Document

10-K 1 exc-20171231x10k.htm FORM 10-K Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K



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

For the Fiscal Year Ended December 31, 2017



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



Commission File Number	Name of Registrant; State or Other Jurisdiction 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 (800) 483-3220

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

001-31403	PEPCO HOLDINGS LLC	52-2297449
	(a Delaware limited liability company) 701 Ninth Street, N.W. Washington, District of Columbia 20068 (202) 872-2000

001-01072	POTOMAC ELECTRIC POWER COMPANY	53-0127880
	(a District of Columbia and Virginia corporation) 701 Ninth Street, N.W. Washington, District of Columbia 20068 (202) 872-2000

001-01405	DELMARVA POWER & LIGHT COMPANY	51-0084283
	(a Delaware and Virginia corporation) 500 North Wakefield Drive Newark, Delaware 19702 (202) 872-2000

001-03559	ATLANTIC CITY ELECTRIC COMPANY	21-0398280
	(a New Jersey corporation) 500 North Wakefield Drive Newark, Delaware 19702 (202) 872-2000

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Name of Each Exchange on Which Registered
EXELON CORPORATION:
Common Stock, without par value		New York and Chicago
Series A Junior Subordinated Debentures		New York
Corporate Units		New York
PECO ENERGY COMPANY:
Trust Receipts of PECO Energy Capital Trust III, each representing a 7.38% Cumulative Preferred Security, Series D, $25 stated value, issued by PECO Energy Capital, L.P. and unconditionally guaranteed by PECO Energy Company		New York

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class

COMMONWEALTH EDISON COMPANY:

Common Stock Purchase Warrants, 1971 Warrants and Series B Warrants

POTOMAC ELECTRIC POWER COMPANY:

Common Stock, $.01 par value

DELMARVA POWER & LIGHT COMPANY:

Common Stock, $2.25 par value

ATLANTIC CITY ELECTRIC COMPANY:

Common Stock, $3.00 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.



Exelon Corporation	Yes x	No o
Exelon Generation Company, LLC	Yes x	No o
Commonwealth Edison Company	Yes x	No o
PECO Energy Company	Yes x	No o
Baltimore Gas and Electric Company	Yes x	No o
Pepco Holdings LLC	Yes x	No o
Potomac Electric Power Company	Yes o	No x
Delmarva Power & Light Company	Yes o	No x
Atlantic City Electric Company	Yes o	No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.



Exelon Corporation	Yes o	No x
Exelon Generation Company, LLC	Yes o	No x
Commonwealth Edison Company	Yes o	No x
PECO Energy Company	Yes o	No x
Baltimore Gas and Electric Company	Yes o	No x
Pepco Holdings LLC	Yes o	No x
Potomac Electric Power Company	Yes o	No x
Delmarva Power & Light Company	Yes o	No x
Atlantic City Electric Company	Yes o	No x

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 ý 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 ý No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

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



	Large Accelerated Filer	Accelerated Filer	Non-accelerated Filer	Smaller Reporting Company	Emerging Growth Company
Exelon Corporation	x
Exelon Generation Company, LLC			x
Commonwealth Edison Company			x
PECO Energy Company			x
Baltimore Gas and Electric Company			x
Pepco Holdings LLC			x
Potomac Electric Power Company			x
Delmarva Power & Light Company			x
Atlantic City Electric Company			x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

The estimated aggregate market value of the voting and non-voting common equity held by nonaffiliates of each registrant as of June 30, 2017 was as follows:



Exelon Corporation Common Stock, without par value		$34,604,071,959
Exelon Generation Company, LLC		Not applicable
Commonwealth Edison Company Common Stock, $12.50 par value		No established market
PECO Energy Company Common Stock, without par value		None
Baltimore Gas and Electric Company, without par value		None
Pepco Holdings LLC		Not applicable
Potomac Electric Power Company		None
Delmarva Power & Light Company		None
Atlantic City Electric Company		None

The number of shares outstanding of each registrant’s common stock as of January 31, 2018 was as follows:



Exelon Corporation Common Stock, without par value		965,029,399
Exelon Generation Company, LLC		Not applicable
Commonwealth Edison Company Common Stock, $12.50 par value		127,021,256
PECO Energy Company Common Stock, without par value		170,478,507
Baltimore Gas and Electric Company Common Stock, without par value		1,000
Pepco Holdings LLC		Not applicable
Potomac Electric Power Company Common Stock, $0.01 par value		100
Delmarva Power & Light Company Common Stock, $2.25 par value		1,000
Atlantic City Electric Company Common Stock, $3.00 par value		8,546,017

Documents Incorporated by Reference

Portions of the Exelon Proxy Statement for the 2018 Annual Meeting of

Shareholders and the Commonwealth Edison Company 2018 Information Statement are

incorporated by reference in Part III.

Exelon Generation Company, LLC, PECO Energy Company, Baltimore Gas and Electric Company, Pepco Holdings LLC, Potomac Electric Power Company, Delmarva Power & Light Company and Atlantic City Electric Company meet the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and are therefore filing this Form in the reduced disclosure format.

TABLE OF CONTENTS



		Page No.
GLOSSARY OF TERMS AND ABBREVIATIONS		1
FILING FORMAT		6
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION		6
WHERE TO FIND MORE INFORMATION		6

PART I
ITEM 1.	BUSINESS	7
	General	7
	Exelon Generation Company, LLC	8
	Utility Operations	20
	Employees	24
	Environmental Regulation	25
	Executive Officers of the Registrants	30
ITEM 1A.	RISK FACTORS	36
ITEM 1B.	UNRESOLVED STAFF COMMENTS	60
ITEM 2.	PROPERTIES	61
	Exelon Generation Company, LLC	61
	Commonwealth Edison Company	65
	PECO Energy Company	65
	Baltimore Gas and Electric Company	66
	Potomac Electric Power Company	67
	Delmarva Power & Light Company	68
	Atlantic City Electric Company	69
ITEM 3.	LEGAL PROCEEDINGS	70
ITEM 4.	MINE SAFETY DISCLOSURES	70
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	71
ITEM 6.	SELECTED FINANCIAL DATA	76
	Exelon Corporation	76
	Exelon Generation Company, LLC	77
	Commonwealth Edison Company	77
	PECO Energy Company	78
	Baltimore Gas and Electric Company	79
	Pepco Holdings LLC	79
	Potomac Electric Power Company	80
	Delmarva Power & Light Company	81
	Atlantic City Electric Company	81



		Page No.
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	83
	Exelon Corporation	83
	Executive Overview	83
	Financial Results of Operations	85
	Significant 2017 Transactions and Recent Developments	92
	Exelon's Strategy and Outlook for 2018 and Beyond	99
	Liquidity Considerations	100
	Other Key Business Drivers and Management Strategies	101
	Critical Accounting Policies and Estimates	107
	Results of Operations	124
	Exelon Generation Company, LLC	125
	Commonwealth Edison Company	137
	PECO Energy Company	145
	Baltimore Gas and Electric Company	152
	Pepco Holdings LLC	159
	Potomac Electric Power Company	162
	Delmarva Power & Light Company	169
	Atlantic City Electric Company	178
	Liquidity and Capital Resources	185
	Contractual Obligations and Off-Balance Sheet Arrangements	208
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	216
	Exelon Corporation	216
	Exelon Generation Company, LLC	226
	Commonwealth Edison Company	228
	PECO Energy Company	230
	Baltimore Gas and Electric Company	232
	Pepco Holdings LLC	234
	Potomac Electric Power Company	236
	Delmarva Power & Light Company	238
	Atlantic City Electric Company	240



		Page No.
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	242
	Exelon Corporation	267
	Exelon Generation Company, LLC	272
	Commonwealth Edison Company	277
	PECO Energy Company	282
	Baltimore Gas and Electric Company	287
	Pepco Holdings LLC	292
	Potomac Electric Power Company	297
	Delmarva Power & Light Company	302
	Atlantic City Electric Company	307
	Combined Notes to Consolidated Financial Statements	312
	1. Significant Accounting Policies	312
	2. Variable Interest Entities	330
	3. Regulatory Matters	341
	4. Mergers, Acquisitions and Dispositions	376
	5. Accounts Receivable	387
	6. Property, Plant and Equipment	388
	7. Impairment of Long-Lived Assets and Intangibles	394
	8. Early Nuclear Plant Retirements	396
	9. Jointly Owned Electric Utility Plant	400
	10. Intangible Assets	401
	11. Fair Value of Financial Assets and Liabilities	407
	12. Derivative Financial Instruments	431
	13. Debt and Credit Agreements	447
	14. Income Taxes	460
	15. Asset Retirement Obligations	476
	16. Retirement Benefits	484
	17. Severance	505
	18. Mezzanine Equity	508
	19. Shareholders' Equity	509
	20. Stock-Based Compensation Plans	510
	21. Earnings Per Share	517
	22. Changes in Accumulated Other Comprehensive Income	518
	23. Commitments and Contingencies	522
	24. Supplemental Financial Information	539
	25. Segment Information	552
	26. Related Party Transactions	560
	27. Quarterly Data	573
	28. Subsequent Events	576
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	578
ITEM 9A.	CONTROLS AND PROCEDURES	578
ITEM 9B.	OTHER INFORMATION	579



		Page No.
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	580
ITEM 11.	EXECUTIVE COMPENSATION	581
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	582
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	583
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	584
PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	585
ITEM 16.	FORM 10-K SUMMARY	641
SIGNATURES		642
	Exelon Corporation	642
	Exelon Generation Company, LLC	643
	Commonwealth Edison Company	644
	PECO Energy Company	645
	Baltimore Gas and Electric Company	646
	Pepco Holdings LLC	647
	Potomac Electric Power Company	648
	Delmarva Power & Light Company	649
	Atlantic City Electric Company	650

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
Pepco Holdings or PHI		Pepco Holdings LLC (formerly Pepco Holdings, Inc.)
Pepco		Potomac Electric Power Company
DPL		Delmarva Power & Light Company
ACE		Atlantic City Electric Company
Registrants		Exelon, Generation, ComEd, PECO, BGE, PHI, Pepco, DPL and ACE, collectively
Utility Registrants		ComEd, PECO, BGE, Pepco, DPL and ACE, collectively
Legacy PHI		PHI, Pepco, DPL, ACE, PES and PCI collectively
ACE Funding or ATF		Atlantic City Electric Transition Funding LLC
Antelope Valley		Antelope Valley Solar Ranch One
BondCo		RSB BondCo LLC
BSC		Exelon Business Services Company, LLC
CENG		Constellation Energy Nuclear Group, LLC
ConEdison Solutions		The competitive retail electricity and natural gas business of Consolidated Edison Solutions, Inc., a subsidiary of Consolidated Edison, Inc
Constellation		Constellation Energy Group, Inc.
EEDC		Exelon Energy Delivery Company, LLC
EGR IV		ExGen Renewables IV, LLC
EGTP		ExGen Texas Power, LLC
Entergy		Entergy Nuclear FitzPatrick, LLC
Exelon Corporate		Exelon in its corporate capacity as a holding company
Exelon Transmission Company		Exelon Transmission Company, LLC
Exelon Wind		Exelon Wind, LLC and Exelon Generation Acquisition Company, LLC
FitzPatrick		James A. FitzPatrick nuclear generating station
PCI		Potomac Capital Investment Corporation and its subsidiaries
PEC L.P.		PECO Energy Capital, L.P.
PECO Trust III		PECO Capital Trust III
PECO Trust IV		PECO Energy Capital Trust IV
Pepco Energy Services or PES		Pepco Energy Services, Inc. and its subsidiaries
PHI Corporate		PHI in its corporate capacity as a holding company
PHISCO		PHI Service Company
RPG		Renewable Power Generation
SolGen		SolGen, LLC
TMI		Three Mile Island nuclear facility
UII		Unicom Investments, Inc.

Table of Contents



GLOSSARY OF TERMS AND ABBREVIATIONS
Other Terms and Abbreviations
AEC		Alternative Energy Credit that is issued for each megawatt hour of generation from a qualified alternative energy source
AESO		Alberta Electric Systems Operator
AFUDC		Allowance for Funds Used During Construction
AGE		Albany Green Energy Project
AMI		Advanced Metering Infrastructure
AMP		Advanced Metering Program
AOCI		Accumulated Other Comprehensive Income
ARC		Asset Retirement Cost
ARO		Asset Retirement Obligation
ARP		Alternative Revenue Program
CAISO		California ISO
CAP		Customer Assistance Program
CCGTs		Combined-Cycle gas turbines
CERCLA		Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
CES		Clean Energy Standard
Clean Air Act		Clean Air Act of 1963, as amended
Clean Water Act		Federal Water Pollution Control Amendments of 1972, as amended
Conectiv		Conectiv, LLC, a wholly owned subsidiary of PHI and the parent of DPL and ACE during the Predecessor periods
Conectiv Energy		Conectiv Energy Holdings, Inc. and substantially all of its subsidiaries, which were sold to Calpine in July 2010
CSAPR		Cross-State Air Pollution Rule
CTA		Consolidated tax adjustment
D.C. Circuit Court		United States Court of Appeals for the District of Columbia Circuit
DCPSC		District of Columbia Public Service Commission
Default Electricity Supply		The supply of electricity by PHI’s electric utility subsidiaries at regulated rates to retail customers who do not elect to purchase electricity from a competitive supplier, and which, depending on the jurisdiction, is also known as Standard Offer Service or BGS
DOE		United States Department of Energy
DOJ		United States Department of Justice
DPSC		Delaware Public Service Commission
DRP		Direct Stock Purchase and Dividend Reinvestment Plan
DSP		Default Service Provider
DSP Program		Default Service Provider Program
EDF		Electricite de France SA and its subsidiaries
EE&C		Energy Efficiency and Conservation/Demand Response
EIMA		Energy Infrastructure Modernization Act (Illinois Senate Bill 1652 and Illinois House Bill 3036)
EmPower Maryland		A Maryland demand-side management program for Pepco and DPL
EPA		United States Environmental Protection Agency
EPSA		Electric Power Supply Association

Table of Contents



GLOSSARY OF TERMS AND ABBREVIATIONS
Other Terms and Abbreviations
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
FEJA		Illinois Public Act 99-0906 or Future Energy Jobs Act
FERC		Federal Energy Regulatory Commission
FRCC		Florida Reliability Coordinating Council
GAAP		Generally Accepted Accounting Principles in the United States
GCR		Gas Cost Rate
GHG		Greenhouse Gas
GSA		Generation Supply Adjustment
GWh		Gigawatt hour
IBEW		International Brotherhood of Electrical Workers
ICC		Illinois Commerce Commission
ICE		Intercontinental Exchange
Illinois EPA		Illinois Environmental Protection Agency
Illinois Settlement Legislation		Legislation enacted in 2007 affecting electric utilities in Illinois
Integrys		Integrys Energy Services, Inc.
IPA		Illinois Power Agency
IRC		Internal Revenue Code
IRS		Internal Revenue Service
ISO		Independent System Operator
ISO-NE		ISO New England Inc.
ISO-NY		ISO New York
kV		Kilovolt
kW		Kilowatt
kWh		Kilowatt-hour
LIBOR		London Interbank Offered Rate
LLRW		Low-Level Radioactive Waste
LT Plan		Long-Term renewable resources procurement plan
LTIP		Long-Term Incentive Plan
MAPP		Mid-Atlantic Power Pathway
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

Table of Contents



GLOSSARY OF TERMS AND ABBREVIATIONS
Other Terms and Abbreviations
MRV		Market-Related Value
MW		Megawatt
MWh		Megawatt hour
n.m.		not meaningful
NAAQS		National Ambient Air Quality Standards
NAV		Net Asset Value
NDT		Nuclear Decommissioning Trust
NEIL		Nuclear Electric Insurance Limited
NERC		North American Electric Reliability Corporation
NGS		Natural Gas Supplier
NJBPU		New Jersey Board of Public Utilities
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
NOSA		Nuclear Operating Services Agreement
NPDES		National Pollutant Discharge Elimination System
NRC		Nuclear Regulatory Commission
NSPS		New Source Performance Standards
NUGs		Non-utility generators
NWPA		Nuclear Waste Policy Act of 1982
NYMEX		New York Mercantile Exchange
NYPSC		New York Public Service Commission
OCI		Other Comprehensive Income
OIESO		Ontario Independent Electricity System Operator
OPC		Office of People’s Counsel
OPEB		Other Postretirement Employee Benefits
PA DEP		Pennsylvania Department of Environmental Protection
PAPUC		Pennsylvania Public Utility Commission
PGC		Purchased Gas Cost Clause
PJM		PJM Interconnection, LLC
POLR		Provider of Last Resort
POR		Purchase of Receivables
PPA		Power Purchase Agreement
Price-Anderson Act		Price-Anderson Nuclear Industries Indemnity Act of 1957
Preferred Stock		Originally issued shares of non-voting, non-convertible and non-transferable Series A preferred stock, par value $0.01 per share
PRP		Potentially Responsible Parties
PSEG		Public Service Enterprise Group Incorporated
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

Table of Contents



GLOSSARY OF TERMS AND ABBREVIATIONS
Other Terms and Abbreviations
Regulatory Agreement Units		Nuclear generating units or portions thereof 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
ROE		Return on equity
RPM		PJM Reliability Pricing Model
RPS		Renewable Energy Portfolio Standards
RSSA		Reliability Support Services Agreement
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)
SGIG		Smart Grid Investment Grant from DOE
SILO		Sale-In, Lease-Out
SNF		Spent Nuclear Fuel
SOS		Standard Offer Service
SPFPA		Security, Police and Fire Professionals of America
SPP		Southwest Power Pool
TCJA		Tax Cuts and Jobs Act
Transition Bond Charge		Revenue ACE receives, and pays to ACE Funding, to fund the principal and interest payments on Transition Bonds and related taxes, expenses and fees
Transition Bonds		Transition Bonds issued by ACE Funding
Upstream		Natural gas and oil exploration and production activities
VIE		Variable Interest Entity
WECC		Western Electric Coordinating Council
ZEC		Zero Emission Credit
ZES		Zero Emission Standard

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FILING FORMAT

This combined Annual Report on Form 10-K is being filed separately by Exelon Corporation, Exelon Generation Company, LLC, Commonwealth Edison Company, PECO Energy Company, Baltimore Gas and Electric Company, Pepco Holdings LLC, Potomac Electric Power Company, Delmarva Power & Light Company and Atlantic City 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.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

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, including those factors discussed with respect to the Registrants discussed 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 23, Commitments and Contingencies; and (d) 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’ website at www.exeloncorp.com. Information contained on the Registrants’ website shall not be deemed incorporated into, or to be a part of, this Report.

Table of Contents

PART I



ITEM 1.	BUSINESS

General

Corporate Structure and Business and Other Information

Exelon, incorporated in Pennsylvania in February 1999, is a utility services holding company engaged, through Generation, in the energy generation business, and through ComEd, PECO, BGE, PHI, Pepco, DPL and ACE in the energy delivery businesses discussed below. Exelon’s principal executive offices are located at 10 South Dearborn Street, Chicago, Illinois 60603.



Name of Registrant	State/Jurisdiction and	Business	Service	Address of Principal
Name of Registrant	Year of Incorporation	Business	Territories	Executive Offices

Exelon Generation Company, LLC	Pennsylvania (2000)	Generation, physical delivery and marketing of power across multiple geographical regions through its customer-facing business, Constellation, which sells electricity to both wholesale and retail customers. Generation also sells natural gas, renewable energy and other energy-related products and services.	Six reportable segments: Mid-Atlantic, Midwest, New England, New York, ERCOT and Other Power Regions	300 Exelon Way, Kennett Square, Pennsylvania 19348

Commonwealth Edison Company	Illinois (1913)	Purchase and regulated retail sale of electricity	Northern Illinois, including the City of Chicago	440 South LaSalle Street, Chicago, Illinois 60605
		Transmission and distribution of electricity to retail customers

PECO Energy Company	Pennsylvania (1929)	Purchase and regulated retail sale of electricity and natural gas	Southeastern Pennsylvania, including the City of Philadelphia (electricity)	2301 Market Street, Philadelphia, Pennsylvania 19103
		Transmission and distribution of electricity and distribution of natural gas to retail customers	Pennsylvania counties surrounding the City of Philadelphia (natural gas)

Baltimore Gas and Electric Company	Maryland (1906)	Purchase and regulated retail sale of electricity and natural gas	Central Maryland, including the City of Baltimore (electricity and natural gas)	110 West Fayette Street, Baltimore, Maryland 21201
		Transmission and distribution of electricity and distribution of natural gas to retail customers

Pepco Holdings LLC	Delaware (2016)	Utility services holding company engaged, through its reportable segments Pepco, DPL and ACE	Service Territories of Pepco, DPL and ACE	701 Ninth Street, N.W., Washington, D.C. 20068

Potomac Electric Power Company	District of Columbia (1896) Virginia (1949)	Purchase and regulated retail sale of electricity	District of Columbia and Major portions of Montgomery and Prince George’s Counties, Maryland	701 Ninth Street, N.W., Washington, D.C. 20068
		Transmission and distribution of electricity to retail customers

Delmarva Power & Light Company	Delaware (1909) Virginia (1979)	Purchase and regulated retail sale of electricity and natural gas	Portions of Delaware and Maryland (electricity)	500 North Wakefield Drive, Newark, Delaware 19702
		Transmission and distribution of electricity and distribution of natural gas to retail customers	Portions of New Castle County, Delaware (natural gas)

Atlantic City Electric Company	New Jersey (1924)	Purchase and regulated retail sale of electricity	Portions of Southern New Jersey	500 North Wakefield Drive, Newark, Delaware 19702
		Transmission and distribution of electricity to retail customers

Table of Contents

Business Services

Through its business services subsidiary BSC, Exelon provides its operating subsidiaries with a variety of corporate governance support services including corporate strategy and development, legal, human resources, information technology, finance, real estate, security, corporate communications and supply at cost. The costs of these services are directly charged or allocated to the applicable operating segments. The services are provided pursuant to service agreements. Additionally, the results of Exelon’s corporate operations include interest costs and income from various investment and financing activities.

PHI Service Company (PHISCO), a wholly owned subsidiary of PHI, provides a variety of support services at cost, including legal, finance, engineering, distribution and transmission planning, asset management, system operations, and power procurement, to PHI and its operating subsidiaries. These services are directly charged or allocated pursuant to service agreements among PHISCO and the participating operating subsidiaries.

Operating Segments

See Note 25 — Segment Information of the Combined Notes to Consolidated Financial Statements for additional information on Exelon’s operating segments.

Merger with Pepco Holdings, Inc. (Exelon)

On March 23, 2016, Exelon completed the merger contemplated by the Merger Agreement among Exelon, Purple Acquisition Corp., a wholly owned subsidiary of Exelon (Merger Sub) and Pepco Holdings, Inc. (PHI). As a result of that merger, Merger Sub was merged into PHI (the PHI Merger) with PHI surviving as a wholly owned subsidiary of Exelon and Exelon Energy Delivery Company, LLC (EEDC), a wholly owned subsidiary of Exelon which also owns Exelon's interests in ComEd, PECO and BGE (through a special purpose subsidiary in the case of BGE). Following the completion of the PHI Merger, Exelon and PHI completed a series of internal corporate organization restructuring transactions resulting in the transfer of PHI’s unregulated business interests to Exelon and Generation and the transfer of PHI, Pepco, DPL and ACE to a special purpose subsidiary of EEDC. See Note 4 — Mergers, Acquisitions and Dispositions of the Combined Notes to Consolidated Financial Statements for additional information on the PHI 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, including renewable energy, in competitive energy markets to both wholesale and retail customers. The retail sales include commercial, industrial and residential customers. 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 operates in well-developed energy markets and employs an integrated hedging strategy to manage commodity price volatility. Generation's fleet also provides geographic and supply source diversity. Generation’s customers include distribution utilities, municipalities, cooperatives, financial institutions, and commercial, industrial, governmental, and residential customers in competitive markets. Generation’s customer-facing activities foster development and delivery of other innovative energy-related products and services for its customers.

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

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for sales of energy, capacity and ancillary services to ensure that such sales are just and reasonable. FERC’s jurisdiction over ratemaking 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.

RTOs and ISOs exist in a number of regions to provide transmission service across multiple transmission systems. FERC has approved PJM, MISO, ISO-NE and SPP as RTOs and CAISO and ISO-NY 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. 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 NERC mandatory reliability standards, which protect the nation’s bulk power system against potential disruptions from cyber and physical security breaches.

Constellation Energy Nuclear Group, LLC

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 (Ginna) and Nine Mile Point. CENG’s ownership share in the total capacity of these units is 4,026 MW. See ITEM 2. PROPERTIES for additional information on these sites.

Generation and EDF entered into a Put Option Agreement on April 1, 2014, pursuant to which EDF has the option, exercisable beginning on January 1, 2016 and thereafter until June 30, 2022, to sell its 49.99% interest in CENG to Generation for a fair market value price determined by agreement of the parties, or absent agreement, a third-party arbitration process. The appraisers determining fair market value of EDF’s 49.99% interest in CENG under the Put Option Agreement are instructed to take into account all rights and obligations under the CENG Operating Agreement, including Generation’s rights with respect to any unpaid aggregate preferred distributions and the related return, and the value of Generation’s rights to other distributions. In addition, under limited circumstances, the period for exercise of the put option may be extended for 18 months. In order to exercise its option, EDF must give 60-days advance written notice to Generation stating that it is exercising its option. To date, EDF has not given notice to Generation that it is exercising its option.

Prior to April 1, 2014, Exelon and Generation accounted for their investment in CENG under the equity method of accounting. The transfer of the nuclear operating licenses and the execution of the NOSA on April 1, 2014, resulted in the derecognition of the equity method investment in CENG and the recording of all assets, liabilities and EDF’s noncontrolling interests in CENG at fair value on a fully consolidated basis in Exelon’s and Generation’s Consolidated Balance Sheets. See Note 2 — Variable Interest Entities of the Combined Notes to Consolidated Financial Statements for further information regarding the CENG consolidation.

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Acquisitions

James A. FitzPatrick Nuclear Generating Station

On March 31, 2017, Generation acquired the 838 MW single-unit James A. FitzPatrick nuclear generating station located in Scriba, New York from Entergy Nuclear FitzPatrick LLC (Entergy) for a total purchase price consideration of $289 million, resulting in an after-tax bargain purchase gain of $233 million in 2017.

ConEdison Solutions

On September 1, 2016, Generation acquired the competitive retail electric and natural gas business activities of ConEdison Solutions, a subsidiary of Consolidated Edison, Inc., for a purchase price of $257 million including net working capital of $204 million. The renewable energy, sustainable services and energy efficiency businesses of ConEdison were excluded from the transaction.

Integrys Energy Services, Inc.

On November 1, 2014, Generation acquired the competitive retail electric and natural gas business activities of Integrys Energy Group, Inc. through the purchase of all of the stock of its wholly owned subsidiary, Integrys Energy Services, Inc. (Integrys) for a purchase price of $332 million, including net working capital. The generation and solar asset businesses of Integrys were excluded from the transaction.

Dispositions

ExGen Texas Power, LLC.

On May 2, 2017, EGTP entered into a consent agreement with its lenders to permit EGTP to draw on its revolving credit facility and initiate an orderly sales process to sell the assets of its wholly owned subsidiaries, the proceeds from which will first be used to pay the administrative costs of the sale, the normal and ordinary costs of operating the plants and repayment of the secured debt of EGTP, including the revolving credit facility. As a result, Exelon and Generation classified certain EGTP assets and liabilities as held for sale at their respective fair values less costs to sell and recorded associated pre-tax impairment charges of $460 million. On November 7, 2017, EGTP and all of its wholly owned subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware. As a result of the bankruptcy filing, EGTP’s assets and liabilities were deconsolidated from Exelon and Generation's consolidated financial statements. Exelon and Generation recorded a pre-tax gain upon deconsolidation of $213 million in the fourth quarter of 2017.

Asset Divestitures

During 2015 and 2014, Generation sold certain generating assets with total pre-tax proceeds of $1.8 billion (after-tax proceeds of approximately $1.4 billion). Proceeds were used primarily to finance a portion of the acquisition of PHI.

See Note 4 — Mergers, Acquisitions and Dispositions and Note 7 — Impairment of Long-Lived Assets and Intangibles of the Combined Notes to Consolidated Financial Statements for additional information on acquisitions and dispositions.

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Generating Resources

At December 31, 2017, the generating resources of Generation consisted of the following:



Type of Capacity	MW
Owned generation assets^(a)(b)
Nuclear	20,310
Fossil (primarily natural gas and oil)	11,723
Renewable^(c)	3,135
Owned generation assets^(e)	35,168
Long-term power purchase contracts^(d)	5,285
Total generating resources	40,453

__________


(a)	See “Fuel” for sources of fuels used in electric generation.


(b)	Net generation capacity is stated at proportionate ownership share. See ITEM 2. PROPERTIES—Generation for additional information.


(c)	Includes wind, hydroelectric and solar generating assets.


(d)	Electric supply procured under site specific agreements.


(e)	Includes EGTP generating assets that were deconsolidated from Generation's consolidated financial statements. See Note 4 — Mergers, Acquisitions and Dispositions of the Combined Notes to Consolidated Financial Statements for additional information.

Generation has six reportable segments, the Mid-Atlantic, Midwest, New England, New York, ERCOT and Other Power Regions, representing the different geographical areas in which Generation’s generating resources are located and Generation's customer-facing activities are conducted.


•	Mid-Atlantic represents operations in the eastern half of PJM, which includes Pennsylvania, New Jersey, Maryland, Virginia, West Virginia, Delaware, the District of Columbia and parts of North Carolina (approximately 33% of capacity).

•

Midwest represents operations in the western half of PJM, which includes portions of Illinois, Indiana, Ohio, Michigan, Kentucky and Tennessee; and the United States footprint of MISO (excluding MISO’s Southern Region), which covers all or most of North Dakota, South Dakota, Nebraska, Minnesota, Iowa, Wisconsin and the remaining parts of Illinois, Indiana, Michigan and Ohio not covered by PJM; and parts of Montana, Missouri and Kentucky (approximately 34% of capacity).


•	New England represents the operations within ISO-NE covering the states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont (approximately 6% of capacity).


•	New York represents the operations within ISO-NY, which covers the state of New York in its entirety (approximately 6% of capacity).


•	ERCOT represents operations within Electric Reliability Council of Texas, covering most of the state of Texas (approximately 16% of capacity).


•	Other Power Regions is an aggregate of regions not considered individually significant (approximately 5% of capacity).

See Note 25 — Segment Information of the Combined Notes to Consolidated Financial Statements for additional information on revenues from external customers and revenues net of purchased power and fuel expense for each of Generation's reportable segments.

Nuclear Facilities

Generation has ownership interests in fifteen nuclear generating stations currently in service, consisting of 25 units with an aggregate of 20,310 MW of capacity. Generation wholly owns all of its

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nuclear generating stations, except for undivided ownership interests in three jointly-owned nuclear stations: Quad Cities (75% ownership), Peach Bottom (50% ownership), and Salem (42.59% ownership), which are consolidated on Exelon’s and Generation's financial statements relative to its proportionate ownership interest in each unit, and a 50.01% membership interest in CENG, which owns Calvert Cliffs, Nine Mile Point [excluding Long Island Power Authority's 18% undivided ownership interest in Nine Mile Point Unit 2] and Ginna nuclear stations. CENG is 100% consolidated on Exelon's and Generation’s financial statements.

Generation’s nuclear generating stations are all operated by Generation, with the exception of the two units at Salem, which are operated by PSEG Nuclear, LLC (PSEG Nuclear), an indirect, wholly owned subsidiary of PSEG. In 2017, 2016 and 2015 electric supply (in GWh) generated from the nuclear generating facilities was 69%, 67% and 68%, respectively, of Generation’s total electric supply, which also includes fossil, hydroelectric and renewable generation and electric supply purchased for resale. Generation’s wholesale and retail power marketing activities are, in part, supplied by the output from the nuclear generating stations. See ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for further discussion of Generation’s electric supply sources.

Nuclear Operations

Capacity factors, which are significantly affected by the number and duration of refueling and non-refueling outages, can have a significant impact on Generation’s results of operations. As the largest generator of nuclear power in the United States, Generation can negotiate favorable terms for the materials and services that its business requires. Generation’s operations from its nuclear plants have historically had minimal environmental impact and the plants have a safe operating history.

During 2017, 2016 and 2015, the nuclear generating facilities operated by Generation achieved capacity factors of 94.1%, 94.6% and 93.7%, respectively. The capacity factors reflect ownership percentage of stations operated by Generation and include CENG. Generation manages its scheduled refueling outages to minimize their duration and to maintain high nuclear generating capacity factors, resulting in a stable generation base for Generation’s wholesale and retail power marketing activities. During scheduled refueling outages, Generation performs maintenance and equipment upgrades in order to minimize the occurrence of unplanned outages and to maintain safe, reliable operations.

In addition to the maintenance and equipment upgrades performed by Generation during scheduled refueling outages, Generation has extensive operating and security procedures in place to ensure the safe operation of the nuclear units. Generation also has extensive safety systems in place to protect the plant, personnel and surrounding area in the unlikely event of an accident or other incident.

Regulation of Nuclear Power Generation

Generation is subject to the jurisdiction of the NRC with respect to the operation of its nuclear generating stations, including the licensing for operation of each unit. The NRC subjects nuclear generating stations to continuing review and regulation covering, among other things, operations, maintenance, emergency planning, security and environmental and radiological aspects of those stations. As part of its reactor oversight process, the NRC continuously assesses unit performance indicators and inspection results, and communicates its assessment on a semi-annual basis. All nuclear generating stations operated by Generation, except for Clinton, are categorized by the NRC in the Licensee Response Column, which is the highest of five performance bands. As of February 1, 2018, the NRC categorized Clinton in the Regulatory Response Column, which is the second highest of five performance bands. The NRC may modify, suspend or revoke operating licenses and impose civil penalties for failure to comply with the Atomic Energy Act, the regulations under such Act or the terms of the operating licenses. Changes in regulations by the NRC may require a substantial increase in capital expenditures and/or operating costs for nuclear generating facilities.

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Licenses

Generation has original 40-year operating licenses from the NRC for each of its nuclear units and has received 20-year operating license renewals from the NRC for all its nuclear units except Clinton. Additionally, PSEG has received 20-year operating license renewals for Salem Units 1 and 2. On May 30, 2017, Exelon announced that Generation will permanently cease generation operations at TMI on or about September 30, 2019. On February 2, 2018, Exelon announced that Generation will permanently cease generation operations at Oyster Creek at the end of its current operating cycle in October 2018. In 2010, Generation had previously agreed to permanently cease generation operations at Oyster Creek by the end of 2019. See Note 8 — Early Nuclear Plant Retirements of the Combined Notes to Consolidated Financial Statements for additional information regarding the early retirement of TMI. See Note 28 — Subsequent Events of the Combined Notes to Consolidated Financial Statements for additional information regarding the early retirement of Oyster Creek.

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The following table summarizes the current operating license expiration dates for Generation’s nuclear facilities in service:



Station	Unit	In-Service Date^(a)	Current License Expiration
Braidwood	1	1988	2046
	2	1988	2047
Byron	1	1985	2044
	2	1987	2046
Calvert Cliffs	1	1975	2034
	2	1977	2036
Clinton^(b)	1	1987	2026
Dresden	2	1970	2029
	3	1971	2031
FitzPatrick	1	1974	2034
LaSalle	1	1984	2042
	2	1984	2043
Limerick	1	1986	2044
	2	1990	2049
Nine Mile Point	1	1969	2029
	2	1988	2046
Oyster Creek^(c)	1	1969	2029
Peach Bottom^(d)	2	1974	2033
	3	1974	2034
Quad Cities	1	1973	2032
	2	1973	2032
Ginna	1	1970	2029
Salem	1	1977	2036
	2	1981	2040
Three Mile Island^(e)	1	1974	2034

__________


(a)	Denotes year in which nuclear unit began commercial operations.


(b)	Although timing has been delayed, Generation currently plans to seek license renewal for Clinton and has advised the NRC that any license renewal application would not be filed until the first quarter of 2021.


(c)	Generation had previously announced and notified the NRC that it will permanently cease generation operations at Oyster Creek by the end of 2019. On February 2, 2018, Exelon announced that Generation will permanently cease generation operations at Oyster Creek at the end of its current operating cycle in October 2018.


(d)	On June 7, 2016, Generation announced that it will submit a second 20-year license renewal application to NRC for Peach Bottom Units 2 and 3 in 2018.


(e)	On May 30, 2017, Exelon announced that Generation will permanently cease generation operations at TMI on or about September 30, 2019 and has notified the NRC.

The operating license renewal process takes approximately four to five years from the commencement of the renewal process, which includes approximately two years for Generation to develop the application and approximately two years for the NRC to review the application. To date, each granted license renewal has been for 20 years beyond the original operating license expiration. Depreciation provisions are based on the estimated useful lives of the stations, which reflect the actual renewal of operating licenses for all of Generation’s operating nuclear generating stations except for Oyster Creek, TMI and Clinton. In 2017, Oyster Creek and TMI depreciation provisions were based on

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their 2019 expected shutdown dates. Beginning February 2018, Oyster Creek depreciation provisions will be based on its announced shutdown date of 2018. Clinton depreciation provisions are based on 2027 which is the last year of the Illinois Zero Emissions Standard. See Note 3 - Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional detail on the new Illinois legislation and Note 8 — Early Nuclear Plant Retirements of the Combined Notes to Consolidated Financial Statements for additional detail on early retirements.

Nuclear Waste Storage and Disposal

There are no facilities for the reprocessing or permanent disposal of SNF currently in operation in the United States, nor has the NRC licensed any such facilities. Generation currently stores all SNF generated by its nuclear generating facilities on-site in storage pools or in dry cask storage facilities. Since Generation’s SNF storage pools generally do not have sufficient storage capacity for the life of the respective plant, Generation has developed dry cask storage facilities to support operations.

As of December 31, 2017, Generation had approximately 84,100 SNF assemblies (20,600 tons) stored on site in SNF pools or dry cask storage (this includes SNF assemblies at Zion Station, for which Generation retains ownership even though the responsibility for decommissioning Zion Station has been assumed by another party; see Note 15 — Asset Retirement Obligations of the Combined Notes to Consolidated Financial Statements for additional information regarding Zion Station Decommissioning). All currently operating Generation-owned nuclear sites have on-site dry cask storage, except for TMI, where such storage is projected to be in operation in 2021. On-site dry cask storage in concert with on-site storage pools will be capable of meeting all current and future SNF storage requirements at Generation’s sites through the end of the license renewal periods and through decommissioning.

For a discussion of matters associated with Generation’s contracts with the DOE for the disposal of SNF, see Note 23 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements.

As a by-product of their operations, nuclear generating units produce LLRW. LLRW is accumulated at each generating station and permanently disposed of at licensed disposal facilities. The Federal Low-Level Radioactive Waste Policy Act of 1980 provides that states may enter into agreements to provide regional disposal facilities for LLRW and restrict use of those facilities to waste generated within the region. Illinois and Kentucky have entered into such an agreement, although neither state currently has an operational site and none is anticipated to be operational until after 2020.

Generation ships its Class A LLRW, which represents 93% of LLRW generated at its stations, to disposal facilities in Utah and South Carolina, which have enough storage capacity to store all Class A LLRW for the life of all stations in Generation's nuclear fleet. The disposal facility in South Carolina at present is only receiving LLRW from LLRW generators in South Carolina, New Jersey (which includes Oyster Creek and Salem) and Connecticut.

Generation utilizes on-site storage capacity at all its stations to store and stage for shipping Class B and Class C LLRW. Generation has a contract through 2032 to ship Class B and Class C LLRW to a disposal facility in Texas. The agreement provides for disposal of all current Class B and Class C LLRW currently stored at each station as well as the Class B and Class C LLRW generated during the term of the agreement. However, because the production of LLRW from Generation’s nuclear fleet will exceed the capacity at the Texas site (3.9 million curies for 15 years beginning in 2012), Generation will still be required to utilize on-site storage at its stations for Class B and Class C LLRW. Generation currently has enough storage capacity to store all Class B and Class C LLRW for the life of all stations in Generation’s nuclear fleet. Generation continues to pursue alternative disposal strategies for LLRW, including an LLRW reduction program to minimize on-site storage and cost impacts.

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Nuclear Insurance

Generation is subject to liability, property damage and other risks associated with major incidents at any of its nuclear stations, including the CENG nuclear stations. Generation has reduced its financial exposure to these risks through insurance and other industry risk-sharing provisions. See “Nuclear Insurance” within Note 23 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for details.

For information regarding property insurance, see ITEM 2. PROPERTIES — Generation. Generation is self-insured to the extent that any losses may exceed the amount of insurance maintained or are within the policy deductible for its insured losses. Such losses could have a material adverse effect on Exelon’s and Generation’s future financial conditions and results of operations and cash flows.

Decommissioning

NRC regulations require that licensees of nuclear generating facilities demonstrate reasonable assurance that funds will be available in specified minimum amounts at the end of the life of the facility to decommission the facility. The ultimate decommissioning obligation will be funded by the NDTs. The NDTs are recorded on Exelon’s and Generation’s Consolidated Balance Sheets at December 31, 2017 at fair value of approximately $13.3 billion and have an estimated targeted annual pre-tax return of 4.8% to 6.4%, while the Nuclear AROs are recorded on Exelon’s and Generation’s Consolidated Balance Sheets at December 31, 2017 at approximately $9.7 billion and have an estimated annual average accretion of the ARO of approximately 5% through a period of approximately 30 years after the end of the extended lives of the units. See ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Exelon Corporation, Executive Overview; ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Critical Accounting Policies and Estimates, Nuclear Decommissioning, Asset Retirement Obligations and Nuclear Decommissioning Trust Fund Investments; and Note 3 — Regulatory Matters, Note 11 — Fair Value of Financial Assets and Liabilities and Note 15 — Asset Retirement Obligations of the Combined Notes to Consolidated Financial Statements for additional information regarding Generation’s NDT funds and its decommissioning obligations.

Zion Station Decommissioning. On December 11, 2007, Generation entered into an Asset Sale Agreement (ASA) with EnergySolutions, Inc. and its wholly owned subsidiaries, EnergySolutions, LLC (EnergySolutions) and ZionSolutions, LLC (ZionSolutions) under which ZionSolutions assumed responsibility for decommissioning Zion Station, which is in Zion, Illinois, and ceased operation in 1998.

On September 1, 2010, Generation and EnergySolutions completed the transactions contemplated by the ASA. Specifically, Generation transferred to ZionSolutions substantially all of the assets (other than land) associated with Zion Station, including assets held in related NDT funds. In consideration for Generation’s transfer of those assets, ZionSolutions assumed decommissioning and other liabilities, excluding the obligation to dispose of SNF, associated with Zion Station. Pursuant to the ASA, ZionSolutions will periodically request reimbursement from the Zion Station-related NDT funds for costs incurred related to the decommissioning efforts at Zion Station. However, ZionSolutions is subject to certain restrictions on its ability to request reimbursement; specifically, if certain milestones as defined in the ASA are not met, all or a portion of requested reimbursements shall be deferred until such milestones are met. See Note 15 — Asset Retirement Obligations of the Combined Notes to Consolidated Financial Statements for additional information regarding Zion Station decommissioning and see Note 2 — Variable Interest Entities of the Combined Notes to Consolidated Financial Statements for a discussion of variable interest entity considerations related to ZionSolutions.

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Fossil and Renewable Facilities (including Hydroelectric)

At December 31, 2017, Generation had ownership interests in 14,858 MW of capacity in generating facilities currently in service, consisting of 11,723 MW of natural gas and oil, and 3,135 MW of renewables (wind, hydroelectric and solar). Generation wholly owns all of its fossil and renewable generating stations, with the exception of: (1) Wyman; (2) certain wind project entities and a biomass project entity with minority interest owners; and (3) ExGen Renewables Partners, LLC which is owned 49% by another owner. See Note 2 — Variable Interest Entities of the Combined Notes to Consolidated Financial Statements for additional information regarding certain of these entities which are VIEs. Generation’s fossil and renewable generating stations are all operated by Generation, with the exception of LaPorte and Wyman, which are operated by third parties. In 2017, 2016 and 2015, electric supply (in GWh) generated from owned fossil and renewable generating facilities was 12%, 10% and 8%, respectively, of Generation’s total electric supply. The majority of this output was dispatched to support Generation’s wholesale and retail power marketing activities. For additional information regarding Generation’s electric generating facilities, see ITEM 2. PROPERTIES — Exelon Generation Company, LLC and ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Exelon Corporation, Executive Overview for additional information on Generation Renewable Development.

Licenses

Fossil and renewable generation plants are generally not licensed, and, therefore, the decision on when to retire plants is, fundamentally, a commercial one. FERC has the exclusive authority to license most non-Federal hydropower projects located on navigable waterways or Federal lands, or connected to the interstate electric grid, which include Generation's Conowingo Hydroelectric Project (Conowingo) and Muddy Run Pumped Storage Facility Project (Muddy Run). On August 29, 2012 and August 30, 2012, Generation submitted hydroelectric license applications to the FERC for 46-year licenses for the Conowingo and Muddy Run, respectively. On December 22, 2015, FERC issued a new 40-year license for Muddy Run. The license term expires on December 1, 2055. Based on the FERC procedural schedule, the FERC licensing process for Conowingo was not completed prior to the expiration of the plant’s license on September 1, 2014. The FERC is required to issue annual licenses for Conowingo until the new long-term license is issued. On September 10, 2014, FERC issued an annual license for Conowingo, effective as of the expiration of the previous license. The annual license renews automatically absent any further FERC action. The stations are currently being depreciated over their estimated useful lives, which includes actual and anticipated license renewal periods. Refer to Note 3 — Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information.

Insurance

Generation maintains business interruption insurance for its renewable projects, but not for its fossil and hydroelectric operations unless required by contract or financing agreements. Refer to Note 13 — Debt and Credit Agreements of the Combined Notes to Consolidated Financial Statements for additional information on financing agreements. Generation maintains both property damage and liability insurance. For property damage and liability claims for these operations, Generation is self-insured to the extent that losses are within the policy deductible or exceed the amount of insurance maintained. Such losses could have a material adverse effect on Exelon’s and Generation’s future financial conditions and their results of operations and cash flows. For information regarding property insurance, see ITEM 2. PROPERTIES — Exelon Generation Company, LLC.

Long-Term Power Purchase Contracts

In addition to energy produced by owned generation assets, Generation sources electricity from plants it does not own under long-term contracts. The following tables summarize Generation’s long-

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term contracts to purchase unit-specific physical power with an original term in excess of one year in duration, by region, in effect as of December 31, 2017:



Region	Number of Agreements	Expiration Dates	Capacity (MW)
Mid-Atlantic	14	2019 - 2032	237
Midwest	4	2019 - 2026	834
New England	7	2018	40
ERCOT	5	2020 - 2031	1,524
Other Power Regions	12	2018 - 2030	2,650
Total	42		5,285



	2018	2019	2020	2021	2022	Thereafter	Total
Capacity Expiring (MW)	141	644	1,020	815	298	2,367	5,285

Fuel

The following table shows sources of electric supply in GWh for 2017 and 2016:



	Source of Electric Supply
	2017	2016
Nuclear^(a)	182,843	176,799
Purchases — non-trading portfolio	51,595	59,987
Fossil (primarily natural gas and oil)	22,546	19,830
Renewable^(b)	7,848	6,324
Total supply	264,832	262,940

__________


(a)	Includes the proportionate share of output where Generation has an undivided ownership interest in jointly-owned generating plants and includes the total output of plants that are fully consolidated (e.g., CENG). Nuclear generation for 2017 and 2016 includes physical volumes of 34,761 GWh and 33,444 GWh, respectively, for CENG.


(b)	Includes wind, hydroelectric and solar generating assets.

The fuel costs per MWh for nuclear generation are less than those for fossil-fuel generation. Consequently, nuclear generation is generally the most cost-effective way for Generation to meet its wholesale and retail load servicing requirements.

The cycle of production and utilization of nuclear fuel includes the mining and milling of uranium ore into uranium concentrates, the conversion of uranium concentrates to uranium hexafluoride, the enrichment of the uranium hexafluoride and the fabrication of fuel assemblies. Generation has inventory in various forms and does not anticipate difficulty in obtaining the necessary uranium concentrates or conversion, enrichment or fabrication services to meet the nuclear fuel requirements of its nuclear units.

Natural gas is procured through long-term and short-term contracts, as well as spot-market purchases. Fuel oil inventories are managed so that in the winter months sufficient volumes of fuel are available in the event of extreme weather conditions and during the remaining months to take advantage of favorable market pricing.

Generation uses financial instruments to mitigate price risk associated with certain commodity price exposures, using both over-the-counter and exchange-traded instruments. See ITEM 1A. RISK FACTORS, ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

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AND RESULTS OF OPERATIONS, Critical Accounting Policies and Estimates and Note 12 — Derivative Financial Instruments of the Combined Notes to Consolidated Financial Statements for additional information regarding derivative financial instruments.

Power Marketing

Generation’s integrated business operations include physical delivery and marketing of power. Generation largely obtains physical power supply from its generating assets and power purchase agreements in multiple geographic regions. Power purchase agreements, including tolling arrangements, are commitments related to power generation of specific generation plants and/or dispatch similar to an owned asset depending on the type of underlying asset. The commodity risks associated with the output from generating assets and PPAs are managed using various commodity transactions including sales to customers. The main objective is to obtain low-cost energy supply to meet physical delivery obligations to both wholesale and retail customers. Generation sells electricity, natural gas and other energy related products and solutions to various customers, including distribution utilities, municipalities, cooperatives, and commercial, industrial, governmental and residential customers in competitive markets. Where necessary, Generation may also purchase transmission service to ensure that it has reliable transmission capacity to physically move its power supplies to meet customer delivery needs.

Price and Supply Risk Management

Generation also manages the price and supply risks for energy and fuel associated with generation assets and the risks of power marketing activities. Generation implements a three-year ratable sales plan to align its hedging strategy with its financial objectives. Generation may also enter into transactions that are outside of this ratable sales plan. Generation is exposed to commodity price risk in 2018 and beyond for portions of its electricity portfolio that are unhedged. As of December 31, 2017, the percentage of expected generation hedged is 85%-88%, 55%-58% and 26%-29% for 2018, 2019, and 2020, respectively. The percentage of expected generation hedged is the amount of equivalent sales divided by the expected generation. Expected generation is the volume of energy that best represents our commodity position in energy markets from owned or contracted generating facilities based upon a simulated dispatch model that makes assumptions regarding future market conditions, which are calibrated to market quotes for power, fuel, load following products and options. Equivalent sales represent all hedging products, which include economic hedges and certain non-derivative contracts, including sales to ComEd, PECO, BGE, Pepco, DPL and ACE to serve their retail load. A portion of Generation’s hedging strategy may be implemented through the use of fuel products based on assumed correlations between power and fuel prices. The risk management group and Exelon’s RMC monitor the financial risks of the wholesale and retail power marketing activities. Generation also uses financial and commodity contracts for proprietary trading purposes, but this activity accounts for only a small portion of Generation’s efforts. The proprietary trading portfolio is subject to a risk management policy that includes stringent risk management limits. See ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK for additional information.

Capital Expenditures

Generation’s business is capital intensive and requires significant investments primarily in nuclear fuel and energy generation assets. Generation’s estimated capital expenditures for 2018 are approximately $2.1 billion, which includes Generation's share of the investment in nuclear fuel for the co-owned Salem plant.

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ComEd, PECO, BGE, Pepco, DPL and ACE

Utility Operations

Service Territories and Franchise Agreements

The following table presents the size of service territories, populations of each service territory and the number of customers within each service territory for the Utility Registrants as of December 31, 2017:



	Service Territories			Service Territory Population				Number of Customers
	(in square miles)			(in millions)				(in millions)
	Total	Electric	Natural gas	Total		Electric	Natural gas	Total	Electric	Natural gas
ComEd	11,400	11,400	n/a	9.4	^(a)	9.4	n/a	4.0	4.0	n/a
PECO	2,100	1,900	1,900	4.0	^(b)	4.0	2.4	1.6	1.6	0.5
BGE	3,250	2,300	3,050	3.1	^(c)	3.0	2.9	1.3	1.3	0.7
Pepco	640	640	n/a	2.4	^(d)	2.4	n/a	0.9	0.9	n/a
DPL	5,400	5,400	275	1.4	^(e)	1.4	0.6	0.5	0.5	0.1
ACE	2,800	2,800	n/a	1.1	^(f)	1.1	n/a	0.6	0.6	n/a

__________


(a)	Includes approximately 2.7 million in the city of Chicago.


(b)	Includes approximately 1.6 million in the city of Philadelphia.


(c)	Includes approximately 0.6 million in the city of Baltimore.


(d)	Includes approximately 0.7 million in the District of Columbia.


(e)	Includes approximately 0.1 million in the city of Wilmington.


(f)	Includes approximately 0.1 million in the city of Atlantic City.

The Utility Registrants have the necessary authorizations to perform their current business of providing regulated electric and natural gas distribution services in the various municipalities and territories in which they now supply such services. These authorizations include charters, franchises, permits, and certificates of public convenience issued by local and state governments and state utility commissions. ComEd's, BGE's and ACE's rights are generally non-exclusive; while PECO's, Pepco's and DPL's rights are generally exclusive. Certain authorizations are perpetual while others have varying expiration dates. The Utility Registrants anticipate working with the appropriate governmental bodies to extend or replace the authorizations prior to their expirations.

Utility Regulations

State utility commissions regulate the Utility Registrants' electric and gas distribution rates and service, issuances of certain securities, and certain other aspects of the business. The following table outlines the state commissions responsible for utility oversight.



Registrant		Commission
ComEd		ICC
PECO		PAPUC
BGE		MDPSC
Pepco		DCPSC/MDPSC
DPL		DPSC/MDPSC
ACE		NJBPU

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The Utility Registrants are public utilities under the Federal Power Act subject to regulation by FERC related to transmission rates and certain other aspects of the utilities' business. The U.S. Department of Transportation also regulates pipeline safety and other areas of gas operations for PECO, BGE and DPL. Additionally, the Utility Registrants are subject to NERC mandatory reliability standards, which protect the nation's bulk power system against potential disruptions from cyber and physical security breaches.

Seasonality Impacts on Delivery Volumes

The Utility Registrants' electric distribution volumes are generally higher during the summer and winter months when temperature extremes create demand for either summer cooling or winter heating. For PECO, BGE and DPL, natural gas distribution volumes are generally higher during the winter months when cold temperatures create demand for winter heating.

ComEd, BGE, Pepco and DPL Maryland have electric distribution decoupling mechanisms and BGE has a natural gas decoupling mechanism that eliminate the favorable and unfavorable impacts of weather and customer usage patterns on electric distribution and natural gas delivery volumes. As a result, ComEd’s, BGE’s, Pepco’s and DPL’s Maryland electric distribution revenues and BGE's natural gas revenues are not materially impacted by delivery volumes. PECO’s and ACE’s electric distribution revenues and DPL’s Delaware electric distribution and natural gas revenues are impacted by delivery volumes.

Electric and Natural Gas Distribution Services

The Utility Registrants are allowed to recover reasonable costs and fair and prudent capital expenditures associated with electric and natural gas distribution services and earn a return on those capital expenditures, subject to commission approval. ComEd recovers costs through a performance-based rate formula. ComEd is required to file an update to the performance-based rate formula on an annual basis. PECO's, BGE’s and DPL's electric and gas distribution costs and Pepco's and ACE's electric distribution costs are recovered through traditional rate case proceedings. In certain instances, the Utility Registrants use specific recovery mechanisms as approved by their respective regulatory agencies.

ComEd, Pepco and ACE customers have the choice to purchase electricity, and PECO, BGE and DPL customers have the choice to purchase electricity and natural gas from competitive electric generation and natural gas suppliers. The Utility Registrants remain the distribution service providers for all customers and are obligated to deliver electricity and natural gas to customers in their respective service territories while charging a regulated rate for distribution service. In addition, the Utility Registrants also retain significant default service obligations to provide electricity to certain groups of customers in their respective service areas who do not choose a competitive electric generation supplier. PECO and BGE also retain significant default service obligations to provide natural gas to certain groups of customers in their respective service areas who do not choose a competitive natural gas supplier. For natural gas, DPL does not retain default service obligations.

For customers that choose to purchase electric generation or natural gas from competitive suppliers, the Utility Registrants act as the billing agent and therefore do not record Operating revenues or Purchased power and fuel expense related to the electricity and/or natural gas. Refer to ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Results of Operations for further information. For customers that choose to purchase electric generation or natural gas from a Utility Registrant, the Utility Registrants are permitted to recover the electricity and natural gas procurement costs without mark-up and therefore record equal and offsetting amounts of Operating revenues and Purchased power and fuel expense related to the electricity and/or natural gas. As a result, fluctuations in electricity or natural gas sales and procurement costs

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have no impact on the Utility Registrants’ Revenues net of purchased power and fuel expense, which is a non-GAAP measure used to evaluate operational performance, or Net Income.

Procurement-Related Proceedings

The Utility Registrants' electric supply for its customers is primarily procured through contracts as required by the ICC, PAPUC, MDPSC, DCPSC, DPSC and NJBPU. The Utility Registrants procure electricity supply from various approved bidders, including Generation. RTO spot market purchases and sales are utilized to balance the utility electric load and supply as required. Charges incurred for electric supply procured through contracts with Generation are included in Purchased power from affiliates on the Utility Registrants' Statements of Operations and Comprehensive Income.

PECO's, BGE’s and DPL's natural gas supplies are purchased from a number of suppliers for terms of up to three years. PECO, BGE and DPL have annual firm supply and transportation contracts of 132,000 mmcf, 128,000 mmcf and 58,000 mmcf, respectively. In addition, to supplement gas supply at times of heavy winter demands and in the event of temporary emergencies, PECO, BGE and DPL have available storage capacity from the following sources:



	Peak Natural Gas Sources (in mmcf)
	Liquefied Natural Gas Facility	Propane-Air Plant	Underground Storage Service Agreements^(a)
PECO	1,200	150	18,000
BGE	1,056	550	22,000
DPL	257	n/a	3,800

___________


(a)	Natural gas from underground storage represents approximately 28%, 46% and 34% of PECO's, BGE’s and DPL's 2017-2018 heating season planned supplies, respectively.

PECO, BGE and DPL have long-term interstate pipeline contracts and also participate in the interstate markets by releasing pipeline capacity or bundling pipeline capacity with gas for off-system sales. Off-system gas sales are low-margin direct sales of gas to wholesale suppliers of natural gas. Earnings from these activities are shared between the utilities and customers. PECO, BGE and DPL make these sales as part of a program to balance its supply and cost of natural gas. The off-system gas sales are not material to PECO, BGE and DPL.

Refer to ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, Commodity Price, for further information regarding Utility Registrants' contracts to procure electric supply and natural gas.

Energy Efficiency Programs

The Utility Registrants are allowed to recover costs associated with energy efficiency and demand response programs. Each commission approved program seeks to meet mandated electric consumption reduction targets and implement demand response measures to reduce peak demand. The programs are designed to meet standards required by each respective regulatory agency.

The Utility Registrants are allowed to earn a return on their energy efficiency costs. See Note 3 — Regulatory Matters of the Combined Notes to Consolidated Financial Statements for further information.

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Capital Investment

The Utility Registrants' businesses are capital intensive and require significant investments, primarily in electric transmission and distribution and natural gas transportation and distribution facilities, to ensure the adequate capacity, reliability and efficiency of their systems. ComEd's, PECO's, BGE's, Pepco's, DPL's and ACE's most recent estimates of capital expenditures for plant additions and improvements for 2018 are as follows:



	Projected 2018 Capital Expenditure Spending
(in millions)	Transmission		Distribution		Gas		Total
ComEd	$	375	$	1,750	N/A		$	2,125
PECO	125		450		$	225	800
BGE	175		425		400		1,000
Pepco	125		600		N/A		725
DPL	150		200		50		400
ACE	175		200		N/A		375

ComEd, PECO, BGE, Pepco and DPL have AMI smart meter and smart grid deployment programs within their respective service territories to enhance their distribution systems. PECO, BGE, Pepco and DPL have completed the installation and activation of smart meters and smart grid in their respective service territories. ComEd expects to complete its smart meter and smart grid deployment in 2018.

Transmission Services

Under FERC’s open access transmission policy, the Utility Registrants, as owners of transmission facilities, are required to provide open access to their transmission facilities under filed tariffs at cost-based rates approved by FERC. The Utility Registrants and their affiliates are required to comply with FERC’s Standards of Conduct regulation governing the communication of non-public transmission information between the transmission owner’s employees and wholesale merchant employees.

PJM is the regional grid operator and operates pursuant to FERC-approved tariffs. PJM is the transmission provider under, and the administrator of, the PJM Open Access Transmission Tariff (PJM Tariff). PJM operates the PJM energy, capacity and other markets, and, through central dispatch, controls the day-to-day operations of the bulk power system for the region. The Utility Registrants are members of PJM and provide regional transmission service pursuant to the PJM Tariff. The Utility Registrants and the other transmission owners in PJM have turned over control of their transmission facilities to PJM, and their transmission systems are under the dispatch control of PJM. Under the PJM Tariff, transmission service is provided on a region-wide, open-access basis using the transmission facilities of the PJM transmission owners at rates based on the costs of transmission service.

ComEd's transmission rates are established based on a formula that was approved by FERC in January 2008. BGE's, Pepco's, DPL's and ACE's transmission rates are established based on a formula that was approved by FERC in April 2006. FERC’s orders establish the agreed-upon treatment of costs and revenues in the determination of network service transmission rates and the process for updating the formula rate calculation on an annual basis.

On May 1, 2017, PECO filed a request with FERC seeking approval to update its transmission rates and change the manner in which PECO’s transmission rate is determined from a fixed rate to a formula rate. The new formula was accepted by FERC effective as of December 1, 2017, subject to refund and set for hearing and settlement judge proceedings, which are currently ongoing. See Note 3

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— Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional detail regarding the transmission formula late.

See Note 3 — Regulatory Matters, Note 25—Segment Information of the Combined Notes to Consolidated Financial Statements and ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Liquidity and Capital Resources for additional information regarding transmission services.

Employees

As of December 31, 2017, Exelon and its subsidiaries had 34,621 employees in the following companies, of which 11,845 or 34% were covered by collective bargaining agreements (CBAs):



	IBEW Local 15^(a)	IBEW Local 614^(b)	Other CBAs	Total Employees Covered by CBAs	Total Employees
Generation^(c)	1,660	97	2,729	4,486	15,011
ComEd	3,515	—	—	3,515	6,280
PECO	—	1,148	—	1,148	2,534
BGE^(d)	—	—	—	—	3,022
PHI^(e)	—	—	322	322	1,320
Pepco^(e)	—	—	1,151	1,151	1,582
DPL^(e)	—	—	688	688	944
ACE^(e)	—	—	421	421	647
Other^(f)	65	—	49	114	3,281
Total	5,240	1,245	5,360	11,845	34,621

__________


(a)	A separate CBA between ComEd and IBEW Local 15 covers approximately 65 employees in ComEd’s System Services Group and was renewed in 2016. Generation’s and ComEd’s separate CBAs with IBEW Local 15 will expire in 2022.


(b)	PECO craft and call center employees in the Philadelphia service territory are covered by CBAs with IBEW Local 614, both expiring in 2021. Additionally, Exelon Power, an operating unit of Generation, has an agreement covering 97 employees, which was renewed in 2016 and expiring in 2019.

(c)

During 2017, Generation finalized CBAs with the Security Officer unions at LaSalle, Limerick and Quad Cities, which all will expire in 2020 and Dresden expiring in 2021. Additionally, during 2017, Generation acquired and combined two CBAs at FitzPatrick into one CBA covering both craft and security employees, which will expire in 2023. During 2016, Generation finalized its CBA with the Security Officer union at Oyster Creek, expiring in 2022 and New Energy IUOE Local 95-95A, which will expire in 2021. Also, during 2016, Generation finalized a 5-year agreement with the New England ENEH, UWUA Local 369, which will expire in 2022. During 2015, Generation finalized its CBA with Clinton Local 51 which will expire in 2020; its two CBAs with Local 369 at Mystic 7 and Mystic 8/9, both expiring in 2020; and four Security Officer unions at Braidwood, Byron, Clinton and TMI, all expiring between 2018 and 2021, respectively. During 2014, Generation finalized CBAs with TMI Local 777 and Oyster Creek Local 1289, expiring in 2019 and 2021, respectively and CENG finalized its CBA with Nine Mile Point which will expire in 2020. Additionally, during 2014, an agreement was negotiated with Las Vegas District Energy and IUOE Local 501, which will expire in 2018.


(d)	In January 2017, an election was held at BGE which resulted in union representation for 1,394 employees at the end of the year. BGE and IBEW Local 410 are negotiating an initial agreement which could result in some modifications to wages, hours and other terms and conditions of employment. No agreement has been finalized to date and management cannot predict the outcome of such negotiations.


(e)	PHI’s utility subsidiaries are parties to five CBAs with four local unions. CBAs are generally renegotiated every three to five years. All of these CBAs were renegotiated in 2014 and were extended through various dates ranging from October 2018 through June 2020.


(f)	Other includes shared services employees at BSC.

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Environmental Regulation

General

The Registrants are subject to comprehensive and complex legislation regarding environmental matters by the federal government and various state and local jurisdictions in which they operate their facilities. The Registrants are also subject to environmental regulations administered by the EPA and various state and local environmental protection agencies. Federal, state and local regulation includes the authority to regulate air, water, and solid and hazardous waste disposal.

The Exelon Board of Directors is responsible for overseeing the management of environmental matters. Exelon has a management team to address environmental compliance and strategy, including the CEO; the Senior Vice President, Corporate Strategy and Chief Sustainability Officer; the Senior Vice President, Competitive Market Policy; and the Director, Safety & Sustainability, as well as senior management of Generation, ComEd, PECO, BGE, PHI, Pepco, DPL and ACE. Performance of those individuals directly involved in environmental compliance and strategy is reviewed and affects compensation as part of the annual individual performance review process. The Exelon Board of Directors has delegated to its Generation Oversight Committee and the Corporate Governance Committee the authority to oversee Exelon’s compliance with health, environmental and safety laws and regulations and its strategies and efforts to protect and improve the quality of the environment, including Exelon’s internal climate change and sustainability policies and programs, as discussed in further detail below. The respective Boards of ComEd, PECO, BGE, Pepco, DPL and ACE oversee environmental, health and safety issues related to these companies.

Air Quality

Air quality regulations promulgated by the EPA and the various state and local environmental agencies impose restrictions on emission of particulates, sulfur dioxide (SO2), nitrogen oxides (NOx), mercury and other air pollutants and require permits for operation of emitting sources. Such permits have been obtained as needed by Exelon’s subsidiaries. However, due to its low emitting generation fleet comprised of nuclear, natural gas, hydroelectric, wind and solar, compliance with the Federal Clean Air Act does not have a material impact on Generation’s operations.

See ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for additional information regarding clean air regulation in the forms of the CSAPR, the regulation of hazardous air pollutants from coal- and oil-fired electric generating facilities under MATS, and regulation of GHG emissions.

Water Quality

Under the federal Clean Water Act, NPDES permits for discharges into waterways are required to be obtained from the EPA or from the state environmental agency to which the permit program has been delegated and must be renewed periodically. Certain of Exelon's facilities discharge stormwater and industrial wastewater into waterways and are therefore subject to these regulations and operate under NPDES permits or pending applications for renewals of such permits after being granted an administrative extension. Generation is also subject to the jurisdiction of the Delaware River Basin Commission and the Susquehanna River Basin Commission, regional agencies that primarily regulate water usage.

Section 316(b) of the Clean Water Act

Section 316(b) requires that the cooling water intake structures at electric power plants reflect the best technology available to minimize adverse environmental impacts, and is implemented through state-level NPDES permit programs. All of Generation’s power generation facilities with cooling water systems are subject to the regulations. Facilities without closed-cycle recirculating systems (e.g., cooling towers)

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are potentially most affected by recent changes to the regulations. For Generation, those facilities are Calvert Cliffs, Clinton, Dresden, Eddystone, Fairless Hills, FitzPatrick, Ginna, Gould Street, Mountain Creek, Handley, Mystic 7, Nine Mile Point Unit 1, Peach Bottom, Quad Cities, Riverside and Salem.

On October 14, 2014, the EPA's Section 316(b) rule became effective. The rule requires that a series of studies and analyses be performed to determine the best technology available to minimize adverse impacts on aquatic life, followed by an implementation period for the selected technology. The timing of the various requirements for each facility is related to the status of its current NPDES permit and the subsequent renewal period. There is no fixed compliance schedule, as this is left to the discretion of the state permitting director.

Until the compliance requirements are determined by the applicable state permitting director on a site-specific basis for each plant, Generation cannot estimate the effect that compliance with the rule will have on the operation of its generating facilities and its future results of operations, cash flows, and financial position. Should a state permitting director determine that a facility must install cooling towers to comply with the rule, that facility’s economic viability could be called into question. However, the potential impact of the rule has been significantly reduced since the final rule does not mandate cooling towers as a national standard and sets forth technologies that are presumptively compliant, and the state permitting director is required to apply a cost-benefit test and can take into consideration site-specific factors, such as those that would make cooling towers infeasible.

Pursuant to discussions with the NJDEP in 2010 regarding the application of Section 316(b) to Oyster Creek, Generation agreed to permanently cease generation operations at Oyster Creek by December 31, 2019, ten years before the expiration of its operating license in 2029. The agreement only applies to Oyster Creek based on its unique circumstances and does not set any precedent for the ultimate compliance requirements for Section 316(b) at Exelon’s other plants. On February 2, 2018, Exelon announced that Generation will permanently cease generation operations at Oyster Creek at the end of its current operating cycle in October 2018.

New York Facilities

In July 2011, the New York Department of Environmental Conservation (DEC) issued a policy regarding the best available technology for cooling water intake structures. Through its policy, the DEC established closed-cycle cooling or its equivalent as the performance goal for all existing facilities, but also provided that the DEC will select a feasible technology whose costs are not wholly disproportionate to the environmental benefits to be gained and allows for a site-specific determination where the entrainment performance goal cannot be achieved (i.e., the requirement most likely to support cooling towers). The R.E Ginna and Nine Mile Point Unit 1 power generation facilities received renewals of their state water discharge permits in 2014 and cooling towers were not required. These facilities are now engaged in the required analyses to enable the environmental agency to determine the best technology available in the next permit renewal cycles.

Salem

On July 28, 2016, the NJDEP issued a final permit for Salem that did not require the installation of cooling towers and allows Salem to continue to operate utilizing the existing cooling water system with certain required system modifications. However, the permit is being challenged by an environmental organization, and if successful, could result in additional costs for Clean Water Act compliance. Potential cooling water system modification costs could be material and could adversely impact the economic competitiveness of this facility.

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Solid and Hazardous Waste

CERCLA provides for immediate response and removal actions coordinated by the EPA in the event of threatened releases of hazardous substances and authorizes the EPA either to clean up sites at which hazardous substances have created actual or potential environmental hazards or to order persons responsible for the situation to do so. Under CERCLA, generators and transporters of hazardous substances, as well as past and present owners and operators of hazardous waste sites, are strictly, jointly and severally liable for the cleanup costs of waste at sites, most of which are listed by the EPA on the National Priorities List (NPL). These PRPs can be ordered to perform a cleanup, can be sued for costs associated with an EPA-directed cleanup, may voluntarily settle with the EPA concerning their liability for cleanup costs, or may voluntarily begin a site investigation and site remediation under state oversight prior to listing on the NPL. Various states, including Delaware, Illinois, Maryland, New Jersey and Pennsylvania and the District of Columbia have also enacted statutes that contain provisions substantially similar to CERCLA. In addition, RCRA governs treatment, storage and disposal of solid and hazardous wastes and cleanup of sites where such activities were conducted.

Generation, ComEd, PECO, BGE, Pepco, DPL and ACE and their subsidiaries are, or could become in the future, parties to proceedings initiated by the EPA, state agencies and/or other responsible parties under CERCLA and RCRA with respect to a number of sites, including MGP sites, or may undertake to investigate and remediate sites for which they may be subject to enforcement actions by an agency or third-party.

See Note 23 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for additional information regarding solid and hazardous waste regulation and legislation.

Environmental Remediation

ComEd’s and PECO’s environmental liabilities primarily arise from contamination at former MGP sites. ComEd, pursuant to an ICC order, and PECO, pursuant to settlements of natural gas distribution rate cases with the PAPUC, have an on-going process to recover environmental remediation costs of the MGP sites through a provision within customer rates. BGE, ACE, Pepco and DPL do not have material contingent liabilities relating to MGP sites. The amount to be expended in 2018 for compliance with environmental remediation related to contamination at former MGP sites and other gas purification sites is expected to total $48 million, consisting of $42 million and $6 million at ComEd and PECO respectively. The Utility Registrants also have contingent liabilities for environmental remediation of non-MGP contaminants (e.g., PCBs). As of December 31, 2017, the Utility Registrants have established appropriate contingent liabilities for environmental remediation requirements.

The Registrants’ operations have in the past, and may in the future, require substantial expenditures in order to comply with environmental laws. Additionally, under Federal and state environmental laws, the Registrants are generally liable for the costs of remediating environmental contamination of property now or formerly owned by them and of property contaminated by hazardous substances generated by them. The Registrants own or lease a number of real estate parcels, including parcels on which their operations or the operations of others may have resulted in contamination by substances that are considered hazardous under environmental laws.

In addition, Generation, ComEd, PECO, BGE, Pepco, DPL and ACE may be required to make significant additional expenditures not presently determinable for other environmental remediation costs.

See Notes 3 — Regulatory Matters and 23 — Commitments and Contingencies of the Combined Notes to Consolidated Financial Statements for additional information regarding the Registrants’ environmental remediation efforts and related impacts to the Registrants’ results of operations, cash flows and financial positions.

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Global Climate Change

Exelon has utility and generation assets, and customers, that are and will be further subject to the impacts of climate change. Accordingly, Exelon is engaged in a variety of initiatives to understand and mitigate these impacts, including investments in resiliency, partnering with federal, state and local governments to minimize impacts, and, importantly, advocating for public policy that reduces emissions that cause climate change. Exelon, as a producer of electricity from predominantly low- and zero-carbon generating facilities (such as nuclear, hydroelectric, natural gas, wind and solar photovoltaic), has a relatively small greenhouse gas (GHG) emission profile, or carbon footprint, compared to other domestic generators of electricity (Exelon neither owns or operates any coal-fueled generating assets). Exelon's natural gas and biomass fired generating plants produce GHG emissions, most notably, CO2. However, Generation’s owned-asset emission intensity, or rate of carbon dioxide equivalent (CO₂e) emitted per unit of electricity generated, is among the lowest in the industry. In 2017, while fossil fuel powered approximately 33 percent of Exelon's owned generating capacity, fossil fuel-fired generation represents less than 12 percent of Exelon's overall generation on a MWh basis. Other GHG emission sources at Exelon include natural gas (methane) leakage on the natural gas systems, sulfur hexafluoride (SF6) leakage from electric transmission and distribution operations, refrigerant leakage from chilling and cooling equipment, and fossil fuel combustion in motor vehicles. Exelon facilities and operations are subject to the global impacts of climate change and Exelon believes its operations could be significantly affected by the physical risks of climate change. See ITEM 1A. RISK FACTORS for information regarding the market and financial, regulatory and legislative, and operational risks associated with climate change.

Climate Change Regulation

Exelon is or may become subject to additional climate change regulation or legislation at the federal, regional and state levels.

International Climate Change Agreements. At the international level, the United States is a Party to the United Nations Framework Convention on Climate Change (UNFCCC). The Parties to the UNFCCC adopted the Paris Agreement at the 21^stsession of the UNFCCC Conference of the Parties (COP 21) on December 12, 2015, and it became effective on November 4, 2016. Under the Paris Agreement, the Parties agreed to try to limit the global average temperature increase to 2°C (3.6°F) above pre-industrial levels. In doing so, Parties developed their own national reduction commitments. The United States submitted a non-binding target of 17% below 2005 emission levels by 2020 and 26% to 28% below 2005 levels by 2025. President Trump has stated his intention to withdraw the U.S. from the Paris Agreement, but no formal action has been initiated.

Federal Climate Change Legislation and Regulation. It is highly unlikely whether federal legislation to reduce GHG emissions will be enacted in the near-term. If such legislation is adopted, Exelon may incur costs either to further limit or offset the GHG emissions from its operations or to procure emission allowances or credits. More importantly, continued inaction could negatively impact the value of Exelon’s low-carbon fleet.

Under the Obama Administration, the EPA proposed and finalized regulations for fossil fuel-fired power plants, referred to as the Clean Power Plan, which are currently being litigated. However, the Trump Administration has proposed a repeal of the Clean Power Plan, and is expected to seek broad public comment on whether and how to regulate GHGs at the federal level. Details are not yet known and are likely to be further informed by the public comment process.

Given this uncertainty, Exelon and Generation cannot at this time predict the future of the Clean Power Plan, or its repeal and/or replacement, or individual state responses to Clean Power Plan developments or how developments will impact their future results of operations, cash flows and financial positions.

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Regional and State Climate Change Legislation and Regulation. A number of states in which Exelon operates have state and regional programs to reduce GHG emissions, including from the power sector. As the nation’s largest generator of carbon-free electricity, our fleet supports these efforts to produce safe, reliable electricity with minimal GHGs. Notably, nine northeast and mid-Atlantic states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont) currently participate in the Regional Greenhouse Gas Initiative (RGGI), which is in the process of strengthening its requirements. The program requires most fossil fuel-fired power plants in the region to hold allowances, purchased at auction, for each ton of CO₂ emissions. Non-emitting resources do not have to purchase or hold these allowances.

Many states in which Exelon subsidiaries operate also have state-specific programs to address GHGs, including from power plants. Most notable of these, besides RGGI, are through renewable and other portfolio standards. Additionally, in response to a court decision clarifying obligations under the Global Warming Solutions Act, the Massachusetts Department of Environmental Protection in 2017 finalized regulations establishing a statewide cap on CO₂ emissions from fossil fuel power plants (Massachusetts remains in RGGI as well). The effect of this new obligation and potential for market illiquidity in the early years represent a risk to Generation’s Massachusetts fossil facilities, including Medway and Mystic. At the same time, the District of Columbia is considering a plan to incorporate the cost of carbon into electricity, via consumption, as well as directly into the cost of transportation and home heating fuels. Details remain to be developed, but the specifics could have implications for Pepco’s operations.

Regardless of whether GHG regulation occurs at the local, state, or federal level, Exelon remains one of the largest, lowest-carbon electric generators in the United States, relying mainly on nuclear, natural gas, hydropower, wind, and solar. The extent that the low-carbon generating fleet will continue to be a competitive advantage for Exelon depends on what, if anything, replaces the Clean Power Plan at the federal level, new or expanded state action on greenhouse gas emissions or direct support of clean energy technologies, including nuclear, as well as potential market reforms that value our fleet’s emission-free attributes.

Renewable and Alternative Energy Portfolio Standards

Thirty-nine states and the District of Columbia, incorporating the vast majority of Exelon operations as well as all utility operations, have adopted some form of RPS requirement. These standards impose varying levels of mandates for procurement of renewable or clean electricity (the definition of which varies by state) and/or energy efficiency. These are generally expressed as a percentage of annual electric load, often increasing by year. Exelon's utilities comply with these various requirements through purchasing qualifying renewables, implementing efficiency programs, acquiring sufficient credits (e.g., RECs), paying an alternative compliance payment, and/or a combination of these compliance alternatives. The Utility Registrants are permitted to recover from retail customers the costs of complying with their state RPS requirements, including the procurement of RECs or other alternative energy resources. New York and Illinois adopted standards targeted at preserving the zero-carbon attributes of certain Exelon’s nuclear-powered generating facilities. Generation owns multiple facilities participating in these programs within both states. Other states in which Generation and our utilities operate are considering similar programs.

See Note 3 — Regulatory Matters of the Combined Notes to Consolidated Financial Statements for additional information on renewable portfolio standards.

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Executive Officers of the Registrants as of February 9, 2018

Exelon



Name	Age	Position	Period
Crane, Christopher M.	59	Chief Executive Officer, Exelon	2012 - Present
		Chairman, ComEd, PECO & BGE	2012 - Present
		Chairman, PHI	2016 - Present
		President, Exelon	2008 - Present
		President, Generation	2008 - 2013

Cornew, Kenneth W.	52	Senior Executive Vice President and Chief Commercial Officer, Exelon	2013 - Present
		President and CEO, Generation	2013 - Present
		Executive Vice President and Chief Commercial Officer, Exelon	2012 - 2013
		President and Chief Executive Officer, Constellation	2012 - 2013

O’Brien, Denis P.	57	Senior Executive Vice President, Exelon; Chief Executive Officer, Exelon Utilities	2012 - Present
		Vice Chairman, ComEd, PECO & BGE	2012 - Present
		Vice Chairman, PHI	2016 - Present

Pramaggiore, Anne R.	59	Chief Executive Officer, ComEd	2012 - Present
		President, ComEd	2009 - Present

Adams, Craig L.	65	President and Chief Executive Officer, PECO	2012 - Present

Butler, Calvin G.	48	Chief Executive Officer, BGE	2014 - Present
		Senior Vice President, Regulatory and External Affairs, BGE	2013 - 2014
		Senior Vice President, Corporate Affairs, Exelon	2011 - 2013

David M. Velazquez	58	President and Chief Executive Officer, PHI	2016 - Present
		President and Chief Executive Officer, Pepco, DPL & ACE	2009 - Present
		Executive Vice President, Pepco Holdings, Inc.	2009 - 2016

Von Hoene Jr., William A.	64	Senior Executive Vice President and Chief Strategy Officer, Exelon	2012 - Present

Thayer, Jonathan W.	46	Senior Executive Vice President and Chief Financial Officer, Exelon	2012 - Present

Aliabadi, Paymon	55	Executive Vice President and Chief Risk Officer, Exelon	2013 - Present
		Managing Director, Gleam Capital Management	2012 - 2013

DesParte, Duane M.	54	Senior Vice President and Corporate Controller, Exelon	2008 - Present

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Generation



Name	Age	Position	Period
Cornew, Kenneth W.	52	Senior Executive Vice President and Chief Commercial Officer, Exelon	2013 - Present
		President and CEO, Generation	2013 - Present
		Executive Vice President and Chief Commercial Officer, Exelon	2012 - 2013
		President and Chief Executive Officer, Constellation	2012 - 2013

Pacilio, Michael J.	57	Executive Vice President and Chief Operating Officer, Generation	2015 - Present
		President, Exelon Nuclear; Senior Vice President	2010 - 2015
		and Chief Nuclear Officer, Generation

Hanson, Bryan C	52	President and Chief Nuclear Officer, Exelon Nuclear; Senior Vice President, Generation	2015 - Present

Nigro, Joseph	53	Executive Vice President, Exelon; Chief Executive Officer, Constellation	2013 - Present
		Senior Vice President, Portfolio Management and Strategy	2012 - 2013

DeGregorio, Ronald	55	Senior Vice President, Generation; President, Exelon Power	2012 - Present

Wright, Bryan P.	51	Senior Vice President and Chief Financial Officer, Generation	2013 - Present
		Senior Vice President, Corporate Finance, Exelon	2012 - 2013

Bauer, Matthew N.	41	Vice President and Controller, Generation	2016 - Present
		Vice President and Controller, BGE	2014 - 2016
		Vice President of Power Finance, Exelon Power	2012 - 2014

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ComEd



Name	Age	Position	Period
Pramaggiore, Anne R.	59	Chief Executive Officer, ComEd	2012 - Present
		President, ComEd	2009 - Present

Donnelly, Terence R.	57	Executive Vice President and Chief Operating Officer, ComEd	2012 - Present

Trpik Jr., Joseph R.	48	Senior Vice President, Chief Financial Officer and Treasurer, ComEd	2009 - Present

Jensen, Val	62	Senior Vice President, Customer Operations, ComEd	2012 - Present

Gomez, Veronica	48	Senior Vice President, Regulatory and Energy Policy and General Counsel, ComEd	2017 - Present
		Vice President and Deputy General Counsel, Litigation, Exelon	2012 - 2017

Marquez Jr., Fidel	56	Senior Vice President, Governmental & External Affairs, Exelon	2012 - Present

McGuire, Timothy M.	59	Senior Vice President, Distribution Operations, ComEd	2016 - Present
		Vice President, Transmission and Substations, ComEd	2010 - 2016

Kozel, Gerald J.	45	Vice President, Controller, ComEd	2013 - Present
		Assistant Corporate Controller, Exelon	2012 - 2013

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PECO



Name	Age	Position	Period
Adams, Craig L.	65	President and Chief Executive Officer, PECO	2012 - Present

Barnett, Phillip S.	54	Senior Vice President and Chief Financial Officer, PECO	2007 - Present
		Treasurer, PECO	2012 - Present

Innocenzo, Michael A.	52	Senior Vice President and Chief Operations Officer, PECO	2012 - Present

Murphy, Elizabeth A.	58	Senior Vice President, Governmental & External Affairs, PECO	2016 - Present
		Vice President, Governmental & External Affairs, PECO	2012 - 2016

Webster Jr., Richard G.	56	Vice President, Regulatory Policy and Strategy, PECO	2012 - Present

Jiruska, Frank J.	57	Vice President, Customer Operations, PECO	2013 - Present

Diaz Jr., Romulo L.	71	Vice President and General Counsel, PECO	2012 - Present

Bailey, Scott A.	41	Vice President and Controller, PECO	2012 - Present

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BGE



Name	Age	Position	Period
Butler, Calvin G.	48	Chief Executive Officer, BGE	2014 - Present
		Senior Vice President, Regulatory and External Affairs, BGE	2013 - 2014
		Senior Vice President, Corporate Affairs, Exelon	2011 - 2013

Woerner, Stephen J.	50	President, BGE	2014 - Present
		Chief Operating Officer, BGE	2012 - Present
		Senior Vice President, BGE	2009 - 2014

Vahos, David M.	45	Senior Vice President, Chief Financial Officer and Treasurer, BGE	2016 - Present
		Vice President, Chief Financial Officer and Treasurer, BGE	2014 - 2016
		Vice President and Controller, BGE	2012 - 2014

Núñez, Alexander G.	46	Senior Vice President, Regulatory and External Affairs, BGE	2016 - Present
		Vice President, Governmental & External Affairs, BGE	2013 - 2016
		Director, State Affairs, BGE	2012 - 2013

Case, Mark D.	56	Vice President, Regulatory Policy and Strategy, BGE	2012 - Present

Biagiotti, Robert D.	48	Vice President, Customer Operations, BGE	2015 - Present
		Vice President, Gas Distribution, BGE	2011 - 2015

Gahagan, Daniel P.	64	Vice President and General Counsel, BGE	2007 - Present

Andrew W. Holmes	49	Vice President and Controller, BGE	2016 - Present
		Director, Generation Accounting, Exelon	2013 - 2016
		Director, Derivatives and Technical Accounting, Exelon	2008 - 2013

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PHI, Pepco, DPL and ACE



Name	Age	Position	Period
Velazquez, David M.	58	President and Chief Executive Officer, PHI	2016 - Present
		Executive Vice President, Pepco Holdings, Inc.	2009-2016
		President and Chief Executive Officer, Pepco, DPL & ACE	2009 - Present

Anthony, J. Tyler	53	Senior Vice President and Chief Operating Officer, PHI, Pepco, DPL & ACE	2016 - Present
		Senior Vice President, Distribution Operations, ComEd	2010 - 2016

Kinzel, Donna J.	50	Senior Vice President, Chief Financial Officer and Treasurer, PHI, Pepco, DPL & ACE	2016 - Present
		Vice President, Treasurer and Chief Risk Officer, Pepco Holdings	2012 - 2016

Bonney, Paul R.	59	Senior Vice President, Legal and Regulatory Strategy, PHI, Pepco, DPL & ACE	2016 - Present
		Senior Vice President and General Counsel, Constellation	2012 - 2016

Lavinson, Melissa A.	48	Senior Vice President, Governmental & External Affairs, PHI, Pepco, DPL & ACE	2018 - Present
		Vice President, Federal Affairs and Policy, and Chief Sustainability Officer, PG&E Corporation	2015 - 2018
		Vice President, Federal Affairs, PG&E Corporation	2012 - 2015

Stark, Wendy E.	45	Vice President and General Counsel, PHI, Pepco DPL & ACE	2016 - Present
		Deputy General Counsel, Pepco Holdings, Inc.	2012 - Present

McGowan, Kevin M.	56	Vice President, Regulatory Policy and Strategy, PHI, Pepco, DPL & ACE	2016 - Present
		Vice President, Regulatory Affairs, Pepco Holdings, Inc.	2012 - 2016

Aiken, Robert M.	51	Vice President and Controller, PHI, Pepco, DPL & ACE	2016 - Present
		Vice President and Controller, Generation	2012 - 2016

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ITEM 1A.	RISK FACTORS

Each of the Registrants operates in a market and regulatory environment that poses significant risks, many of which are beyond that Registrant’s control. Management of each Registrant regularly meets with the Chief Risk Officer and the Registrant's Risk Management Committee (RMC), which comprises officers of the Registrant, to identify and evaluate the most significant risks of the Registrant's business and the appropriate steps to manage and mitigate those risks. The Chief Risk Officer and senior executives of the Registrants discuss those risks with the Finance and Risk Committee and Audit Committee of the Exelon Board of Directors and the ComEd, PECO, BGE and PHI boards of directors. In addition, the Generation Oversight Committee of the Exelon Board of Directors evaluates risks related to the generation business. The risk factors discussed below could adversely affect one or more of the Registrants’ results of operations, cash flows or financial positions and the market prices of their publicly traded securities. Each of the Registrants has disclosed the known material risks that affect its business at this time. However, there may be further risks and uncertainties that are not presently known or that are not currently believed by a Registrant to be material that could adversely affect its performance or financial condition in the future.

Exelon's results of operations, cash flows and financial position are affected to a significant degree by: (1) Generation’s position as a predominantly nuclear generator selling power into competitive energy markets with a concentration in select regions and (2) the role of the Utility Registrants as operators of electric transmission and distribution systems in six of the largest metropolitan areas in the United States. Factors that affect the results of operations, cash flows or financial positions of the Registrants fall primarily under the following categories, all of which are discussed in further detail below:

•

Market and Financial Factors. Exelon’s and Generation’s results of operations are affected by price fluctuations in the energy markets. Power prices are a function of supply and demand, which in turn are driven by factors such as (1) the price of fuels, in particular the price of natural gas, which affects the prices that Generation can obtain for the output of its power plants, (2) the presence of other generation resources in the markets in which Generation’s output is sold, (3) the demand for electricity in the markets where the Registrants conduct their business, (4) the impacts of on-going competition in the retail channel and (5) emerging technologies.

•

Regulatory and Legislative Factors. The regulatory and legislative factors that affect the Registrants include changes to the laws and regulations that govern competitive markets and utility cost recovery, tax policy, zero emission credit programs and environmental policy. In particular, Exelon’s and Generation’s financial performance could be affected by changes in the design of competitive wholesale power markets or Generation’s ability to sell power in those markets. In addition, potential regulation and legislation, including regulation or legislation regarding climate change and renewable portfolio standards (RPS), could have significant effects on the Registrants. Also, returns for the Utility Registrants are influenced significantly by state regulation and regulatory proceedings.

•

Operational Factors. The Registrants’ operational performance is subject to those factors inherent in running the nation’s largest fleet of nuclear power reactors and large electric and gas distribution systems. The safe, secure and effective operation of the nuclear facilities and the ability to effectively manage the associated decommissioning obligations as well as the ability to maintain the availability, reliability, safety and security of its energy delivery systems are fundamental to Exelon’s ability to achieve value-added growth for customers, communities and shareholders. Additionally, the operating costs of the Registrants and the opinions of their customers, regulators and shareholders are affected by those companies’ ability to maintain the reliability, safety and efficiency of their energy delivery systems.

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•	Risks Related to the PHI Merger. Exelon is subject to additional risks related to the merger with PHI, which closed on March 23, 2016.

A discussion of each of these risk categories and other risk factors is included below.

Market and Financial Factors

Generation is exposed to depressed prices in the wholesale and retail power markets, which could negatively affect its results of operations, cash flows or financial position (Exelon and Generation).

Generation is exposed to commodity price risk for the unhedged portion of its electricity generation supply portfolio. Generation’s earnings and cash flows are therefore exposed to variability of spot and forward market prices in the markets in which it operates.

Price of Fuels

The spot market price of electricity for each hour is generally determined by the marginal cost of supplying the next unit of electricity to the market during that hour. Thus, the market price of power is affected by the market price of the marginal fuel used to generate the electricity unit. Often, the next unit of electricity will be supplied from generating stations fueled by fossil fuels. Consequently, changes in the market price of fossil fuels often result in comparable changes to the market price of power. For example, the use of technologies to recover natural gas from shale deposits has increased natural gas supply and reserves, placing downward pressure on natural gas prices and, therefore, on power prices. The continued addition of supply from new alternative generation resources, such as wind and solar, whether mandated through RPS or otherwise subsidized or encouraged through climate legislation or regulation, could displace a higher marginal cost plant, further reducing power prices. In addition, further delay or elimination of EPA air quality regulations could prolong the duration for which the cost of pollution from fossil fuel generation is not factored into market prices.

Demand and Supply

The market price for electricity is also affected by changes in the demand for electricity and the available supply of electricity. Unfavorable economic conditions, milder than normal weather, and the growth of energy efficiency and demand response programs could each depress demand. The result is that higher-cost generating resources do not run as frequently, putting downward pressure on electricity market prices. The tepid economic environment in recent years and growing energy efficiency and demand response initiatives have limited the demand for electricity in Generation’s markets. In addition, in some markets, the supply of electricity through wind or solar generation, when combined with other base-load generation such as nuclear, could often exceed demand during some hours of the day, resulting in loss of revenue for base-load generating plants such as Exelon's nuclear plants. Increased supply in excess of demand is furthered by the continuation of RPS mandates and subsidies for renewable energy.

Retail Competition

Generation’s retail operations compete for customers in a competitive environment, which affects the margins that Generation can earn and the volumes that it is able to serve. In periods of sustained low natural gas and power prices and low market volatility, retail competitors can aggressively pursue market share because the barriers to entry can be low and wholesale generators (including Generation) use their retail operations to hedge generation output. Increased or more aggressive competition could adversely affect overall gross margins and profitability in Generation’s retail operations.

Sustained low market prices or depressed demand and over-supply could adversely affect Exelon’s and Generation’s results of operations, cash flows or financial positions and such impacts could be

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emphasized given Generation’s concentration of base-load electric generating capacity within primarily two geographic market regions, namely the Midwest and the Mid-Atlantic. These impacts could adversely affect Exelon’s and Generation’s ability to fund regulated utility growth for the benefit of customers, reduce debt and provide attractive shareholder returns. In addition, such conditions may no longer support the continued operation of certain generating facilities, which could adversely affect Exelon's and Generation's result of operations through accelerated depreciation expense, impairment charges related to inventory that cannot be used at other nuclear units and cancellation of in-flight capital projects, accelerated amortization of plant specific nuclear fuel costs, severance costs, accelerated asset retirement obligation expense related to future decommissioning activities, and additional funding of decommissioning costs, which can be offset in whole or in part by reduced operating and maintenance expenses. A slow recovery in market conditions could result in a prolonged depression of or further decline in commodity prices, including low forward natural gas and power prices and low market volatility, which could also adversely affect Exelon’s and Generation’s results of operations, cash flows or financial positions. See Note 8 — Early Nuclear Plant Retirements of the Combined Notes to Consolidated Financial Statements for additional information.

In addition to price fluctuations, Generation is exposed to other risks in the power markets that are beyond its control and could negatively affect its results of operations (Exelon and Generation).

Credit Risk

In the bilateral markets, Generation is exposed to the risk that counterparties that owe Generation money, or are obligated to purchase energy or fuel from Generation, will not perform under their obligations for operational or financial reasons. In the event the counterparties to these arrangements fail to perform, Generation could be forced to purchase or sell energy or fuel in the wholesale markets at less favorable prices and incur additional losses, to the extent of amounts, if any, already paid to the counterparties. In the spot markets, Generation is exposed to risk as a result of default sharing mechanisms that exist within certain markets, primarily RTOs and ISOs, the purpose of which is to spread such risk across all market participants. Generation is also a party to agreements with entities in the energy sector that have experienced rating downgrades or other financial difficulties. In addition, Generation’s retail sales subject it to credit risk through competitive electricity and natural gas supply activities to serve commercial and industrial companies, governmental entities and residential customers. Retail credit risk results when customers default on their contractual obligations. This risk represents the loss that could be incurred due to the nonpayment of a customer’s account balance, as well as the loss from the resale of energy previously committed to serve the customer.

Market Designs

The wholesale markets vary from region to region with distinct rules, practices and procedures. Changes in these market rules, problems with rule implementation, or failure of any of these markets could adversely affect Generation’s business. In addition, a significant decrease in market participation could affect market liquidity and have a detrimental effect on market stability.

The Registrants are potentially affected by emerging technologies that could over time affect or transform the energy industry, including technologies related to energy generation, distribution and consumption (All Registrants).

Some of these technologies include, but are not limited to, further development or applications of technologies related to shale gas production, cost-effective renewable energy technologies, energy efficiency, distributed generation and energy storage devices. Such developments could affect the price of energy, levels of customer-owned generation, customer expectations and current business models and make portions of our electric system power supply and transmission and/or distribution facilities

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obsolete prior to the end of their useful lives. Such technologies could also result in further declines in commodity prices or demand for delivered energy. Each of these factors could materially affect the Registrants’ results of operations, cash flows or financial positions through, among other things, reduced operating revenues, increased operating and maintenance expenses, and increased capital expenditures, as well as potential asset impairment charges or accelerated depreciation and decommissioning expenses over shortened remaining asset useful lives.

Market performance and other factors could decrease the value of NDT funds and employee benefit plan assets and could increase the related employee benefit plan obligations, which then could require si