ComEd 2013 Annual Report Download - page 190

Theaggregate fairvalue ofall derivativeinstrumentswithcredit-risk-relatedcontingent featuresinaliabilityposition that are not fully
collateralized(excludingtransactionson theexchangesthat are fullycollateralized) is detailedinthetable below:
For the Years Ended December 31,
Credit-Risk Related Contingent Feature 2013 2012
Gross FairValue ofDerivativeContractsContainingthis Feature (a)......................... $(1,056) $(1,849)
OffsettingFairValue ofIn-the-MoneyContractsUnder Master NettingArrangements(b) ......... $ 846 $1,426
Net FairValue ofDerivativeContractsContaining This Feature (c) ....................... $ (210)$(423)
(a)Amount representsthegross fairvalue ofout-of-the-moneyderivativecontractscontainingcredit-risk-relatedcontingent ignoringtheeffectsofmaster netting
agreements.
(b) Amount representstheoffsettingfairvalue ofin-the-moneyderivativecontractsunder legallyenforceable master nettingagreementswiththesamecounterparty,
which reducestheamount ofanyliabilityfor which aRegistrant couldpotentiallyberequiredto postcollateral.
(c) Amount representsthe net fairvalue ofout-of-the-moneyderivativecontractscontainingcredit-risk relatedcontingent featuresafter consideringthemitigatingeffects
ofoffsettingpositionsunder master nettingarrangementsandreflectstheactual net liabilityupon which anypotential contingent collateral obligationswouldbe
based.
Generation hadcash collateral postedof$72million,lettersofcreditpostedof$364 million,cash collateral heldof$206million and
lettersofcreditheldof$34million asofDecember 31,2013 for counterpartieswithderivativepositions. Generation hadcash
collateral postedof$527million andlettersofcreditpostedof $563million andcash collateral heldof $499 million andlettersof
creditheldof $45 million at December 31,2012 for counterpartieswithderivativepositions. Intheevent ofacreditdowngradebelow
investment grade(i.e. BB+ or Ba1), Generation couldberequiredto postadditional collateral of$2.0billion asofDecember 31,2013
andDecember 31,2012.Theseamountsrepresent the potential additional collateral requiredafter givingconsideration to offsetting
derivativeandnon-derivativepositionsunder master nettingagreements.
Generation’s andExelon’s interest rate swapscontain provisionsthat,intheevent ofamerger,ifGeneration’s debt ratings were to
materiallyweaken,itwouldbeinviolation ofthese provisions, resultingintheabilityofthecounterpartyto terminate theagreement
prior to maturity. Collateralization wouldnot berequiredunder anycircumstance.Termination oftheagreement couldresult ina
settlement payment by Exelon or thecounterpartyon anyinterest rate swap in a net liabilityposition.Thesettlement amount would
beequal to thefairvalue oftheswap on the termination date.AsofDecember 31,2013,Generation’s andExelon’s swapswere in
an asset position,withafairvalue of$18million and$21 million,respectively. See Note 24—Segment Information for additional
information regardingthe lettersofcreditsupportingthecash collateral.
Generation enteredinto supplyforwardcontractswithcertainutilities, including PECO and BGE, withone-sidedcollateral postings
onlyfromGeneration.Ifmarket pricesfall belowthebenchmarkpricelevelsinthesecontracts, theutilitiesare not requiredto post
collateral.However,when market pricesriseabovethebenchmarkpricelevels, counterpartysuppliers, includingGeneration,are
requiredto postcollateral oncecertainunsecuredcreditlimitsare exceeded. Under the terms ofComEd’s standardblock energy
contracts, collateral postings are one-sidedfromsuppliers, includingGeneration,shouldexposuresbetween market pricesand
benchmarkpricesexceedestablishedunsecuredcreditlimitsoutlinedinthecontracts. AsofDecember 31,2013,ComEd held
neither cash nor lettersofcreditfor the purposeofcollateral fromsuppliersinassociation withenergy procurement contracts. Under
the terms ofComEd’s annual renewable energy contracts, collateral postings are requiredto cover a fixedvalue for RECs only. In
addition,under the terms ofComEd’s long-termrenewable energy contracts, collateral postings are requiredfromsuppliersfor both
RECs andenergy. TheREC portion is afixedvalue andthe energy portion is one-sidedfromsuppliersshouldtheforwardmarket
pricesexceedcontractprices. AsofDecember 31,2013,ComEd heldapproximately$19million intheformofcash andlettersof
creditasmarginfor boththe annual andlong-termREC obligations. See Note 1—Significant AccountingPoliciesfor additional
information.
PECO’s natural gasprocurement contractscontain provisionsthat couldrequire PECO to postcollateral. This collateral maybe
postedintheformofcash or creditsupport withthresholds contingent upon PECO’s credit ratingfromthemajor credit rating
agencies. Thecollateral andcreditsupport requirementsvarybycontractandbycounterparty. AsofDecember 31,2013, PECO
wasnot requiredto postcollateral for anyoftheseagreements. If PECO lostitsinvestment gradecredit ratingasofDecember 31,
2013, PECO couldhavebeen requiredto post approximately$42million ofcollateral to itscounterparties.
PECO’s supplier master agreementsthat govern the terms ofits DSP Programcontractsdo not contain provisionsthat wouldrequire
PECO to postcollateral.
BGE’s full requirementswholesale power agreementsthat govern the terms ofitselectric supplyprocurement contractsdo not
contain provisionsthat wouldrequire BGE to postcollateral.
184