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2013 Annual Report

Table of contents

  • Page 1
    2013 Annual Report

  • Page 2

  • Page 3
    Exelon Corporate 2013 Annual Report

  • Page 4

  • Page 5
    ...'s leading competitive energy provider, with 2013 revenues of approximately $24.9 billion. Headquartered in Chicago, Exelon has operations and business activities in 47 states, the District of Columbia and Canada. Exelon is one of the largest competitive U.S. power generators, with approximately...

  • Page 6
    ...OF TERMS AND ABBREVIATIONS ...FILING FORMAT ...FORWARD-LOOKING STATEMENTS ...WHERE TO FIND MORE INFORMATION ...GENERAL DESCRIPTION OF OUR BUSINESS ...General ...Exelon Generation Company, LLC ...Commonwealth Edison Company ...PECO Energy Company ...Baltimore Gas and Electric Company ...Environmental...

  • Page 7
    ... Edison Company PECO Energy Company Baltimore Gas and Electric Company Exelon Business Services Company, LLC Exelon's holding company Constellation Energy Nuclear Group, LLC Constellation Energy Group, Inc. Exelon Transmission Company, LLC Exelon Wind, LLC and Exelon Generation Acquisition Company...

  • Page 8
    ... Stock Purchase Plan Financial Accounting Standards Board Federal Energy Regulatory Commission Florida Reliability Coordinating Council Federal Trade Commission Generally Accepted Accounting Principles in the United States Greenhouse Gas Gross Receipts Tax Generation Supply Adjustment Gigawatt hour...

  • Page 9
    ...Receivables Power Purchase Agreement Price-Anderson Nuclear Industries Indemnity Act of 1957 Potentially Responsible Parties Public Service Enterprise Group Incorporated Pennsylvania Public Realty Tax Act Photovoltaic Resource Conservation and Recovery Act of 1976, as amended Renewable Energy Credit...

  • Page 10
    ...Penoles Natural gas exploration and production activities Variable Interest Entity Western Electric Coordinating Council FILING FORMAT The information included within this Annual Report has been taken from Exelon's Form 10-K annual report for the year ended December 31, 2013. That annual report was...

  • Page 11
    ... offices are located at 440 South LaSalle Street, Chicago, Illinois 60605, and its telephone number is 312-394-4321. PECO PECO's energy delivery business consists of the purchase and regulated retail sale of electricity and the provision of transmission and distribution services to retail customers...

  • Page 12
    ...supply source diversity. These factors help Generation mitigate the current challenging conditions in competitive energy markets. Generation operates as an integrated business, leveraging its owned and contracted electric generation capacity to market and sell power to wholesale and retail customers...

  • Page 13
    ...commercial operation in the first half of 2014. The acquisition supports the Exelon commitment to renewable energy as part of Exelon 2020. The project has a 25-year PPA, approved by the CPUC, with Pacific Gas & Electric Company for the full output of the plant. Upon completion, the facility will add...

  • Page 14
    ... to support Generation's wholesale and retail power marketing activities. See ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for further discussion of Generation's electric supply sources. Constellation Energy Nuclear Group, Inc. Generation also owns...

  • Page 15
    ... power in the United States, Generation can negotiate favorable terms for the materials and services that its business requires. Generation's operations from its nuclear plants have historically had minimal environmental impact and the plants have a safe operating history. During 2013 and 2012...

  • Page 16
    ... Creek. In August 2012, Generation entered into an operating services agreement with the Omaha Public Power District (OPPD) to provide operational and managerial support services for the Fort Calhoun Station and a licensing agreement for use of the Exelon Nuclear Management Model. The terms for both...

  • Page 17
    ... generated within the region. Illinois and Kentucky have entered into such an agreement, although neither state currently has an operational site and none is anticipated to be operational until after 2020. Generation is currently utilizing on-site storage capacity at its nuclear generation stations...

  • Page 18
    ...wholesale and retail power marketing activities. For additional information regarding Generation's electric generating facilities, see ITEM 2. PROPERTIES-Generation of Exelon's 2013 Form 10-K and MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Exelon Corporation...

  • Page 19
    ...Exelon's and Generation's financial condition and their results of operations and cash flows. For information regarding property insurance, see ITEM 2. PROPERTIES- Generation. Long-Term Power Purchase Contracts In addition to energy produced by owned generation assets, Generation sources electricity...

  • Page 20
    ...-cost energy supply sources to meet its physical delivery obligations to both wholesale and retail customers and assisting customers to meet renewable portfolio standards. Generation may buy power to meet the energy demand of its customers, including ComEd, PECO and BGE. Generation sells electricity...

  • Page 21
    ...capacity to third parties under long-term capacity sale contracts. Expected payments include certain fixed capacity charges which may be reduced on plant availability. (b) The table excludes renewable energy purchases that are contingent in nature. (c) Transmission rights purchases include estimated...

  • Page 22
    ... energy; however, that activity has no impact on electric revenue net of purchased power expense. ComEd's cost of electric supply is passed without markup directly through to those customers not served by a competitive electric generation supplier and those rates are subject to adjustment monthly...

  • Page 23
    ... the process and timing for a refund to customers. On May 24, 2011, the ICC issued an order in ComEd's 2010 electric distribution rate case (2010 Rate Case), which became effective on June 1, 2011. The order approved a $143 million increase to ComEd's annual delivery service revenue requirement and...

  • Page 24
    ... supply of retail electricity while retail transmission and distribution service remains regulated under the Competition Act. At December 31, 2013, there were 87 competitive electric generation suppliers serving PECO customers. At December 31, 2013, the number of retail customers purchasing energy...

  • Page 25
    ... costs and retail transmission service charges. PECO presents on customer bills its electric supply Price to Compare, which is updated quarterly, to assist customers with the evaluation of offers from competitive electric generation suppliers. Customer choice program activity affects revenue...

  • Page 26
    ... retail customers. Retail deliveries purchased from competitive natural gas suppliers represented approximately 19% of PECO's mmcf sales for the year ended December 31, 2013. PECO provides distribution, billing, metering, installation, maintenance and emergency response services at regulated rates...

  • Page 27
    ... to supplied energy; however, that activity has minimal impact on electric revenue net of purchased power expense or BGE's financial position. At December 31, 2013, there were 73 competitive electric generation suppliers serving BGE customers. At December 31, 2013, the number of retail customers...

  • Page 28
    ... in annual distribution service revenue of $34 million. The electric distribution rate increase was set using an allowed return on equity of 9.75%. The approved electric distribution rate became effective for services rendered on or after December 13, 2013. Smart Meter and Energy Efficiency Programs...

  • Page 29
    .... On July 27, 2012, BGE filed an application for an increase to its gas base rates with the MDPSC. On February 22, 2013, the MDPSC issued an order in BGE's 2012 gas rate case for increases in annual distribution service revenue of $32 million. The electric distribution rate increase was set using an...

  • Page 30
    ... service transmission rates and the process for updating the formula rate calculation on an annual basis. See Note 3 of the Combined Notes to Consolidated Financial Statements for additional information regarding transmission services. Environmental Regulation General Exelon, Generation, ComEd, PECO...

  • Page 31
    ... by the Intergovernmental Panel on Climate Change in their Fifth Assessment Report Summary for Policy Makers issues September 2013. Exelon, as a producer of electricity from predominantly low-carbon generating facilities (such as nuclear, hydroelectric, wind and solar photovoltaic), has a relatively...

  • Page 32
    ... in 2013, although only a small portion of Exelon's electric supply is from fossil generating plants. Other GHG emission sources at Exelon include natural gas (methane) leakage on the natural gas systems, sulfur hexafluoride (SF6) leakage in its electric transmission and distribution operations and...

  • Page 33
    ... about global climate change and regulatory action to reduce GHG, Exelon's low-carbon generating fleet is seen by management as a competitive advantage. Exelon remains one of the largest, lowest carbon electric generators in the United States: nuclear for base load, natural gas for marginal and...

  • Page 34
    ... renewable and alternative energy resources could increase the pace of development of wind and other renewable/alternative energy resources, which could put downward pressure on wholesale market prices for electricity in some markets where Exelon operates generation assets. At the same time, such...

  • Page 35
    ... presents the New York Stock Exchange-Composite Common Stock Prices and dividends by quarter on a per share basis: 2013 Third Second Quarter Quarter 2012 Third Second Quarter Quarter Fourth Quarter First Quarter Fourth Quarter First Quarter High price ...Low price ...Close ...Dividends ... $30...

  • Page 36
    ... common stock of ComEd. Dividends Under applicable Federal law, Generation, ComEd, PECO and BGE can pay dividends only from retained, undistributed or current earnings. A significant loss recorded at Generation, ComEd, PECO or BGE may limit the dividends that these companies can distribute to Exelon...

  • Page 37
    ... unlawful for any officer or director of any public utility "to participate in the making or paying of any dividends of such public utility from any funds properly included in capital account." What constitutes "funds properly included in capital account" is undefined in the Federal Power Act or the...

  • Page 38
    ...In millions) 2013 2012 December 31, 2011 2010 2009 Balance Sheet data: Current assets ...Property, plant and equipment, net ...Noncurrent regulatory assets ...Goodwill ...Other deferred debits and other assets ...Total assets ...Current liabilities ...Long-term debt, including long-term debt to...

  • Page 39
    ... company, operates through the following principal subsidiaries: • Generation, whose integrated business consists of owned, contracted and investments in electric generating facilities managed through customer supply of electric and natural gas products and services, including renewable energy...

  • Page 40
    ...natural gas distribution rate increases that became effective February 23, 2013; Increase in Generation's revenue net of purchased power and fuel of $159 million on other activities, including proprietary trading, retail gas, energy efficiency, energy management and demand response, upstream natural...

  • Page 41
    demand response programs, decreased gross receipts tax revenue, and the customer refund in 2013 of the tax cash benefit related to gas property distribution repairs. Operating and maintenance expense decreased by $691 million as compared to 2012 primarily due to the following favorable factors ...

  • Page 42
    ... pre-acquisition contingencies, and CENG transaction costs, partially offset in 2013 by a one-time benefit pursuant to the BGE 2012 electric and gas distribution rate case order for the recovery of previously incurred integration costs. See Note 4-Merger and Acquisitions of the Combined Notes to...

  • Page 43
    ... total additional Constellation merger-related expenses in 2014 and 2015 of approximately $34 million. Pursuant to the conditions set forth by the MDPSC in its approval of the merger transaction, Exelon committed to provide a package of benefits to BGE customers, and make certain investments in the...

  • Page 44
    ... commodity price volatility. Its generation fleet, including its nuclear plants which consistently operate at high capacity factors, also provide geographic and supply source diversity. These factors help mitigate the current challenging conditions in competitive energy markets. Exelon's utility...

  • Page 45
    ... Exelon utility companies. ComEd is projecting load volumes to decrease by 0.2% in 2014 compared to 2013, while PECO and BGE are projecting an increase of 0.3% and 0.6%, respectively, in 2014 compared to 2013. Retail Competition. Generation's retail operations compete for customers in a competitive...

  • Page 46
    .... Management continually evaluates growth opportunities aligned with Exelon's existing businesses in electric and gas distribution, electric transmission, generation, customer supply of electric and natural gas products and services, and natural gas exploration and production activities, leveraging...

  • Page 47
    ... energy as part of Exelon 2020. The project has a 25-year PPA with Pacific Gas & Electric Company for the full output of the plant, which has been approved by the CPUC. Upon completion, the facility will add 230 MWs to Generation's renewable generation fleet. Total capitalized costs for the facility...

  • Page 48
    ... annually evaluates its financing plan, dividend practices and credit line sizing, focusing on maintaining its investment grade ratings while meeting its cash needs to fund capital requirements, retire debt, pay dividends, fund pension and other postretirement benefit obligations and invest in new...

  • Page 49
    ... 2014. On December 16, 2011, the U.S. EPA signed a final rule to reduce emissions of toxic air pollutants from power plants and signed revisions to the NSPS for electric generating units. The final rule, known as MATS, requires coal-fired electric generation plants to achieve high removal rates...

  • Page 50
    ...or changes in the storage of spent nuclear fuel within the plant's spent nuclear fuel pools. In 2012, the NRC authorized its staff to issue three immediately effective orders (Tier 1 orders) to commercial reactor licensees operating in the United States for compliance no later than December 31, 2016...

  • Page 51
    ... then develop a final rule by March 2017. Additionally, in 2012, the NRC had issued a detailed information request to every operating commercial nuclear power plant in the United States. The information requested requires: (1) use of the current NRC guidance to reevaluate current seismic and flood...

  • Page 52
    .... Energy Infrastructure Modernization Act. Since 2011, ComEd's distribution rates are established through a performance-based rate formula, pursuant to EIMA. EIMA also provides a structure for substantial capital investment by utilities over a ten-year period to modernize Illinois' electric utility...

  • Page 53
    ... Compliance (ComEd, PECO and BGE). In FERC Order No. 1000, the FERC required public utility transmission providers to enhance their transmission planning procedures and their cost allocation methods applicable to certain new regional and interregional transmission projects. As part of the changes to...

  • Page 54
    ... per unit as of December 31, 2013. The size of the increase to the ARO for a particular nuclear unit is dependent upon the current stage in its original license term and its specific decommissioning cost estimates. If Generation does not receive license renewal on a particular unit, the increase to...

  • Page 55
    ... NDTs. The NDTs are recorded on Exelon's and Generation's Consolidated Balance Sheets at December 31, 2013 at fair value of approximately $8.1 billion and have an estimated targeted annual pre-tax return of 5.9 % to 6.7 %. To illustrate the significant impact that changes in the CARFR, when combined...

  • Page 56
    ...rates, utility sector market performance and transactions, projected operating and capital cash flows for ComEd's business and the fair value of debt. In applying the second step (if needed), management must estimate the fair value of specific assets and liabilities of the reporting unit. Management...

  • Page 57
    ... supply and risk management activities, including cash flows from contracts that are accounted for as intangible contract assets and liabilities recorded on the balance sheet. In certain cases generation assets may be evaluated on an individual basis where those assets are contracted on a long-term...

  • Page 58
    ... made by Exelon. Depreciable Lives of Property, Plant and Equipment The Registrants have significant investments in electric generation assets and electric and natural gas transmission and distribution assets. Depreciation of these assets is generally provided over their estimated service lives on...

  • Page 59
    ... this modification, over time, Exelon determined that it will decrease equity investments and increase investments in fixed income securities and alternative investments in order to achieve a balanced portfolio of liability hedging and return-generating assets. See Note 16-Retirement Benefits of the...

  • Page 60
    ... benefit plans. Accounting guidance requires that annual health care cost estimates be developed using past and present health care cost trends (both for Exelon and across the broader economy), as well as expectations of health care cost escalation, changes in health care utilization and delivery...

  • Page 61
    ... swap contract with Generation that expired May 31, 2013 and currently holds floating-to-fixed energy swaps with several unaffiliated suppliers that extend into 2032. PECO and BGE have entered into derivative natural gas contracts to hedge their long-term price risk in the natural gas market. PECO...

  • Page 62
    ... part of Generation's energy marketing business, Generation enters into contracts to buy and sell energy to meet the requirements of its customers. These contracts include short-term and long-term commitments to purchase and sell energy and energy-related products in the retail and wholesale markets...

  • Page 63
    ...Black model, an industry standard option valuation model. The Black model takes into account inputs such as contract terms, including maturity, and market parameters, and assumptions of the future prices of energy, interest rates, volatility, credit worthiness and credit spread. For derivatives that...

  • Page 64
    ... 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...

  • Page 65
    ..., 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...

  • Page 66
    .... The increase in revenues, net or purchased power and fuel expense was primarily due to increased capacity prices and higher nuclear volume partially offset by lower realized energy prices, higher nuclear fuel costs, and lower mark-to-market gains in 2013. The decrease in operating and maintenance...

  • Page 67
    ...: retail and wholesale gas, investments in natural gas exploration and production activities, proprietary trading, energy efficiency and demand response, heating, cooling, and cogeneration facilities, and home improvements, sales of electric and gas appliances, servicing of heating, air conditioning...

  • Page 68
    ... Notes to Consolidated Financial Statements for additional information. Generation's supply sources by region are summarized below: 2013 vs. 2012 Supply source (GWh) 2013 2012 (a) Variance % Change 2011 2012 vs. 2011 Variance % Change Nuclear generation (b) Mid-Atlantic ...Midwest ...Fossil...

  • Page 69
    ...(f) Excludes Generation's other business activities not allocated to a region, including retail and wholesale gas, upstream natural gas, proprietary trading, energy efficiency, energy management and demand response. Also excludes Generation's compensation under the reliability-must-run rate schedule...

  • Page 70
    ... in revenue net of purchased power and fuel expense in ERCOT was primarily due to increased realized energy prices and the addition of Constellation in 2012, partially offset by a decrease due to the termination of an energy supply contract with a retail power supply company that was previously...

  • Page 71
    ... of the 2012 merger with Constellation including retail gas, energy efficiency, energy management and demand response, upstream natural gas, and the design and construction of renewable energy facilities. These increases were partially offset by the reduction in revenues net of purchased power and...

  • Page 72
    ... for 2012 compared to 2011, consisted of the following: Increase (Decrease) Labor, other benefits, contracting and materials (a) ...Loss on the sale of Maryland Clean Coal assets (b) ...FERC settlement (c) ...Constellation merger and integration costs ...Corporate allocations (d) ...Pension and...

  • Page 73
    ... to the NDT funds of Generation's Non-Regulatory Agreement Units compared to net realized and unrealized losses in 2011, as described in the table below, offset by $85 million of credit facility termination fees recorded in 2012. Additionally, the increase reflects income related to the contractual...

  • Page 74
    ... increased electric distribution revenues, including the impacts of Senate Bill 9, and increased transmission revenues. See Note 3-Regulatory Matters and Note 14-Income Taxes of the Combined Notes to Consolidated Financial Statements for additional information. Year Ended December 31, 2012, Compared...

  • Page 75
    ...of purchased power expense for the year ended 2013 compared to the same period in 2012 consisted of the following: Increase (Decrease) Weather ...Volume ...Electric distribution revenues, including impacts of Senate Bill 9 ...Discrete impacts of the 2012 Distribution Rate Case Order ...Transmission...

  • Page 76
    ... customers for costs of various legislative and regulatory programs on a full and current basis through approved regulated rates. Programs include ComEd's energy efficiency and demand response and purchased power administrative costs. An equal and offsetting amount has been reflected in operating...

  • Page 77
    ... average usage per residential customer as compared to the same period in 2011. Electric Distribution Revenues. Under EIMA, ComEd recorded increased revenues during the year ended December 31, 2012 of $53 million, primarily due to increased capital investments and increased operating expenses...

  • Page 78
    ...required programs Energy efficiency and demand response programs ...Purchased power administrative costs ...Increase in operating and maintenance expense ... 20 - 20 $ 23 33 (1) 32 $156 (a) The increase includes contracting costs resulting from new projects associated with EIMA for the years ended...

  • Page 79
    ... income tax rates. % Change 2013 vs 2012 WeatherNormal % Change % Change 2012 vs 2011 WeatherNormal % Change Retail Deliveries to customers (in GWhs) 2013 2012 2011 Retail Deliveries Residential ...Small commercial & industrial ...Large commercial & industrial ...Public authorities & electric...

  • Page 80
    ... gas service. Customer choice program activity has no impact on electric and gas revenues net of purchase power and fuel expense. The number of retail customers purchasing energy from a competitive electric generation supplier was 531,500, 496,500, and 387,600 at December 31, 2013, 2012 and 2011...

  • Page 81
    Retail deliveries purchased from competitive electric generation suppliers represented 68%, 66%, and 57% of PECO's retail kWh sales for the years ended December 31, 2013, 2012 and 2011, respectively. The number of retail customers purchasing natural gas from a competitive natural gas supplier was 66...

  • Page 82
    ... gas revenues net of purchased power and fuel expense were lower due to unfavorable winter weather conditions during 2012 in PECO's service territory. The changes in heating and cooling degree days in PECO's service territory for the year ended December 31, 2012 compared to the same period in 2011...

  • Page 83
    ... to 2012 and 2012 compared to 2011 consisted of the following: Increase (Decrease) 2013 vs. 2012 Increase (Decrease) 2012 vs. 2011 Baseline Labor, other benefits, contracting and materials ...Storm-related costs ...Pension and non-pension postretirement benefits expense ...Constellation merger and...

  • Page 84
    ... income tax rates. PECO Electric Operating Statistics and Revenue Detail Weather% Change Normal % 2013 vs. 2012 Change Weather% Change Normal % 2012 vs. 2011 Change Retail Deliveries to customers (in GWhs) (a) 2013 2012 2011 Retail Deliveries Residential ...13,341 13,233 Small commercial...

  • Page 85
    ... electric generation supplier as all customers are assessed distribution charges. For customers purchasing electricity from PECO, revenue also reflects the cost of energy and transmission. (b) Other revenue includes transmission revenue from PJM and wholesale electric revenues. PECO Gas Operating...

  • Page 86
    ... of the 2012 rate order issued by MDPSC and decreased operating revenues net of purchased power and fuel expense in 2012 related to the accrual of the residential customer rate credit provided as a condition of the MDPSC's approval of Exelon's merger with Constellation. Additionally, the increase in...

  • Page 87
    ...to the residential customer rate credit provided in 2012 as a result of the MDPSC's order approving Exelon's merger with Constellation. Pricing. The increase in operating revenues net of purchased power and fuel expense as a result of pricing for the year ended December 31, 2013 compared to the same...

  • Page 88
    ... residential customer rate credit provided as a result of the MDPSC's order approving Exelon's merger with Constellation decreased operating revenues net of purchased power and fuel expense for the year ended December 31, 2012. Commodity Margin The commodity margin for both electric and gas revenues...

  • Page 89
    ... increased during the year ended December 31, 2012 compared to the same period in 2011 due to higher revenue requirements. BGE's transmission rates are established based on a FERC-approved formula. The rates also include transmission investment incentives approved by FERC in a number of orders...

  • Page 90
    ... income tax rates. BGE Electric Operating Statistics and Revenue Detail Weather% Change Normal % 2013 vs. 2012 Change Weather% Change Normal % 2012 vs. 2011 Change Retail Deliveries to customers (in GWhs) 2013 2012 2011 Retail Deliveries (a) Residential ...13,077 12,719 Small commercial...

  • Page 91
    ... electric generation supplier as all customers are assessed distribution charges. For customers purchasing electricity from BGE, revenue also reflects the cost of energy and transmission. (b) Other revenue includes wholesale transmission revenue and late payment charges. (c) Certain commercial...

  • Page 92
    ... and supply power at competitive costs as well as to obtain collections from customers. ComEd's, PECO's and BGE's cash flows from operating activities primarily result from the transmission and distribution of electricity and, in the case of PECO and BGE, gas distribution services. ComEd's, PECO...

  • Page 93
    ... and liabilities exclude the changes in commercial paper, income taxes and the current portion of long-term debt. Cash flows provided by operations for 2013, 2012 and 2011 by Registrant were as follows: 2013 2012 2011 ...Generation (a) ...ComEd ...PECO ...BGE (a) ... Exelon (a) $6,343 3,887 1,218...

  • Page 94
    ... of option activity in a given year may vary due to several factors, including changes in market conditions as well as changes in hedging strategy. ComEd • During 2013, 2012 and 2011, ComEd's net payables to Generation for energy purchases related to its supplier forward contract, ICC-approved...

  • Page 95
    ... the activity of Constellation, and BGE in the case of Exelon, from the merger effective date of March 12, 2012 through December 31, 2012. Exelon's and Generation's activity for 2011 is unadjusted for the effects of the merger. BGE's prior year activity includes its activity for the 12 months ended...

  • Page 96
    ... activity for 2013, 2012 and 2011 by Registrant was as follows: Company Issuances of long-term debt in 2013 Use of proceeds Generation Generation Generation Generation Generation ComEd PECO $5 million of variable rate CEU Credit Agreement project financing, due July 22, 2016 $227 million of fixed...

  • Page 97
    ... paper obligations and for general corporate purposes BGE $300 million of fixed rate 3.50% Notes, due November 15, 2021 Company Retirement of long-term debt in 2013 Generation Generation Generation Generation Generation ComEd ComEd PECO BGE BGE Company (a) $3 million scheduled payments of 7.83...

  • Page 98
    ...time to time and as market conditions warrant, the Registrants may engage in long-term debt retirements via tender offers, open market repurchases or other viable options to reduce debt on their respective balance sheets. Dividends. Cash dividend payments and distributions during 2013, 2012 and 2011...

  • Page 99
    ..., normal purchase normal sales contracts and applicable payables and receivables, net of the contractual right of offset under master netting agreements, which is well within its current available credit facility capacities of $4.3 billion. If ComEd lost its investment grade credit ratings as of...

  • Page 100
    ... on a number of factors at the time of the proposed sale, including other required regulatory approvals, as applicable, the current financial condition of the Registrant, its securities ratings and market conditions. Regulatory Authorizations. The issuance by ComEd, PECO and BGE of long-term debt or...

  • Page 101
    ... Power Act declares it to be unlawful for any officer or director of any public utility "to participate in the making or paying of any dividends of such public utility from any funds properly included in capital account." In addition, under Illinois law, ComEd may not pay any dividend on its stock...

  • Page 102
    ... service fees related to PECO's meter reading operating lease. (e) Purchase power obligations include PPAs and other capacity contracts including those that are accounted for as operating leases. Amounts presented represent Generation's expected payments under these arrangements at December 31, 2013...

  • Page 103
    ...and officers representing Exelon's business units. The RMC reports to the risk oversight committee of the Exelon board of directors on the scope of the risk management activities. Commodity Price Risk Commodity price risk is associated with price movements resulting from changes in supply and demand...

  • Page 104
    ... supply procurement costs from retail customers with no mark-up. 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...

  • Page 105
    ... balance sheet classification of the mark-to-market energy contract net assets (liabilities) recorded as of December 31, 2013, and December 31, 2012. Exelon(b) Total mark-to-market energy contract net assets (liabilities) at January 1, 2012 ...Contracts acquired at merger date (c) ...Total change...

  • Page 106
    ... measurements and the fair value hierarchy. Exelon Maturities Within 2014 2015 2016 2017 2018 2019 and Beyond Total Fair Value Normal Operations, Commodity derivative contracts (a)(b): Actively quoted prices (Level 1) ...Prices provided by external sources (Level 2) ... $ (30) $ (26) $ 17 444 143...

  • Page 107
    ... tariffs to adjust rates annually through a rider mechanism to reflect increases or decreases in annual uncollectible accounts expense. ComEd's power procurement contracts provide suppliers with a certain amount of unsecured credit. The credit position is based on forward market prices compared to...

  • Page 108
    ...under its natural gas supply and asset management agreements with investment grade suppliers. BGE Credit risk for BGE is managed by credit and collection policies, which are consistent with state regulatory requirements. BGE is currently obligated to provide service to all electric customers within...

  • Page 109
    ...collateral under its electric supply and natural gas procurement contracts. See Note 12 of the Combined Notes to Consolidated Financial Statements for further information. RTOs and ISOs Generation, ComEd, PECO and BGE participate in all, or some, of the established, real-time energy markets that are...

  • Page 110
    ... and have limited counterparty credit risk. Long-Term Leases Exelon's consolidated balance sheet, as of December 31, 2013, included a $698 million net investment in coal-fired plants in Georgia and Texas subject to long-term leases. This investment represents the estimated residual value of leased...

  • Page 111
    ... variables constant and assumes only the discussed changes in interest rates and equity prices. See Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion of equity price risk as a result of the current capital and credit market conditions. 105

  • Page 112
    ... to Exelon's 2013 Form 10-K. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Management's Report on Internal Control Over Financial Reporting The management of Exelon Corporation (Exelon) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is...

  • Page 113
    ... financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform...

  • Page 114
    Exelon Corporation and Subsidiary Companies Consolidated Statements of Operations and Comprehensive Income For the Years Ended December 31, 2013 2012 2011 (In millions, except per share data) Operating revenues ...Operating expenses ...Purchased power and fuel ...Purchased power and fuel from ...

  • Page 115
    ... ...Purchases of investments ...Change in restricted cash ...Distribution from CENG ...Other investing activities ...Net cash flows used in investing activities ...Cash flows from financing activities Payment of accounts receivable agreement ...Changes in short-term debt ...Issuance of long-term...

  • Page 116
    Exelon Corporation and Subsidiary Companies Consolidated Balance Sheets (In millions) December 31, 2013 2012 ASSETS Current assets Cash and cash equivalents ...Cash and cash equivalents of variable interest entities ...Restricted cash and investments ...Restricted cash and investments of variable...

  • Page 117
    Exelon Corporation and Subsidiary Companies Consolidated Balance Sheets December 31, 2013 2012 (In millions) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Short-term borrowings ...Short-term notes payable-accounts receivable agreement ...Long-term debt due within one year ...Long-term ...

  • Page 118
    ... and preference stock dividends ...Other comprehensive loss, net of income taxes of $(41) ...Balance, December 31, 2011 ...Net income (loss) ...Long-term incentive plan activity ...Employee stock purchase plan issuances ...Common stock dividends ...Common stock issuance Constellation merger ...Non...

  • Page 119
    ... by the Agreement and Plan of Merger ("Merger Agreement"). As a result of the merger transaction, Generation now includes the former Constellation generation and customer supply operations. BGE, formerly Constellation's regulated utility subsidiary, is now a subsidiary of Exelon. Refer to...

  • Page 120
    ... costs and other loss contingencies, taxes and unbilled energy revenues. Actual results could differ from those estimates. Reclassifications Certain prior year amounts in Exelon's Consolidated Statements of Operations, Consolidated Statements of Cash Flows, and Consolidated Balance Sheets...

  • Page 121
    ... or purchased power on their Consolidated Statements of Operations, the classification of which depends on the net hourly activity. In addition, capacity revenue and expense classification is based on the net sale or purchase position of the Company in the different RTOs and ISOs. Option Contracts...

  • Page 122
    ... based on accounts receivable aging, historical experience and other currently available information. ComEd and PECO estimate the allowance for uncollectible accounts on customer receivables by applying loss rates developed specifically for each company to the outstanding receivable balance by risk...

  • Page 123
    ... and supplies inventory generally includes the weighted average costs of transmission, distribution and generating plant materials. Materials are generally charged to inventory when purchased and expensed or capitalized to property, plant and equipment, as appropriate, when installed or used...

  • Page 124
    ... also includes capitalized interest for Generation and Exelon Corporate and AFUDC for regulated property at ComEd, PECO and BGE. The cost of repairs and maintenance, including planned major maintenance activities and minor replacements of property, is charged to maintenance expense as incurred. For...

  • Page 125
    ... board of directors has approved the project and has committed to a plan to develop it, and Exelon and Generation have received the required regulatory approvals or management believes the receipt of required regulatory approvals is probable. Capitalized development costs are charged to Operating...

  • Page 126
    ... asset retirement activity even though the timing and/or method of settlement may be conditional on a future event. To estimate its decommissioning obligation related to its nuclear generating stations, Generation uses a probability-weighted, discounted cash flow model which, on a unit-by-unit basis...

  • Page 127
    ... activities, including cash flows from contracts that are recorded as intangible contract assets and liabilities on the balance sheet. In certain cases generation assets may be evaluated on an individual basis where those assets are contracted on a long-term basis with a third party and operations...

  • Page 128
    ... changes in fair value recognized through earnings for the combined company. As part of Generation's energy marketing business, Generation enters into contracts to buy and sell energy to meet the requirements of its customers. These contracts include short-term and long-term commitments to purchase...

  • Page 129
    ...future. The following recently issued accounting standard is not yet required to be reflected in Exelon's combined financial statements. Presentation of Unrecognized Tax Benefits When Net Operating Loss Carryforwards, Similar Tax Losses or Tax Credit Carryforwards Exist In July 2013, the FASB issued...

  • Page 130
    ... BGE, including the right to assess, collect, and receive nonbypassable rate stabilization charges payable by all residential electric customers of BGE. These charges are being assessed in order to recover previously incurred power purchase costs that BGE deferred pursuant to Senate Bill 1. BGE has...

  • Page 131
    ... arrangements refer to Note 13-Debt and Credit Agreements. Retail Power Supply Entity. In August 2013, Generation executed an agreement to terminate its energy supply contract with a retail power supply company that was previously a consolidated VIE. Generation did not have an ownership interest in...

  • Page 132
    ... monetize the value of the original contracts to purchase and sell power. Under the power sales contracts, Generation sold power to the VIEs which, in turn, sold that power to an electric distribution utility through 2013. In connection with this transaction, a third-party acquired the equity of the...

  • Page 133
    ... to Exelon's or Generation's general credit. Fuel Purchase Commitments. Generation's customer supply operations include the physical delivery and marketing of power obtained through its generating capacity, and long-, intermediate- and short-term contracts. Generation also has contracts to purchase...

  • Page 134
    ... Energy Infrastructure Modernization Act Background Since 2011, ComEd's distribution rates are established through a performance-based rate formula, pursuant to EIMA. EIMA also provides a structure for substantial capital investment by utilities over a ten-year period to modernize Illinois' electric...

  • Page 135
    ...five years, as long as ComEd is subject to EIMA, to fund customer assistance programs for low-income customers, which will not be recoverable through rates. These contributions began in 2012. On January 6, 2012, ComEd filed its Infrastructure Investment Plan with the ICC. Under that plan, ComEd will...

  • Page 136
    ... meters, of which more than 60,000 meters were installed by the end of 2013. Appeal of 2007 Illinois Electric Distribution Rate Case. The ICC issued an order in ComEd's 2007 electric distribution rate case (2007 Rate Case) approving a $274 million increase in ComEd's annual delivery services revenue...

  • Page 137
    ...assumed commercial operation date in 2017. The sourcing agreement provides that the Utilities will pay FutureGen's contract prices, which are set annually pursuant to a formula rate. The contract prices are based on the difference between the costs of the facility and the revenues FutureGen receives...

  • Page 138
    ... in customer bills since January 1, 2012. In September 2012, PECO filed an application with the IRS to change its method of accounting for gas distribution repairs for the 2011 tax year. The expected total refund to customers for the tax cash benefit from the application of the new method to costs...

  • Page 139
    ...PAPUC in its previously issued Retail Markets Intermediate Work Plan Order. PECO was also directed to allow its low-income Customer Assistance Program (CAP) customers to purchase their generation supply from electric generation suppliers beginning April 1, 2014. On May 1, 2013, PECO filed a Petition...

  • Page 140
    .... Pursuant to the January 23, 2014, vendor agreement, PECO will reclassify the regulatory asset balance as a receivable, with no gain or loss impacts on future results of operations. Energy Efficiency Programs PECO's PAPUC-approved Phase I EE&C Plan had a four-year term that began on June 1, 2009...

  • Page 141
    ... Gas Distribution Rate Case On July 27, 2012, BGE filed an application for increases to its electric and gas base rates with the MDPSC. On February 22, 2013, the MDPSC issued an order in BGE's 2012 electric and natural gas distribution rate case for increases in annual distribution service revenue...

  • Page 142
    ... includes $6 million of costs incurred during 2012. Current MDPSC treatment of these merger integration regulatory assets is to provide recovery over a five year period. 2013 Maryland Electric and Gas Distribution Rate Case On May 17, 2013, BGE filed an application for increases of $101 million and...

  • Page 143
    ..., Exelon is working with other market participants to implement market rules that will appropriately limit the market suppressing effect of such state activities. MDPSC Derecho Storm Order Following the June 2012 Derecho storm which hit the mid-Atlantic region interrupting electrical service to...

  • Page 144
    ...transmission investment), the estimated annual impact would be a reduction in revenues of approximately $10 million. PJM Transmission Rate Design and Operating Agreements PJM Transmission Rate Design specifies the rates for transmission service charged to customers within PJM. Currently, ComEd, PECO...

  • Page 145
    ... limited availability demand response resources) cannot inappropriately affect capacity auction prices in PJM. Market-Based Rates Generation, ComEd, PECO and BGE are public utilities for purposes of the Federal Power Act and are required to obtain FERC's acceptance of rate schedules for wholesale...

  • Page 146
    ... 36 months ahead of the scheduled delivery year. The most recent auction for the delivery year ending May 31, 2017 occurred in May 2013. License Renewals On June 22, 2011, Generation submitted applications to the NRC to extend the operating licenses of Limerick Units 1 and 2 by 20 years. The current...

  • Page 147
    ...31, 2013 and 2012. December 31, 2013 Current Noncurrent Regulatory assets Pension and other postretirement benefits ...Deferred income taxes ...AMI programs ...AMI meter events ...Under-recovered distribution service costs ...Debt costs ...Fair value of BGE long-term debt ...Fair value of BGE supply...

  • Page 148
    ...Current Noncurrent Regulatory liabilities Nuclear decommissioning ...Removal costs ...Energy efficiency and demand response programs ...Electric distribution tax repairs ...Gas distribution tax repairs ...Over-recovered uncollectible accounts ...Energy and transmission programs ...Over-recovered gas...

  • Page 149
    ... for the original meters and related installation and removal costs were probable of recovery based on applicable case law and past precedent on reasonably and prudently incurred costs. As such, PECO has deferred these costs on Exelon's and PECO's Consolidated Balance Sheet. PECO will not earn...

  • Page 150
    ... discounts issued to electric and gas customers enrolled in assistance programs. As of December 31, 2013, PECO was over-recovered for both its electric and gas programs. PECO earns interest on under-recovered costs and pays interest on overrecovered costs to customers. Financial swap with Generation...

  • Page 151
    ... in 2007, ComEd's energy and transmission costs are recoverable (refundable) under ComEd's ICC and/or FERC-approved rates. ComEd earns interest on under-recovered costs and pays interest on over-recovered costs to customers. The PECO energy costs represent the electric and gas supply related costs...

  • Page 152
    ...pursuant to an order by the MDPSC. Fixed assets related to the demand response program are recovered over the life of the equipment. Also included in the demand response program are customer bill credits related to BGE's Smart Energy Rewards program which began in July 2013. Actual costs incurred in...

  • Page 153
    ...over a seven-year period. Credits began being reflected in customer bills on January 1, 2012. No interest will be paid to customers. Gas distribution tax repairs. PECO's 2010 natural gas distribution rate case settlement required that the expected cash benefit from the application of new tax repairs...

  • Page 154
    ... its next gas distribution rate case, PECO will propose a mechanism to recover the remaining implementation costs as a distribution charge to low volume transportation customers or apply future discounts on purchased receivables from natural gas suppliers serving those customers. (b) For ComEd and...

  • Page 155
    ... with 120MW of new natural gas-fired generation to satisfy certain of these commitments and achievement of commercial operation is expected in 2015. In December 2013, Generation acquired the Fourmile Ridge Project in western Maryland and executed a wind turbine supply agreement for construction of...

  • Page 156
    ...of March 31, 2013. The final purchase price allocation of the Merger of Exelon with Constellation was as follows: Preliminary Purchase Price Allocation, excluding amortization Current assets ...Property, plant and equipment ...Unamortized energy contracts ...Other intangibles, trade name and retail...

  • Page 157
    ...the underlying cash flows as of the merger date. Amortization expense and income are recorded through purchased power and fuel expense or operating revenues. Exelon and Generation present separately in their Consolidated Balance Sheets the unamortized energy contract assets and liabilities for these...

  • Page 158
    ...' respective Consolidated Statements of Operations and Comprehensive Income, with the exception of the BGE customer rate credit and the credit facility fees, which are included as a reduction to operating revenues and other, net, respectively, for years ended December 31, 2013 and 2012. See Note...

  • Page 159
    ... Public Utilities Commission, with Pacific Gas & Electric Company for the full output of the plant. The acquisition supports Exelon's commitment to renewable energy as part of Exelon 2020. Exelon expects to invest up to $650 million in equity in the project through 2014. The DOE's Loan Programs...

  • Page 160
    ...the Investment in CENG on Exelon's and Generation's Consolidated Balance Sheets. A second distribution will occur prior to the closing provided that CENG has sufficient available cash. At the closing, Generation, CENG and subsidiaries of CENG will execute a Nuclear Operating Services Agreement (NOSA...

  • Page 161
    ... Customers with past due balances that meet certain income criteria are provided the option to enter into an installment payment plan, some of which have terms greater than one year, to repay past due balances in addition to paying for their ongoing service on a current basis. The receivable balance...

  • Page 162
    ... 31, 2013 and 2012: Average Service Life (years) 2013 2012 Asset Category Electric-transmission and distribution ...Electric-generation ...Gas-transportation and distribution ...Common-electric and gas ...Nuclear fuel (a) ...Construction work in progress ...Other property, plant and equipment...

  • Page 163
    ... the years ended December 31, 2013, 2012 and 2011. See Note 1-Significant Accounting Polices for further information regarding property, plant and equipment policies and accounting for capitalized software costs for Exelon, Generation, ComEd, PECO and BGE. See Note 13-Debt and Credit Agreements for...

  • Page 164
    ...long-term energy and capacity price expectations. As a result, Exelon recorded a $14 million pre-tax impairment charge in the second quarter of 2013, which was recorded in investments and operating and maintenance expense in the Consolidated Balance Sheet and the Consolidated Statement of Operations...

  • Page 165
    9. Jointly Owned Electric Utility Plant Exelon, Generation, PECO and BGE's undivided ownership interests in jointly owned electric plants and transmission facilities at December 31, 2013 and 2012 were as follows: Nuclear generation Peach Quad Cities Bottom Salem (a) Fossil fuel generation Keystone ...

  • Page 166
    ... include discount and growth rates, utility sector market performance and transactions, projected operating and capital cash flows from ComEd's business and the fair value of debt. Management performs a reconciliation of the sum of the estimated fair value of all Exelon reporting units to Exelon...

  • Page 167
    ... for ComEd's business (including the impacts of the May 2012 Order) as well as changes in certain other market conditions, such as the discount rate and EBITDA multiples. Other Intangible Assets For discussion surrounding Exelon's and Generation's unamortized energy contracts, trade name and retail...

  • Page 168
    ... Energy Credits and Alternative Energy Credits Exelon's, Generation's, ComEd's and PECO's other intangible assets, included in other current assets and other deferred debits and other assets on the Consolidated Balance Sheets, include RECs and AECs. Revenue for RECs that are part of a bundled power...

  • Page 169
    ... value using Generation's discount rate, which is calculated using the same methodology as described above for the taxable debt securities, and an estimated maturity date of 2025. Long-Term Debt to Financing Trusts. Exelon's long-term debt to financing trusts is valued based on publicly traded...

  • Page 170
    ... value on Exelon's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of December 31, 2013 and December 31, 2012: As of December 31, 2013 Level 1 Level 2 Level 3 Total Assets Cash equivalents (a) ...Nuclear decommissioning trust fund investments Cash...

  • Page 171
    ... 31, 2013 Level 1 Level 2 Level 3 Total Rabbi trust investments Cash equivalents ...Mutual funds (d)(e) ...Rabbi trust investments subtotal ......and allocation of collateral ...Interest rate mark-to-market derivative assets subtotal ...Other Investments ...Total assets ...Liabilities Commodity...

  • Page 172
    ... and agencies ...Debt securities issued by states of the United States and political subdivisions of the states ...Corporate debt securities ...Federal agency mortgage-backed securities ...Commercial mortgage-backed securities (non-agency) ...Fixed income subtotal ...Middle market lending ...Other...

  • Page 173
    ... with ComEd. (h) The Level 3 balance includes the current and noncurrent liability of $17 million and $176 million at December 31, 2013, respectively, and $18 million and $49 million at December 31, 2012, respectively, related to floating-to-fixed energy swap contracts with unaffiliated suppliers...

  • Page 174
    ...consolidation in Exelon's Consolidated Financial Statements. (c) Includes an increase of transfers into Level 3 arising from reductions in market liquidity, which resulted in less observable contract tenures in various locations. For the Year Ended December 31, 2012 Nuclear Decommissioning Pledged...

  • Page 175
    ... 40 Operating Revenue $108 $127 Purchased Power and Fuel $2 $1 Other, net Total gains included in income for the year ended December 31, 2012 ...Change in the unrealized gains (losses) relating to assets and liabilities held for the year ended December 31, 2012 ...(a) Other, net activity consists...

  • Page 176
    ...fund share (the unit of account), primarily derived from the quoted prices in active markets on the underlying equity securities. Middle market lending are investments in loans or managed funds which invest in private companies. Generation elected the fair value option for its investments in certain...

  • Page 177
    ... assumptions. The modeling assumptions include using natural gas heat rates to project long term forward power curves adjusted by a renewable factor that incorporates time of day and seasonality factors to reflect accurate renewable energy pricing. In addition, marketability reserves are applied...

  • Page 178
    ... the five-year financial swap contract between Generation and ComEd that ended in May 2013, which eliminates in consolidation. Quoted forward natural gas rates are utilized to project the forward power curve for the delivery of energy at specified future dates. The natural gas curve is extrapolated...

  • Page 179
    ... in the application of discounts or premiums applied to the prices of comparable companies for factors such as size, marketability, credit risk and relative performance. Because Generation relies on third-party fund managers to develop the quantitative unobservable inputs without adjustment for the...

  • Page 180
    ...its electricity procurement costs from retail customers with no mark-up, ComEd's price risk related to power procurement is limited. On December 17, 2010, ComEd entered into several 20-year floating-to-fixed energy swap contracts with unaffiliated suppliers for the procurement of long-term renewable...

  • Page 181
    ... balance of long-term and short-term gas purchases under different pricing approaches in order to achieve system supply reliability at the least cost. PECO's reliability strategy is twofold. First, PECO must assure that there is sufficient transportation capacity to satisfy delivery requirements...

  • Page 182
    ... position that gives rise to the interest rate exposure. Generation does not utilize proprietary trading interest rate derivatives with the objective of benefiting from shifts or changes in market interest rates. (b) Represents the netting of fair value balances with the same counterparty and any...

  • Page 183
    ...in current earnings. Exelon includes the gain or loss on the hedged items and the offsetting loss or gain on the related interest rate swaps in interest expense as follows: Twelve Months Ended December 31, 2013 2012 2011 2013 2012 2011 Gain (Loss) on Swaps Gain (Loss) on Borrowings Income Statement...

  • Page 184
    ... U.S. dollars. At December 31, 2013, Exelon and Generation had $150 million in notional amounts of fixed-to-floating interest rate swaps that are marked-to-market, with unrealized gains of $2 million. These swaps, which were acquired as part of the merger with Constellation, expire in 2014. During...

  • Page 185
    ... Includes current and noncurrent liabilities relating to floating-to-fixed energy swap contracts with unaffiliated suppliers. Cash Flow Hedges. As discussed previously, effective prior to the merger with Constellation, Generation de-designated all of its cash flow hedges relating to commodity price...

  • Page 186
    ... Dollars. For the years ended December 31, 2013, 2012 and 2011, the following net pre-tax mark-tomarket gains (losses) of certain purchase and sale contracts were reported in operating revenues or purchased power and fuel expense at Exelon and Generation in the Consolidated Statements of Operations...

  • Page 187
    ... merger, the five-year financial swap contract between Generation and ComEd was de-designated. As a result, all prospective changes in fair value are recorded to operating revenues and eliminated in consolidation. (b) Exelon has historically presented mark-to-market gains and losses within purchased...

  • Page 188
    ... of credit . ComEd's power procurement contracts provide suppliers with a certain amount of unsecured credit. The credit position is based on forward market prices compared to the benchmark prices. The benchmark prices are the forward prices of energy projected through the contract term and are set...

  • Page 189
    ...electric supply through its PAPUC-approved DSP Program. PECO's counterparty credit risk is mitigated by its ability to recover realized energy costs through customer rates. See Note 3-Regulatory Matters for additional information. PECO's natural gas procurement plan is reviewed and approved annually...

  • Page 190
    ...exceed contract prices. As of December 31, 2013, ComEd held approximately $19 million in the form of cash and letters of credit as margin for both the annual and long-term REC obligations. See Note 1-Significant Accounting Policies for additional information. PECO's natural gas procurement contracts...

  • Page 191
    ... with minority and community banks located primarily within ComEd's, PECO's and BGE's service territories. These facilities expire on October 17, 2014 and are solely for issuing letters of credit. As of December 31, 2013, letters of credit issued under these agreements totaled $20 million, $18...

  • Page 192
    ... term for an additional one year period. Generally, it is expected that costs incurred to extend the facility will be amortized over the newly extended life of the facility. Borrowings under Exelon Corporate's, Generation's, ComEd's, PECO's and BGE's credit agreements bear interest at a rate based...

  • Page 193
    ...Lease In the second quarter of 2013, ComEd entered into a 20-year capital lease for distribution substation space at Willis Tower in Chicago, Illinois. Exelon and ComEd recorded $8 million on their Consolidated Balance Sheets within property plant and equipment and long-term debt at the inception of...

  • Page 194
    ... to financing trusts within Exelon's Consolidated Balance Sheets. Long-term debt maturities at Exelon in the periods 2014 through 2018 and thereafter are as follows: Year 2014 ...2015 ...2016 ...2017 ...2018 ...Thereafter ...Total ...(a) Includes $648 million due to ComEd, PECO and BGE financing...

  • Page 195
    ...a Generation subsidiary, Constellation Solar, LLC, paid off the remaining balance of the three-year senior secured credit facility that is designed to support the growth of solar operations in the amount of $94 million and terminated the facility. The facility was scheduled to mature in June of 2014...

  • Page 196
    ... 2013 2012 2011 U.S. Federal statutory rate ...Increase (decrease) due to: State income taxes, net of Federal income tax benefit ...Qualified nuclear decommissioning trust fund income ...Tax exempt income ...Health care reform legislation ...Amortization of investment tax credit, net deferred taxes...

  • Page 197
    ..., 2013 2012 Plant basis differences ...Accrual based contracts ...Derivatives and other financial instruments ...Deferred pension and post-retirement obligation ...Nuclear decommissioning activities ...Deferred debt refinancing costs ...Regulatory ...Tax loss carryforward ...Tax credit carryforward...

  • Page 198
    ... Unrecognized tax benefits at December 31, 2013 ...$2,175 Unrecognized tax benefits at January 1, 2012 ...$ 807 Merger Balance Transfer ...195 Increases based on tax positions related to 2012 ...34 Change to positions that only affect timing ...(88) Increases based on tax positions prior to 2012...

  • Page 199
    ...the Registrants' Consolidated Balance Sheets. Prior to the merger legacy Constellation recorded interest related to uncertain tax positions as a tax and not interest. Net interest receivable (payable) as of December 31, 2013 ...December 31, 2012 ... $(349) 31 The following table sets forth the net...

  • Page 200
    ... the appropriate tax treatment of costs incurred to repair electric generation assets. Generation expects to change its method of accounting for deducting repairs in accordance with this guidance beginning with its 2014 tax year. Generation has estimated that adoption of the new method will...

  • Page 201
    ... electric distribution rate case settlement for PECO's cash tax benefit resulting from the application of the method change to years prior to 2010. Accounting for Gas Distribution Property Repairs In September 2012, PECO filed an application with the IRS to change its method of accounting for gas...

  • Page 202
    ... an allocation of Federal tax benefits from Exelon under the Tax Sharing Agreement as a result of ComEd's and BGE's 2013 tax net operating loss generated primarily by the bonus depreciation deduction allowed under the Tax Relief Act of 2010. During 2012, Generation and PECO recorded an allocation of...

  • Page 203
    ...-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 were entirely offset by decreases in Property, plant and equipment within Exelon's and Generation...

  • Page 204
    ... on Exelon's Consolidated Balance Sheets. (c) Net unrealized gains (losses) related to Generation's NDT funds with Non-Regulatory Agreement Units are included within Other, net in Exelon's Consolidated Statements of Operations and Comprehensive Income. Interest and dividends on NDT fund investments...

  • Page 205
    ... former PECO nuclear units, regardless of whether the funds held in the NDT funds are expected to exceed or fall short of the total estimated decommissioning obligation, decommissioning-related activities are generally offset within Exelon's and Generation's Consolidated Statements of Operations and...

  • Page 206
    ... annual pre-tax return on the NDT funds of 5.9% to 6.7% (as compared to a historical 5-year annual average pre-tax return of approximately 11.7%). Generation is required to provide to the NRC a biennial report by unit (annually for units that have been retired or are within five years of the current...

  • Page 207
    ... documents generally relating to Exelon and Generation's reporting and funding of the future decommissioning of Exelon's nuclear power plants. Exelon and Generation are cooperating with the SEC and providing the requested documents. As the future values of trust funds change due to market conditions...

  • Page 208
    ... utilities' Consolidated Balance Sheets. 16. Retirement Benefits As of December 31, 2013, Exelon sponsored defined benefit pension plans and other postretirement benefit plans for essentially all Generation, ComEd, PECO, BGE and BSC employees. In connection with the acquisition of Constellation...

  • Page 209
    ... of the pension and other postretirement benefit obligations refers to the difference between plan assets and estimated obligations of the plan. The funded status changes over time due to several factors, including contribution levels, assumed discount rates and actual returns on plan assets. 203

  • Page 210
    ... discount rate of 4.66%. Certain other postretirement benefit plans are not funded. A portion of the net periodic benefit cost is capitalized within the Consolidated Balance Sheets. Other Postretirement Benefits 2013 2012 2011 Pension Benefits 2013 2012 2011 Components of net periodic benefit cost...

  • Page 211
    ... Postretirement Benefits 2013 2012 2011 Pension Benefits 2013 2012 2011 Changes in plan assets and benefit obligations recognized in AOCI and regulatory assets (liabilities): Current year actuarial (gain) loss ...Amortization of actuarial gain (loss) ...Current year prior service (credit) cost...

  • Page 212
    ... claims activity as of December 31, 2013. The valuation is expected to be completed in the first quarter of 2014 for legacy Exelon plans and in the second quarter of 2014 for legacy Constellation plans. Pension Benefits Other Postretirement Benefits Prior service cost (credit) ...Actuarial loss...

  • Page 213
    ...the Constellation merger, plan settlement and curtailment events, and plan changes using discount rates of 3.71% and 3.72% for pension and other postretirement benefits, respectively. Costs for the year ended December 31, 2012 reflect the impact of these remeasurements. (c) Not applicable to pension...

  • Page 214
    ... in 2012 and $11 million in 2011. Effective January 1, 2013, Exelon is no longer receiving this subsidy. (b) The increase in 2011 pension contributions was related to Exelon's $2.1 billion contribution to its pension plans as a result of accelerated cash benefits associated with the Tax Relief...

  • Page 215
    ... plans at December 31, 2013 were: Pension Benefits Other Postretirement Benefits 2014 ...2015 ...2016 ...2017 ...2018 ...2019 through 2023 ...Total estimated future benefit payments through 2023 ...Plan Assets $ 929 851 873 902 1,015 5,257 $9,827 $ 204 210 219 228 238 1,383 $2,482 Investment...

  • Page 216
    ... ...Fixed income securities ...Alternative investments (a) ...Total ...(a) Alternative investments include private equity, hedge funds and real estate. 41% 39% 20% 45% 37 18 100% 46% 40 14 100% Concentrations of Credit Risk. Exelon evaluated its pension and other postretirement benefit plans...

  • Page 217
    ...Exelon's pension and other postretirement benefit plan assets measured and recorded at fair value on Exelon's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy at December 31, 2013 and 2012: Level 1 Level 2 Level 3 At December 31, 2013 (a) Pension plan...

  • Page 218
    ... the amount of the company's exposure to credit or market loss. (c) Excludes net assets of $43 million and $81 million at December 31, 2013 and 2012, respectively, which are required to reconcile to the fair value of net plan assets. These items consist primarily of receivables related to pending...

  • Page 219
    ... pension and other postretirement benefit plans for the years ended December 31, 2013 and 2012: Hedge funds Private equity Real estate Debt securities Preferred stock Total Pension Assets Balance as of January 1, 2013 ...Actual return on plan assets: Relating to assets still held at the reporting...

  • Page 220
    ... limited partnerships that invest in operating companies that are not publicly traded on a stock exchange such as leveraged buyouts, growth capital, venture capital, distressed investments and investments in natural resources. Private equity valuations are reported by the fund manager and are based...

  • Page 221
    ... the years ended December 31, 2013, 2012 and 2011: For the Year Ended December 31, 2013 ...2012 ...2011 ...17. Severance $85 67 78 Exelon has an ongoing severance plan under which, in general, the longer an employee worked prior to termination the greater the amount of severance benefits. Exelon...

  • Page 222
    ... course of business, which were not directly related to the merger with Constellation. These benefits are accrued for when the benefits are considered probable and can be reasonably estimated. For the years ended December 31, 2013, 2012, and 2011, Exelon recorded severance costs of $18 million...

  • Page 223
    ... of PECO, at the indicated dollar amounts per share, plus accrued dividends. At December 31, 2013 and 2012, BGE cumulative preference stock, $100 par value, consisted of 6,500,000 shares authorized and the outstanding amounts set forth below. Shares of BGE preference stock have no voting power...

  • Page 224
    ... 31, 2013, 2012 and 2011, exercised and distributed stock-based awards were primarily issued from authorized but unissued common stock shares. The Compensation Committee of Exelon's Board of Directors changed the mix of awards granted under the LTIP in 2013 by eliminating stock options in favor...

  • Page 225
    ..., 2013, 2012 and 2011: Year Ended December 31, 2013 2012 2011 Realized tax benefit when exercised/distributed: Stock options ...Restricted stock units ...Performance share awards ...Stock deferral plan ...Excess tax benefits included in other financing activities of Exelon's Consolidated Statements...

  • Page 226
    ...do not include stock options that were converted in connection with the merger with Constellation during the year ended 2012. The dividend yield is based on several factors, including Exelon's most recent dividend payment at the grant date and the average stock price over the previous year. Expected...

  • Page 227
    ... in Exelon's Consolidated Balance Sheets. For the years ended December 31, 2013, 2012 and 2011, Exelon settled restricted stock units with fair value totaling $28 million, $25 million and $19 million, respectively. At December 31, 2013, $64 million of total unrecognized compensation costs related...

  • Page 228
    ... prior to 2012 generally vest and settle over a three-year period with the holders receiving shares of common stock and/or cash annually during the vesting period. The one-time 2013 performance share transition awards, which provide an opportunity to earn an award contingent on company performance...

  • Page 229
    ...effect was approximately 20 million in 2013, 14 million in 2012 and 9 million in 2011. Under share repurchase programs, 35 million shares of common stock are held as treasury stock with a cost of $2.3 billion as of December 31, 2013. In 2008, Exelon management decided to defer indefinitely any share...

  • Page 230
    ... Energy related hedges ...Other cash flow hedges ... $ 464 (3) 461 (184) $ 277 Operating revenues Interest expense Total before tax Tax expense Net of tax Amortization of pension and other postretirement benefit plan items Prior service costs ...Actuarial losses ...Deferred compensation unit plan...

  • Page 231
    .... As of January 1, 2013, the amount of nuclear energy liability insurance purchased is $375 million for each operating site. Additionally, the Price-Anderson Act requires a second layer of protection through the mandatory participation in a retrospective rating plan for power reactors (currently 104...

  • Page 232
    ..., 2014. Additionally, NEIL provides replacement power cost insurance in the event of a major accidental outage at an insured nuclear station. The premium for this coverage is subject to assessment for adverse loss experience. Generation's maximum share of any assessment is $58 million per year (the...

  • Page 233
    ...-cost energy supply sources to meet its physical delivery obligations to its customers. Generation has also purchased firm transmission rights to ensure that it has reliable transmission capacity to physically move its power supplies to meet customer delivery needs. The primary intent and business...

  • Page 234
    ... acquired capacity to third parties under long-term capacity sale contracts. Expected payments include certain fixed capacity charges which may be reduced based on plant availability. (b) The table excludes renewable energy purchases that are contingent in nature. (c) Transmission rights purchases...

  • Page 235
    ... above, Generation has commitments to purchase fuel supplies for nuclear and fossil generation. PECO and BGE have commitments to purchase natural gas, related transportation, storage capacity and services to serve customers in their gas distribution service territory. As of December 31, 2013, these...

  • Page 236
    ... cars, operating equipment and office equipment, as of December 31, 2013 were: 2014 ...2015 ...2016 ...2017 ...2018 ...Remaining years ...Total minimum future lease payments (a)(b)(c) ...(a) Excludes Generation's PPAs and other capacity contracts that are accounted for as contingent operating lease...

  • Page 237
    ... plus certain purchase price adjustments. In connection with the transaction, Generation entered into a guarantee agreement under which Generation guarantees the timely payment of TII's obligations to the subsidiary of AES Corporation pursuant to the terms of the purchase and sale agreement relating...

  • Page 238
    ... at the direction of the MDE. • ComEd, pursuant to an ICC order, and PECO, pursuant to settlements of natural gas distribution rate cases with the PAPUC, are currently recovering environmental remediation costs of former MGP facility sites through customer rates. BGE is authorized to and is...

  • Page 239
    ... conditions. Prior to the Merger, Constellation recorded in its Consolidated Balance Sheets total liabilities of approximately $30 million to comply with the consent decree with an additional $3 million recognized through purchase accounting. During third quarter of 2013, Generation increased...

  • Page 240
    ... high removal rates of metals. Owners of oil units not currently meeting the proposed emission standards may choose to convert the units to light oils or natural gas, install control technologies or retire the units. The MATS rule requires generating stations to meet the new standards three years...

  • Page 241
    ... rejection left Generation as the party responsible to make remaining payments under the lease. In January 2013, Generation made the final $10 million payment due under the lease agreement which had been accrued at December 31, 2012. During the second quarter of 2013, Exelon filed proofs of claim of...

  • Page 242
    ... impacted any accounting conclusions as of December 31, 2013. In May 2010, the United States and State of Illinois initiated a lawsuit against Midwest Generation, ComEd and EME alleging Clean Air Act violations relating to the modification and/or operation of six (coal) electric generation plants in...

  • Page 243
    ...site was accepted into the program in 2010 and is currently going through the process to remediate the site and receive closure from MDE. Exelon currently estimates the cost to close the site to be approximately $6 million, which has been fully reserved as of December 31, 2013. Sauer Dump. On May 30...

  • Page 244
    ... 1, 2015, and require that states submit to U.S. EPA their implementation plans no later than June 30, 2016. In developing this rulemaking, U.S. EPA is directed to consider a number of factors, including options to reduce costs, options to ensure the continued use of a range of energy sources and...

  • Page 245
    ... recorded as of December 31, 2013. Increased claims activity resulting from this ruling could have a material adverse impact on Exelon, Generation's and PECO's future results of operations and cash flows. BGE. Since 1993, BGE and certain Constellation (now Generation) subsidiaries have been involved...

  • Page 246
    ...-125 of the Illinois Public Utilities Act provides that in the event an electric utility, such as ComEd, experiences a continuous power interruption of four hours or more that affects (in ComEd's case) more than 30,000 customers, the utility may be liable for actual damages suffered by customers as...

  • Page 247
    ... the terms of Exelon's intercompany money pool agreement, Exelon can lend to, but not borrow from the money pool. The Federal Power Act declares it to be unlawful for any officer or director of any public utility "to participate in the making or paying of any dividends of such public utility from...

  • Page 248
    ... maintained electric facilities in the City's public right-of-ways for over one hundred years without the proper franchise rights from the City. BGE is currently reviewing the merits of this claim. BGE has not recorded an accrual for payment of franchise fees for past periods as a range of loss, if...

  • Page 249
    ...regarding the accounting for nuclear decommissioning. Supplemental Cash Flow Information The following tables provide additional information regarding Exelon's Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011. For the Years Ended December 31, 2013 2012 2011...

  • Page 250
    ...Lived Assets for more information. (g) In May 2011, as a result of the 2010 Rate Case order, ComEd recorded one-time benefits to reestablish previously expensed plant balances and to recover previously incurred costs related to Exelon's 2009 restructuring plan. See Note 3-Regulatory Matters for more...

  • Page 251
    ...million and $58 million, respectively, related to PECO's and BGE's DOE SGIG programs. For the year ended December 31, 2012, Exelon, PECO and BGE have included in the capital expenditures line item under investing activities of the cash flow statement capital expenditures of $103 million, $56 million...

  • Page 252
    ... tolling agreements. Generation's other business activities, including retail and wholesale gas, upstream natural gas, proprietary trading, energy efficiency and demand response, heating, cooling, and cogeneration facilities, and home improvements, sales of electric and gas appliances, servicing of...

  • Page 253
    ... statements for the years ended December 31, 2013, 2012 and 2011 is as follows: Generation (a) ComEd PECO BGE (b) Other (c) Intersegment Eliminations Exelon Operating 2013 ...2012 ...2011 ...Intersegment revenues (e): 2013 ...2012 ...2011 ...Depreciation and amortization 2013 ...2012 ...2011...

  • Page 254
    ...Exelon's corporate operations, shared service entities and other financing and investment activities. (d) For the years ended December 31, 2013, 2012 and 2011, utility taxes of $79 million, $82 million and $27 million, respectively, are included in revenues and expenses for Generation. For the years...

  • Page 255
    ... Party Transactions The financial statements of Exelon include related party transactions as presented in the tables below: For the Years Ended December 31, 2013 2012 2011 Operating revenues from affiliates: PECO (a) ...CENG (b) ...BGE ...Total operating revenues from affiliates ...Purchase power...

  • Page 256
    ... would transfer to Generation upon completion of the Put Option Agreement transaction. For further information regarding the Investment in CENG see Note 5-Investment in Constellation Energy Nuclear Group, LLC. (d) Exelon Foundation is a nonconsolidated not-for-profit Illinois corporation. The Exelon...

  • Page 257
    ... costs associated with employee overtime, support from other utilities and incremental equipment, contracted tree trimming crews and supplies. PECO estimates that restoration efforts will have a material impact to Exelon's and PECO's results of operations and cash flows for the first quarter of 2014...

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