Summary
Exelon Corporation (EXC) filed an 8-K on March 6, 2003, primarily detailing an agreement reached by its subsidiary, Commonwealth Edison Company (ComEd), regarding various rate and market development matters in Illinois. This agreement, pending Illinois Commerce Commission (ICC) approval, aims to provide greater rate certainty, enhance competition, and mitigate ComEd's provider of last resort obligations. Investors should note that the effectiveness of this agreement is contingent on ICC orders consistent with its terms, and there's no guarantee of its finalization. The filing also reaffirms Exelon's previously issued 2003 operating earnings guidance.
Key Highlights
- 1Exelon reaffirmed its 2003 operating earnings per share guidance of $4.80 to $5.00.
- 2ComEd reached an agreement with Illinois electric retail market suppliers, customer groups, and governmental parties concerning rates and market development.
- 3The agreement sets new delivery service rates for ComEd based on a $1.517 billion revenue requirement, effective through December 31, 2006.
- 4Traditional bundled customer rates will remain frozen through 2006.
- 5Modifications to market value energy credits and competitive transition charges (CTCs) are included, with new 'adders' expected to reduce CTCs for customers by an estimated $65-70 million annually.
- 6The agreement extends ComEd's full-requirements power purchase agreement with affiliate Exelon Generation through 2005-2006.
- 7A net one-time charge of approximately $0.05 per share is anticipated upon ICC approval due to program funding and reserve adjustments.
Frequently Asked Questions
The agreement aims to establish greater rate certainty and stability for customers and ComEd, enhance competition in the Illinois electricity market, mitigate ComEd's provider of last resort obligations, and avoid costly litigation. It addresses delivery service rates, market development, competitive declarations, power purchase agreements with Exelon Generation, and funding for various programs.
Upon ICC approval, ComEd expects to record a net one-time charge of approximately $0.05 per share. This charge is a result of $51 million in pre-tax funding for specified programs, partially offset by the reversal of a $12 million reserve related to a capital disallowance and a $10 million credit for capitalizing employee incentive payments.
The agreement is contingent upon the Illinois Commerce Commission (ICC) issuing orders consistent with its terms in various regulatory proceedings. While parties to the agreement have consented to the general content of these orders, other parties could seek modifications or delays. Therefore, there is no assurance that the agreement will become effective.
Traditional bundled rates paid by customers who retain ComEd as their electricity supplier will remain frozen through 2006. For customers choosing alternative suppliers, new 'adders' will be introduced to the market value energy credit, which is expected to reduce the competitive transition charge (CTC) by $65-70 million annually. Customers will also have the option to lock in CTCs for longer periods.