ComEd 2015 Annual Report Download - page 315

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)

December 31, 2015 December 31, 2014
Carrying
Amount
Fair Value Carrying
Amount
Fair
Value Level 1 Level 2 Level 3 Total
Short-term liabilities $ 213 $ 3 $ 210 $ — $ 213 $ 123 $ 123
Long-term debt (including amounts due within one year) 1,858 — 2,044 — 2,044 1,932 2,178
Long-term debt to financing trusts 252 — — 264 264 252 236
(a) Includes unamortized debt issuance costs of $180 million, $70 million, $38 million, $15 million and $9 million for Exelon, Generation, ComEd, PECO and BGE, respectively, at
December 31, 2015 and $150 million, $70 million, $33 million, $14 million and $10 million at December 31, 2014.
(b) Includes unamortized debt issuance costs of $7 million, $1 million and $6 million for Exelon, ComEd and BGE, respectively, at both December 31, 2015 and 2014.
 The short-term liabilities included in the tables above are comprised of dividends payable (included in other current
liabilities) (Level 1), short-term borrowings (Level 2) and third party financing (Level 3). The Registrants’ carrying amounts of the short-term
liabilities are representative of fair value because of the short-term nature of these instruments.
 The fair value amounts of Exelon’s taxable debt securities (Level 2) are determined by a valuation model that is based on a
conventional discounted cash flow methodology and utilizes assumptions of current market pricing curves. In order to incorporate the credit risk of
the Registrants into the discount rates, Exelon obtains pricing (i.e., U.S. Treasury rate plus credit spread) based on trades of existing Exelon debt
securities as well as debt securities of other issuers in the electric utility sector with similar credit ratings in both the primary and secondary
market, across the Registrants’ debt maturity spectrum. The credit spreads of various tenors obtained from this information are added to the
appropriate benchmark U.S. Treasury rates in order to determine the current market yields for the various tenors. The yields are then converted
into discount rates of various tenors that are used for discounting the respective cash flows of the same tenor for each bond or note. The fair value
of Exelon’s equity units (Level 1) are valued based on publicly traded securities issued by Exelon.
The fair value of Generation’s non-government-backed fixed rate nonrecourse debt (Level 3) is based on market and quoted prices for its own
and other nonrecourse debt with similar risk profiles. Given the low trading volume in the nonrecourse debt market, the price quotes used to
determine fair value will reflect certain qualitative factors, such as market conditions, investor demand, new developments that might significantly
impact the project cash flows or off-taker credit, and other circumstances related to the project (e.g., political and regulatory environment). The fair
value of Generation’s government-backed fixed rate project financing debt (Level 3) is largely based on a discounted cash flow methodology that is
similar to the taxable debt securities methodology described above. Due to the lack of market trading data on similar debt, the discount rates are
derived based on the original loan interest rate spread to the applicable Treasury rate as well as a current market curve derived from government-
backed securities. Variable rate project financing debt resets on a quarterly basis and the carrying value approximates fair value (Level 2).
Generation also has tax-exempt debt (Level 2). Due to low trading volume in this market, qualitative factors, such as market conditions, investor
demand, and circumstances related to the issuer (e.g., conduit issuer political and regulatory environment), may be incorporated into the credit
spreads that are used to obtain the fair value as described above.
308
(a)
(b)
Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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