Exelon 2014 Annual Report Download - page 213

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Generation
Intercompany
Eliminations
Exelon
Corporate Exelon
Year Ended December 31, 2012
Operating
Revenues
Purchased
Power
and Fuel
Interest
Expense Total
Operating
Revenues (a)
Interest
Expense Total
Change in fair value of commodity positions ...... $(362) $215 $— $(147) $ (94) $— $(241)
Reclassification to realized at settlement of
commodity positions ....................... 432 238 — 670 101 — 771
Net commodity mark-to-market gains
(losses) .............................. 70 453 — 523 7 — 530
Change in fair value of treasury positions ........ — — 6 6 — — 6
Reclassification to realized at settlement of
treasury positions .......................... (3) — — (3) — — (3)
Net treasury mark-to market gains (losses) . . . (3) — 6 3 — — 3
Net mark-to market gains (losses) .............. $ 67 $453 $ 6 $ 526 $ 7 $— $ 533
(a) Prior to the Constellation merger, the five-year financial swap contract between Generation and ComEd was de-designated. As a result, all prospective changes in
fair value were recorded to operating revenues and eliminated in consolidation.
Proprietary Trading Activities. For the years ended December 31, 2014, 2013, and 2012 Exelon and Generation recognized the
following net unrealized mark-to-market gains (losses), net realized mark-to-market gains (losses) and total net mark-to-market gains
(losses) (before income taxes) relating to mark-to-market activity on commodity derivative instruments entered into for proprietary
trading purposes and interest rate derivative contracts to hedge risk associated with the interest rate component of underlying
commodity positions. Gains and losses associated with proprietary trading are reported as operating revenue in Exelon’s
Consolidated Statements of Operations and Comprehensive Income and are included in “Net fair value changes related to
derivatives” in Exelon’s Consolidated Statements of Cash Flows. In the tables below, “Change in fair value” represents the change in
fair value of the derivative contracts held at the reporting date. The “Reclassification to realized at settlement” represents the
recognized change in fair value that was reclassified to realized due to settlement of the derivative during the period.
Location on Income
Statement
For the Years
Ended
December 31,
2014 2013 2012
Change in fair value of commodity positions .................................... Operating Revenues $ (1) $(22) $ (13)
Reclassification to realized at settlement of commodity positions .................... Operating Revenues (29) (15) 108
Net commodity mark-to-market gains (losses) ............................... Operating Revenues (30) (37) 95
Change in fair value of treasury positions ....................................... Operating Revenues 1 1 1
Reclassification to realized at settlement of treasury positions .................. Operating Revenues 3 (3) —
Net treasury mark-to market gains (losses) .................................. Operating Revenues 4 (2) 1
Net mark-to market gains (losses) ............................................. Operating Revenues $(26) $(39) $ 96
Credit Risk
The Registrants would be exposed to credit-related losses in the event of non-performance by counterparties that enter into
derivative instruments. The credit exposure of derivative contracts, before collateral, is represented by the fair value of contracts at
the reporting date. For energy-related derivative instruments, Generation enters into enabling agreements that allow for payment
netting with its counterparties, which reduces Generation’s exposure to counterparty risk by providing for the offset of amounts
payable to the counterparty against amounts receivable from the counterparty. Typically, each enabling agreement is for a specific
commodity and so, with respect to each individual counterparty, netting is limited to transactions involving that specific commodity
product, except where master netting agreements exist with a counterparty that allow for cross product netting. In addition to
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