Exelon 2015 Annual Report Download - page 123

Table of Contents
Revenue Recognition (Exelon, Generation, ComEd, PECO and BGE)
Sources of Revenue and Determination of Accounting Treatment. The Registrants earn revenues from various business activities
including: the sale of energy and energy-related products, such as natural gas, capacity, and other commodities in non-regulated markets
(wholesale and retail) the sale and delivery of electricity and natural gas in regulated markets; and the provision of other energy-related non-
regulated products and services.
The appropriate accounting treatment for revenue recognition is based on the nature of the underlying transaction and applicable accounting
standards. The Registrants primarily use accrual and mark-to-market accounting as discussed in more detail below.
Accrual Accounting. Under accrual accounting, the Registrants record revenues in the period when services are rendered or energy is
delivered to customers. The Registrants generally use accrual accounting to recognize revenues for sales of electricity, natural gas and other
commodities as part of their physical delivery activities. The Registrants enter into these sales transactions using a variety of instruments,
including non-derivative agreements, derivatives that qualify for and are designated as normal purchases and normal sales (NPNS) of commodities
that will be physically delivered, sales to utility customers under regulated service tariffs and spot-market sales, including settlements with
independent system operators.
Mark-to-Market Accounting. The Registrants record revenues and expenses using the mark-to-market method of accounting for
transactions that meet the definition of a derivative for which they are not permitted, or have not elected, the NPNS exception. These mark-to-
market transactions primarily relate to risk management activities and economic hedges of other accrual activities. Mark-to-market revenues and
expenses include: inception gains or losses on new transactions where the fair value is observable and realized; and unrealized gains and losses
from changes in the fair value of open contracts.
Use of Estimates. Estimates are based upon actual costs incurred and investments in rate base for the period and the rates of return on
common equity and associated regulatory capital structure allowed under the applicable tariff. The estimated reconciliations can be affected by,
among other things, variances in costs incurred and investments made and actions by regulators or courts.
Unbilled Revenues The determination of Generation’s, ComEd’s, PECO’s and BGE’s retail energy sales to individual customers is based
on systematic readings of customer meters generally on a monthly basis. At the end of each month, amounts of energy delivered to customers
since the date of the last meter reading are estimated, and corresponding unbilled revenue is recorded. The measurement of unbilled revenue is
affected by the following factors: daily customer usage measured by generation or gas throughput volume, customer usage by class, losses of
energy during delivery to customers and applicable customer rates. Increases or decreases in volumes delivered to the utilities’ customers and
favorable or unfavorable rate mix due to changes in usage patterns in customer classes in the period could be significant to the calculation of
unbilled revenue. In addition, revenues may fluctuate monthly as a result of customers electing to use an alternate supplier, since unbilled
commodity receivables are not recorded for these customers. Changes in the timing of meter reading schedules and the number and type of
customers scheduled for each meter reading date would also have an effect on the measurement of unbilled revenue; however, total operating
revenues would remain materially unchanged.
See Note 6—Accounts Receivable of the Combined Notes to Consolidated Financial Statements for additional information.
Regulated Transmission & Distribution Revenues. ComEd’s EIMA distribution formula rate tariff provides for annual reconciliations to the
distribution revenue requirement. As of the balance
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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