Summary
This 8-K filing from Exelon Corporation (EXC) on October 4, 2010, primarily concerns a significant adverse ruling by the Illinois Appellate Court regarding Commonwealth Edison Company (ComEd), a subsidiary of Exelon. The court's decision impacts how ComEd can recover costs related to its electric distribution services and a smart meter pilot program. Specifically, the court remanded a previous ICC order, mandating a reduction in ComEd's rate base to account for additional accumulated depreciation. Furthermore, the court reversed the ICC's approval of a rider (Rider SMP) for the recovery of advanced metering infrastructure (AMI) costs, deeming it illegal single-issue ratemaking and establishing a stricter standard for future cost-recovery riders. These rulings could necessitate refunds to customers dating back to September 30, 2010, and are expected to negatively impact ComEd's pre-tax earnings.
Key Highlights
- 1Illinois Appellate Court ruled against Commonwealth Edison Company (ComEd) on key aspects of its 2007 rate case order.
- 2The court mandated a reduction in ComEd's rate base due to additional accumulated depreciation, impacting revenue recovery.
- 3Approval of Rider SMP, which covered costs for a smart meter pilot program (131,000 meters), was reversed by the court.
- 4The court established a new, stricter standard for utility cost-recovery riders, requiring them to be for unexpected, volatile costs imposed by external circumstances and not alter other expenses or income.
- 5The ruling could trigger a refund obligation to customers as early as September 30, 2010, pending further proceedings.
- 6ComEd estimates a negative pre-tax revenue impact of approximately $77 million annually from the rate base/depreciation issue.
- 7The loss of Rider SMP is expected to reduce ComEd's pre-tax earnings by approximately $5 million in 2010, including a $4 million write-off of a related regulatory asset.