Exelon 2014 Annual Report Download - page 230

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
15. Asset Retirement Obligations
Nuclear Decommissioning Asset Retirement Obligations
Generation has a legal obligation to decommission its nuclear power plants following the expiration of their operating licenses. To
estimate its decommissioning obligation related to its nuclear generating stations for financial accounting and reporting purposes,
Generation uses a probability-weighted, discounted cash flow model which, on a unit-by-unit basis, considers multiple outcome
scenarios that include significant estimates and assumptions, and are based on decommissioning cost studies, cost escalation rates,
probabilistic cash flow models and discount rates. Generation generally updates its ARO annually during the third quarter, unless
circumstances warrant more frequent updates, based on its review of updated cost studies and its annual evaluation of cost
escalation factors and probabilities assigned to various scenarios.
The following table provides a rollforward of the nuclear decommissioning ARO reflected on Exelon’s Consolidated Balance Sheets,
from January 1, 2013 to December 31, 2014:
Nuclear decommissioning ARO at January 1, 2013 ............................................................ $4,741
Accretion expense ....................................................................................... 259
Net decrease due to changes in, and timing of, estimated future cash flows ........................................ (140)
Costs incurred to decommission retired plants ................................................................ (5)
Nuclear decommissioning ARO at December 31, 2013 (a) ....................................................... 4,855
Consolidation of CENG (b) ................................................................................. 1,760
Accretion expense ....................................................................................... 334
Net increase due to changes in, and timing of, estimated future cash flows ......................................... 19
Costs incurred to decommission retired plants ................................................................ (7)
Nuclear decommissioning ARO at December 31, 2014 (a) ....................................................... $6,961
(a) Includes $8 million and $9 million as the current portion of the ARO at December 31, 2014 and 2013, respectively, which is included in Other current liabilities on
Exelon’s Consolidated Balance Sheets.
(b) Represents the fair value of the CENG ARO liability as of April 1, 2014, the date of consolidation. See Note 5—Investment in Constellation Energy Nuclear Group,
LLC for additional information.
During 2014, Generation’s ARO increased by approximately $2.1 billion. The increase is largely driven by the recording of an ARO
on Exelon’s Consolidated Balance Sheets at fair value, including subsequent purchase accounting adjustments, upon consolidation
of CENG (see Note 5—Investment in Constellation Energy Nuclear Group, LLC ). The change in the ARO was also driven by an
increase for accretion of the obligation and an increase in the estimated costs to decommission Byron, Braidwood, and LaSalle
nuclear units resulting from the completion of updated decommissioning costs studies received during 2014 as part of the annual
assessment. These increases in the ARO were partially offset by decreases in the ARO due to a reduction in estimated escalation
rates, primarily for labor and energy costs. The increase in the ARO due to the changes in, and timing of, estimated cash flows was
offset within Property, plant and equipment on Exelon’s Consolidated Balance Sheets, aside from an approximate $16 million credit
to income, which is included in Operating and maintenance expense within Exelon’s Consolidated Statements of Operations and
Comprehensive Income.
During 2013, Generation’s ARO increased by approximately $114 million. The increase is largely driven by an increase in the
estimated costs to decommission the Limerick and Three Mile Island nuclear units resulting from the completion of updated
decommissioning costs studies received during 2013 and an increase for accretion of the obligation. These increases in the ARO
were offset by decreases to the ARO due to changes in long-term escalation rates, primarily for labor and energy costs, as well as
changes in the timing of the future nominal cash flows coupled with the fact that cash flows affected by this change in timing are re-
measured and discounted at current credit adjusted risk free rates (CARFRs), which have increased from the prior year. The
decrease in the ARO due to the changes in, and timing of, estimated cash flows was entirely offset by decreases in Property, plant
and equipment within Exelon’s Consolidated Balance Sheets.
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