Exelon 2014 Annual Report Download - page 101

Exelon’s and Generation’s expected qualified pension plan contributions above include $36 million related to legacy CENG plans
that will be funded by CENG as provided in an Employee Matters Agreement (EMA) between Exelon and CENG. Unlike the qualified
pension plans, Exelon’s non-qualified pension plans are not funded. Exelon expects to make non-qualified pension plan benefit
payments of $15 million in 2015, of which Generation, ComEd, PECO and BGE will make payments of $6 million, $1 million, $1
million, and $1 million respectively. See Note 16—Retirement Benefits of the Combined Notes to Consolidated Financial Statements
for the Registrants’ 2014 and 2013 pension contributions.
To the extent interest rates decline significantly or the pension plans do not earn the expected asset return rates, annual pension
contribution requirements in future years could increase, especially in years 2017 and beyond. Additionally, the contributions above
could change if Exelon changes its pension funding strategy.
Unlike qualified pension plans, other postretirement benefit plans are not subject to statutory minimum contribution requirements and
certain plans are not funded. Exelon’s management has historically considered several factors in determining the level of
contributions to its funded other postretirement benefit plans, including levels of benefit claims paid and regulatory implications
(amounts deemed prudent to meet regulator expectations and best assure continued recovery). Exelon expects to make other
postretirement benefit plan contributions, including benefit payments related to unfunded plans, of approximately $37 million in 2015,
of which Generation, ComEd, PECO, and BGE expect to contribute $17 million, $2 million, $0 million, and $17 million, respectively.
See Note 16—Retirement Benefits of the Combined Notes to Consolidated Financial Statements for the Registrants’ 2014 and 2013
other postretirement benefit contributions.
See the “Contractual Obligations” section for management’s estimated future pension and other postretirement benefits
contributions.
Tax Matters
The Registrants’ future cash flows from operating activities may be affected by the following tax matters:
• In the event of a fully successful IRS challenge to Exelon’s like-kind exchange position, the potential tax and after-tax interest,
exclusive of penalties, that could become currently payable as of December 31, 2014 may be as much as $810 million, of which
approximately $310 million would be attributable to ComEd after consideration of Exelon’s agreement to hold ComEd harmless,
and the balance at Exelon. Litigation could take several years such that the estimated cash and interest impacts will increase by
a material amount.
• Exelon, Generation, and ComEd expect to receive tax refunds of approximately $430 million, $190 million, and $260 million,
respectively, in 2015. PECO expects to make tax payments of approximately $6 million related to IRS positions settling in 2015.
• Given the current economic environment, state and local governments are facing increasing financial challenges, which may
increase the risk of additional income tax levies, property taxes and other taxes.
• On December 19th, 2014, President Obama signed H.R. 5771, The Tax Increase Prevention Act. The Act included an extension
of 50% bonus depreciation for 2014. As a result of the 50% bonus depreciation extension, Exelon, ExGen, ComEd, PECO, and
BGE are estimated to generate incremental cash of approximately $600 million, $272 million, $217 million, $53 million, and $46
million, respectively. The resulting cash benefits are expected primarily in 2015. The cash generated is an acceleration of tax
benefits that Registrants would have received over the normal depreciable life of the property. Furthermore, the extension of
50% bonus depreciation will result in a decrease to Generation’s Domestic Production Activities Deduction, reducing cash tax
benefits and increasing income tax expense by approximately $30 million for 2014. ComEd’s 2014 revenue requirement is
expected to decrease by approximately $12 million (after-tax) due to the extension of 50% bonus depreciation.
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