Exelon 2014 Annual Report Download - page 211

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
The tables below provide the activity of Accumulated OCI related to cash flow hedges for the years ended December 31, 2014 and
2013, containing information about the changes in the fair value of cash flow hedges and the reclassification from Accumulated OCI
into results of operations. The amounts reclassified from Accumulated OCI, when combined with the impacts of the actual physical
power sales, result in the ultimate recognition of net revenues at the contracted price.
Income Statement
Location
Total Cash Flow Hedge OCI Activity,
Net of Income Tax
Generation Exelon
Energy-Related
Hedges
Total Cash Flow
Hedges
Accumulated OCI derivative gain at January 1, 2013 ................ $532
(a)(d) $ 368
Effective portion of changes in fair value ........................... — 29
(e)
Reclassifications from accumulated OCI to net income ............... Operating Revenues (413)(c)(b) (277)
Ineffective portion recognized in income ........................... Operating Revenues — —
Accumulated OCI derivative gain at December 31, 2013 ............. 119
(d) 120
Effective portion of changes in fair value ........................... — (31)(e)
Reclassifications from accumulated OCI to net income ............... Operating Revenues (117)(b) (117)
Accumulated OCI derivative gain at December 31, 2014 ............. $ 2
(d) $ (28)
(a) Includes $133 million of gains, net of taxes, related to the fair value of the five-year financial swap contract with ComEd for the years ended December 31, 2012.
(b) Amount is net of related income tax expense of $78 million and $270 million for the years ended December 31, 2014 and 2013, respectively.
(c) Includes $133 million of losses, net of taxes, reclassified from Accumulated OCI to recognize gains in net income related to settlements of the five-year financial swap
contract with ComEd for the year ended December 31, 2013.
(d) Excludes $20 million and $5 million, of losses, net of taxes, related to interest rate swaps and treasury rate locks for the years ended December 31, 2014 and 2013,
respectively.
(e) Includes $15 million and $15 million of losses, net of taxes, related to the effective portion of changes in fair value of interest rate swaps and treasury rate locks at
Generation for the years ended December 31, 2014 and 2013, respectively.
During the years ended December 31, 2014, 2013, and 2012, Generation’s former energy-related cash flow hedge activity impact to
pre-tax earnings based on the reclassification adjustment from Accumulated OCI to earnings was a $195 million, $683 million and
$1,368 million pre-tax gain, respectively. Given that the cash flow hedges had primarily consisted of forward power sales and power
swaps and did not include power and gas options or sales, the ineffectiveness of Generation’s cash flow hedges was primarily the
result of differences between the locational settlement prices of the cash flow hedges and the hedged generating units. Changes in
cash flow hedge ineffectiveness were losses of $5 million for the year ended December 31, 2012.
The effect of Exelon’s former energy-related cash flow hedge activity impact on pre-tax earnings based on the reclassification
adjustment from Accumulated OCI to earnings was a $195 million, $464 million and $747 million pre-tax gain for the years ended
December 31, 2014, 2013 and 2012, respectively. Changes in cash flow hedge ineffectiveness, primarily due to changes in market
prices, were losses of $5 million for the year ended December 31, 2012. Neither Exelon nor Generation will incur changes in cash
flow hedge ineffectiveness in future periods as all energy-related cash flow hedge positions were de-designated prior to the
Constellation merger date.
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