Exelon 2014 Annual Report Download - page 273

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Coal Combustion Residuals. On December 19, 2014, the U.S. EPA issued the first federal regulation for the disposal of coal
combustion residuals (CCR) from power plants, including the classification of CCR as non-hazardous waste under RCRA. The EPA
ruling is effective 180 days after publication in the Federal Register, which is anticipated in early 2015. Under the regulation, CCR
will continue to be regulated by most states subject to coordination with the federal regulations. Generation has previously recorded
reserves consistent with state regulation for its owned coal ash sites, and as such, the regulation is not expected to impact Exelon’s
and Generation’s financial results. Generation is evaluating what, if any, incremental costs will be incurred for coal ash disposal sites
formerly owned by Generation that have not yet been closed by their current owners. At this time, however, Generation does not
have sufficient information to reasonably assess the potential likelihood or magnitude of any remediation requirements that may be
asserted for these former sites under the new federal regulations. For these reasons, Generation is unable to predict whether and to
what extent they may ultimately be held responsible for remediation and other costs relating to formerly owned coal ash disposal
sites under the new regulations, and as a result no new liability has been recorded as of December 31, 2014.
Litigation and Regulatory Matters
Asbestos Personal Injury Claims
Generation maintains a reserve for claims associated with asbestos-related personal injury actions in certain facilities that are
currently owned by Generation or were previously owned by ComEd and PECO. The reserve is recorded on an undiscounted basis
and excludes the estimated legal costs associated with handling these matters, which could be material.
At December 31, 2014 and 2013, Generation had reserved approximately $100 million and $90 million, respectively, in total for
asbestos-related bodily injury claims. As of December 31, 2014, approximately $22 million of this amount related to 255 open claims
presented to Generation, while the remaining $78 million of the reserve is for estimated future asbestos-related bodily injury claims
anticipated to arise through 2050, based on actuarial assumptions and analyses, which are updated on an annual basis. On a
quarterly basis, Generation monitors actual experience against the number of forecasted claims to be received and expected claim
payments and evaluates whether an adjustment to the reserve is necessary. During the second quarter of 2014, Generation
increased its reserve by approximately $15 million, primarily due to increased actual and projected number and severity of claims.
On November 22, 2013, the Supreme Court of Pennsylvania held that the Pennsylvania Workers Compensation Act does not apply
to an employee’s disability or death resulting from occupational disease, such as diseases related to asbestos exposure, which
manifests more than 300 weeks after the employee’s last employment-based exposure, and that therefore the exclusivity provision
of the Act does not apply to preclude such employee from suing his or her employer in court. The Supreme Court’s ruling reverses
previous rulings by the Pennsylvania Superior Court precluding current and former employees from suing their employers in court,
despite the fact that the same employee was not eligible for workers compensation benefits for diseases that manifest more than
300 weeks after the employee’s last employment-based exposure to asbestos. Currently, Exelon, Generation and PECO are unable
to predict whether and to what extent they may experience additional claims in the future as a result of this ruling; as such no
increase to the asbestos-related bodily injury liability has been recorded as of December 31, 2014. Increased claims activity resulting
from this ruling could have a material adverse impact on Exelon, Generation’s and PECO’s future results of operations and cash
flows.
Since 1993, BGE and certain Constellation (now Generation) subsidiaries have been involved in several actions concerning
asbestos. The actions are based upon the theory of “premises liability,” alleging that BGE and Generation knew of and exposed
individuals to an asbestos hazard. In addition to BGE and Generation, numerous other parties are defendants in these cases.
Approximately 486 individuals who were never employees of BGE or certain Constellation subsidiaries have pending claims each
seeking several million dollars in compensatory and punitive damages. Cross-claims and third-party claims brought by other
defendants may also be filed against BGE and certain Constellation subsidiaries in these actions. To date, most asbestos claims
which have been resolved have been dismissed or resolved without any payment by BGE or certain Constellation subsidiaries and a
small minority of these cases has been resolved for amounts that were not material to BGE or Generation’s financial results.
Discovery begins in these cases after they are placed on the trial docket. At present, only two of the pending cases are set for trial.
Given the limited discovery in these cases, BGE and Generation do not know the specific facts that are necessary to provide an
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