ComEd 2006 Annual Report Download - page 141

The following table provides detail on changes in Generation’s mark-to-market net asset or liability
balance sheet position from January 1, 2005 to December 31, 2006. It indicates the drivers behind changes
in the balance sheet amounts. This table incorporates the mark-to-market activities that are immediately
recorded in earnings as well as the settlements from OCI to earnings and changes in fair value for the
hedging activities that are recorded in accumulated OCI on the Consolidated Balance Sheets.
Total
Total mark-to-market energy contract net liabilities at January 1, 2005 (a) ................... $(145)
Total change in fair value during 2005 of contracts recorded in earnings ................... 108
Reclassification to realized at settlement of contracts recorded in earnings ................. (105)
Reclassification to realized at settlement from OCI ..................................... 583
Effective portion of changes in fair value—recorded in OCI .............................. (879)
Purchase/sale/disposal of existing contracts or portfolios subject to mark-to-market .......... (102)
Total mark-to-market energy contract net liabilities at December 31, 2005 (a) ................ (540)
Total change in fair value during 2006 of contracts recorded in earnings ................... 41
Reclassification to realized at settlement of contracts recorded in earnings ................. 66
Reclassification to realized at settlement from OCI ..................................... 146
Effective portion of changes in fair value—recorded in OCI .............................. 789
Purchase/sale/disposal of existing contracts or portfolios subject to mark-to-market .......... (3)
Total mark-to-market energy contract net assets at December 31, 2006 ................... $499
(a) Includes a $39 million liability related to Sithe and the related mark-to-market expense which were reclassified to
discontinued operations.
The following table details the balance sheet classification of the mark-to-market energy contract
net assets (liabilities) recorded as of December 31, 2006 and 2005:
December 31, 2006 December 31, 2005
Current assets .......................................... $1,408 $ 916
Noncurrent assets ....................................... 171 286
Total mark-to-market energy contract assets .............. 1,579 1,202
Current liabilities ......................................... (1,003) (1,282)
Noncurrent liabilities ...................................... (77) (460)
Total mark-to-market energy contract liabilities ............ (1,080) (1,742)
Total mark-to-market energy contract net assets (liabilities) ...... $ 499 $ (540)
The majority of Generation’s contracts are non-exchange-traded contracts valued using prices
provided by external sources, primarily price quotations available through brokers or over-the-counter,
on-line exchanges. Prices reflect the average of the bid-ask mid-point prices obtained from all sources
that Generation believes provide the most liquid market for the commodity. The terms for which such
price information is available vary by commodity, region and product. The remainder of the assets
represents contracts for which external valuations are not available, primarily option contracts. These
contracts are valued using the Black model, an industry standard option valuation model. The fair
values in each category reflect the level of forward prices and volatility factors as of December 31,
2006 and may change as a result of changes in these factors. Management uses its best estimates to
determine the fair value of commodity and derivative contracts Generation holds and sells. These
estimates consider various factors including closing exchange and over-the-counter price quotations,
time value, volatility factors and credit exposure. It is possible, however, that future market prices could
vary from those used in recording assets and liabilities from energy marketing and trading activities
and such variations could be material.
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