Exelon 2003 Annual Report Download - page 123

121Notes to Consolidated Financial Statements
EXELON CORPORATION AND SUBSIDIARY COMPANIES
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 maintains a net positive supply of energy and ca-
pacity, through ownership of generation assets and power
purchase and lease agreements, to protect it from the
potential operational failure of one of its owned or con-
tracted 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 phys-
ical delivery obligations to its customers. Exelon has also
purchased firm transmission rights to ensure that it has
reliable transmission capacity to physically move its power
supplies to meet customer delivery needs. The primary in-
tent and business objective for the use of its capital assets
and contracts is to provide Exelon with physical power sup-
ply 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,
including electric utilities, municipalities, electric coopera-
tives, and retail load aggregators. Exelon also enters into
contractual obligations to deliver energy to wholesale mar-
ket 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.
At December 31, 2003, Exelon had long-term commit-
ments, relating to the purchase and sale of energy, capacity
and transmission rights from unaffiliated utilities and oth-
ers, including the Midwest Generation contract, as expressed
in the following tables:
Net Capacity
Purchases(1)
Power Only
Sales
Power Only
Purchases
Transmission Rights
Purchases(2)
2004 $ 716 $3,393 $ 1,661 $ 113
2005 414 1,088 429 86
2006 410 290 276 3
2007 492 80 253 –
2008 434 – 226 –
Thereafter 3,880 – 723 –
Total $6,346 $ 4,851 $3,568 $202
(1) Generation will take 1,696 MWs of non-option coal capacity, 687 MWs of option coal capacity, 1,084 MWs of Collins Station capacity and 391 MWs of peaking capacity from Mid-
west Generation in 2004, the fifth and final year of the contract. In total, Generation has retained 3,858 MWs of capacity under the terms of the three existing PPAs with Mid-
west 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 Generation in return for exclusive rights to the energy and capacity of the gen-
eration plants. The combined capacity of the two plants is 2,334 MWs. Net capacity purchases also include tolling agreements that are accounted for as operating leases.
(2) Transmission rights purchases include estimated commitments in 2004 and 2005 for additional transmission rights that will be required to fulfill firm sales contracts.
In connection with the 2001 corporate restructuring, Gen-
eration entered into a PPA with ComEd under which
Generation has agreed to supply all of ComEd’s load
requirements through 2004. Prices for this energy vary de-
pending upon the time of day and month of delivery. An ex-
tension of this contract for 2005 and 2006 has been agreed
to by ComEd and Generation with substantially the same
terms as the PPA currently in effect, except for the prices of
energy which were reset to reflect the current rates at the
time the extension was agreed to. This extension must still
be filed with the ICC. Subsequent to 2006, ComEd will obtain
all of its supply from market sources, which could include
Generation. Additionally, Generation entered into a PPA with
PECO under which PECO obtains substantially all of its elec-
tric supply from Generation through 2010. Also, under the
restructuring, PECO assigned its rights and obligations un-
der various PPAs and fuel supply agreements to Generation.
Generation supplies power to PECO from the transferred
generation assets, assigned PPAs and other market sources.