Form 10-Q
Table of Contents

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2013

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission

File Number

  

Name of Registrant; State of Incorporation;

Address of Principal Executive Offices; and

Telephone Number

   IRS  Employer
Identification

Number
 

1-16169

  

EXELON CORPORATION

     23-2990190   
  

(a Pennsylvania corporation)

10 South Dearborn Street

P.O. Box 805379

Chicago, Illinois 60680-5379

(312) 394-7398

  

333-85496

  

EXELON GENERATION COMPANY, LLC

     23-3064219   
  

(a Pennsylvania limited liability company)

300 Exelon Way

Kennett Square, Pennsylvania 19348-2473

(610) 765-5959

  

1-1839

  

COMMONWEALTH EDISON COMPANY

     36-0938600   
  

(an Illinois corporation)

440 South LaSalle Street

Chicago, Illinois 60605-1028

(312) 394-4321

  

000-16844

  

PECO ENERGY COMPANY

     23-0970240   
  

(a Pennsylvania corporation)

P.O. Box 8699

2301 Market Street

Philadelphia, Pennsylvania 19101-8699

(215) 841-4000

  

1-1910

  

BALTIMORE GAS AND ELECTRIC COMPANY

     52-0280210   
  

(a Maryland corporation)

2 Center Plaza

110 West Fayette Street

Baltimore, Maryland 21201-3708

(410) 234-5000

  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

     Large Accelerated Filer    Accelerated Filer    Non-accelerated Filer    Smaller
Reporting
Company

Exelon Corporation

   x         

Exelon Generation Company, LLC

         x   

Commonwealth Edison Company

         x   

PECO Energy Company

         x   

Baltimore Gas and Electric Company

         x   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes  ¨    No  x

The number of shares outstanding of each registrant’s common stock as of June 30, 2013 was:

 

Exelon Corporation Common Stock, without par value

   856,563,385

Exelon Generation Company, LLC

   not applicable

Commonwealth Edison Company Common Stock, $12.50 par value

   127,016,818

PECO Energy Company Common Stock, without par value

   170,478,507

Baltimore Gas and Electric Company Common Stock, without par value

   1,000

 

 

 

 


Table of Contents

TABLE OF CONTENTS

 

    Page No.  
FILING FORMAT     7   
FORWARD-LOOKING STATEMENTS     7   
WHERE TO FIND MORE INFORMATION     7   
PART I.  

FINANCIAL INFORMATION

    8   
ITEM 1.  

FINANCIAL STATEMENTS

    8   
 

Exelon Corporation

 
 

Consolidated Statements of Operations and Comprehensive Income

    9   
 

Consolidated Statements of Cash Flows

    10   
 

Consolidated Balance Sheets

    11   
 

Consolidated Statement of Changes in Shareholders’ Equity

    13   
 

Exelon Generation Company, LLC

 
 

Consolidated Statements of Operations and Comprehensive Income

    14   
 

Consolidated Statements of Cash Flows

    15   
 

Consolidated Balance Sheets

    16   
 

Consolidated Statement of Changes in Equity

    18   
 

Commonwealth Edison Company

 
 

Consolidated Statements of Operations and Comprehensive Income

    19   
 

Consolidated Statements of Cash Flows

    20   
 

Consolidated Balance Sheets

    21   
 

Consolidated Statement of Changes in Shareholders’ Equity

    23   
 

PECO Energy Company

 
 

Consolidated Statements of Operations and Comprehensive Income

    24   
 

Consolidated Statements of Cash Flows

    25   
 

Consolidated Balance Sheets

    26   
 

Consolidated Statement of Changes in Shareholders’ Equity

    28   
 

Baltimore Gas and Electric Company

 
 

Consolidated Statements of Operations and Comprehensive Income

    29   
 

Consolidated Statements of Cash Flows

    30   
 

Consolidated Balance Sheets

    31   
 

Consolidated Statement of Changes in Shareholders’ Equity

    33   
 

Combined Notes to Consolidated Financial Statements

    34   
 

1. Basis of Presentation

    34   
 

2. New Accounting Pronouncements

    35   
 

3. Variable Interest Entities

    36   
 

4. Merger and Acquisitions

    39   
 

5. Regulatory Matters

    45   
 

6. Investment in Constellation Energy Nuclear Group, LLC

    59   
 

7. Impairment of Long-Lived Assets

    61   
 

8. Goodwill

    63   

 

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Table of Contents
     Page No.  
  

9. Fair Value of Financial Assets and Liabilities

     64   
  

10. Derivative Financial Instruments

     89   
  

11. Debt and Credit Agreements

     105   
  

12. Income Taxes

     109   
  

13. Nuclear Decommissioning

     113   
  

14. Retirement Benefits

     116   
  

15. Stock-Based Compensation Plans

     119   
  

16. Changes in Accumulated Other Comprehensive Income

     123   
  

17. Earnings Per Share and Equity

     125   
  

18. Commitments and Contingencies

     126   
  

19. Supplemental Financial Information

     143   
  

20. Segment Information

     148   
ITEM 2.   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     154   
  

Exelon Corporation

     154   
  

General

     154   
  

Executive Overview

     155   
  

Critical Accounting Policies and Estimates

     173   
  

Results of Operations

     174   
  

Liquidity and Capital Resources

     203   
  

Contractual Obligations and Off-Balance Sheet Arrangements

     212   
ITEM 3.   

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     213   
ITEM 4.   

CONTROLS AND PROCEDURES

     222   
PART II.   

OTHER INFORMATION

     223   
ITEM 1.   

LEGAL PROCEEDINGS

     223   
ITEM 1A.   

RISK FACTORS

     223   
ITEM 4.   

MINE SAFETY DISCLOSURES

     223   
ITEM 6.   

EXHIBITS

     223   
SIGNATURES      225   
  

Exelon Corporation

     225   
  

Exelon Generation Company, LLC

     225   
  

Commonwealth Edison Company

     225   
  

PECO Energy Company

     226   
  

Baltimore Gas and Electric Company

     226   
CERTIFICATION EXHIBITS      227   
  

Exelon Corporation

     227, 237   
  

Exelon Generation Company, LLC

     229, 239   
  

Commonwealth Edison Company

     231, 241   
  

PECO Energy Company

     233, 243   
  

Baltimore Gas and Electric Company

     235, 245   

 

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Table of Contents
GLOSSARY OF TERMS AND ABBREVIATIONS

Exelon Corporation and Related Entities

Exelon

   Exelon Corporation

Generation

   Exelon Generation Company, LLC

ComEd

   Commonwealth Edison Company

PECO

   PECO Energy Company

BGE

   Baltimore Gas and Electric Company

BSC

   Exelon Business Services Company, LLC

Exelon Corporate

   Exelon in its corporate capacity as a holding company

CENG

   Constellation Energy Nuclear Group, LLC

Constellation

   Constellation Energy Group, Inc.

Exelon Transmission Company

   Exelon Transmission Company, LLC

Exelon Wind

   Exelon Wind, LLC and Exelon Generation Acquisition Company, LLC

Ventures

   Exelon Ventures Company, LLC

AmerGen

   AmerGen Energy Company, LLC

BondCo

   RSB BondCo LLC

PEC L.P.

   PECO Energy Capital, L.P.

PECO Trust III

   PECO Capital Trust III

PECO Trust IV

   PECO Energy Capital Trust IV

PETT

   PECO Energy Transition Trust

Registrants

   Exelon, Generation, ComEd, PECO and BGE, collectively

Other Terms and Abbreviations

Note "—" of the Exelon 2012 Form 10-K

   Reference to specific Combined Note to Consolidated Financial Statements within Exelon's 2012 Annual Report on Form 10-K

1998 restructuring settlement

   PECO's 1998 settlement of its restructuring case mandated by the Competition Act

Act 11

   Pennsylvania Act 11 of 2012

Act 129

   Pennsylvania Act 129 of 2008

AEC

   Alternative Energy Credit that is issued for each megawatt hour of generation from a qualified alternative energy source

AEPS

   Pennsylvania Alternative Energy Portfolio Standards

AEPS Act

   Pennsylvania Alternative Energy Portfolio Standards Act of 2004, as amended

AESO

   Alberta Electric Systems Operator

AFUDC

   Allowance for Funds Used During Construction

ALJ

   Administrative Law Judge

AMI

   Advanced Metering Infrastructure

ARC

   Asset Retirement Cost

ARO

   Asset Retirement Obligation

ARP

   Title IV Acid Rain Program

ARRA of 2009

   American Recovery and Reinvestment Act of 2009

Block contracts

   Forward Purchase Energy Block Contracts

CAIR

   Clean Air Interstate Rule

CAISO

   California ISO

CAMR

   Federal Clean Air Mercury Rule

CERCLA

   Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended

CFL

   Compact Fluorescent Light

Clean Air Act

   Clean Air Act of 1963, as amended

Clean Water Act

   Federal Water Pollution Control Amendments of 1972, as amended

Competition Act

   Pennsylvania Electricity Generation Customer Choice and Competition Act of 1996

CPI

   Consumer Price Index

CPUC

   California Public Utilities Commission

 

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Table of Contents
GLOSSARY OF TERMS AND ABBREVIATIONS

Other Terms and Abbreviations

CSAPR

   Cross-State Air Pollution Rule

CTC

   Competitive Transition Charge

DOE

   United States Department of Energy

DOJ

   United States Department of Justice

DSP

   Default Service Provider

DSP Program

   Default Service Provider Program

EDF

   Electricite de France SA

EE&C

   Energy Efficiency and Conservation/Demand Response

EGS

   Electric Generation Supplier

EIMA

   Energy Infrastructure Modernization Act (Illinois Senate Bill 1652 and Illinois House Bill 3036)

EPA

   United States Environmental Protection Agency

ERCOT

   Electric Reliability Council of Texas

ERISA

   Employee Retirement Income Security Act of 1974, as amended

EROA

   Expected Rate of Return on Assets

ESPP

   Employee Stock Purchase Plan

FASB

   Financial Accounting Standards Board

FERC

   Federal Energy Regulatory Commission

FRCC

   Florida Reliability Coordinating Council

FTC

   Federal Trade Commission

GAAP

   Generally Accepted Accounting Principles in the United States

GHG

   Greenhouse Gas

GRT

   Gross Receipts Tax

GSA

   Generation Supply Adjustment

GWh

   Gigawatt hour

HAP

   Hazardous air pollutants

Health Care Reform Acts

   Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act of 2010

IBEW

   International Brotherhood of Electrical Workers

ICC

   Illinois Commerce Commission

ICE

   Intercontinental Exchange

Illinois Act

   Illinois Electric Service Customer Choice and Rate Relief Law of 1997

Illinois EPA

   Illinois Environmental Protection Agency

Illinois Settlement Legislation

   Legislation enacted in 2007 affecting electric utilities in Illinois

IPA

   Illinois Power Agency

IRC

   Internal Revenue Code

IRS

   Internal Revenue Service

ISO

   Independent System Operator

ISO-NE

   ISO New England Inc.

ISO-NY

   ISO New York

kV

   Kilovolt

kW

   Kilowatt

kWh

   Kilowatt-hour

LIBOR

   London Interbank Offered Rate

LILO

   Lease-In, Lease-Out

LLRW

   Low-Level Radioactive Waste

LTIP

   Long-Term Incentive Plan

MATS

   U.S. EPA Mercury and Air Toxics Rule

MBR

   Market Based Rates Incentive

MDE

   Maryland Department of the Environment

MDPSC

   Maryland Public Service Commission

MGP

   Manufactured Gas Plant

MISO

   Midwest Independent Transmission System Operator, Inc.

 

4


Table of Contents
GLOSSARY OF TERMS AND ABBREVIATIONS

Other Terms and Abbreviations

mmcf

   Million Cubic Feet

Moody's

   Moody's Investor Service

MOPR

   Minimum Offer Price Rule

MRV

   Market-Related Value

MW

   Megawatt

MWh

   Megawatt hour

NAAQS

   National Ambient Air Quality Standards

n.m.

   not meaningful

NAV

   Net Asset Value

NDT

   Nuclear Decommissioning Trust

NEIL

   Nuclear Electric Insurance Limited

NERC

   North American Electric Reliability Corporation

NGS

   Natural Gas Supplier

NJDEP

   New Jersey Department of Environmental Protection

Non-Regulatory Agreements Units

   Nuclear generating units or portions thereof whose decommissioning-related activities are not subject to contractual elimination under regulatory accounting

NOV

   Notice of Violation

NPDES

   National Pollutant Discharge Elimination System

NRC

   Nuclear Regulatory Commission

NSPS

   New Source Performance Standards

NWPA

   Nuclear Waste Policy Act of 1982

NYMEX

   New York Mercantile Exchange

OCI

   Other Comprehensive Income

OIESO

   Ontario Independent Electricity System Operator

OPEB

   Other Postretirement Employee Benefits

PA DEP

   Pennsylvania Department of Environmental Protection

PAPUC

   Pennsylvania Public Utility Commission

PGC

   Purchased Gas Cost Clause

PJM

   PJM Interconnection, LLC

POLR

   Provider of Last Resort

POR

   Purchase of Receivables

PPA

   Power Purchase Agreement

Price-Anderson Act

   Price-Anderson Nuclear Industries Indemnity Act of 1957

PRP

   Potentially Responsible Parties

PSEG

   Public Service Enterprise Group Incorporated

PURTA

   Pennsylvania Public Realty Tax Act

PV

   Photovoltaic

RCRA

   Resource Conservation and Recovery Act of 1976, as amended

REC

   Renewable Energy Credit which is issued for each megawatt hour of generation from a qualified renewable energy source

Regulatory Agreement Units

   Nuclear generating units whose decommissioning-related activities are subject to contractual elimination under regulatory accounting

RES

   Retail Electric Suppliers

RFP

   Request for Proposal

Rider

   Reconcilable Surcharge Recovery Mechanism

RGGI

   Regional Greenhouse Gas Initiative

RMC

   Risk Management Committee

RPM

   PJM Reliability Pricing Model

RPS

   Renewable Energy Portfolio Standards

RTEP

   Regional Transmission Expansion Plan

RTO

   Regional Transmission Organization

S&P

   Standard & Poor's Ratings Services

 

5


Table of Contents
GLOSSARY OF TERMS AND ABBREVIATIONS

Other Terms and Abbreviations

SEC

   United States Securities and Exchange Commission

Senate Bill 1

   Maryland Senate Bill 1

SERC

   SERC Reliability Corporation (formerly Southeast Electric Reliability Council)

SERP

   Supplemental Employee Retirement Plan

SFC

   Supplier Forward Contract

SGIG

   Smart Grid Investment Grant

SGIP

   Smart Grid Initiative Program

SILO

   Sale-In, Lease-Out

SMP

   Smart Meter Program

SMPIP

   Smart Meter Procurement and Installation Plan

SNF

   Spent Nuclear Fuel

SOS

   Standard Offer Service

SPP

   Southwest Power Pool

Tax Relief Act of 2010

   Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010

TEG

   Termoelectrica del Golfo

TEP

   Termoelectrica Penoles

Upstream

   Natural gas exploration and production activities

VIE

   Variable Interest Entity

WECC

   Western Electric Coordinating Council

 

6


Table of Contents

FILING FORMAT

This combined Form 10-Q is being filed separately by the Registrants. Information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf. No Registrant makes any representation as to information relating to any other Registrant.

FORWARD-LOOKING STATEMENTS

This Report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by Exelon Corporation, Exelon Generation Company, LLC, Commonwealth Edison Company, PECO Energy Company and Baltimore Gas and Electric Company (Registrants) include those factors discussed herein, as well as the items discussed in (1) Exelon’s 2012 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 19; (2) Exelon’s First Quarter 2013 Quarterly Report on Form 10-Q in (a) Part II, Other Information, ITEM 1A. Risk Factors; (b) Part 1, Financial Information, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements: Note 18; and (3) other factors discussed in filings with the SEC by the Registrants. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Report. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this Report.

WHERE TO FIND MORE INFORMATION

The public may read and copy any reports or other information that the Registrants file with the SEC at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. These documents are also available to the public from commercial document retrieval services, the website maintained by the SEC at www.sec.gov and the Registrants’ websites at www.exeloncorp.com. Information contained on the Registrants’ websites shall not be deemed incorporated into, or to be a part of, this Report.

 

7


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PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

 

 

 

 

 

8


Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(In millions, except per share data)        2013             2012             2013             2012      

Operating revenues

   $ 6,141     $ 5,966     $ 12,223     $ 10,656  

Operating expenses

        

Purchased power and fuel

     2,419       2,606       5,400       4,371  

Operating and maintenance

     1,892       1,841       3,656       3,809  

Depreciation and amortization

     533       494       1,076       876  

Taxes other than income

     271       254       548       448  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     5,115       5,195       10,680       9,504  
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity in loss of unconsolidated affiliates

     (21     (57     (30     (79

Operating income

     1,005       714       1,513       1,073  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense

     (246     (250     (863     (439

Interest expense to affiliates, net

     (6     (6     (13     (12

Other, net

     (17     (43     155       152  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (269     (299     (721     (299
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     736       415       792       774  

Income taxes

     239       126       294       284  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     497       289       498       490  

Net income attributable to noncontrolling interests, preferred security dividends and redemption and preference stock dividends

     7       3       12       4  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders

     490       286       486       486  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss), net of income taxes

        

Net income

     497       289       498       490  

Other comprehensive income (loss), net of income taxes

        

Pension and non-pension postretirement benefit plans:

        

Prior service benefit reclassified to periodic benefit cost

            1       1       1  

Actuarial loss reclassified to periodic cost

     50       41       100       82  

Transition obligation reclassified to periodic cost

                          2  

Pension and non-pension postretirement benefit plans valuation adjustment

     2       (3     77       (11

Deferred compensation unit valuation adjustment

     10              10         

Change in unrealized (loss) gain on cash flow hedges

     (65     (156     (123     59  

Change in unrealized income on equity investments

     8       6       36       6  

Change in unrealized loss on foreign currency translation

     (5     (2     (6     (2

Change in unrealized loss on marketable securities

            (1     (1       
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

            (114     94       137  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 497     $ 175     $ 592     $ 627  
  

 

 

   

 

 

   

 

 

   

 

 

 

Average shares of common stock outstanding:

        

Basic

     856       853       856       779  

Diluted

     860       856       859       781  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per average common share:

        

Basic

   $ 0.57     $ 0.34     $ 0.57     $ 0.62  

Diluted

   $ 0.57     $ 0.33     $ 0.57     $ 0.62  
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends per common share

   $ 0.31     $ 0.53     $ 0.84     $ 1.05  
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Six Months Ended
June 30,
 
(In millions)    2013     2012  

Cash flows from operating activities

    

Net income

   $ 498     $ 490  

Adjustments to reconcile net income to net cash flows provided by operating activities:

    

Depreciation, amortization, depletion and accretion, including nuclear fuel and energy contract amortization

     1,972       1,895  

Deferred income taxes and amortization of investment tax credits

     (468     227  

Net fair value changes related to derivatives

     (28     (323

Net realized and unrealized gains on nuclear decommissioning trust fund investments

     (27     (70

Other non-cash operating activities

     576       959  

Changes in assets and liabilities:

    

Accounts receivable

     131       414  

Inventories

     (18     45  

Accounts payable, accrued expenses and other current liabilities

     (583     (1,063

Option premiums paid, net

     (10     (108

Counterparty collateral (posted) received, net

     (259     451  

Income taxes

     705       259  

Pension and non-pension postretirement benefit contributions

     (284     (90

Other assets and liabilities

     133       (373
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     2,338       2,713  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (2,518     (2,800

Proceeds from nuclear decommissioning trust fund sales

     1,448       5,371  

Investment in nuclear decommissioning trust funds

     (1,565     (5,483

Cash and restricted cash acquired from Constellation

            964  

Proceeds from sales of investments

     4       12  

Purchases of investments

     (3     (5

Change in restricted cash

     22       (15

Other investing activities

     63       (12
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (2,549     (1,968
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in short-term debt

     662       179  

Issuance of long-term debt

     509       850  

Retirement of long-term debt

     (616     (649

Redemption of preferred securities

     (93       

Dividends paid on common stock

     (716     (773

Dividends paid to former Constellation shareholders

            (51

Proceeds from employee stock plans

     32       42  

Other financing activities

     (62     (10
  

 

 

   

 

 

 

Net cash flows used in financing activities

     (284     (412
  

 

 

   

 

 

 

(Decrease) increase in cash and cash equivalents

     (495     333  

Cash and cash equivalents at beginning of period

     1,486       1,016  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 991     $ 1,349  
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

 

(In millions)    June 30,
2013
     December 31,
2012
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 956      $ 1,411  

Cash and cash equivalents of variable interest entities

     35        75  

Restricted cash and investments

     61        86  

Restricted cash and investments of variable interest entities

     53        47  

Accounts receivable, net

     

Customer ($286 and $289 gross accounts receivable pledged as collateral as of June 30, 2013 and December 31, 2012, respectively)

     2,609        2,795  

Other

     1,224        1,141  

Accounts receivable, net, variable interest entities

     252        292  

Mark-to-market derivative assets

     845        938  

Unamortized energy contract assets

     573        886  

Inventories, net

     

Fossil fuel

     214        246  

Materials and supplies

     805        768  

Deferred income taxes

     288        131  

Regulatory assets

     804        764  

Other

     690        560  
  

 

 

    

 

 

 

Total current assets

     9,409        10,140  
  

 

 

    

 

 

 

Property, plant and equipment, net

     45,994        45,186  

Deferred debits and other assets

     

Regulatory assets

     6,519        6,497  

Nuclear decommissioning trust funds

     7,463        7,248  

Investments

     1,171        1,184  

Investments in affiliates

     22        22  

Investment in CENG

     1,876        1,849  

Goodwill

     2,625        2,625  

Mark-to-market derivative assets

     772        937  

Unamortized energy contracts assets

     856        1,073  

Pledged assets for Zion Station decommissioning

     538        614  

Other

     1,175        1,186  
  

 

 

    

 

 

 

Total deferred debits and other assets

     23,017        23,235  
  

 

 

    

 

 

 

Total assets

   $ 78,420      $ 78,561  
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

11


Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

 

(In millions)    June 30,
2013
    December 31,
2012
 
     (Unaudited)        
LIABILITIES AND SHAREHOLDERS' EQUITY     

Current liabilities

    

Short-term borrowings

   $ 662     $   

Short-term notes payable — accounts receivable agreement

     210       210  

Long-term debt due within one year

     1,944       975  

Long-term debt due within one year of variable interest entities

     87       72  

Accounts payable

     2,210       2,446  

Accounts payable of variable interest entities

     147       202  

Accrued expenses

     1,382       1,800  

Deferred income taxes

     45       58  

Regulatory liabilities

     357       368  

Mark-to-market derivative liabilities

     147       352  

Unamortized energy contract liabilities

     360       455  

Other

     823       853  
  

 

 

   

 

 

 

Total current liabilities

     8,374       7,791  
  

 

 

   

 

 

 

Long-term debt

     16,121       17,190  

Long-term debt to financing trusts

     648       648  

Long-term debt of variable interest entities

     449       508  

Deferred credits and other liabilities

    

Deferred income taxes and unamortized investment tax credits

     11,519       11,551  

Asset retirement obligations

     5,202       5,074  

Pension obligations

     3,164       3,428  

Non-pension postretirement benefit obligations

     2,706       2,662  

Spent nuclear fuel obligation

     1,020       1,020  

Regulatory liabilities

     4,044       3,981  

Mark-to-market derivative liabilities

     178       281  

Unamortized energy contract liabilities

     399       528  

Payable for Zion Station decommissioning

     373       432  

Other

     2,635       1,650  
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     31,240       30,607  
  

 

 

   

 

 

 

Total liabilities

     56,832       56,744  
  

 

 

   

 

 

 

Commitments and contingencies

    

Preferred securities of subsidiary

            87  

Shareholders' equity

    

Common stock (No par value, 2,000 shares authorized, 857 shares and 855 shares outstanding at June 30, 2013 and December 31, 2012, respectively)

     16,693       16,632  

Treasury stock, at cost (35 shares at June 30, 2013 and December 31, 2012, respectively)

     (2,327     (2,327

Retained earnings

     9,660       9,893  

Accumulated other comprehensive loss, net

     (2,673     (2,767
  

 

 

   

 

 

 

Total shareholders' equity

     21,353       21,431  

BGE preference stock not subject to mandatory redemption

     193       193  

Noncontrolling interest

     42       106  
  

 

 

   

 

 

 

Total equity

     21,588       21,730  
  

 

 

   

 

 

 

Total liabilities and shareholders' equity

   $ 78,420     $ 78,561  
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

12


Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(In millions, shares

in thousands)

  Issued
Shares
    Common
Stock
    Treasury
Stock
    Retained
Earnings
    Accumulated
Other
Comprehensive
Loss, net
    Non-controlling
Interest
    Preferred and
Preference
Stock
    Total
Equity
 

Balance, December 31, 2012

    889,525     $ 16,632     $ (2,327   $ 9,893     $ (2,767   $ 106     $ 193     $ 21,730  

Net income (loss)

                         486              (1     13       498  

Long-term incentive plan activity

    1,782       61                                          61  

Common stock dividends

                         (719                          (719

Consolidated VIE dividend to non-controlling interest

                                       (63            (63

Redemption of preferred securities

                                              (6     (6

Preferred and preference stock dividends

                                              (7     (7

Other comprehensive income net of income taxes of $(67)

                                94                     94  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2013

    891,307     $ 16,693     $ (2,327   $ 9,660     $ (2,673   $ 42     $ 193     $ 21,588  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

13


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(In millions)        2013             2012             2013             2012      

Operating revenues

        

Operating revenues

   $ 3,718     $ 3,345     $ 6,859     $ 5,718  

Operating revenues from affiliates

     352       420       744       790  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     4,070       3,765       7,603       6,508  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power and fuel

     1,946       1,852       4,114       2,896  

Operating and maintenance

     1,041       990       2,007       2,029  

Operating and maintenance from affiliates

     148       188       295       327  

Depreciation and amortization

     210       204       424       357  

Taxes other than income

     101       90       194       164  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     3,446       3,324       7,034       5,773  
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity in loss of unconsolidated affiliates

     (21     (57     (30     (79

Operating income

     603       384       539       656  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense

     (93     (85     (176     (138

Other, net

     (33     (76     95       103  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (126     (161     (81     (35
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     477       223       458       621  

Income taxes

     149       58       148       289  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     328       165       310       332  

Net loss attributable to noncontrolling interests

     (2     (1     (1     (2
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to membership interest

     330       166       311       334  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss), net of income taxes

        

Net income

     328       165       310       332  

Other comprehensive (loss) income, net of income taxes

        

Change in unrealized loss on cash flow hedges

     (137     (266     (267     (14

Change in unrealized income on equity investments

     8       6       36       6  

Change in unrealized loss on foreign currency translation

     (5     (2     (6     (2

Change in unrealized loss on marketable securities

            (1     (1     (1
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive loss

     (134     (263     (238     (11
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 194     $ (98   $ 72     $ 321  
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

14


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Six Months Ended
June 30,
 
(In millions)        2013             2012      

Cash flows from operating activities

    

Net income

   $ 310     $ 332  

Adjustments to reconcile net income to net cash flows provided by operating activities:

    

Depreciation, amortization, depletion and accretion, including nuclear fuel and energy contract amortization

     1,358       1,423  

Deferred income taxes and amortization of investment tax credits

     (44     168  

Net fair value changes related to derivatives

     (21     (307

Net realized and unrealized gains on nuclear decommissioning trust fund investments

     (27     (70

Other non-cash operating activities

     315       318  

Changes in assets and liabilities:

    

Accounts receivable

     88       306  

Receivables from and payables to affiliates, net

     (29     (42

Inventories

     (38     30  

Accounts payable, accrued expenses and other current liabilities

     (426     (732

Option premiums paid, net

     (10     (108

Counterparty collateral (paid) received, net

     (303     443  

Income taxes

     265       314  

Pension and non-pension postretirement benefit contributions

     (120     (35

Other assets and liabilities

     (168     (174
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     1,150       1,866  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (1,277     (1,820

Proceeds from nuclear decommissioning trust fund sales

     1,448       5,371  

Investment in nuclear decommissioning trust funds

     (1,565     (5,483

Change in restricted cash

     (11     6  

Cash acquired from Constellation

            708  

Other investing activities

     27       (66
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (1,378     (1,284
  

 

 

   

 

 

 

Cash flows from financing activities

    

Issuance of long-term debt

     209       850  

Retirement of long-term debt

     (458     (56

Change in short-term debt

     288       (42

Changes in Exelon intercompany money pool borrowings

     263         

Distribution to member

     (474     (891

Other financing activities

     (49     (9
  

 

 

   

 

 

 

Net cash flows used in financing activities

     (221     (148
  

 

 

   

 

 

 

(Decrease) increase in cash and cash equivalents

     (449     434  

Cash and cash equivalents at beginning of period

     671       496  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 222     $ 930  
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

15


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

 

(In millions)    June 30,
2013
     December 31,
2012
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 187      $ 596  

Cash and cash equivalents of variable interest entities

     35        75  

Restricted cash and cash equivalents of variable interest entities

     27        16  

Accounts receivable, net

     

Customer

     1,464        1,482  

Other

     347        472  

Accounts receivable, net, variable interest entities

     242        292  

Mark-to-market derivative assets

     845        938  

Mark-to-market derivative assets with affiliates

             226  

Receivables from affiliates

     123        141  

Unamortized energy contract assets

     573        886  

Inventories, net

     

Fossil fuel

     133        130  

Materials and supplies

     648        626  

Deferred income taxes

     195          

Other

     488        331  
  

 

 

    

 

 

 

Total current assets

     5,307        6,211  
  

 

 

    

 

 

 

Property, plant and equipment, net

     19,678        19,531  

Deferred debits and other assets

     

Nuclear decommissioning trust funds

     7,463        7,248  

Investments

     409        420  

Investment in CENG

     1,876        1,849  

Mark-to-market derivative assets

     740        924  

Prepaid pension asset

     1,982        1,975  

Pledged assets for Zion Station decommissioning

     538        614  

Unamortized energy contract assets

     856        1,073  

Other

     829        836  
  

 

 

    

 

 

 

Total deferred debits and other assets

     14,693        14,939  
  

 

 

    

 

 

 

Total assets

   $ 39,678      $ 40,681  
  

 

 

    

 

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

16


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

 

(In millions)    June 30,
2013
     December 31,
2012
 
     (Unaudited)         
LIABILITIES AND EQUITY      

Current liabilities

     

Short-term borrowings

   $ 288      $   

Long-term debt due within one year

     500        24  

Long-term debt due within one year of variable interest entities

     8        4  

Accounts payable

     1,134        1,346  

Accounts payable of variable interest entities

     147        202  

Accrued expenses

     812        1,116  

Payables to affiliates

     148        193  

Borrowings from Exelon intercompany money pool

     263          

Deferred income taxes

     35        128  

Mark-to-market derivative liabilities

     131        334  

Unamortized energy contract liabilities

     315        378  

Other

     321        372  
  

 

 

    

 

 

 

Total current liabilities

     4,102        4,097  
  

 

 

    

 

 

 

Long-term debt

     4,975        5,245  

Long-term debt to affiliate

     1,534        2,007  

Long-term debt of variable interest entities

     196        203  

Deferred credits and other liabilities

     

Deferred income taxes and unamortized investment tax credits

     5,647        5,398  

Asset retirement obligations

     5,065        4,938  

Non-pension postretirement benefit obligations

     814        755  

Spent nuclear fuel obligation

     1,020        1,020  

Payables to affiliates

     2,433        2,397  

Mark-to-market derivative liabilities

     109        232  

Unamortized energy contract liabilities

     393        516  

Payable for Zion Station decommissioning

     373        432  

Other

     820        776  
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     16,674        16,464  
  

 

 

    

 

 

 

Total liabilities

     27,481        28,016  
  

 

 

    

 

 

 

Commitments and contingencies

     

Equity

     

Member's equity

     

Membership interest

     8,873        8,876  

Undistributed earnings

     3,005        3,168  

Accumulated other comprehensive income, net

     275        513  
  

 

 

    

 

 

 

Total member’s equity

     12,153        12,557  

Noncontrolling interest

     44        108  
  

 

 

    

 

 

 

Total equity

     12,197        12,665  
  

 

 

    

 

 

 

Total liabilities and equity

   $ 39,678      $ 40,681  
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

17


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)

 

     Member's Equity              
(In millions)    Membership
Interest
    Undistributed
Earnings
    Accumulated
Other
Comprehensive
Income, net
    Noncontrolling
Interest
    Total
Equity
 

Balance, December 31, 2012

   $ 8,876     $ 3,168     $ 513     $ 108     $ 12,665  

Net income (loss)

            311              (1     310  

Noncontrolling interest acquired

     (3                          (3

Distribution to member

            (474                   (474

Consolidated VIE dividend to non-controlling interest

                          (63     (63

Other comprehensive loss, net of income taxes of $152

                   (238            (238
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2013

   $ 8,873     $ 3,005     $ 275     $ 44     $ 12,197  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

18


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(In millions)        2013             2012             2013             2012      

Operating revenues

        

Operating revenues

   $ 1,080     $ 1,280     $ 2,238     $ 2,669  

Operating revenues from affiliates

            1       1       1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     1,080       1,281       2,239       2,670  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power

     127       384       364       757  

Purchased power from affiliate

     121       203       266       451  

Operating and maintenance

     319       293       611       569  

Operating and maintenance from affiliate

     40       38       76       81  

Depreciation and amortization

     170       152       337       300  

Taxes other than income

     71       69       145       144  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     848       1,139       1,799       2,302  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     232       142       440       368  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense

     (72     (71     (422     (150

Interest expense to affiliates, net

     (4     (3     (7     (6

Other, net

     6       3       11       7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (70     (71     (418     (149
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     162       71       22       219  

Income taxes

     66       29       8       90  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     96       42       14       129  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income, net of income taxes

        

Change in unrealized gain on marketable securities

                          1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

                          1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 96     $ 42     $ 14     $ 130  
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

19


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Six Months Ended
June 30,
 
(In millions)        2013             2012      

Cash flows from operating activities

    

Net income

   $ 14     $ 129  

Adjustments to reconcile net income to net cash flows provided by operating activities:

    

Depreciation, amortization and accretion

     337       300  

Deferred income taxes and amortization of investment tax credits

     (226     116  

Other non-cash operating activities

     39       241  

Changes in assets and liabilities:

    

Accounts receivable

     18       (26

Receivables from and payables to affiliates, net

     (26     (18

Inventories

     (11     (7

Accounts payable, accrued expenses and other current liabilities

     20       (54

Counterparty collateral received, net

     45       8  

Income taxes

     240       149  

Pension and non-pension postretirement benefit contributions

     (119     (12

Other assets and liabilities

     172       (104
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     503       722  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (711     (585

Proceeds from sales of investments

     4       12  

Purchases of investments

     (3     (5

Change in restricted cash

     (3       

Other investing activities

     20       11  
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (693     (567
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in short-term debt

     374       178  

Retirement of long-term debt

     (125     (450

Dividends paid on common stock

     (110     (85

Other financing activities

            (3
  

 

 

   

 

 

 

Net cash flows provided by (used in) financing activities

     139       (360
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (51     (205

Cash and cash equivalents at beginning of period

     144       234  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 93     $ 29  
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

20


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

 

(In millions)    June 30,
2013
     December 31,
2012
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 93      $ 144  

Restricted cash

     3          

Accounts receivable, net

     

Customer

     455        539  

Other

     518        452  

Inventories, net

     102        91  

Deferred income taxes

     32        83  

Counterparty collateral deposited

     8        53  

Regulatory assets

     274        388  

Other

     26        25  
  

 

 

    

 

 

 

Total current assets

     1,511        1,775  
  

 

 

    

 

 

 

Property, plant and equipment, net

     14,233        13,826  

Deferred debits and other assets

     

Regulatory assets

     732        666  

Investments

     6        8  

Investments in affiliates

     6        6  

Goodwill

     2,625        2,625  

Receivables from affiliates

     2,244        2,039  

Prepaid pension asset

     1,680        1,661  

Other

     312        299  
  

 

 

    

 

 

 

Total deferred debits and other assets

     7,605        7,304  
  

 

 

    

 

 

 

Total assets

   $ 23,349      $ 22,905  
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

21


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

 

(In millions)    June 30,
2013
     December 31,
2012
 
     (Unaudited)         
LIABILITIES AND SHAREHOLDERS’ EQUITY      

Current liabilities

     

Short-term borrowings

   $ 374      $   

Long-term debt due within one year

     744        252  

Accounts payable

     432        379  

Accrued expenses

     253        295  

Payables to affiliates

     70        97  

Customer deposits

     135        136  

Regulatory liabilities

     151        170  

Mark-to-market derivative liability

     16        18  

Mark-to-market derivative liability with affiliate

             226  

Other

     81        82  
  

 

 

    

 

 

 

Total current liabilities

     2,256        1,655  
  

 

 

    

 

 

 

Long-term debt

     4,707        5,315  

Long-term debt to financing trust

     206        206  

Deferred credits and other liabilities

     

Deferred income taxes and unamortized investment tax credits

     3,997        4,272  

Asset retirement obligations

     100        99  

Non-pension postretirement benefits obligations

     327        273  

Regulatory liabilities

     3,276        3,229  

Mark-to-market derivative liability

     69        49  

Other

     1,010        484  
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     8,779        8,406  
  

 

 

    

 

 

 

Total liabilities

     15,948        15,582  
  

 

 

    

 

 

 

Commitments and contingencies

     

Shareholders' equity

     

Common stock

     1,588        1,588  

Other paid-in capital

     5,188        5,014  

Retained earnings

     625        721  
  

 

 

    

 

 

 

Total shareholders' equity

     7,401        7,323  
  

 

 

    

 

 

 

Total liabilities and shareholders' equity

   $ 23,349      $ 22,905  
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

22


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(In millions)   Common
Stock
    Other
Paid-In
Capital
    Retained Deficit
Unappropriated
    Retained
Earnings
Appropriated
    Accumulated
Other
Comprehensive
Income, net
    Total
Shareholders’
Equity
 

Balance, December 31, 2012

  $ 1,588     $ 5,014     $ (1,639   $ 2,360     $      $ 7,323  

Net income

                  14                     14  

Appropriation of retained earnings for future dividends

                  (14     14                

Common stock dividends

                         (110            (110

Parent tax matter indemnification

           174                            174  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2013

  $ 1,588     $ 5,188     $ (1,639   $ 2,264     $      $ 7,401  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

23


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(In millions)    2013     2012     2013     2012  

Operating revenues

        

Operating revenues

   $ 672     $ 714     $ 1,567     $ 1,588  

Operating revenues from affiliates

            1              2  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     672       715       1,567       1,590  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power and fuel

     161       171       426       472  

Purchased power from affiliate

     97       125       238       235  

Operating and maintenance

     155       146       319       318  

Operating and maintenance from affiliates

     26       26       50       57  

Depreciation and amortization

     56       54       113       107  

Taxes other than income

     39       42       80       74  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     534       564       1,226       1,263  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     138       151       341       327  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense

     (25     (28     (51     (56

Interest expense to affiliates, net

     (3     (3     (6     (6

Other, net

            2       3       5  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (28     (29     (54     (57
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     110       122       287       270  

Income taxes

     32       42       87       93  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     78       80       200       177  

Preferred security dividends and redemption

     6       1       7       2  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholder

     72       79       193       175  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income, net of income taxes

        

Net income

     78       80       200       177  

Other comprehensive income, net of income taxes

        

Change in unrealized gains on marketable securities

                          1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

                          1  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 78     $ 80     $ 200     $ 178  
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

24


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Six Months Ended
June 30,
 
(In millions)        2013             2012      

Cash flows from operating activities

    

Net income

   $ 200     $ 177  

Adjustments to reconcile net income to net cash flows provided by operating activities:

    

Depreciation, amortization and accretion

     113       107  

Deferred income taxes and amortization of investment tax credits

     25       19  

Other non-cash operating activities

     50       66  

Changes in assets and liabilities:

    

Accounts receivable

     55       62  

Receivables from and payables to affiliates, net

     (18     9  

Inventories

     27       26  

Accounts payable, accrued expenses and other current liabilities

     35       (83

Income taxes

     39       121  

Pension and non-pension postretirement benefit contributions

     (10     (8

Other assets and liabilities

     (49     (87
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     467       409  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (254     (179

Changes in intercompany money pool

     (263     18  

Change in restricted cash

     (1     (3

Other investing activities

     4       7  
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (514     (157
  

 

 

   

 

 

 

Cash flows from financing activities

    

Dividends paid on common stock

     (166     (172

Dividends paid on preferred securities

     (1     (2

Redemption of preferred securities

     (93       

Other financing activities

     1         
  

 

 

   

 

 

 

Net cash flows used in financing activities

     (259     (174
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (306     78  

Cash and cash equivalents at beginning of period

     362       194  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 56     $ 272  
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

25


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

 

(In millions)    June 30,
2013
     December 31,
2012
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 56      $ 362  

Restricted cash and cash equivalents

     1          

Accounts receivable, net ($286 and $289 gross accounts receivable pledged as collateral as of June 30, 2013 and December 31, 2012, respectively)

     

Customer

     286        364  

Other

     141        161  

Inventories, net

     

Fossil fuel

     36        65  

Materials and supplies

     20        19  

Deferred income taxes

     42        40  

Receivable from Exelon intercompany money pool

     263          

Prepaid utility taxes

     71        21  

Regulatory assets

     35        32  

Other

     43        30  
  

 

 

    

 

 

 

Total current assets

     994        1,094  
  

 

 

    

 

 

 

Property, plant and equipment, net

     6,207        6,078  

Deferred debits and other assets

     

Regulatory assets

     1,400        1,378  

Investments

     23        22  

Investments in affiliates

     8        8  

Receivable from affiliates

     366        360  

Prepaid pension asset

     373        373  

Other

     36        40  
  

 

 

    

 

 

 

Total deferred debits and other assets

     2,206        2,181  
  

 

 

    

 

 

 

Total assets

   $ 9,407      $ 9,353  
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

26


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

 

(In millions)    June 30,
2013
     December 31,
2012
 
     (Unaudited)         
LIABILITIES AND SHAREHOLDERS’ EQUITY      

Current liabilities

     

Short-term notes payable — accounts receivable agreement

   $ 210      $ 210  

Long-term debt due within one year

     300        300  

Accounts payable

     264        244  

Accrued expenses

     107        82  

Payables to affiliates

     60        76  

Customer deposits

     48        51  

Regulatory liabilities

     166        169  

Other

     34        26  
  

 

 

    

 

 

 

Total current liabilities

     1,189        1,158  
  

 

 

    

 

 

 

Long-term debt

     1,648        1,647  

Long-term debt to financing trusts

     184        184  

Deferred credits and other liabilities

     

Deferred income taxes and unamortized investment tax credits

     2,397        2,331  

Asset retirement obligations

     30        29  

Non-pension postretirement benefits obligations

     295        284  

Regulatory liabilities

     547        538  

Other

     108        113  
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     3,377        3,295  
  

 

 

    

 

 

 

Total liabilities

     6,398        6,284  
  

 

 

    

 

 

 

Commitments and contingencies

     

Preferred securities

             87  

Shareholder's equity

     

Common stock

     2,388        2,388  

Retained earnings

     620        593  

Accumulated other comprehensive income, net

     1        1  
  

 

 

    

 

 

 

Total shareholder’s equity

     3,009        2,982  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 9,407      $ 9,353  
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

27


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(In millions)    Common
Stock
     Retained
Earnings
    Accumulated
Other
Comprehensive
Income, net
     Total
Shareholders’
Equity
 

Balance, December 31, 2012

   $ 2,388      $ 593     $ 1      $ 2,982  

Net income

             200               200  

Common stock dividends

             (166             (166

Preferred security dividends

             (1             (1

Redemption of preferred securities

             (6             (6
  

 

 

    

 

 

   

 

 

    

 

 

 

Balance, June 30, 2013

   $ 2,388      $ 620     $ 1      $ 3,009  
  

 

 

    

 

 

   

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

28


Table of Contents

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(In millions)        2013             2012             2013             2012      

Operating revenues

        

Operating revenues

   $ 649     $ 614     $ 1,525     $ 1,307  

Operating revenues from affiliates

     4       2       8       5  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     653       616       1,533       1,312  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power and fuel

     189       201       501       494  

Purchased power from affiliate

     99       84       212       176  

Operating and maintenance

     139       136       266       297  

Operating and maintenance from affiliates

     21       25       37       59  

Depreciation and amortization

     82       71       175       150  

Taxes other than income

     54       47       109       95  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     584       564       1,300       1,271  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     69       52       233       41  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense

     (32     (34     (66     (75

Other, net

     4       7       9       13  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (28     (27     (57     (62
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     41       25       176       (21

Income taxes

     16       9       70       (7
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     25       16       106       (14

Preference stock dividends

     3       3       6       6  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to common shareholder

   $ 22     $ 13     $ 100     $ (20
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   $ 25     $ 16     $ 106     $ (14
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

29


Table of Contents

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Six Months Ended
June 30,
 
(In millions)        2013             2012      

Cash flows from operating activities

    

Net (loss) income

   $ 106     $ (14

Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:

    

Depreciation, amortization and accretion

     175       150  

Deferred income taxes and amortization of investment tax credits

     98       91  

Other non-cash operating activities

     61       100  

Changes in assets and liabilities:

    

Accounts receivable

     (58     76  

Receivables from and payables to affiliates, net

     (11     (3

Inventories

     4       37  

Accounts payable, accrued expenses and other current liabilities

     (28     (71

Income taxes

     (33     (48

Pension and non-pension postretirement benefit contributions

     (11     (8

Other assets and liabilities

     63       43  
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     366       353  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (264     (266

Change in restricted cash

     3       8  

Other investing activities

     4       (10
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (257     (268
  

 

 

   

 

 

 

Cash flows from financing activities

    

Issuance of long-term debt

     300         

Repayment of long-term debt

     (33     (141

Dividends paid on preference stock

     (6     (6

Contributions from parent

            66  

Other financing activities

     (2       
  

 

 

   

 

 

 

Net cash flows provided by (used in) financing activities

     259       (81
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     368       4  

Cash and cash equivalents at beginning of period

     89       49  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 457     $ 53  
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

30


Table of Contents

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

 

(In millions)    June 30,
2013
     December 31,
2012
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 457      $ 89  

Restricted cash and cash equivalents of variable interest entity

     27        30  

Accounts receivable, net

     

Customer

     415        409  

Other

     145        111  

Income taxes receivable

     30        3  

Inventories, net

     

Gas held in storage

     44        51  

Materials and supplies

     34        31  

Deferred income taxes

     13        1  

Prepaid utility taxes

     1        57  

Regulatory assets

     142        190  

Other

     6        8  
  

 

 

    

 

 

 

Total current assets

     1,314        980  
  

 

 

    

 

 

 

Property, plant and equipment, net

     5,637        5,498  

Deferred debits and other assets

     

Regulatory assets

     536        522  

Investments

     5        5  

Investments in affiliates

     8        8  

Prepaid pension asset

     445        467  

Other

     23        26  
  

 

 

    

 

 

 

Total deferred debits and other assets

     1,017        1,028  
  

 

 

    

 

 

 

Total assets

   $ 7,968      $ 7,506  
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

31


Table of Contents

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

 

(In millions)    June 30,
2013
     December 31,
2012
 
     (Unaudited)         
LIABILITIES AND SHAREHOLDERS’ EQUITY      

Current liabilities

     

Long-term debt due within one year

   $ 400      $ 400  

Long-term debt of variable interest entity due within one year

     68        67  

Accounts payable

     138        195  

Accrued expenses

     105        106  

Deferred income taxes

     9          

Payables to affiliates

     59        65  

Customer deposits

     69        71  

Regulatory liabilities

     40        29  

Other

     60        47  
  

 

 

    

 

 

 

Total current liabilities

     948        980  
  

 

 

    

 

 

 

Long-term debt

     1,746        1,446  

Long-term debt to financing trust

     258        258  

Long-term debt of variable interest entity

     230        265  

Deferred credits and other liabilities

     

Deferred income taxes and unamortized investment tax credits

     1,761        1,658  

Asset retirement obligations

     7        8  

Non-pension postretirement benefits obligations

     223        229  

Regulatory liabilities

     221        214  

Other

     116        90  
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     2,328        2,199  
  

 

 

    

 

 

 

Total liabilities

     5,510        5,148  
  

 

 

    

 

 

 

Commitments and contingencies

     

Shareholders’ equity

     

Common stock

     1,360        1,360  

Retained earnings

     908        808  
  

 

 

    

 

 

 

Total shareholder’s equity

     2,268        2,168  
  

 

 

    

 

 

 

Preference stock not subject to mandatory redemption

     190        190  
  

 

 

    

 

 

 

Total equity

     2,458        2,358  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 7,968      $ 7,506  
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(In millions)    Common
Stock
     Retained
Earnings
    Total
Shareholders’
Equity
    Preference stock
not subject to
mandatory
redemption
     Total
Equity
 

Balance, December 31, 2012

   $ 1,360      $ 808     $ 2,168     $ 190      $ 2,358  

Net income

             106       106              106  

Preference stock dividends

             (6     (6             (6
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Balance, June 30, 2013

   $ 1,360      $ 908     $ 2,268     $ 190      $ 2,458  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data, unless otherwise noted)

1.    Basis of Presentation (Exelon, Generation, ComEd, PECO and BGE)

Exelon is a utility services holding company engaged through its principal subsidiaries in the energy generation and energy distribution businesses. Prior to March 12, 2012, Exelon’s principal, wholly owned subsidiaries included ComEd, PECO and Generation. On March 12, 2012, Constellation merged into Exelon with Exelon continuing as the surviving corporation pursuant to the transactions contemplated by the Agreement and Plan of Merger (the “Merger Agreement”). As a result of the merger transaction, Generation now includes the former Constellation generation and customer supply operations. BGE, formerly Constellation’s regulated utility subsidiary, is now a subsidiary of Exelon. Refer to Note 4 — Merger and Acquisitions for further information regarding the merger transaction.

The energy generation business includes:

 

   

Generation:    Physical delivery and marketing of owned and contracted electric generation capacity and provision of renewable and other energy-related products and services, and natural gas exploration and production activities. Generation has six reportable segments consisting of the Mid-Atlantic, Midwest, New England, New York, ERCOT and Other regions.

The energy delivery businesses include:

 

   

ComEd:    Purchase and regulated retail sale of electricity and the provision of distribution and transmission services in northern Illinois, including the City of Chicago.

 

   

PECO:    Purchase and regulated retail sale of electricity and the provision of distribution and transmission services in southeastern Pennsylvania, including the City of Philadelphia, and the purchase and regulated retail sale of natural gas and the provision of distribution services in the Pennsylvania counties surrounding the City of Philadelphia.

 

   

BGE:    Purchase and regulated retail sale of electricity and the provision of distribution and transmission services in central Maryland, including the City of Baltimore, and the purchase and regulated retail sale of natural gas and the provision of distribution services in central Maryland, including the City of Baltimore.

For financial statement purposes, beginning on March 12, 2012, disclosures that solely relate to Constellation or BGE activities now also apply to Exelon, unless otherwise noted. When appropriate, Exelon, Generation, ComEd, PECO and BGE are named specifically for their related activities and disclosures.

Exelon did not apply push-down accounting to BGE. As a result, BGE continues to maintain its reporting requirements as an SEC registrant. The information disclosed for BGE represents the activity of the standalone entity for the three and six months ended June 30, 2013 and 2012 and the financial position as of June 30, 2013 and December 31, 2012. However, for Exelon’s financial reporting, Exelon is reporting BGE activity for the three and six months ended June 30, 2013 and from March 12, 2012 through June 30, 2012 and the financial position as of June 30, 2013 and December 31, 2012.

Each of the Registrant’s Consolidated Financial Statements includes the accounts of its subsidiaries. All intercompany transactions have been eliminated.

For the six months ended June 30, 2013, BGE recorded a $2 million correcting adjustment to decrease amortization expense related to regulatory assets that was originally recorded during 2012. Exelon and BGE have concluded that this correcting adjustment is not material to their respective results of operations or cash flows for

 

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COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Dollars in millions, except per share data, unless otherwise noted)

 

the six months ended June 30, 2013 or any prior period. Exelon and BGE do not expect this correcting adjustment to have a material impact on their respective results of operations or cash flows for the year ended December 31, 2013.

The accompanying consolidated financial statements as of June 30, 2013 and 2012 and for the three and six months then ended are unaudited but, in the opinion of the management of each Registrant include all adjustments that are considered necessary for a fair statement of the Registrants’ respective financial statements in accordance with GAAP. All adjustments are of a normal, recurring nature, except as otherwise disclosed. The December 31, 2012 Consolidated Balance Sheets were obtained from audited financial statements. Certain prior year amounts in BGE’s Consolidated Statements of Cash Flows, Exelon’s, Generation's and BGE’s Consolidated Statements of Operations and Comprehensive Income and in Exelon’s, Generation's, ComEd’s, and BGE’s Consolidated Balance Sheets have been reclassified between line items for comparative purposes. The reclassifications did not materially affect any of the Registrants’ net income or cash flows from operating activities. Financial results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for fiscal year ended December 31, 2013. These Combined Notes to Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These notes should be read in conjunction with the Notes to Combined Consolidated Financial Statements of all Registrants included in ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA of their respective 2012 Form 10-K Reports.

2.    New Accounting Pronouncements (Exelon, Generation, ComEd, PECO and BGE)

The following recently issued accounting standards were adopted by the Registrants during the period.

Presentation of Unrecognized Tax Benefits When Net Operating Loss Carryforwards, Similar Tax Losses or Tax Credit Carryforwards Exist

In July 2013, the FASB issued authoritative guidance requiring entities to present unrecognized tax benefits as a reduction to deferred tax assets for losses or other tax carryforwards that would be available to settle the uncertain tax positions at the reporting date. Currently, the Registrants present their unrecognized tax benefits as liabilities on a gross basis unless an unrecognized tax benefit is directly associated with a tax position taken in a tax year that results in the recognition of a net operating loss or other tax carryforward for that year. This guidance is effective for the Registrants for periods beginning after December 15, 2013 and is required to be applied prospectively, with retroactive application permitted. The Registrants are currently assessing the impacts this guidance may have on their financial positions and cash flows. The adoption of this standard will not impact the Registrants’ results of operations.

Inclusion of the Fed Funds Effective Swap Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

In July 2013, the FASB issued authoritative guidance permitting entities to designate the Fed Funds Effective Swap Rate as a U.S. benchmark interest rate for hedge accounting purposes. Prior to the issuance of this guidance, only interest rates on direct treasury obligations of the U.S. government and the LIBOR swap rate were considered benchmark interest rates in the U.S. This guidance is effective immediately and can be applied prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. Currently, the Registrants do not use the Fed Funds Effective Swap Rate as a benchmark interest rate, but may in the future.

 

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COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Dollars in millions, except per share data, unless otherwise noted)

 

Presentation of Items Reclassified out of Accumulated Other Comprehensive Income

In February 2013, the FASB issued authoritative guidance requiring entities to present either in the notes or parenthetically on the face of the financial statements, reclassifications from each component of accumulated other comprehensive income and the affected income statement line items. Entities only need to disclose the affected income statement line item for components reclassified to net income in their entirety; otherwise, a cross-reference to the related note should be provided. This guidance is effective for the Registrants for periods beginning after December 15, 2012 and was required to be applied prospectively. As this guidance provides only disclosure requirements, the adoption of this standard did not impact the Registrants’ results of operations, cash flows or financial positions. See Note 16 — Changes in Accumulated Other Comprehensive Income for the new disclosures.

Disclosures About Offsetting Assets and Liabilities

In December 2011, the FASB issued (and amended in January 2013), authoritative guidance requiring entities to disclose both gross and net information about recognized derivative instruments, including bifurcated embedded derivatives, repurchase and reverse repurchase agreements, and securities borrowing or lending transactions that are offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the balance sheet. This guidance is effective for the Registrants for periods beginning on or after January 1, 2013 and is required to be applied retrospectively. This guidance is primarily applicable to certain derivative transactions for Exelon and Generation. As this guidance provides only disclosure requirements, the adoption of this standard did not impact the Registrants’ results of operations, cash flows or financial positions. See Note 10 — Derivative Financial Instruments for the new disclosures.

3.    Variable Interest Entities (Exelon, Generation, ComEd, PECO and BGE)

Under the applicable authoritative guidance, a VIE is a legal entity that possesses any of the following characteristics: an insufficient amount of equity at risk to finance its activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or equity owners who do not have the obligation to absorb expected losses or the right to receive the expected residual returns of the entity. Companies are required to consolidate a VIE if they are its primary beneficiary, which is the enterprise that has the power to direct the activities that most significantly impact the entity’s economic performance.

As of June 30, 2013 and December 31, 2012, the Registrants’ consolidated five VIEs or VIE groups for which the Registrants were the primary beneficiary, and the Registrants had significant interests in eight other VIEs for which the Registrants do not have the power to direct the entities’ activities and, accordingly, were not the primary beneficiary.

Consolidated Variable Interest Entities

Exelon, Generation and BGE’s consolidated VIEs consist of:

 

   

BondCo, a special purpose bankruptcy remote limited liability company formed by BGE to acquire, hold, and issue and service bonds secured by rate stabilization property;

 

   

a retail gas group formed to enter into a collateralized gas supply agreement with a third-party gas supplier;

 

   

a retail power supply company;

 

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COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Dollars in millions, except per share data, unless otherwise noted)

 

   

a group of solar project limited liability companies formed to build, own and operate solar power facilities, and,

 

   

several wind project companies designed to develop, construct and operate wind generation facilities.

As of June 30, 2013, ComEd and PECO do not have any consolidated VIEs.

For each of the consolidated VIEs, except as otherwise noted:

 

   

The assets of the VIEs are restricted and can only be used to settle obligations of the respective VIE. In the case of BondCo, BGE is required to remit all payments it receives from all residential customers through non-bypassable, rate stabilization charges to BondCo. During the three and six months ended June 30, 2013, BGE remitted $17 million and $39 million, respectively, to BondCo. During the three and six months ended June 30, 2012, BGE remitted $15 million and $35 million, respectively, to BondCo.

 

   

Except for providing capital funding to the solar entities for ongoing construction of the solar power facilities and a $75 million parental guarantee to the third-party gas supplier in support of the retail gas group, during the six months ended June 30, 2013 and year ended December 31, 2012:

 

   

Exelon, Generation and BGE did not provide any additional financial support to the VIEs;

 

   

Exelon, Generation and BGE did not have any contractual commitments or obligations to provide financial support to the VIEs; and

 

   

the creditors of the VIEs did not have recourse to Exelon’s, Generation’s or BGE’s general credit.

The carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in E