Form 10-Q
Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2014

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission

File Number

  

Name of Registrant; State of Incorporation;

Address of Principal Executive Offices; and

Telephone Number

   IRS Employer
Identification
Number
 

1-16169

  

EXELON CORPORATION

     23-2990190   
  

(a Pennsylvania corporation)

10 South Dearborn Street

P.O. Box 805379

Chicago, Illinois 60680-5379

(312) 394-7398

  

333-85496

  

EXELON GENERATION COMPANY, LLC

     23-3064219   
  

(a Pennsylvania limited liability company)

300 Exelon Way

Kennett Square, Pennsylvania 19348-2473

(610) 765-5959

  

1-1839

  

COMMONWEALTH EDISON COMPANY

     36-0938600   
  

(an Illinois corporation)

440 South LaSalle Street

Chicago, Illinois 60605-1028

(312) 394-4321

  

000-16844

  

PECO ENERGY COMPANY

     23-0970240   
  

(a Pennsylvania corporation)

P.O. Box 8699

2301 Market Street

Philadelphia, Pennsylvania 19101-8699

(215) 841-4000

  

1-1910

  

BALTIMORE GAS AND ELECTRIC COMPANY

     52-0280210   
  

(a Maryland corporation)

2 Center Plaza

110 West Fayette Street

Baltimore, Maryland 21201-3708

(410) 234-5000

  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

     Large Accelerated Filer    Accelerated Filer    Non-accelerated Filer    Smaller
Reporting
Company

Exelon Corporation

   x         

Exelon Generation Company, LLC

         x   

Commonwealth Edison Company

         x   

PECO Energy Company

         x   

Baltimore Gas and Electric Company

         x   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The number of shares outstanding of each registrant’s common stock as of September 30, 2014 was:

 

Exelon Corporation Common Stock, without par value

   859,464,772

Exelon Generation Company, LLC

   not applicable

Commonwealth Edison Company Common Stock, $12.50 par value

   127,016,934

PECO Energy Company Common Stock, without par value

   170,478,507

Baltimore Gas and Electric Company Common Stock, without par value

   1,000


Table of Contents

TABLE OF CONTENTS

 

    Page No.  
FILING FORMAT     7   
FORWARD-LOOKING STATEMENTS     7   
WHERE TO FIND MORE INFORMATION     7   
PART I.  

FINANCIAL INFORMATION

    8   
ITEM 1.  

FINANCIAL STATEMENTS

    8   
 

Exelon Corporation

 
 

Consolidated Statements of Operations and Comprehensive Income

    9   
 

Consolidated Statements of Cash Flows

    10   
 

Consolidated Balance Sheets

    11   
 

Consolidated Statement of Changes in Shareholders’ Equity

    13   
 

Exelon Generation Company, LLC

 
 

Consolidated Statements of Operations and Comprehensive Income

    14   
 

Consolidated Statements of Cash Flows

    15   
 

Consolidated Balance Sheets

    16   
 

Consolidated Statement of Changes in Equity

    18   
 

Commonwealth Edison Company

 
 

Consolidated Statements of Operations and Comprehensive Income

    19   
 

Consolidated Statements of Cash Flows

    20   
 

Consolidated Balance Sheets

    21   
 

Consolidated Statement of Changes in Shareholders’ Equity

    23   
 

PECO Energy Company

 
 

Consolidated Statements of Operations and Comprehensive Income

    24   
 

Consolidated Statements of Cash Flows

    25   
 

Consolidated Balance Sheets

    26   
 

Consolidated Statement of Changes in Shareholders’ Equity

    28   
 

Baltimore Gas and Electric Company

 
 

Consolidated Statements of Operations and Comprehensive Income

    29   
 

Consolidated Statements of Cash Flows

    30   
 

Consolidated Balance Sheets

    31   
 

Consolidated Statement of Changes in Shareholders’ Equity

    33   
 

Combined Notes to Consolidated Financial Statements

    34   
 

1. Basis of Presentation

    34   
 

2. New Accounting Pronouncements

    35   
 

3. Variable Interest Entities

    36   
 

4. Mergers, Acquisitions, and Dispositions

    41   
 

5. Regulatory Matters

    44   
 

6. Investment in Constellation Energy Nuclear Group, LLC

    61   
 

7. Impairment of Long-Lived Assets

    65   
 

8. Fair Value of Financial Assets and Liabilities

    67   

 

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Table of Contents
    Page No.  
 

9. Derivative Financial Instruments

    84   
 

10. Debt and Credit Agreements

    101   
 

11. Income Taxes

    107   
 

12. Nuclear Decommissioning

    110   
 

13. Retirement Benefits

    115   
 

14. Severance

    118   
 

15. Changes in Accumulated Other Comprehensive Income

    121   
 

16. Common Stock

    126   
 

17. Earnings Per Share and Equity

    127   
 

18. Commitments and Contingencies

    128   
 

19. Supplemental Financial Information

    147   
 

20. Segment Information

    153   
 

21. Subsequent Events

    158   
ITEM 2.  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    159   
 

Exelon Corporation

    159   
 

General

    159   
 

Executive Overview

    160   
 

Critical Accounting Policies and Estimates

    181   
 

Results of Operations

    181   
 

Liquidity and Capital Resources

    209   
 

Contractual Obligations and Off-Balance Sheet Arrangements

    220   
ITEM 3.  

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    222   
ITEM 4.  

CONTROLS AND PROCEDURES

    231   
PART II.  

OTHER INFORMATION

    232   
ITEM 1.  

LEGAL PROCEEDINGS

    232   
ITEM 1A.  

RISK FACTORS

    232   
ITEM 4.  

MINE SAFETY DISCLOSURES

    236   
ITEM 6.  

EXHIBITS

    236   
SIGNATURES     238   
 

Exelon Corporation

    238   
 

Exelon Generation Company, LLC

    238   
 

Commonwealth Edison Company

    239   
 

PECO Energy Company

    239   
 

Baltimore Gas and Electric Company

    239   

 

2


Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

 

Exelon Corporation and Related Entities

Exelon

   Exelon Corporation

Generation

   Exelon Generation Company, LLC

ComEd

   Commonwealth Edison Company

PECO

   PECO Energy Company

BGE

   Baltimore Gas and Electric Company

BSC

   Exelon Business Services Company, LLC

Exelon Corporate

   Exelon in its corporate capacity as a holding company

CENG

   Constellation Energy Nuclear Group, LLC

Constellation

   Constellation Energy Group, Inc.

Antelope Valley

   Antelope Valley Solar Ranch One

Exelon Transmission Company

   Exelon Transmission Company, LLC

Exelon Wind

   Exelon Wind, LLC and Exelon Generation Acquisition Company, LLC

Ventures

   Exelon Ventures Company, LLC

AmerGen

   AmerGen Energy Company, LLC

BondCo

   RSB BondCo LLC

PEC L.P.

   PECO Energy Capital, L.P.

PECO Trust III

   PECO Capital Trust III

PECO Trust IV

   PECO Energy Capital Trust IV

PETT

   PECO Energy Transition Trust

Registrants

   Exelon, Generation, ComEd, PECO and BGE, collectively

GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

Note “—” of the Exelon 2013 Form 10-K

   Reference to specific Combined Note to Consolidated Financial Statements within Exelon’s 2013 Annual Report on Form 10-K

1998 restructuring settlement

   PECO’s 1998 settlement of its restructuring case mandated by the Competition Act

Act 11

   Pennsylvania Act 11 of 2012

Act 129

   Pennsylvania Act 129 of 2008

AEC

   Alternative Energy Credit that is issued for each megawatt hour of generation from a qualified alternative energy source

AEPS

   Pennsylvania Alternative Energy Portfolio Standards

AEPS Act

   Pennsylvania Alternative Energy Portfolio Standards Act of 2004, as amended

AESO

   Alberta Electric Systems Operator

AFUDC

   Allowance for Funds Used During Construction

ALJ

   Administrative Law Judge

AMI

   Advanced Metering Infrastructure

AMP

   Advanced Metering Program

ARC

   Asset Retirement Cost

ARO

   Asset Retirement Obligation

ARP

   Title IV Acid Rain Program

ARRA of 2009

   American Recovery and Reinvestment Act of 2009

Block contracts

   Forward Purchase Energy Block Contracts

CAIR

   Clean Air Interstate Rule

CAISO

   California ISO

CAMR

   Federal Clean Air Mercury Rule

 

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GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

CERCLA

   Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended

CFL

   Compact Fluorescent Light

Clean Air Act

   Clean Air Act of 1963, as amended

Clean Water Act

   Federal Water Pollution Control Amendments of 1972, as amended

Competition Act

   Pennsylvania Electricity Generation Customer Choice and Competition Act of 1996

CPI

   Consumer Price Index

CPUC

   California Public Utilities Commission

CSAPR

   Cross-State Air Pollution Rule

CTC

   Competitive Transition Charge

D.C. Circuit Court

   United States Court of Appeals for the District of Columbia Circuit

DOE

   United States Department of Energy

DOJ

   United States Department of Justice

DSP

   Default Service Provider

DSP Program

   Default Service Provider Program

EDF

   Electricite de France SA

EE&C

   Energy Efficiency and Conservation/Demand Response

EGS

   Electric Generation Supplier

EGTP

   ExGen Texas Power, LLC

EIMA

   Energy Infrastructure Modernization Act (Illinois Senate Bill 1652 and Illinois House Bill 3036)

EPA

   United States Environmental Protection Agency

ERCOT

   Electric Reliability Council of Texas

ERISA

   Employee Retirement Income Security Act of 1974, as amended

EROA

   Expected Rate of Return on Assets

ESPP

   Employee Stock Purchase Plan

FASB

   Financial Accounting Standards Board

FERC

   Federal Energy Regulatory Commission

FRCC

   Florida Reliability Coordinating Council

FTC

   Federal Trade Commission

GAAP

   Generally Accepted Accounting Principles in the United States

GHG

   Greenhouse Gas

GRT

   Gross Receipts Tax

GSA

   Generation Supply Adjustment

GWh

   Gigawatt hour

HAP

   Hazardous air pollutants

Health Care Reform Acts

   Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act of 2010

IBEW

   International Brotherhood of Electrical Workers

ICC

   Illinois Commerce Commission

ICE

   Intercontinental Exchange

Illinois Act

   Illinois Electric Service Customer Choice and Rate Relief Law of 1997

Illinois EPA

   Illinois Environmental Protection Agency

Illinois Settlement Legislation

   Legislation enacted in 2007 affecting electric utilities in Illinois

IPA

   Illinois Power Agency

IRC

   Internal Revenue Code

IRS

   Internal Revenue Service

ISO

   Independent System Operator

 

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GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

ISO-NE

   ISO New England Inc.

ISO-NY

   ISO New York

kV

   Kilovolt

kW

   Kilowatt

kWh

   Kilowatt-hour

LIBOR

   London Interbank Offered Rate

LILO

   Lease-In, Lease-Out

LLRW

   Low-Level Radioactive Waste

LTIP

   Long-Term Incentive Plan

MATS

   U.S. EPA Mercury and Air Toxics Rule

MBR

   Market Based Rates Incentive

MDE

   Maryland Department of the Environment

MDPSC

   Maryland Public Service Commission

MGP

   Manufactured Gas Plant

MISO

   Midcontinent Independent System Operator, Inc.

mmcf

   Million Cubic Feet

Moody’s

   Moody’s Investor Service

MOPR

   Minimum Offer Price Rule

MRV

   Market-Related Value

MW

   Megawatt

MWh

   Megawatt hour

NAAQS

   National Ambient Air Quality Standards

n.m.

   not meaningful

NAV

   Net Asset Value

NDT

   Nuclear Decommissioning Trust

NEIL

   Nuclear Electric Insurance Limited

NERC

   North American Electric Reliability Corporation

NGS

   Natural Gas Supplier

NJDEP

   New Jersey Department of Environmental Protection

Non-Regulatory Agreements Units

   Nuclear generating units or portions thereof whose decommissioning-related activities are not subject to contractual elimination under regulatory accounting

NOV

   Notice of Violation

NPDES

   National Pollutant Discharge Elimination System

NRC

   Nuclear Regulatory Commission

NSPS

   New Source Performance Standards

NWPA

   Nuclear Waste Policy Act of 1982

NYMEX

   New York Mercantile Exchange

OCI

   Other Comprehensive Income

OIESO

   Ontario Independent Electricity System Operator

OPEB

   Other Postretirement Employee Benefits

PA DEP

   Pennsylvania Department of Environmental Protection

PAPUC

   Pennsylvania Public Utility Commission

PGC

   Purchased Gas Cost Clause

PHI

   Pepco Holdings, Inc.

PJM

   PJM Interconnection, LLC

POLR

   Provider of Last Resort

POR

   Purchase of Receivables

PPA

   Power Purchase Agreement

 

5


Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

Price-Anderson Act

   Price-Anderson Nuclear Industries Indemnity Act of 1957

PRP

   Potentially Responsible Parties

PSEG

   Public Service Enterprise Group Incorporated

PURTA

   Pennsylvania Public Realty Tax Act

PV

   Photovoltaic

RCRA

   Resource Conservation and Recovery Act of 1976, as amended

REC

   Renewable Energy Credit which is issued for each megawatt hour of generation from a qualified renewable energy source

Regulatory Agreement Units

   Nuclear generating units whose decommissioning-related activities are subject to contractual elimination under regulatory accounting

RES

   Retail Electric Suppliers

RFP

   Request for Proposal

Rider

   Reconcilable Surcharge Recovery Mechanism

RGGI

   Regional Greenhouse Gas Initiative

RMC

   Risk Management Committee

RPM

   PJM Reliability Pricing Model

RPS

   Renewable Energy Portfolio Standards

RTEP

   Regional Transmission Expansion Plan

RTO

   Regional Transmission Organization

S&P

   Standard & Poor’s Ratings Services

SEC

   United States Securities and Exchange Commission

Senate Bill 1

   Maryland Senate Bill 1

SERC

   SERC Reliability Corporation (formerly Southeast Electric Reliability Council)

SERP

   Supplemental Employee Retirement Plan

SGIG

   Smart Grid Investment Grant

SGIP

   Smart Grid Initiative Program

SILO

   Sale-In, Lease-Out

SMPIP

   Smart Meter Procurement and Installation Plan

SNF

   Spent Nuclear Fuel

SOS

   Standard Offer Service

SPP

   Southwest Power Pool

Tax Relief Act of 2010

   Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010

Upstream

   Natural gas exploration and production activities

VIE

   Variable Interest Entity

WECC

   Western Electric Coordinating Council

 

6


Table of Contents

FILING FORMAT

This combined Form 10-Q is being filed separately by Exelon Corporation, Exelon Generation Company, LLC, Commonwealth Edison Company, PECO Energy Company and Baltimore Gas and Electric Company (Registrants). Information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf. No Registrant makes any representation as to information relating to any other Registrant.

FORWARD-LOOKING STATEMENTS

This Report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by the Registrants include those factors discussed herein, as well as the items discussed in (1) Exelon’s 2013 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 22; (2) this Quarterly Report on Form 10-Q in (a) Part II, Other Information, ITEM 1A. Risk Factors, (b) Part 1, Financial Information, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements: Note 18; and (3) other factors discussed in filings with the SEC by the Registrants. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Report. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this Report.

WHERE TO FIND MORE INFORMATION

The public may read and copy any reports or other information that the Registrants file with the SEC at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. These documents are also available to the public from commercial document retrieval services, the website maintained by the SEC at www.sec.gov and the Registrants’ websites at www.exeloncorp.com. Information contained on the Registrants’ websites shall not be deemed incorporated into, or to be a part of, this Report.

 

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PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

 

 

 

 

 

8


Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
(In millions, except per share data)       2014             2013             2014             2013      

Operating revenues

  $ 6,912      $ 6,502      $ 20,173      $ 18,725   

Operating expenses

       

Purchased power and fuel

    2,591        2,404        8,943        7,199   

Purchased power and fuel from affiliates

    57        339        456        944   

Operating and maintenance

    1,982        1,735        6,005        5,391   

Depreciation and amortization

    577        530        1,732        1,606   

Taxes other than income

    306        277        887        825   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    5,513        5,285        18,023        15,965   
 

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings (loss) of unconsolidated affiliates

    1        37        (20     7   

Gain on consolidation of CENG

                  261          
 

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    1,400        1,254        2,391        2,767   
 

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

       

Interest expense, net

    (247     (228     (691     (1,091

Interest expense to affiliates, net

    (11     (6     (31     (19

Other, net

    354        155        702        311   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

    96        (79     (20     (799
 

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    1,496        1,175        2,371        1,968   

Income taxes

    422        439        646        733   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    1,074        736        1,725        1,235   

Net income (loss) attributable to noncontrolling interest, preferred security dividends and redemption and preference stock dividends

    81        (2     121        11   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders

    993        738        1,604        1,224   
 

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income, net of income taxes

       

Net income

    1,074        736        1,725        1,235   

Other comprehensive income (loss), net of income taxes

       

Pension and non-pension postretirement benefit plans:

       

Prior service (benefit) cost reclassified to periodic benefit cost

    (11     1        (18       

Actuarial loss reclassified to periodic cost

    38        49        109        151   

Pension and non-pension postretirement benefit plans valuation adjustment

    (8     (8     240        69   

Deferred compensation unit valuation adjustment

                         10   

Unrealized (loss) on cash flow hedges

    (19     (46     (92     (169

Unrealized gain (loss) on equity investments

    (3     16        8        51   

Unrealized (loss) on foreign currency translation

    (5            (6     (5

Unrealized (loss) on marketable securities

    (3            (2     (1

Reversal of CENG equity method AOCI

                  (116       
 

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

    (11     12        123        106   
 

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

  $ 1,063      $ 748      $ 1,848      $ 1,341   
 

 

 

   

 

 

   

 

 

   

 

 

 

Average shares of common stock outstanding:

       

Basic

    861        857        860        856   

Diluted

    863        860        863        860   
 

 

 

   

 

 

   

 

 

   

 

 

 
       

Earnings per average common share:

       

Basic

  $ 1.15      $ 0.86      $ 1.87      $ 1.43   

Diluted

  $ 1.15      $ 0.86      $ 1.86      $ 1.42   
 

 

 

   

 

 

   

 

 

   

 

 

 

Dividends per common share

  $ 0.31      $ 0.31      $ 0.93      $ 1.15   
 

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Nine Months Ended
September 30,
 
(In millions)    2014     2013  

Cash flows from operating activities

    

Net income

   $ 1,725      $ 1,235   

Adjustments to reconcile net income to net cash flows provided by operating activities:

    

Depreciation, amortization, depletion and accretion, including nuclear fuel and energy contract amortization

     2,856        2,844   

Impairment of long-lived assets

     162        171   

Gain on consolidation of CENG

     (268       

Gain on sale of assets

     (356     (17

Deferred income taxes and amortization of investment tax credits

     459        (164

Net fair value changes related to derivatives

     522        (229

Net realized and unrealized gains on nuclear decommissioning trust fund investments

     (141     (95

Other non-cash operating activities

     698        584   

Changes in assets and liabilities:

    

Accounts receivable

     198        54   

Inventories

     (316     (103

Accounts payable, accrued expenses and other current liabilities

     (322     (243

Option premiums received (paid), net

     21        (38

Counterparty collateral posted, net

     (615     (73

Income taxes

     72        863   

Pension and non-pension postretirement benefit contributions

     (516     (360

Other assets and liabilities

     (536     (35
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     3,643        4,394   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (4,114     (3,887

Proceeds from nuclear decommissioning trust fund sales

     5,464        3,344   

Investment in nuclear decommissioning trust funds

     (5,550     (3,518

Acquisition of businesses

     (67       

Proceeds from sale of long-lived assets

     660        32   

Proceeds from termination of direct financing lease investment

     335          

Proceeds from sale of investments

     7        20   

Purchases of investments

     (3     (3

Cash consolidated from CENG

     129          

Change in restricted cash

     (151     (23

Other investing activities

     (86     65   
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (3,376     (3,970
  

 

 

   

 

 

 

Cash flows from financing activities

    

Payment of accounts receivable agreement

            (210

Changes in short-term borrowings

     236        205   

Issuance of long-term debt

     3,212        2,031   

Retirement of long-term debt

     (1,214     (1,156

Redemption of preferred securities

            (93

Distributions to noncontrolling interest of consolidated VIE

     (415       

Dividends paid on common stock

     (799     (981

Proceeds from employee stock plans

     25        40   

Other financing activities

     (158     (102
  

 

 

   

 

 

 

Net cash flows provided by (used in) financing activities

     887        (266
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     1,154        158   

Cash and cash equivalents at beginning of period

     1,609        1,486   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 2,763      $ 1,644   
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    September 30,
2014
     December 31,
2013
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 2,763       $ 1,609   

Restricted cash and cash equivalents

     318         167   

Accounts receivable, net

     

Customer

     2,815         2,981   

Other

     898         1,175   

Mark-to-market derivative assets

     744         727   

Unamortized energy contract assets

     225         374   

Inventories, net

     

Fossil fuel

     546         276   

Materials and supplies

     1,045         829   

Deferred income taxes

     38         573   

Regulatory assets

     774         760   

Assets held for sale

     649         14   

Other

     1,022         652   
  

 

 

    

 

 

 

Total current assets

     11,837         10,137   
  

 

 

    

 

 

 

Property, plant and equipment, net

     51,630         47,330   

Deferred debits and other assets

     

Regulatory assets

     5,589         5,910   

Nuclear decommissioning trust funds

     10,349         8,071   

Investments

     562         1,165   

Investments in affiliates

     26         22   

Investment in CENG

             1,925   

Goodwill

     2,672         2,625   

Mark-to-market derivative assets

     524         607   

Unamortized energy contracts assets

     571         710   

Pledged assets for Zion Station decommissioning

     365         458   

Other

     1,139         964   
  

 

 

    

 

 

 

Total deferred debits and other assets

     21,797         22,457   
  

 

 

    

 

 

 

Total assets(a)

   $ 85,264       $ 79,924   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

11


Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)   September 30,
2014
    December 31,
2013
 
    (Unaudited)        
LIABILITIES AND SHAREHOLDERS’ EQUITY    

Current liabilities

   

Short-term borrowings

  $ 562      $ 341   

Long-term debt due within one year

    2,064        1,509   

Accounts payable

    2,502        2,484   

Accrued expenses

    1,462        1,633   

Payables to affiliates

    22        116   

Deferred income taxes

    26        40   

Regulatory liabilities

    364        327   

Mark-to-market derivative liabilities

    249        159   

Unamortized energy contract liabilities

    195        261   

Other

    985        858   
 

 

 

   

 

 

 

Total current liabilities

    8,431        7,728   
 

 

 

   

 

 

 

Long-term debt

    19,200        17,623   

Long-term debt to financing trusts

    648        648   

Deferred credits and other liabilities

   

Deferred income taxes and unamortized investment tax credits

    13,181        12,905   

Asset retirement obligations

    7,003        5,194   

Pension obligations

    1,809        1,876   

Non-pension postretirement benefit obligations

    1,459        2,190   

Spent nuclear fuel obligation

    1,021        1,021   

Regulatory liabilities

    4,593        4,388   

Mark-to-market derivative liabilities

    291        300   

Unamortized energy contract liabilities

    214        266   

Payable for Zion Station decommissioning

    260        305   

Other

    2,104        2,540   
 

 

 

   

 

 

 

Total deferred credits and other liabilities

    31,935        30,985   
 

 

 

   

 

 

 

Total liabilities(a)

    60,214        56,984   
 

 

 

   

 

 

 

Commitments and contingencies

   

Shareholders’ equity

   

Common stock (No par value, 2,000 shares authorized, 859 shares and 857 shares outstanding at September 30, 2014 and December 31, 2013, respectively)

    16,679        16,741   

Treasury stock, at cost (35 shares at both September 30, 2014 and December 31, 2013)

    (2,327     (2,327

Retained earnings

    11,160        10,358   

Accumulated other comprehensive loss, net

    (1,917     (2,040
 

 

 

   

 

 

 

Total shareholders’ equity

    23,595        22,732   

BGE preference stock not subject to mandatory redemption

    193        193   

Noncontrolling interest

    1,262        15   
 

 

 

   

 

 

 

Total equity

    25,050        22,940   
 

 

 

   

 

 

 

Total liabilities and shareholders’ equity

  $ 85,264      $ 79,924   
 

 

 

   

 

 

 

 

(a)

Exelon’s consolidated assets include $7,773 million and $1,755 million at September 30, 2014 and December 31, 2013, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Exelon’s consolidated liabilities include $2,594 million and $658 million at September 30, 2014 and December 31, 2013, respectively, of certain VIEs for which the VIE creditors do not have recourse to Exelon. See Note 3 — Variable Interest Entities.

See the Combined Notes to Consolidated Financial Statements

 

12


Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(In millions, shares

in thousands)

  Issued
Shares
    Common
Stock
    Treasury
Stock
    Retained
Earnings
    Accumulated
Other
Comprehensive
Loss, net
    Noncontrolling
Interest
    Preferred  and
Preference
Stock
    Total
Equity
 

Balance, December 31, 2013

    892,034      $ 16,741      $ (2,327   $ 10,358      $ (2,040   $ 15      $ 193      $ 22,940   

Net income

                         1,604               111        10        1,725   

Long-term incentive plan activity

    1,439        49                                           49   

Employee stock purchase plan issuances

    735        25                                           25   

Tax benefit on stock compensation

           (7                                        (7

Acquisition of noncontrolling interest

                                       3               3   

Common stock dividends

                         (802                          (802

Preferred and preference stock dividends

                                              (10     (10

Fair value of financing contract payments

           (131                                        (131

Noncontrolling interest established upon consolidation of CENG

                                       1,548               1,548   

Transfer of CENG pension and non-pension post retirement benefit obligations

           2                                           2   

Consolidated VIE dividend to noncontrolling interest

                                       (415            (415

Reversal of CENG equity method AOCI, net of income taxes of $77

                                (116                   (116

Other comprehensive income net of income taxes of $(154)

                                239                      239   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2014

    894,208      $ 16,679      $ (2,327   $ 11,160      $ (1,917   $ 1,262      $ 193      $ 25,050   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

13


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
(In millions)        2014             2013             2014             2013      

Operating revenues

        

Operating revenues

   $ 4,300      $ 3,871      $ 11,944      $ 10,729   

Operating revenues from affiliates

     112        384        647        1,129   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     4,412        4,255        12,591        11,858   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power and fuel

     1,821        1,837        6,595        5,341   

Purchased power and fuel from affiliates

     59        342        476        953   

Operating and maintenance

     1,114        936        3,308        2,943   

Operating and maintenance from affiliates

     152        140        457        434   

Depreciation and amortization

     253        218        719        643   

Taxes other than income

     127        98        350        292   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     3,526        3,571        11,905        10,606   
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings (losses) of unconsolidated affiliates

     1        37        (20     7   

Gain on consolidation of CENG

                   261          
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     887        721        927        1,259   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense

     (77     (69     (224     (210

Interest expense to affiliates, net

     (12     (13     (37     (47

Other, net

     342        134        661        229   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     253        52        400        (28
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     1,140        773        1,327        1,231   

Income taxes

     291        288        290        436   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     849        485        1,037        795   

Net income (loss) attributable to noncontrolling interests

     78        (5     111        (6
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to membership interest

     771        490        926        801   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income, net of income taxes

        

Net income

     849        485        1,037        795   

Other comprehensive income (loss), net of income taxes

        

Unrealized loss on cash flow hedges

     (16     (49     (86     (316

Unrealized gain (loss) on equity investments

     (3     16        8        52   

Unrealized gain (loss) on foreign currency translation

     (5     1        (6     (5

Unrealized loss on marketable securities

     (2            (3     (1

Reversal of CENG equity method AOCI

                   (116       
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive loss

     (26     (32     (203     (270
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 823      $ 453      $ 834      $ 525   
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

14


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Nine Months Ended
September 30,
 
(In millions)        2014             2013      

Cash flows from operating activities

    

Net income

   $ 1,037      $ 795   

Adjustments to reconcile net income to net cash flows provided by operating activities:

    

Depreciation, amortization, depletion and accretion, including nuclear fuel and energy contract amortization

     1,853        1,937   

Impairment of long-lived assets

     138        157   

Gain on consolidation of CENG

     (268       

Gain on sale of assets

     (355     (13

Deferred income taxes and amortization of investment tax credits

     154        183   

Net fair value changes related to derivatives

     509        (222

Net realized and unrealized gains on nuclear decommissioning trust fund investments

     (141     (95

Other non-cash operating activities

     251        231   

Changes in assets and liabilities:

    

Accounts receivable

     153        57   

Receivables from and payables to affiliates, net

     72        2   

Inventories

     (286     (81

Accounts payable, accrued expenses and other current liabilities

     (311     (162

Option premiums received (paid), net

     21        (38

Counterparty collateral paid, net

     (634     (123

Income taxes

     172        315   

Pension and non-pension postretirement benefit contributions

     (214     (123

Other assets and liabilities

     (367     (163
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     1,784        2,657   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (1,961     (1,995

Proceeds from nuclear decommissioning trust fund sales

     5,464        3,344   

Investment in nuclear decommissioning trust funds

     (5,550     (3,518

Acquisition of businesses

     (67       

Proceeds from sale of long-lived assets

     660        32   

Change in restricted cash

     (116     (30

Changes in Exelon intercompany money pool

     44          

Cash consolidated from CENG

     129          

Other investing activities

     (34     18   
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (1,431     (2,149
  

 

 

   

 

 

 

Cash flows from financing activities

    

Change in short-term borrowings

     7        12   

Issuance of long-term debt

     1,112        831   

Retirement of long-term debt

     (552     (471

Distribution to member

     (440     (550

Distributions to noncontrolling interest of consolidated VIE

     (415       

Contribution from member

     55          

Other financing activities

     (67     (73
  

 

 

   

 

 

 

Net cash flows used in financing activities

     (300     (251
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     53        257   

Cash and cash equivalents at beginning of period

     1,258        671   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,311      $ 928   
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

15


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    September 30,
2014
     December 31,
2013
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 1,311       $ 1,258   

Restricted cash and cash equivalents

     187         71   

Accounts receivable, net

     

Customer

     1,705         1,689   

Other

     325         353   

Mark-to-market derivative assets

     744         727   

Receivables from affiliates

     56         108   

Receivable from Exelon intercompany money pool

             44   

Unamortized energy contract assets

     225         374   

Inventories, net

     

Fossil fuel

     426         164   

Materials and supplies

     865         671   

Deferred income taxes

     144         475   

Assets held for sale

     649         14   

Other

     821         491   
  

 

 

    

 

 

 

Total current assets

     7,458         6,439   
  

 

 

    

 

 

 

Property, plant and equipment, net

     23,143         20,111   

Deferred debits and other assets

     

Nuclear decommissioning trust funds

     10,349         8,071   

Investments

     154         400   

Investment in CENG

             1,925   

Goodwill

     47           

Mark-to-market derivative assets

     507         600   

Prepaid pension asset

     1,711         1,873   

Pledged assets for Zion Station decommissioning

     365         458   

Unamortized energy contract assets

     571         710   

Other

     714         645   
  

 

 

    

 

 

 

Total deferred debits and other assets

     14,418         14,682   
  

 

 

    

 

 

 

Total assets(a)

   $ 45,019       $ 41,232   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

16


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    September 30,
2014
     December 31,
2013
 
     (Unaudited)         
LIABILITIES AND EQUITY      

Current liabilities

     

Short-term borrowings

   $ 14       $ 22   

Long-term debt due within one year

     73         561   

Long-term debt to affiliates due within one year

     560           

Accounts payable

     1,318         1,322   

Accrued expenses

     840         976   

Payables to affiliates

     124         181   

Deferred income taxes

     1         25   

Mark-to-market derivative liabilities

     235         142   

Unamortized energy contract liabilities

     192         249   

Other

     478         389   
  

 

 

    

 

 

 

Total current liabilities

     3,835         3,867   
  

 

 

    

 

 

 

Long-term debt

     6,741         5,645   

Long-term debt to affiliate

     946         1,523   

Deferred credits and other liabilities

     

Deferred income taxes and unamortized investment tax credits

     6,202         6,295   

Asset retirement obligations

     6,853         5,047   

Non-pension postretirement benefit obligations

     949         850   

Spent nuclear fuel obligation

     1,021         1,021   

Payables to affiliates

     2,850         2,740   

Mark-to-market derivative liabilities

     104         120   

Unamortized energy contract liabilities

     214         266   

Payable for Zion Station decommissioning

     260         305   

Other

     718         811   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     19,171         17,455   
  

 

 

    

 

 

 

Total liabilities(a)

     30,693         28,490   
  

 

 

    

 

 

 

Commitments and contingencies

     

Equity

     

Member’s equity

     

Membership interest

     8,953         8,898   

Undistributed earnings

     4,099         3,613   

Accumulated other comprehensive income, net

     11         214   
  

 

 

    

 

 

 

Total member’s equity

     13,063         12,725   

Noncontrolling interest

     1,263         17   
  

 

 

    

 

 

 

Total equity

     14,326         12,742   
  

 

 

    

 

 

 

Total liabilities and equity

   $ 45,019       $ 41,232   
  

 

 

    

 

 

 

 

(a)

Generation’s consolidated assets include $7,703 million and $1,695 million at September 30, 2014 and December 31, 2013, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Generation’s consolidated liabilities include $2,338 million and $362 million at September 30, 2014 and December 31, 2013, respectively, of certain VIEs for which the VIE creditors do not have recourse to Generation. See Note 3 — Variable Interest Entities.

See the Combined Notes to Consolidated Financial Statements

 

17


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)

 

    Member’s Equity              
(In millions)   Membership
Interest
    Undistributed
Earnings
    Accumulated
Other
Comprehensive
Income, net
    Noncontrolling
Interest
    Total
Equity
 

Balance, December 31, 2013

  $ 8,898      $ 3,613      $ 214      $ 17      $ 12,742   

Net income

           926               111        1,037   

Acquisition of noncontrolling interest

                         2        2   

Allocation of tax benefit from member

    55                             55   

Distribution to member

           (440                   (440

Noncontrolling interest established upon consolidation of CENG

                         1,548        1,548   

Consolidated VIE dividend to noncontrolling interest

                         (415     (415

Reversal of CENG equity method AOCI, net of income taxes of $77

                  (116            (116

Other comprehensive loss, net of income taxes of $53

                  (87            (87
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2014

  $ 8,953      $ 4,099      $ 11      $ 1,263      $ 14,326   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

18


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
(In millions)        2014             2013             2014             2013      

Operating revenues

        

Operating revenues

   $ 1,221      $ 1,155      $ 3,482      $ 3,393   

Operating revenues from affiliates

     1        1        2        2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     1,222        1,156        3,484        3,395   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power

     325        158        741        522   

Purchased power from affiliate

     1        143        174        409   

Operating and maintenance

     320        296        923        907   

Operating and maintenance from affiliate

     39        37        117        113   

Depreciation and amortization

     174        164        521        501   

Taxes other than income

     76        80        225        225   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     935        878        2,701        2,677   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     287        278        783        718   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense

     (78     (71     (231     (493

Interest expense to affiliates, net

     (3     (3     (10     (10

Other, net

     4        7        14        18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (77     (67     (227     (485
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     210        211        556        233   

Income taxes

     84        85        221        93   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 126      $ 126      $ 335      $ 140   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 126      $ 126      $ 335      $ 140   
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

19


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

       Nine Months Ended  
September 30,
 
(In millions)        2014             2013      

Cash flows from operating activities

    

Net income

   $ 335      $ 140   

Adjustments to reconcile net income to net cash flows provided by operating activities:

    

Depreciation, amortization and accretion

     521        501   

Deferred income taxes and amortization of investment tax credits

     154        (152

Other non-cash operating activities

     116        26   

Changes in assets and liabilities:

    

Accounts receivable

     (109     (21

Receivables from and payables to affiliates, net

     (55     (32

Inventories

     (12     (12

Accounts payable, accrued expenses and other current liabilities

     59        48   

Income taxes

     15        262   

Pension and non-pension postretirement benefit contributions

     (237     (120

Other assets and liabilities

     62        210   
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     849        850   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (1,173     (1,074

Proceeds from sales of investments

     7        5   

Purchases of investments

     (3     (3

Change in restricted cash

     (2     (3

Other investing activities

     23        33   
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (1,148     (1,042
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in short-term borrowings

     344        153   

Issuance of long-term debt

     650        350   

Retirement of long-term debt

     (617     (252

Contributions from parent

     168          

Dividends paid on common stock

     (230     (165

Other financing activities

     (8     (4
  

 

 

   

 

 

 

Net cash flows provided by financing activities

     307        82   
  

 

 

   

 

 

 

Increase (Decrease) in cash and cash equivalents

     8        (110

Cash and cash equivalents at beginning of period

     36        144   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 44      $ 34   
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

20


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    September 30,
2014
     December 31,
2013
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 44       $ 36   

Restricted cash

     4         2   

Accounts receivable, net

     

Customer

     486         451   

Other

     455         581   

Receivables from affiliates

     3         3   

Inventories, net

     121         109   

Regulatory assets

     330         329   

Other

     37         29   
  

 

 

    

 

 

 

Total current assets

     1,480         1,540   
  

 

 

    

 

 

 

Property, plant and equipment, net

     15,389         14,666   

Deferred debits and other assets

     

Regulatory assets

     928         933   

Investments

             5   

Investments in affiliates

     6         6   

Goodwill

     2,625         2,625   

Receivables from affiliates

     2,551         2,469   

Prepaid pension asset

     1,588         1,583   

Other

     278         291   
  

 

 

    

 

 

 

Total deferred debits and other assets

     7,976         7,912   
  

 

 

    

 

 

 

Total assets

   $ 24,845       $ 24,118   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

21


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    September 30,
2014
     December 31,
2013
 
     (Unaudited)         
LIABILITIES AND SHAREHOLDERS’ EQUITY      

Current liabilities

     

Short-term borrowings

   $ 528       $ 184   

Long-term debt due within one year

     260         617   

Accounts payable

     571         449   

Accrued expenses

     254         307   

Payables to affiliates

     28         83   

Customer deposits

     128         133   

Regulatory liabilities

     187         170   

Deferred income taxes

     117         16   

Mark-to-market derivative liability

     14         17   

Other

     73         72   
  

 

 

    

 

 

 

Total current liabilities

     2,160         2,048   
  

 

 

    

 

 

 

Long-term debt

     5,448         5,058   

Long-term debt to financing trust

     206         206   

Deferred credits and other liabilities

     

Deferred income taxes and unamortized investment tax credits

     4,170         4,116   

Asset retirement obligations

     103         99   

Non-pension postretirement benefits obligations

     278         381   

Regulatory liabilities

     3,643         3,512   

Mark-to-market derivative liability

     164         176   

Other

     868         994   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     9,226         9,278   
  

 

 

    

 

 

 

Total liabilities

     17,040         16,590   
  

 

 

    

 

 

 

Commitments and contingencies

     

Shareholders’ equity

     

Common stock

     1,588         1,588   

Other paid-in capital

     5,362         5,190   

Retained earnings

     855         750   
  

 

 

    

 

 

 

Total shareholders’ equity

     7,805         7,528   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 24,845       $ 24,118   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

22


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(In millions)    Common
Stock
     Other Paid-
In  Capital
     Retained Deficit
Unappropriated
    Retained
Earnings
Appropriated
    Total
Shareholders’
Equity
 

Balance, December 31, 2013

   $ 1,588       $ 5,190       $ (1,639   $ 2,389      $ 7,528   

Net income

                     335               335   

Appropriation of retained earnings for future dividends

                     (335     335          

Common stock dividends

                            (230     (230

Contribution from parent

             168                       168   

Parent tax matter indemnification

             4                       4   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance, September 30, 2014

   $ 1,588       $ 5,362       $ (1,639   $ 2,494      $ 7,805   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

23


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
(In millions)        2014             2013             2014             2013      

Operating revenues

        

Operating revenues

   $ 693      $ 727      $ 2,342      $ 2,294   

Operating revenues from affiliates

            1        1        1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     693        728        2,343        2,295   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power and fuel

     228        207        798        632   

Purchased power from affiliate

     27        82        162        321   

Operating and maintenance

     181        162        597        480   

Operating and maintenance from affiliates

     23        24        71        74   

Depreciation and amortization

     59        57        176        171   

Taxes other than income

     42        41        122        121   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     560        573        1,926        1,799   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     133        155        417        496   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense

     (26     (26     (76     (77

Interest expense to affiliates, net

     (3     (3     (9     (9

Other, net

     2        1        5        4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (27     (28     (80     (82
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     106        127        337        414   

Income taxes

     25        35        82        122   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     81        92        255        292   

Preferred security dividends and redemption

                          7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholder

   $ 81      $ 92      $ 255      $ 285   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 81      $ 92      $ 255      $ 292   
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

24


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Nine Months Ended
September 30,
 
(In millions)        2014             2013      

Cash flows from operating activities

    

Net income

   $ 255      $ 292   

Adjustments to reconcile net income to net cash flows provided by operating activities:

    

Depreciation, amortization and accretion

     176        171   

Deferred income taxes and amortization of investment tax credits

     7        35   

Other non-cash operating activities

     70        84   

Changes in assets and liabilities:

    

Accounts receivable

     63        41   

Receivables from and payables to affiliates, net

     (20     (25

Inventories

     5        4   

Accounts payable, accrued expenses and other current liabilities

     19        9   

Income taxes

     16        66   

Pension and non-pension postretirement benefit contributions

     (12     (10

Other assets and liabilities

     (75     (47
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     504        620   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (461     (374

Changes in intercompany money pool

            (1

Change in restricted cash

            (1

Other investing activities

     9        8   
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (452     (368
  

 

 

   

 

 

 

Cash flows from financing activities

    

Payment of accounts receivable agreement

            (210

Issuance of long-term debt

     300        550   

Contributions from parent

     24          

Dividends paid on common stock

     (240     (248

Dividends paid on preferred securities

            (1

Redemption of preferred securities

            (93

Other financing activities

     (7     (3
  

 

 

   

 

 

 

Net cash flows provided by (used in) financing activities

     77        (5
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     129        247   

Cash and cash equivalents at beginning of period

     217        362   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 346      $ 609   
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

25


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    September 30,
2014
     December 31,
2013
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 346       $ 217   

Restricted cash and cash equivalents

     2         2   

Accounts receivable, net

     

Customer

     258         360   

Other

     105         103   

Receivables from affiliates

     3         4   

Inventories, net

     

Fossil fuel

     52         60   

Materials and supplies

     24         21   

Deferred income taxes

     83         83   

Prepaid utility taxes

     44         3   

Regulatory assets

     21         17   

Other

     44         36   
  

 

 

    

 

 

 

Total current assets

     982         906   
  

 

 

    

 

 

 

Property, plant and equipment, net

     6,648         6,384   

Deferred debits and other assets

     

Regulatory assets

     1,520         1,448   

Investments

     23         23   

Investments in affiliates

     8         8   

Receivable from affiliates

     479         447   

Prepaid pension asset

     352         363   

Other

     39         38   
  

 

 

    

 

 

 

Total deferred debits and other assets

     2,421         2,327   
  

 

 

    

 

 

 

Total assets

   $ 10,051       $ 9,617   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

26


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    September 30,
2014
     December 31,
2013
 
     (Unaudited)         
LIABILITIES AND SHAREHOLDERS’ EQUITY      

Current liabilities

     

Long-term debt due within one year

   $ 250       $ 250   

Accounts payable

     303         285   

Accrued expenses

     121         106   

Payables to affiliates

     38         58   

Customer deposits

     53         49   

Regulatory liabilities

     79         106   

Other

     26         37   
  

 

 

    

 

 

 

Total current liabilities

     870         891   
  

 

 

    

 

 

 

Long-term debt

     2,246         1,947   

Long-term debt to financing trusts

     184         184   

Deferred credits and other liabilities

     

Deferred income taxes and unamortized investment tax credits

     2,574         2,487   

Asset retirement obligations

     30         29   

Non-pension postretirement benefits obligations

     291         286   

Regulatory liabilities

     655         629   

Other

     97         99   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     3,647         3,530   
  

 

 

    

 

 

 

Total liabilities

     6,947         6,552   
  

 

 

    

 

 

 

Commitments and contingencies

     

Shareholder’s equity

     

Common stock

     2,439         2,415   

Retained earnings

     664         649   

Accumulated other comprehensive income, net

     1         1   
  

 

 

    

 

 

 

Total shareholder’s equity

     3,104         3,065   
  

 

 

    

 

 

 

Total liabilities and shareholder’s equity

   $ 10,051       $ 9,617   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

27


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY

(Unaudited)

 

(In millions)    Common
Stock
     Retained
Earnings
    Accumulated
Other
Comprehensive
Income, net
     Total
Shareholder’s
Equity
 

Balance, December 31, 2013

   $ 2,415       $ 649      $ 1       $ 3,065   

Net income

             255                255   

Common stock dividends

             (240             (240

Allocation of tax benefit from parent

   $ 24       $      $       $ 24   
  

 

 

    

 

 

   

 

 

    

 

 

 

Balance, September 30, 2014

   $ 2,439       $ 664      $ 1       $ 3,104   
  

 

 

    

 

 

   

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

28


Table of Contents

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
(In millions)        2014             2013             2014             2013      

Operating revenues

        

Operating revenues

   $ 694      $ 735      $ 2,383      $ 2,261   

Operating revenues from affiliates

     3        2        21        10   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     697        737        2,404        2,271   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power and fuel

     216        202        808        703   

Purchased power from affiliate

     81        144        286        356   

Operating and maintenance

     142        125        468        391   

Operating and maintenance from affiliates

     23        21        73        59   

Depreciation and amortization

     78        78        275        252   

Taxes other than income

     55        53        168        162   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     595        623        2,078        1,923   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     102        114        326        348   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense

     (22     (25     (69     (82

Interest expense to affiliates, net

     (4     (4     (12     (12

Other, net

     4        4        14        13   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (22     (25     (67     (81
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     80        89        259        267   

Income taxes

     31        36        103        107   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     49        53        156        160   

Preference stock dividends

     3        3        10        10   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholder

   $ 46      $ 50      $ 146      $ 150   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 49      $ 53      $ 156      $ 160   
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

29


Table of Contents

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Nine Months Ended
September 30,
 
(In millions)        2014             2013      

Cash flows from operating activities

    

Net income

   $ 156      $ 160   

Adjustments to reconcile net income to net cash flows provided by operating activities:

    

Depreciation, amortization and accretion

     275        252   

Deferred income taxes and amortization of investment tax credits

     57        105   

Other non-cash operating activities

     129        105   

Changes in assets and liabilities:

    

Accounts receivable

     101        (28

Receivables from and payables to affiliates, net

     (11     (12

Inventories

     (21     (15

Accounts payable, accrued expenses and other current liabilities

     (50     (5

Counterparty collateral received, net

     16          

Income taxes

     53        6   

Pension and non-pension postretirement benefit contributions

     (13     (16

Other assets and liabilities

     (67     (119
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     625        433   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (458     (391

Change in restricted cash

     (37     (20

Other investing activities

     15        2   
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (480     (409
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in short-term borrowings

     (115     40   

Issuance of long-term debt

            300   

Retirement of long-term debt

     (35     (433

Dividends paid on preference stock

     (10     (10

Other financing activities

     11        (3
  

 

 

   

 

 

 

Net cash flows used in financing activities

     (149     (106
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (4     (82

Cash and cash equivalents at beginning of period

     31        89   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 27      $ 7   
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

30


Table of Contents

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    September 30,
2014
     December 31,
2013
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 27       $ 31   

Restricted cash and cash equivalents

     65         28   

Accounts receivable, net

     

Customer

     366         480   

Other

     90         114   

Income taxes receivable

             30   

Inventories, net

     

Gas held in storage

     68         53   

Materials and supplies

     34         28   

Deferred income taxes

     5         2   

Prepaid utility taxes

     2         57   

Regulatory assets

     206         181   

Other

     6         7   
  

 

 

    

 

 

 

Total current assets

     869         1,011   
  

 

 

    

 

 

 

Property, plant and equipment, net

     6,126         5,864   

Deferred debits and other assets

     

Regulatory assets

     500         524   

Investments

     4         5   

Investments in affiliates

     8         8   

Prepaid pension asset

     382         423   

Other

     26         26   
  

 

 

    

 

 

 

Total deferred debits and other assets

     920         986   
  

 

 

    

 

 

 

Total assets(a)

   $ 7,915       $ 7,861   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    September 30,
2014
     December 31,
2013
 
     (Unaudited)         
LIABILITIES AND SHAREHOLDERS’ EQUITY      

Current liabilities

     

Short-term borrowings

   $ 20       $ 135   

Long-term debt due within one year

     72         70   

Accounts payable

     207         270   

Accrued expenses

     167         111   

Deferred income taxes

     52         27   

Payables to affiliates

     56         55   

Customer deposits

     93         76   

Regulatory liabilities

     45         48   

Other

     45         35   
  

 

 

    

 

 

 

Total current liabilities

     757         827   
  

 

 

    

 

 

 

Long-term debt

     1,904         1,941   

Long-term debt to financing trust

     258         258   

Deferred credits and other liabilities

     

Deferred income taxes and unamortized investment tax credits

     1,805         1,773   

Asset retirement obligations

     18         19   

Non-pension postretirement benefits obligations

     213         217   

Regulatory liabilities

     199         204   

Other

     60         67   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     2,295         2,280   
  

 

 

    

 

 

 

Total liabilities(a)

     5,214         5,306   
  

 

 

    

 

 

 

Commitments and contingencies

     

Shareholders’ equity

     

Common stock

     1,360         1,360   

Retained earnings

     1,151         1,005   
  

 

 

    

 

 

 

Total shareholder’s equity

     2,511         2,365   
  

 

 

    

 

 

 

Preference stock not subject to mandatory redemption

     190         190   
  

 

 

    

 

 

 

Total equity

     2,701         2,555   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 7,915       $ 7,861   
  

 

 

    

 

 

 

 

(a)

BGE’s consolidated assets include $50 million and $31 million at September 30, 2014 and December 31, 2013, respectively, of BGE’s consolidated VIE that can only be used to settle the liabilities of the VIE. BGE’s consolidated liabilities include $237 million and $269 million at September 30, 2014 and December 31, 2013, respectively, of BGE’s consolidated VIE for which the VIE creditors do not have recourse to BGE. See Note 3 — Variable Interest Entities.

See the Combined Notes to Consolidated Financial Statements

 

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Table of Contents

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(In millions)    Common
Stock
   &nb