Exelon 2014 Annual Report Download - page 171

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Electric generation-related regulatory asset. As a result of the deregulation of electric generation, BGE ceased to meet the
requirements for accounting for a regulated business for the previous electric generation portion of its business. As a result, BGE
wrote-off its entire individual, generation-related regulatory assets and liabilities and established a single, generation-related
regulatory asset to be collected through its regulated rates, which is being amortized on a basis that approximates the pre-existing
individual regulatory asset amortization schedules. The portion of this regulatory asset that does not earn a regulated rate of return
was $28 million as of December 31, 2014, and $37 million as of December 31, 2013. BGE will continue to amortize this amount
through 2017.
Rate stabilization deferral. In June 2006, Senate Bill 1 was enacted in Maryland and imposed a rate stabilization measure that
capped rate increases by BGE for residential electric customers at 15% from July 1, 2006, to May 31, 2007. As a result, BGE
recorded a regulatory asset on its Consolidated Balance Sheets equal to the difference between the costs to purchase power and
the revenues collected from customers, as well as related carrying charges based on short-term interest rates from July 1, 2006 to
May 31, 2007. In addition, as required by Senate Bill 1, the MDPSC approved a plan that allowed residential electric customers the
option to further defer the transition to market rates from June 1, 2007 to January 1, 2008. During 2007, BGE deferred $306 million
of electricity purchased for resale expenses and certain applicable carrying charges, which are calculated using the implied interest
rates of the rate stabilization bonds, as a regulatory asset related to the rate stabilization plans. During 2014 and 2013, BGE
recovered $65 million and $66 million, respectively, of electricity purchased for resale expenses and carrying charges related to the
rate stabilization plan regulatory asset. BGE began amortizing the regulatory asset associated with the deferral which ended in May
2007 to earnings over a period not to exceed ten years when collection from customers began in June 2007.
Energy efficiency and demand response programs. These amounts represent costs recoverable (refundable) under ComEd’s
ICC approved Energy Efficiency and Demand Response Plan, PECO’s PAPUC-approved EE&C Plan, and the BGE Smart Energy
Savers Program®. ComEd recovers these costs through a rider. ComEd earns a return on the capital investment incurred under the
program but does not earn (pay) interest on under (over) collections. For PECO, this amount represents an over-collection of
program costs related to both Phase I and Phase II of its EE&C Plan. PECO does not earn (pay) interest on under (over) collections.
PECO began recovering the costs of its Phase I and Phase II EE&C Plans through a surcharge in January 2010 and June 2013,
respectively, based on projected spending under the programs. Phase I recovery continued over the life of the program, which
expired on May 31, 2013 and excess funds collected began being refunded in June 2013. Phase II of the program began on June 1,
2013, and will continue over the life of the program, which will expire on May 31, 2016. Excess funds collected are required to be
refunded beginning in June 2016. PECO earned a return on the capital investment incurred under Phase I of the program. BGE’s
Smart Energy Savers Program®includes both MDPSC approved demand response and energy efficiency programs. For the BGE
Peak RewardsSM demand response program which began in January 2008, actual marketing and customer bonus costs incurred in
the demand response program are being recovered over a 5-year amortization period from the date incurred pursuant to an order by
the MDPSC. Fixed assets related to the demand response program are recovered over the life of the equipment. Also included in the
demand response program are customer bill credits related to BGE’s Smart Energy Rewards program which began in July 2013.
Actual costs incurred in the conservation program are being amortized over a 5-year period with recovery beginning in 2010
pursuant to an order by the MDPSC. BGE earns a rate of return on the capital investments and deferred costs incurred under the
program and earns (pays) interest on under (over) collections.
Merger integration costs. These amounts represent integration costs to achieve distribution synergies related to the Constellation
merger transaction. As a result of the MDPSC’s February 2013 rate order, BGE deferred $8 million related to non-severance merger
integration costs incurred during 2012 and the first quarter of 2013. Of these costs, $4 million was authorized to be amortized over a
5-year period that began in March 2013. The recovery of the remaining $4 million was deferred. In the MDPSC’s December 2013
rate order, BGE was authorized to recover the remaining $4 million and an additional $4 million of non-severance merger integration
costs incurred during 2013. These costs are being amortized over a 5-year period that began in December 2013. BGE is earning a
return on this regulatory asset included in base rates.
Under (Over)-recovered electric and gas revenue decoupling. These amounts represent the electric and gas distribution costs
recoverable from or (refundable) to customers under BGE’s decoupling mechanism, which does not earn a rate of return. As of
December 31, 2014, BGE had a regulatory asset of $7 million related to under-recovered electric revenue decoupling and a
regulatory liability of $12 million related to over-recovered natural gas revenue decoupling. As of December 31, 2013, BGE had a
regulatory liability of $7 million related to over-recovered electric revenue decoupling and $9 million related to over-recovered natural
gas revenue decoupling.
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