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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
September 26, 2002
(Date of earliest
event reported)
Exhibit 99.1
[Exelon Logo]
News Release
From: Exelon Corporation FOR IMMEDIATE RELEASE
Corporate Communications September 26, 2002
P.O. Box 805379
Chicago, IL 60680-5379
Contact: Don Kirchoffner, Exelon Media Relations
312.394.3001
John Hatfield, ComEd Media Relations
312.394.4214
Linda Byus, CFA, Investor Relations
312.394.7696
Exelon Accounting for Merger Goodwill is Appropriate, Federal Regulators Rule
Chicago (September 26, 2002) - Exelon Corporation (NYSE:EXC) received approval
today from the Federal Energy Regulatory Commission (FERC) for its accounting
treatment for goodwill during a corporate restructuring in January 2001. FERC's
decision means that Commonwealth Edison (ComEd), Exelon's Illinois energy
delivery subsidiary, will not be required to remove goodwill from its books, as
FERC had directed in a previous letter order dated August 27, 2002.
In a letter order today signed by Deputy Executive Director and Chief Accountant
John M. Delaware, FERC ruled that, "Since the issuance of the August 27th
letter, however, ComEd has provided the Commission, as well as the Securities
and Exchange Commission, with extensive additional information to support
ComEd's contention that the amount recognized as goodwill on its books relates
entirely to ComEd's energy delivery business and thus no portion of that amount
should be associated with the facilities and businesses transferred to
Generation."
The ruling comes a week after the Securities and Exchange Commission (SEC)
notified Exelon that it did not object to the company's treatment of goodwill.
The SEC's decision was significant because it confirmed Exelon's position that
the company's accounting complied with generally accepted accounting principles
(GAAP).
"This was a particularly important matter for us to resolve swiftly and
conclusively, not only because of the potential impact on our shareholders, but
also because of our uncompromising commitment to honest reporting," stated
Exelon Chairman and Chief Executive Officer John W. Rowe. "Our accounting was
open and appropriate, and we are quite pleased to have this behind us. I
particularly appreciate the support we received from members of the Illinois
Commerce Commission."
Page 2
Exelon Senior Vice President Elizabeth Moler praised federal regulators for
their quick action. "Officials at FERC and the SEC deserve great credit for
recognizing the potential impact of this issue on Exelon and on the continued
development of competition in Illinois. Their professionalism and thoroughness
was extraordinary," said Moler.
The accounting issue arose last month when FERC staff sent ComEd a letter order
ruling that an unspecified amount of goodwill should be removed from ComEd's
books in conjunction with the company's January 2001 transfer of nuclear units
and power marketing operations to its affiliate Exelon Generation Company, LLC.
ComEd responded that the company's accounting treatment was consistent with
GAAP, and that FERC's order would unintentionally disrupt the continued
development of competition in Illinois. ComEd filed a petition on September 9
asking FERC for a rehearing.
Today's FERC order stated, "Based on our review of the additional information
ComEd has provided and the additional disclosures it intends to provide in the
2002 FERC Form 1 regarding the sensitivity of the goodwill impairment analysis,
we have no objection to ComEd's determination that none of the goodwill was
related to assets transferred to Generation."
###
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This press release contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and are subject to
uncertainty and changes in circumstances. Actual results may vary materially
from the expectations contained herein. The forward-looking statements herein
include statements about future financial and operating results of
Exelon. Economic, business, competitive and/or regulatory factors affecting
Exelon's businesses generally could causeactual results to differ materially
from those described herein. For a discussion of the factors that could cause
actual results to differ materially, please see Exelon's filings with the
Securities and Exchange Commission, particularly those discussed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Outlook" in Exelon's 2001 Annual Report. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date of this press release. Exelon does not undertake any
obligation to publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date of
this press release.
Exelon Corporation is one of the nation's largest electric utilities with
approximately 5 million customers and more than $15 billion in annual
revenues. The company has one of the industry's largest portfolios of
electricity generation capacity, with a nationwide reach and strong positions
in the Midwest and Mid-Atlantic. Exelon distributes electricity to
approximately 5 million customers in Illinois and Pennsylvania and gas to more
than 440,000 customers in the Philadelphia area. Exelon is headquartered in
Chicago and trades on the NYSE under the ticker EXC.
Exhibit 99.2
Below is the text of the September 26, 2002 Federal Energy Regulatory Commission
letter order to Commonwealth Edison Company.
[On Federal Energy Regulatory Commission letterhead]
Federal Energy Regulatory Commission
Washington, D.C. 20426
Office of the Executive Director
In Reply Refer To: OED-DRAP, Docket No. AC01-56-002
September 26, 2002
Commonwealth Edison Company
Attention: Mr. John E. Ebright
Controller
Three Lincoln Centre
Oakbrook Terrace, IL 601804260
By letters dated August 1 and 27, 2002, I advised
Commonwealth Edison (ComEd) that it should remove from Account 114,
Electric Plant Acquisition Adjustments, the amount of goodwill
associated with the generation and power marketing businesses
transferred to its affiliate, Exelon Generation LLC (Generation). My
determination was based on an inability to reach a contrary conclusion
based simply on an assertion that the fair value of the generation
assets was significantly below their book value at the time of the
merger.1 Goodwill represented the amount paid above fair value for all
of ComEd's identifiable assets at the time of the Peco/Unicom merger.
Therefore, the fact that the fair value of the generation assets was
below their book value at the time of the merger was not a sufficient
basis either under Generally Accepted Accounting Principles or the
Uniform systems of Accounts for concluding that no amount of the
goodwill should be associated with both the generation business and
power marketing business that were being transferred to Generation.
Since the issuance of the August 27th letter, however, ComEd
has provided the Commission, as well as the Securities and Exchange
Commission, with extensive additional information to support ComEd's
contention that the amount recognized as goodwill on its books relates
entirely to ComEd's energy delivery business and thus no portion of
that amount should be associated with the facilities and businesses
transferred to Generation. In particular, ComEd argued and provided
supporting information that:
o the amount recognized as goodwill relates exclusively to
ComEd's transmission and distribution business because of
cash flows expected to be realized from the stranded cost
recovery provision of the Illinois Restructuring Act that
are included in rates charged for delivery services by
ComEd.
o at the time of the Peco/Unicom merger, the unidentified
value (i.e. the goodwill) in the purchase transaction was
associated with the regulatory framework in Illinois,
ComEd's energy delivery franchises, and the connection its
transmission and distribution assets provided to over 3
million retail customers.
o no intangible value was assignable to the power marketing
operations transferred to Generation because those
operations were limited in scope2 and the processes and
systems developed by Wholesale Marketing Group were not
expected to be used by Generation.
Based on our review of the additional information ComEd has
provided and the additional disclosures it intends to provide in the
2002 FERC Form 1 regarding the sensitivity of the goodwill impairment
analysis3 we have no objection to ComEd's determination than none of
the goodwill was related to assets transferred to Generation.
This letter order constitutes final agency action. To request
that the Commission rehear you case you must file a request within 30
days of the date of this letter order (see 18 C.F.R. ss. 385.713).
Sincerely,
/s/ John M. Delaware
------------------------
John M. Delaware
Deputy Executive Director and Chief Accountant
--------------------
1 Commonwealth Edison letter to the FERC Chief Accountant
dated August 15, 2002.
2 ComEd stated that the primary focus of its Wholesale
Marketing Group (WMG) was managing and balancing electricity supply to
the load on ComEd's system. WMG had very limited approval to engage in
financial hedging transactions and did not engage in speculative
trading.
3 ComEd letter dated September 18, 2002.