Exelon 2014 Annual Report Download - page 114

See Note 22—Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for discussion of the
Registrants’ other commitments potentially triggered by future events.
For additional information regarding:
• commercial paper, see Note 13—Debt and Credit Agreements of the Combined Notes to Consolidated Financial Statements.
• long-term debt, see Note 13—Debt and Credit Agreements of the Combined Notes to Consolidated Financial Statements.
• liabilities related to uncertain tax positions, see Note 14—Income Taxes of the Combined Notes to Consolidated Financial
Statements.
• capital lease obligations, see Note 13—Debt and Credit Agreements of the Combined Notes to Consolidated Financial
Statements.
• operating leases, energy commitments, fuel purchase agreements, construction commitments and rate relief commitments, see
Note 22—Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements.
• the nuclear decommissioning and SNF obligations, see Notes 15—Asset Retirement Obligations and 22—Commitments and
Contingencies of the Combined Notes to Consolidated Financial Statements.
• regulatory commitments, see Note 3—Regulatory Matters of the Combined Notes to Consolidated Financial Statements.
• variable interest entities, see Note 2—Variable Interest Entities of the Combined Notes to Consolidated Financial Statements.
• nuclear insurance, see Note 22—Commitments and Contingencies of the Combined Notes to Consolidated Financial
Statements.
• new accounting pronouncements, see Note 1—Significant Accounting Policies of the Combined Notes to Consolidated Financial
Statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Registrants are exposed to market risks associated with adverse changes in commodity prices, counterparty credit, interest
rates and equity prices. Exelon’s RMC approves risk management policies and objectives for risk assessment, control and valuation,
counterparty credit approval, and the monitoring and reporting of risk exposures. The RMC is chaired by the chief executive officer
and includes the chief risk officer, chief strategy officer, chief executive officer of Exelon Utilities, chief commercial officer, chief
financial officer and chief executive officer of Constellation. The RMC reports to the Finance and Risk Committee of the Exelon
Board of Directors on the scope of the risk management activities.
Commodity Price Risk
Commodity price risk is associated with price movements resulting from changes in supply and demand, fuel costs, market liquidity,
weather conditions, governmental regulatory and environmental policies, and other factors. To the extent the amount of energy
Exelon generates differs from the amount of energy it has contracted to sell, Exelon has price risk from commodity price movements.
Exelon seeks to mitigate its commodity price risk through the sale and purchase of electricity, fossil fuel, and other commodities.
Generation
Normal Operations and Hedging Activities. Electricity available from Generation’s owned or contracted generation supply in
excess of Generation’s obligations to customers, including portions of ComEd’s, PECO’s and BGE’s retail load, is sold into the
wholesale markets. To reduce price risk caused by market fluctuations, Generation enters into non-derivative contracts as well as
derivative contracts, including forwards, futures, swaps, and options, with approved counterparties to hedge anticipated exposures.
Generation believes these instruments represent economic hedges that mitigate exposure to fluctuations in commodity prices.
Generation expects the settlement of the majority of its economic hedges will occur during 2015 through 2017.
In general, increases and decreases in forward market prices have a positive and negative impact, respectively, on Generation’s
owned and contracted generation positions which have not been hedged. Generation hedges commodity risk on a ratable basis over
the three years leading to the spot market. As of December 31, 2014, the percentage of expected generation hedged for the major
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