Exelon 2014 Annual Report Download - page 159

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
New Electric Generation. On April 12, 2012, the MDPSC issued an order directing BGE and two other Maryland utilities to enter
into a contract for differences (CfD) with CPV Maryland, LLC (CPV), under which CPV will construct an approximately 700MW
natural gas-fired combined-cycle generation plant in Waldorf, Maryland, that CPV projected will be in commercial operation by
June 1, 2015. The initial term of the proposed contract is 20 years. The CfD mandates that BGE and the other utilities pay (or
receive) the difference between CPV’s contract prices and the revenues CPV receives for capacity and energy from clearing the unit
in the PJM capacity market. The MDPSC’s order requires the three Maryland utilities to enter into a CfD in amounts proportionate to
their relative SOS load.
On April 16, 2013, the MDPSC issued an order that required BGE to execute a specific form of contract with CPV, and the parties
executed the contract as of June 6, 2013. As of December 31, 2014, there is no impact on Exelon’s and BGE’s results of operations,
cash flows and financial positions. Furthermore, the agreement does not become effective until the resolution of certain items,
including all current litigation.
On April 27, 2012, a civil complaint was filed in the U.S. District Court for the District of Maryland by certain unaffiliated parties that
challenged the actions taken by the MDPSC on Federal law grounds. On October 24, 2013, the U.S. District Court issued a
judgment order finding that the MDPSC’s Order directing BGE and the two other Maryland utilities to enter into a CfD, which assures
that CPV receives a guaranteed fixed price regardless of the price set by the federally regulated wholesale market, violates the
Supremacy Clause of the United States Constitution. On November 22, 2013, the MDPSC and CPV appealed the District Court’s
ruling to the United States Court of Appeals for the Fourth Circuit.
On May 4, 2012, BGE filed a petition in the Circuit Court for Anne Arundel County, Maryland, seeking judicial review of the MDPSC
order under state law. That petition was subsequently transferred to the Circuit Court for Baltimore City and consolidated with similar
appeals that have been filed by other interested parties. On October 1, 2013, the Circuit Court Judge issued a Memorandum Opinion
and Order finding the decisions of the MDPSC were within its statutory authority under Maryland law. This decision is separate from
the judgment in the federal litigation that the MDPSC Order is unconstitutional and the CfD is unenforceable under federal law. The
federal judgment, if upheld, would prevent enforcement of the CfD even if the Circuit Court decision stands. On October 29, 2013,
BGE and the two other Maryland utilities appealed the Circuit Court’s ruling to the Maryland Court of Special Appeals.
Depending on the ultimate outcome of the pending state and federal litigation, on the eventual market conditions, and on the manner
of cost recovery as of the effective date of the agreement, the CfD could have a material impact on Exelon and BGE’s results of
operations, cash flows and financial positions.
Exelon believes that this and other states’ projects may have artificially suppressed capacity prices in PJM and may continue to do
so in future auctions to the detriment of Exelon’s market driven position. In addition to this litigation, Exelon is working with other
market participants to implement market rules that will appropriately limit the market suppressing effect of such state activities.
MDPSC Derecho Storm Order. Following the June 2012 Derecho storm which hit the mid-Atlantic region interrupting electrical
service to a significant portion of the State of Maryland, the MDPSC issued an order on February 27, 2013 requiring BGE and other
Maryland utilities to file several comprehensive reports with short-term and long-term plans to improve reliability and grid resiliency
that were due at various times before August 30, 2013.
On September 3, 2013, BGE filed a comprehensive long term assessment examining potential alternatives for improving the
resiliency of the electric grid and a staffing analysis reviewing historical staffing levels as well as forecasting staffing levels necessary
under various storm scenarios. During the summer of 2014, an evaluation of the reports filed by BGE and other Maryland utilities
was undertaken by consultants on behalf of the MDPSC and MDPSC Staff. The MDPSC Staff also proposed standards for reliability
during major events and estimated times of restoration as well as undertaking an evaluation of performance-based ratemaking
principles and methodologies that would more directly and transparently align reliable service with the utilities’ distribution rates and
that reduce returns or otherwise penalize sub-standard performance. The MDPSC held hearings in September 2014. BGE currently
cannot predict the outcome of these proceedings, which may result in increased capital expenditures and operating costs.
The Maryland Strategic Infrastructure Development and Enhancement Program. In February 2013, the Maryland General
Assembly passed legislation intended to accelerate gas infrastructure replacements in Maryland by establishing a mechanism for
gas companies to promptly recover reasonable and prudent costs of eligible infrastructure replacement projects separate from base
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