ComEd 2013 Annual Report Download - page 133

beneficiary. Asaresult,Generation hasconcludedthat consolidation is not required. Other than theasset sale agreement,Exelon or
Generation do not haveanycontractual or other obligationsto provideadditional financial support andZionSolutions’ creditorsdo
not haveanyrecoursetoExelon’s or Generation’s general credit.
Fuel Purchase Commitments. Generation’s customer supplyoperationsincludethephysical deliveryandmarketingofpower
obtainedthrough itsgeneratingcapacity, andlong-, intermediate-andshort-termcontracts. Generation alsohascontractsto
purchasefuel suppliesfor nuclear andfossilgeneration.ThesecontractsandGeneration’s membershipinNEIL are discussedin
further detailinNote 22—CommitmentsandContingencies. Generation hasevaluatedthesecontractsanditsmembershipwith
NEIL anddeterminedthat iteither hasno variable interestin an entityor,where Generation doeshaveavariable interestinan
entity, thevariable interestis not significant anditis not theprimarybeneficiary; therefore,consolidation is not required.
For contractswhere Generation hasavariable interest,thelevel ofvariabilitybeingabsorbedthrough thecontractsisnot considered
significant becauseofthesmall proportion ofthe entities’ activitiesencompassedbythecontractswithGeneration.Further,
Generation hasconsidered which interestholder hasthepower to directtheactivitiesthat mostsignificantlyaffecttheeconomic
performanceoftheVIE andthusisconsideredtheprimarybeneficiaryandisrequiredto consolidate the entity. Theprimary
beneficiarymustalsohaveexposure to significant lossesor therighttoreceivesignificant benefitsfromtheVIE. Ingeneral,themost
significant activityoftheVIEs is the operation andmaintenanceofthefacilities. Facilitiesrepresent power plants, sourcesofuranium
andfossilfuels, or plantsusedinthe uraniumconversion,enrichment andfabrication process. Generation doesnot havecontrol
over the operation andmaintenanceofthefacilitiesconsidered VIEs, anditdoesnot bear operational risk ofthefacilities.
Furthermore,Generation hasno debtorequityinvestmentsinthe entitiesandGeneration doesnot provideanyother financial
support through liquidityarrangements, guaranteesor other commitmentsother than purchasecommitmentsdescribedin
Note 22—CommitmentsandContingencies. Upon consideration ofthesefactors, Generation doesnot consider itselfto have
significant variable interestsinthese entitiesor betheprimarybeneficiaryoftheseVIEs and, accordingly, hasdeterminedthat
consolidation is not required.
Investment in Energy Development Projects. Generation hasseveral equityinvestmentsin energy generatingfacilities.
Generation hasevaluatedthesignificant agreements, ownershipstructuresandrisks ofeach ofitsequityinvestments, and
determinedthat certainofthe entitiesare VIEs becauseGeneration guaranteesthedebtofthe entity, providesequitysupport,or
providesoperatingservicesto the entity. Generation hasreviewedthe entitiesandhasdeterminedthat Generation is not theprimary
beneficiaryofthe entitiesthat qualify as VIEs becauseGeneration doesnot havethepower to directtheactivitiesoftheVIEs that
mostsignificantlyimpacttheVIEs economic performance.
Residential Solar Provider. Generation hasan equityinvestment inaresidential solar provider.Generation hasevaluatedthe
significant agreements, ownershipstructure andrisks ofthe entity, anddeterminedthat the entityisaVIE becauseitdoesnot have
sufficient equityat risk to funditsoperations. Generation hasdeterminedthat itsequityinvestment inthe entityisavariable interest.
However,Generation hasconcludedthat we are not theprimarybeneficiarybecauseGeneration doesnot havethepower to direct
theactivitiesoftheVIE that mostsignificantlyimpactthe entity’s economic performance.Exelon or Generation do not haveany
contractual or other obligationsto provideadditional financial support andtheresidential solar provider’s creditorsdo not haveany
recoursetoExelon’s or Generation’s general credit.
ComEd, PECO and BGE
ComEd’s, PECO’s, and BGE’s retail operationsfrequentlyincludethe purchaseofelectricityandRECs through procurement
contractsofvaryingdurations. See Note 3—RegulatoryMattersandNote 22—CommitmentsandContingenciesfor additional
information on thesecontracts. ComEd, PECO and BGE haveevaluatedthesetypesofcontractsandhavehistoricallydetermined
that either there is no significant variable interestinthe entity, or where either ComEd, PECO or BGE doeshaveasignificant
variable interestinaVIE, ComEd, PECO or BGE wouldnot betheprimarybeneficiaryand, therefore,consolidation wouldnot be
required.
For contractswhere ComEd, PECO or BGE is consideredto haveasignificant variable interest,consideration is given to which
interestholder hasthepower to directtheactivitiesthat mostsignificantlyaffecttheeconomic performanceoftheVIE. Ingeneral,
themostsignificant activityoftheVIEs is the operation andmaintenanceoftheir production or procurement processesrelatedto
electricity, RECs, AECs or natural gas. ComEd, PECO and BGE do not havecontrol over the operation andmaintenanceofthe
entitiesandtheydo not bear operational risk relatedto theassociatedactivities. Generally, thecarryingamountsofassetsand
liabilitiesinComEd’s, PECO’s, and BGE’s ConsolidatedBalanceSheetsthat relate to theirinvolvement with VIEs asaresult of
commercial arrangementsrepresent theamountsowedbytheutilitiesfor the purchasesassociatedwiththecurrent billing cycles
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