What is the primary impact of the PJM capacity auction results on Exelon?

The primary impact is that Exelon's Quad Cities and Three Mile Island nuclear plants will not generate capacity revenue for the 2019-2020 planning year because they did not clear in the auction. This could lead to significant financial implications for these specific assets.

Does this mean Quad Cities and Three Mile Island will be retired immediately?

The auction results take effect in June 2019. While the failure to clear the auction is a negative development, Exelon had previously stated a potential retirement of Quad Cities (and Clinton) if legislative support was not secured by the end of May 2016. The immediate operational status beyond that date would depend on further company decisions and legislative outcomes.

Are all of Exelon's nuclear plants affected by this auction?

No, not all of Exelon's nuclear plants in the PJM market are affected in the same way. While Quad Cities and Three Mile Island did not clear, other nuclear plants did clear. Oyster Creek was scheduled to retire in 2019 and did not participate, and a portion of Byron's capacity did not clear, but the plant itself is committed to operate through May 2020.

What is a 'capacity auction' and why is it important?

A capacity auction is a market mechanism designed to ensure there is sufficient electricity generation capacity available to meet future demand. Plants that clear the auction are paid to be available during peak demand periods, providing a revenue stream. For Exelon, clearing these auctions is crucial for the economic viability of its generation assets.

EXC 8-K SEC Disclosure — May 25, 2016

Summary

Exelon Corporation (EXC) has filed an 8-K report detailing the results of the PJM capacity auction for the 2019-2020 planning year, which occurred on May 24, 2016. The key takeaway for investors is that Exelon Generation Company, LLC's Quad Cities and Three Mile Island nuclear plants did not clear in this auction and will therefore not receive capacity revenue for the specified period. This significantly impacts the financial outlook for these specific assets. While the company is committed to operating the Byron nuclear plant through May 2020, even with a portion of its capacity not clearing, the failure of Quad Cities and Three Mile Island to secure capacity revenue raises concerns. This development aligns with Exelon's prior disclosure that these plants might be retired if adequate legislative support is not provided by the end of May 2016. Investors should note that the auction results directly influence future revenue streams for Exelon's generation assets in the PJM market.

Key Highlights

1Quad Cities and Three Mile Island nuclear plants failed to clear in the PJM 2019-2020 capacity auction.
2These plants will not receive capacity revenue for the 2019-2020 planning year.
3The auction results take effect starting June 2019.
4A portion of the Byron nuclear plant's capacity did not clear, but the plant is committed to operate through May 2020.
5Other Exelon nuclear plants in PJM cleared the auction, except Oyster Creek (scheduled for retirement in 2019 and did not participate).
6This filing is consistent with Exelon's prior statements regarding potential retirement of Quad Cities and Clinton nuclear plants if legislative action is not taken.
7The report includes detailed cleared capacity volumes and prices by zone for nuclear and fossil/other generation.

EXELON CORP 8-K Report, Corporate Update (May 25, 2016)

Summary

Key Highlights

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