Exelon 2014 Annual Report Download - page 11

Pending Merger with Pepco Holdings, Inc.
On April 29, 2014, Exelon and PHI signed an agreement and plan of merger (as subsequently amended and restated as of July 18,
2014) to combine the two companies in an all cash transaction. The resulting company will retain the Exelon name and be
headquartered in Chicago. The merger is expected to be completed in the second or third quarter of 2015. See Note 4—Mergers,
Acquisitions, and Dispositions of the Combined Notes to Consolidated Financial Statements for additional information on the pending
transaction.
Generation
Generation, one of the largest competitive electric generation companies in the United States as measured by owned and contracted
MW, physically delivers and markets power across multiple geographic regions through its customer-facing business, Constellation.
Constellation sells electricity and natural gas to both wholesale and retail customers. The retail sales include commercial, industrial
and residential customers. Generation’s electricity generation strategy is to pursue opportunities that provide generation-to-load
matching and that diversify the generation fleet by expanding Generation’s regional and technological footprint. Generation
leverages its energy generation portfolio to ensure delivery of energy to both wholesale and retail customers under long-term and
short-term contracts, and in wholesale power markets. Generation’s customer facing activities foster development and delivery of
other innovative energy-related products and services for its customers. Generation operates in well-developed energy markets and
employs an integrated hedging strategy to manage commodity price volatility. Generation’s fleet, including its nuclear plants which
consistently operate at high capacity factors, also provide geographic and supply source diversity. These factors help Generation
mitigate the challenging conditions emanating from competitive energy markets. Generation’s customers include distribution utilities,
municipalities, cooperatives, financial institutions, and commercial, industrial, governmental, and residential customers in competitive
markets. Generation also sells renewable energy and other energy-related products and services, and engages in natural gas and
oil exploration and production activities (Upstream).
Generation is a public utility under the Federal Power Act and is subject to FERC’s exclusive ratemaking jurisdiction over wholesale
sales of electricity and the transmission of electricity in interstate commerce. Under the Federal Power Act, FERC has the authority
to grant or deny market-based rates for sales of energy, capacity and ancillary services to ensure that such sales are just and
reasonable. FERC’s jurisdiction over ratemaking also includes the authority to suspend the market-based rates of utilities and set
cost-based rates should FERC find that its previous grant of market-based rates authority is no longer just and reasonable. Other
matters subject to FERC jurisdiction include, but are not limited to, third-party financings; review of mergers; dispositions of
jurisdictional facilities and acquisitions of securities of another public utility or an existing operational generating facility; affiliate
transactions; intercompany financings and cash management arrangements; certain internal corporate reorganizations; and certain
holding company acquisitions of public utility and holding company securities. Additionally, ERCOT is not subject to regulation by
FERC but performs a similar function in Texas to that performed by RTOs in markets regulated by FERC. Specific operations of
Generation are also subject to the jurisdiction of various other Federal, state, regional and local agencies, including the NRC and
Federal and state environmental protection agencies. Additionally, Generation is subject to mandatory reliability standards
promulgated by the NERC, with the approval of FERC.
RTOs and ISOs exist in a number of regions to provide transmission service across multiple transmission systems. PJM, MISO, ISO-
NE and SPP, have been approved by FERC as RTOs, and CAISO and ISO-NY have been approved as ISOs. These entities are
responsible for regional planning, managing transmission congestion, developing wholesale markets for energy and capacity,
maintaining reliability, market monitoring, the scheduling of physical power sales brokered through ICE and NYMEX and the
elimination or reduction of redundant transmission charges imposed by multiple transmission providers when wholesale customers
take transmission service across several transmission systems.
Merger with Constellation Energy Group, Inc.
On March 12, 2012, Constellation merged into Exelon with Exelon continuing as the surviving corporation pursuant to the
transactions contemplated by the Agreement and Plan of Merger. Since the merger transaction, Generation includes the former
Constellation generation and customer supply operations. See Note 4—Mergers, Acquisitions, and Dispositions of the Combined
Notes to Consolidated Financial Statements for additional information on the Constellation merger.
Constellation Energy Nuclear Group, Inc.
Generation owns a 50.01% interest in CENG, a joint venture with EDF. CENG is governed by a board of ten directors, five of which
are appointed by Generation and five by EDF. CENG owns a total of five nuclear generating facilities on three sites, Calvert Cliffs,
R.E. Ginna and Nine Mile Point. CENG’s ownership share in the total capacity of these units is 3,998 MW. See ITEM 2.
PROPERTIES for additional information on these sites.
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