Exelon 2015 Annual Report Download - page 56

Table of Contents
lead to a decline in the revenues of Exelon, ComEd, and PECO. For additional information, see ITEM 1. BUSINESS “Environmental Regulation-
Renewable and Alternative Energy Portfolio Standards.”
The impact of not meeting the criteria of the FASB guidance for accounting for the effects of certain types of regulation could be material
to Exelon, ComEd, PECO and BGE. (Exelon, ComEd, PECO and BGE)
As of December 31, 2015, Exelon, ComEd, PECO and BGE have concluded that the operations of ComEd, PECO and BGE meet the
criteria of the authoritative guidance for accounting for the effects of certain types of regulation. If it is concluded in a future period that a separable
portion of their businesses no longer meets the criteria, Exelon, ComEd, PECO and BGE would be required to eliminate the financial statement
effects of regulation for that part of their business. That action would include the elimination of any or all regulatory assets and liabilities that had
been recorded in their Consolidated Balance Sheets and the recognition of a one-time charge in their Consolidated Statements of Operations and
Comprehensive Income. The impact of not meeting the criteria of the authoritative guidance could be material to the financial statements of
Exelon, ComEd, PECO and BGE. At December 31, 2015, the gain (loss) could have been as much as $(2.5) billion, $978 million and $559 million
(before taxes) as a result of the elimination of ComEd’s, PECO’s and BGE’s regulatory assets and liabilities, respectively. Further, Exelon would
record a charge against OCI (before taxes) of up to $2.5 billion and $634 million for ComEd and BGE, respectively, related to Exelon’s net
regulatory assets associated with its defined benefit postretirement plans. Exelon also has a net regulatory liability of $47 million (before taxes)
associated with PECO’s defined benefit postretirement plans that would result in an increase in OCI if reversed. The impacts and resolution of the
above items could lead to an additional impairment of ComEd’s goodwill, which could be significant and at least partially offset the gain at ComEd
discussed above. A significant decrease in equity as a result of any changes could limit the ability of ComEd, PECO and BGE to pay dividends
under Federal and state law and no longer meeting the regulatory accounting criteria could cause significant volatility in future results of
operations. See Notes 1—Significant Accounting Policies, 3—Regulatory Matters and 11—Intangible Assets of the Combined Notes to
Consolidated Financial Statements for additional information regarding accounting for the effects of regulation, regulatory matters and ComEd’s
goodwill, respectively.
Exelon and Generation could incur material costs of compliance if Federal and/or state regulation or legislation is adopted to address
climate change. (Exelon and Generation)
Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, as well as other companies in
many business sectors, including utilities, are considering ways to address the effect of GHG emissions on climate change. In 2009, select
Northeast and Mid-Atlantic states implemented a model rule, developed via the RGGI, to regulate CO2 emissions from fossil-fired generation.
RGGI states are working on updated programs to further limit emissions and the EPA has introduced regulation to address greenhouse gases from
new fossil plants that could potentially impact existing plants. If carbon reduction regulation or legislation becomes effective, Exelon and
Generation may incur costs either to limit further the GHG emissions from their operations or to procure emission allowance credits. For example,
more stringent permitting requirements may preclude the construction of lower-carbon nuclear and gas-fired power plants. Similarly, a Federal RPS
could increase the cost of compliance by mandating the purchase or construction of more expensive supply alternatives. For more information
regarding climate change, see ITEM 1. BUSINESS “Global Climate Change” and Note 23—Commitments and Contingencies of 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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