Exelon 2001 Annual Report Download - page 91

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89
Service Interruptions.In August 1999, three class action lawsuits were filed against ComEd, and subsequently consolidated,
in the Circuit Court of Cook County, Illinois seeking damages for personal injuries, property damage and economic losses
related to a series of service interruptions that occurred in the summer of 1999. The combined effect of these interruptions
resulted in over 168,000 customers losing service for more than four hours. Conditional class certification was approved by
the court for the sole purpose of exploring settlement talks. ComEd filed a motion to dismiss the complaints. On April 24,
2001, the court dismissed four of the five counts of the consolidated complaint without prejudice and the sole remaining
count was dismissed in part. On June 1, 2001, the plaintiffs filed a second amended consolidated complaint and ComEd has
filed an answer. A portion of any settlement or verdict may be covered by insurance; discussions with the carrier are
ongoing. Exelon’s management believes adequate reserves have been established in connection with these cases.
Enron.Exelon is an unsecured creditor in Enron Corp.’s (Enron) bankruptcy proceeding. Exelon’s claim for power and other
products sold to Enron in November and early December 2001 is $8.5 million. Enron may assert that Exelon should not have
closed out and terminated all of its forward contracts with Enron. If Enron is successful in this argument, Exelon’s exposure
could be greater than $8.5 million. Exelon may also be subject to exposure due to the credit policies of ISO-operated spot
markets that allocate defaults of market participants to non-defaulting participants. Exelon has established reserves for
these matters.
As a result of Enron’s bankruptcy, ComEd has potential monetary exposure for customers served by Enron Energy Services
(EES),either as a billing agent or a third party supplier.EES is the billing agent for 366 of ComEd’s customer accounts.On January
7, 2002, EES was authorized by the bankruptcy court to reject its contracts for 129 of these accounts. EES advised Exelon on
January 10, 2002, that it will move to reject its contracts with the remaining 237 accounts during the week of January 14, 2002.
Exelon is working to ensure that customers know what amounts are owed to ComEd, and is obtaining updated billing
addresses for these accounts. As of January 8, 2002, approximately $3.5 million in payments to Exelon were overdue and an
additional $1.8 million in charges is currently payable but not overdue. Therefore, Exelon’s total amount outstanding with
respect to the EES accounts is approximately $5.3 million. Because that amount is owed to Exelon by individual customers, it is
not part of the bankrupt Enron’s estate.
General. Exelon is involved in various other litigation matters.The ultimate outcome of such matters, as well as the matters
discussed above, while uncertain, are not expected to have a material adverse effect on its respective financial condition or
results of operations.