8-KOther Events

EXELON CORP 8-K Report, Corporate Update (Sep 6, 2005)

Filed September 6, 2005For Securities:EXC

Summary

This 8-K filing by Exelon Corporation (EXC) and its subsidiaries, Commonwealth Edison Company (ComEd) and Exelon Generation Company, LLC, details significant regulatory and legal challenges concerning electricity procurement and rate setting for ComEd's customers in Illinois, effective January 2, 2007. ComEd is facing opposition from the Illinois Governor and the Attorney General regarding its proposed competitive bidding process for electricity procurement and a requested increase in delivery service tariffs. These challenges raise concerns about ComEd's ability to recover its electricity procurement costs. The company warns that if allowed rates are significantly below procurement costs, it could lead to material adverse consequences, including potential insolvency, credit rating downgrades for both ComEd and Exelon, and reduced access to credit markets. Exelon and ComEd are actively exploring various legal and strategic alternatives to ensure cost recovery and mitigate these risks.

Key Highlights

  • 1ComEd has filed for ICC approval of a competitive bidding process to procure electricity for its customers post-January 1, 2007, when the current rate freeze ends.
  • 2ComEd also filed a separate rate case requesting an approximate 6% increase in delivery service tariffs effective January 2, 2007.
  • 3Illinois Governor Blagojevich has formally opposed ComEd's proposed energy procurement process.
  • 4The Illinois Attorney General, Cook County State's Attorney, Citizen's Utility Board, and Environmental Law & Policy Center filed a lawsuit challenging the ICC's authority to approve market-based rates for un-declared competitive electric services.
  • 5ComEd believes the Attorney General's lawsuit claims are without merit and intends to defend the ICC's authority to approve the proposed procurement process.
  • 6Exelon and ComEd warn of material adverse consequences if ComEd cannot recover its electricity procurement costs, including potential insolvency, credit downgrades, and limited market access.
  • 7Exelon and ComEd are exploring legal actions, strategies, and alternatives to ensure cost recovery and mitigate potential negative impacts.

Frequently Asked Questions

The main issue is the opposition from the Illinois Governor and Attorney General to Commonwealth Edison Company's (ComEd) proposed methods for procuring electricity and setting delivery rates for its customers after the current rate freeze ends in 2007. This includes challenges to ComEd's competitive bidding process and its request for a tariff increase.

Exelon and ComEd warn of significant adverse consequences, including ComEd's potential insolvency, loss of investment-grade credit ratings for both ComEd and potentially Exelon, reduced access to credit markets for financing, and an inability to enter into favorable long-term energy procurement contracts, possibly leading to higher costs in the spot market. Service reliability could also be impacted.

Under Illinois law enacted in 1997, ComEd is required to purchase energy in wholesale energy markets to meet its retail customers' needs, as ComEd itself does not own generation facilities. This procurement is set to begin in 2007.

Exelon and ComEd are actively exploring various legal actions, strategies, and alternatives. They intend to defend against the Attorney General's lawsuit, pursue their rate cases before the Illinois Commerce Commission (ICC), and consider other measures to ensure cost recovery and mitigate potential adverse effects.