Exhibit 99.2
Below is the text of the September 26, 2002 Federal Energy Regulatory Commission
letter order to Commonwealth Edison Company.
[On Federal Energy Regulatory Commission letterhead]
Federal Energy Regulatory Commission
Washington, D.C. 20426
Office of the Executive Director
In Reply Refer To: OED-DRAP, Docket No. AC01-56-002
September 26, 2002
Commonwealth Edison Company
Attention: Mr. John E. Ebright
Controller
Three Lincoln Centre
Oakbrook Terrace, IL 601804260
By letters dated August 1 and 27, 2002, I advised
Commonwealth Edison (ComEd) that it should remove from Account 114,
Electric Plant Acquisition Adjustments, the amount of goodwill
associated with the generation and power marketing businesses
transferred to its affiliate, Exelon Generation LLC (Generation). My
determination was based on an inability to reach a contrary conclusion
based simply on an assertion that the fair value of the generation
assets was significantly below their book value at the time of the
merger.1 Goodwill represented the amount paid above fair value for all
of ComEd's identifiable assets at the time of the Peco/Unicom merger.
Therefore, the fact that the fair value of the generation assets was
below their book value at the time of the merger was not a sufficient
basis either under Generally Accepted Accounting Principles or the
Uniform systems of Accounts for concluding that no amount of the
goodwill should be associated with both the generation business and
power marketing business that were being transferred to Generation.
Since the issuance of the August 27th letter, however, ComEd
has provided the Commission, as well as the Securities and Exchange
Commission, with extensive additional information to support ComEd's
contention that the amount recognized as goodwill on its books relates
entirely to ComEd's energy delivery business and thus no portion of
that amount should be associated with the facilities and businesses
transferred to Generation. In particular, ComEd argued and provided
supporting information that:
o the amount recognized as goodwill relates exclusively to
ComEd's transmission and distribution business because of
cash flows expected to be realized from the stranded cost
recovery provision of the Illinois Restructuring Act that
are included in rates charged for delivery services by
ComEd.
o at the time of the Peco/Unicom merger, the unidentified
value (i.e. the goodwill) in the purchase transaction was
associated with the regulatory framework in Illinois,
ComEd's energy delivery franchises, and the connection its
transmission and distribution assets provided to over 3
million retail customers.
o no intangible value was assignable to the power marketing
operations transferred to Generation because those
operations were limited in scope2 and the processes and
systems developed by Wholesale Marketing Group were not
expected to be used by Generation.
Based on our review of the additional information ComEd has
provided and the additional disclosures it intends to provide in the
2002 FERC Form 1 regarding the sensitivity of the goodwill impairment
analysis3 we have no objection to ComEd's determination than none of
the goodwill was related to assets transferred to Generation.
This letter order constitutes final agency action. To request
that the Commission rehear you case you must file a request within 30
days of the date of this letter order (see 18 C.F.R. ss. 385.713).
Sincerely,
/s/ John M. Delaware
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John M. Delaware
Deputy Executive Director and Chief Accountant
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1 Commonwealth Edison letter to the FERC Chief Accountant
dated August 15, 2002.
2 ComEd stated that the primary focus of its Wholesale
Marketing Group (WMG) was managing and balancing electricity supply to
the load on ComEd's system. WMG had very limited approval to engage in
financial hedging transactions and did not engage in speculative
trading.
3 ComEd letter dated September 18, 2002.