2.2.0.7 true COMMITMENTS AND CONTINGENCIES 121 - Disclosure - COMMITMENTS AND CONTINGENCIES true false false false 1 USD true false false false PEPCO HOLDINGS INC dei_LegalEntityAxis xbrldi http://xbrl.org/2006/xbrldi us-gaap_ParentCompanyMember dei_LegalEntityAxis explicitMember iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 iso4217_USD_per_shares Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 shares Standard http://www.xbrl.org/2003/instance shares 0 $ 1 PEPCO HOLDINGS INC 0 na true na na No definition available. false true false false false false false false false false false http://www.pepcoholdings.com/taxonomy/role/notestofinancialstatementscommitmentsandcontingenciesdisclosuretextblock false 1 false false false false 0 0 false false false false 1 USD true false false false PEPCO HOLDINGS INC dei_LegalEntityAxis xbrldi http://xbrl.org/2006/xbrldi us-gaap_ParentCompanyMember dei_LegalEntityAxis explicitMember iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 iso4217_USD_per_shares Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 shares Standard http://www.xbrl.org/2003/instance shares 0 $ na No definition available. No authoritative reference available. false 2 COMMITMENTS AND CONTINGENCIES 2 us-gaap_CommitmentsAndContingenciesDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0 <div> (14) COMMITMENTS AND CONTINGENCIES Regulatory and Other Matters Proceeds from Settlement of Mirant Bankruptcy Claims In 2007, Pepco received proceeds from the settlement of its Mirant Corporation (Mirant) bankruptcy claims relating to a power purchase agreement between Pepco and Panda-Brandywine L.P. (Panda PPA). In September 2008, Pepco transferred the Panda PPA to an unaffiliated third party, along with a payment to the third party of a portion of the settlement proceeds. In March 2009, the District of Columbia Public Service Commission (DCPSC) approved an allocation between Pepco and its District of Columbia customers of the District of Columbia portion of the Mirant bankruptcy settlement proceeds remaining after the transfer of the Panda PPA. As a result, Pepco recorded a pre-tax gain of $14 million in the first quarter of 2009 reflecting the District of Columbia proceeds retained by Pepco. In July 2009, the MPSC approved an allocation between Pepco and its Maryland customers of the Maryland portion of the Mirant bankruptcy settlement proceeds remaining after the transfer of the Panda PPA. As a result, Pepco recorded a pre-tax gain of $26 million in the third quarter of 2009 reflecting the Maryland proceeds retained by Pepco. Rate Proceedings In recent electric service distribution base rate cases, PHI’s utility subsidiaries have proposed the adoption of revenue decoupling methods for retail customers. To date:   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> A bill stabilization adjustment mechanism (BSA) has been approved and implemented for both Pepco and DPL electric service in Maryland and for Pepco electric service in the District of Columbia. </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> A modified fixed variable rate design (MFVRD) has been approved in concept for DPL electric service in Delaware and a settlement among the parties to the ongoing base rate proceeding (as described below) has been submitted to the DPSC, which provides for the implementation of the MFVRD after the conclusion of the proceeding. </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> A MFVRD has been approved in concept for DPL natural gas service in Delaware. Based on a settlement among the parties to the ongoing gas decoupling proceeding, implementation of the MFVRD will be considered as part of DPL’s pending natural gas distribution base rate case filed on July 2, 2010 (as discussed below). </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> A BSA remains pending for ACE in New Jersey. </td> </tr> </table> Under the BSA, customer delivery rates are subject to adjustment (through a credit or surcharge mechanism), depending on whether actual distribution revenue per customer exceeds or falls short of the revenue-per-customer amount approved by the applicable public service commission. The BSA increases rates if actual distribution revenues fall below the approved level and decreases rates if actual distribution revenues are above the approved level. The result is that, over time, the utility collects its authorized revenues for distribution deliveries. As a consequence, a BSA “decouples” distribution revenue from unit sales consumption and ties the growth in distribution revenues to the growth in the number of customers. Some advantages of the BSA are that it (i) eliminates revenue fluctuations due to weather and changes in customer usage patterns and, therefore, provides for more predictable distribution revenues that are better aligned with costs, (ii) provides for more reliable fixed-cost recovery, (iii) tends to stabilize customers’ delivery bills, and (iv) removes any disincentives for the regulated utilities to promote energy efficiency programs for their customers, because it breaks the link between overall sales volumes and distribution revenues. The MFVRD approved in concept in Delaware provides for a fixed customer charge (i.e., not tied to the customer’s volumetric consumption) to recover the utility’s fixed costs, plus a reasonable rate of return. Although different from the BSA, PHI views the MFVRD as an appropriate distribution revenue decoupling mechanism. Delaware In August 2009, DPL submitted to the DPSC its 2009 Gas Cost Rate (GCR) filing, which permits DPL to recover gas procurement costs through customer rates. The requested 10.2% decrease in the level of GCR, became effective on a temporary basis on November 1, 2009, subject to refund and pending final DPSC approval. On August 17, 2010, the DPSC approved the rates as filed. On August 31, 2010, DPL submitted to the DPSC its 2010 GCR filing, which proposed a two-year amortization of under-recovered gas costs in the 2010 filing. In October 2010, the DPSC issued an order placing those rates into effect on November 1, 2010, subject to refund and pending final DPSC approval. The effect of the proposed two-year amortization upon rates is essentially flat (an increase of 0.1% in the level of GCR). If the DPSC does not accept DPL’s proposal, the full GCR would result in an increase of 6.9% in the level of GCR. In September 2009, DPL submitted an application with the DPSC to increase its electric distribution base rates. The filing, as revised in March 2010, sought approval of an annual rate increase of approximately $26.2 million, assuming approval of the implementation of the MFVRD, based on a requested return on equity (ROE) of 10.75%. As permitted by Delaware law, DPL placed an increase of approximately $2.5 million annually into effect on a temporary basis in November 2009, subject to refund and pending final DPSC approval of the entirety of the requested increase. As permitted by Delaware law, DPL placed approximately $23.7 million of the remaining requested increase into effect on April 19, 2010, subject to refund and pending final DPSC approval. On April 16, 2010, all of the parties to the base rate proceeding, including DPL, the DPSC staff, the Division of the Public Advocate, the Delaware Department of Natural Resources and Environmental Control, and the Delaware Energy Users Group, which represents large industrial consumers of electricity, entered into a settlement agreement regarding implementation of the MFVRD. The settlement agreement (as modified non-materially on August 27, 2010) provides for implementation of the MFVRD after the conclusion of the current base rate proceeding. Hearings on the unresolved issues in the case were concluded in late May 2010. In June 2010, DPL lowered the requested annual rate increase to approximately $24.2 million. On October 1, 2010, the Hearing Examiner issued a report to the DPSC, recommending an increase of approximately $6.3 million, based on an ROE of 8.5% with the MFVRD (or approximately $9.7 million, based on an ROE of 9.5%, without the MFVRD), and recommending approval of the settlement agreement providing for implementation of the MFVRD. On October 25, 2010, DPL filed a number of objections to the Hearing Examiner’s report. The DPSC is expected to consider the case at its meeting on November 10, 2010, during which DPL will have an additional opportunity to challenge each of the recommendations in the report to which it objects. On July 2, 2010, DPL submitted an application with the DPSC to increase its natural gas distribution base rates. As subsequently amended on September 10, 2010 (to replace test year data for the twelve months ended June 2010 with the actual data) and on October 11, 2010 (based on an update to DPL’s Gas advanced metering infrastructure implementation schedule), the filing seeks approval of an annual rate increase of approximately $10.2 million, assuming the implementation of the MFVRD, based on a requested ROE of 11.00%. DPL placed an annual increase of approximately $2.5 million into effect on a temporary basis on August 31, 2010, subject to refund and pending final DPSC approval of the entirety of the requested increase. A procedural schedule has been set which provides for a hearing in January 2011 and a DPSC decision in April 2011. Previously, in June 2009, DPL filed an application requesting approval for the implementation of the MFVRD for gas distribution rates. The parties to the MFVRD proceeding have been working toward a settlement agreement that would be submitted to the DPSC. DPL anticipates that the MFVRD proceeding will be merged with the natural gas base rate proceeding discussed above.   Maryland In December 2009, Pepco filed an electric distribution base rate case in Maryland. The filing sought approval of an annual rate increase of approximately $40 million, based on a requested ROE of 10.75%. During the course of the proceeding, Pepco reduced its request to approximately $28.2 million. On August 6, 2010, the MPSC issued an order approving a rate increase of approximately $7.8 million, based on an ROE of 9.83%. On September 2, 2010, Pepco filed with the MPSC a motion for reconsideration of the following issues: (1) denial of inclusion in rate base of certain reliability plant investments, which occurred subsequent to the test period but before the rate effective period; (2) denial of Pepco’s request to increase depreciation rates to reflect a corrected formula relating to the cost of removal expenses; and (3) imposition of imputed cost savings to partially offset the costs of Pepco’s enhanced vegetation management program. The Office of People’s Counsel and MPSC Staff filed responses to Pepco’s motion on October 4, 2010. Maryland law and regulation do not mandate a response time from the MPSC regarding Pepco’s motion and, therefore, it is not known when the MPSC will issue a ruling on the motion. District of Columbia Divestiture Case In June 2000, the DCPSC approved a divestiture settlement under which Pepco is required to share with its District of Columbia customers the net proceeds realized by Pepco from the sale of its generation-related assets in 2000. This approval left unresolved issues of (i) whether Pepco should be required to share with customers the excess deferred income taxes (EDIT) and accumulated deferred investment tax credits (ADITC) associated with the sold assets and, if so, whether such sharing would violate the normalization provisions of the Internal Revenue Code and its implementing regulations and (ii) whether Pepco was entitled to deduct certain costs in determining the amount of proceeds to be shared. On May 18, 2010, the DCPSC issued an order addressing all of the remaining issues related to the sharing of the proceeds of Pepco’s divestiture of its generating assets. In the order, the DCPSC ruled that Pepco is not required to share EDIT and ADITC with customers. However, the order also disallowed certain items that Pepco had included in the costs deducted from the proceeds of the sale of the generation assets. The disallowance of these costs, together with interest on the allowed amount, increases the aggregate amount Pepco is required to distribute to customers, pursuant to the sharing formula, by approximately $11 million. On June 17, 2010, Pepco filed an application for reconsideration of the DCPSC’s order, contesting (i) approximately $5 million of the approximate total of $6 million in disallowances and (ii) approximately $4 million of the approximately $5 million in interest to be credited to customers (reflecting a difference in the period of time over which interest was calculated as well as the balance to which interest would be applied). On July 16, 2010, the DCPSC denied Pepco’s application for reconsideration. On September 7, 2010, Pepco filed an appeal of the DCPSC’s decision with the District of Columbia Court of Appeals. PHI recognized expenses of $9 million and $11 million, respectively, for the three and nine months ended September 30, 2010 corresponding to the disallowed items. Pepco intends to continue to pursue its appeal. Pepco Energy Services Cooling Service Interruption – Atlantic City, New Jersey On Thursday, July 15, 2010, Pepco Energy Services’ thermal energy business unit disconnected chilled water service to four facilities in Atlantic City, New Jersey due to a break in a 36-inch water line. Chilled water is used to provide air conditioning to the casinos and other customer facilities served by Pepco Energy Services. The affected facilities are located along the boardwalk in the midtown area of Atlantic City; service to thermal customers not served by the water line was not affected. Pepco Energy Services secured replacement equipment including chillers, cooling towers and generators, and restored cooling service to the affected customers that needed service by Sunday, July 18, 2010. Pepco Energy Services then evaluated the water line failure, completed the permanent repair and was able to restore normal service to customers on July 23, 2010. The pre-tax cost of installing and operating the temporary cooling equipment and completing the repair of the water line was approximately $3 million. Pepco Energy Services’ thermal energy service agreements with customers require Pepco Energy Services to undertake the repair of any assets that caused interruption of chilled water services. Under the agreements, the customers may seek to claim direct damages, such as costs to repair or replace customers’ assets, but are not entitled to indirect damages, such as lost profits or consequential damages. Because Pepco Energy Services incurred the costs to secure temporary chilled water service and to perform the permanent repair of the pipe leak, Pepco Energy Services currently expects that it has no additional material exposure from its customers for damages. Retained Environmental Exposures from the Sale of the Conectiv Energy Wholesale Power Generation Business On July 1, 2010, PHI sold the Conectiv Energy wholesale power generation business to Calpine. Under New Jersey’s Industrial Site Recovery Act (ISRA), the transfer of ownership triggered an obligation on the part of Conectiv Energy to remediate any environmental contamination at each of the nine Conectiv Energy generating facility sites located in New Jersey. Under the Purchase Agreement dated April 20, 2010, between PHI and Calpine (the Purchase Agreement), Calpine has assumed responsibility for performing the ISRA-required remediation and for the payment of all related ISRA compliance costs up to $10 million. PHI is obligated to indemnify Calpine for any ISRA compliance remediation costs in excess of $10 million. According to preliminary estimates, the costs of ISRA-required remediation activities at the nine generating facility sites located in New Jersey are in the range of approximately $7 million to $18 million. PHI has accrued $4 million as of September 30, 2010 for the ISRA-required remediation activities at the nine generating facility sites. The sale of the Conectiv Energy wholesale power generation business to Calpine did not include a coal ash landfill site that PHI intends to close, located at Conectiv Energy’s Edge Moor generating facility. The preliminary estimate of the costs to PHI to close the coal ash landfill ranges from approximately $2 million to $3 million, plus annual post-closure operations, maintenance and monitoring costs, estimated to range between $120,000 and $193,000 per year for 30 years. As of the end of the third quarter of 2010, PHI had accrued approximately $5 million for landfill closure and monitoring. In orders issued in 2007, the New Jersey Department of Environmental Protection (NJDEP) assessed penalties against Conectiv Energy in an aggregate amount of approximately $2 million, based on NJDEP’s contention that Conectiv Energy’s Deepwater generating facility exceeded the maximum allowable hourly heat input limits during certain periods in calendar years 2004, 2005 and 2006. Conectiv Energy has appealed the NJDEP orders imposing these penalties to the New Jersey Office of Administrative Law. PHI is continuing to prosecute this appeal and, under the Purchase Agreement, has agreed to indemnify Calpine for monetary penalties, fines or assessments arising out of the NJDEP orders. General Litigation In 1993, Pepco was served with Amended Complaints filed in the state Circuit Courts of Prince George’s County, Baltimore City and Baltimore County, Maryland in separate ongoing, consolidated proceedings known as “In re: Personal Injury Asbestos Case.” Pepco and other corporate entities were brought into these cases on a theory of premises liability. Under this theory, the plaintiffs argued that Pepco was negligent in not providing a safe work environment for employees or its contractors, who allegedly were exposed to asbestos while working on Pepco’s property. Initially, a total of approximately 448 individual plaintiffs added Pepco to their complaints. While the pleadings are not entirely clear, it appears that each plaintiff sought $2 million in compensatory damages and $4 million in punitive damages from each defendant. Since the initial filings in 1993, additional individual suits have been filed against Pepco, and significant numbers of cases have been dismissed. As a result of two motions to dismiss, numerous hearings and meetings and one motion for summary judgment, Pepco has had approximately 400 of these cases successfully dismissed with prejudice, either voluntarily by the plaintiff or by the court. As of September 30, 2010, there are approximately 180 cases still pending against Pepco in the State Courts of Maryland, of which approximately 90 cases were filed after December 19, 2000, and were tendered to Mirant for defense and indemnification pursuant to the terms of the Asset Purchase and Sale Agreement between Pepco and Mirant under which Pepco sold its generation assets to Mirant in 2000.   While the aggregate amount of monetary damages sought in the remaining suits (excluding those tendered to Mirant) is approximately $360 million, PHI and Pepco believe the amounts claimed by the remaining plaintiffs are greatly exaggerated. The amount of total liability, if any, and any related insurance recovery cannot be determined at this time; however, based on information and relevant circumstances known at this time, neither PHI nor Pepco believes these suits will have a material adverse effect on its financial condition, results of operations or cash flows. However, if an unfavorable decision were rendered against Pepco, it could have a material adverse effect on Pepco’s and PHI’s financial condition, results of operations and cash flows. Environmental Litigation PHI, through its subsidiaries, is subject to regulation by various federal, regional, state, and local authorities with respect to the environmental effects of its operations, including air and water quality control, solid and hazardous waste disposal, and limitations on land use. In addition, federal and state statutes authorize governmental agencies to compel responsible parties to clean up certain abandoned or unremediated hazardous waste sites. PHI’s subsidiaries may incur costs to clean up currently or formerly owned facilities or sites found to be contaminated, as well as other facilities or sites that may have been contaminated due to past disposal practices. Although penalties assessed for violations of environmental laws and regulations are not recoverable from customers of the operating utilities, environmental clean-up costs incurred by Pepco, DPL and ACE would be included by each company in its respective cost of service for ratemaking purposes. Franklin Slag Pile Site. On November 26, 2008, ACE received a general notice letter from the U.S. Environmental Protection Agency (EPA) concerning the Franklin Slag Pile site in Philadelphia, Pennsylvania, asserting that ACE is a potentially responsible party (PRP) that may have liability with respect to the site. If liable, ACE would be responsible for reimbursing EPA for clean-up costs incurred and to be incurred by the agency and for the costs of implementing an EPA-mandated remedy. The EPA’s claims are based on ACE’s sale of boiler slag from the B.L. England generating facility to MDC Industries, Inc. (MDC) during the period June 1978 to May 1983 (ACE owned B.L. England at that time and MDC formerly operated the Franklin Slag Pile site). EPA further claims that the boiler slag ACE sold to MDC contained copper and lead, which are hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), and that the sales transactions may have constituted an arrangement for the disposal or treatment of hazardous substances at the site, which could be a basis for liability under CERCLA. The EPA’s letter also states that as of the date of the letter, EPA’s expenditures for response measures at the site exceed $6 million. EPA estimates approximately $6 million as the cost for future response measures it recommends. ACE understands that the EPA sent similar general notice letters to three other companies and various individuals. ACE believes that the B.L. England boiler slag sold to MDC was a valuable material with various industrial applications and, therefore, the sale was not an arrangement for the disposal or treatment of any hazardous substances as would be necessary to constitute a basis for liability under CERCLA. ACE intends to contest any claims to the contrary made by the EPA. In a May 2009 decision arising under CERCLA, which did not involve ACE, the U.S. Supreme Court rejected an EPA argument that the sale of a useful product constituted an arrangement for disposal or treatment of hazardous substances. While this decision supports ACE’s position, at this time ACE cannot predict how EPA will proceed with respect to the Franklin Slag Pile site, or what portion, if any, of the Franklin Slag Pile site response costs EPA would seek to recover from ACE. Peck Iron and Metal Site. EPA informed Pepco in a May 20, 2009 letter that Pepco may be a PRP under CERCLA with respect to the cleanup of the Peck Iron and Metal site in Portsmouth, Virginia, for costs EPA has incurred in cleaning up the site. EPA’s letter states that Peck Iron and Metal purchased, processed, stored and shipped metal scrap from military bases, governmental agencies and businesses and that Peck’s metal scrap operations resulted in the improper storage and disposal of hazardous substances. EPA bases its allegation that Pepco arranged for disposal or treatment of hazardous substances sent to the site on information provided by Peck Iron and Metal personnel, who informed the EPA that Pepco was a customer at the site. Pepco has advised the EPA by letter that its records show no evidence of any sale of scrap metal by Pepco to the site. Even if EPA has such records and such sales did occur, Pepco believes that any such scrap metal sales are entitled to the recyclable material exemption from CERCLA liability. At this time Pepco cannot predict how EPA will proceed regarding this matter, or what portion, if any, of the Peck Iron and Metal site response costs EPA would seek to recover from Pepco. In a notice published on November 4, 2009, EPA placed the Peck Iron and Metal site on the National Priorities List.   Ward Transformer Site. In April 2009, a group of PRPs with respect to the Ward Transformer site in Raleigh, North Carolina, filed a complaint in the U.S. District Court for the Eastern District of North Carolina, alleging cost recovery and/or contribution claims against ACE, DPL and Pepco with respect to past and future response costs incurred by the PRP group in performing a removal action at the site. With the court’s permission, the plaintiffs filed amended complaints on September 1, 2009. ACE, DPL and Pepco, as part of a group of defendants, filed a motion to dismiss on October 13, 2009. In a March 24, 2010 order, the court denied the defendants’ motion to dismiss. Although it is too early in the process to characterize the magnitude of the potential liability at this site, it does not appear that any of the three PHI utilities had extensive business transactions, if any, with the Ward Transformer site. Benning Road Site. On September 21, 2010, PHI received a letter from EPA stating that EPA and the District of Columbia Department of the Environment (DDOE) have identified the Benning Road distribution and generating facility as one of six land-based sites potentially contributing to contamination of the Lower Anacostia River. The letter states that the principal contaminants of concern are polychlorinated biphenyls (PCBs) and polycyclic aromatic hydrocarbons, that EPA is monitoring the efforts of DDOE and that EPA intends to use federal authority to address the Benning Road facility if an agreement for a comprehensive study to evaluate (and, if necessary as a result of the study, to clean up the facility) is not in effect by mid-December 2010. In a letter dated October 8, 2010, the Office of the Attorney General of the District of Columbia notified PHI of the District’s intent to sue Pepco Energy Services and Pepco under the Resource Conservation and Recovery Act for abatement of conditions related to their historical activities, including the discharge of PCBs at the Benning Road facility. The District’s letter also states that EPA will list the Benning Road facility on the National Priorities List by December 2010 if contamination at the facility is not addressed in a timely manner and that if Pepco fails to meet the District’s December 2010 deadline, the District intends to sue Pepco and Pepco Energy Services in federal court to seek a scientific study to identify the nature of conditions at the Benning Road facility, abatement of conditions, compensation for natural resource damages, and reimbursement of DDOE’s related costs. PHI is in the process of evaluating the potential financial exposure at this site and has scheduled a meeting with DDOE with the intent of reaching an agreement by the mid-December deadline. Appeal of New Jersey Flood Hazard Regulations. In November 2007, NJDEP adopted amendments to the agency’s regulations under the Flood Hazard Area Control Act (FHACA) to minimize damage to life and property from flooding caused by development in flood plains. The amended regulations impose a new regulatory program to mitigate flooding and related environmental impacts from a broad range of construction and development activities, including electric utility transmission and distribution construction that was previously unregulated under the FHACA. These regulations impose restrictions on construction of new electric transmission and distribution facilities and increase the time and personnel resources required to obtain permits and conduct maintenance activities. In November 2008, ACE filed an appeal of these regulations with the Appellate Division of the Superior Court of New Jersey. The grounds for ACE’s appeal include the lack of administrative record justification for the FHACA regulations and conflict between the FHACA regulations and other state and federal regulations and standards for maintenance of electric power transmission and distribution facilities. The briefing process has been completed and the case is awaiting assignment of a date for oral argument before the appellate court. Indian River Oil Release In 2001, DPL entered into a consent agreement with the Delaware Department of Natural Resources and Environmental Control for remediation, site restoration, natural resource damage compensatory projects and other costs associated with environmental contamination resulting from an oil release at the Indian River generating facility, which was sold in June 2001. DPL has a continuing obligation with respect to the costs under the consent agreement. Based on current engineering estimates, DPL has accrued $6 million of expected future costs, $1 million of which will be incurred during the next 12 months, to fulfill its obligations under the consent agreement. A $4 million charge was recorded in operating expenses for DPL in the second quarter of 2010.   PHI’s Cross-Border Energy Lease Investments Between 1994 and 2002, PCI, a subsidiary of PHI, entered into eight cross-border energy lease investments involving public utility assets (primarily consisting of hydroelectric generation and coal-fired electric generating facilities and natural gas distribution networks) located outside of the United States. Each of these investments is structured as a sale and leaseback transaction commonly referred to as a sale-in/lease-out or SILO transaction. PHI’s current annual tax benefits from these eight cross-border energy lease investments are approximately $59 million. As of September 30, 2010, PHI’s equity investment in its cross-border energy leases was approximately $1.4 billion, which included the impact of the reassessments discussed below. From January 1, 2001, the earliest year that remains open to audit, to September 30, 2010, PHI has derived approximately $560 million in federal and state income tax benefits from the depreciation and interest deductions in excess of rental income with respect to these cross-border energy lease investments. In 2005, the Treasury Department and IRS issued Notice 2005-13 identifying sale-leaseback transactions with certain attributes entered into with tax-indifferent parties as tax avoidance transactions, and the IRS announced its intention to disallow the associated tax benefits claimed by the investors in these transactions. PHI’s cross-border energy lease investments, each of which is with a tax-indifferent party, have been under examination by the IRS as part of the normal PHI federal income tax audits. In the final RARs issued in June 2006 and in March 2009 in connection with the audit of PHI’s 2001-2002, and 2003-2005 income tax returns, respectively, the IRS disallowed the depreciation and interest deductions in excess of rental income claimed by PHI with respect to each of its cross-border energy lease investments. In addition, the IRS has sought to recharacterize each of the leases as loan transactions as to which PHI would be subject to original issue discount income. PHI disagrees with the IRS’ proposed adjustments and filed tax protests in August 2006 and May 2009 in connection with the audit of PHI’s 2001-2002 and 2003-2005 income tax returns, respectively. Both cases have been forwarded to and are under review by the IRS Appeals Office. PHI believes that it is unlikely that a resolution will be reached with the Appeals Office and, therefore, PHI currently intends to pursue litigation against the IRS to defend its tax position, which, absent a settlement, may take several years to resolve. PHI expects to pay the $74 million of additional tax claimed by the IRS to be due with respect to the cross border energy leases for 2001 and 2002, plus interest and penalties of approximately $34 million, by December 31, 2010. In the last several years, IRS challenges to certain cross-border lease transactions have been the subject of litigation, including several decisions in favor of the IRS which were factored into PHI’s decision to adjust the lease values in June 2008. On October 21, 2009, the U.S. Court of Federal Claims issued a decision in favor of a taxpayer regarding a cross-border lease transaction. PHI views this ruling as a favorable development in PHI’s dispute with the IRS because the transaction that is the subject of the ruling is similar in many respects to PHI’s cross-border energy lease investments. At December 31, 2009, PHI modified its tax cash flow assumptions under its cross-border energy lease investments for the period 2010-2012 to reflect the anticipated timing of potential litigation with the IRS concerning the investments. As a result of the recalculation of the equity investment, PHI recorded a $2 million after-tax non-cash earnings charge in 2009, and expects to record an offsetting $3 million after-tax non-cash earnings benefit during the latter part of 2010, once the tax payment for the 2001 and 2002 income tax returns is made. In the event that the IRS were to be successful in disallowing 100% of the tax benefits associated with these leases and recharacterizing these leases as loans, PHI estimates that, as of September 30, 2010, it would be obligated to pay approximately $673 million in additional federal and state taxes and $126 million of interest. In addition, the IRS could require PHI to pay a penalty of up to 20% on the amount of additional taxes due.   PHI anticipates that any additional taxes that it would be required to pay as a result of the disallowance of prior deductions or a re-characterization of the leases as loans would be recoverable in the form of lower taxes over the remaining terms of the affected leases. Moreover, the entire amount of any additional tax would not be due immediately. Rather, the federal and state taxes would be payable when the open audit years are closed and PHI amends subsequent tax returns not then under audit. To mitigate the taxes due in the event of a total disallowance of tax benefits, PHI could, were it to so elect, choose to liquidate all or a portion of its cross-border energy lease portfolio, which PHI estimates could be accomplished over a period of six months to one year. Based on current market values, PHI estimates that liquidation of the entire portfolio would generate sufficient cash proceeds to cover the estimated $799 million in federal and state taxes and interest due as of September 30, 2010, in the event of a total disallowance of tax benefits and a recharacterization of the transactions as loans. If payments of additional taxes and interest preceded the receipt of liquidation proceeds, the payments would be funded by currently available sources of liquidity. To the extent that PHI does not prevail in this matter and suffers a disallowance of the tax benefits and incurs imputed original issue discount income due to the recharacterization of the leases as loans, PHI would be required under FASB guidance on leases (ASC 840 and ASC 850) to recalculate the timing of the tax benefits generated by the cross-border energy lease investments and adjust the equity value of the investments, which would result in a non-cash charge to earnings. District of Columbia Tax Legislation On December 24, 2009, the Mayor of the District of Columbia approved legislation adopted by the City Council that imposes mandatory combined unitary business reporting beginning with tax year 2011, and revises the District’s related party expense disallowance beginning with tax year 2009. Because the City Council must still enact further legislation providing guidance on how to implement combined unitary business reporting before this provision is effective, PHI believes that the legislative process was not complete as of September 30, 2010, and, therefore, the effect of the legislation for combined unitary business tax reporting has not been accounted for as of September 30, 2010. However, because the City Council is not required to enact any further legislation in order for the provisions for the disallowance of related party transactions to become effective, PHI accrued approximately $500,000 of additional income tax expense during the first quarter of 2010. The legislation does not define the term “unitary business” and does not specify how combined tax reporting would differ from PHI’s current consolidated tax reporting in the District of Columbia. However, based upon PHI’s interpretation of combined unitary business tax reporting in other taxing jurisdictions, the legislation would likely result in a change in PHI’s overall state income tax rate and, therefore, would likely require an adjustment to PHI’s net deferred income tax liabilities. Further, to the extent that the change in rate increases net deferred income tax liabilities, PHI must determine if these increased tax liabilities are probable of recovery in future rates. No timetable has been established by the City Council to enact the required further legislation and, therefore, uncertainty exists as to when combined unitary reporting will be effective for PHI’s District of Columbia tax returns. Management continues to analyze the impact that the unitary business tax reporting aspect of this legislation, if completed, may have on the financial position, results of operations and cash flows of PHI and its subsidiaries. Third Party Guarantees, Indemnifications, and Off-Balance Sheet Arrangements Pepco Holdings and certain of its subsidiaries have various financial and performance guarantees and indemnification obligations that they have entered into in the normal course of business to facilitate commercial transactions with third parties as discussed below.   As of September 30, 2010, Pepco Holdings and its subsidiaries were parties to a variety of agreements pursuant to which they were guarantors for standby letters of credit, performance residual value, and other commitments and obligations. The commitments and obligations, in millions of dollars, were as follows:   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="80%"></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="14" align="center">Guarantor</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2"> </td> <td valign="bottom"> </td> </tr> <tr> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">PHI</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">DPL</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">ACE</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Pepco</td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">Total</td> <td valign="bottom"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Energy marketing obligations of Conectiv Energy (a) </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">179</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">179</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr> <td valign="top"> Energy procurement obligations of Pepco Energy Services (a) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">315</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom" nowrap="nowrap" align="right">—  </td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">315</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Guaranteed lease residual values (b) </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">10</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-TOP: #000000 1px solid" valign="bottom">  </td> <td> </td> </tr> <tr> <td valign="top"> Total </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">495</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">4</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">3</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">2</td> <td valign="bottom" nowrap="nowrap"> </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">504</td> <td valign="bottom" nowrap="nowrap"> </td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> <td valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td style="BORDER-TOP: #000000 3px double" valign="bottom">  </td> <td> </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="4%" align="left">(a)</td> <td valign="top" align="left">Pepco Holdings has contractual commitments for performance and related payments of Conectiv Energy and Pepco Energy Services to counterparties under routine energy sales and procurement obligations, including retail customer load obligations of Pepco Energy Services and requirements under BGS contracts entered into by Conectiv Energy with ACE.</td> </tr> </table> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="4%" align="left">(b)</td> <td valign="top" align="left">Subsidiaries of Pepco Holdings have guaranteed residual values in excess of fair value of certain equipment and fleet vehicles held through lease agreements. As of September 30, 2010, obligations under the guarantees were approximately $10 million. Assets leased under agreements subject to residual value guarantees are typically for periods ranging from 2 years to 10 years. Historically, payments under the guarantees have not been made by the guarantor as, under normal conditions, the contract runs to full term at which time the residual value is minimal. As such, Pepco Holdings believes the likelihood of payment being required under the guarantee is remote.</td> </tr> </table> Pepco Energy Services has entered into various energy savings guaranty contracts associated with the installation of energy savings equipment for federal, state and local government customers. As part of those contracts, Pepco Energy Services typically guarantees that the equipment will generate a specified amount of energy savings on an annual basis based on contractually established performance measures. The longest remaining term of the guarantees currently in effect is 15 years. On an annual basis, Pepco Energy Services undertakes a measurement and verification process to determine the amount of energy savings for the year and whether there is any shortfall in the annual energy savings compared to the guaranteed amount. Pepco Energy Services recognizes a liability for the value of the estimated energy savings shortfall when it is probable that the guaranteed energy savings will not be achieved. The liability for energy savings guaranty contracts has not changed during the nine month reporting period ending September 30, 2010 and currently is less than $1 million. Pepco Energy Services did not make any significant payouts under the guarantees, and there was no significant change in guarantees issued or expired for the three and nine months ended September 30, 2010. Pepco Holdings and certain of its subsidiaries have entered into various indemnification agreements related to purchase and sale agreements and other types of contractual agreements with vendors and other third parties. These indemnification agreements typically cover environmental, tax, litigation and other matters, as well as breaches of representations, warranties and covenants set forth in these agreements. Typically, claims may be made by third parties under these indemnification agreements over various periods of time depending on the nature of the claim. The maximum potential exposure under these indemnification agreements can range from a specified dollar amount to an unlimited amount depending on the nature of the claim and the particular transaction. The total maximum potential amount of future payments under these indemnification agreements is not estimable due to several factors, including uncertainty as to whether or when claims may be made under these indemnities. Dividends On October 28, 2010, Pepco Holdings’ Board of Directors declared a dividend on common stock of 27 cents per share payable December 31, 2010, to shareholders of record on December 10, 2010.   </div> false false false us-types:textBlockItemType textblock Includes disclosure of commitments and contingencies. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Interpretation (FIN) -Number 14 -Paragraph 3 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 5 -Paragraph 9, 10, 11, 12 false 3 ATLANTIC CITY ELECTRIC CO 0 na true na na No definition available. false true false false false false false false false false false http://www.pepcoholdings.com/taxonomy/role/notestofinancialstatementscommitmentsandcontingenciesdisclosuretextblock false 1 false false false false 0 0 false false false false 2 USD true false false false ATLANTIC CITY ELECTRIC CO dei_LegalEntityAxis xbrldi http://xbrl.org/2006/xbrldi pom_AtlanticCityElectricCoMember dei_LegalEntityAxis explicitMember iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 $ na No definition available. No authoritative reference available. false 4 COMMITMENTS AND CONTINGENCIES 2 us-gaap_CommitmentsAndContingenciesDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0 <div> (10) COMMITMENTS AND CONTINGENCIES Regulatory and Other Matters Rate Proceedings In its recent electric service distribution base rate case, ACE proposed the adoption of bill stabilization adjustment mechanism (BSA) for retail customers in New Jersey. The BSA proposal remains pending. Under the BSA, customer delivery rates are subject to adjustment (through a credit or surcharge mechanism), depending on whether actual distribution revenue per customer exceeds or falls short of the revenue-per-customer amount approved by the New Jersey Board of Public Utilities. The BSA increases rates if actual distribution revenues fall below the approved level and decreases rates if actual distribution revenues are above the approved level. The result is that, over time, ACE collects its authorized revenues for distribution deliveries. As a consequence, a BSA “decouples” distribution revenue from unit sales consumption and ties the growth in distribution revenues to the growth in the number of customers. Some advantages of the BSA are that it (i) eliminates revenue fluctuations due to weather and changes in customer usage patterns and, therefore, provides for more predictable distribution revenues that are better aligned with costs, (ii) provides for more reliable fixed-cost recovery, (iii) tends to stabilize customers’ delivery bills, and (iv) removes any disincentives for ACE to promote energy efficiency programs for their customers, because it breaks the link between overall sales volumes and distribution revenues. Environmental Litigation ACE is subject to regulation by various federal, regional, state, and local authorities with respect to the environmental effects of its operations, including air and water quality control, solid and hazardous waste disposal, and limitations on land use. In addition, federal and state statutes authorize governmental agencies to compel responsible parties to clean up certain abandoned or unremediated hazardous waste sites. ACE may incur costs to clean up currently or formerly owned facilities or sites found to be contaminated, as well as other facilities or sites that may have been contaminated due to past disposal practices. Although penalties assessed for violations of environmental laws and regulations are not recoverable from ACE’s customers, environmental clean-up costs incurred by ACE would be included in its cost of service for ratemaking purposes. Franklin Slag Pile Site. On November 26, 2008, ACE received a general notice letter from the U.S. Environmental Protection Agency (EPA) concerning the Franklin Slag Pile site in Philadelphia, Pennsylvania, asserting that ACE is a potentially responsible party (PRP) that may have liability with respect to the site. If liable, ACE would be responsible for reimbursing EPA for clean-up costs incurred and to be incurred by the agency and for the costs of implementing an EPA-mandated remedy. The EPA’s claims are based on ACE’s sale of boiler slag from the B.L. England generating facility to MDC Industries, Inc. (MDC) during the period June 1978 to May 1983 (ACE owned B.L. England at that time and MDC formerly operated the Franklin Slag Pile site). EPA further claims that the boiler slag ACE sold to MDC contained copper and lead, which are hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), and that the sales transactions may have constituted an arrangement for the disposal or treatment of hazardous substances at the site, which could be a basis for liability under CERCLA. The EPA’s letter also states that as of the date of the letter, EPA’s expenditures for response measures at the site exceed $6 million. EPA estimates approximately $6 million as the cost for future response measures it recommends. ACE understands that the EPA sent similar general notice letters to three other companies and various individuals. ACE believes that the B.L. England boiler slag sold to MDC was a valuable material with various industrial applications and, therefore, the sale was not an arrangement for the disposal or treatment of any hazardous substances as would be necessary to constitute a basis for liability under CERCLA. ACE intends to contest any claims to the contrary made by the EPA. In a May 2009 decision arising under CERCLA, which did not involve ACE, the U.S. Supreme Court rejected an EPA argument that the sale of a useful product constituted an arrangement for disposal or treatment of hazardous substances. While this decision supports ACE’s position, at this time ACE cannot predict how EPA will proceed with respect to the Franklin Slag Pile site, or what portion, if any, of the Franklin Slag Pile site response costs EPA would seek to recover from ACE. Ward Transformer Site. In April 2009, a group of PRPs with respect to the Ward Transformer site in Raleigh, North Carolina, filed a complaint in the U.S. District Court for the Eastern District of North Carolina, alleging cost recovery and/or contribution claims against ACE with respect to past and future response costs incurred by the PRP group in performing a removal action at the site. With the court’s permission, the plaintiffs filed amended complaints on September 1, 2009. ACE, as part of a group of defendants, filed a motion to dismiss on October 13, 2009. In a March 24, 2010 order, the court denied the defendants’ motion to dismiss. Although it is too early in the process to characterize the magnitude of the potential liability at this site, it does not appear that ACE had extensive business transactions, if any, with the Ward Transformer site. Appeal of New Jersey Flood Hazard Regulations. In November 2007, the New Jersey Department of Environmental Protection adopted amendments to the agency’s regulations under the Flood Hazard Area Control Act (FHACA) to minimize damage to life and property from flooding caused by development in flood plains. The amended regulations impose a new regulatory program to mitigate flooding and related environmental impacts from a broad range of construction and development activities, including electric utility transmission and distribution construction that was previously unregulated under the FHACA. These regulations impose restrictions on construction of new electric transmission and distribution facilities and increase the time and personnel resources required to obtain permits and conduct maintenance activities. In November 2008, ACE filed an appeal of these regulations with the Appellate Division of the Superior Court of New Jersey. The grounds for ACE’s appeal include the lack of administrative record justification for the FHACA regulations and conflict between the FHACA regulations and other state and federal regulations and standards for maintenance of electric power transmission and distribution facilities. The briefing process has been completed and the case is awaiting assignment of a date for oral argument before the appellate court. </div> false false false us-types:textBlockItemType textblock Includes disclosure of commitments and contingencies. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Interpretation (FIN) -Number 14 -Paragraph 3 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 5 -Paragraph 9, 10, 11, 12 false 5 DELMARVA POWER & LIGHT CO /DE/ 0 na true na na No definition available. false true false false false false false false false false false http://www.pepcoholdings.com/taxonomy/role/notestofinancialstatementscommitmentsandcontingenciesdisclosuretextblock false 1 false false false false 0 0 false false false false 3 USD true false false false DELMARVA POWER & LIGHT CO /DE/ dei_LegalEntityAxis xbrldi http://xbrl.org/2006/xbrldi pom_DelmarvaPowerLightCoMember dei_LegalEntityAxis explicitMember iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 $ na No definition available. No authoritative reference available. false 6 COMMITMENTS AND CONTINGENCIES 2 us-gaap_CommitmentsAndContingenciesDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0 <div> (12) COMMITMENTS AND CONTINGENCIES Regulatory and Other Matters Rate Proceedings In recent electric service distribution base rate cases, DPL has proposed the adoption of revenue decoupling methods for retail customers. To date:   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> A BSA has been approved and implemented for DPL electric service in Maryland. </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> A modified fixed variable rate design (MFVRD) has been approved in concept for DPL electric service in Delaware and a settlement among the parties to the ongoing base rate proceeding (as described below) has been submitted to the DPSC, which provides for the implementation of the MFVRD after the conclusion of the proceeding. </td> </tr> </table>   <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="3%" align="left">•</td> <td valign="top" width="1%"> </td> <td valign="top" align="left"> A MFVRD has been approved in concept for DPL natural gas service in Delaware. Based on a settlement among the parties to the ongoing gas decoupling proceeding, implementation of the MFVRD will be considered as part of DPL’s pending natural gas distribution base rate case filed on July 2, 2010 (as discussed below). </td> </tr> </table> Under the BSA, customer delivery rates are subject to adjustment (through a credit or surcharge mechanism), depending on whether actual distribution revenue per customer exceeds or falls short of the revenue-per-customer amount approved by the applicable public service commission. The BSA increases rates if actual distribution revenues fall below the approved level and decreases rates if actual distribution revenues are above the approved level. The result is that, over time, DPL collects its authorized revenues for distribution deliveries. As a consequence, a BSA “decouples” distribution revenue from unit sales consumption and ties the growth in distribution revenues to the growth in the number of customers. Some advantages of the BSA are that it (i) eliminates revenue fluctuations due to weather and changes in customer usage patterns and, therefore, provides for more predictable distribution revenues that are better aligned with costs, (ii) provides for more reliable fixed-cost recovery, (iii) tends to stabilize customers’ delivery bills, and (iv) removes any disincentives for DPL to promote energy efficiency programs for their customers, because it breaks the link between overall sales volumes and distribution revenues. The MFVRD approved in concept in Delaware provides for a fixed customer charge (i.e., not tied to the customer’s volumetric consumption) to recover the utility’s fixed costs, plus a reasonable rate of return. Although different from the BSA, PHI views the MFVRD as an appropriate distribution revenue decoupling mechanism. Delaware In August 2009, DPL submitted to the DPSC its 2009 Gas Cost Rate (GCR) filing, which permits DPL to recover gas procurement costs through customer rates. The requested 10.2% decrease in the level of GCR, became effective on a temporary basis on November 1, 2009, subject to refund and pending final DPSC approval. On August 17, 2010, the DPSC approved the rates as filed. On August 31, 2010, DPL submitted to the DPSC its 2010 GCR filing, which proposed a two-year amortization of under-recovered gas costs in the 2010 filing. In October 2010, the DPSC issued an order placing those rates into effect on November 1, 2010, subject to refund and pending final DPSC approval. The effect of the proposed two-year amortization upon rates is essentially flat (an increase of 0.1% in the level of GCR). If the DPSC does not accept DPL’s proposal, the full GCR would result in an increase of 6.9% in the level of GCR. In September 2009, DPL submitted an application with the DPSC to increase its electric distribution base rates. The filing, as revised in March 2010, sought approval of an annual rate increase of approximately $26.2 million, assuming approval of the implementation of the MFVRD, based on a requested return on equity (ROE) of 10.75%. As permitted by Delaware law, DPL placed an increase of approximately $2.5 million annually into effect on a temporary basis in November 2009, subject to refund and pending final DPSC approval of the entirety of the requested increase. As permitted by Delaware law, DPL placed approximately $23.7 million of the remaining requested increase into effect on April 19, 2010, subject to refund and pending final DPSC approval. On April 16, 2010, all of the parties to the base rate proceeding, including DPL, the DPSC staff, the Division of the Public Advocate, the Delaware Department of Natural Resources and Environmental Control, and the Delaware Energy Users Group, which represents large industrial consumers of electricity, entered into a settlement agreement regarding implementation of the MFVRD. The settlement agreement (as modified non-materially on August 27, 2010) provides for implementation of the MFVRD after the conclusion of the current base rate proceeding. Hearings on the unresolved issues in the case were concluded in late May 2010. In June 2010, DPL lowered the requested annual rate increase to approximately $24.2 million. On October 1, 2010, the Hearing Examiner issued a report to the DPSC, recommending an increase of approximately $6.3 million, based on an ROE of 8.5% with the MFVRD (or approximately $9.7 million, based on an ROE of 9.5%, without the MFVRD), and recommending approval of the settlement agreement providing for implementation of the MFVRD. On October 25, 2010, DPL filed a number of objections to the Hearing Examiner’s report. The DPSC is expected to consider the case at its meeting on November 10, 2010, during which DPL will have an additional opportunity to challenge each of the recommendations in the report to which it objects. On July 2, 2010, DPL submitted an application with the DPSC to increase its natural gas distribution base rates. As subsequently amended on September 10, 2010 (to replace test year data for the twelve months ended June 2010 with the actual data) and on October 11, 2010 (based on an update to DPL’s Gas advanced metering infrastructure implementation schedule), the filing seeks approval of an annual rate increase of approximately $10.2 million, assuming the implementation of the MFVRD, based on a requested ROE of 11.00%. DPL placed an annual increase of approximately $2.5 million into effect on a temporary basis on August 31, 2010, subject to refund and pending final DPSC approval of the entirety of the requested increase. A procedural schedule has been set which provides for a hearing in January 2011 and a DPSC decision in April 2011. Previously, in June 2009, DPL filed an application requesting approval for the implementation of the MFVRD for gas distribution rates. The parties to the MFVRD proceeding have been working toward a settlement agreement that would be submitted to the DPSC. DPL anticipates that the MFVRD proceeding will be merged with the natural gas base rate proceeding discussed above.   Environmental Litigation DPL is subject to regulation by various federal, regional, state, and local authorities with respect to the environmental effects of its operations, including air and water quality control, solid and hazardous waste disposal, and limitations on land use. In addition, federal and state statutes authorize governmental agencies to compel responsible parties to clean up certain abandoned or unremediated hazardous waste sites. DPL may incur costs to clean up currently or formerly owned facilities or sites found to be contaminated, as well as other facilities or sites that may have been contaminated due to past disposal practices. Although penalties assessed for violations of environmental laws and regulations are not recoverable from DPL’s customers, environmental clean-up costs incurred by DPL would be included in its cost of service for ratemaking purposes. Ward Transformer Site. In April 2009, a group of potentially responsible parties (PRPs) with respect to the Ward Transformer site in Raleigh, North Carolina, filed a complaint in the U.S. District Court for the Eastern District of North Carolina, alleging cost recovery and/or contribution claims against DPL with respect to past and future response costs incurred by the PRP group in performing a removal action at the site. With the court’s permission, the plaintiffs filed amended complaints on September 1, 2009. DPL, as part of a group of defendants, filed a motion to dismiss on October 13, 2009. In a March 24, 2010 order, the court denied the defendants’ motion to dismiss. Although it is too early in the process to characterize the magnitude of the potential liability at this site, it does not appear that DPL had extensive business transactions, if any, with the Ward Transformer site. Indian River Oil Release In 2001, DPL entered into a consent agreement with the Delaware Department of Natural Resources and Environmental Control for remediation, site restoration, natural resource damage compensatory projects and other costs associated with environmental contamination resulting from an oil release at the Indian River generating facility, which was sold in June 2001. DPL has a continuing obligation with respect to the costs under the consent agreement. Based on current engineering estimates, DPL has accrued $6 million of expected future costs, $1 million of which will be incurred during the next 12 months, to fulfill its obligations under the consent agreement. A $4 million charge was recorded in operating expenses for DPL in the second quarter of 2010. </div> false false false us-types:textBlockItemType textblock Includes disclosure of commitments and contingencies. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Interpretation (FIN) -Number 14 -Paragraph 3 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 5 -Paragraph 9, 10, 11, 12 false 7 POTOMAC ELECTRIC POWER CO 0 na true na na No definition available. false true false false false false false false false false false http://www.pepcoholdings.com/taxonomy/role/notestofinancialstatementscommitmentsandcontingenciesdisclosuretextblock false 1 false false false false 0 0 false false false false 4 USD true false false false POTOMAC ELECTRIC POWER CO dei_LegalEntityAxis xbrldi http://xbrl.org/2006/xbrldi pom_PotomacElectricPowerCoMember dei_LegalEntityAxis explicitMember iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 $ na No definition available. No authoritative reference available. false 8 COMMITMENTS AND CONTINGENCIES 2 us-gaap_CommitmentsAndContingenciesDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0 <div> (10) COMMITMENTS AND CONTINGENCIES Regulatory and Other Matters Proceeds from Settlement of Mirant Bankruptcy Claims In 2007, Pepco received proceeds from the settlement of its Mirant Corporation (Mirant) bankruptcy claims relating to a power purchase agreement between Pepco and Panda-Brandywine L.P. (Panda PPA). In September 2008, Pepco transferred the Panda PPA to an unaffiliated third party, along with a payment to the third party of a portion of the settlement proceeds. In March 2009, the District of Columbia Public Service Commission (DCPSC) approved an allocation between Pepco and its District of Columbia customers of the District of Columbia portion of the Mirant bankruptcy settlement proceeds remaining after the transfer of the Panda PPA. As a result, Pepco recorded a pre-tax gain of $14 million in the first quarter of 2009 reflecting the District of Columbia proceeds retained by Pepco. In July 2009, the MPSC approved an allocation between Pepco and its Maryland customers of the Maryland portion of the Mirant bankruptcy settlement proceeds remaining after the transfer of the Panda PPA. As a result, Pepco recorded a pre-tax gain of $26 million in the third quarter of 2009 reflecting the Maryland proceeds retained by Pepco. Rate Proceedings In recent electric service distribution base rate cases, a bill stabilization adjustment mechanism (BSA) for Pepco electric service in Maryland and the District of Columbia has been approved and implemented by the MPSC and the DCPSC, respectively. Under the BSA, customer delivery rates are subject to adjustment (through a credit or surcharge mechanism), depending on whether actual distribution revenue per customer exceeds or falls short of the revenue-per-customer amount approved by the applicable public service commission. The BSA increases rates if actual distribution revenues fall below the approved level and decreases rates if actual distribution revenues are above the approved level. The result is that, over time, Pepco collects its authorized revenues for distribution deliveries. As a consequence, a BSA “decouples” distribution revenue from unit sales consumption and ties the growth in distribution revenues to the growth in the number of customers. Some advantages of the BSA are that it (i) eliminates revenue fluctuations due to weather and changes in customer usage patterns and, therefore, provides for more predictable distribution revenues that are better aligned with costs, (ii) provides for more reliable fixed-cost recovery, (iii) tends to stabilize customers’ delivery bills, and (iv) removes any disincentives for Pepco to promote energy efficiency programs for their customers, because it breaks the link between overall sales volumes and distribution revenues. Maryland In December 2009, Pepco filed an electric distribution base rate case in Maryland. The filing sought approval of an annual rate increase of approximately $40 million, based on a requested return on equity (ROE) of 10.75%. During the course of the proceeding, Pepco reduced its request to approximately $28.2 million. On August 6, 2010, the MPSC issued an order approving a rate increase of approximately $7.8 million, based on an ROE of 9.83%. On September 2, 2010, Pepco filed with the MPSC a motion for reconsideration of the following issues: (1) denial of inclusion in rate base of certain reliability plant investments, which occurred subsequent to the test period but before the rate effective period; (2) denial of Pepco’s request to increase depreciation rates to reflect a corrected formula relating to the cost of removal expenses; and (3) imposition of imputed cost savings to partially offset the costs of Pepco’s enhanced vegetation management program. The Office of People’s Counsel and MPSC Staff filed responses to Pepco’s motion on October 4, 2010. Maryland law and regulation do not mandate a response time from the MPSC regarding Pepco’s motion and, therefore, it is not known when the MPSC will issue a ruling on the motion. District of Columbia Divestiture Case In June 2000, the DCPSC approved a divestiture settlement under which Pepco is required to share with its District of Columbia customers the net proceeds realized by Pepco from the sale of its generation-related assets in 2000. This approval left unresolved issues of (i) whether Pepco should be required to share with customers the excess deferred income taxes (EDIT) and accumulated deferred investment tax credits (ADITC) associated with the sold assets and, if so, whether such sharing would violate the normalization provisions of the Internal Revenue Code and its implementing regulations and (ii) whether Pepco was entitled to deduct certain costs in determining the amount of proceeds to be shared. On May 18, 2010, the DCPSC issued an order addressing all of the remaining issues related to the sharing of the proceeds of Pepco’s divestiture of its generating assets. In the order, the DCPSC ruled that Pepco is not required to share EDIT and ADITC with customers. However, the order also disallowed certain items that Pepco had included in the costs deducted from the proceeds of the sale of the generation assets. The disallowance of these costs, together with interest on the allowed amount, increases the aggregate amount Pepco is required to distribute to customers, pursuant to the sharing formula, by approximately $11 million. On June 17, 2010, Pepco filed an application for reconsideration of the DCPSC’s order, contesting (i) approximately $5 million of the approximate total of $6 million in disallowances and (ii) approximately $4 million of the approximately $5 million in interest to be credited to customers (reflecting a difference in the period of time over which interest was calculated as well as the balance to which interest would be applied). On July 16, 2010, the DCPSC denied Pepco’s application for reconsideration. On September 7, 2010, Pepco filed an appeal of the DCPSC’s decision with the District of Columbia Court of Appeals. PHI recognized expenses of $9 million and $11 million, respectively, for the three and nine months ended September 30, 2010 corresponding to the disallowed items. Pepco intends to continue to pursue its appeal. General Litigation In 1993, Pepco was served with Amended Complaints filed in the state Circuit Courts of Prince George’s County, Baltimore City and Baltimore County, Maryland in separate ongoing, consolidated proceedings known as “In re: Personal Injury Asbestos Case.” Pepco and other corporate entities were brought into these cases on a theory of premises liability. Under this theory, the plaintiffs argued that Pepco was negligent in not providing a safe work environment for employees or its contractors, who allegedly were exposed to asbestos while working on Pepco’s property. Initially, a total of approximately 448 individual plaintiffs added Pepco to their complaints. While the pleadings are not entirely clear, it appears that each plaintiff sought $2 million in compensatory damages and $4 million in punitive damages from each defendant.   Since the initial filings in 1993, additional individual suits have been filed against Pepco, and significant numbers of cases have been dismissed. As a result of two motions to dismiss, numerous hearings and meetings and one motion for summary judgment, Pepco has had approximately 400 of these cases successfully dismissed with prejudice, either voluntarily by the plaintiff or by the court. As of September 30, 2010, there are approximately 180 cases still pending against Pepco in the State Courts of Maryland, of which approximately 90 cases were filed after December 19, 2000, and were tendered to Mirant for defense and indemnification pursuant to the terms of the Asset Purchase and Sale Agreement between Pepco and Mirant under which Pepco sold its generation assets to Mirant in 2000. While the aggregate amount of monetary damages sought in the remaining suits (excluding those tendered to Mirant) is approximately $360 million, PHI and Pepco believe the amounts claimed by the remaining plaintiffs are greatly exaggerated. The amount of total liability, if any, and any related insurance recovery cannot be determined at this time; however, based on information and relevant circumstances known at this time, neither PHI nor Pepco believes these suits will have a material adverse effect on its financial condition, results of operations or cash flows. However, if an unfavorable decision were rendered against Pepco, it could have a material adverse effect on Pepco’s and PHI’s financial condition, results of operations and cash flows. Environmental Litigation Pepco is subject to regulation by various federal, regional, state, and local authorities with respect to the environmental effects of its operations, including air and water quality control, solid and hazardous waste disposal, and limitations on land use. In addition, federal and state statutes authorize governmental agencies to compel responsible parties to clean up certain abandoned or unremediated hazardous waste sites. Pepco may incur costs to clean up currently or formerly owned facilities or sites found to be contaminated, as well as other facilities or sites that may have been contaminated due to past disposal practices. Although penalties assessed for violations of environmental laws and regulations are not recoverable from Pepco’s customers, environmental clean-up costs incurred by Pepco would be included in its cost of service for ratemaking purposes. Peck Iron and Metal Site. The U.S. Environmental Protection Agency (EPA) informed Pepco in a May 20, 2009 letter that Pepco may be a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) with respect to the cleanup of the Peck Iron and Metal site in Portsmouth, Virginia, for costs EPA has incurred in cleaning up the site. EPA’s letter states that Peck Iron and Metal purchased, processed, stored and shipped metal scrap from military bases, governmental agencies and businesses and that Peck’s metal scrap operations resulted in the improper storage and disposal of hazardous substances. EPA bases its allegation that Pepco arranged for disposal or treatment of hazardous substances sent to the site on information provided by Peck Iron and Metal personnel, who informed the EPA that Pepco was a customer at the site. Pepco has advised the EPA by letter that its records show no evidence of any sale of scrap metal by Pepco to the site. Even if EPA has such records and such sales did occur, Pepco believes that any such scrap metal sales are entitled to the recyclable material exemption from CERCLA liability. At this time Pepco cannot predict how EPA will proceed regarding this matter, or what portion, if any, of the Peck Iron and Metal site response costs EPA would seek to recover from Pepco. In a notice published on November 4, 2009, EPA placed the Peck Iron and Metal site on the National Priorities List. Ward Transformer Site. In April 2009, a group of PRPs with respect to the Ward Transformer site in Raleigh, North Carolina, filed a complaint in the U.S. District Court for the Eastern District of North Carolina, alleging cost recovery and/or contribution claims against Pepco with respect to past and future response costs incurred by the PRP group in performing a removal action at the site. With the court’s permission, the plaintiffs filed amended complaints on September 1, 2009. Pepco, as part of a group of defendants, filed a motion to dismiss on October 13, 2009. In a March 24, 2010 order, the court denied the defendants’ motion to dismiss.   Although it is too early in the process to characterize the magnitude of the potential liability at this site, it does not appear that Pepco had extensive business transactions, if any, with the Ward Transformer site. Benning Road Site. On September 21, 2010, PHI received a letter from EPA stating that EPA and the District of Columbia Department of the Environment (DDOE) have identified Pepco’s Benning Road distribution facility as one of six land-based sites potentially contributing to contamination of the Lower Anacostia River. The letter states that the principal contaminants of concern are polychlorinated biphenyls (PCBs) and polycyclic aromatic hydrocarbons, that EPA is monitoring the efforts of DDOE and that EPA intends to use federal authority to address the Benning Road facility if an agreement for a comprehensive study to evaluate (and, if necessary as a result of the study, to clean up the facility) is not in effect by mid-December 2010. In a letter dated October 8, 2010, the Office of the Attorney General of the District of Columbia notified Pepco of the District’s intent to sue Pepco under the Resource Conservation and Recovery Act for abatement of conditions related to Pepco’s historical activities, including the discharge of PCBs at the Benning Road facility. The District’s letter also states that EPA will list the Benning Road facility on the National Priorities List by December 2010 if contamination at the facility is not addressed in a timely manner and that if Pepco fails to meet the District’s December 2010 deadline, the District intends to sue Pepco in federal court to seek a scientific study to identify the nature of conditions at the Benning Road facility, abatement of conditions, compensation for natural resource damages, and reimbursement of DDOE’s related costs. Pepco is in the process of evaluating the potential financial exposure at this site and has scheduled a meeting with DDOE with the intent of reaching an agreement by the mid-December deadline. District of Columbia Tax Legislation On December 24, 2009, the Mayor of the District of Columbia approved legislation adopted by the City Council that imposes mandatory combined unitary business reporting beginning with tax year 2011, and revises the District’s related party expense disallowance beginning with tax year 2009. Because the City Council must still enact further legislation providing guidance on how to implement combined unitary business reporting before this provision is effective, PHI believes that the legislative process was not complete as of September 30, 2010, and, therefore, the effect of the legislation for combined unitary business tax reporting has not been accounted for as of September 30, 2010. The legislation does not define the term “unitary business” and does not specify how combined tax reporting would differ from PHI’s current consolidated tax reporting in the District of Columbia. However, based upon PHI’s interpretation of combined unitary business tax reporting in other taxing jurisdictions, the legislation would likely result in a change in PHI’s overall state income tax rate and, therefore, would likely require an adjustment to PHI’s net deferred income tax liabilities. Further, to the extent that the change in rate increases net deferred income tax liabilities, PHI must determine if these increased tax liabilities are probable of recovery in future rates. No timetable has been established by the City Council to enact the required further legislation and, therefore, uncertainty exists as to when combined unitary reporting will be effective for PHI’s District of Columbia tax returns. Management continues to analyze the impact that the unitary business tax reporting aspect of this legislation, if completed, may have on the financial position, results of operations and cash flows of PHI and its subsidiaries. </div> false false false us-types:textBlockItemType textblock Includes disclosure of commitments and contingencies. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Interpretation (FIN) -Number 14 -Paragraph 3 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 5 -Paragraph 9, 10, 11, 12 false 1 8 false UnKnown UnKnown UnKnown false true