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                                  FORM 10-K10-K/A

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON,Washington, D.C. 20549

                         (MARK
   ONE)Amendment No. 1 to Form 10-K

  (Mark
   one)
   [X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBERFor the Fiscal Year Ended December 31, 19971999
   [_]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934


COMMISSION REGISTRANT; STATE OF INCORPORATION;Commission Registrant; State of Incorporation; IRS EMPLOYER FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.Employer File Number Address; and Telephone Number Identification No. ----------- ----------------------------------- ------------------ 1-11375 UNICOM CORPORATION 36-3961038 (an Illinois corporation) 37th Floor, 10 South Dearborn Street Post Office Box A-3005 Chicago, Illinois 60690-3005 312/394-7399 1-1839 COMMONWEALTH EDISON COMPANY 36-0938600 (an Illinois corporation) 37th Floor, 10 South Dearborn Street Post Office Box 767 Chicago, Illinois 60690-0767 312/394-4321
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGESecurities Registered Pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange - --------------------------- ON WHICH REGISTEREDon Which Registered ------------------------- UNICOM CORPORATION - ------------------Unicom Corporation Common Stock, without par value New York, Chicago and Pacific COMMONWEALTH EDISON COMPANY - ---------------------------Commonwealth Edison Company (Listed on inside cover) INDICATE BY CHECK MARK WHETHER THE REGISTRANTSIndicate by check mark whether the registrants (1) HAVE FILED ALL REPORTS REQUIRED TO BE FILED BY SECTIONhave filed all reports required to be filed by Section 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OFor 15(d) of the Securities Exchange Act of 1934 DURING THE PRECEDINGduring the preceding 12 MONTHS, ANDmonths, and (2) HAVE BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PASThave been subject to such filing requirements for the past 90 DAYS. YESdays. Yes X . No . ----- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- COMMONWEALTH EDISON COMPANY Securities Registered Pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - --------------------------------------- --------------------------- First Mortgage Bonds: 7 5/8% Series 25, due June 1, 2003 ) 8% Series 26, due October 15, 2003 ) New York 8 1/8% Series 35, due January 15, 2007 ) Sinking Fund Debentures: 3%, due April 1, 1999 ) 2 7/8%, due April 1, 2001 ) New York 7 5/8% Series 1, due February 15, 2003 ) 2 3/4%, due April 1, 1999 New York and Chicago Cumulative Preference Stock, without par value: $1.90; $2.00; $7.24; $8.40; $8.38; and $8.40 Series B New York, Chicago and Pacific $2.425 New York Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely the Company's 8.48% Subordinated Debt Securities New York THE ESTIMATED AGGREGATE MARKET VALUE OF UNICOM CORPORATION'S 216,683,743 shares of outstanding Common Stock, without par value, was approximately $6,948 million as of February 28, 1998. In excess of 99.9% of Unicom Corporation's voting stock was owned by non-affiliates as of that date. THE ESTIMATED AGGREGATE MARKET VALUE OF COMMONWEALTH EDISON COMPANY'S outstanding $1.425 Convertible Preferred Stock, Cumulative Preference Stock and Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts Holding Solely the Company's Subordinated Debt Securities was approximately $1,107 million as of February 28, 1998. Unicom Corporation held in excess of 99.99% of the 214,231,528 shares of outstanding Common Stock, $12.50 par value, of Commonwealth Edison Company as of that date. DOCUMENTS INCORPORATED BY REFERENCE: Portions of Unicom Corporation's Current Report on Form 8-K dated January 30, 1998 are incorporated by reference into Parts I, II and IV of the Unicom Corporation Annual Report on Form 10-K and portions of its definitive Proxy Statement to be filed prior to April 30, 1998, relating to its Annual Meeting of shareholders to be held on May 28, 1998, are incorporated by reference into Part III of the Unicom Corporation Annual Report on Form 10-K. Portions of Commonwealth Edison Company's Current Report on Form 8-K dated January 30, 1998 are incorporated by reference into Parts I, II and IV of the Commonwealth Edison Company Annual Report on Form 10-K and portions of its definitive Information Statement to be filed prior to April 30, 1998, relating to its Annual Meeting of shareholders to be held on May 28, 1998, are incorporated by reference into Part III of the Commonwealth Edison Company Annual Report on Form 10-K. UNICOM CORPORATION ANDand COMMONWEALTH EDISON COMPANY FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER10-K/A For the Fiscal Year Ended December 31, 19971999 This document contains amendments to the Annual Reports on Form 10-K for the fiscal year ended December 31, 19971999 for each of Unicom Corporation and Commonwealth Edison Company. Information contained herein relating to an individual registrant is filed by such registrant on its own behalf. Accordingly, except for its subsidiaries, Commonwealth Edison Company makes no representationrepresentations as to information relating to Unicom Corporation or to any other companies affiliated with Unicom Corporation. TABLE OF CONTENTS
PAGE ---- Definitions............................................................... 1 ANNUAL REPORT ON FORM 10-K FOR UNICOM CORPORATION: Part I Item 1. Business........................................................ 2 General......................................................... 2 Changes in the Electric Utility Industry........................ 3 Net Electric Generating Capability.............................. 6 Construction Program............................................ 6 Rate Matters.................................................... 8 Fuel Supply..................................................... 8 Regulation...................................................... 10 Employees....................................................... 16 Interconnections................................................ 16 Franchises...................................................... 16 Executive Officers of the Registrant............................ 18 Operating Statistics............................................ 19 Year 2000 Conversion............................................ 20 Market Risks.................................................... 20 Forward-Looking Information..................................... 20 Item 2. Properties...................................................... 20 Item 3. Legal Proceedings............................................... 22 Item 4. Submission of Matters to a Vote of Security Holders............. 23 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................................................... 23 Item 6. Selected Financial Data......................................... 25 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 25 Item 8. Financial Statements and Supplementary Data..................... 25 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................ 25 Part III Item 10. Directors and Executive Officers of the Registrant............. 25 Item 11. Executive Compensation......................................... 25 Item 12. Security Ownership of Certain Beneficial Owners and Management..................................................... 25 Item 13. Certain Relationships and Related Transactions................. 25
i UNICOM CORPORATION AND COMMONWEALTH EDISON COMPANY FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 TABLE OF CONTENTS (CONCLUDED)
PAGE ---- ANNUAL REPORT ON FORM 10-K FOR COMMONWEALTH EDISON COMPANY: Part I Item 1. Business........................................................ 26 Executive Officers of the Registrant............................... 26 Item 2. Properties...................................................... 28 Item 3. Legal Proceedings............................................... 28 Item 4. Submission of Matters to a Vote of Security Holders............. 28 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................................................................ 28 Item 6. Selected Financial Data......................................... 28 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...................................................... 28 Item 8. Financial Statements and Supplementary Data..................... 28 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................................ 28 Part III Item 10. Directors and Executive Officers of the Registrant............. 28 Item 11. Executive Compensation......................................... 29 Item 12. Security Ownership of Certain Beneficial Owners and Management. 29 Item 13. Certain Relationships and Related Transactions................. 29 ANNUAL REPORTS ON FORM 10-K FOR UNICOM CORPORATION AND COMMONWEALTH EDISON COMPANY: Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8- K...................................................................... 30 (a) Financial Statements, Financial Statement Schedules and Exhib- its............................................................... 30 (b) Reports on Form 8-K............................................ 37 Report of Independent Public Accountants on Supplemental Schedule to Unicom Corporation............................................................ 38 Report of Independent Public Accountants on Supplemental Schedule to Commonwealth Edison Company............................................ 39 Schedule II--Valuation and Qualifying Accounts.......................... 40 Signature Page to Unicom Corporation Annual Report on Form 10-K......... 41 Signature Page to Commonwealth Edison Company Annual Report on Form 10- K...................................................................... 42
ii DEFINITIONS The following terms are used in this document withundersigned Registrant hereby amends the following meanings:
TERM MEANING ---------------------- ------------------------------------------------------- 1997 Act The Illinois Electric Service Customer Choice and Rate Relief Law of 1997 BWR Boiling water reactor CERCLA Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended CFC Chlorofluorocarbon CHA Chicago Housing Authority Clean Air Amendments Clean Air Act Amendments of 1990 ComEd Commonwealth Edison Company Congress U.S. Congress Cotter Cotter Corporation, a ComEd subsidiary CTC Non-bypassable "competitive transition charge" DOE U.S. Department of Energy EMFs Electric and magnetic fields FAC Fuel adjustment clause FERC Federal Energy Regulatory Commission FERC Order FERC Open Access Order No. 888 issued in April 1996 IBEW International Brotherhood of Electrical Workers (AFL- CIO) ICC Illinois Commerce Commission IDNS Illinois Department of Nuclear Safety IDR Illinois Department of Revenue Illinois EPA Illinois Environmental Protection Agency Indiana Company Commonwealth Edison Company of Indiana, Inc., a ComEd subsidiary INPO Institute of Nuclear Power Operations IPCB Illinois Pollution Control Board ISO Independent System Operator January 30, 1998 Unicom's Currentitems of its Annual Report on Form 8-K including auditor's Form 8-K Reports opinion dated January 30, 1998 and ComEd's Current Report on Form 8-K including auditor's opinion dated January 30, 1998 MAIN Mid-America Interconnected Network MGP Manufactured gas plant NERC North American Electric Reliability Council NPDES National Pollutant Discharge Elimination System NPL National Priorities List NRC Nuclear Regulatory Commission O&M Operation and maintenance Rate Order ICC rate order issued in January 1995, as subsequently modified SEC Securities and Exchange Commission S&P Standard & Poor's Trust Securities ComEd-obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely ComEd's subordinated debt securities Unicom Unicom Corporation Unicom Energy Services Unicom Energy Services Inc., a Unicom subsidiary Unicom Enterprises Unicom Enterprises Inc., a Unicom subsidiary UT Holdings UT Holdings Inc., a Unicom subsidiary U.S. EPA U.S. Environmental Protection Agency
1 ANNUAL REPORT ON FORM 10-K FOR UNICOM CORPORATIONfor the fiscal year ended December 31, 1999 as set forth on the pages attached hereto: 1. Part III: Item 10--Directors and Executive Officers of the Registrant. 2. Part III: Item 11--Executive Compensation. 3. Part III: Item 12--Security Ownership of Certain Beneficial Owners and Management. 4. Part III: Item 13--Certain Relationships and Related Transactions. PART I ITEM 1. BUSINESS. GENERALIII Item 10. Directors and Executive Officers of the Registrant. Elizabeth Anne Moler resigned from the Unicom was incorporated in January 1994.and ComEd boards of directors on December 31, 1999, to become a regulated electric utility, is the principal subsidiary of Unicom. Unicom Enterprises is an unregulated subsidiarySenior Vice President of Unicom and ComEd. Donald P. Jacobs is retiring as a director of Unicom and ComEd after serving as a director of Unicom since its incorporation in 1994 and as a director of ComEd since 1979. His contributions to Unicom and to ComEd have been many and are gratefully appreciated. The vacancies created by Ms. Moler's resignation and Mr. Jacob's retirement are not being filled, and the number of directors is being reduced to nine. Nine directors are to be elected at the annual meeting to serve terms of one year and until their respective successors have been elected. The nominees for director, all of whom are now serving as directors of Unicom and ComEd, are listed below together with certain biographical information. Except as otherwise indicated, each nominee for director has been engaged in his or her present principal occupation for at least the past five years. Unicom was formed in 1994. Biographical Information of Unicom Directors Edward A. Brennan, age 66. Director of Unicom and ComEd since 1995. Retired. Chairman and CEO of Sears, Roebuck and Co. (retail merchandiser) for more than five years prior to his retirement in August 1995. Chairman of Compensation Committee. Other directorships: The Allstate Corporation, AMR Corporation, Dean Foods Company, Minnesota Mining and Manufacturing Company, Morgan Stanley Dean Witter & Co. and The SABRE Group Holdings, Inc. Carlos H. Cantu, age 66. Director of Unicom and ComEd since July 31, 1998. Retired. President and Chief Executive Officer of The ServiceMaster Company (service businesses) from January 1, 1994 through its subsidiaries,October 1, 1999. Other directorships: The ServiceMaster Company, First Tennessee National Corporation. 1 James W. Compton, age 62. Director of Unicom since 1994 and ComEd since 1989. President and Chief Executive Officer of the Chicago Urban League (a non- profit agency). Chairman of Audit and Compliance Committee and member of Compensation Committee. Other directorships: Ariel Mutual Funds and Highland Community Bank. Bruce DeMars, age 64. Director of Unicom and ComEd since 1996. Vice President and Secretary of DeMars, Inc. (consulting firm) since May 1997 and Partner, Trident Merchant Group since May 1998. Admiral, United States Navy and Director, Naval Nuclear Propulsion Program for more than five years prior to his retirement in energyOctober 1996. Member of Audit and Compliance Committee. Other directorship: McDermott International. Sue L. Gin, age 58. Director of Unicom since 1994 and ComEd since 1993. Founder, Owner, Chairman and Chief Executive Officer of Flying Food Group, Inc. (in-flight catering company). Chairperson of Business Development Committee and member of Audit and Compliance and Governance and Nominating Committees. Edgar D. Jannotta, age 68. Director of Unicom and ComEd since 1994. Senior Director of William Blair & Company, L.L.C. (investment banking and brokerage company) since January 1996. For more than five years prior thereto, Managing Partner of William Blair & Company and Senior Partner during 1995. Chairman of Governance and Nominating Committee and member of Business Development Committee. Other directorships: AAR Corp., AON Corporation, Bandag, Incorporated and Molex Incorporated. John W. Rogers, Jr., age 42. Director of Unicom and ComEd since 1999. President of Ariel Capital Management, Inc., an institutional money management firm which he founded in 1983. Ariel Capital Management also serves as the investment advisor, administrator and distributor for Ariel Mutual Funds. Member of Governance and Nominating and Business Development Committees. Other directorships: AON Corporation, Bank One Corporation, Burrell Communications Group, Inc. and GATX Corporation. John W. Rowe, age 54. Director, Chairman, President and Chief Executive Officer of Unicom and ComEd since March 16, 1998. President and Chief Executive Officer of New England Electric System from February 1989 to March 1998. Other directorships: Fleet Boston Financial, UnumProvident Corporation and Wisconsin Central Transportation Corporation. Richard L. Thomas, age 69. Director of Unicom and ComEd since July 31, 1998. Retired. Chairman of First Chicago NBD Corporation (banking and financial services) from 1995 to 1996 and of The First National Bank of Chicago from 1992 to 1996. Member of the Audit and Compliance and Compensation Committees. Other directorships: IMC Global Inc., The PMI Group, Inc., The SABRE Group Holdings, Inc. and Sara Lee Corporation. 2 Item 11. Executive Compensation. Executive Compensation The following table sets forth certain information relating to the compensation during the past three calendar years of the person who served as the Chief Executive Officer during 1999 and the other four most highly compensated executive officers of Unicom or ComEd at December 31, 1999. Summary Compensation Table
Annual Compensation Long-Term Compensation ----------------------------------- -------------------------------------- Bonus Awards Payouts ---------------- --------------------- ---------------- LTIP Payouts ---------------- Other Securities Annual Underlying All Other Stock- Compen- Restricted Options/ Stock- Compen- Name and Salary Cash Based(1) sation(2) Stock(3) SARs Cash Based(1) sation(4) Principal Position Year $ $ $ $ $ # $ $ $ ------------------ ---- ------- ------- -------- --------- ---------- ---------- ------- -------- --------- John W. Rowe(5)........ 1999 957,692 529,125 529,125* 55,112 -- 123,000 475,246 203,677* 42,478 Chairman (Chief 1998 726,923 484,209 484,209* 215,117 -- 250,000 343,219 52,537* 2,728,076 Executive Officer) 1997 -- -- -- -- -- -- -- -- -- Unicom and ComEd Oliver D. Kingsley, Jr.(6)................ 1999 544,385 -- 594,000* 175,502 231,562 40,000 -- 322,488* 24,139 Executive Vice President 1998 475,000 -- 383,332* 220,713 -- 35,000 -- 187,984* 20,994 Unicom and ComEd 1997 82,212 -- -- 202,828 560,000 25,000 182,712 10,777* 378,395 Robert J. Manning...... 1999 401,931 210,456 70,152* -- -- 40,000 102,229 102,229* 18,327 Executive Vice President 1998 375,035 184,958 61,653* -- -- 35,000 43,469 43,469* 22,132 Unicom and ComEd 1997 312,802 86,319 28,773* -- 291,250 25,000 42,153 42,153* 19,894 Pamela B. Strobel...... 1999 375,131 208,961 69,654* -- -- 30,000 84,410 84,410* 16,483 Executive Vice President 1998 341,000 137,341 58,861* -- -- 20,000 42,528 42,528* 20,347 and General Counsel 1997 304,970 41,742 13,914* -- 291,250 17,500 33,605 33,605* 19,247 Unicom and ComEd David R. Helwig(7)..... 1999 355,115 177,071 177,071* -- 479,256 25,000 -- 144,206* 15,702 Senior Vice President 1998 312,500 -- 196,727* -- -- 22,000 -- 85,747* 285,875 Unicom and ComEd 1997 -- -- -- -- -- -- -- -- --
- ------- (1) All of the amounts shown under "Bonus--Stock-Based" and "LTIP Payouts-- Stock-Based" were either paid in shares of Unicom common stock or were deferred and are deemed to be invested in shares of Unicom's common stock, and thus fully "at risk" until the end of the deferral period. Deferred amounts are noted with an asterisk. See note 7 to the "Security Ownership of Certain Beneficial Owners and Management" table on page 15. (2) Excludes perquisites and other benefits, unless the aggregate amount of such compensation is at least the lesser of either $50,000 or 10% of the total annual salary and bonus reported for the named executive officer. For 1999, includes $13,276 and $66,345 paid to Messrs. Rowe and Kingsley for the payment of taxes and $75,000 paid to Mr. Kingsley as a living cost allowance and $15,395 paid for financial and legal services for Mr. Rowe. For 1998, includes $89,381 and $132,077 paid to Messrs. Rowe and Kingsley, respectively, for reimbursements for the payment of taxes, $108,340 paid to Mr. Rowe for moving expenses and $75,000 paid to Mr. Kingsley as a living cost allowance. For 1997, includes payments to Mr. Kingsley of $74,065 for moving expenses, $75,000 as a living cost allowance and $53,251 for reimbursement of taxes. (3) The value shown is as of the date of grant. Dividends are paid or accrued on restricted stock awards at the same rate as paid to all shareholders. As of December 31, 1999, Mr. Manning had an aggregate of 5,000 shares of restricted stock worth $167,500, Ms. Strobel had an aggregate of 10,000 shares of restricted stock worth $335,000, Mr. Helwig had an aggregate of 12,000 shares of restricted stock worth $402,000 and Mr. Kingsley had an aggregate of 16,500 shares of restricted stock worth $552,750. (4) Amounts shown include matching contributions made by ComEd pursuant to the ComEd Employee Savings and Investment Plan ("ESIP"), matching contributions made by ComEd pursuant to the ComEd Excess 3 Benefit Savings Plan and premiums and administrative service activities.fees paid by ComEd on behalf of the named individuals under various group life insurance plans. For the year 1999, contributions made to the ESIP amounted to $6,960, $6,960, $4,184, $4,518 and $4,547 on behalf of Mr. Rowe, Mr. Kingsley, Mr. Manning, Ms. Strobel and Mr. Helwig, respectively. Contributions made to the ComEd Excess Benefit Savings Plan during 1999 totaled $34,700, $16,720, $12,311, $11,104 and $10,901 on behalf of Mr. Rowe, Mr. Kingsley, Mr. Manning, Ms. Strobel and Mr. Helwig, respectively. Premiums and administrative service fees paid during 1999 for Split Dollar Life, Accidental Death and Travel Accident insurance policies for Mr. Rowe, Mr. Kingsley, Mr. Manning, Ms. Strobel and Mr. Helwig, respectively, are as follows: $818, $459, $1,832, $861 and $254. For the year 1998, contributions made to the ESIP amounted to $7,287, $4,246, $4,350 and $1,915 on behalf of Mr. Kingsley, Mr. Manning, Ms. Strobel and Mr. Helwig, respectively. Contributions made to the ComEd Excess Benefit Savings Plan during 1998 totaled $31,621, $13,375, $11,079, $9,787 and $8,960 on behalf of Mr. Rowe, Mr. Kingsley, Mr. Manning, Ms. Strobel and Mr. Helwig, respectively. Premiums and administrative service fees paid during 1998 for Split Dollar Life, Accidental Death and Travel Accident insurance policies for Mr. Rowe, Mr. Kingsley, Mr. Manning and Ms. Strobel, respectively, are as follows: $96,455, $332, $6,807 and $6,210. ComEd is entitled to recover the premiums and administrative service fees from any amounts paid by the insurer on such Split Dollar Life policies and has retained a collateral interest on each policy to the extent of the premiums and administrative service fees paid with respect to such policy. Includes a $2,000,000 lump sum payment to Mr. Rowe in 1998 as partial compensation for actual compensation, benefits and programs which Mr. Rowe was, or was reasonably expected to become, entitled to receive from his previous employer, and a payment of $600,000 as an inducement to enter into his employment agreement. For 1997, includes $375,000 paid to Mr. Kingsley as an inducement to enter into his employment agreement. For 1998, includes $275,000 paid to Mr. Helwig as an inducement to enter into his employment agreement. (5) Mr. Rowe commenced employment on March 16, 1998. (6) Mr. Kingsley commenced employment on November 1, 1997. (7) Mr. Helwig commenced employment on January 19, 1998. Option/SAR Grants in Last Fiscal Year
Individual Grants ---------------------------------------------- Number of Securities % of Total Underlying Options/SARs Exercise Grant Date Options/SARs Granted to or Base Present Granted(1) Employees in Price Expiration Value(2) Name # Fiscal Year $ /Share Date $ ---- ------------ ------------ -------- ---------- ---------- John W. Rowe (CEO)...... 110,000 5.99 35.75 1/24/09 $712,250 John W. Rowe (CEO)...... 13,000(3) 0.71 35.563 3/03/09 84,175 Oliver D. Kingsley, Jr..................... 40,000 2.18 35.75 1/24/09 259,000 Robert J. Manning....... 40,000 2.18 35.75 1/24/09 259,000 Pamela B. Strobel....... 30,000 1.63 35.75 1/24/09 194,250 David R. Helwig......... 25,000 1.36 35.75 1/24/09 161,875
- ------- (1) Except as noted in note 3 below, each option becomes exercisable in equal annual increments on the first, second and third anniversaries of the grant date, subject to acceleration in the event that termination after a change in control of Unicom occurs. The options do not include any stock appreciation rights. (2) The "grant date present value" is based upon the Black-Scholes option- pricing model. The actual value, if any, an executive may realize upon exercise of the option will depend on the excess of the stock price over the exercise price on the date the option is exercised. Consequently, there is no assurance the value realized by an executive will be at or near the value estimated by the Black-Scholes model. The principal assumptions incorporated into the valuation model by Unicom for the options expiring 1/24/09 and 3/03/09 are as follows: (i) expected time to exercise of seven years, (ii) dividend yield rate of 4.5%, (iii) risk-free interest rate of 4.83% and (iv) expected volatility of 23.02%. (3) Mr. Rowe received this grant of options as a premium for deferring half of his 1998 Annual Incentive Award. Half of this grant vested immediately and the balance vested on the first anniversary of the grant date. 4 Aggregated Option Exercises in 1999 and 1999 Year-End Option Value
Underlying Unexercised Value of Unexercised Shares Options at In-The-Money Options at Name Acquired December 31, 1999 December 31, 1999(1) ---- on Value ------------------------- ------------------------- Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable # $ # # $ $ -------- ----------- ----------- ------------- ----------- ------------- John W. Rowe (CEO)...... 0 0 89,834 283,166 5,167 10,333 Oliver D. Kingsley, Jr..................... 0 0 28,334 71,666 91,669 45,831 Robert J. Manning....... 0 0 45,834 71,666 326,454 93,221 Pamela B. Strobel....... 0 0 30,334 49,166 226,519 65,254 David R. Helwig......... 0 0 7,334 39,666 6,875 13,745
- -------- (1) Market value less exercise price, before payment of applicable income taxes. Long-term Incentive Plans--Awards in Last Fiscal Year
Estimated Future Payouts Under Number of Performance or Other Non-Stock Price-Based Plans Shares, Units Period Until -------------------------------- or Other Maturation Threshold Target Maximum Name Rights(1) or Payout(2) Number Number Number ---- ------------- -------------------- --------------------- ---------- (Number of Performance Units) John W. Rowe (CEO)...... 12,694.32 3 years 6,347.16 12,694.32 25,388.64 Oliver D. Kingsley, Jr..................... 6,093.27 3 years 3,046.64 6,093.27 12,186.55 Robert J. Manning....... 4,804.31 3 years 2,402.16 4,804.31 9,608.62 Pamela B. Strobel....... 3,905.94 3 years 1,952.97 3,905.94 7,811.89 David R. Helwig......... 3,235.42 3 years 1,617.71 3,235.42 6,470.85
- -------- (1) Long-term performance unit awards were established in 1994 for executive and group level employees under the Unicom Corporation Long-Term Incentive Plan. The awards are based on a three-year performance period. For the awards described in the table, the number of units initially awarded to a participant is determined by dividing a percentage of base salary (including income from current compensation units under Unicom's principaland ComEd's Deferred Compensation Unit Plans) by $38.403. The applicable percentages for the individuals shown in the table are: 50% for Mr. Rowe; 45% for Mr. Kingsley; 45% for Mr. Manning; 40% for Ms. Strobel; and 35% for Mr. Helwig. If a promotion changes the applicable percentage of salary, awards are pro-rated accordingly. Payouts are based on achievement of corporate shareholder value added and customer satisfaction goals as well as specific business unit strategic initiatives over the three-year performance period ending December 31, 2001. The dollar value of a payout will be determined by multiplying (a) the number of units applicable by (b) the average closing price of Unicom common stock as reported in the Wall Street Journal as New York Stock Exchange Composite Transactions during the calendar quarter ending on December 31, 2001 by (c) the level of performance achieved. Payments will be made half in cash and half in the form of unrestricted shares of Unicom common stock. A participant may elect to defer receipt of up to 100% of the total award (net of applicable taxes) under the Unicom Corporation Stock Bonus Deferral Plan and receive, after such deferral, the deferred amount in the form of unrestricted shares of Unicom common stock. (2) Three-year period ending December 31, 2001. Service Annuity System The following table sets forth the annual retirement benefits payable under ComEd's Service Annuity System (including payments under a supplemental management retirement plan) to employees who retire at age 65 at stated levels of compensation and years of service at retirement (in 1999). 5 PENSION PLAN TABLE
Highest 4-Year Average Annual Normal Retirement Benefits After Specified Years of Earnings Service* -------- ---------------------------------------------------------- 15 20 25 30 35 40 -- -- -- -- -- -- $ 100,000 $ 31,936 $ 42,472 $ 52,368 $ 61,784 $ 70,842 $ 79,633 200,000 63,872 84,945 104,735 123,568 141,684 159,266 300,000 95,808 127,417 157,103 185,351 212,526 238,899 400,000 127,744 169,889 209,470 247,135 283,368 318,532 500,000 159,681 212,362 261,838 308,919 354,211 398,165 600,000 191,617 254,834 314,206 370,703 425,053 477,798 700,000 223,553 297,307 366,573 432,487 495,895 557,431 800,000 255,489 339,779 418,941 494,271 566,737 637,064 900,000 287,425 382,251 471,308 556,054 637,579 716,696 1,000,000 319,361 424,724 523,676 617,838 708,421 796,329 1,100,000 351,297 467,196 576,044 679,622 779,263 875,962 1,200,000 383,233 509,668 628,411 741,406 850,105 955,595 1,300,000 415,169 552,141 680,779 803,190 920,948 1,035,228 1,400,000 447,106 594,613 733,146 864,974 991,790 1,114,861 1,500,000 479,042 637,085 785,514 926,757 1,062,632 1,194,494 1,600,000 510,978 679,558 837,882 988,541 1,133,474 1,274,127 1,700,000 542,914 722,030 890,249 1,050,325 1,204,316 1,353,760 1,800,000 574,850 764,503 942,617 1,112,109 1,275,158 1,433,393 1,900,000 606,786 806,975 994,984 1,173,893 1,346,000 1,513,026 2,000,000 638,722 849,447 1,047,352 1,235,677 1,416,842 1,592,659
- -------- * An employee may elect a marital annuity for a surviving spouse which would reduce the employee's normal retirement benefits. The amounts shown reflect certain assumptions as to total earnings, but do not reflect any reduction for Social Security benefits. Service Annuity System. ComEd maintains a non-contributory pension plan, the Service Annuity System, for all regular employees of ComEd. The Service Annuity System ("Plan") provides benefits upon retirement at age 65 which are based upon years of credited service and percentages of the employee's highest consecutive four-year average annual base pay, which includes basic compensation and certain incentive pay. An employee with at least 10 years of service may retire prior to attaining age 65 (but not prior to age 50) and will receive reduced benefits if retirement is prior to age 60. A non- executive officesemployee may work beyond age 65 with additional benefits accruing for earnings and service after age 65. Contributions to the Plan by ComEd are located at 10 South Dearborn Street, Post Office Box A-3005, Chicago, Illinois 60690- 3005,based upon actuarial determinations that take into account the amount deductible for income tax purposes and its telephonethe minimum contribution required under the Employee Retirement Income Security Act of 1974, as amended. Compensation used in the computation of annual retirement benefits under the Plan is substantially equivalent to the amounts shown in the "Salary" and "Bonus" columns under the "Annual Compensation" heading of the Summary Compensation Table. The compensation used in the computation of annual retirement benefits under the Plan is limited by the Internal Revenue Code as of January 1, 2000 to $170,000 (which number is 312/394-7399.subject to adjustment for increases in the cost of living) for any one employee. Any reduction in the annual retirement benefits payable to management employees under the Plan as a result of any limitations imposed by the Internal Revenue Code is restored under a supplemental management retirement plan maintained by ComEd, represents substantially allwhich also provides retirement benefits granted under employment agreements or other arrangements. Thus, annual retirement benefits, as set forth in the Pension Plan Table above, are based on the amounts shown in the "Salary" and "Bonus" columns under the "Annual Compensation" heading of the assets, revenues and net income (loss) of Unicom; and Unicom's resources and results of operations are largely dependent on, and reflect, those of ComEd. Consequently, the following discussion focuses on ComEd's utility operations although information is also provided about Unicom's unregulated operations. Utility Operations ComEd is engaged principally in the production, purchase, transmission, distribution and sale of electricity to a diverse base of residential, commercial, industrial and wholesale customers. ComEd was organized in the state of Illinois on October 17, 1913Summary Compensation Table, without limitation 6 as a result of the mergerapplication of Cosmopolitan Electric Companythe provisions of the Internal Revenue Code. The approximate number of years of credited service under the Plan or, if applicable, under the supplemental management retirement plan, for the persons named in the Summary Compensation Table are as follows: John W. Rowe, 22 years; Robert J. Manning, 36 years; Oliver D. Kingsley, 17 years; Pamela B. Strobel, 7 years; and David R. Helwig, 2 years. Employment Agreements John W. Rowe Unicom and ComEd have an employment agreement with John W. Rowe, pursuant to which he became Chairman, President and Chief Executive Officer of each company on March 16, 1998. The agreement provides that Mr. Rowe will be paid an annual base salary of at least $900,000. Unicom also granted Mr. Rowe an option to purchase 250,000 shares of common stock with an option price equal to the fair market value of the common stock as of March 16, 1998. Such options become exercisable in equal installments on March 16 of 1999, 2000, and 2001, and expire on March 15, 2008. In accordance with the terms of his employment agreement, Mr. Rowe was not entitled to any additional grants of stock options during 1998. The employment agreement with Mr. Rowe further provides that Mr. Rowe will participate in Unicom's Annual Incentive Award Program and will receive an annual incentive award for 1998 and 1999 that shall equal at least $600,000. The employment agreement was amended to provide that Mr. Rowe's annual incentive awards for 1998 and 1999 would be paid half in cash and half in Unicom common stock, and that the guaranteed portion of Mr. Rowe's annual incentive award for 1998 and 1999 would be paid 50% in cash and 50% as a grant of shares of Unicom common stock, half of which vested on the date the annual incentive would otherwise be paid (the "Grant Date") and half of which vested on the anniversary of the Grant Date. In connection with this grant of shares, Mr. Rowe also received, on the Grant Date, an option to purchase 13,000 of Unicom common stock, which was the number of shares with a value as of the Grant Date of $90,000 (determined using the pricing models used by the Compensation Committee). Such option became exercisable 50% on the Grant Date and 50% on the first anniversary thereof. Mr. Rowe participates in the Unicom Long-Term Performance Unit Award Program, and any award payable under such Program with respect to the three-year performance periods ending on December 31, 1998, 1999, or 2000 will be made as though he had participated in the Program throughout such performance periods (except in the case of a termination of employment). Mr. Rowe agreed to defer receipt of the stock portion of any incentive award under the Unicom Corporation Stock Bonus Deferral Plan. As partial compensation for actual compensation, benefits and programs that Mr. Rowe was, or was reasonably expected to become, entitled to receive from his previous employer, he received a lump-sum payment of $2,000,000. In addition, Mr. Rowe received $600,000 as an inducement to enter into the original corporation named Commonwealth Edison Company.employment agreement. Mr. Rowe's employment agreement provides for a retirement benefit equal to the amount that would have been payable under the Service Annuity System (plus amounts payable under the ComEd Supplemental Management Retirement Plan) for an employee who retires at age 60 (or such greater age if Mr. Rowe should become eligible for the retirement benefit after attaining the age of 60) calculated based on the assumption that Mr. Rowe had completed 20 years of credited service as well as his actual years of credited service. The latter had been incorporated on September 17, 1907. ComEd's electric service territory has an area of approximately 11,300 square miles and an estimated population of approximately 8 million as of December 31, 1997. It includesemployment agreement with Mr. Rowe provides for severance payments to Mr. Rowe if he should be terminated without cause or if he should terminate the city of Chicago, an area of about 225 square miles with an estimated population of approximately 3 million from which ComEd derived approximately one-third of its ultimate consumer revenues in 1997. ComEd had 3.4 million electric customers at December 31, 1997. ComEd's principal executive offices are located at 10 South Dearborn Street, Post Office Box 767, Chicago, Illinois 60690-0767, and its telephone number is 312/394-4321. Unregulated Operations Unicom Enterprises is engaged, through subsidiaries, in energy service activities which are not subject to utility regulation by state or federal agencies. One of these subsidiaries, UT Holdings, provides district cooling, heating and related services to offices and other buildingsemployment agreement for good reason (as defined in the central business districtagreement) equal to his base salary at the time of such termination, together with a formula annual incentive award (as defined in the agreement), until the later of March 16, 2001 or one 7 year after termination (if such termination should occur before March 16, 2001), or one year after the date of termination (if such termination should occur after March 16, 2001), and a continuation of health and life insurance benefits during such period, plus retirement benefits. In addition, any unvested options shall continue to become exercisable during such period, except that any unvested portion of the citydeferred shares and additional option granted to Mr. Rowe pursuant to the amendment to his employment agreement described above will immediately become fully exercisable upon any such termination of Chicago underemployment. If the termination occurs within 24 months following a non-exclusivechange in control of Unicom, such benefits will be paid for three years after the date of termination. Mr. Rowe agreed not to use agreementfor his own benefit or disclose any confidential information of Unicom or ComEd during or after the term of his employment, and not to compete with Unicom or ComEd or solicit any key employee or interfere with the cityrelationship with any material customer or supplier of Chicago for an initialeither company until two years after the term expiring in 2014. District cooling involves, in essence,of his employment with the production of chilled water at one or more central locationscompanies. The employment agreement has been amended and its circulation to customers' buildings through a closed circuit of supply and return piping. Such water is circulated through customers' premises primarily for air conditioning. This process is used by customers in lieu of self-generated cooling. As a resultrestated, effective upon the completion of the Clean Air Amendments,merger, as described under "The Merger--Interests of Unicom's Directors and Management in the manufacture of CFCs has been curtailed since January 1996, thereby creating a marketing opportunity for non-CFC based systems, such as UT Holdings' district cooling. UT Holdings is involvedMerger" in energy projects in other cities, generally working with the local utilities in those cities. Unicom Energy Services, another subsidiary of Unicom Enterprises, is engaged in providing energy services including gas services, performance contracting, distributed energy and active energy management systems. In 1997, Unicom Energy Services entered into a joint venture with Sonat Marketing Company L.P. to market natural gas and related services to large gas purchasers within ComEd's service area in Northern Illinois and other Midwestern areas. As an entry into the 2 distributed energy market, Unicom Energy Services alsoChapter I. Oliver D. Kingsley, Jr. ComEd entered into an alliance with AlliedSignal Power Systems, Inc., a subsidiary of AlliedSignal Inc., to market, install and service an electric energy generator developed by AlliedSignal, known as a TurboGenerator, in a 12-state region and the province of Ontario, Canada. Unicom Energy Services entered into an exclusive national distributorshipemployment agreement with Engage Networks, Inc.Oliver D. Kingsley, Jr. pursuant to which he became Executive Vice President and President and Chief Nuclear Officer--Nuclear Generation Group, effective November 1, 1997. The agreement provides for an annual base salary for 1997 and 1998 equal to $475,000, and further provides for a guaranteed increase of at least 4% per year, beginning in 1999. Mr. Kingsley received an option to purchase 25,000 shares of common stock with an option price equal to the fair market active energy management softwarevalue of the common stock as of November 1, 1997. Such options become exercisable in equal installments on November 1 of 1998, 1999 and related hardware2000, and services. CHANGES IN THE ELECTRIC UTILITY INDUSTRY Unicomexpire on October 31, 2007. Mr. Kingsley also received a grant of 20,000 shares of restricted stock that vests in equal installments on November 1 of 1998, 1999 and its predominant business, electric energy generation, transmission2000. The employment agreement with Mr. Kingsley provides that Mr. Kingsley will participate in Unicom's Annual Incentive Award Program and distribution, are in a periodwill receive an annual incentive award for 1998 and 1999 at least equal to the target award of fundamental change$213,750. Mr. Kingsley participates in the mannerUnicom Long-Term Performance Unit Award Program, and any award payable under such Program with respect to the three- year performance periods ending on December 31, 1997, 1998, or 1999 will be made as though he had participated in which customers obtain,the Program throughout such performance periods (except in the case of a termination of employment). In addition, Mr. Kingsley received $375,000 as an inducement to enter into the employment agreement, and energy suppliers provide, energy services. These changes are attributablean annual living cost allowance equal to changes in technology,$75,000 (increased by the relaxationamount of regulatory barriersapplicable taxes on such amount as so increased) for the first three years of the agreement term. Mr. Kingsley's employment agreement provides for a retirement benefit equal to utilities' respective service territories as well as to efforts to change the manner in which electric utilities are regulated. Federal law and regulationsamount that would have been amended to providepayable under the Service Annuity System (plus amounts payable under the ComEd Supplemental Management Retirement Plan) for open transmission system access,an employee who retires at age 60 calculated based on the assumption that Mr. Kingsley had completed 15 years of credited service beginning with the third year of his employment and various states, including Illinois, are considering, or have adopted, new regulatory structures to allow accessthat such credited service increased by some or all customers to energy suppliersfive years during each of the next two years, in addition to his actual years of credited service after five years of employment. 8 The employment agreement with Mr. Kingsley provides for a lump sum severance payment to Mr. Kingsley if he should be terminated without cause equal to two times his base salary at the local utility. Electric Utility Industry. The electric utility industry has historically consistedtime of vertically integrated companies which combine generation, transmissionsuch termination, and distribution assets; serve customers within relatively defineda continuation of health and life insurance benefits for two years after the date of termination, plus retirement benefits (calculated as though he had completed at least 15 years of credited service territories;if such termination occurs during the first two years of employment) and operate under extensive regulation with respect to rates, operations and other matters. Utilities have operated under a regulatory compact with the state, with a statutory obligation to serve allretiree health care coverage. In addition, any unvested portion of the electricity needs within their service territoryrestricted stock granted under the agreement will immediately become fully vested and nonforfeitable. Mr. Kingsley agreed not to use for his own benefit or disclose any confidential information of Unicom or ComEd during or after the term of his employment, and not to solicit any employee of ComEd for one year after the term of his employment with ComEd. Severance Plans Unicom established the Key Management Severance Plan in a nondiscriminatory manner. Historically, investment and operating decisions have been made based upon1998 to provide key employees, including the utilities' respective assessment of the current and projected needs of their customers. In view of this obligation, regulation has focused on investment and operating costs, and rates have been based on a recovery of some or all of such prudently incurred costs plus a return on invested capital. Such rate regulation, and the ability of utilities to recover investment and other costs through rates, have provided the basis for recordingnamed executive officers, certain costs as regulatory assets. These assets represent costs which are allocated over future periods reflecting related regulatory treatment, rather than expensedbenefits in the current period. The 1997 Act. On December 16, 1997,event their employment is terminated by their employer without cause, or in the Governor of Illinois signed into law the 1997 Act, which established a phased-process to introduce competition into the electric industry in Illinois under a less regulated structure. The 1997 Act,event they resign for good reason (both terms as it applies to ComEd, provides for, among other things, a 15% residential base rate reduction commencing on August 1, 1998, an additional 5% residential base rate reduction commencing on May 1, 2002, and customer access to other electric suppliers in a phased-in process. Access for commercial and industrial customers will occur over a period from October 1999 to December 2000, and access for residential customers will occur after May 1, 2002. The 15% residential base rate reduction, commencing on August 1, 1998, is expected to reduce ComEd's operating revenues by approximately $160 million and $375 million in 1998 and 1999, respectively, compared to 1997 rate levels. ComEd is engaged in certain pricing experiments contemplated by the 1997 Act, which are expected to reduce ComEd's operating revenues by approximately $30 million and $60 million in 1998 and 1999, respectively, compared to 1997 rate levels, notwithstanding the effects of customer growth. The 1997 Act also provides for the collection of a CTC from customers who choose another electric service provider during a transition period that extends through 2006, and can be extended through 2008 with ICC approval if certain factors are met. The CTC will be established in accordance with a formula defined in the 1997 Act.Plan). Benefits under the Plan include severance pay equal to the sum of a terminated executive's current annual base salary plus the average of his annual incentive awards for the two years preceding the termination, annual incentive awards and long-term incentive awards (with respect to any performance cycle for which the executive has completed 24 months) prorated through the date of termination, continuation of health care coverage, life insurance and long- term disability coverage, and outplacement services. Payment of severance pay and continuation of the benefits described above is made over two years, and the amount of the severance pay and incentive and the payment period is included for purposes of calculating retirement benefits under the supplemental management retirement plan and determining eligibility for retiree health care coverage. As a condition of receiving plan benefits, an executive must agree not to use for his own benefit or disclose any confidential information of Unicom or ComEd during or after the term of his employment, and not to compete with Unicom or ComEd or solicit any key employee or interfere with the relationship with any material customer or supplier of either company until two years after the term of his employment with the companies, and must release Unicom from all claims arising out of his employment as of the date of termination. In the case of Mr. Rowe and Mr. Kingsley, the severance benefits provided under the terms of their employment agreements will control, to the extent they exceed the benefits provided under the Plan. The CTC,boards of directors of Unicom and ComEd approved a change in control policy (the "Policy") in 1998 pursuant to which will be applied on a cents per kilowatthour basis, considersMr. Rowe and the revenue which would have been collected from a customer under tariffed rates, reduced by the revenue the utilityother named executive officers will receive benefits in the event their employment is terminated without cause or if they resign for providing delivery servicesgood reason (as such terms are defined under the Policy) within 24 months following a change in control of Unicom. The change in control benefits are provided in the form of individual agreements for the named executives, and Mr. Rowe's employment agreement was amended, effective March 8, 1999, to reflect the customer, the market price for electricity and a defined mitigation factor which represents the utility's opportunity to develop new revenue sources and achieve cost savings. 3 Notwithstanding these rate reductions, and subject to certain earnings tests, a rate freeze will generally be in effect until at least January 1, 2005. During this period, utilities may reorganize, sell or assign assets, retire or remove plants from service, and accelerate depreciation or amortization of assets with limited ICC regulatory review. Under the earnings provision of the 1997 Act, if the earned return on common equity of a utility during this period exceeds an established threshold, a portion of the excess earnings must be refunded to customers. A utility may request a rate increase during the rate freeze period when necessary to ensure the utility's financial viability, but not before January 1, 2000. Under the 1997 Act, utilities are required to continue to offer delivery services, including the transmission and distribution of electric energy, such that customers who select an alternative energy supplier can receive electric energy from that supplier using existing transmission and distribution facilities. Such services will continue to be offered under cost-based regulated rates.Policy provisions. The 1997 Act also requires utilities to establish or join an ISO that will independently manage and control utility transmission systems. Additionally, the 1997 Act includes the option to eliminate the FAC, the leveling of certain regulatory requirements to permit operational flexibility, the leveling of certain regulatory and tax provisions as applied to various electric suppliers and a new more stringent liability standard applicable to ComEdbenefits provided in the event of a major outage. The 1997 Act also allows ComEd to unbundle a portionchange in control, including approval of its future revenues, including tariffed ratesthe merger, are described under "The Merger--Interests of Unicom's Directors and CTC revenues, and issue securities backed by these revenues. The proceeds from such security issuances must generally be used to refinance outstanding debt or equity or for certain other limited purposes. The total amount of such securities that ComEd may issue is approximately $6.8 billion; approximately one-half of that amount can be issuedManagement in the twelve-month period commencingMerger" in Chapter I. Compensation Committee Report on August 1, 1998. As a resultExecutive Compensation The Compensation Committee of the 1997 Act, prices for the supply of electric generation are expected to transition from cost-based, regulated rates to rates determined by competitive market forces. The CTC allows ComEd to recover a portion of any of its costs which might otherwise be unrecoverable under market-based rates. Nonetheless, ComEd will need to take steps to address the portion of such costs which are not recoverable through the CTC. Such steps include cost control efforts and developing new sources of revenue. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," subcaption "Changes in the Electric Utility Industry-- Accounting Effects Related to the 1997 Act" and Note 2 of Notes to Financial Statements in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference, for the accounting effects related to the 1997 Act. Federal Regulation. The Federal Energy Policy Act of 1992, among other things, empowered the FERC to introduce a greater level of competition into the wholesale marketplace for electric energy. In April 1996, the FERC Order was issued requiring utilities to file open access tariffs with regard to their transmission systems. These tariffs set forth the terms, including prices, under which other parties and the utility's wholesale marketing function may use the utility's transmission system. ComEd has an approved open access tariff with the FERC. The FERC Order requires the separation of the transmission operations and wholesale marketing functions so as to ensure that unaffiliated third parties have access to the same information as to system availability and other requirements. The FERC Order further requires utilities to operate an electronic bulletin board to make transmission price and access data available to all potential users. A key feature of the FERC Order is that it contemplates full recovery of a utility's costs "stranded" by competition. These costs are "stranded" or "strandable" to the extent market-based rates would be insufficient to allow for their full recovery. To recover stranded costs, the utility must show that it had a reasonable expectation that it would continue to serve the customer in question under its regulatory compact. In addition, some governmental entities, such as cities, may elect to "municipalize" a utility's distribution facilities 4 through condemnation proceedings. Such municipalities would then be able to purchase electric power on a wholesale basis and resell it to customers over the newly acquired facilities. The FERC Order provides for the recovery of a utility's investment stranded by municipalization. ComEd's Response to Regulatory Changes. ComEd is responding, and is undertaking significant strategic planning efforts to respond further, to the developments within the utility industry and the 1997 Act and its potential for strandable investment. During the past several years, such efforts have focused on cost reductions, including personnel reductions, efficiencies in purchasing and inventory management, and an incentive compensation system keyed to cost control and improvement in shareholder value. Notwithstanding these efforts, ComEd's costs remain high in comparison to its neighboring utilities. Although ComEd's operating results and financial condition have historically been affected by various rate proceedings, ComEd expects that the changes in the national and Illinois electric energy marketplace, and ComEd's activities anticipating or responding to them, will directly impact its operating results and financial condition over the next several years. ComEd anticipates that the 1997 Act, and the resultant increasing competition to supply energy in Illinois and elsewhere, will have significant effects upon its revenues and assets as it takes steps to adjust its operations and services to meet the changing market for electric energy. Both Unicom and ComEd have been examining methods of positioning themselves and their affiliates to deal with those effects and to address the developing opportunities and challenges. ComEd has been engaged in a broad-based examination of its assets and operations, particularly nuclear and fossil generation and generation-related (i.e., fuel and inventory) assets, with a view toward rationalizing their investment and operating costs against their ability to contribute to the revenues of ComEd under various market scenarios. Such an assessment involves the consideration of numerous factors, including revenue contribution, operating costs, impacts on ComEd's service obligations, purchase commitments and the impact of various options. Such options include continued operation with accelerated depreciation, indefinite suspension from operation, sale to a third party and retirement or closure. As discussed below, ComEd recently ceased nuclear generation operations and retired facilities at its Zion Station. If ComEd retired or closed one or more additional generating plants, particularly a nuclear plant, such retirement would have a material impact on Unicom and ComEd's financial position and results of operations. See "General--Unregulated Operations" above regarding Unicom Energy Services' energy services activities. On January 14, 1998, the Boards of Directors of Unicom and ComEd authorizedhas furnished the permanent cessation of nuclear generation operationsfollowing report on executive compensation: Introduction. The Committee is responsible for Unicom's executive compensation philosophy and retirement of facilities at ComEd's 2,080 megawatt Zion nuclear generating station. Such retirement resulted in a chargepolicies, which form the basis for 1997 of $523 million (after-tax) or $2.42 per common share.the Committee's decisions. The decision to close Zion Station was a result of an ongoing analysis, which ComEd performed regarding the economic value of its generating assets in lightoverall objectives of the expected changes inexecutive 9 compensation programs are to drive and reinforce achievement of financial objectives and strategic initiatives, to provide compensation opportunities that are competitive with top performing energy services companies and general industry firms, and to ensure that compensation is linked to performance and increasing shareholder value. It is the manner in which electric energy is marketed and sold. The passagepolicy of the 1997 Act provided a clearer basis for evaluating the costsCommittee to compensate executive officers based on fulfillment of their responsibilities and benefitstheir achievement of alternative courses of action. In reaching the decision to cease nuclear generation operations at Zion Station, the Boards also considered the significant uncertainty associated with continued operation of the station due to the degradation of the steam generators,established corporate and the expected operating costs associated with continued station operation. Notwithstanding the closure of Zion Station as a nuclear generating facility, a portion of the station will continue to be used to provide voltage support in the transmission system that serves ComEd's northern region. Such support will require capital expenditures at the station as well as upgrades to the transmission system at various points, in order to improve the ability to import and transport power through the system. See Note 5 of Notes to Financial Statements in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference, for additional information. 5 In April 1996, ComEd announced that it had finalized agreements to sell two of its coal-fired generating stations, representing 1,598 megawatts of generating capacity, and to enter into exclusive 15-year purchased power agreements for the output of the stations.business unit goals. The sale of State Line Station was completed in December 1997 and the sale of Kincaid Station was completed in February 1998. The net proceeds of the sales, after income tax effects and closing costs, were approximately $190 million. The proceeds will be used to retire or redeem existing debt. ComEd joined with eight Midwestern utilities to form a regional Midwest ISO in January 1998. The Midwest ISO is a key element in accommodatingbusiness challenges resulting from the restructuring of the electricutility industry make it critical that Unicom's compensation programs drive and reinforce achievement of financial, operational and strategic goals. A study of management compensation programs was commissioned by the Committee in the fall of 1998. This study was conducted by a leading external management compensation consulting firm and included an assessment of business plans and strategic and competitive compensation levels compared with the external market. While overall, Unicom's total compensation levels were found to be generally competitive, the study results indicated that Unicom's mix of compensation components (i. e., salary, annual and long term incentives and stock options) could be more effectively aligned with the competitive market. Based on those results, Unicom's pay-for-performance philosophy was refined to have an increased emphasis on pay-at-risk. When excellent performance is achieved, pay will promote enhanced reliabilityexceed market levels. Failure to achieve target goals will result in below-market pay. In addition, other compensation changes were made to achieve a more effective use of shareholder value as a determinant of compensation and to encourage officers and other employees to act like owners of the transmission system, equal accessbusiness. The Committee believes that compensation paid should be appropriate in relation to the transmission systemfinancial performance of Unicom and should be sufficient to enable Unicom to attract and retain individuals possessing the talents required for ensuring the Company's long-term successful performance. The Committee also believes that incentive compensation performance goals for executive management should be based on factors over which management has significant control and which are important to Unicom's long-term success. In 1999, the major components of executive officer compensation were base salary, consisting of cash salary and current compensation unit income, non- qualified stock options, and incentive compensation (both annual and longer- term) related to awards under the Unicom Corporation Long-Term Incentive Plan. Base Salary. The process of determining the officers' base salaries began with a review of the salary levels for various comparable executive positions at a group of peer companies identified by the Committee. The Committee also used compensation survey information from several executive compensation-consulting firms. The Committee then considered differences from other companies in Unicom's organizational structure and the responsibilities of its executive officers, in the size, scope and complexity of Unicom's operations, and in the regulatory environment and competitive challenges faced by Unicom. Salary range increases and salary adjustment budgets are established annually for non-officer employees based on business and economic conditions of Unicom as well as on competitive practices. Beginning in 1999, Unicom initiated a two- year scheduled review cycle for officer level executives to make the rewards more meaningful and to cover a longer performance period. Salaries are adjusted based upon each executive's performance impact and overall contributions to Unicom. The Chairman reviewed the base salary of each officer and recommended an adjustment after assessing particular responsibilities and performance. The Chairman's recommendations were reviewed and approved by the Committee. Percentage increases for individual officers varied and were structured to recognize changes in industry compensation levels; to reflect the impact, performance and contributions of individual officers; and to reflect strategic changes in job responsibilities and assignments. 10 In 1999, four executive officers held current compensation units. Each such unit entitles the holder to receive current income equal to the dividends paid on one share of Unicom Common Stock. During 1999, no additional units were awarded by the Committee. Incentive Compensation Awards. Another component of executive compensation is incentive compensation earned under awards made by the Committee under the Unicom Corporation Long-Term Incentive Plan. Such incentives are designed to drive and enforce achievement of established financial, operational and strategic goals that are critical to Unicom's success, including increasing shareholder value. Incentive opportunities include an annual incentive target, a long-term performance unit target covering a three-year performance period and non-qualified stock options. The Unicom Corporation 1999 Annual Incentive Award for Management Employees under the Unicom Corporation Long-Term Incentive Plan was established to reward the achievement of certain corporate and business unit goals during 1999. The annual incentive award placed increased competition. The Midwest ISO will establish an independent bodyemphasis on financial performance, strategic direction and results that will ultimately direct the managementincrease shareholder value. A significant portion of the transmission system1999 annual incentive for executive officers was tied to a Shareholder Value Added measure. The award is variable and is designed to encourage achievement of short-term goals. Employees receive incentive awards only if their business units and Unicom meet or exceed the established performance targets for the utilities involved. ComEdyear. The amount of the individual awards is based upon the individual and collective accomplishments of employees and varies based upon the degree to which the financial and strategic goals are met or exceeded and upon the Committee's assessment of individual performance. For key management employees, the annual incentive award is payable 75% in cash and 25% in Unicom Common Stock. For management employees other than those in selected sales-related positions, the 1999 corporate financial goal was "Shareholder Value Added." Shareholder Value Added was defined as revenues (ComEd, Off System and Subsidiaries) less Costs (operations and maintenance expenditures, fuel, depreciation and taxes), minus capital charge (debt and equity costs). Staff executive officers' annual incentive awards were tied to the corporate Shareholder Value Added goals whereas line executive officers were tied to both the corporate Shareholder Value Added goal and his or her business unit's Shareholder Value Added goal. The 1999 Unicom Corporate Shareholder Value Added achieved was 138.95% of the target level. In addition to the Shareholder Value Added goal tie, the remaining portion of executive officers' annual incentive award was comprised of a combination of corporate and business unit strategic initiatives and key performance indicators. Quantitative goals (for example, nuclear capacity) were measured on a scale of performance ranging from "threshold" to "maximum." Other strategic goals were assessed and approved by the Committee. For Mr. Rowe and other executive officers, the final determination of the annual incentive award was based on the accomplishment of Shareholder Value Added, strategic goals, and an individual performance assessment by the Committee. A long term performance unit award program was established in 1994 to focus employees on long range performance by linking certain incentive payments to specific performance measures. Incentive opportunities are expressed as a percentage of base salary and increase with the executive's management level. The awards payable in 2000 and in 2001 are based on the total return of Unicom Common Stock relative to that of the other companies constituting the Dow Jones Utility Stock Index over three-year performance periods. The Dow Jones Utility Stock Index includes Unicom and fourteen other large energy services companies. To better support improved business performance and the creation of Unicom shareholder value, the award payable in 2002 places a significant emphasis on Business Unit performance as well as corporate profitability as measured by Corporate Cumulative Shareholder Value Added and a Customer Satisfaction Index. 11 Awards for the performance period 1997-1999 resulted in a payment that was 115.5% of the target award. Payments to certain executive officers are included in the "Payouts" column under the "Long-Term Compensation" heading in the Summary Compensation Table. Unicom's shareholder return increased by 44.3% during that same performance period. Stock Option Grants in 1999. Unicom grants non-qualified stock options to reward and motivate the Company's management to increase long-term shareholder value. Option grants are made generally to key employees who are expected to contribute materially to Unicom's success. The option awards permit grantees to purchase shares of Unicom's Common Stock at an exercise price equal to the market value on the date of grant, and become exercisable in equal increments over a three-year period. The options have a maximum term of ten years. Committee decisions regarding the size of option grants were based on an evaluation of competitive data drawn from companies in a study conducted in fall 1998 for Unicom by a leading executive compensation consulting firm, as well as the option recipient's base salary, target mix of other compensation components, management level, performance and potential. Compensation of the Chief Executive Officer. In considering the compensation for 1999 of Mr. Rowe, the Compensation Committee evaluated Unicom's 1998 performance, compensation for other chief executive officers, and Unicom's strategic direction. Under his employment agreement, Mr. Rowe is paid an annual base salary of at least $900,000, is guaranteed an annual incentive award for 1998 and 1999 of at least $600,000, and participates in the Long- Term Performance Unit Award Programs with respect to the three-year performance periods ending December 31, 1998, 1999 and 2000 as though he had participated in the Program throughout the performance periods. Salary. The Committee's assessment of the personal performance of Mr. Rowe was based upon an evaluation of his leadership, achievements and contributions to Unicom during 1998, as well as an assessment of competitive practices and market comparisons of chief executive officers for comparable companies. Mr. Rowe's total annual salary in 1999 was increased $75,000 to a rate of $975,000 per year. Incentive Compensation Plans Annual Incentive Program. Mr. Rowe participated in the annual incentive program described earlier in this report. Mr. Rowe's target award was 70% of his base salary. The actual award paid was 155.1% of his target level based on the achievement of Shareholder Value Added, strategic goals and an individual performance assessment by the Committee. The Committee approved payment of the award 50% in cash and 50% in Unicom Common Stock. Mr. Rowe deferred the portion of his incentive that was payable in Unicom Common Stock under the Unicom Corporation Stock Bonus Deferral Plan. Long Term Performance Unit Award. Mr. Rowe's award opportunity for the 1997- 1999 performance cycle was at a target level of 50% of his then-current base salary. The actual award paid was 115.5% of his target level based on the total return of Unicom Common Stock relative to the other companies constituting the Dow Jones Utility Stock Index over the performance period. Stock Option Award. Mr. Rowe was granted 110,000 non-qualified stock options as part of the normal annual grant cycle. In addition, as Mr. Rowe voluntarily deferred one-half of his guaranteed annual awards for 1998 and 1999, the Committee awarded him a premium of an additional 13,000 options on March 4, 1999. One-half of this premium grant vested immediately and the remaining portion will retain ownershipvest on March 4, 2000. Internal Revenue Code Section 162(m) Considerations. Under Section 162(m) of the Internal Revenue Code, executive compensation in excess of $1 million is generally not deductible for purposes of corporate income taxes. However, "qualified performance-based compensation" which is paid pursuant to a plan meeting certain requirements of the Code and applicable regulations remains 12 deductible. As noted in previous reports, the Committee intends to continue reliance on performance-based compensation programs, consistent with sound executive compensation policy. Such programs will be designed to fulfill, in the best possible manner, future corporate business objectives. The Committee's policy has been to seek to cause executive incentive compensation to qualify as "performance-based" in order to preserve its deductibility for federal income tax purposes to the extent possible without sacrificing flexibility in designing appropriate compensation programs. In 1997 and 1999, the Company obtained shareholder approval of performance-based incentives in Long-Term Performance Unit Awards in order to qualify such compensation as "performance-based." However, in order to provide executives with appropriate incentives, the Committee may also determine, in light of all applicable circumstances, that it would be in the best interests of Unicom for awards to be paid under certain of its transmission lines.incentive compensation programs or otherwise in a manner that would not satisfy the requirements to qualify as performance-based compensation under Code Section 162(m). The formationportion of Mr. Rowe's incentive compensation that was guaranteed under his employment agreement does not qualify as performance-based compensation under Code Section 162(m), and accordingly, to the extent receipt of such compensation is not deferred, the amount of such incentive compensation and salary in excess of $1 million will not be deductible by Unicom for purposes of corporate income taxes. Mr. Rowe deferred the portion of his incentive that was payable in Unicom Common Stock under the Unicom Corporation Stock Bonus Deferral Plan. Compensation Committee Edward A. Brennan, Chairman James W. Compton Donald P. Jacobs Richard Thomas 13 Shareholder Return Performance Set forth below is a line graph comparing the quarterly percentage change in the cumulative total shareholder return on Unicom common stock ("UCM") against the cumulative total return of the Midwest ISO is subject to FERC approval. NET ELECTRIC GENERATING CAPABILITY As described under "Item 2. Properties," ComEd considers its non-summer net generating capability to be 20,736,000 kilowatts (including the recently sold Kincaid and State Line generating stations, whose capability is committed to ComEd pursuant to exclusive 15-year purchase power agreements, and after giving effect to the closure of Zion Station and certain plant re-ratings). After deducting summer limitations of 538,000 kilowatts, ComEd considers its net summer generating capability to be 20,198,000 kilowatts. The net generating capability available for operation at any time may be less due to regulatory restrictions, fuel restrictions, efficiency of cooling facilities and generating units being temporarily out of service for inspection, maintenance, refueling, repairs or modifications required by regulatory authorities. See "Regulation--Nuclear" below for information concerning outages at certain of ComEd's nuclear generating stations. ComEd's highest peak load experienced to date occurred on August 14, 1995 and was 19,212,000 kilowatts;S&P 500 Composite Stock Index and the highest peak load experienced to date during a winter season occurred on January 18, 1994 and was 14,179,000 kilowatts. ComEd's kilowatthour sales and generation are generally higher, primarily during the summer periods but also during the winter periods, when temperature extremes create demand for either summer cooling or winter heating. CONSTRUCTION PROGRAMDow Jones Utility Operations ComEd has a construction programStock Index for the year 1998, which consists principallyfive-year period ending December 31, 1999. Cumulative Performance Since January 1, 1995 Assuming Reinvestment of improvements to its existing nuclear and other electric production, transmission and distribution facilities. It does not include funds to add new generating capacity to ComEd's system. The program, as currently approved by ComEd, includes the following estimated expenditures (excluding nuclear fuel expenditures of approximately $160 million).Dividends (January 1, 1995 = $100)
December 31, -------------------------------- 1994 1995 1996 1997 1998 1999 ------- ---- (MILLIONS OF DOLLARS)---- ---- ---- ---- Production................................................ $425 Transmission and Distribution............................. 415 General................................................... 90 ---- $930 ---- ----
Such estimated expenditures include $130 million toward the replacement of the steam generators at ComEd's Braidwood Unit 1 and Byron Unit 1 nuclear generating units by year-end 1998. The total replacement cost is estimated to be $455 million, of which approximately $295 million has been incurred through December 31, 1997 and $30 million will be incurred in 1999. ComEd and the Indiana Company's construction expenditures during 1997 were $970 million. 6 ComEd's gross investment in nuclear generating capacity (excluding nuclear fuel) is $13.4 billion at December 31, 1997 (after reflecting the closure of Zion Station), and ComEd expects that investment to be approximately $13.9 billion by the end of 1998 as a result of improvements. Gross additions to and retirements from utility property, excluding nuclear fuel, of ComEd and the Indiana Company for the five years ended December 31, 1997 were $4,352 million and $1,686 million, respectively (after reflecting the closure of Zion Station and the sale of State Line Station). ComEd periodically reviews its projection of probable future demand for electricity in its service territory. It currently projects average annual growth of 1.75% in annual peak load and 1.5% in total annual electricity requirements, excluding sales to other utilities. ComEd's forecasts of peak load indicate a need for additional resources to meet demand, either through generating capacity, equivalent purchased power or the development of additional demand-side management resources, in 1998 and each year thereafter. However, ComEd believes that adequate resources, including cost-effective demand-side management resources, non-utility generation resources and other- utility power purchases, could be obtained in sufficient quantities to meet such forecasted needs. The 1998 construction program includes approximately $2 million for environmental control facilities. Expenditures on such facilities were $18 million in 1997 and $16 million for each of the years 1996 and 1995. Purchase commitments for ComEd, principally related to construction and nuclear fuel, approximated $286 million at December 31, 1997. In addition, ComEd's estimated commitments for the purchase of coal are as follows:
CONTRACT PERIOD COMMITMENT(1) -------- --------- ------------- Black Butte Coal Co............................... 1998-2000 $ 679 Decker Coal Co. .................................. 1998-2014 427 Other commitments ................................ 1998 25 ------ $1,131 ======Unicom Corporation............................. $100.00 144 127 154 202 183 S&P 500 Stock Index............................ $100.00 137 169 225 289 350 Dow Jones Utility Average...................... $100.00 132 144 177 210 198
-------- (1) In millions of dollars, excluding transportation costs. No estimate of future costescalation has been made. For additional information concerning these coal contracts and ComEd's fuel supply, see "Fuel Supply" below and Notes 1 and 23 of Notes to Financial Statements in the January 30, 1998 Form 8-K Reports, whichBoard Compensation Directors who are incorporated herein by reference. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" subcaption "Liquidity and Capital Resources--Utility Operations--Capital Resources" in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference, for information regarding the capital resources of ComEd. Unregulated Operations Unicom has approved capital expenditures for 1998 of approximately $92 million for UT Holdings, primarily related to an expansion of two of its four Chicago district cooling facilities, the related distribution piping and plants in other cities. As of December 31, 1997, UT Holdings' purchase commitments, principally related to construction, were approximately $11 million and Unicom Energy Services' purchase commitments were approximately $8 million. Unicom expects to obtain funds to invest in its unregulated subsidiaries principally from dividends received on its ComEd common stock and from bank borrowings. The availability of ComEd's dividends to Unicom is dependent on ComEd's financial performance and cash position. Other forms of financing by ComEd to Unicom or the unregulated subsidiaries of Unicom, such as loans or additional equity investments, none of which is expected, would be subject to prior approval by the ICC. 7 Unicom Enterprises has a $200 million credit facility which will expire in November 1999, of which $40 million was unused as of December 31, 1997. The credit facility can be used by Unicom Enterprises to finance investments in unregulated businesses and projects, including UT Holdings and Unicom Energy Services, and for general corporate purposes. The credit facility is guaranteed by Unicom and includes certain covenants with respect to Unicom and Unicom Enterprises' operations. Interest rates for borrowings under the credit facility are set at the time of a borrowing and are based on either a prime interest rate or a floating rate bank index plus a spread which varies with the credit rating of ComEd's outstanding first mortgage bonds. See Note 13 of Notes to Financial Statements in Unicom's January 30, 1998 Form 8-K Report, which is incorporated herein by reference, for additional information regarding certain covenants with respect to Unicom and Unicom Enterprises' operations. RATE MATTERS In January 1995, the ICC issued its Rate Order in the proceedings relating to ComEd's February 1994 rate increase request. The Rate Order provided, among other things, for an increase in ComEd's total revenues of approximately $302 million (excluding add-on revenue taxes) on an annual basis. The rates provided in the Rate Order became effective on January 14, 1995; however, they are being collected subject to refund as a result of subsequent judicial action. As a result of a May 30, 1997 decision of the Illinois Appellate Court, the Rate Order has been remanded to the ICC for the purpose of providing further analysis on two issues: (i) the manner in which certain costs are recovered and which customers should pay those costs, and (ii) the proper rate of return on common equity for ComEd. ComEd believes that the ICC can satisfy the Appellate Court's remand directions on the basis of the existing record from the ICC proceedings which led to the Rate Order. An ICC Hearing Examiner issued a proposed order in January 1998 which, if adopted by the ICC, would uphold the Rate Order and the associated $302 million revenue increase on an annual basis. A decision is expected early in the second quarter of 1998. See Note 4 of Notes to Financial Statements in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference, for additional information. See "Changes in the Electric Utility Industry--The 1997 Act" above for information regarding the 1997 Act. FUEL SUPPLY The kilowatthour generation of ComEd and the Indiana Company for 1997 was provided from the following fuel sources: nuclear 57%, coal 39% and natural gas 4%. The lower nuclear generation as a percentage of total generation for 1997, as compared to recent prior years, is primarily due to outages at certain of ComEd's nuclear generating stations. See "Regulation--Nuclear" below for information regarding outages at certain of ComEd's nuclear generating stations. Nuclear Fuel ComEd has uranium concentrate inventory and supply contracts sufficient to meet all of its uranium concentrate requirements through 1999 and portions of its uranium concentrate requirements for periods beyond 1999. ComEd's contracted conversion services are sufficient to meet all of its uranium conversion requirements through 1998 and portions of 1999. All of ComEd's enrichment requirements have been contracted through 2003 and portions of its enrichment requirements for periods beyond 2003. Commitments for fuel fabrication have been obtained for ComEd's nuclear units at least through 2005. ComEd does not anticipate that it will have any difficulty in negotiating contracts for uranium concentrates, conversion, enrichment and fuel fabrication services for its remaining requirements. Under the Energy Policy Act of 1992, investor-owned electric utilities that have purchased enrichment services from the DOE are being assessed amounts to fund a portion of the cost for the decontamination and decommissioning of uranium enrichment facilities owned and previously operated by the DOE. ComEd's portion of such assessments is estimated to be approximately $16 million per 8 year (to be adjusted annually for inflation) to 2007. The Act provides that such assessments are to be treated as a cost of fuel. See Note 1 of Notes to Financial Statements under "Nuclear Fuel" in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference, for information related to the accounting for such costs. See "Regulation--Nuclear" below for information concerning the disposal of radioactive waste. Coal ComEd burns low sulfur western coal at all of its coal-fired stations. ComEd's present policy is to maintain a coal inventory of 30 to 45 days of high utilization. As of February 28, 1998, coal inventories approximated 45 days. The average cost per ton of coal consumed by ComEd and the Indiana Company for the years 1997, 1996 and 1995, including transportation charges, was $38.47, $41.16 and $41.72, respectively. Compared to other utilities, ComEd has relatively low average fuel costs as a result of its reliance predominantly on lower cost nuclear generation. ComEd's coal costs, however, are high compared to those of other utilities. ComEd's western coal contracts and its rail contracts for delivery of the western coal provide for the purchase of certain coal at prices substantially above currently prevailing market prices, and ComEd has significant purchase commitments under its contracts. In addition, as of December 31, 1997, ComEd had coal reserves of $282 million. In prior years, ComEd's commitments for the purchase of coal exceeded its requirements. Rather than take all the coal it was required to take, ComEd agreed to purchase the coal in place in the form of coal reserves. For additional information concerning ComEd's coal purchase commitments, see "Construction Program--Utility Operations" above. For additional information regarding coal reserves, see Note 1 of Notes to Financial Statements in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference. Oil and Gas ComEd's fast-start peaking units use middle distillate oils. Approximately half of this capacity can also be fueled with natural gas. ComEd's 2,698,000 kilowatt Collins Station is fueled with natural gas and residual oil. ComEd purchases oil and gas in the spot market as needed. The conversion of four of the five units at Collins Station to dual fuel capability (residual oil and natural gas) was completed during 1994 and 1996 and conversion of the fifth unit was completed in 1997. ComEd has a contract for the delivery and storage of natural gas from gas pipelines to Collins Station, which expires in 2003. Fuel Adjustment Clause The FAC provided for the recovery of changes in fossil and nuclear fuel costs and the energy portion of purchased power costs as compared to the fuel and purchased energy costs included in ComEd's base rates. As authorized by the ICC, ComEd had recorded under or overrecoveries of allowable fuel and energy costs which, under the FAC, were recoverable or refundable in subsequent months. Pursuant to an option contained in the 1997 Act, ComEd filed a tariff on December 16, 1997 to eliminate its FAC as of January 1, 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," subcaption "Changes in the Electric Utility Industry-- Accounting Effects Related to the 1997 Act" in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference, for additional information regarding the effects of eliminating the FAC. Also see "Regulation--Nuclear" below concerning FAC reconcililation proceedings for the years 1994 and 1996. 9 REGULATION ComEd and the Indiana Company are subject to state and federal regulation in the conduct of their respective businesses, including the operations of Cotter. Such regulation includes rates, securities issuance, nuclear operations, environmental and other matters. Particularly in the cases of nuclear operations and environmental matters, such regulation can and does affect operational and capital expenditures. ComEd is subject to regulation by the ICC as to rates and charges, issuance of most of its securities, service and facilities, classification of accounts, transactions with affiliated interests, as defined in the Illinois Public Utilities Act, and other matters. In addition, the ICC in certain of its rate orders has exercised jurisdiction over ComEd's environmental control program. See "Changes in the Electric Utility Industry--The 1997 Act" above for information regarding the 1997 Act. ComEd is subject to the jurisdiction of the FERC with respect to the issuance of certain of its securities. ComEd is also subject to the jurisdiction of the FERC and the DOE under the Federal Power Act with respect to certain other matters, including the sale for resale of electric energy and the transmission of electric energy in interstate commerce, and to the jurisdiction of the DOE with respect to the disposal of spent nuclear fuel and other radioactive wastes. See "Changes in the Electric Utility Industry-- Federal Regulation" above for information regarding the FERC Order and the Federal Energy Policy Act of 1992. Unicom is a public utility holding company, as defined by the Public Utility Holding Company Act of 1935, because of its majority ownership of ComEd's common stock, and ComEd is a public utility holding company as defined in such Act because of its ownership of the Indiana Company. However, both Unicom and ComEd are exempt from most provisions of such Act. The Indiana Company, an "affiliated interest" of ComEd within the meaning of the Illinois Public Utilities Act, is subject to regulation by the Indiana Utility Regulatory Commission and to the jurisdiction of the FERC, the DOE and federal and state of Indiana pollution control and other agencies. Nuclear Under the Nuclear Waste Policy Act of 1982, the DOE is responsible for the selection and development of repositories for, and the disposal of, spent nuclear fuel and high-level radioactive waste. ComEd, as required by that Act, has signed a contract with the DOE to provide for the disposal of spent nuclear fuel and high-level radioactive waste from ComEd's nuclear generating stations. That contract provided for acceptance by the DOE of such materials to begin in January 1998; however, that date was not met by the DOE and is expected to be delayed significantly. The DOE's current estimate for opening a facility to accept such waste is 2010. Extended delays in spent nuclear fuel acceptance by the DOE would lead to ComEd's consideration of costly storage alternatives. The contract with the DOE requires ComEd to pay the DOE a one- time fee applicable to nuclear generation through April 6, 1983 of approximately $277 million, with interest to date of payment, and a fee payable quarterly equal to one mill per kilowatthour of nuclear-generated and sold electricity after April 6, 1983. As provided for under the contract, ComEd has elected to pay the one-time fee, with interest, just prior to the first delivery of spent nuclear fuel to the DOE. The costs incurred by the DOE for disposal activities will be paid out of fees charged to owners and generators of spent nuclear fuel and high-level radioactive waste. ComEd has primary responsibility for the interim storage of its spent nuclear fuel. Dresden Station has spent fuel capacity through the year 2001, Zion Station has capacity for all its spent fuel, Quad Cities Station has spent fuel capacity through 2006 and all of the other stations have spent fuel capacity through at least 2008. ComEd is developing on site dry cask spent fuel storage for Dresden Unit 1, which is expected to be funded by the external decommissioning trusts. See "Depreciation and Decommissioning" under Note 1 of Notes to Financial 10 Statements in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference, for information regarding the external decommissioning trusts. The Dresden Unit 1 dry storage canisters will meet the federal requirements for both storage and transportation of spent nuclear fuel. The storage canisters could be used by 1999. Meeting spent fuel storage requirements beyond the years stated above could require new and separate storage facilities. The federal Low-Level Radioactive Waste Policy Act of 1980 provides that states may enter into compacts to provide for regional disposal facilities for low-level radioactive waste and restrict use of such facilities to waste generated within the region. Illinois has entered into a compact with the state of Kentucky, which has been approved by Congress as required by the Waste Policy Act. Neither Illinois nor Kentucky currently has an operational site, and none is currently expected to be operational until after the year 2011. ComEd has temporary on-site storage capacity at its nuclear generating stations for a limited amount of low-level radioactive waste and has been shipping such waste to a low-level radioactive waste site in Barnwell, South Carolina. ComEd anticipates the possibility of continuing difficulties in disposing of low-level radioactive waste. ComEd continues to evaluate its options relating to the disposal of low-level radioactive waste. ComEd is subject to the jurisdiction of the NRC with respect to its nuclear generating stations. The NRC regulations control the granting of permits and licenses for the construction and operation of nuclear generating stations and subject such stations to continuing review and regulation. The NRC review and regulatory process covers, among other things, operations, maintenance, and environmental and radiological aspects of such stations. The NRC may modify, suspend or revoke licenses and impose civil penalties for failure to comply with the Atomic Energy Act, the regulations under such Act or the terms of such licenses. Nuclear operations have been, and remain, an important focus of ComEd--given the impact of such operations on overall O&M expenditures and the ability of nuclear power plants to produce electric energy at a relatively low marginal cost. ComEd operates a large number of nuclear plants, ranging from the older Dresden and Quad Cities Stations to the more recently completed LaSalle, Byron and Braidwood Stations, and is intent upon safe, reliable and efficient operation. These plants were constructed over a period of time in which technology, construction procedures and regulatory initiatives and oversight have evolved, with the result that older plants generally require greater attention and resources to meet regulatory requirements and expectations, as well as to maintain operational reliability. As discussed in "Changes in the Electric Utility Industry--ComEd's Response to Regulatory Changes" above, ComEd has ceased nuclear generation operations at its Zion Station. ComEd's Dresden, Zion and LaSalle nuclear generating stations are currently on the NRC's list of plants that require increased regulatory scrutiny by the NRC. Dresden Station has been on the list since 1992 and LaSalle and Zion Stations were added in January 1997. On January 21, 1998, the NRC stated in a public meeting that although Dresden Station has demonstrated sustained improved performance that would warrant removal from the list, continued evidence of cyclical and inconsistent performance at ComEd's other nuclear generating stations indicated removal of Dresden Station from the list would not be appropriate at that time. The NRC also acknowledged improvements at LaSalle Station but concluded that a substantial amount of work remains and the plant should remain on the list. The NRC also stated that, based on a determination made prior to the announcement of the cessation of power operations at the station, Zion should remain on the list. The listing of the plants does not prevent ComEd from operating the generating units; however, it does mean that the NRC will devote additional resources to monitoring ComEd's operating performance and that ComEd will need to work to demonstrate to the NRC the sustainability of improvements which it believes it has undertaken and is continuing to implement. Also at the meeting, the NRC noted a declining performance trend at Quad Cities Station. In a meeting on March 3, 1998, the NRC stated that weaknesses were observed with respect to certain operations, maintenance and engineering activities 11 at Quad Cities Station. The NRC has indicated that it is monitoring ComEd's ability to manage its nuclear operations in their entirety and that the performance at any one facility will be viewed by the NRC in context with the performance of ComEd's nuclear generating group as a whole. In January 1997, the NRC took the unusual step of requiring ComEd to submit information to allow the NRC to determine what actions, if any, should be taken to assure that ComEd can safely operate its six nuclear generating stations (prior to the permanent cessation of nuclear generation operations at Zion Station) while sustaining performance improvement at each site. The request also required ComEd to submit information regarding the criteria that it has established, or planned to establish, to measure performance and to explain ComEd's proposed actions if the criteria were not met. The request stated the NRC staff's concerns with the "cyclical safety performance of ComEd nuclear stations," noting the presence on the list of plants that require increased regulatory scrutiny by the NRC of Dresden, LaSalle and Zion Stations at various times during the past 10 years. It also noted concerns regarding "ComEd's ability to establish lasting and effective programs that result in sustained performance improvement." The problems identified by the NRC are consistent with weaknesses that had been identified in station self- assessments initiated by ComEd, and management had already undertaken to develop and implement programs designed to address these issues. ComEd submitted a response to the NRC on March 28, 1997 and the NRC indicated in an April 25, 1997 public meeting with representatives of ComEd management that ComEd's response was generally adequate to demonstrate ComEd's ability to operate its nuclear generating stations while sustaining performance improvements. In a November 4, 1997 meeting with the NRC staff, the NRC indicated that it believes ComEd's nuclear performance has shown improvement, but that it is too early to conclude that lasting improvement has been achieved. The NRC noted, as an exception to ComEd's general improving and sustained performance in its nuclear operations, concerns regarding ComEd's engineering efforts to resolve longstanding fire protection issues at the Quad Cities Station. The NRC and representatives of ComEd's management have met and will continue to meet periodically in the future, to follow-up on these matters. INPO, a nuclear power industry funded organization, also has been critical of ComEd's nuclear operations and the progress made by ComEd at correcting problems INPO previously identified. In the past, INPO has raised concerns with respect to management and performance of ComEd's nuclear operations, including accountability and the effectiveness of efforts aimed at engaging the workforce in the improvement process. ComEd continues to address INPO's concerns. ComEd has devoted, and intends to continue to devote, significant resources to the management and operations of its nuclear generating stations. Over the past several years, it has increased and reinforced management with managers drawn from other utilities which have resolved similar operational and performance issues, including the appointment of a new Chief Nuclear Officer in late 1997. It also has sought to identify, anticipate and address operating and performance issues in a safe, cost-effective manner, while seeking to improve the availability and capacity factors of its nuclear generating units. ComEd's activities, with respect to its nuclear generating stations, have included improvements in operating and personnel procedures and repair and replacement of equipment and can result in longer unit outages. LaSalle Units 1 and 2 and Quad Cities Units 1 and 2 are currently not operating. It currently is expected that LaSalle Unit 1 will restart by the end of the third quarter of 1998 and LaSalle Unit 2 is expected to restart by the end of the first quarter of 1999. Both units at Quad Cities Station are expected to return to service by approximately the end of the second quarter of 1998. In each case the restart of these units requires the resolution of issues with the NRC. The LaSalle Station outage and an outage at Zion Station were part of several outages of nuclear and fossil generating stations that several utilities operating in the Midwestern power grid (including ComEd) were expecting and experienced during 1997. Although ComEd met its customers' electricity 12 demands, the expectation of the NERC, prior to the beginning of the summer, had been that there could have been electric energy shortages during summer peak demand periods due to generating station outages in the Midwestern power grid and transmission limitations on delivering power from neighboring systems. In response to these regional circumstances and expectations, ComEd increased the availability of its remaining nuclear and fossil generating capacity, reinforced transmission capacity, negotiated the purchase of power and related transmission service from third parties, and worked with a number of customers to manage the use and demand for power. ComEd is evaluating and the NERC will be analyzing electric reliability and the potential for electric energy shortages for the summer of 1998 in light of the potential for continued outages of nuclear plants operated by ComEd and other utilities in the Midwestern power grid. Generating station availability and performance during a year may be issues in fuel reconciliation proceedings in assessing the prudence of fuel and purchased power costs during such year. Final ICC orders have been issued in fuel reconciliation proceedings for years prior to 1994 and for the year 1995. In 1996, an intervenor filed testimony in the fuel reconciliation proceeding for 1994 seeking a refund of approximately $90 million relating to nuclear station performance. In March 1998, the ICC Staff also filed testimony in the fuel reconciliation proceeding for 1994 proposing a refund of $36 million. The 1997 Act provides that the fuel reconciliation proceedings for 1994 and 1996 must be concluded by the end of 1998. If refunds are required in these proceedings, the refunds could have a material adverse effect on results of operations. The 1997 Act also provides that, because ComEd eliminated its FAC effective January 1, 1997, the ICC shall not conduct a fuel reconciliation proceeding for the year 1997 or any subsequent years. See "Changes in the Electric Utility Industry" and "Fuel Supply--Fuel Adjustment Clause" above for information regarding the elimination of ComEd's FAC. ComEd has completed replacement of the steam generators at Byron Unit 1 and is replacing the steam generators at Braidwood Unit 1. See "Construction Program--Utility Operations" above for additional information. Based on ComEd's most recent study approved by the ICC, decommissioning costs, including the cost of decontamination and dismantling, are estimated to aggregate $4.4 billion in current-year (1998) dollars, including a contingency allowance. ComEd estimates it will expend approximately $11.6 billion, including a contingency allowance, for decommissioning costs primarily during the period from 2007 through 2032. Such costs are expected to be funded by external decommissioning trusts which ComEd established in compliance with Illinois law and into which ComEd has been making annual contributions. Future decommissioning cost estimates may be significantly affected by the adoption of or changes to NRC regulations, as well as changes in the assumptions used in making such estimates, including changes in technology, available alternatives for the disposal of nuclear waste, and inflation. See Note 1 of Notes to Financial Statements under "Depreciation and Decommissioning" in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference, for additional information regarding decommissioning costs. During the year 1997, civil penalties were imposed on ComEd on ten occasions for violations of NRC regulations in amounts aggregating $1,390,000. Since January 1, 1998, civil penalties were imposed on ComEd on three occasions for violations of NRC regulations in amounts aggregating $495,000. To ComEd's knowledge, there are two current enforcement issues outstanding and under review by the NRC. The IDNS has jurisdiction over certain activities in Illinois relating to nuclear power and safety, and radioactive materials. Effective June 1, 1987, the IDNS replaced the NRC as the regulator and licensor of certain source, by- product and special nuclear material in quantities not sufficient to form a critical mass, including such material contained in various measuring devices used at fossil-fuel power plants. The IDNS does not regulate ComEd's nuclear generating stations. The IDNS has promulgated 13 regulations which are substantially similar to the corresponding federal regulations. The IDNS also has authority to license a low-level radioactive waste disposal facility and to regulate alternative methods for disposing of materials which contain only trace amounts of radioactivity. The uranium mining and milling operations of Cotter are subject to regulation by the state of Colorado and the NRC. Environmental ComEd is subject to regulation regarding environmental matters by the United States and by the states of Illinois, Iowa and, in the case of Cotter, Colorado, and by local jurisdictions where ComEd operates its facilities. The IPCB has jurisdiction over environmental control in the state of Illinois, which includes authority to regulate air, water and noise emissions and solid waste disposal, together with the Illinois EPA, which enforces regulations of the IPCB and issues permits in connection with environmental control. The U.S. EPA administers certain federal statutes relating to such matters. The IPCB has published a proposed rule under which it would have the power to regulate radioactive air pollutants under the Illinois Environmental Protection Act and the Federal Clean Air Act Amendments of 1977. Air quality regulations, promulgated by the IPCB in accordance with federal standards, impose restrictions on the emission of particulates, sulfur dioxide, nitrogen oxides and other air pollutants and require permits from the respective state and local environmental protection agencies for the operation of emission sources. Permits authorizing operation of ComEd's fossil fuel generating facilities subject to this requirement have been obtained and, where such permits are due to expire, ComEd has, in a timely manner, filed applications for renewal or requested extensions of the existing permits. Under the Federal Clean Water Act, NPDES permits for discharges into waterways are required to be obtained from the U.S. EPA or from the state environmental agency to which the permit program has been delegated. Those permits must be renewed periodically. ComEd either has NPDES permits for all of its generating stations or has pending applications for such permits under the current delegation of the program to the Illinois EPA. ComEd is also subject to the jurisdiction of certain pollution control agencies of the state of Iowa with respect to the discharge into the Mississippi River from Quad Cities Station. The Clean Air Amendments require reductions in nitrogen oxide emissions from ComEd's fossil fuel generating units. In January 1996, the U.S. EPA issued a final rule exempting existing sources inside the Chicago ozone non-attainment area from further nitrogen oxide emission reductions; however, this exemption is limited pending the finalization of the U.S. EPA Clean Air Act, Section 110. The U.S. EPA issued a proposed rule in late 1997 which would mandate reductions in nitrogen oxide emissions to address ozone transport problems in much of the eastern United States. In its current form, the proposed rule would require electric utility sources in a 22-state region to meet a nitrogen oxide emission limitation of 0.15 lbs/MBtu. Under the Acid Rain program, the U.S. EPA prepared nitrogen oxide emission regulations that apply to all of ComEd's boilers with a compliance date of January 1, 2000. These regulations include limits for cyclone and tangentially fired boilers of 0.86 and 0.40 lbs/mm Btu, respectively. CERCLA provides for immediate response and removal actions coordinated by the U.S. EPA to releases of hazardous substances into the environment and authorizes the U.S. Government either to clean up sites at which hazardous substances have created actual or potential environmental hazards 14 or to order persons responsible for the situation to do so. Under CERCLA, generators and transporters of hazardous substances, as well as past and present owners and operators of hazardous waste sites, are made strictly, jointly and severally liable for the cleanup costs of waste at sites, most of which are listed by the U.S. EPA on the NPL. These responsible parties can be ordered to perform a cleanup, can be sued for costs associated with a U.S. EPA directed cleanup, may voluntarily settle with the U.S. Government concerning their liability for cleanup costs, or may voluntarily begin a site investigation and site remediation prior to listing on the NPL under state oversight. Various states, including Illinois, have enacted statutes which contain provisions substantially similar to CERCLA. ComEd and its subsidiaries are or are likely to become parties to proceedings initiated by the U.S. EPA, state agencies and/or other responsible parties under CERCLA with respect to a number of sites, including MGP sites, or may voluntarily undertake to investigate and remediate sites for which they may be liable under CERCLA. MGPs manufactured gas in Illinois from approximately 1850 to 1950. ComEd generally did not operate MGPs as a corporate entity but did, however, acquire MGP sites as part of the absorption of smaller utilities. Approximately half of these sites were transferred to Northern Illinois Gas Company as part of a general conveyance in 1954. ComEd also acquired former MGP sites as vacant real estate on which ComEd facilities have been constructed. To date, ComEd has identified 44 former MGP sites for which it may be liable for remediation. ComEd presently estimates that its costs of former MGP site investigation and remediation will aggregate from $25 million to $150 million in current-year (1998) dollars. It is expected that the costs associated with investigation and remediation of former MGP sites will be incurred over a period not to exceed 30 years. Because ComEd is not able to determine the most probable liability for such MGP costs, in accordance with accounting standards, a reserve of $25 million has been included in other noncurrent liabilities on the Consolidated Balance Sheets in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference, as of December 31, 1997 and 1996, which reflects the low end of the range of ComEd's estimate of the liability associated with former MGP sites. In addition, as of December 31, 1997 and 1996, a reserve of $8 million has been included in other noncurrent liabilities on the Consolidated Balance Sheets in the January 30, 1998 Form 8- K Reports, which are incorporated herein by reference, representing ComEd's estimate of the liability associated with cleanup costs of remediation sites other than former MGP sites. Approximately half of this reserve relates to anticipated cleanup costs associated with a property formerly used as a tannery which was purchased by ComEd in 1973. Unicom and ComEd presently estimate that ComEd's costs of investigating and remediating the former MGP and other remediation sites, pursuant to CERCLA and state environmental laws, will not have a material impact on the financial position or results of operationsemployees of Unicom or ComEd.any of its subsidiaries receive an annual fee of $36,200 payable in shares of Unicom common stock under the Unicom Corporation 1996 Directors' Fee Plan. These cost estimates are based on currently available information regarding the responsible parties likely to share in the costsdirectors also receive a fee of responding to site contamination, the extent$1,500 for each board of contamination at sitesdirectors and committee meeting they attend and an additional annual fee of $2,500 for which the investigation has not yet been completed and the cleanup levels to which sites are expected to have to be remediated. The outcome of manyeach committee of the regulatory proceedings referredboard of directors that they chair, which meeting and chair fees may, at the election of the director, be paid in shares of Unicom common stock under the 1996 Directors' Fee Plan. In the event that directors also serve as directors of ComEd, or as chairs of corresponding committees of ComEd, the aggregate fees paid to above, if not favorable, could have a material adverse effect on Unicom and ComEd's future business and operating results. An unresolved issue is whether exposure to EMFs may resultsuch directors in adverse health effects or damage to the environment. EMFs are produced by virtually all devices carrying or utilizing electricity, including transmission and distribution lines, as well as home appliances. If regulations are adopted related to EMFs, they could affect the construction and operation of electrical equipment, including transmission and distribution lines and the costrespect of such equipment. ComEd cannot predict the effect on the cost of such equipment or operations if new regulations relatedservice to EMFs are adopted. In the absence of such regulations, EMFs have nonetheless become an issue in siting facilities and in other land use contexts. Litigation has been filed in a variety of locations against a variety of defendants, including ComEd, alleging that the presence or use of electrical equipment has had an adverse effect on the health of persons or has caused a diminution in property values of land adjacent to these facilities. If plaintiffs are successful in litigation of this type and it becomes widespread, the impact on ComEd and on the electric utility industry is not predictable, but could be severe. 15 From time to time, Unicom and its subsidiaries are, or are claimed to be, in violation of or in default under orders, statutes, rules or regulations relating to environmental controls and other matters, compliance plans imposed upon or agreed to by them or permits issued by various state and federal agencies for the construction or operation of their facilities. Unicom and ComEd do not believe,exceed the foregoing amounts, so farthat directors do not receive duplicate fees. Directors who are full-time employees of Unicom or any 14 of its subsidiaries receive no fees for service on the Unicom board of directors. Directors may defer their fees. Prior to 1997, directors who had never been an officer or an employee of Unicom or any of its subsidiaries, and who had attained at least age 65 and completed the required period of board service (3 to 5 years as they now foresee, thatapplicable, including service as a director of ComEd), became eligible for retirement benefits upon retirement. Such benefits were to be paid to the retired director or a surviving spouse for a period equal to such violationsdirector's years of service (including service as a director of ComEd) in an amount per year equal to the annual retainer for board members as in effect at the time of payment. Effective January 1, 1997, the Unicom board of directors terminated the further accrual of retirement benefits and offered each director the option to irrevocably elect, in lieu of amounts otherwise payable, a lump sum amount payable upon retirement, either by delivery of shares of Unicom common stock or defaults will havein cash. In lieu of further accrual of retirement benefits, non-employee directors received a material adverse effect on$6,200 increase in their future business and operating results, except for events otherwise described in these Annual Reports on Form 10-K, which could have such an effect. See "Item 3. Legal Proceedings" regarding Cotter. EMPLOYEES Unicom and its subsidiary companies had approximately 16,704 employees as of December 31, 1997. ComEd had approximately 16,663 employees as of December 31, 1997 of which approximately 9,140 ComEd employees were represented by IBEW Local 15. A new Collective Bargaining Agreement with Local 15 becameannual fee (from $30,000 to $36,200), effective August 25,June 1, 1997 and provides, among other things, for a term expiring on March 31, 2001. A previously negotiated general wage increase of 1.5% was effective April 1, 1997, for all employees covered by the Collective Bargaining Agreement. Additionally, a general wage increase of 1.5% was effective October 13, 1997, and was applied on a retroactive basis to March 31, 1997. For each of the remaining three years, a 3% general wage increase will be granted to employees covered by the Collective Bargaining Agreement, effective the beginning of the pay period that includes April 1st of each such year. The supplemental agreements covering life insurance, savings and investment plan, and health care plans are effective through March 31, 2001. The supplemental agreement covering pension benefits is effective through September 30, 1999. INTERCONNECTIONS ComEd has interconnections for the transmission of electricity with Central Illinois Light Company, Central Illinois Public Service Company, Illinois Power Company, Indiana Michigan Power Company (a subsidiary of American Electric Power Company), Interstate Power Company, MidAmerican Energy Company, Northern Indiana Public Service Company, Wisconsin Electric Power Company and Wisconsin Power and Light Company for the purpose of exchanging energy and for other forms of mutual assistance. ComEd and 14 other Midwest power systems are regular members of MAIN, which also includes 23 associate members and 5 affiliate members. The members have entered into an agreement to work together to ensure the reliability of electric power production and transmission throughout the area they serve. ComEd joined with eight Midwestern utilities to form a regional Midwest ISOpayable in January 1998. See "Changes in the Electric Utility Industry--ComEd's Response to Regulatory Changes" for additional information. FRANCHISES ComEd's franchises are, in general, deemed adequate to permit it to engage in the business it now conducts. In the city of Chicago, ComEd operates under a nonexclusive electric franchise ordinance, effective January 1, 1992, and continuing in force until December 31, 2020. ComEd derives 16 approximately one-third of its ultimate consumer revenues from customers located within the city of Chicago. See "Item 3. Legal Proceedings" regarding an arbitration proceeding initiated by the City of Chicago under its franchise agreement with ComEd. The electric business outside of the city of Chicago is conducted in municipalities under nonexclusive franchises and, where required, under certificates of convenience and necessity granted by the ICC. The following tabulation summarizes, as of December 31, 1997, the expiration dates of the electric franchises held in the 396 municipalities outside of the city of Chicago capable of granting franchises and in which ComEd currently provides electric service.
ESTIMATED NUMBER OF AGGREGATE FRANCHISE EXPIRATION PERIODS MUNICIPALITIES POPULATION - ---------------------------- -------------- ---------- 1998-2006............................................. 3 89,000 2007-2017............................................. 10 95,000 2018-2028............................................. 3 4,000 2029-2039............................................. 1 * 2040 and subsequent years............................. 376 4,127,000 No stated time limit.................................. 3 61,000
- -------- *Less than 1,000 people. 17 EXECUTIVE OFFICERS OF THE REGISTRANT The effective year of election of the officers to their present positions and the prior positions they have held with Unicom or other companies, since January 1, 1993, are described below.
NAME AND AGE POSITION ------------- ------------------------------------------------------------- *John W. Chairman, President and Chief Executive Officer of Unicom and Rowe, 52 ComEd since March 1998; previously President and Chief Exec- utive Officer of New England Electric System. *Oliver D. Executive Vice President and President and Chief Nuclear Of- Kingsley, ficer--Nuclear Generation Group of ComEd since October 1997; Jr., 55 previously Chief Nuclear Officer at the Tennessee Valley Au- thority. *Robert J. Executive Vice President of ComEd since January 1997 and Manning, 55 President--Fossil Generation Group of ComEd since October 1997; previously Senior Vice President of ComEd. *John C. Senior Vice President and Chief Financial Officer of Unicom Bukovski, 55 and ComEd since October 1997; previously Vice President and Chief Financial Officer of Unicom and ComEd. *Paul D. Senior Vice President of ComEd since October 1997; previously McCoy, 47 Vice President of ComEd. Donald A. Senior Vice President of Unicom since 1995; President and Petkus, 56 Chief Executive Officer of UT Holdings since 1997 and Unicom Thermal Technologies Inc. since 1995, and Senior Vice Presi- dent of ComEd. *S. Gary Senior Vice President of Unicom and ComEd since October 1997; Snodgrass, Vice President of Unicom and ComEd, September 1997 to Octo- 46 ber 1997; previously Vice President of USG Corporation. *Pamela B. Senior Vice President and General Counsel of Unicom and ComEd Strobel, 45 since October 1997; previously Vice President and General Counsel of ComEd. *Michael J. Senior Vice President of ComEd since 1993; previously Vice Wallace, 50 President of ComEd. John T. Vice President of Unicom and ComEd since 1996; previously Costello, 49 Manager of Corporate Relations of ComEd, 1995 to 1996 and Manager of Public Affairs of ComEd. *William H. Vice President of ComEd. Downey, 53 Ruth Ann M. Vice President and Treasurer of Unicom and ComEd since Sep- Gillis, 43 tember 1997; previously Vice President, Chief Financial Of- ficer and Treasurer of the University of Chicago Hospitals and Health System from 1996 to 1997 and Senior Vice Presi- dent and Chief Financial Officer of American National Bank and Trust Company. Thomas J. Vice President of Unicom and ComEd since 1996; previously McCaffrey, Vice President of Mercer Management Consulting, 1995 to 1996 53 and Corporate Senior Vice President of First Chicago Corpo- ration. *Robert E. Comptroller of Unicom and ComEd since July 1997; previously Berdelle, 42 held various financial reporting and analysis positions within ComEd. David A. Secretary of Unicom and ComEd since 1994 and 1989, respec- Scholz, 56 tively.
-------- * Executive Officers for Section 16 reporting purposes. The present term of office of each of the above executive officers extends to the first meeting of Unicom's Board of Directors after the next annual election of Directors scheduled to be held on May 28, 1998. There are no family relationships among the executive officers, directors and nominees for director of Unicom. 18 OPERATING STATISTICS
YEAR ENDED DECEMBER 31 ---------------------------------- 1997 1996 1995 ---------- ---------- ---------- Operating Revenues (thousands of dol- lars)(1): Residential.............................. $2,552,742 $2,541,873 $2,621,038 Small commercial and industrial.......... 2,153,113 2,113,716 2,073,998 Large commercial and industrial.......... 1,467,574 1,445,708 1,425,784 Public authorities....................... 505,907 503,004 487,142 Electric railroads....................... 29,785 29,651 26,894 Provisions for revenue refunds--ultimate consumers............................... (45,470) -- -- Sales for resale......................... 336,480 235,041 207,256 Other revenues........................... 82,891 68,031 67,933 ---------- ---------- ---------- Total................................. $7,083,022 $6,937,024 $6,910,045 ========== ========== ========== Sales (millions of kilowatthours): Residential.............................. 22,151 22,310 23,303 Small commercial and industrial.......... 25,860 25,131 25,313 Large commercial and industrial.......... 24,074 23,896 23,777 Public authorities....................... 7,322 7,336 7,158 Electric railroads....................... 418 424 390 Sales for resale......................... 15,679 12,178 11,412 ---------- ---------- ---------- Total................................. 95,504 91,275 91,353 ========== ========== ========== Sources of Electric Energy (millions of kilowatthours): Generation-- Nuclear................................. 49,136 62,610 70,261 Fossil.................................. 36,604 30,315 26,231 Fast-start peaking units................ 121 123 116 ---------- ---------- ---------- Net generation........................ 85,861 93,048 96,608 Purchased power.......................... 16,672 6,129 2,475 Company use and losses................... (7,029) (7,902) (7,730) ---------- ---------- ---------- Total................................. 95,504 91,275 91,353 ========== ========== ========== Cost of Fuel Consumed (per million Btu): Nuclear.................................. $0.57 $0.53 $0.52 Coal..................................... $2.28 $2.41 $2.43 Oil...................................... $3.90 $3.41 $3.06 Natural gas.............................. $2.69 $2.75 $1.85 Average all fuels........................ $1.33 $1.17 $1.05 Peak Load (kilowatts)..................... 18,497,000 18,916,000 19,212,000 Number of Customers (at end of year): Residential.............................. 3,123,364 3,102,101 3,079,381 Small commercial and industrial.......... 291,143 289,803 288,848 Large commercial and industrial.......... 1,566 1,550 1,539 Public authorities....................... 12,180 12,142 12,039 Electric railroads and resale............ 53 46 26 ---------- ---------- ---------- Total................................. 3,428,306 3,405,642 3,381,833 ========== ========== ========== Average Annual Revenue Per Residential Customer (excluding light bulb service)........... $816.91 $819.52 $852.18 Average Use Per Residential Customer (kilowatthours).......................... 7,108 7,213 7,598 Average Revenue Per Kilowatthour: Residential (excluding light bulb serv- ice).................................... 11.49c 11.36c 11.22c Small commercial and industrial.......... 8.33c 8.41c 8.19c Large commercial and industrial.......... 6.10c 6.05c 6.00c
- -------- (1) See "Rate Matters" above. 19 YEAR 2000 CONVERSION See "Management's Discussion and Analysis of Financial Condition and Results of Operations," subcaption "Liquidity and Capital Resources--Year 2000 Conversion" in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference, for information regarding Unicom and ComEd's Year 2000 conversion. MARKET RISKS ComEd is exposed to market risk due to changes in interest rates and changes in the market price for electricity. Exposure for interest rate changes relates to its long-term debt and preferred equity obligations. Exposure to electricity market price risk relates to forward activities taken to effectively manage the supply of, and demand for, the electric generation capability of ComEd's generating plants. ComEd does not currently utilize derivative commodity or financial instruments for trading or speculative purposes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations," subcaption "Liquidity and Capital Resources--Interest Rate Exposure and Market Price Exposure" in the January 30, 1998 Form 8-K Reports, which are incorporated herein by reference, for additional information. FORWARD-LOOKING INFORMATION Except for historical data, the information contained in these Annual Reports constitutes forward-looking statements. Forward-looking statements are inherently uncertain and subject to risks. Such statements should be viewed with caution. Actual results or experience could differ materially from the forward-looking statements as a result of many factors. Forward-looking statements in this report include, but are not limited to: (1) statements regarding expectations of revenue reductions as a result of the 1997 Act in "Item 1. Business," subcaption "Changes in the Electric Utility Industry--The 1997 Act" (2) statements regarding estimated capital expenditures in "Item 1. Business," subcaption "Construction Program," (3) statements regarding the estimated return to service of certain nuclear generating units and the costs of purchased power in "Item 1. Business," subcaption "Regulation--Nuclear," (4) statements regarding the costs of decommissioning nuclear generating stations in "Item 1. Business," subcaption "Regulation--Nuclear," (5) statements regarding cleanup costs associated with MGPs and other remediation sites in "Item 1. Business," subcaption "Regulation--Environmental" and (6) "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 8. Financial Statements and Supplementary Data" which, in the caseshares of Unicom incorporate portions of Unicom's January 30, 1998 Form 8-K Report, which is incorporated herein by reference, which contain forward-looking information as described therein, and in the case of ComEd, incorporate portions of ComEd's January 30, 1998 Form 8-K Report, which is incorporated herein by reference, which contain forward-looking information as described therein. Management cannot predict the course of future events or anticipate the interaction of multiple factors beyond management's control and their effect on revenues, project timing and costs. The statements regarding revenue reductions are subject to unforeseen developments in the market for electricity in Illinois resulting from regulatory changes. The statements regarding estimated capital expenditures, estimated return to service of nuclear generation units, decommissioning costs and cleanup costs are subject to changes in the scope of work and manner in which the work is performed and consequent changes in the timing and level of the projected expenditure, and are also subject to changes in laws and regulations or their interpretation or enforcement. The statements regarding the estimated return to service of nuclear generating units are subject to the concurrence of the NRC with proceeding to power operations. Unicom and ComEd make no commitment to disclose any revisions to the forward-looking statements, or any facts, events or circumstances after the date hereof that may bear upon forward-looking statements. ITEM 2. PROPERTIES. ComEd's electric properties are located in Illinois and the Indiana Company's electric facilities are located in Indiana. In management's opinion, ComEd and the Indiana Company's operating properties 20 are adequately maintained and are substantially in good operating condition. The electric generating, transmission, distribution and general facilities of ComEd and the Indiana Company represent approximately 64%, 10%, 22% and 4%, respectively, of their gross investment in electric plant and equipment in service (after reflecting the closure of Zion Station and the sale of State Line Station). The electric generating stations, substations and a portion of the transmission rights of way of ComEd and the Indiana Company are owned in fee. A significant portion of the electric transmission and distribution facilities is located over or under highways, streets, other public places or property owned by others, for which permits, grants, easements or licenses, deemed satisfactory by ComEd, but without examination of underlying land titles, have been obtained. The principal plants and properties of ComEd are subject to the lien of ComEd's Mortgage dated July 1, 1923, as amended and supplemented, under which ComEd's first mortgage bonds are issued. The net generating capability of ComEd, as of March 1, 1998, is derived from the following electric generating facilities:
NET GENERATING CAPABILITY STATION LOCATION (KILOWATTS)(1) ------- -------------- ------------------------- Nuclear-- Zion Zion --(2) Dresden Near Morris 1,588,000 Quad Cities Near Cordova 1,183,000(3) LaSalle County Near Seneca 2,156,000 Byron Near Byron 2,240,000 Braidwood Near Braidwood 2,240,000 Fossil-- Collins Near Morris 2,698,000 Powerton Near Pekin 1,538,000 Joliet 6 Near Joliet 314,000 Joliet 7 & 8 Near Joliet 1,025,000 Will County Near Lockport 1,092,000 Waukegan Waukegan 789,000 Crawford Chicago 542,000 Fisk Chicago 326,000 Fast-Start Peaking Units Various 1,407,000(4) ---------- Company owned net non-summer generating capability 19,138,000 Deduct--Summer limitations 538,000 ---------- Company owned net summer generating capability 18,600,000 Add--Capability under long-term purchase power agreements 1,598,000(5) ---------- Net summer generating capability 20,198,000 ==========
- -------- (1) Reflects a re-rating of certain generating stations as of February 1, 1998. (2) On January 14, 1998, the Boards of Directors of Unicom and ComEd authorized the permanent cessation of nuclear generation operations at Zion Station. (3) Excludes the 25% undivided interest of MidAmerican Energy Company in the Quad Cities Station. (4) Such generating units are normally designed for use primarily during the maximum load periods of the year or during system operating emergencies. Such units are capable of starting and coming on-line quickly. (5) ComEd sold its Kincaid and State Line generating stations in February 1998 and December 1997, respectively. Under the terms of the sales, ComEd entered into exclusive 15-year purchase power agreements for the output of the plants. Major electric transmission lines owned and in service are as follows:
VOLTAGE CIRCUIT (VOLTS) MILES ------- ------- 765,000........................................................... 90 345,000........................................................... 2,545 138,000........................................................... 2,737
21 ComEd's electric distribution system includes 38,630 pole line miles of overhead lines and 34,579 cable miles of underground lines. A total of approximately 1,334,930 poles are included in ComEd's distribution system, of which about 593,390 poles are owned jointly with telephone companies. ITEM 3. LEGAL PROCEEDINGS. During 1989 and 1991, actions were brought in federal and state courts in Colorado against ComEd and Cotter seeking unspecified damages and injunctive relief based on allegations that Cotter has permitted radioactive and other hazardous material to be released from its mill into areas owned or occupied by the plaintiffs resulting in property damage and potential adverse health effects. In 1994, a federal jury returned nominal dollar verdicts on eight bellwether plaintiffs' claims in the 1989 cases, which verdicts were upheld on appeal. The remaining claims in the 1989 actions have been settled and dismissed. Although the 1991 cases will necessarily involve the resolution of numerous contested issues of fact and law, Unicom and ComEd's determination is that these actions will not have a material impact on their financial position or results of operations. A case relating to 14 of the plaintiffs in the 1991 cases has been set for trial in June 1998. In July 1995, the Chicago area experienced several consecutive days of unusually high temperatures coupled with high humidity. Between July 12 and 14, 1995, ComEd experienced record demand for electricity. On July 14, 1995, a fire in a substation caused a power outage to approximately 40,000 customers. Other equipment failures in the same general area caused certain of these customers to be without power for up to 48 hours. In the wake of these power outages, three class action lawsuits were filed against ComEd seeking recovery of damages for property losses allegedly suffered. One suit seeks at least $10 million in damages; the others seek unspecified damages. One individual suit was also filed seeking damages of less than $100,000 for property losses. On March 11, 1998 the Illinois Supreme Court approved a settlement of ComEd's dispute regarding property tax assessments for its Byron nuclear generating station. Under the terms of the settlement agreement, the taxing bodies in Ogle County have agreed that taxes in future years will not exceed certain specified amounts. ComEd will receive $8.5 million in refunds and set aside additional credits which will be available to enforce the provisions regarding future levies. The settlement agreement continues in effect until 2004. Appeals are still pending for cases involving ComEd's Braidwood and LaSalle Stations, as well as other properties. These proceedings seek refunds and reduced valuations, resulting in lower property taxes for the challenged and subsequent years. On November 1, 1996, the city of Chicago, Illinois filed a demand for the appointment of an Adjustment Board before the American Arbitration Association under the provisions of its franchise agreement with ComEd. In its demand, the city alleges, among other items, that ComEd has failed to carry out certain commitments related to system reliability under the franchise agreement, which requires ComEd to budget $1 billion in expenditures for transmission and distribution enhancements within or for the benefit of Chicago over a ten-year period that commenced in January 1992. ComEd is disputing the city's allegations. During the six years since January 1992, ComEd has expended approximately $499 million to enhance electric service reliability and energy supply for the city, and it continues to review, and budget appropriately, for needed projects. On June 13, 1997, the IDR issued a Notice of Tax Liability to ComEd alleging deficiencies in Illinois invested capital tax for the years 1988 through 1994 of $22 million, plus interest of $11 million and a penalty of $2 million. On January 2, 1998, the IDR issued a second Notice of Tax Liability also alleging deficiencies in Illinois invested capital tax for the years 1995 through 1996 of $7 million, plus interest of $1 million. ComEd has protested the notices, and the matter is currently pending before the IDR's Office of Administrative Hearings. Interest will continue to accrue on the alleged tax deficiencies at 9% per annum. 22 In November and December of 1997, Unicom and its directors were served with several shareholder derivative lawsuits in state and federal court. All of the suits assert identical claims that the directors breached fiduciary duties to the shareholders by allegedly failing to properly supervise ComEd's nuclear program. Each plaintiff alleges that this caused ComEd to violate NRC rules, which has cost ComEd millions of dollars. Plaintiffs seek to have the directors reimburse ComEd for these costs, and they seek attorneys' fees. Unicom and ComEd's preliminary assessment of these claims is that they are without merit. In October 1997, six ComEd employees who were formerly located at ComEd's nuclear station in Zion, Illinois brought state and federal claims against ComEd, alleging that they were relocated and demoted as the result of raising nuclear safety concerns. They claimed retaliatory demotion, retaliatory constructive discharge and intentional infliction of emotional distress. They requested reinstatement in their former positions, back pay, compensatory damages, attorneys' fees and punitive damages. The aggregate amount of punitive damages requested equals $18 million. They also filed a claim with the U.S. Department of Labor under the Energy Reorganization Act. Unicom and ComEd do not believe that their exposure with respect to these claims is material. On April 28, 1997, Tower Leasing, Inc. ("Tower") and QST Energy, Inc. ("QST") filed a complaint with the ICC alleging that ComEd violated Illinois law and its own tariffs by preventing Tower and QST from installing a cogeneration facility at Sears Tower in Chicago, Illinois and interconnecting such facility with ComEd's system in that building. Tower and QST have asked the ICC to enter an order that would essentially require ComEd to assist in the implementation of the proposed facility. If Tower and QST are allowed to pursue the installation and interconnection of their proposed facility, ComEd could lose customer revenue. ComEd does not believe that it is obligated to allow Tower and QST to implement their proposed facility. ComEd also believes that the proposed facility would be inconsistent with Illinois law. On November 14, 1997, the CHA filed an application with the FERC, seeking to require ComEd to provide transmission service to some of CHA's buildings so that those buildings may take electric service from an alternate electric supplier. ComEd maintains that the CHA is a retail customer ineligible for transmission service. Should this proceeding be resolved adversely to ComEd, ComEd could lose customer revenue. This revenue loss may be offset, however, by a stranded cost obligation the CHA would owe ComEd under FERC Order. See "Item 1. Business," subcaptions "Rate Matters" and "Regulation" above for information concerning other legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. ComEd's securities and other securities guaranteed by ComEd are currently rated by three principal securities rating agencies as follows:
STANDARD DUFF & MOODY'S & POOR'S PHELPS ------- -------- ------ First mortgage and secured pollution control bonds.. Baa2 BBB BBB Publicly-held debentures and unsecured pollution control obligations........................................ Baa3 BBB- BBB- Convertible preferred stock......................... baa3 BBB- BBB- Preference stock.................................... baa3 BBB- BBB- Trust Securities.................................... baa3 BBB- BBB- Commercial paper.................................... P-2 A-2 D-2
23 As of January 1998, Moody's rating outlook on ComEd's securities is "negative" and Duff & Phelps has classified ComEd's securities as "Rating Watch-Down." S&P changed its rating outlook on ComEd from "stable" to "positive" in November 1997. The above ratings reflect only the views of such rating agencies and each rating should be evaluated independently of any other rating. Generally, rating agencies base their ratings on information furnished to them by the issuing company and on investigations, studies and assumptions by the rating agencies. There is no assurance that any particular rating will continue for any given period of time or that it will not be changed or withdrawn entirely if, in the judgment of the rating agency, circumstances so warrant. Such ratings are not a recommendation to buy, sell or hold securities. The following is a brief summary of the meanings of the above ratings and the relative rank of the above ratings within each rating agency's classification system. Moody's top four long-term debt ratings (Aaa, Aa, A and Baa) are generally considered "investment grade." Obligations rated Baa are considered as medium grade obligations, neither highly protected nor poorly secured. Such obligations lack outstanding investment characteristics and in fact have speculative characteristics. A numerical modifier in Moody's system shows relative standing within the principal rating category, with 1 indicating the high end of that category, 2 the mid-range and 3 the low end. S&P's top four bond ratings (AAA, AA, A and BBB) are generally considered to describe obligations in which investment characteristics predominate. Obligations rated BBB are regarded as having an adequate capacity to pay interest and repay principal. Such obligations normally exhibit adequate protection parameters, but adverse economic conditions or changing circumstances are more likely to lead to weakened capacity to pay. A plus or minus sign in S&P's system shows relative standing within its rating categories. Both Moody's and S&P's preferred stock ratings represent relative security of dividends. Moody's top four preferred stock ratings (aaa, aa, a and baa) are generally considered "investment grade." Moody's baa rating describes a medium grade preferred stock, neither highly protected nor poorly secured. S&P's top four preferred stock ratings (AAA, AA, A and BBB) are generally considered "investment grade." S&P's BBB rating applies to medium grade preferred stock which is below A ("sound") and above BB ("lower grade"). Duff & Phelps' credit rating scale has 17 alphabetical categories, of which ratings AAA through BBB (with AAA being the highest rating) represent investment grade securities. Ratings of BBB+, BBB and BBB- represent the lowest category of "investment grade" rating. This category describes securities with below average protection factors but which are considered sufficient for institutional investment. Considerable variability in risk occurs during economic cycles. Moody's P-2 rating of commercial paper is the second highest of three possible ratings. P-2 describes a strong capacity for repayment of short-term promissory obligations. S&P rates commercial paper in four basic categories with A-2 being the second highest category. Duff & Phelps rates commercial paper in three basic categories, with D-2 indicating the middle category. Further explanations of the significance of ratings may be obtained from the rating agencies. Additional information required bycommon stock. Item 5 is incorporated herein by reference to the "Price Range and Cash Dividends Paid Per Share of Common Stock" on page 3 of Unicom's January 30, 1998 Form 8-K Report. 24 ITEM 6. SELECTED FINANCIAL DATA. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by Items 6, 7 and 8 is incorporated herein by reference to the "Summary of Selected Consolidated Financial Data" on page 3, "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 4 through 20, and the audited consolidated financial statements and notes thereto on pages 22 through 54 of Unicom's January 30, 1998 Form 8-K Report. Reference is also made to "Item 1. Business," subcaptions "Changes in the Electric Utility Industry," "Construction Program" and "Regulation" for additional information. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required by Item 10 relating to directors and nominees for election as directors at Unicom's Annual Meeting of shareholders to be held on May 28, 1998 is incorporated herein by reference to the information under the heading "Security12. Security Ownership of Certain Beneficial Owners and Management" in Unicom's definitive Proxy Statement ("1998 Proxy Statement") to be filed with the SEC prior to April 30, 1998, pursuant to Regulation 14A under the Securities Exchange Act of 1934. The information required by Item 10 relating to executive officers is set forth in Part I of Unicom's Annual Report on Form 10-K under "Item 1. Business," subcaption "Executive Officers of the Registrant" and under the heading "SecurityManagement. Security Ownership of Certain Beneficial Owners and Management"Management No person is known to Unicom to be the beneficial owner of more than five percent of Unicom common stock. The following table lists the beneficial ownership, as defined under the rules of the Securities and Exchange Commission, as of January 31, 2000, of Unicom common stock held by each of the directors, each of the executive officers named in the Summary Compensation Table under Item 11. Executive Compensation and Unicom's directors and executive officers as a group. In addition, the table includes two columns describing securities held by such persons that are not considered to be "beneficially owned" under the rules of the SEC. The column headed "Other Stock Options" includes stock options held by such persons that are not exercisable within 60 days of January 31, 2000. The column headed "Deferred Share Equivalents" includes shares deferred by such persons under the Unicom Corporation Stock Bonus Deferral Plan or the Unicom Corporation 1996 Directors' Fee Plan or share equivalents held in the Unicom Corporation Retirement Plan for Directors.
Beneficial Ownership of Common Stock ------------------------------ Other Amount Percent Stock Deferred Share Name and Nature of Class Options(5) Equivalents(7) ---- ------------ --------- ---------- -------------- Edward A. Brennan....... 4,403 * -- 1,000 Carlos H. Cantu......... 2,047 * -- -- James W. Compton........ 5,105 * -- 3,477 Bruce DeMars............ 3,787 * -- 505 Sue L. Gin.............. 12,347 * -- 1,169 Donald P. Jacobs........ 10,101 * -- 10,290 Edgar D. Jannotta....... 7,567 * -- 4,020 John W. Rogers, Jr...... 1,000 * -- 738 Richard L. Thomas....... 10,610 * -- 2,349 John W. Rowe............ 295,335(1)(2) * 208,333 24,344 Oliver D. Kingsley, Jr..................... 52,795(1) * 133,332 44,530 Robert J. Manning....... 79,265(1)(3) * 68,197(6) 22,648(8) Pamela B. Strobel....... 52,490(1) * 74,166 13,687 David R. Helwig......... 31,001(1) * 52,999 11,697 Directors and executive officers as a group (22 persons)............... 749,385(1)(4) * 946,522 159,305
- -------- * Less than one percent 15 (1) The numbers and percentages of shares shown in the table above include shares as to which the indicated person(s) had the right to acquire within 60 days of January 31, 2000 upon the exercise of outstanding stock options, as follows: Mr. Rowe 289,667; Mr. Kingsley 41,668; Mr. Manning 72,103 (includes 12,935 options owned by spouse); Ms. Strobel 40,334; Mr. Helwig 19,001; and all executive officers and directors as a group (including such individuals) 560,778. Such persons disclaim any beneficial ownership of the shares subject to such options. (2) Includes 2,000 shares owned by spouse, beneficial ownership of which is disclaimed. (3) Includes 14,881 shares owned by spouse, beneficial ownership of which is disclaimed. (4) Includes 16,881 shares owned by spouses. The directors and executive officers to whom such beneficial ownership is attributed disclaim any beneficial ownership of the shares held by such persons. (5) Includes stock options which are not considered to be "beneficially owned" under SEC rules because they cannot be exercised within 60 days of January 31, 2000. (6) Includes 9,865 stock options held by spouse, beneficial ownership of which is disclaimed. (7) Includes share equivalents that are not considered to be "beneficially owned" under SEC rules because they are deferred under the Unicom Corporation Stock Bonus Deferral Plan, the Unicom 1996 Directors' Fee Plan, or the Unicom Corporation Retirement Plan for Directors. Under the Unicom Corporation Stock Bonus Deferral Plan and the Unicom 1996 Directors' Fee Plan, executives and directors, respectively, may defer the receipt of the stock portion of certain awards made pursuant to the Unicom Corporation Long-Term Incentive Plan or certain fees, respectively. Deferred amounts are only required to be kept in Unicom's 1998 Proxy Statement,books of account as deferred stock accounts, which are incorporated hereinfor bookkeeping purposes only. Unicom has no obligation to set aside or segregate any actual shares of Unicom common stock or other assets in respect of such accounts. Unicom has elected to issue the deferred shares to trusts having an institutional trustee, which has sole voting rights with respect to such shares. At the end of the deferral period (in the case of the Unicom Stock Bonus Deferral Plan) or upon leaving the board of directors (in the case of the Unicom 1996 Directors' Fee Plan), the share equivalents are distributed in whole shares of Unicom common stock and cash in lieu of any fractional share. Dividends paid with respect to deferred shares under the Unicom Stock Bonus Deferral Plan are either reinvested in Unicom common stock and held by reference. ITEM 11. EXECUTIVE COMPENSATION. The information required by Item 11 is incorporated herein by referencesuch Trustee or are paid to the information labelled "Compensation of Directors" andexecutive officer making the paragraphsdeferral. Dividends paid with respect to deferred shares under the heading "Executive Compensation" (other thanUnicom 1996 Directors' Fee Plan are reinvested in Unicom common stock and held by such Trustee. Under the paragraphsUnicom Corporation Retirement Plan for Directors, effective January 1, 1997, the accrual of further benefits was terminated and directors could elect to have benefits accrued through such date deferred into share equivalents to be paid in shares of Unicom common stock upon retirement. Accounts under such Plan are credited with an additional number of share equivalents determined by assuming the heading "Corporate Governancereinvestment of dividend equivalents on share equivalents in such accounts. (8) Includes 3,608 deferred share equivalents held by spouse. Item 13. Certain Relationships and Compensation CommitteeRelated Transactions. None COMMONWEALTH EDISON COMPANY The undersigned Registrant hereby amends the following items of its Annual Report on Form 10-K for the fiscal year ended December 31, 1999 as set forth on the pages attached hereto: 1. Part III: Item 10--Directors and Executive Compensation") in Unicom's 1998 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required byOfficers of the Registrant. 2. Part III: Item 12 is incorporated herein by reference to the stock ownership information under the heading "Security11--Executive Compensation. 3. Part III: Item 12--Security Ownership of Certain Beneficial Owners and Management" in Unicom's 1998 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. 25Managers. 4. Part III: Item 13--Certain Relationships and Related Transactions. 16 ANNUAL REPORT ON FORM 10-K FOR COMMONWEALTH EDISON COMPANY PART I ITEM 1. BUSINESS. See Unicom's "Item 1. Business" (other than the paragraphs under the headings "General--Unregulated Operations," "Construction Program--Unregulated Operations"III Item 10. Directors and "ExecutiveExecutive Officers of the Registrant"), which is incorporated herein by this reference. EXECUTIVE OFFICERS OF THE REGISTRANT The effective year of election ofRegistrant. Elizabeth Anne Moler resigned from the officers to their present positions and the prior positions they have held with ComEd or other companies, since January 1, 1993, are described below.
NAME AND AGE POSITION ---------------------------- ----------------------------------------------- *John W. Rowe, 52 Chairman, President and Chief Executive Officer of ComEd and Unicom since March 1998; previ- ously President and Chief Executive Officer of New England Electric System. *Oliver D. Kingsley, Jr., 55 Executive Vice President and President and Chief Nuclear Officer--Nuclear Generation Group of ComEd since October 1997; previously Chief Nuclear Officer at the Tennessee Valley Authority. *Robert J. Manning, 55 Executive Vice President of ComEd since January 1997 and President--Fossil Generation Group of ComEd since October 1997; previously Senior Vice President of ComEd. *John C. Bukovski, 55 Senior Vice President and Chief Financial Offi- cer of ComEd and Unicom since October 1997; previously Vice President and Chief Financial Officer of ComEd and Unicom. *Paul D. McCoy, 47 Senior Vice President of ComEd since October 1997; previously Vice President of ComEd. Donald A. Petkus, 56 Senior Vice President of ComEd since 1992 and of Unicom since 1995; President and Chief Ex- ecutive Officer of UT Holdings since 1997 and Unicom Thermal Technologies Inc. since 1995. *S. Gary Snodgrass, 46 Senior Vice President of ComEd and Unicom since October 1997; Vice President of ComEd and Unicom, September 1997 to October 1997; previ- ously Vice President of USG Corporation. *Pamela B. Strobel, 45 Senior Vice President and General Counsel of ComEd and Unicom since October 1997; previ- ously Vice President and General Counsel of ComEd. *Michael J. Wallace, 50 Senior Vice President of ComEd since 1993; pre- viously Vice President of ComEd. T. Oliver Butler, 46 Vice President of ComEd since July 1997; previ- ously Purchasing Vice President of ComEd, 1994 to 1997 and European Acquisition Manager--Ge- neva of Digital Corporation.
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NAME AND AGE POSITION ----------------------- ---------------------------------------------------- Frank M. Clark, 52 Vice President of ComEd since January 1997; previ- ously Governmental Affairs Vice President 1996 to January 1997 and Governmental Affairs Manager. John T. Costello, 49 Vice President of ComEd and Unicom since 1996; pre- viously Manager of Corporate Relations of ComEd, 1995 to 1996 and Manager of Public Affairs of ComEd. Louis O. DelGeorge, 50 Vice President of ComEd. *William H. Downey, 53 Vice President of ComEd. Ruth Ann M. Gillis, 43 Vice President and Treasurer of ComEd and Unicom since September 1997; previously Vice President, Chief Financial Officer and Treasurer of the Uni- versity of Chicago Hospitals and Health System from 1996 to 1997 and Senior Vice President and Chief Financial Officer of American National Bank and Trust Company. David R. Helwig, 47 Vice President of ComEd since January 1998; previ- ously General Manager of General Electric Company's Nuclear Services Company, 1997 to January 1998 and Vice President at PECO Energy. Emerson W. Lacey, 56 Vice President of ComEd. Andrew J. Lynch, 51 Vice President of ComEd since April 1997; previously President of First Chicago Trust Company of New York. Thomas J. McCaffrey, 53 Vice President of ComEd and Unicom since 1996; pre- viously Vice President of Mercer Management Con- sulting, 1995 to 1996 and Corporate Senior Vice President of First Chicago Corporation. J. Stephen Perry, 59 Vice President of ComEd since 1994; previously Se- nior Vice President of Illinois Power Company. James A. Small, 54 Vice President of ComEd since 1993; previously Gen- eral Manager of Fuel Services of Georgia Power Com- pany. Harold Gene Stanley, 57 Vice President of ComEd since September 1997; Site Vice President at Braidwood Station, 1996 to 1997; previously Vice President at Pennsylvania Power and Light Company. *Robert E. Berdelle, 42 Comptroller of ComEd and Unicom since July 1997; previously held various financial reporting and analysis positions within ComEd. David A. Scholz, 56 Secretary of ComEd and Unicom since 1989 and 1994, respectively.
-------- * Executive Officers for Section 16 reporting purposes. The present term of office of each of the above executive officers extends to the first meeting of ComEd's Board of Directors after the next annual election of Directors scheduled to be held on May 28, 1998. 27 There are no family relationships among the executive officers, directors and nominees for director of ComEd. ITEM 2. PROPERTIES. See Unicom's "Item 2. Properties," which is incorporated herein by this reference. ITEM 3. LEGAL PROCEEDINGS. See Unicom's "Item 3. Legal Proceedings," which is incorporated herein by this reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS. None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. See Unicom's "Item 5. Market for Registrant's Common Equity and Related Stockholder Matters" (other than the last paragraph thereof), which is incorporated herein by reference. Additional information required by Item 5 is incorporated herein by reference to the "Cash Dividends Paid Per Share of Common Stock" on page 3 of ComEd's January 30, 1998 Form 8-K Report. ITEM 6. SELECTED FINANCIAL DATA. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by Items 6, 7 and 8 is incorporated herein by reference to the "Summary of Selected Consolidated Financial Data" on page 3, "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 4 through 19, and the audited consolidated financial statements and notes thereto on pages 21 through 51 of ComEd's January 30, 1998 Form 8-K Report. Reference is also made to "Item 1. Business," subcaptions "Changes in the Electric Utility Industry," "Construction Program" and "Regulation" for additional information. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information required by Item 10 relating to directors and nominees for election as directors at ComEd's Annual Meeting of shareholders to be held on May 28, 1998 is incorporated herein by reference to information under the heading "Security Ownership of Certain Beneficial Owners and Management" in ComEd's definitive Information Statement ("1998 Information Statement") to be filed with the SEC prior to April 30, 1998, pursuant to Regulation 14C under the Securities Exchange Act of 1934. The information required by Item 10 relating to executive officers is set forth in Part I of ComEd's Annual Report on Form 10-K under "Item 1. Business," subcaption "Executive Officers of the Registrant" and under the heading "Security Ownership of Certain Beneficial Owners and Management" in ComEd's 1998 Information Statement, which are incorporated herein by reference. 28 ITEM 11. EXECUTIVE COMPENSATION. The information required by Item 11 is incorporated herein by reference to the paragraph labelled "Compensation of Directors" and the paragraphs under the heading "Executive Compensation" (other than the paragraphs under the heading "Corporate Governance and Compensation Committee Report on Executive Compensation") in ComEd's 1998 Information Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by Item 12 is incorporated herein by reference to the stock ownership information under the heading "Security Ownership of Certain Beneficial Owners and Management" in ComEd's 1998 Information Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. 29 ANNUAL REPORTS ON FORM 10-K FOR UNICOM CORPORATION AND COMMONWEALTH EDISON COMPANY PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (A)FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS:
PAGE OF JANUARY 30, 1998 FORM 8- K REPORT ------------ UNICOM COMED ------ ----- The following financial statements are incorporated into the Unicom Annual Report on Form 10-K by reference to the indi- cated page or pages of Unicom's January 30, 1998 Form 8-K Report, and into the ComEd Annual Report on Form 10-K by reference to the indicated page or pages of ComEd's January 30, 1998 Form 8-K Report: Report of Independent Public Accountants.................... 21 20 Statements of Consolidated Operations for the years 1997, 1996 and 1995.............................................. 22 21 Consolidated Balance Sheets--December 31, 1997 and 1996..... 23-24 22-23 Statements of Consolidated Capitalization--December 31, 1997 and 1996................................................... 25 24 Statements of Consolidated Retained Earnings (Deficit) for the years 1997, 1996 and 1995.............................. 26 25 Statements of Consolidated Cash Flows for the years 1997, 1996 and 1995.............................................. 27 26 Notes to Financial Statements............................... 28-54 27-51
ANNUAL REPORT ON PAGE OF FORM 10-K THIS ------------ DOCUMENT UNICOM COMED -------- ------ ----- The following supplemental schedules are included in the indicated Annual Report on Form 10-K: Report of Independent Public Accountants on Supplemental Schedule.............................. 38 x Report of Independent Public Accountants on Supplemental Schedule.............................. 39 x Schedule II--Valuation and Qualifying Accounts for each of the three years in the period ended December 31, 1997........................ 40 x x
The following schedules are omitted as not applicable or not required under rules of Regulation S-X: I, III, IV and V. 30 The individual financial statements and schedules of ComEd's nonconsolidated wholly owned subsidiaries have been omitted from Unicom and ComEd's Annual Reports on Form 10-K because the investments are not material in relation to ComEd's financial position or results of operations. As of December 31, 1997, the assets of the nonconsolidated subsidiaries, in the aggregate, were less than 1% of ComEd's consolidated assets. The 1997 revenues of the nonconsolidated subsidiaries, in the aggregate, were less than 1% of ComEd's consolidated annual revenues. The following exhibits are filed with the indicated Annual Report on Form 10-K or incorporated therein by reference. Documents indicated by an asterisk (*) are incorporated by reference to the File No. indicated. Documents indicated by a plus sign (+) identify management contracts or compensatory plans or arrangements.
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- --------------------------------------------- ------ ----- *(3)-1 Articles of Incorporation of Unicom effective January 28, 1994. (File No. 1-11375, Form 10-K for the year ended December 31, 1994, Exhibit (3)-1). x *(3)-2 Restated Articles of Incorporation of ComEd effective February 20, 1985, including Statements of Resolution Establishing Se- ries, relating to the establishment of three new series of ComEd preference stock known as the "$9.00 Cumulative Preference Stock," the "$6.875 Cumulative Preference Stock" and the "$2.425 Cumulative Preference Stock." (File No. 1-1839, Form 10-K for the year ended Decem- ber 31, 1994, Exhibit (3)-2). x (3)-3 By-Laws of Unicom Corporation, effective Jan- uary 28, 1994 as amended through March 11, 1998. x (3)-4 By-Laws of Commonwealth Edison Company, ef- fective September 2, 1988 as amended through March 11, 1998. x *(4)-1 Mortgage of ComEd to Illinois Merchants Trust Company, Trustee (Harris Trust and Savings Bank, as current successor Trustee), dated July 1, 1923, Supplemental Indenture thereto dated August 1, 1944, and amendments and supplements thereto dated, respectively, Au- gust 1, 1946, April 1, 1953, March 31, 1967, April 1, 1967, July 1, 1968, October 1, 1968, February 28, 1969, May 29, 1970, Janu- ary 1, 1971, June 1, 1971, May 31, 1972, June 1, 1973, June 15, 1973, October 15, 1973, May 31, 1974, June 13, 1975, May 28, 1976, January 15, 1977 and June 3, 1977 (File No. 2-60201, Form S-7, Exhibit 2-1). x *(4)-2 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, May 17, 1978, August 31, 1978, June 18, 1979, June 20, 1980, April 16, 1981, April 30, 1982, April 15, 1983, April 13, 1984 and April 15, 1985 (File No. 2-99665, Form S-3, Exhibit (4)-3). x *(4)-3 Supplemental Indenture to Mortgage dated July 1, 1923 dated April 15, 1986 (File No. 33- 6879, Form S-3, Exhibit (4)-9). x
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EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- --------------------------------------------- ------ ----- *(4)-4 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, February 15, 1990 and June 15, 1990 (File No. 33- 38232, Form S-3, Exhibits (4)-11 and (4)- 12). x *(4)-5 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, June 1, 1991, October 1, 1991 and October 15, 1991 (File No. 33-44018, Form S-3, Exhibits (4)- 12, (4)-13 and (4)-14). x *(4)-6 Supplemental Indenture to Mortgage dated July 1, 1923 dated February 1, 1992 (File No. 1- 1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)-18). x *(4)-7 Supplemental Indenture to Mortgage dated July 1, 1923 dated May 15, 1992 (File No. 33- 48542, Form S-3, Exhibit (4)-14). x *(4)-8 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, July 15, 1992 and September 15, 1992 (File No. 33- 53766, Form S-3, Exhibits (4)-13 and (4)- 14). x *(4)-9 Supplemental Indenture to Mortgage dated July 1, 1923 dated February 1, 1993 (File No. 1- 1839, Form 10-K for the year ended December 31, 1992, Exhibit (4)-14). x *(4)-10 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, April 1, 1993 and April 15, 1993 (File No. 33-64028, Form S-3, Exhibits (4)-12 and (4)-13). x *(4)-11 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, June 15, 1993 and July 1, 1993 (File No. 1-1839, Form 8-K dated May 21, 1993, Exhibits (4)-1 and (4)-2). x *(4)-12 Supplemental Indenture to Mortgage dated July 1, 1923 dated July 15, 1993 (File No. 1- 1839, Form 10-Q for the quarter ended June 30, 1993, Exhibit (4)-1). x *(4)-13 Supplemental Indenture to Mortgage dated July 1, 1923 dated January 15, 1994 (File No. 1- 1839, Form 10-K for the year ended December 31, 1993, Exhibit (4)-15). x *(4)-14 Supplemental Indenture to Mortgage dated July 1, 1923 dated December 1, 1994 (File No. 1- 1839, Form 10-K for the year ended December 31, 1994, Exhibit (4)-16). x *(4)-15 Supplemental Indenture to Mortgage dated July 1, 1923 dated June 1, 1996. (File No. 1- 1839, Form 10-K for the year ended December 31, 1996, Exhibit (4)-16). x *(4)-16 Instrument of Resignation, Appointment and Acceptance dated January 31, 1996, under the provisions of the Mortgage dated July 1, 1923, and Indentures Supplemental thereto (File No. 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (4)-28). x
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EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- --------------------------------------------- ------ ----- *(4)-17 Instrument dated as of January 31, 1996, for trustee under the Mortgage dated July 1, 1923 and Indentures Supplemental thereto (File No. 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (4)-29). x *(4)-18 Indentures of ComEd to The First National Bank of Chicago, Trustee (Amalgamated Bank of Chicago, as current successor Trustee), dated April 1, 1949, October 1, 1949, Octo- ber 1, 1950, October 1, 1954, January 1, 1958, January 1, 1959 and December 1, 1961 (File No. 1-1839, Form 10-K for the year ended December 31, 1982, Exhibit (4)-20). x *(4)-19 Indenture of ComEd dated February 15, 1973 to The First National Bank of Chicago, Trustee (LaSalle National Bank, successor Trustee), and Supplemental Indenture thereto dated July 13, 1973 (File No. 2-66100, Form S-16, Exhibit (b)-2). x *(4)-20 Indenture dated as of September 1, 1987 be- tween ComEd and Citibank, N.A., Trustee re- lating to Notes (File No. 33-20619, Form S- 3, Exhibit (4)-13). x *(4)-21 Supplemental Indenture to Indenture dated September 1, 1987 dated July 14, 1989 (File No. 33-32929, Form S-3, Exhibit (4)-16). x (4)-22 Supplemental Indenture to Indenture dated September 1, 1987 dated January 1, 1997. x *(4)-23 Credit Agreement dated as of October 1, 1991, among ComEd, as borrower, the Banks named therein and the other Lenders from time to time parties thereto, and Citibank, N.A. (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)-27). x *(4)-24 Credit Agreement dated as of October 1, 1991, among ComEd, as borrower, the Banks named therein and the other Lenders from time to time parties thereto, and Citibank, N.A. (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)-28). x (4)-25 Letter Agreement dated as of September 29, 1997, among ComEd and certain of the Banks party to the Credit Agreement dated as of October 1, 1991. x *(4)-26 Amended and Restated Credit Agreement dated as of November 15, 1996, among Unicom Enterprises, the Banks Named Therein and Citibank, N.A. (File No. 1-11375, Form 10-K for the year ended December 31, 1996, Exhibit (4)-31). x *(4)-27 Amended and Restated Guaranty dated as of No- vember 15, 1996, by Unicom in favor of the Lenders and LC Banks parties to the afore- mentioned Credit Agreement with Unicom En- terprises (File No. 1-11375, Form 10-K for the year ended December 31, 1996, Exhibit (4)-32). x
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EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- --------------------------------------------- ------ ----- *(4)-28 Indenture dated September 1, 1995 between ComEd and Wilmington Trust Company. (File No. 1-1839, Form 10-K for the year ended De- cember 31, 1996, Exhibit (4)-34). x *(4)-29 First Supplemental Indenture dated September 19, 1995 to Indenture dated September 1, 1995. (File No. 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (4)- 35). x *(4)-30 Second Supplemental Indenture dated January 24, 1997 to Indenture dated September 1, 1995. (File No. 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (4)- 36). x *(4)-31 Rights Agreement dated as of February 2, 1998 between Unicom Corporation and First Chicago Trust Company of New York, as Rights Agent, which includes as Exhibit A the form of Rights Certificate and as Exhibit B, the Summary of Rights to Purchase Common Stock (File No. 1-11375, Current Report on Form 8- K dated February 2, 1998, Exhibit 4). x *(10)-1 Nuclear Fuel Lease Agreement dated as of No- vember 23, 1993, between CommEd Fuel Compa- ny, Inc., as Lessor, and ComEd, as Lessee (File No. 1-1839, Form 10-K for the year ended December 31, 1993, Exhibit (10)-1). x +*(10)- Unicom Corporation Amended and Restated Long- 2 Term Incentive Plan (File No. 1-11375, Unicom Proxy Statement dated April 9, 1997, Exhibit A). x +*(10)- 1995 Long-Term Performance Unit Award for 3 Executive and Group Level Employees Payable in 1998 under the Unicom Corporation Long- Term Incentive Plan, as amended (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (10)-6). x x +*(10)- 1996 Long-Term Performance Unit Award for Ex- 4 ecutive and Group Level Employees Payable in 1999 under the Unicom Corporation Long-Term Incentive Plan (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended Decem- ber 31, 1995, Exhibit (10)-9). x x +*(10)-5 1997 Long-Term Performance Unit Award for Ex- ecutive and Group Level Employees Payable in 2000 under the Unicom Corporation Long-Term Incentive Plan. (File Nos. 1-11375 and 1- 1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)-12). x x +(10)-6 1998 Long-Term Performance Unit Award for Executive and Group Level Employees Payable in 2001 under the Unicom Corporation Long- Term Incentive Plan. x x +*(10)-7 Unicom Corporation General Provisions Regard- ing 1996 Stock Option Awards Granted under the Unicom Corporation Long-Term Incentive Plan. (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)-9). x x
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EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- --------------------------------------------- ------ ----- +*(10)-8 Unicom Corporation General Provisions Regard- ing 1996B Stock Option Awards Granted under the Unicom Corporation Long-Term Incentive Plan. (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)-11). x x +(10)-9 Unicom Corporation General Provisions Regard- ing Stock Option Awards Granted under the Unicom Corporation Long-Term Incentive Plan (Effective July 10, 1997). x x +*(10)- 1997 Annual Incentive Award for Management 10 Employees under the Unicom Corporation Long- Term Incentive Plan. (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)-13). x x +*(10)- 1997 Award to Mr. O'Connor, Mr. Mullin and 11 Mr. Skinner under the Unicom Corporation Long-Term Incentive Plan. x x +(10)- 1998 Annual Incentive Award for Management 12 Employees under the Unicom Corporation Long- Term Incentive Plan. x x +*(10)- Unicom Corporation Deferred Compensation Unit 13 Plan, as amended (File Nos. 1-11375 and 1- 1839, Form 10-K for the year ended Decem- ber 31, 1995, Exhibit (10)-12). x x +*(10)- Deferred Compensation Plan (included in Arti- 14 cle Five of Exhibit (3)-2 above). x +*(10)- Management Incentive Compensation Plan, ef- 15 fective January 1, 1989 (File No. 1-1839, Form 10-K for the year ended December 31, 1988, Exhibit (10)-4). x +*(10)- Amendments to Management Incentive Compensa- 16 tion Plan, dated December 14, 1989 and March 21, 1990 (File No. 1-1839, Form 10-K for the year ended December 31, 1989, Exhibit (10)- 5). x +*(10)- Amendment to Management Incentive Compensa- 17 tion Plan, dated March 21, 1991 (File No. 1- 1839, Form 10-K for the year ended December 31, 1991, Exhibit (10)-6). x +*(10)- Retirement Plan for Directors, effective Sep- 18 tember 1, 1994, as amended through March 12, 1997. (File No. 1-11375, Form 10-K for the year ended December 31, 1996, Exhibit (10)- 19). x +*(10)- Retirement Plan for Directors, effective Jan- 19 uary 1, 1987, as amended through March 12, 1997. (File No. 1-1839 Form 10-K for the year ended December 31, 1996, Exhibit (10)- 20) x +*(10)- Unicom Corporation 1996 Directors' Fee Plan 20 (File No. 1-11375, Unicom Proxy Statement dated April 8, 1996, Appendix A). x x +*(10)- Executive Group Life Insurance Plan (File No. 21 1-1839, Form 10-K for the year ended Decem- ber 31, 1980, Exhibit (10)-3). x +*(10)- Amendment to the Executive Group Life Insur- 22 ance Plan (File No. 1-1839, Form 10-K for the year ended December 31, 1981, Exhibit (10)-4). x +*(10)- Amendment to the Executive Group Life Insur- 23 ance Plan dated December 12, 1986 (File No. 1-1839, Form 10-K for the year ended Decem- ber 31, 1986, Exhibit (10)-6). x
35
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- --------------------------------------------- ------ ----- +*(10)- Amendment of Executive Group Life Insurance 24 Plan to implement program of "split dollar life insurance" dated December 13, 1990 (File No. 1-1839, Form 10-K for the year ended December 31, 1990, Exhibit (10)-10). x +*(10)- Commonwealth Edison Company Supplemental Man- 25 agement Retirement Plan (File No. 1-1839, Form 10-K for the year ended December 31, 1985, Exhibit (10)-6). x +*(10)- Amendment of Executive Group Life Insurance 26 Plan to stabilize the death benefit applica- ble to participants dated July 22, 1992 (File No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibit (10)-13). x +*(10)- Letter Agreement dated December 16, 1992 be- 27 tween ComEd and Samuel K. Skinner (File No. 1-1839, Form 10-K for the year ended Decem- ber 31, 1992, Exhibit (10)-14). x +*(10)- Amendment dated May 31, 1995 to Letter Agree- 28 ment dated December 16, 1992 between ComEd and Samuel K. Skinner (File No. 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (10)-27). x +*(10)- Amendments dated December 11, 1996 and March 29 24, 1997 to Letter Agreement dated December 16, 1992 between ComEd and Samuel K. Skin- ner. (File No. 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)- 30). x +*(10)- Letter Agreement dated November 14, 1995 be- 30 tween ComEd and Leo F. Mullin (File No. 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (10)-28). x +*(10)- Amendment dated March 24, 1997 to Letter 31 Agreement dated November 14, 1995 between ComEd and Leo F. Mullin. (File No. 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)-32). x +*(10)- Commonwealth Edison Company Excess Benefit 32 Savings Plan (File No. 1-1839, Form 10-Q for the quarter ended June 30, 1994, Exhibit (10)-2). x +*(10)- Amendment No. 1 to Commonwealth Edison Com- 33 pany Excess Benefit Savings Plan dated May 24, 1995 (File No. 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (10)-30). x +(10)-34 Amendment No. 2 to Commonwealth Edison Com- pany Excess Benefit Savings Plan effective as of September 1, 1997. x +*(10)- Unicom Corporation Stock Bonus Deferral Plan 35 (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (10)-31). x x +(10)-36 Amendment No. 1 to Unicom Corporation Stock Bonus Deferral Plan dated January 3, 1997. x x +(10)-37 Form of Stock Award Agreement under the Unicom Corporation Long-Term Incentive Plan. x x
36
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT UNICOM COMED ------- --------------------------------------------- ------ ----- (12) Statement re computation of ratios of earn- ings to fixed charges and ratios of earnings to fixed charges and preferred and prefer- ence stock dividend requirements for ComEd. x (18) Letter from independent public accountants regarding change in accounting principle. x x (21)-1 Subsidiaries of Unicom. x (21)-2 Subsidiaries of ComEd. x (23)-1 Consent of experts for Unicom. x (23)-2 Consent of experts for ComEd. x (24)-1 Powers of attorney of Directors whose names are signed to the Unicom Annual Report on Form 10-K pursuant to such powers. x (24)-2 Powers of attorney of Directors whose names are signed to the ComEd Annual Report on Form 10-K pursuant to such powers. x (99)-1 Unicom's Current Report on Form 8-K dated January 30, 1998. x (99)-2 ComEd's Current Report on Form 8-K dated Jan- uary 30, 1998. x
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Unicom and ComEd hereby agreeboards of directors on December 31, 1999, to furnish to the SEC, upon request, any instrument defining the rightsbecome a Senior Vice President of holdersUnicom and ComEd. Donald P. Jacobs is retiring as a director of long-term debt of ComEd not filed as an exhibit herein. No such instrument authorizes securities in excess of 10% of the total assets of ComEd. (B) REPORTS ON FORM 8-K: A Current Report on Form 8-K dated October 9, 1997, was filed by Unicom and ComEd after serving as a director of ComEd since 1979 and as a director of Unicom since its incorporation in 1994. His contributions to announce that James J. O'Connor,Unicom and ComEd have been many and are gratefully appreciated. The vacancies created by Ms. Moler's resignation and Mr. Jacob's retirement are not being filled, and the number of directors is being reduced to nine. Nine Directors are to be elected at the annual meeting to serve terms of one year and until their respective successors have been elected. The nominees for Director, all of whom are now serving as Directors of the Company and Unicom, are listed below together with certain biographical information. Except as otherwise indicated, each nominee for Director has been engaged in his or her present principal occupation for at least the past five years. Biographical Information of ComEd Directors EDWARD A. BRENNAN, age 66. Director of Unicom and ComEd since 1995. Retired. Chairman and CEO of Sears, Roebuck and Co. (retail merchandiser) for more than five years prior to his retirement in August 1995. Chairman of Compensation Committee and Nuclear Oversight Committee. Other directorships: The Allstate Corporation, AMR Corporation, Dean Foods Company, Minnesota Mining and Manufacturing Company, Morgan Stanley Dean Witter & Co. and The SABRE Group Holdings, Inc. CARLOS H. CANTU, age 66. Director of Unicom and ComEd since 1998. Retired President and Chief Executive Officer of The ServiceMaster Company (service businesses) from January 1, 1994 through October 1, 1999. Other directorships: The ServiceMaster Company, First Tennessee National Corporation. JAMES W. COMPTON, age 62. Director of Unicom since 1994 and ComEd since 1989. President and Chief Executive Officer of the Chicago Urban League (a non- profit agency). Chairman of Audit and Compliance Committee and member of Compensation Committee. Other directorships: Ariel Mutual Funds and Highland Community Bank. BRUCE DeMARS, age 64. Director of Unicom and ComEd since 1996. Vice President and Secretary of DeMars, Inc. (consulting firm) since May 1997 and Partner, Trident Merchant Group since May, 1998. Admiral, United States Navy and Director, Naval Nuclear Propulsion Program for more than five years prior to his retirement in October 1996. Member of Audit and Compliance Committee and Nuclear Oversight Committee. Other directorship: McDermott International. SUE L. GIN, age 58. Director of Unicom since 1994 and ComEd since 1993. Founder, Owner, Chairman and Chief Executive Officer of Flying Food Group, Inc. (in-flight catering company). Member of Audit and Compliance and Governance and Nominating Committees. EDGAR D. JANNOTTA, age 68. Director of Unicom and ComEd since 1994. Senior Director of William Blair & Company, L.L.C. (investment banking and brokerage company) since January 1996. For more than five years prior thereto, Managing Partner of William Blair & Company and Senior Partner during 1995. Chairman of Governance and Nominating Committee and member of Nuclear Oversight Committee. Other directorships: AAR Corp., AON Corporation, Bandag, Incorporated and Molex Incorporated. 17 JOHN W. ROGERS, JR., age 42. Director of Unicom and ComEd Since 1999. President of Ariel Capital Management, Inc., an institutional money management firm which he founded in 1983. Ariel Capital Management also serves as the investment advisor, administrator and distributor for Ariel Mutual Funds. Member of Governance and Nominating and Business Development Committees. Other directorships: AON Corporation, Bank One Corporation; Burrell Communications Group, Inc. and GATX Corporation. JOHN W. ROWE, age 54. Director, Chairman, President and Chief Executive Officer of Unicom and ComEd intendedsince March 16, 1998. President and Chief Executive Officer of New England Electric System from February 1989 to retire from the companies. A Current Report on Form 8-K dated December 16, 1997, was filed byMarch 1998. Other directorships: FleetBoston Financial, UNUM Provident Corporation and Wisconsin Central Transportation Corporation. RICHARD L. THOMAS, age 69. Director of Unicom and ComEd since 1998. Retired. Chairman of First Chicago NBD Corporation (banking and financial services) from 1995 to describe1996 and of The First National Bank of Chicago from 1992 to 1996. Member of the 1997Audit and Compliance and Compensation Committees. Other directorships: IMC Global Inc., The PMI Group, Inc., The SABRE Group Holdings, Inc., and Sara Lee Corporation. Item 11. Executive Compensation. See Unicom's "Item 11. Executive Compensation," which is incorporated herein by reference. In addition to the matters discussed under the heading "Board Compensation," any non-employee Director who is also a member of the Nuclear Oversight Committee receives an additional annual fee of $5,000. Item 12. Security Ownership of Certain Beneficial Owners and Management. See Unicom's "Item 12. Security Ownership of Certain Beneficial Owners and Management," which is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions. None. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Chicago and the related accounting effects. 37 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE To Unicom Corporation: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statementsstate of Unicom Corporation and subsidiary companies incorporated by reference in this Annual Report on Form 10-K, and have issued our report thereon dated January 30, 1998. Our audits were made for the purpose of forming an opinionIllinois on the basic financial statements taken as a whole. The schedule listed in Item 14.(a), is presented for purposes28th day of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Chicago, Illinois January 30, 1998 38 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULE To Commonwealth Edison Company: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Commonwealth Edison Company and subsidiary companies incorporated by reference in this Annual Report on Form 10-K, and have issued our report thereon dated January 30, 1998. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Item 14.(a), is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Chicago, Illinois January 30, 1998 39 SCHEDULE IIApril, 2000. UNICOM CORPORATION AND SUBSIDIARY COMPANIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS (THOUSANDS OF DOLLARS) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------- --------- ----------------- ---------- -------- ADDITIONS ----------------- BALANCE CHARGED AT TO COSTS CHARGED BALANCE BEGINNING AND TO OTHER AT END DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR - ---------------------------- --------- -------- -------- ---------- -------- FOR THE YEAR ENDED DECEMBER 31, 1995 - ---------------------------- Reserve Deducted From Assets in Consolidated Balance Sheet: Provision for uncollectible accounts (a).............. $10,720 $ 1,108 $ -- $ -- $11,828 ======= ======= ====== ======== ======= Estimated Obsolete Materi- als....................... $13,690 $15,350 $ -- $(12,865)(b) $16,175 ======= ======= ====== ======== ======= Other Reserves: Estimated liabilities asso- ciated with remediation costs and former manufac- tured gas plant sites..... $32,522 $ 2,271 $ -- $ (2,271)(c) $32,522 ======= ======= ====== ======== ======= Accumulated provision for injuries and damages...... $55,312 $21,135 $4,671 $(23,142)(d) $57,976 ======= ======= ====== ======== ======= FOR THE YEAR ENDED DECEMBER 31, 1996 - ---------------------------- Reserve Deducted From Assets in Consolidated Balance Sheet: Provision for uncollectible accounts (a).............. $11,828 $ 1,065 $ -- $ -- $12,893 ======= ======= ====== ======== ======= Estimated Obsolete Materi- als....................... $16,175 $12,000 $ -- $(15,873)(b) $12,302 ======= ======= ====== ======== ======= Other Reserves: Estimated liabilities asso- ciated with remediation costs and former manufac- tured gas plant sites..... $32,522 $ 1,728 $ -- $ (1,728)(c) $32,522 ======= ======= ====== ======== ======= Accumulated provision for injuries and damages...... $57,976 $10,892 $5,713 $(20,609)(d) $53,972 ======= ======= ====== ======== ======= FOR THE YEAR ENDED DECEMBER 31, 1997 - ---------------------------- Reserve Deducted From Assets in Consolidated Balance Sheet: Provision for uncollectible accounts (a).............. $12,893 $ 4,651 $ -- $ -- $17,544 ======= ======= ====== ======== ======= Estimated Obsolete Materi- als....................... $12,302 $62,000 $ -- $(32,559)(b) $41,743 ======= ======= ====== ======== ======= Other Reserves: Estimated liabilities asso- ciated with remediation costs and former manufac- tured gas plant sites..... $32,522 $ 2,410 $ -- $ (2,910)(c) $32,022 ======= ======= ====== ======== ======= Accumulated provision for injuries and damages...... $53,972 $ 8,565 $4,939 $(18,213)(d) $49,263 ======= ======= ====== ======== =======
Notes: (a) Bad debt losses, net of recoveries, and provisions for uncollectible accounts were charged to operating expense and amounted to $50,574,000, $41,846,000 and $26,278,000 in 1997, 1996 and 1995, respectively. (b) Write-off of obsolete materials. (c) Expenditures for site investigation and cleanup costs. (d) Payments of claims and related costs. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 40 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO AND STATE OF ILLINOIS ON THE 27TH DAY OF MARCH, 1998. UNICOM CORPORATION/s/ John W. Rowe By -------------------------------- John W. Rowe, Chairman, President and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OFPursuant to the requirements of the Securities Exchange Act of 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON THE 27TH DAY OF MARCH, 1998. SIGNATUREthis report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 28th day of April, 2000. Signature - ---------------------------- TITLETitle --------------------- /s/ John W. Rowe Chairman, President and - ---------------------------- Chief Executive Officer John W. Rowe and Director (principal executive officer) John C. Bukovski/s/ Ruth Ann M. Gillis - ---------------------------- Senior Vice John C. BukovskiRuth Ann M. Gillis President(principal financial officer) /s/ Robert E. Berdelle Vice President and Comptroller (principal - ---------------------------- (principal accounting officer) Robert E. Berdelle Edward A. Brennan* Director Carlos Cantu* Director James W. Compton* Director Bruce DeMars* Director Sue L. Gin* Director Donald P. Jacobs* Director Edgar D. Jannotta* Director David A. ScholzJohn W. Rogers, Director Jr.* Richard L. Thomas* Director /s/ John P. McGarrity *By -------------------------------- David A. Scholz, Attorney-in- factJohn P. McGarrity, Attorney- in-fact [Signature page to Unicom Corporation Annual Report on Form 10-K] 4110-K/A] 19 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTIONPursuant to the requirements of Section 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OFor 15(d) of the Securities Exchange Act of 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO AND STATE OF ILLINOIS ON THE 27TH DAY OF MARCH, 1998.the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Chicago and state of Illinois on the 28th day of April, 2000. COMMONWEALTH EDISON COMPANY /s/ John W. Rowe By -------------------------------- John W. Rowe, Chairman, President and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OFPursuant to the requirements of the Securities Exchange Act of 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON THE 27TH DAY OF MARCH, 1998. SIGNATUREthis report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 28th day of April, 2000. Signature - ---------------------------- TITLETitle --------------------- /s/ John W. Rowe Chairman, President and - ---------------------------- Chief Executive Officer John W. Rowe and Director (principal executive officer) John C. Bukovski/s/ Ruth Ann M. Gillis - ---------------------------- Senior Vice John C. BukovskiRuth Ann M. Gillis President(principal financial officer) /s/ Robert E. Berdelle Vice President and Comptroller (principal - ---------------------------- (principal accounting officer) Robert E. Berdelle Edward A. Brennan* Director Carlos Cantu* Director James W. Compton* Director Bruce DeMars* Director Sue L. Gin* Director Donald P. Jacobs* Director Edgar D. Jannotta* Director David A. ScholzJohn W. Rogers, Director Jr.* Richard L. Thomas* Director /s/ John P. McGarrity *By -------------------------------- David A. Scholz, Attorney-in- factJohn P. McGarrity, Attorney- in-fact [Signature page to Commonwealth Edison Company Annual Report on Form 10-K] 42 Unicom Corporation and Commonwealth Edison Company Form 10-K File Nos. 1-11375 and 1-1839 EXHIBIT INDEX The following exhibits are filed with the indicated Annual Report on Form 10-K or incorporated therein by reference. Documents indicated by an asterisk (*) are incorporated by reference to the File No. indicated. Documents indicated by a plus sign (+) identify management contracts or compensatory plans or arrangements.
Exhibit Number Description of Document Unicom ComEd ------- ------------------------------------------------- ------ ----- *(3)-1 Articles of Incorporation of Unicom effective January 28, 1994. (File No. 1-11375, Form 10-K for the year ended December 31, 1994, Exhibit (3)-1). x *(3)-2 Restated Articles of Incorporation of ComEd ef- fective February10-K/A] 20 1985, including Statements of Resolution Establishing Series, relating to the establishment of three new series of ComEd preference stock known as the "$9.00 Cumulative Preference Stock," the "$6.875 Cumulative Pref- erence Stock" and the "$2.425 Cumulative Prefer- ence Stock." (File No. 1-1839, Form 10-K for the year ended December 31, 1994, Exhibit (3)-2). x (3)-3 By-Laws of Unicom Corporation, effective January 28, 1994 as amended through March 11, 1998. x (3)-4 By-Laws of Commonwealth Edison Company, effective September 2, 1988 as amended through March 11, 1998. x *(4)-1 Mortgage of ComEd to Illinois Merchants Trust Company, Trustee (Harris Trust and Savings Bank, as current successor Trustee), dated July 1, 1923, Supplemental Indenture thereto dated Au- gust 1, 1944, and amendments and supplements thereto dated, respectively, August 1, 1946, April 1, 1953, March 31, 1967, April 1, 1967, July 1, 1968, October 1, 1968, February 28, 1969, May 29, 1970, January 1, 1971, June 1, 1971, May 31, 1972, June 1, 1973, June 15, 1973, October 15, 1973, May 31, 1974, June 13, 1975, May 28, 1976, January 15, 1977 and June 3, 1977 (File No. 2-60201, Form S-7, Exhibit 2-1). x *(4)-2 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, May 17, 1978, August 31, 1978, June 18, 1979, June 20, 1980, April 16, 1981, April 30, 1982, April 15, 1983, April 13, 1984 and April 15, 1985 (File No. 2-99665, Form S-3, Exhibit (4)-3). x
1
Exhibit Number Description of Document Unicom ComEd ------- ------------------------------------------------- ------ ----- *(4)-3 Supplemental Indenture to Mortgage dated July 1, 1923 dated April 15, 1986 (File No. 33-6879, Form S-3, Exhibit (4)-9). x *(4)-4 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, February 15, 1990 and June 15, 1990 (File No. 33-38232, Form S-3, Ex- hibits (4)-11 and (4)-12). x *(4)-5 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, June 1, 1991, October 1, 1991 and October 15, 1991 (File No. 33-44018, Form S-3, Exhibits (4)-12, (4)-13 and (4)-14). x *(4)-6 Supplemental Indenture to Mortgage dated July 1, 1923 dated February 1, 1992 (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)-18). x *(4)-7 Supplemental Indenture to Mortgage dated July 1, 1923 dated May 15, 1992 (File No. 33-48542, Form S-3, Exhibit (4)-14). x *(4)-8 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, July 15, 1992 and September 15, 1992 (File No. 33-53766, Form S-3, Exhibits (4)-13 and (4)-14). x *(4)-9 Supplemental Indenture to Mortgage dated July 1, 1923 dated February 1, 1993 (File No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibits (4)-14). x *(4)-10 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, April 1, 1993 and April 15, 1993 (File No. 33-64028, Form S-3, Ex- hibits (4)-12 and (4)-13). x *(4)-11 Supplemental Indentures to Mortgage dated July 1, 1923 dated, respectively, June 15, 1993 and July 1, 1993 (File No. 1-1839, Form 8-K dated May 21, 1993, Exhibits (4)-1 and (4)-2). x *(4)-12 Supplemental Indenture to Mortgage dated July 1, 1923 dated July 15, 1993 (File No. 1-1839, Form 10-Q for the quarter ended June 30, 1993, Ex- hibit (4)-1). x *(4)-13 Supplemental Indenture to Mortgage dated July 1, 1923 dated January 15, 1994 (File No. 1-1839, Form 10-K for the year ended December 31, 1993, Exhibit (4)-15). x *(4)-14 Supplemental Indenture to Mortgage dated July 1, 1923 dated December 1, 1994 (File No. 1-1839, Form 10-K for the year ended December 31, 1994, Exhibit (4)-16). x *(4)-15 Supplemental Indenture to Mortgage dated July 1, 1923 dated June 1, 1996. (File No. 1-1839, Form 10-K for the year ended December 31, 1996, Ex- hibit (4)-16). x
2
Exhibit Number Description of Document Unicom ComEd ------- ------------------------------------------------- ------ ----- *(4)-16 Instrument of Resignation, Appointment and Ac- ceptance dated January 31, 1996, under the pro- visions of the Mortgage dated July 1, 1923, and Indentures Supplemental thereto (File No. 1- 1839, Form 10-K for the year ended December 31, 1995, Exhibit (4)-28). x *(4)-17 Instrument dated as of January 31, 1996, for trustee under the Mortgage dated July 1, 1923 and Indentures Supplemental thereto (File No. 1- 1839, Form 10-K for the year ended December 31, 1995, Exhibit (4)-29). x *(4)-18 Indentures of ComEd to The First National Bank of Chicago, Trustee (Amalgamated Bank of Chicago, as current successor Trustee), dated April 1, 1949, October 1, 1949, October 1, 1950, October 1, 1954, January 1, 1958, January 1, 1959 and December 1, 1961 (File No. 1-1839, Form 10-K for the year ended December 31, 1982, Exhibit (4)- 20). x *(4)-19 Indenture of ComEd dated February 15, 1973 to The First National Bank of Chicago, Trustee (LaSalle National Bank, successor Trustee), and Supple- mental Indenture thereto dated July 13, 1973 (File No. 2-66100, Form S-16, Exhibit (b)-2). x *(4)-20 Indenture dated as of September 1, 1987 between ComEd and Citibank, N.A., Trustee relating to Notes (File No. 33-20619, Form S-3, Exhibit (4)- 13). x *(4)-21 Supplemental Indenture to Indenture dated Septem- ber 1, 1987 dated July 14, 1989 (File No. 33- 32929, Form S-3, Exhibit (4)-16). x (4)-22 Supplemental Indenture to Indenture dated Septem- ber 1, 1987 dated January 1, 1997. x *(4)-23 Credit Agreement dated as of October 1, 1991, among ComEd, as borrower, the Banks named therein and the other Lenders from time to time parties thereto, and Citibank, N.A. (File No. 1- 1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)-27). x
3
Exhibit Number Description of Document Unicom ComEd ------- ------------------------------------------------- ------ ----- *(4)-24 Credit Agreement dated as of October 1, 1991, among ComEd, as borrower, the Banks named therein and the other Lenders from time to time parties thereto, and Citibank, N.A. (File No. 1- 1839, Form 10-K for the year ended December 31, 1991, Exhibit (4)-28). x (4)-25 Letter Agreement dated as of September 29, 1997, among ComEd and certain of the Banks party to the Credit Agreement dated as of October 1, 1991. x *(4)-26 Amended and Restated Credit Agreement dated as of November 15, 1996, among Unicom Enterprises, the Banks Named Therein and Citibank, N.A. (File No. 1-11375, Form 10-K for the year ended December 31, 1996, Exhibit (4)-31). x *(4)-27 Amended and Restated Guaranty dated as of Novem- ber 15, 1996, by Unicom in favor of the Lenders and LC Banks parties to the aforementioned Credit Agreement with Unicom Enterprises (File No. 1-11375, Form 10-K for the year ended Decem- ber 31, 1996, Exhibit (4)-32). x *(4)-28 Indenture dated September 1, 1995 between ComEd and Wilmington Trust Company. (File No. 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (4)-34). x *(4)-29 First Supplemental Indenture dated September 19, 1995 to Indenture dated September 1, 1995. (File No. 1-1839, Form 10-K for the year ended Decem- ber 31, 1996, Exhibit (4)-35). x *(4)-30 Second Supplemental Indenture dated January 24, 1997 to Indenture dated September 1, 1995. (File No. 1-1839, Form 10-K for the year ended Decem- ber 31, 1996, Exhibit (4)-36). x *(4)-31 Rights Agreement dated as of February 2, 1998 between Unicom Corporation and First Chicago Trust Company of New York, as Rights Agent, which includes as Exhibit A the Form of Rights Certificate and as Exhibit B, the Summary of Rights to Purchase Common Stock (File No. 1-11375, Current Report on Form 8-K dated February 2, 1998, Exhibit 4). x *(10)-1 Nuclear Fuel Lease Agreement dated as of November 23, 1993, between CommEd Fuel Company, Inc., as Lessor, and ComEd, as Lessee (File No. 1-1839, Form 10-K for the year ended December 31, 1993, Exhibit (10)-1). x +*(10)-2 Unicom Corporation Amended and Restated Long-Term Incentive Plan (File No. 1-11375, Unicom Proxy Statement dated April 9, 1997, Exhibit A). x +*(10)-3 1995 Long-Term Performance Unit Award for Executive and Group Level Employees Payable in 1998 under the Unicom Corporation Long-Term Incentive Plan, as amended (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (10)-6). x x
4
Exhibit Number Description of Document Unicom ComEd ------- ------------------------------------------------- ------ ----- +*(10)-4 1996 Long-Term Performance Unit Award for Execu- tive and Group Level Employees Payable in 1999 under the Unicom Corporation Long-Term Incentive Plan (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (10)-9). x x +*(10)-5 1997 Long-Term Performance Unit Award for Execu- tive and Group Level Employees Payable in 2000 under the Unicom Corporation Long-Term Incentive Plan. (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)-12). x x +(10)-6 1998 Long-Term Performance Unit Award for Executive and Group Level Employees Payable in 2001 under the Unicom Corporation Long-Term Incentive Plan. x x +*(10)-7 Unicom Corporation General Provisions Regarding 1996 Stock Option Awards Granted under the Unicom Corporation Long-Term Incentive Plan. (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)-9). x x +*(10)-8 Unicom Corporation General Provisions Regarding 1996B Stock Option Awards Granted under the Unicom Corporation Long-Term Incentive Plan. (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)-11). x x +(10)-9 Unicom Corporation General Provisions Regarding Stock Option Awards Granted under the Unicom Corporation Long-Term Incentive Plan (Effective July 10, 1997). x x +*(10)-10 1997 Annual Incentive Award for Managment Employees under the Unicom Corporation Long-Term Incentive Plan. (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)-13). x x +*(10)-11 1997 Award to Mr. O'Connor, Mr. Mullin and Mr. Skinner under the Unicom Corporation Long-Term Incentive Plan. x x +(10)-12 1998 Annual Incentive Award for Management Employees under the Unicom Corporation Long-Term Incentive Plan. x x +*(10)-13 Unicom Corporation Deferred Compensation Unit Plan, as amended (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (10)-12). x x +*(10)-14 Deferred Compensation Plan (included in Article Five of Exhibit (3)-2 above). x +*(10)-15 Management Incentive Compensation Plan, effective January 1, 1989 (File No. 1-1839, Form 10-K for the year ended December 31, 1988, Exhibit (10)- 4). x +*(10)-16 Amendments to Management Incentive Compensation Plan, dated December 14, 1989 and March 21, 1990 (File No. 1-1839, Form 10-K for the year ended December 31, 1989, Exhibit (10)-5). x
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Exhibit Number Description of Document Unicom ComEd ------- ------------------------------------------------- ------ ----- +*(10)-17 Amendment to Management Incentive Compensation Plan, dated March 21, 1991 (File No. 1-1839, Form 10-K for the year ended December 31, 1991, Exhibit (10)-6). x +*(10)-18 Retirement Plan for Directors, effective Septem- ber 1, 1994, as amended through March 12, 1997. (File No. 1-11375, Form 10-K for the year ended December 31, 1996, Exhibit (10)-19). x +*(10)-19 Retirement Plan for Directors, effective January 1, 1987, as amended through March 12, 1997. (File No. 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)-20) x +*(10)-20 Unicom Corporation 1996 Directors' Fee Plan (File No. 1-11375, Unicom Proxy Statement dated April 8, 1996, Appendix A). x x +*(10)-21 Executive Group Life Insurance Plan (File No. 1- 1839, Form 10-K for the year ended December 31, 1980, Exhibit (10)-3). x +*(10)-22 Amendment to the Executive Group Life Insurance Plan (File No. 1-1839, Form 10-K for the year ended December 31, 1981, Exhibit (10)-4). x +*(10)-23 Amendment to the Executive Group Life Insurance Plan dated December 12, 1986 (File No. 1-1839, Form 10-K for the year ended December 31, 1986, Exhibit (10)-6). x +*(10)-24 Amendment of Executive Group Life Insurance Plan to implement program of "split dollar life in- surance" dated December 13, 1990 (File No. 1- 1839, Form 10-K for the year ended December 31, 1990, Exhibit (10)-10). x +*(10)-25 Commonwealth Edison Company Supplemental Manage- ment Retirement Plan (File No. 1-1839, Form 10-K for the year ended December 31, 1985, Exhibit (10)-6). x +*(10)-26 Amendment of Executive Group Life Insurance Plan to stabilize the death benefit applicable to participants dated July 22, 1992 (File No. 1- 1839, Form 10-K for the year ended December 31, 1992, Exhibit (10)-13). x +*(10)-27 Letter Agreement dated December 16, 1992 between ComEd and Samuel K. Skinner (File No. 1-1839, Form 10-K for the year ended December 31, 1992, Exhibit (10)-14). x +*(10)-28 Amendment dated May 31, 1995 to Letter Agreement dated December 16, 1992 between ComEd and Samuel K. Skinner (File No. 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (10)-27). x +*(10)-29 Amendments dated December 11, 1996 and March 24, 1997 to Letter Agreement dated December 16, 1992 between ComEd and Samuel K. Skinner. (File No. 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)-30). x +*(10)-30 Letter Agreement dated November 14, 1995 between ComEd and Leo F. Mullin (File No. 1-1839, Form 10-K for the year ended December 31, 1995, Ex- hibit (10)-28). x
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Exhibit Number Description of Document Unicom ComEd ------- ------------------------------------------------- ------ ----- +*(10)-31 Amendment dated March 24, 1997 to Letter Agree- ment dated November 14, 1995 between ComEd and Leo F. Mullin. (File No. 1-1839, Form 10-K for the year ended December 31, 1996, Exhibit (10)- 32). x +*(10)-32 Commonwealth Edison Company Excess Benefit Sav- ings Plan (File No. 1-1839, Form 10-Q for the quarter ended June 30, 1994, Exhibit (10)-2). x +*(10)-33 Amendment No. 1 to Commonwealth Edison Company Excess Benefit Savings Plan dated May 24, 1995 (File No. 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (10)-30). x +(10)-34 Amendment No. 2 to Commonwealth Edison Company Excess Benefit Savings Plan effective as of September 1, 1997. x +*(10)-35 Unicom Corporation Stock Bonus Deferral Plan (File Nos. 1-11375 and 1-1839, Form 10-K for the year ended December 31, 1995, Exhibit (10)-31). x x +(10)-36 Amendment No. 1 to Unicom Corporation Stock Bonus Deferral Plan dated January 3, 1997. x x +(10)-37 Form of Stock Award Agreement under the Unicom Corporation Long-Term Incentive Plan. x x (12) Statement re computation of ratios of earnings to fixed charges and ratios of earnings to fixed charges and preferred and preference stock divi- dend requirements for ComEd. x (18) Letter from independent public accountants regarding change in accounting principle. x x (21)-1 Subsidiaries of Unicom. x (21)-2 Subsidiaries of ComEd. x (23)-1 Consent of experts for Unicom. x (23)-2 Consent of experts for ComEd. x (24)-1 Powers of attorney of Directors whose names are signed to the Unicom Annual Report on Form 10-K pursuant to such powers. x (24)-2 Powers of attorney of Directors whose names are signed to the ComEd Annual Report on Form 10-K pursuant to such powers. x (99)-1 Unicom's Current Report on Form 8-K dated January 30, 1998. x (99)-2 ComEd's Current Report on Form 8-K dated January 30, 1998. x
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Unicom and ComEd hereby agree to furnish to the SEC, upon request, any instrument defining the rights of holders of long-term debt of ComEd not filed as an exhibit herein. No such instrument authorizes securities in excess of 10% of the total assets of ComEd. 7