8-KOther Events

EXELON CORP 8-K Report, Corporate Update (Dec 21, 2005)

Filed December 21, 2005For Securities:EXC

Summary

This 8-K filing from Exelon Corporation (EXC) dated December 21, 2005, provides updates on several critical matters impacting its subsidiary, Commonwealth Edison Company (ComEd), and the parent company. The most significant developments include a court hearing regarding litigation challenging the Illinois Commerce Commission's (ICC) authority in ComEd's power procurement rider case, and a credit rating downgrade for ComEd by Moody's. Additionally, the filing reports on important regulatory approvals from the Federal Energy Regulatory Commission (FERC) concerning ComEd's proposed electricity auction process and the potential merger between Exelon and PSEG.

Key Highlights

  • 1A court hearing was held on December 14, 2005, regarding litigation challenging the ICC's authority in ComEd's proposed competitive electricity procurement process. The court is expected to issue a written decision on January 25, 2006.
  • 2Moody's Investor Service downgraded ComEd's long-term debt ratings to Baa2 from Baa1, citing the challenging regulatory environment in Illinois, ongoing litigation, and expectations of material deferred cost recovery over a lengthy timeframe.
  • 3Ratings for Exelon, Exelon Generation Company LLC, and PECO Energy Company were affirmed with a stable outlook, indicating differentiation in credit assessment between the parent/other subsidiaries and ComEd.
  • 4The Federal Energy Regulatory Commission (FERC) authorized ComEd's proposed competitive electricity auction process and allowed Exelon Generation Company to participate and sell power to ComEd under this process.
  • 5FERC found ComEd's auction proposal to be consistent with its principles for competitive wholesale power procurement and rejected arguments concerning potential affiliate abuse.
  • 6FERC affirmed its prior approval of the proposed merger between Exelon and Public Service Enterprise Group Inc. (PSEG), emphasizing mitigation measures including substantial divestiture of generation assets.

Frequently Asked Questions

The primary litigation involves a challenge filed by the Illinois Attorney General and other parties seeking to prevent the Illinois Commerce Commission (ICC) from approving ComEd's proposed competitive bidding process for electricity procurement starting in 2007. This process aims to use a reverse-auction to set retail rates.

Moody's downgraded ComEd's long-term debt rating due to the difficult political and regulatory environment in Illinois, specifically mentioning the litigation surrounding ComEd's power procurement proposal and opposition from the Governor and Attorney General. Moody's also cited concerns about the financial impact of financing a large amount of deferred costs over an extended recovery period.

FERC's approval is significant because it validates ComEd's proposed competitive auction process under federal regulations for wholesale power procurement. It also permits Exelon Generation Company to participate in this auction and sell power to ComEd, providing regulatory clearance for a key component of ComEd's future electricity supply strategy.

The Federal Energy Regulatory Commission (FERC) affirmed its prior approval of the proposed merger between Exelon and PSEG. This affirmation was made after considering petitions for rehearing and emphasized that mitigation measures, including substantial divestiture of generation assets, are in place to address competitive concerns.