Exelon 2002 Annual Report Download - page 114

Notes To Consolidated Financial Statements
exelon corporation and subsidiary companies
112
Transmission
Net Capacity Power Only Power Only Purchases from Rights
Purchases(1) Sales AmerGen Non-Affiliates Purchases(2)
2003 $ 589 $ 2,606 $ 280 $ 1,722 $ 86
2004 639 1,181 292 768 93
2005 356 355 472 283 84
2006 328 92 472 239 3
2007 408 22 179 227 –
Thereafter 3,742 1 2,638 829 –
Total $ 6,062 $ 4,257 $ 4,333 $ 4,068 $ 266
(1) On October 2, 2002, Generation notified Midwest Generation of its exercise of termination options under the existing Collins Generating Station (Collins) and Peaking Unit (Peaking)
Purchase Power Agreements. Generation exercised its termination options on 1,727 MWs in 2003 and 2004. In 2003, Generation will take 1,778 MWs of option capacity under the Collins
and Peaking Unit Agreements as well as 1,265 MWs of option capacity under the Coal Generation Purchase Power Agreement. Net capacity purchases in 2004 include 3,474 MWs of
optional capacity from Midwest Generation. Net Capacity Purchases also include capacity sales to TXU under the purchase power agreement entered into in connection with the purchase
of two generating plants in April 2002, which states that TXU will purchase the plant output from May through September from 2002 through 2006. During the periods covered by the
power purchase agreement,TXU will make fixed capacity payments and will provide fuel to Exelon in return for exclusive rights to the energy and capacity of the generation plants.The
combined capacity of the two plants is 2,334 MWs.
(2) Transmission Rights Purchases include estimated commitments in 2004 and 2005 for additional transmission rights that will be required to fulfill firm sales contracts.
Energy Commitments
Exelon’s wholesale operations include the physical delivery and
marketing of power obtained through its generation capacity,
and long, intermediate and short-term contracts. Exelon main-
tains a net positive supply of energy and capacity, through own-
ership of generation assets and power purchase and lease
agreements, to protect it from the potential operational failure
of one of its owned or contracted power generating units.
Exelon has also contracted for access to additional generation
through bilateral long-term power purchase agreements.These
agreements are firm commitments related to power generation
of specific generation plants and/or are dispatchable in
nature.Exelon enters into power purchase agreements with the
objective of obtaining low-cost energy supply sources to meet
its physical delivery obligations to its customers.Exelon has also
purchased firm transmission rights to ensure that it has reli-
able transmission capacity to physically move its power sup-
plies to meet customer delivery needs. The primary intent and
business objective for the use of its capital assets and contracts
is to provide Exelon with physical power supply to enable it
to deliver energy to meet customer needs. Exelon primarily
uses financial contracts in its wholesale marketing activities
for hedging purposes. Exelon also uses financial contracts to
manage the risk surrounding trading for profit activities.
Exelon has entered into bilateral long-term contractual
obligations for sales of energy to load-serving entities, includ-
ing electric utilities, municipalities, electric cooperatives, and
retail load aggregators.Exelon also enters into contractual obli-
gations to deliver energy to wholesale market participants who
primarily focus on the resale of energy products for delivery.
Exelon provides delivery of its energy to these customers
through access to its transmission assets or rights for firm
transmission.
Generation has power purchase agreements (PPAs) with
Midwest Generation, LLC (Midwest Generation) for the purchase
of capacity from its coal-fired stations through 2004. Con-
tracted capacity and capacity available through the exercise of
an annual option are 1,696 MWs and 3,949 MWs in 2003 and
2004,respectively.
The agreements also provide for the option to purchase 1,084
MWs of oil and gas-fired capacity, and 857 MWs of peaking
capacity, subject to reduction.
Generation has entered into PPAs with AmerGen, under
which it will purchase all the energy from Unit No. 1 at Three
Mile Island Nuclear Station after December 31, 2001 through
December 31, 2014. Under a January 1, 2003 PPA, Generation will
purchase from AmerGen all of the residual energy from the
Clinton Nuclear Power Station (Clinton), through December 31,
2003.Currently, the residual output is approximately 31% of the
total output of Clinton. In accordance with the terms of the
AmerGen partnership agreement,the 2003 PPA will be extended
through the end of the AmerGen partnership agreementin 2006.
Exelon has a long-term supply agreement through Decem-
ber 2022 with Distrigas of Massachusetts, LLC to guarantee
physical gas supply to its New England generating units. Under
the agreement,prices are indexed to New England gas markets.
At December 31,2002,Exelon had long-term commitments,
relating to the purchase and sale of energy, capacity and trans-
mission rights from unaffiliated utilities and others, including
the Midwest Generation and AmerGen contracts, as expressed
in the following tables: