ComEd 2006 Annual Report Download - page 236

Exelon Corporation and Subsidiary Companies
Exelon Generation Company, LLC and Subsidiary Companies
Commonwealth Edison Company and Subsidiary Companies
PECO Energy Company and Subsidiary Companies
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
December 31, 2005
Total Cash-
Flow Hedge
OCI Activity, Net of
Income Tax
Exelon and
Generation
Accumulated OCI derivative loss at January 1, 2005 ........................... $(137)
Changes in fair value .................................................... (533)
Reclassifications from OCI to net income .................................... 356
Accumulated OCI derivative loss at December 31, 2005 ........................ $(314)
At December 31, 2006, Generation and ComEd had net unrealized pre-tax gains (losses) of $415
million and $(6) million, respectively, of cash-flow hedges recorded in accumulated OCI. Based on
market prices at December 31, 2006, approximately $341 million and $(6) million of these deferred net
pre-tax unrealized gains (losses) on derivative instruments in accumulated OCI are expected to be
reclassified to earnings during the next twelve months by Generation and ComEd, respectively.
However, the actual amount reclassified to earnings could vary due to future changes in market prices.
Amounts recorded in accumulated OCI related to changes in energy commodity cash-flow hedges are
reclassified into earnings when the forecasted purchase or sale of the energy commodity occurs. The
majority of Generation’s cash-flow hedges are expected to settle within the next two years. ComEd’s
cash flow hedge expires on May 31, 2007.
Generation’s cash-flow hedge activity impact to pre-tax earnings based on the reclassification
adjustment from accumulated OCI to earnings was a $146 million pre-tax loss, a $583 million pre-tax loss
and a $475 million pre-tax loss for the years ended December 31, 2006, 2005 and 2004, respectively.
Other Derivatives (Exelon, Generation and ComEd)
Exelon, Generation and ComEd enter into certain contracts that are derivatives, but do not qualify
for hedge accounting under SFAS No. 133 or are not designated as cash-flow hedges. These
contracts are entered into to economically hedge and limit the market price risk associated with energy
commodity prices. Changes in the fair value of these derivative contracts are recognized in current
earnings. For 2006, 2005 and 2004, Exelon, Generation and ComEd recognized the following net
unrealized mark-to-market gains (losses), realized mark-to-market gains (losses) and total
mark-to-market gains (losses) (before income taxes) relating to mark-to-market activity of certain
non-trading purchase power and sale contracts pursuant to SFAS No. 133. Generation’s, ComEd’s and
Exelon’s other mark-to-market activity on non-trading purchase power and sale contracts are reported
in fuel and purchased power, revenue and operating and maintenance expense, respectively.
For the Year Ended December 31, 2006 Generation ComEd (a) Other (b) Exelon
Unrealized mark-to-market gains (losses) ................. $ 29 $(8) $(15) $ 6
Realized mark-to-market gains .......................... 74 3 — 77
Total net mark-to-market gains (losses) ................... $103 $(5) $(15) $83
(a) See “Energy-Related Derivatives” above.
(b) Other includes corporate operations, shared services entities, including BSC, Enterprises and investments in synthetic fuel-
producing facilities.
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