Exelon 2015 Annual Report Download - page 107

Table of Contents
The Maryland Strategic Infrastructure Development and Enhancement Program (Exelon and BGE). In 2013, legislation intended to
accelerate gas infrastructure replacements in Maryland was signed into law. The law established a mechanism, separate from base rate
proceedings, for gas companies to promptly recover reasonable and prudent costs of eligible infrastructure replacement projects incurred after
June 1, 2013. The monthly surcharge and infrastructure replacement costs must be approved by the MDPSC and are subject to a cap and require
an annual true-up of the surcharge revenues against actual expenditures. Investment levels in excess of the cap would be recoverable in a
subsequent gas base rate proceeding at which time all costs for the infrastructure replacement projects would be rolled into gas distribution rates.
Irrespective of the cap, BGE is required to file a gas rate case every five years under this legislation.
On August 2, 2013, BGE filed its infrastructure replacement plan and associated surcharge. On January 29, 2014, the MDPSC issued a
decision conditionally approving the first five years of BGE’s plan and surcharge. On November 16, 2015, BGE filed a surcharge update to be
effective January 1, 2016, including a true-up of cost estimates included in the 2015 surcharge, along with its 2016 project list and projected
capital estimates of $113 million to be included in the 2016 surcharge calculation. The MDPSC subsequently approved BGE’s 2016 project list and
the proposed surcharge for 2016, which included the 2015 surcharge true-up. As of December 31, 2015, BGE recorded a regulatory asset of less
than $1 million, representing the difference between the surcharge revenues and program costs.
In 2014, the residential consumer advocate in Maryland appealed MDPSC’s decision on BGE’s infrastructure replacement plan and
associated surcharge with the Baltimore City Circuit Court, who affirmed the MDPSC’s decision. On October 10, 2014, the residential consumer
advocate noticed its appeal to the Maryland Court of Special Appeals from the judgment entered by the Baltimore City Circuit Court. During the
third quarter of 2015, the residential consumer advocate, MDPSC, and BGE filed briefs. Oral argument in this matter was held before the Court of
Special Appeals on November 3, 2015. On January 28, 2016, the Maryland Court of Special Appeals issued a decision affirming the MDPSC’s
decision. See Note 3—Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information.
PJM Minimum Offer Price Rule (Exelon and Generation). PJM’s capacity market rules include a Minimum Offer Price Rule (MOPR) that
is intended to preclude sellers from artificially suppressing the competitive price signals for generation capacity. The FERC orders approving the
MOPR were upheld by the United States Court of Appeals for the Third Circuit in February 2014.
Exelon continues to work with PJM stakeholders and through the FERC process to implement several proposed changes to the PJM tariff
aimed at ensuring that capacity resources (including those with state-sanctioned subsidy contracts and capacity market speculators) cannot
inappropriately affect capacity auction prices in PJM.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires that management apply accounting policies and make estimates
and assumptions that affect results of operations and the amounts of assets and liabilities reported in the financial statements. Management
discusses these policies, estimates and assumptions with its accounting and disclosure governance committee on a regular basis and provides
periodic updates on management decisions to the audit committee of the Exelon board of directors. Management believes that the accounting
policies described below require significant judgment in their application, or estimates and assumptions that are inherently uncertain and that may
change in subsequent periods. Additional discussion of the application of these accounting policies can be found in the Combined Notes to
Consolidated Financial Statements.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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