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U.S. Securities and Exchange Commission

SECURITIES AND EXCHANGE COMMISSION

(Release No. 35-27755; 70-10139)

Exelon Corporation

Order Authorizing Acquisition of Interest in Nonutility Business

November 10, 2003

Exelon Corporation ("Exelon"), a registered holding company, Chicago, Illinois, has filed an application ("Application") with the Securities and Exchange Commission ("Commission") under sections 9(a)(1), 10, and 12(f) of the Public Utility Holding Company Act of 1935, as amended ("Act") and rule 54 under the Act. The Commission issued a notice of the Application ("Holding Co. Act Release No. 27699).

Exelon has a number of public-utility company subsidiaries: PECO Energy Company, which transmits, distributes and sells electricity and purchases and sells natural gas in Pennsylvania; Commonwealth Edison Company, which transmits, distributes and sells electricity in Illinois; Exelon Generation Company (also a registered holding company), which generates and sells electricity in Pennsylvania, Illinois, and elsewhere;1 Commonwealth Edison Company of Indiana; PECO Energy Power Company, Susquehanna Power Company; and Susquehanna Electric Company. Through direct and indirect subsidiaries, Exelon is also engaged in various nonutility businesses.

Exelon requests authority to acquire, directly or indirectly through one or more subsidiaries, a membership interest in PowerTree Carbon Company, LLC ("PowerTree Carbon"). Exelon also requests authority to sell all or a portion of its membership interest in PowerTree Carbon at any time to any of its associate companies. Any intra-system sale shall be for an amount equal to Exelon's investment (or, in the case of a sale of a portion of the membership interest, the pro rata share of the investment). No sale to an associate company that requires approval by any other regulatory commission shall take place until such approval has been obtained.

PowerTree Carbon, a Delaware limited liability company, was organized in cooperation with the U.S. Department of Energy ("DOE"). It is designed to facilitate investments by energy companies such as Exelon in forestation projects in the Lower Mississippi River Valley and possibly other sites as a means of reducing greenhouse gases.

PowerTree Carbon is part of an industry-wide effort to address climate change voluntarily through measures designed to reduce greenhouse gas emissions in response to the Bush Administration's recent "Climate VISION" plan, or Climate, Voluntary Innovative Sector Initiatives: Opportunities Now.

PowerTree Carbon has obtained commitments totaling approximately $3.275 million from holding companies, electric utility companies and other energy concerns. The capital contributions by registered holding companies (or their subsidiaries) and their corresponding percentage interests in the company are as follows:


Registered Holding Company

Total Capital Contribution Commitment

Percentage Ownership Interest in PowerTree Carbon

Ameren Corporation

$100,000

3.05%

American Electric Power Company, Inc.

$300,000

9.16%

Cinergy Corp.

$100,000

3.05%

Dominion Resources, Inc.

$100,000

3.05%

Entergy Corporation

$100,000

3.05%

Exelon Corporation

$100,000

3.05%

FirstEnergy Corp.

$100,000

3.05%

Great Plains Energy Incorporated

$50,000

1.53%

PEPCO Holdings, Inc.

$50,000

1.53%

Progress Energy

$100,000

3.05%

Xcel Energy, Inc.

$100,000

3.05%

In the aggregate, the capital contribution commitments of the eleven registered holding companies represent approximately 36.6% of the total commitments by the initial members.2

Capital contributions to PowerTree Carbon will be used to fund six forestation projects located in Louisiana, Mississippi and Arkansas. These reforestation projects are intended to provide multiple environmental benefits, including removing from the atmosphere and storing over two million tons of CO2 over the projects' 100-year lifetimes. Other benefits will include: restoring habitat for birds and animals; reducing fertilizer inputs to waters; and stabilizing soils. Two of the projects will involve purchase and donation of land to the U.S. Fish & Wildlife Service, while other projects will involve obtaining easements for tree planting on private land. The contributions of the members to PowerTree Carbon will be utilized for land acquisition and to pay the cost of planting tree seedlings. It is estimated that these projects will provide carbon benefits of more than 400 and 450 tons of CO2 per acre by years 70 and 100, respectively, at a cost of less than two dollars per ton.

PowerTree Carbon was organized as a for-profit limited liability company ("LLC"), to allow carbon or CO2 reduction credits, if and when they become available, to be more readily transferred. The LLC structure will also allow members to take advantage of tax benefits of land donation. Although formed as a for-profit LLC, PowerTree Carbon is essentially a passive medium for making investments in projects that are not expected to have any operating revenues, and will not engage in any active business operations.

Under the Operating Agreement of PowerTree Carbon ("Operating Agreement"), the business and affairs of the company shall be managed by its board of managers ("Board"). Each member that commits to make a capital contribution of at least $100,000 is entitled to appoint one representative to the Board. In general, actions by the Board may be taken by a majority of the managers present at a meeting. However, certain actions of the Board or of any individual manager or any officer require authorization by a two-thirds vote of the full board. These include, among other actions: the sale, exchange or other disposition of any of the assets of the company greater than $20,000 in value; the commencement of a voluntary bankruptcy proceeding; the declaration or making of any distributions to members; the incurrence of any indebtedness by the company; capital expenditures exceeding $20,000; and the acquisition or lease of any real property and any sale of, donation, lease or sublease affecting real property owned by the company.

New members will be admitted to PowerTree Carbon only upon the unanimous approval of the then existing members. Upon admission of any new member, the percentage interests of existing members shall be reduced accordingly. A member may transfer all or a portion of its membership interest only upon receiving approval of two-thirds of the existing members, except that, without the prior approval of the other members, a member may transfer all or a part of its membership interest to an affiliate of such member or to any other member. A two-thirds vote of the members also will be required to elect officers of PowerTree Carbon. Each member has an equal voting right, regardless of its percentage of ownership interests held.

The Operating Agreement provides that, so long as any member is a registered holding company or subsidiary company thereof, any voting rights received or otherwise obtained by that member equal to or exceeding ten percent of the total outstanding voting rights in PowerTree Carbon shall be automatically (and without any requirement for consent on the part of the affected member) allocated to the other members in equal portions such that no registered holding company member will hold ten percent or more of voting rights in PowerTree Carbon. In addition, any member may elect to limit its voting rights to less than five percent of the total voting rights in PowerTree Carbon, in which case the voting rights of such member or members equal to or exceeding five percent of the total voting rights in PowerTree Carbon will be automatically allocated in equal portions to the other members.

The Operating Agreement further provides that each member (or its designee(s) or transferee(s)) shall be entitled to claim a pro rata share of all carbon that is determined to be sequestered by PowerTree Carbon's efforts to which legal rights, if any, have been obtained ("Carbon Reductions") based on the member's percentage interest in PowerTree Carbon. A member may generally utilize its share of any Carbon Reductions in connection with its participation in any greenhouse gas reporting or regulatory program or transfer or assign such Carbon Reductions to one or more other persons.

Exelon states that it cannot comply with all of the requirements of rule 53(a), but that none of the adverse conditions described in rule 53(b) exist. During the twelve month period that ended June 30, 2003, Exelon's "aggregate investment," as that term is defined in rule 53(a)(1), in exempt wholesale generators ("EWGs") and foreign utility companies ("FUCOs"), as those terms are respectively defined in sections 32 and 33 of the Act, was approximately $2,806 million. Given that Exelon's "consolidated retained earnings," as that term is defined in rule 53(a)(1), during that period, were approximately $2,150 million, the company cannot qualify for the 50% safe harbor established in rule 53(a)(1). Exelon, however, is still below its aggregate investment limit.3

Exelon states that, since the Commission issued the Financing Order, (1) these types of investments have not had a material adverse impact on its capitalization; (2) its consolidated capitalization has improved;4 and (3) its investments in EWGs and FUCOs have been profitable for all annual periods and for the two quarters of 2003.

No state commission and no federal commission, other than this Commission, has jurisdiction over the proposed acquisition of a membership interest in PowerTree Carbon. Exelon estimates that the fees and expenses incurred or to be incurred in connection with its proposal will not exceed $2,000.

Due notice of the Application has been given in the manner prescribed by rule 23, and no hearing has been requested of or ordered by the Commission. Based on the facts in the record, it is found that the applicable standards of the Act are satisfied and that no adverse findings are necessary.

IT IS ORDERED, under the applicable provisions of the Act and rules under the Act, that the Application is granted immediately, subject to the terms and conditions prescribed in rule 24 under the Act.

For the Commission, by the Division of Investment Management, pursuant to delegated authority.


Margaret H. McFarland
Deputy Secretary


Endnotes:


http://www.sec.gov/divisions/investment/opur/filing/35-27755.htm

Modified: 11/21/2003