What is the main impact of the ICC's Rehearing Order on ComEd's finances?

The ICC's Rehearing Order is expected to reduce ComEd's annual revenue recovery by approximately $100 million. While the company gained some recovery related to its pension assets, the ICC's continued use of an average rate base and a short-term debt rate for cost reconciliations are viewed as detrimental, prompting ComEd to plan an appeal.

What is the estimated impact on Exelon's earnings per share (EPS)?

Management has preliminarily estimated that the Rehearing Order will increase GAAP and adjusted operating earnings by approximately $0.10 per Exelon share in 2012. For 2013 and 2014, the estimated annual impact is approximately $0.03 per Exelon share. Exelon will provide updated earnings guidance on October 31, 2012.

Will ComEd be able to recover all its grid modernization costs?

No, ComEd believes the ICC's decisions will prevent it from recovering nearly $100 million per year. This reduced recovery will impact its ability to reinvest in the distribution system in 2014 and beyond, leading to delays in program elements and a planned appeal of the ICC's orders.

EXC 8-K SEC Disclosure

Q: How will this decision affect ComEd's grid modernization program?

Due to the reduced revenue recovery, ComEd will delay certain aspects of its grid modernization program. Specifically, the installation of additional smart meters will be postponed until 2015, and the company is undertaking a review of its broader capital investment plans.

Summary

This 8-K filing from Exelon Corporation and its subsidiary Commonwealth Edison Company (ComEd) details the outcome of a rehearing by the Illinois Commerce Commission (ICC) regarding ComEd's Electric Infrastructure Modernization Act (EIMA) formula rate proceeding. While the ICC partially favored ComEd by allowing recovery of pension asset return, it upheld decisions on using an average rate base and a short-term debt rate for under/over recoveries. These rulings are expected to result in approximately $100 million per year less recovery for ComEd, prompting the company to appeal the ICC's orders. Consequently, ComEd will delay certain grid modernization program elements, specifically the installation of additional smart meters until 2015, and is reviewing its overall capital investment plan. Despite the negative impact on future revenue recovery, management has preliminarily estimated a positive impact on GAAP and adjusted operating earnings of approximately $0.10 per Exelon share in 2012, and $0.03 per share annually in 2013 and 2014. Exelon plans to update its earnings guidance during its third quarter earnings release.

Key Highlights

1Illinois Commerce Commission (ICC) issued a final Order on Rehearing concerning ComEd's EIMA formula rate proceeding.
2ICC partially favored ComEd by allowing recovery of return on its pension asset, increasing annual revenue by $35 million.
3ICC upheld previous decisions on using an average rate base and a short-term debt rate for under/over recoveries, which ComEd views negatively.
4ComEd expects these rulings will result in approximately $100 million per year less recovery, leading to a planned court appeal.
5ComEd will delay the installation of additional smart meters until 2015 and is reviewing its capital investment plan due to the ICC's decision.
6Preliminary estimate of positive impact on Exelon's 2012 earnings: ~$0.10 per share.
7Preliminary estimate of positive impact on Exelon's 2013-2014 earnings: ~$0.03 per share annually.

EXELON CORP 8-K Report, Corporate Update (Oct 5, 2012)

Summary

Key Highlights

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