Exelon 2015 Annual Report Download - page 179

Table of Contents
PECO has also entered into derivative natural gas contracts, which either qualify for the normal purchases and normal sales exception or
have no mark-to-market balances because the derivatives are index priced, to hedge its long-term price risk in the natural gas market. PECO’s
hedging program for natural gas procurement has no direct impact on its financial position or results of operations as natural gas costs are fully
recovered from customers under the PGC.
PECO does not enter into derivatives for speculative or proprietary trading purposes. For additional information on these contracts, see Note
13—Derivative Financial Instruments of the Combined Notes to Consolidated Financial Statements.
BGE
BGE procures electric supply for default service customers through full requirements contracts pursuant to BGE’s MDPSC-approved SOS
program. BGE’s full requirements contracts that are considered derivatives qualify for the normal purchases and normal sales scope exception
under current derivative authoritative guidance and as a result, are accounted for on an accrual basis of accounting. Under the SOS program, BGE
is permitted to recover its electricity procurement costs from retail customers, plus an administrative fee which includes a shareholder return
component and an incremental cost component. However, through December 2016, BGE provides all residential electric customers a credit for the
residential shareholder return component of the administrative charge.
BGE has also entered into derivative natural gas contracts, which qualify for the normal purchases and normal sales scope exception, to
hedge its price risk in the natural gas market. The hedging program for natural gas procurement has no direct impact on BGE’s financial position.
However, under BGE’s market-based rates incentive mechanism, BGE’s actual cost of gas is compared to a market index (a measure of the
market price of gas in a given period). The difference between BGE’s actual cost and the market index is shared equally between shareholders
and customers.
BGE does not enter into derivatives for speculative or proprietary trading purposes. For additional information on these contracts, see Note
13—Derivative Financial Instruments of the Combined Notes to Consolidated Financial Statements.
Trading and Non-Trading Marketing Activities
The following detailed presentation of Exelon’s, Generation’s and ComEd’s trading and non-trading marketing activities is included to address
the recommended disclosures by the energy industry’s Committee of Chief Risk Officers (CCRO).
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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