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
March 3, 2003
(Date of earliest
event reported)
Commission File Name of Registrant; State of Incorporation; Address of IRS Employer
Number Principal Executive Offices; and Telephone Number Identification Number
- --------------------- --------------------------------------------------------- -------------------------
1-16169 EXELON CORPORATION 23-2990190
(a Pennsylvania corporation)
10 South Dearborn Street - 37th Floor
P.O. Box 805379
Chicago, Illinois 60680-5379
(312) 394-7398
1-1839 COMMONWEALTH EDISON COMPANY 36-0938600
(an Illinois corporation)
10 South Dearborn Street - 37th Floor
P.O. Box 805379
Chicago, Illinois 60680-5379
(312) 394-4321
1-1401 PECO ENERGY COMPANY 23-0970240
(a Pennsylvania corporation)
P.O. Box 8699 2301 Market Street
Philadelphia, Pennsylvania 19101-8699
(215) 841-4000
333-85496 EXELON GENERATION COMPANY, LLC 23-3064219
(a Pennsylvania limited liability company)
300 Exelon Way
Kennett Square, Pennsylvania 19348
(610) 765-6900
Item 5. Other Events
Earnings Guidance
- -----------------
Exelon Corporation reaffirms its previously issued operating earnings
guidance of $4.80 to $5.00 per share for 2003.
Rate Matters
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Commonwealth Edison Company (ComEd) entered into an agreement as of
March 3, 2003 with various Illinois electric retail market suppliers, key
customer groups and governmental parties regarding several matters affecting
ComEd's rates for electric service. The agreement contemplates a series of
coordinated filings with the Illinois Commerce Commission (ICC), which must
issue orders consistent with the agreement in order for the provisions of the
agreement to become effective.
The agreement addresses, among other things:
o ComEd's pending proceeding to establish rates for delivery services
provided to its customers
New delivery service rates will be set based upon a $1.517 billion
revenue requirement, and remain in effect through December 31, 2006, with a
possible reopener in the event that a reexamination in 2005 shows that
ComEd is either under-recovering or over-recovering by more than 15% based
on those rates. In addition, a $109 million distribution system capital
expenditure disallowance that was proposed by Liberty Consulting would not
be reflected in the revenue requirement. Distribution system plant
reflected in the rate filing would be considered prudent and used and
useful for purposes of future rate proceedings.
Traditional bundled rates paid by customers that retain ComEd as
their electricity supplier will remain frozen through 2006 and would not be
affected.
o Market development
The methodology used to determine the market value energy credit
that is used to determine 1) the price for specified market-based rate
offerings by ComEd, and 2) and the amount of the competitive transition
charge (CTC) that ComEd is allowed to collect from customers who select an
alternative retail electricity supplier will be modified. The credit will
be adjusted upward through agreed upon "adders," which have the effect of
reducing the CTC for customers.
The new adders, which will increase the market value by up to $5 to $6
per megawatthour depending on the length of the contract, and will take
effect in June 2003, replace an existing June 2002 agreement between Exelon
Generation Company, LLC (Exelon Generation) and Illinois retail electric
suppliers. The existing Exelon Generation agreement, which also provides
for a payment of $5 per megawatthour to retail electric suppliers, expires
in May 2003. The estimated annual revenue impact of the reduction in CTC
revenues under the new agreement is approximately $65-70 million, which is
equivalent in amount to the annualized revenue impact of the payments made
under the existing Exelon Generation agreement that expires in May 2003.
In addition, customers will be offered an option to lock-in CTCs
for longer periods. Currently, CTCs are subject to change annually.
o Competitive service declarations that assist in mitigating ComEd's provider
of last resort obligations
The agreement provides for the withdrawal of certain of the
outstanding appeals of the competitive declaration for service to customers
having load requirements of three or more megawatts. Also, it establishes a
process for achieving in June 2004 a similar competitive declaration for
service to customers having load requirements of one to three megawatts.
o ComEd's ability to enter into a full-requirements power purchase agreement
with its affiliate, Exelon Generation
ComEd's full requirements contract in place through 2004 will be
extended into 2005 and 2006, replacing the partial requirements service for
2005 and 2006 provided for in the existing agreement. The prices for
capacity and energy to meet all of ComEd's retail and wholesale obligations
in 2005 and 2006 will be set in April 2003 using market values consistent
with those used in setting multi-year competitive transition charges. These
prices are expected to approximate the market cost of the risk associated
with ComEd's remaining provider of last resort obligation. The agreement
also confirms the continued recovery of up to $73 million in nuclear
decommissioning charges during 2005 and 2006, depending on the amount of
energy that ComEd purchases from Exelon Generation's nuclear plants
formerly owned by ComEd.
o Funding of certain programs for customer and governmental groups
The agreement provides for $51 million in funding over the
transition period ending in 2006 to various consumer groups and
governmental agencies for a variety of programs, which may include energy
efficiency products and services, residential consumer education and market
development studies and installation of emergency generating equipment.
ComEd believes the agreement assists in protecting the integrity of the
competitive transition charge that it is allowed to collect from customers who
choose an alternative supplier; sets a reasonable delivery service rate,
provides customers and ComEd with greater price certainty and stability;
enhances its relationship with regulatory, governmental and key customer groups;
avoids the costs, uncertainty and time associated with litigation; and presents
a proactive approach to increasing competition in the supply of electricity in
Illinois.
In order for the agreement to become effective, the ICC, which is not a
party to the agreement, must enter orders consistent with the agreement by late
March in various regulatory proceedings that are the subject of the agreement.
Although the parties to the agreement have agreed as to the general content of
those orders, there are other parties to the proceedings who could seek changes
or modifications to the proposed orders or otherwise delay or prevent the
effectiveness of the agreement. As a result, there can be no assurance that the
agreement will become effective.
If the agreement becomes effective, ComEd will record a charge to
earnings associated with the $51 million (pre-tax) of funding of specified
programs and initiatives associated with the agreement. This amount will be
partially offset by the reversal of a $12 million (pre-tax) reserve established
in the third quarter of 2002 for a potential capital disallowance in ComEd's
delivery services rate proceeding, and a credit of $10 million (pre-tax) related
to the capitalization of employee incentive payments provided for in the
delivery services order. The net one-time charge for these items of
approximately $0.05 per share will be recognized upon receipt of necessary ICC
approvals.
This combined Form 8-K is being filed separately by Exelon Corporation,
Commonwealth Edison Company, PECO Energy Company and Exelon Generation Company,
LLC (Registrants). Information contained herein relating to any individual
registrant has been filed by such registrant on its own behalf. No registrant
makes any representation as to information relating to any other registrant.
Except for the historical information contained herein, certain of the matters
discussed in this Report are forward-looking statements that are subject to
risks and uncertainties. The factors that could cause actual results to differ
materially from the forward-looking statements made by a registrant include
those discussed herein as well as those discussed in "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Business Outlook
and the Challenges in Managing Our Business" and Note 19 of the Notes to
Consolidated Financial Statements in Exelon Corporation's 2002 Annual Report,
those discussed in "Risk Factors" in PECO Energy Company's Registration
Statement on Form S-3, Reg. No. 333-99361, those discussed in "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Exelon Generation Company, LLC's Registration Statement on Form
S-4, Reg. No. 333-85496, those discussed in "Risk Factors" in Commonwealth
Edison Company's Registration Statement of Form S-3, Reg. No. 333-99363 and
other factors discussed in filings with the Securities and Exchange Commission
by the Registrants. Readers are cautioned not to place undue reliance on these
forward-looking statements, which apply only as of the date of this Report. None
of the Registrants undertake any obligation to publicly release any revision to
its forward-looking statements to reflect events or circumstances after the date
of this Report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EXELON CORPORATION
COMMONWEALTH EDISON COMPANY
PECO ENERGY COMPANY
EXELON GENERATION COMPANY, LLC
/S/ Robert S. Shapard
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Robert S. Shapard
Executive Vice President and
Chief Financial Officer
Exelon Corporation
March 5, 2003
