8-KOther Events

EXELON CORP 8-K Report, Corporate Update (Nov 22, 2017)

Filed November 22, 2017For Securities:EXC

Summary

This 8-K filing from Exelon Corporation (EXC) on November 22, 2017, primarily reports on a negative development regarding regulatory matters for its subsidiary, Baltimore Gas and Electric Company (BGE). The Federal Energy Regulatory Commission (FERC) issued an order on November 16, 2017, rejecting BGE's proposal to recover certain transmission-related income tax regulatory assets through its transmission formula rate. These assets amounted to $42 million as of September 30, 2017. BGE is currently evaluating its response to this FERC order.

Key Highlights

  • 1FERC rejected BGE's proposal to recover $42 million in transmission-related income tax regulatory assets through its transmission formula rate.
  • 2BGE is assessing its next steps in response to the FERC's order.
  • 3Other Exelon subsidiaries (ComEd, PHI, Pepco, DPL, ACE) also have similar transmission-related income tax regulatory assets pending FERC approval.
  • 4These other subsidiaries have not yet filed with FERC for recovery of their respective assets.
  • 5PECO Energy Company's regulatory assets are not affected by this specific FERC order as they are not subject to the same recovery formula.
  • 6A potential impairment charge to after-tax earnings could be up to approximately $115 million for Exelon and its subsidiaries if these regulatory assets are deemed unrecoverable.
  • 7The filing includes standard forward-looking statements and risk disclaimers related to potential future outcomes.

Frequently Asked Questions

The main issue is the Federal Energy Regulatory Commission's (FERC) rejection of Baltimore Gas and Electric Company's (BGE), an Exelon subsidiary, proposal to recover $42 million in transmission-related income tax regulatory assets through its transmission formula rate.

If these regulatory assets are deemed unrecoverable, Exelon and its subsidiaries could collectively record an impairment charge to after-tax earnings of up to approximately $115 million. The specific amounts vary by subsidiary, with BGE facing a potential charge of up to $25 million.

While other subsidiaries like ComEd and those under Pepco Holdings LLC (PHI) have similar transmission-related income tax regulatory assets, they have not yet filed with FERC for their recovery. Therefore, they are not directly impacted by this specific FERC order on BGE, but they are assessing potential implications and the overall recovery strategy.

These are accounting assets that represent future tax benefits or adjustments related to transmission services. Utilities often seek regulatory approval to recover these costs or recognize these benefits through their established rates, which is what BGE attempted to do.