In conformity with plans of modernization and the benefits there from, a unit of Exelon Corporation (EXC), Commonwealth Edison Company (“ComEd”), filed for a rate increase with the Illinois Commerce Commission (“ICC”). The rate increase will raise the average residential bill by 7% in a month.
 
The rate case filing by the Exelon unit came after three years, as the utility is looking for funds to modernize its electric delivery system for reliable and uninterrupted supply to its consumers. ComEd, through this rate filing, will also try to recover investments made for the purpose of development since 2007.
 
The rate increase, subject to approval by the ICC, will imply a hike of $6 per month in the residential bill of an average consumer, who have a monthly bill of $86 per month. The commission is expected to come to a decision after an eleven-month proceeding, after taking input from all interested parties. If the new rates are approved it will not be effective until June 2011.
 
ComEd has a few other existing programs, which are aimed to mitigate the financial impact of the proposed rate increase. Average residential consumers having a monthly bill of $100 per month can reduce their bill by 20% when they participate in three existing programs of the utility, namely appliance recycling, central air conditioning cycling and residential lighting programs.
 
The adjusted earnings of Exelon Corporation at the end of first-quarter 2010 were $1.00 per share compared with $1.20 per share at the end of first-quarter 2009. The actual results of the quarter were 11 cents higher than the Zacks Consensus expectation of 89 cents. Exelon Corporation expects earnings for 2010 to be in the range of $3.70 to $4.00 per share. The Zacks Consensus Estimate for second-quarter 2010 is 90 cents per share, for 2010 it is $3.81 per share and for 2011 it is $4.12 per share.
 
Based in Chicago, Illinois, Exelon Corporation, a utility services holding company, through its subsidiaries, engages in the generation, transmission, distribution and sale of electricity to residential, commercial, industrial and wholesale customers. The major competitors of Exelon are Ameren Corporation (AEE), Dynegy Inc. (DYN) and PPL Corporation (PPL).
 
We believe the rate increase is necessary as it will allow the utility to recover cost incurred for development of infrastructure, which will ensure a reliable supply of power and enable the utility to restore power more efficiently after major storms. We presently maintain a Neutral rating and Zacks Rank# 4 (Sell) on Exelon, as lower energy gross margins remain a cause for concern.
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