2.2.0.7 true SIGNIFICANT ACCOUNTING POLICIES 109 - Disclosure - SIGNIFICANT ACCOUNTING POLICIES true false false false 1 USD true false false false PEPCO HOLDINGS INC dei_LegalEntityAxis xbrldi http://xbrl.org/2006/xbrldi us-gaap_ParentCompanyMember dei_LegalEntityAxis explicitMember iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 iso4217_USD_per_shares Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 shares Standard http://www.xbrl.org/2003/instance shares 0 $ 1 PEPCO HOLDINGS INC 0 na true na na No definition available. false true false false false false false false false false false http://www.pepcoholdings.com/taxonomy/role/notestofinancialstatementssignificantaccountingpoliciestextblock false 1 false false false false 0 0 false false false false 1 USD true false false false PEPCO HOLDINGS INC dei_LegalEntityAxis xbrldi http://xbrl.org/2006/xbrldi us-gaap_ParentCompanyMember dei_LegalEntityAxis explicitMember iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 iso4217_USD_per_shares Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 shares Standard http://www.xbrl.org/2003/instance shares 0 $ na No definition available. No authoritative reference available. false 2 SIGNIFICANT ACCOUNTING POLICIES 2 us-gaap_SignificantAccountingPoliciesTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false false 1 false false false false 0 0 <div> (2) SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation Pepco Holdings’ unaudited consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Pursuant to the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. Therefore, these financial statements should be read along with the annual financial statements included in PHI’s Annual Report on Form 10-K for the year ended December 31, 2009, as revised and superseded by PHI’s Form 8-K filed on September 17, 2010. In the opinion of PHI’s management, the consolidated financial statements contain all adjustments (which all are of a normal recurring nature) necessary to present fairly Pepco Holdings’ financial condition as of September 30, 2010, in accordance with GAAP. The year-end December 31, 2009 balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. Interim results for the three and nine months ended September 30, 2010 may not be indicative of PHI’s results that will be realized for the full year ending December 31, 2010, since its Power Delivery business and the retail energy supply business of Pepco Energy Services are seasonal. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Although Pepco Holdings believes that its estimates and assumptions are reasonable, they are based upon information available to management at the time the estimates are made. Actual results may differ significantly from these estimates. Significant matters that involve the use of estimates include the assessment of goodwill and long-lived assets for impairment, fair value calculations for certain derivative instruments, the costs of providing pension and other postretirement benefits, evaluation of the probability of recovery of regulatory assets, estimation of storm restoration accruals, estimation of restructuring charges, and the recognition of income tax benefits as it relates to investments in finance leases held in trust associated with PHI’s portfolio of cross-border energy lease investments. Additionally, PHI is subject to legal, regulatory, and other proceedings and claims that arise in the ordinary course of its business. PHI records an estimated liability for these proceedings and claims, when the loss is determined to be probable and is reasonably estimable. Storm Costs In the third quarter of 2010, Pepco recorded $23 million in restoration costs related to severe summer storms, of which $13 million was charged to Other Operation and Maintenance expense and $10 million was recorded as capital expenditures. A portion of the recorded costs of the restoration work relates to services provided by outside contractors and other utilities that were not billed as of September 30, 2010, and accordingly have been estimated. These estimates are subject to adjustment when the actual billings are received in the fourth quarter of 2010. The actual billings may vary from the estimates of such billings. During the first quarter of 2010, Pepco, DPL and ACE incurred significant costs associated with the February 2010 severe winter storms. The actual billings related to the February storms were received by the end of the second quarter with final costs approximating $32 million, with $15 million charged to Other Operation and Maintenance expense and $17 million recorded as capital expenditures. Other Operation and Maintenance expense was further decreased by approximately $5 million during the third quarter due to an adjustment for recoverable February storm costs incurred by Pepco in accordance with the Maryland Public Service Commission rate order issued in August 2010.   Network Service Transmission Rates In May 2010, each of PHI’s utility subsidiaries provided its updated network service transmission rate to the Federal Energy Regulatory Commission (FERC) effective June 1, 2010 through May 31, 2011 which included a true-up of costs incurred in the prior service year that had not yet been reflected in rates charged to customers. The recording of the difference between the true-ups provided to FERC and the estimated true-up calculation as of March 31, 2010 resulted in an increase in transmission service revenue of $8 million in the second quarter of 2010. Consolidation of Variable Interest Entities In accordance with the provisions of the Financial Accounting Standards Board (FASB) guidance on the consolidation of variable interest entities (Accounting Standards Codification (ASC) 810), Pepco Holdings consolidates those variable interest entities with respect to which Pepco Holdings or a subsidiary is the primary beneficiary. The guidance addresses conditions under which an entity should be consolidated based upon variable interests rather than voting interests. The subsidiaries of Pepco Holdings have contractual arrangements with a number of entities to which the guidance applies. ACE Power Purchase Agreements (PPAs) Pepco Holdings, through its ACE subsidiary, is a party to three PPAs with unaffiliated, non-utility generators (NUGs). Due to a variable element in the pricing structure of the PPAs, Pepco Holdings potentially assumes the variability in the operations of the generating facilities related to the NUGs and, therefore, has a variable interest in the entities. Despite exhaustive efforts to obtain information from these entities during the three months ended September 30, 2010, PHI was unable to obtain sufficient information to conduct the analysis required under FASB guidance to determine whether these three entities were variable interest entities or if ACE was the primary beneficiary. As a result, Pepco Holdings has applied the scope exemption from the guidance for enterprises that have conducted exhaustive efforts to obtain the necessary information, but have not been able to obtain such information. Net purchase activities with the NUGs for the three months ended September 30, 2010 and 2009, were approximately $82 million and $70 million, respectively, of which approximately $74 million and $66 million, respectively, consisted of power purchases under the PPAs. Net purchase activities with the NUGs for the nine months ended September 30, 2010 and 2009, were approximately $222 million and $214 million, respectively, of which approximately $203 million and $197 million, respectively, consisted of power purchases under the PPAs. The power purchase costs are recoverable from ACE’s customers through regulated rates. DPL Renewable Energy Transactions PHI, through its DPL subsidiary, has entered into four wind PPAs in amounts up to a total of 350 megawatts and one solar renewable energy credit (REC) purchase agreement with a nine megawatt facility. Of the wind PPAs, three are with land-based facilities and one is with an offshore facility. The Delaware Public Service Commission (DPSC) has approved DPL’s entry into each of the agreements and the recovery of DPL’s purchase costs through customer rates. The RECs purchased under all the agreements will help DPL fulfill a portion of its requirements under the State of Delaware’s Renewable Energy Portfolio Standards Act.   One of the land-based wind facilities became operational and went into service in December 2009. DPL is obligated to purchase energy and RECs from this facility through 2024 in amounts generated and delivered not to exceed 50.25 megawatts at rates that are primarily fixed. DPL’s purchases under this PPA totaled $2 million for the three months ended September 30, 2010 and $8 million for the nine months ended September 30, 2010. Payments under the other wind agreements, which have terms ranging from 20 to 25 years, are currently expected to start in the fourth quarter of 2010 for the other two land-based contracts and 2016 for the offshore contract, if the projects are ultimately completed and become operational. When they become operational, DPL is obligated to purchase energy and RECs in amounts generated and delivered by the sellers at rates that are primarily fixed under these agreements. Under one of the agreements, DPL is also obligated to purchase the capacity associated with the facility at rates that are generally fixed. The inability of the offshore wind facility developer to obtain all necessary permits and financing commitments could result in setbacks in the construction schedules and the operational start dates of the offshore wind facility. If the wind facilities are not operational by specified dates, DPL has the right to terminate the PPAs. The term of the agreement with the solar facility is 20 years and DPL is obligated to purchase RECs in an amount up to seventy percent of the energy output from the solar facility at a fixed price once the facility is operational, which is expected to be by the end of 2011. DPL concluded that consolidation is not required for any of these agreements under FASB guidance on the consolidation of variable interest entities (ASC 810). ACE Transition Funding, LLC ACE Transition Funding, LLC (ACE Funding) was established in 2001 by ACE solely for the purpose of securitizing authorized portions of ACE’s recoverable stranded costs through the issuance and sale of Transition Bonds. The proceeds of the sale of each series of Transition Bonds have been transferred to ACE in exchange for the transfer by ACE to ACE Funding of the right to collect non-bypassable Transition Bond Charges (the Transition Bond Charges) from ACE customers pursuant to bondable stranded costs rate orders issued by the New Jersey Board of Public Utilities in an amount sufficient to fund the principal and interest payments on the Transition Bonds and related taxes, expenses and fees (Bondable Transition Property). ACE collects the Transition Bond Charges from its customers on behalf of ACE Funding and the holders of the Transition Bonds. The assets of ACE Funding, including the Bondable Transition Property, and the Transition Bond Charges collected from ACE’s customers, are not available to creditors of ACE. The holders of the Transition Bonds have recourse only to the assets of ACE Funding. ACE owns 100 percent of the equity of ACE Funding and PHI has consolidated ACE Funding in its financial statements. The amendment to the variable interest entity consolidation guidance effective January 1, 2010 resulted in ACE Funding meeting the definition of a variable interest entity. PHI continues to consolidate ACE Funding in its financial statements as ACE is the primary beneficiary of ACE Funding under the amended variable interest entity consolidation guidance. Goodwill Goodwill represents the excess of the purchase price of an acquisition over the fair value of the net assets acquired at the acquisition date. Substantially all of Pepco Holdings’ goodwill was generated by Pepco’s acquisition of Conectiv in 2002 and was allocated entirely to Pepco Holdings’ Power Delivery reporting unit based on the aggregation of its regulated public utility company components for purposes of testing for impairment. Pepco Holdings tests its goodwill for impairment annually as of November 1 and whenever an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Factors that may result in an interim impairment test include, but are not limited to: a change in the identified reporting units; an adverse change in business conditions; a decline in PHI’s stock price causing market capitalization to fall further below book value; an adverse regulatory action; or an impairment of long-lived assets in the reporting unit. PHI concluded that an interim impairment test was not required during the nine months ended September 30, 2010 as described in Note (6), “Goodwill.”   Long-Lived Asset Impairment Evaluation PHI’s policy for impairment of long-lived assets requires the evaluation of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. PHI recorded an after-tax write-down of the long-lived assets of Conectiv Energy of $67 million for the nine months ended September 30, 2010. The write-down is included as a component of the discontinued operations loss for the nine months ended September 30, 2010. Taxes Assessed by a Governmental Authority on Revenue-Producing Transactions Taxes included in Pepco Holdings’ gross revenues were $118 million and $81 million for the three months ended September 30, 2010 and 2009, respectively, and $280 million and $224 million for the nine months ended September 30, 2010 and 2009, respectively. Reclassifications and Adjustments Certain prior period amounts have been reclassified in order to conform to current period presentation. The following adjustments have been recorded and are not considered material either individually or in the aggregate: In the third quarter of 2010, Pepco recorded an adjustment to correct certain errors related to other taxes which resulted in a decrease to Taxes other than income taxes expense of $5 million (pre-tax) for the three and nine months ended September 30, 2010. During 2010, PHI recorded various adjustments to income tax expense to reflect primarily the benefit from additional deductions related to executive compensation that had erroneously not been included in tax returns prior to 2008, a reduction in income tax expense associated with errors related to the deferred tax assets established in connection with the District of Columbia net operating losses, and an increase to income tax expense associated with the reversal of erroneously recorded interest income for state income tax purposes related to uncertain and effectively settled tax positions. These adjustments resulted in a decrease to income tax expense of $7 million related to continuing operations for the three months ended September 30, 2010 and a decrease to income tax expense of $1 million related to continuing operations for the nine months ended September 30, 2010. In the third quarter of 2010, PHI recorded adjustments to reverse revenue erroneously recognized in the second quarter of 2010 associated with its discontinued operations. The adjustments resulted in an increase in net loss from discontinued operations of $7 million (pre-tax) for the three months ended September 30, 2010. </div> false false false us-types:textBlockItemType textblock This element may be used to describe all significant accounting policies of the reporting entity. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 false 3 ATLANTIC CITY ELECTRIC CO 0 na true na na No definition available. false true false false false false false false false false false http://www.pepcoholdings.com/taxonomy/role/notestofinancialstatementssignificantaccountingpoliciestextblock false 1 false false false false 0 0 false false false false 2 USD true false false false ATLANTIC CITY ELECTRIC CO dei_LegalEntityAxis xbrldi http://xbrl.org/2006/xbrldi pom_AtlanticCityElectricCoMember dei_LegalEntityAxis explicitMember iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 $ na No definition available. No authoritative reference available. false 4 SIGNIFICANT ACCOUNTING POLICIES 2 us-gaap_SignificantAccountingPoliciesTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false false 1 false false false false 0 0 <div> (2) SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation ACE’s unaudited consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Pursuant to the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. Therefore, these financial statements should be read along with the annual financial statements included in ACE’s Annual Report on Form 10-K for the year ended December 31, 2009. In the opinion of ACE’s management, the consolidated financial statements contain all adjustments (which all are of a normal recurring nature) necessary to present fairly ACE’s financial condition as of September 30, 2010, in accordance with GAAP. The year-end December 31, 2009 balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. Interim results for the three and nine months ended September 30, 2010 may not be indicative of results that will be realized for the full year ending December 31, 2010 since the sales of electric energy are seasonal. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Although ACE believes that its estimates and assumptions are reasonable, they are based upon information available to management at the time the estimates are made. Actual results may differ significantly from these estimates. Significant matters that involve the use of estimates include the assessment of contingencies, the calculation of future cash flows and fair value amounts for use in asset impairment evaluations, pension and other postretirement benefits assumptions, unbilled revenue calculations, the assessment of the probability of recovery of regulatory assets, estimation of storm restoration accruals, estimation of restructuring charges, and income tax provisions and reserves. Additionally, ACE is subject to legal, regulatory, and other proceedings and claims that arise in the ordinary course of its business. ACE records an estimated liability for these proceedings and claims when the loss is determined to be probable and is reasonably estimable. Network Service Transmission Rates In May 2010, ACE provided its updated network service transmission rate to the Federal Energy Regulatory Commission (FERC) effective June 1, 2010 through May 31, 2011 which included a true-up of costs incurred in the prior service year that had not yet been reflected in rates charged to customers. The recording of the difference between the true-ups provided to FERC and the estimated true-up calculation as of March 31, 2010 resulted in an increase in transmission service revenue of $2 million in the second quarter of 2010.   Consolidation of Variable Interest Entities ACE Power Purchase Agreements (PPAs) ACE has PPAs with a number of entities, including three contracts between unaffiliated non-utility generators (NUGs). Due to a variable element in the pricing structure of the PPAs, ACE potentially assumes the variability in the operations of the generating facilities related to the NUGs and, therefore, has a variable interest in the entities. Despite exhaustive efforts to obtain information from these entities during the three months ended September 30, 2010, PHI was unable to obtain sufficient information to conduct the analysis required under Financial Accounting Standards Board (FASB) guidance to determine whether these three entities were variable interest entities or if ACE was the primary beneficiary. As a result, ACE has applied the scope exemption from the guidance for enterprises that have conducted exhaustive efforts to obtain the necessary information, but have not been able to obtain such information. Net purchase activities with the NUGs for the three months ended September 30, 2010 and 2009 were approximately $82 million and $70 million, respectively, of which approximately $74 million and $66 million, respectively, consisted of power purchases under the PPAs. Net purchase activities with the NUGs for the nine months ended September 30, 2010 and 2009 were approximately $222 million and $214 million, respectively, of which approximately $203 million and $197 million, respectively, consisted of power purchases under the PPAs. The power purchase costs are recoverable from ACE’s customers through regulated rates. ACE Transition Funding, LLC ACE Transition Funding, LLC (ACE Funding) was established in 2001 by ACE solely for the purpose of securitizing authorized portions of ACE’s recoverable stranded costs through the issuance and sale of Transition Bonds. The proceeds of the sale of each series of Transition Bonds have been transferred to ACE in exchange for the transfer by ACE to ACE Funding of the right to collect non-bypassable Transition Bond Charges (the Transition Bond Charges) from ACE customers pursuant to bondable stranded costs rate orders issued by the New Jersey Board of Public Utilities in an amount sufficient to fund the principal and interest payments on the Transition Bonds and related taxes, expenses and fees (Bondable Transition Property). ACE collects the Transition Bond Charges from its customers on behalf of ACE Funding and the holders of the Transition Bonds. The assets of ACE Funding, including the Bondable Transition Property, and the Transition Bond Charges collected from ACE’s customers, are not available to creditors of ACE. The holders of the Transition Bonds have recourse only to the assets of ACE Funding. ACE owns 100 percent of the equity of ACE Funding and has consolidated ACE Funding in its financial statements. The amendment to the variable interest entity consolidation guidance effective January 1, 2010 resulted in ACE Funding meeting the definition of a variable interest entity. ACE continues to consolidate ACE Funding in its financial statements as ACE is the primary beneficiary of ACE Funding under the amended variable interest entity consolidation guidance. Taxes Assessed by a Governmental Authority on Revenue-Producing Transactions Taxes included in ACE’s gross revenues were $8 million and $6 million for the three months ended September 30, 2010 and 2009, respectively, and $18 million and $17 million for the nine months ended September 30, 2010 and 2009, respectively. Reclassifications and Adjustments Certain prior period amounts have been reclassified in order to conform to current period presentation. The following adjustments have been recorded which are not considered material either individually or in the aggregate: During 2010, ACE recorded an adjustment to correct certain income tax errors related to prior periods. The adjustment resulted in an increase in income tax expense of $6 million for the nine months ended September 30, 2010. During the first and second quarters of 2009, ACE recorded adjustments to correct certain income tax errors related to prior periods. These adjustments resulted in a decrease in income tax expense of $1 million for the nine months ended September 30, 2009. </div> false false false us-types:textBlockItemType textblock This element may be used to describe all significant accounting policies of the reporting entity. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 false 5 DELMARVA POWER & LIGHT CO /DE/ 0 na true na na No definition available. false true false false false false false false false false false http://www.pepcoholdings.com/taxonomy/role/notestofinancialstatementssignificantaccountingpoliciestextblock false 1 false false false false 0 0 false false false false 3 USD true false false false DELMARVA POWER & LIGHT CO /DE/ dei_LegalEntityAxis xbrldi http://xbrl.org/2006/xbrldi pom_DelmarvaPowerLightCoMember dei_LegalEntityAxis explicitMember iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 $ na No definition available. No authoritative reference available. false 6 SIGNIFICANT ACCOUNTING POLICIES 2 us-gaap_SignificantAccountingPoliciesTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false false 1 false false false false 0 0 <div> <table style="BORDER-COLLAPSE: collapse" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr> <td valign="top" width="4%" align="left">(2)</td> <td valign="top" align="left">SIGNIFICANT ACCOUNTING POLICIES</td> </tr> </table> Financial Statement Presentation DPL’s unaudited financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Pursuant to the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. Therefore, these financial statements should be read along with the annual financial statements included in DPL’s Annual Report on Form 10-K for the year ended December 31, 2009. In the opinion of DPL’s management, the financial statements contain all adjustments (which all are of a normal recurring nature) necessary to present fairly DPL’s financial condition as of September 30, 2010, in accordance with GAAP. The year-end December 31, 2009 balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. Interim results for the three and nine months ended September 30, 2010 may not be indicative of results that will be realized for the full year ending December 31, 2010 since the sales of electric energy are seasonal. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. Although DPL believes that its estimates and assumptions are reasonable, they are based upon information available to management at the time the estimates are made. Actual results may differ significantly from these estimates. Significant matters that involve the use of estimates include the assessment of contingencies, the calculation of future cash flows and fair value amounts for use in asset impairment evaluations, fair value calculations (based on estimated market pricing) associated with derivative instruments, pension and other postretirement benefits assumptions, unbilled revenue calculations, the assessment of the probability of recovery of regulatory assets, estimation of storm restoration accruals, estimation of restructuring charges, and income tax provisions and reserves. Additionally, DPL is subject to legal, regulatory, and other proceedings and claims that arise in the ordinary course of its business. DPL records an estimated liability for these proceedings and claims when the loss is determined to be probable and is reasonably estimable. Network Service Transmission Rates In May 2010, DPL provided its updated network service transmission rate to the Federal Energy Regulatory Commission (FERC) effective June 1, 2010 through May 31, 2011 which included a true-up of costs incurred in the prior service year that had not yet been reflected in rates charged to customers. The recording of the difference between the true-ups provided to FERC and the estimated true-up calculation as of March 31, 2010 resulted in an increase in transmission service revenue of $3 million in the second quarter of 2010.   Consolidation of Variable Interest Entities – DPL Renewable Energy Transactions DPL has entered into four wind power purchase agreements (PPAs) in amounts up to a total of 350 megawatts and one solar renewable energy credit (REC) purchase agreement with a nine megawatt facility. Of the wind PPAs, three are with land-based facilities and one is with an offshore facility. The Delaware Public Service Commission (DPSC) has approved DPL’s entry into each of the agreements and the recovery of DPL’s purchase costs through customer rates. The RECs purchased under all the agreements will help DPL fulfill a portion of its requirements under the State of Delaware’s Renewable Energy Portfolio Standards Act. One of the land-based wind facilities became operational and went into service in December 2009. DPL is obligated to purchase energy and RECs from this facility through 2024 in amounts generated and delivered not to exceed 50.25 megawatts at rates that are primarily fixed. DPL’s purchases under this PPA totaled $2 million for the three months ended September 30, 2010 and $8 million for the nine months ended September 30, 2010. Payments under the other wind agreements, which have terms ranging from 20 to 25 years, are currently expected to start in the fourth quarter of 2010 for the other two land-based contracts and 2016 for the offshore contract, if the projects are ultimately completed and become operational. When they become operational, DPL is obligated to purchase energy and RECs in amounts generated and delivered by the sellers at rates that are primarily fixed under these agreements. Under one of the agreements, DPL is also obligated to purchase the capacity associated with the facility at rates that are generally fixed. The inability of the offshore wind facility developer to obtain all necessary permits and financing commitments could result in setbacks in the construction schedules and the operational start dates of the offshore wind facility. If the wind facilities are not operational by specified dates, DPL has the right to terminate the PPAs. The term of the agreement with the solar facility is 20 years and DPL is obligated to purchase RECs in an amount up to seventy percent of the energy output from the solar facility at a fixed price once the facility is operational, which is expected to be by the end of 2011. DPL concluded that consolidation is not required for any of these agreements under Financial Accounting Standards Board (FASB) guidance on the consolidation of variable interest entities (Accounting Standards Codification (ASC) 810). Goodwill Goodwill represents the excess of the purchase price of an acquisition over the fair value of the net assets acquired at the acquisition date. All of DPL’s goodwill was generated by DPL’s acquisition of Conowingo Power Company in 1995. DPL tests its goodwill for impairment annually and whenever an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of DPL below its carrying amount. DPL performs its annual impairment test on November 1. Factors that may result in an interim impairment test include, but are not limited to: a change in the identified reporting units; an adverse change in business conditions; an adverse regulatory action; or an impairment of DPL’s long-lived assets. As described in Note (6), “Goodwill,” DPL concluded that an interim impairment test was not required during the nine months ended September 30, 2010. Taxes Assessed by a Governmental Authority on Revenue-Producing Transactions Taxes included in DPL’s gross revenues were $4 million for the three months ended September 30, 2010 and 2009, and $13 million for the nine months ended September 30, 2010 and 2009. Reclassifications and Adjustments Certain prior period amounts have been reclassified in order to conform to current period presentation. The following adjustments have been recorded which are not considered material individually or in the aggregate: During the second and third quarters of 2009, DPL recorded adjustments to correct certain income tax errors related to prior periods. These adjustments resulted in an increase in income tax expense of $1 million for the three months ended September 30, 2009.   During the third quarter of 2009, DPL recorded an adjustment to correct certain errors in the Bill Stabilization Adjustment (BSA) calculation. The adjustment resulted in a decrease in revenue of $1 million for the three and nine months ended September 30, 2009. </div> false false false us-types:textBlockItemType textblock This element may be used to describe all significant accounting policies of the reporting entity. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 false 7 POTOMAC ELECTRIC POWER CO 0 na true na na No definition available. false true false false false false false false false false false http://www.pepcoholdings.com/taxonomy/role/notestofinancialstatementssignificantaccountingpoliciestextblock false 1 false false false false 0 0 false false false false 4 USD true false false false POTOMAC ELECTRIC POWER CO dei_LegalEntityAxis xbrldi http://xbrl.org/2006/xbrldi pom_PotomacElectricPowerCoMember dei_LegalEntityAxis explicitMember iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 $ na No definition available. No authoritative reference available. false 8 SIGNIFICANT ACCOUNTING POLICIES 2 us-gaap_SignificantAccountingPoliciesTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false false 1 false false false false 0 0 <div> (2) SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation Pepco’s unaudited financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Pursuant to the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. Therefore, these financial statements should be read along with the annual financial statements included in Pepco’s Annual Report on Form 10-K for the year ended December 31, 2009. In the opinion of Pepco’s management, the financial statements contain all adjustments (which all are of a normal recurring nature) necessary to present fairly Pepco’s financial condition as of September 30, 2010, in accordance with GAAP. The year-end December 31, 2009 balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. Interim results for the three and nine months ended September 30, 2010 may not be indicative of results that will be realized for the full year ending December 31, 2010 since the sales of electric energy are seasonal. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. Although Pepco believes that its estimates and assumptions are reasonable, they are based upon information available to management at the time the estimates are made. Actual results may differ significantly from these estimates. Significant matters that involve the use of estimates include the assessment of contingencies, the calculation of future cash flows and fair value amounts for use in asset impairment evaluations, pension and other postretirement benefits assumptions, unbilled revenue calculations, the assessment of the probability of recovery of regulatory assets, estimation of storm restoration accruals, estimation of restructuring charges, and income tax provisions and reserves. Additionally, Pepco is subject to legal, regulatory, and other proceedings and claims that arise in the ordinary course of its business. Pepco records an estimated liability for these proceedings and claims when the loss is determined to be probable and is reasonably estimable. Storm Costs In the third quarter of 2010, Pepco recorded $23 million in restoration costs related to severe summer storms, of which $13 million was charged to Other Operation and Maintenance expense and $10 million was recorded as capital expenditures. A portion of the recorded costs of the restoration work relates to services provided by outside contractors and other utilities that were not billed as of September 30, 2010, and accordingly have been estimated. These estimates are subject to adjustment when the actual billings are received in the fourth quarter of 2010. The actual billings may vary from the estimates of such billings.   During the first quarter of 2010, Pepco incurred significant costs associated with the February 2010 severe winter storms. The actual billings related to the February storms were received by the end of the second quarter with final costs approximating $10 million, with $8 million charged to Other Operation and Maintenance expense and $2 million recorded as capital expenditures. Other Operation and Maintenance expense was further decreased by approximately $5 million during the third quarter due to an adjustment for recoverable February storm costs in accordance with the Maryland Public Service Commission rate order issued in August 2010. Network Service Transmission Rates In May 2010, Pepco provided its updated network service transmission rate to the Federal Energy Regulatory Commission (FERC) effective June 1, 2010 through May 31, 2011 which included a true-up of costs incurred in the prior service year that had not yet been reflected in rates charged to customers. The recording of the difference between the true-ups provided to FERC and the estimated true-up calculation as of March 31, 2010 resulted in an increase in transmission service revenue of $3 million in the second quarter of 2010. Taxes Assessed by a Governmental Authority on Revenue-Producing Transactions Taxes included in Pepco’s gross revenues were $106 million and $71 million for the three months ended September 30, 2010 and 2009, respectively, and $249 million and $194 million for the nine months ended September 30, 2010 and 2009, respectively. Reclassifications and Adjustments Certain prior period amounts have been reclassified in order to conform to current period presentation. The following adjustments have been recorded which are not considered material individually or in the aggregate: In 2010, Pepco recorded certain adjustments to correct errors in Income tax expense which resulted in an increase to Income tax expense of $4 million each for the three and nine months ended September 30, 2010, respectively. In the third quarter of 2010, Pepco recorded an adjustment to correct certain errors related to other taxes which resulted in a decrease to Other taxes expense of $5 million (pre-tax) for the three and nine months ended September 30, 2010. During the third quarter of 2009, Pepco recorded an adjustment to correct amounts incorrectly recorded as an expense related to a new PJM Interconnection, LLC (PJM) program, which should have been deferred as a regulatory asset. The adjustment resulted in a decrease to Purchased energy expenses for the three and nine months ended September 30, 2009 of $1 million. </div> false false false us-types:textBlockItemType textblock This element may be used to describe all significant accounting policies of the reporting entity. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 false 1 8 false UnKnown UnKnown UnKnown false true