Exelon 2014 Annual Report Download - page 153

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Energy Efficiency and Renewable Energy Resources. Electric utilities in Illinois are required to include cost-effective energy
efficiency resources in their plans to meet an incremental annual program energy savings requirement of 0.2% of energy delivered to
retail customers for the year ended June 1, 2009, which increases annually to 2.0% of energy delivered in the year commencing
June 1, 2015 and each year thereafter. Additionally, during the ten-year period that began June 1, 2008, electric utilities must
implement cost-effective demand response measures to reduce peak demand by 0.1% over the prior year for eligible retail
customers. The energy efficiency and demand response goals are subject to rate impact caps each year. Utilities are allowed
recovery of costs for energy efficiency and demand response programs, subject to approval by the ICC. In January 2014, the ICC
approved ComEd’s third three-year Energy Efficiency and Demand Response Plan covering the period June 2014 through May
2017. The plans are designed to meet Illinois’ energy efficiency and demand response goals through May 2017, including reductions
in delivered energy to all retail customers and in the peak demand of eligible retail customers.
EIMA provides for additional energy efficiency in Illinois. Starting in the June 2013 through May 2014 period and occurring annually
thereafter, as part of the IPA procurement plan, ComEd is to include cost-effective expansion of current energy efficiency programs,
and additional new cost-effective and/or third-party energy efficiency programs that are identified through a request for proposal
process. All cost-effective energy efficiency programs are included in the IPA procurement plan for consideration of
implementation. While these programs are monitored separately from the Energy Efficiency Portfolio Standard (EEPS), funds for
both the EEPS portfolio and IPA energy efficiency programs are collected under the same rider.
Illinois utilities are required to procure cost-effective renewable energy resources in amounts that equal or exceed 2% of the total
electricity that each electric utility supplies to its eligible retail customers. ComEd is also required to acquire amounts of renewable
energy resources that will cumulatively increase this percentage to at least 10% by June 1, 2015, with an ultimate target of at least
25% by June 1, 2025. All goals are subject to rate impact criteria set forth by Illinois legislation. As of December 31, 2014, ComEd
had purchased sufficient renewable energy resources or equivalents, such as RECs, to comply with the Illinois legislation. ComEd
currently retires all RECs upon transfer and acceptance. ComEd is permitted to recover procurement costs of RECs from retail
customers without mark-up through rates. See Note 22—Commitments and Contingencies for information regarding ComEd’s future
commitments for the procurement of RECs.
Pennsylvania Regulatory Matters
2010 Pennsylvania Electric and Natural Gas Distribution Rate Cases. On December 16, 2010, the PAPUC approved the
settlement of PECO’s electric and natural gas distribution rate cases, which were filed in March 2010, providing increases in annual
service revenue of $225 million and $20 million, respectively. The electric settlement provides for recovery of PJM transmission
service costs on a full and current basis through a rider. The approved electric and natural gas distribution rates became effective on
January 1, 2011.
In addition, the settlements included a stipulation regarding how tax benefits related to the application of any new IRS guidance on
repairs deduction methodology are to be handled from a rate-making perspective. The settlements require that the expected cash
benefit from the application of any new guidance to tax years prior to 2011 be refunded to customers over a seven-year period. On
August 19, 2011, the IRS issued Revenue Procedure 2011-43 providing a safe harbor method of tax accounting for electric
transmission and distribution property. PECO adopted the safe harbor and elected a method change for the 2010 tax year. The
expected total refund to customers for the tax cash benefit from the application of the safe harbor to costs incurred prior to 2010 is
$171 million. On October 4, 2011, PECO filed a supplement to its electric distribution tariff to execute the refund to customers of the
tax cash benefit related to the IRC Section 481(a) “catch-up” adjustment claimed on the 2010 income tax return, which is subject to
adjustment based on the outcome of IRS examinations. Credits have been reflected in customer bills since January 1, 2012.
In September 2012, PECO filed an application with the IRS to change its method of accounting for gas distribution repairs for the
2011 tax year. The expected total refund to customers for the tax cash benefit from the application of the new method to costs
incurred prior to 2011 is $54 million. This amount is subject to adjustment based on the outcome of IRS examinations. Credits have
been reflected in customer bills since January 1, 2013. PECO currently anticipates that the IRS will issue guidance during 2015
providing a safe harbor method of accounting for gas transmission and distribution property.
The prospective tax benefits claimed as a result of the new methodology will be reflected in tax expense in the year in which they are
claimed on the tax return and will be reflected in the determination of revenue requirements in the next electric and natural gas
distribution rate cases. See Note 14—Income Taxes for additional information.
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