Business Context and Reporting Period
This Form 8-K is a joint current report filed by Commonwealth Edison Company (ComEd) and Exelon Corporation on December 20, 2006. The filing addresses regulatory actions by the Illinois Commerce Commission (ICC) regarding ComEd's rate stabilization programs, delivery service rates, and severance cost recovery.
Key Financial Metrics and Regulatory Orders
- Total Rate Increase Approved: The ICC approved a total delivery service rate increase of $82.6 million. This includes an initial $8.3 million approved on July 26, 2006, and an additional $74.3 million approved in the December 20, 2006 rehearing order.
- Severance Cost Recovery: The December 20, 2006 Order clarified the recovery of previously incurred severance costs totaling $158 million through administrative and general (A&G) expenses.
- Regulatory Asset: ComEd anticipates recording a regulatory asset of $158 million in the fourth quarter of 2006 to reflect the clarified severance cost recovery.
- Impact on Earnings: The impact of recording the $158 million regulatory asset will not be included in Exelon Corporation's adjusted (non-GAAP) operating earnings for 2006.
Material Changes and New Programs
- Rate Stabilization Program: The ICC approved a program allowing residential customers to phase in rate increases originally scheduled for January 2, 2007, over several years.
- Real-Time Pricing: A new program was approved allowing residential customers access to hourly electricity pricing.
- Legal Challenge: On December 21, 2006, the Illinois Attorney General filed a motion in the Illinois Appellate Court to stay scheduled rate increases related to energy procurement pending an appeal. ComEd intends to object to this motion.
Outlook, Risks, and Contingencies
The filing contains forward-looking statements subject to risks and uncertainties, including those detailed in Exelon's 2005 Annual Report on Form 10-K. A primary contingency is the pending appeal by the Illinois Attorney General regarding energy procurement rate increases, which could delay or alter revenue recovery if the stay is granted. Management has indicated an intention to object to the stay motion.
Investor Verification Checklist
- Verify the status of the Illinois Attorney General's motion to stay energy procurement rate increases.
- Confirm the timing of the $158 million regulatory asset recognition in Q4 2006 financial statements.
- Review the specific terms of the rate stabilization phase-in schedule for residential customers.
- Monitor the implementation timeline for the new real-time pricing program.