Exelon 2015 Annual Report Download - page 61

Table of Contents
Generation is a member of an industry mutual insurance company, NEIL, which provides property and business interruption insurance for
Generation’s nuclear operations. In previous years, NEIL has made distributions to its members but Generation cannot predict the level of future
distributions or if they will occur at all. See Note 23—Commitments and Contingencies of the Combined Notes to Consolidated Financial
Statements for additional discussion of nuclear insurance.
Decommissioning. NRC regulations require that licensees of nuclear generating facilities demonstrate reasonable assurance that funds will
be available in certain minimum amounts at the end of the life of the facility to decommission the facility. Generation is required to provide to the
NRC a biennial report by unit (annually for units that have been retired and units that are within five years of retirement) addressing Generation’s
ability to meet the NRC-estimated funding levels including scheduled contributions to and earnings on the decommissioning trust funds. The NRC
funding levels are based upon the assumption that decommissioning will commence after the end of the current licensed life of each unit.
Forecasting trust fund investment earnings and costs to decommission nuclear generating stations requires significant judgment, and actual
results may differ significantly from current estimates. The performance of capital markets also could significantly affect the value of the trust
funds. Currently, Generation is making contributions to certain trust funds of the former PECO units based on amounts being collected by PECO
from its customers and remitted to Generation. While Generation, through PECO, has recourse to collect additional amounts from PECO
customers (subject to certain limitations and thresholds), it has no recourse to collect additional amounts from utility customers for any of its other
nuclear units if there is a shortfall of funds necessary for decommissioning. If circumstances changed such that Generation would be unable to
continue to make contributions to the trust funds of the former PECO units based on amounts collected from PECO customers, or if Generation no
longer had recourse to collect additional amounts from PECO customers if there was a shortfall of funds for decommissioning, the adequacy of the
trust funds related to the former PECO units could be negatively affected and Exelon’s and Generation’s results of operations or financial positions
could be significantly affected. See Note 3—Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional
information.
Ultimately, if the investments held by Generation’s NDTs are not sufficient to fund the decommissioning of Generation’s nuclear units,
Generation may be required to take steps, such as providing financial guarantees through letters of credit or parent company guarantees or making
additional contributions to the trusts, which could be significant, to ensure that the trusts are adequately funded and that current and future NRC
minimum funding requirements are met. As a result, Generation’s cash flows or financial positions could be significantly adversely affected.
Additionally, if the pledged assets are not sufficient to fund the Zion station decommissioning activities under the Asset Sale Agreement (ASA),
Generation could have to seek remedies available under the ASA to reduce the risk of default by ZionSolutions and its parent. See Note 16—
Asset Retirement Obligations of the Combined Notes to Consolidated Financial Statements for additional information.
Generation’s financial performance could be negatively affected by risks arising from its ownership and operation of hydroelectric
facilities. (Exelon and Generation)
FERC has the exclusive authority to license most non-Federal hydropower projects located on navigable waterways, Federal lands or
connected to the interstate electric grid. The license for the Conowingo Hydroelectric Project expires September 1, 2016, and the license for the
Muddy Run Pumped Storage Project expires on December 1, 2055. FERC is required to issue annual licenses for the facilities until a final
determination is made on the license renewal. Generation cannot predict whether it will receive all the regulatory approvals for the renewed
licenses of its hydroelectric facilities. If FERC does not issue new operating licenses for Generation’s hydroelectric facilities or a station cannot be
operated through the end of its operating license, Generation’s results of operations could
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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