8-KOther EventsExhibits & Filings

EXELON CORP 8-K Report, Corporate Update (Jul 24, 2007)

Filed July 24, 2007For Securities:EXC

Summary

Exelon Corporation, through its subsidiary Commonwealth Edison Company (ComEd), announced on July 24, 2007, an expected oral agreement, or Settlement, with key Illinois legislative leaders and the Attorney General concerning electric bills. This Settlement aims to address concerns about rising electricity costs without resorting to harmful legislation for consumers, utilities, or the state. The core of the agreement involves significant voluntary contributions from ComEd and Exelon Generation Company, LLC (Generation) totaling approximately $1 billion over four years, primarily to provide rate relief to Illinois electricity consumers. These contributions are contingent upon the enactment of negotiated Proposed Legislation. The Proposed Legislation would establish a new Illinois Power Agency to oversee competitive electricity procurement processes for utilities, ensuring cost recovery for procurement expenses deemed prudent. It also includes provisions for long-term financial swap contracts to promote price stability, the declaration of certain customer classes as competitive, and mandates for energy efficiency, demand response programs, and renewable portfolio standards. Furthermore, the agreement includes a release and settlement of various pending legal proceedings related to the 2006 Illinois procurement auction, provided the Proposed Legislation is enacted.

Key Highlights

  • 1Commonwealth Edison (ComEd) and Exelon Generation (Generation) are expected to contribute approximately $1 billion over four years towards rate relief for Illinois electricity consumers.
  • 2Generation will contribute $747 million, and ComEd will contribute $53 million to these rate relief funds and the new Illinois Power Agency.
  • 3The Settlement is contingent upon the enactment of negotiated Proposed Legislation.
  • 4The Proposed Legislation establishes a new Illinois Power Agency to manage electricity procurement through a competitive process, with utility costs deemed prudent and recoverable.
  • 5Long-term financial swap contracts are to be entered into for price stability, including a five-year contract between ComEd and Generation for energy costs.
  • 6The Proposed Legislation includes new requirements for energy efficiency, demand response programs, and renewable portfolio standards for utilities.
  • 7The agreement includes a release and settlement of all litigation, claims, and regulatory proceedings related to the 2006 Illinois procurement auction, contingent on legislative enactment.

Frequently Asked Questions

The primary financial impact involves a significant commitment of approximately $1 billion over four years from ComEd and Exelon Generation towards rate relief for Illinois electricity consumers. Exelon Generation is slated to contribute $747 million, while ComEd will contribute $53 million. These contributions are intended to stabilize electricity costs for consumers and are dependent on the passage of the associated Proposed Legislation.

ComEd and Generation can terminate their funding commitments and recover any undisbursed funds if, prior to August 1, 2011, the Illinois General Assembly passes legislation that freezes or reduces electric rates for ComEd or Ameren Utilities, or imposes a generation tax on Exelon Generation or other signatory generators.

The Proposed Legislation would create the Illinois Power Agency, a new state agency responsible for designing annual electricity supply portfolio plans and conducting competitive procurement processes for electric utilities under the oversight of the Illinois Commerce Commission (ICC). This agency will manage the procurement of electricity supply resources, and utilities will be able to recover their procurement costs deemed prudent under this new framework.

The Proposed Legislation shifts power procurement towards a competitive process managed by the Illinois Power Agency. It also mandates long-term financial swap contracts, such as the one Exelon Generation has agreed to with ComEd, to ensure price stability. This indicates a move towards more regulated and predictable long-term procurement arrangements, alongside established market-based principles for new contracts.