Exhibit 99.5
[logo for ComEd, an Exelon Company]
Regulatory Initiatives in Illinois
UBS Warburg
Energy and Utilities Conference
February 12, 2002
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The Illinois Landscape
o Open access phased in for C&I customers beginning 10/1/99; all C&I
customers became eligible for delivery services on 1/1/01
o Open access for all residential customers begins 5/1/02
o ComEd bundled rates frozen at 1994 levels for all customers through 2004,
with 20% residential rate reduction
o Utilities must continue to provide bundled service to all customers at
cost-based rates until declared competitive or abandoned, which requires
ICC approval
- This obligation makes Illinois utilities the provider of last resort
("POLR")
o Transition charges calculated on "lost revenues" basis and end in 2006
- Mitigation factors of 8 to 12% (non-residential) and 6 to 10%
(residential) of bundled rates and create savings opportunities
relative to bundled tariffed rates during transition charge period
o Utilities required to provide unbundled power (i.e., the "PPO") to C&I
customers at same market values used to calculate transition charges,
creating non-supply options for agents and alternative suppliers
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The POLR Dilemma in Illinois
o As is the case in other restructured states, POLR supply service offerings
have a tremendous impact on the development of competition
- POLR service has an "option" value
- Current pricing structure for POLR services creates an inviting "nest"
for some large C&I customers
o Inherent tension between rate certainty and competition must be resolved
- ComEd has divested itself of generation and must procure supplies from
the wholesale market to meet the uncertain--and potentially
volatile--levels of demand beginning 1/1/05
- A fully hedged position on POLR service rates would be costly to
implement and potentially ruinous to competition
- Sudden and dramatic shifts in demand could expose customers to either
prevailing market prices or stranded hedging costs
o Demand uncertainty creates uncertainty for both utilities and retail and
wholesale suppliers alike
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Striking A Balance
ComEd's Obligation to Provide Supply Service
Small Customers ("Mass Market") Larger Customers
less than 400 kW demand Greater than 400 kW demand
99%+ of customers less than 1% of customers
o 65% of peak o 35% of peak
o 53% of energy o 47% of energy
o Potentially nervous about deregulation o Capable of managing risk
Multi-Year Fixed-Price Offer Spot Market Passthrough
o Addresses needs of mass market o Facilitates market
development
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Switching Levels Vary by Customer Size
C&I Customer Supply Analysis
December 31, 2001
[This slide contains a stacked column chart which shows the type of electricity
supply {bundled, power purchase option (PPO), or retail energy supplier (RES)}
for commercial and industrial customer classes broken down according to annual
kilowatt hour usage. The data points are shown on the table below.]
- --------------------------------------------------------------------------------------------------
Watthour % of Class on % of Class % of Class Total
Bundled Supply on PPO on RES Supply
- --------------------------------------------------------------------------------------------------
0 to 25 KW 95% 3% 2% 100%
- --------------------------------------------------------------------------------------------------
25 to 100 KW 88% 6% 6% 100%
- --------------------------------------------------------------------------------------------------
100 to 400 KW 75% 14% 11% 100%
- --------------------------------------------------------------------------------------------------
400 to 800 KW* 62% 17% 21% 100%
- --------------------------------------------------------------------------------------------------
800 to 1,000 KW 59% 24% 16% 100%
- --------------------------------------------------------------------------------------------------
1 to 3 MW** 52% 30% 19% 100%
- --------------------------------------------------------------------------------------------------
3 to 6 MW** 42% 30% 28% 100%
- --------------------------------------------------------------------------------------------------
6 to 10 MW** 45% 22% 33% 100%
- --------------------------------------------------------------------------------------------------
Over 10 MW** 46% 23% 30% 100%
- --------------------------------------------------------------------------------------------------
*[A box on the graph points out that "reliance on bundled rates decreases
markedly at the 400 KW level and above".]
**[A box on the graph points out that these are "Active shoppers that exhibit
the ability to manage supply".]
[logo for ComEd, an Exelon Company]
Next Steps
o In order to provide sufficient time for customers, suppliers and us to
prepare, ComEd's goal is to focus the POLR discussion on the large
customers in 2002
o ComEd's successful filing to limit the eligibility for PPO to customers
paying CTCs was an important first step because it signals to RESs and
wholesale suppliers that customers must and will begin to be served by
market-supplied resources
o ComEd's next steps will be to
- Consider the abandonment and the declaration of certain services as
competitive for large customer classes
- Initiate workshops early this year to discuss the large customer
aspects of this proposal
- Remain flexible to account for participant concerns and market
developments
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Purpose of the Delivery Services Rate Case
o Delivery services rates represent only the distribution costs incurred by
ComEd when customers purchase unbundled generation.
- One-third of ComEd's nonresidential energy sales are made under
delivery services rates.
- Traditional bundled rates are not affected by the delivery services
filing and will remain frozen through 2004.
o Filing was prompted by need to establish residential delivery services
rates for residential choice beginning May 2002.
o Getting the price right -- both in terms of overall revenue and rate design
-- is a major objective.
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Executive Summary
o ComEd is requesting a 29% increase in its delivery services rates, which
includes adjustments for issues that have been resolved during the case.
o The magnitude of the increase is largely driven by the higher 2000 test
year expenditures (both operating expenses and rate base) when compared to
the 1997 test year expenditures on which the current rates are based.
- These expenditures have resulted in a 40% reduction in outage
frequency and duration since 1999.
o Little, if any, additional revenue is expected from the case in the year
2002.
- The increased delivery services revenue is offset by reduced CTC
revenue under the transition charge formula.
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ComEd has Competitive Distribution Rates
Distribution revenue requirements (cents/kWh) for peer restructured utilities:
NSTAR 3.54
SDG&E 3.17
PSE&G 2.90
PG&E 2.70
PECO 2.52
So. CA Edison 2.46
ComEd request 1.93
Detroit Edison 1.90
Cleveland Elec. 1.70
ComEd current 1.50
Reliant 1.27
Simple average of the utilities is 2.46 cents/kWh (excluding ComEd)
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Financial Details - Delivery Services
o ComEd's requested jurisdictional revenue requirement is $1.683 billion per
year with a $4.084 billion net rate base.
o The overall rate of return has been largely settled with major parties in
the proceeding and results in the following financial structure:
Cost or Earnings
----------------
Amount Percent End of
Cost of Capital (millions) of Total Year Weighted
- --------------- ---------- -------- ---- --------
Long Term Debt $6,966 57.14% 6.95% 3.97%
Preferred Stock 0 0.00% 0.00% 0.00%
Common Equity 5,224 42.86% 11.72% 5.02%
------ ------ ------ -----
Total $12,190 100.00% 8.99%
The settlement is an increase over the current approved weighted cost of capital
of 8.84%
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Status of Case
o Recently, ComEd and the parties reached an agreement on the scope of, and
parameters for, an audit of ComEd's test year 2000 expenditures.
- The purpose of the audit is to further analyze and establish the
reasonableness of past investments and expenditures.
- ComEd believes that an audit is unnecessary because it has already
provided sufficient evidence during the proceeding.
o An order establishing interim residential delivery services rates is
expected to be entered by the Illinois Commerce Commission in April, 2002.
o An order concluding the audit process and establishing final delivery
service rates for all customers is expected to be entered by April, 2003.