Summary
Exelon Corporation (EXC) filed an 8-K on December 18, 2017, to report material impairments related to transmission-related income tax regulatory assets at several of its subsidiaries, primarily Baltimore Gas and Electric Company (BGE), Commonwealth Edison Company (ComEd), and Pepco Holdings LLC (PHI). This follows a November 16, 2017, order from the Federal Energy Regulatory Commission (FERC) rejecting BGE's proposed revisions to its transmission formula rate for recovering these assets. As a result, Exelon and its subsidiaries will record a combined after-tax impairment charge of approximately $123 million in December 2017. Specifically, Exelon will record $36 million, with significant portions attributed to PHI ($28 million) and BGE ($5 million). While the companies believe there is a basis for full recovery, they have deemed the portion related to prior amortization as no longer probable of recovery. The recovery of prospective amortization amounts is still considered probable, but additional impairments could arise if this view changes.
Key Highlights
- 1Exelon and its subsidiaries will record a total after-tax impairment charge of $123 million in December 2017 related to transmission-related income tax regulatory assets.
- 2The impairment is a consequence of a FERC order on November 16, 2017, rejecting BGE's proposed rate recovery for these assets.
- 3The impairments are specifically for portions of regulatory assets that would have been previously amortized.
- 4Exelon's direct impairment charge is $36 million.
- 5Pepco Holdings LLC (PHI), encompassing Pepco, DPL, and ACE, will record a consolidated impairment charge of $28 million.
- 6Baltimore Gas and Electric Company (BGE) will record an impairment of $5 million.
- 7The companies intend to seek rehearing and appeal FERC's order for potential future recovery and reestablishment of the assets.