Exelon 2002 Annual Report Download - page 71

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69
The following table provides detail on changes in Generation’s
mark-to-market net asset or liability balance sheet position
from January 1, 2002 to December 31, 2002. It indicates the
drivers behind changes in the balance sheet amounts. This
table will incorporate the mark-to-market activities that are
immediately recorded in earnings, as shown in the previous
table, as well as the settlements from OCI to earnings and
changes in fair value for the hedging activities that are recorded
in Accumulated Other Comprehensive Income on the
Consolidated Balance Sheets.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
exelon corporation and subsidiary companies
Normal Operations and Proprietary
Hedging Activities Trading Total
Total Mark-to-Market Energy Contract Net Assets at January 1,2002 $ 78 $ 14 $ 92
Total Change in Fair Value during 2002 of Contracts Recorded in Earnings 26 (29) (3)
Reclassification to Realized at Settlement of Contracts Recorded in Earnings (20) 20 –
Reclassification to Realized at Settlement from OCI (53) – (53)
Effective Portion of Changes in Fair Value—Recorded in OCI (210) – (210)
Purchase/Sale of Existing Contracts or Portfolios Subject to Mark-to-Market 11 – 11
Total Mark-to-Market Energy Contract Net Assets (Liabilities) at December 31, 2002 $ (168) $ 5 $ (163)
The following table details the balance sheet classification of the Mark-to-Market Energy Contract Net Assets recorded as of
December 31, 2002:
Normal Operations and Proprietary
Hedging Activities Trading Total
Current Assets $ 186 $ 6 $ 192
Noncurrent Assets 46 – 46
Total Mark-to-Market Energy Contract Assets 232 6 238
Current Liabilities (276) – (276)
Noncurrent Liabilities (124) (1) (125)
Total Mark-to-Market Energy Contract Liabilities (400) (1) (401)
Total Mark-to-Market Energy Contract Net Assets (Liabilities) $ (168) $ 5 $ (163)
The majority of our contracts are non-exchange traded con-
tracts valued using prices provided by external sources,
primarily price quotations available through brokers or over-
the-counter, on-line exchanges. Prices reflect the average of the
bid-ask midpoint prices obtained from all sources that we
believe provide the most liquid market for the commodity. The
terms for which such price information is available varies by
commodity, by region and by product. The remainder of the
assets represents contracts for which external valuations are
not available, primarily option contracts. These contracts are
valued using the Black model, an industry standard option
valuation model. The fair values in each category reflect the
level of forward prices and volatility factors as of December 31,
2002 and may change as a result of changes in these factors.
Management uses its best estimates to determine the fair
value of commodity and derivative contracts it holds and sells.
These estimates consider various factors including closing
exchange and over-the-counter price quotations, time value,
volatility factors and credit exposure. It is possible, however,
that future market prices could vary from those used in record-
ing assets and liabilities from energy marketing and trading
activities and such variations could be material.