in 2000 and 2001. Accumulated amortization of goodwill was $185
million, $35 million and $1 million at December 31, 2001, 2000, and 1999, respectively. Effective January 1, 2002 under SFAS No. 142,
“Goodwill and Other Intangible Assets” (SFAS No. 142), goodwill recorded by Exelon will no longer be subject to amortization.
Exelon currently recovers costs for decommissioning its nuclear generating stations through regulated rates. The
amounts recovered from customers are deposited in trust accounts and invested for funding of future costs for operating
and retired plants. Exelon accounts for the current period’s cost of decommissioning related to generating plants previously
owned by PECO following common regulatory accounting practices by recording a charge to depreciation expense and a
corresponding liability in accumulated depreciation concurrently with decommissioning collections. Regulatory accounting
practices for the generating stations previously owned by ComEd were discontinued as a result of an ICC order capping
ComEd’s ultimate recovery of decommissioning costs. See Note 4—Corporate Restructuring and Note 12—Nuclear
Decommissioning and Spent Fuel Storage regarding regulatory accounting practices for nuclear generating stations
transferred by ComEd to Generation. The difference between the current cost decommissioning estimate and the
decommissioning liability recorded in accumulated depreciation for the former ComEd operating stations is amortized to
depreciation expense on a straight-line basis over the remaining lives.The current cost decommissioning estimate (adjusted
annually to reflect inflation) for the former ComEd retired units recorded in deferred credits and other liabilities is accreted
to depreciation expense. Exelon believes that the amounts being recovered from customers through electric rates along with
the earnings on the trust funds will be sufficient to fully fund its decommissioning obligations.