10-Q 1 d124776d10q.htm FORM 10-Q FORM 10-Q
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

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

For the Quarterly Period Ended June 30, 2016

or

 

¨ 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

(a Delaware and Virginia corporation)

500 North Wakefield Drive

Newark, Delaware 19702

(202) 872-2000

     51-0084283   

001-03559

  

ATLANTIC CITY ELECTRIC COMPANY

     21-0398280   
  

(a New Jersey corporation)

500 North Wakefield Drive

Newark, Delaware 19702

(202) 872-2000

  


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

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

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

 

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

Exelon Corporation

   x         

Exelon Generation Company, LLC

         x   

Commonwealth Edison Company

         x   

PECO Energy Company

         x   

Baltimore Gas and Electric Company

         x   

Pepco Holdings LLC

   x         

Potomac Electric Power Company

         x   

Delmarva Power & Light Company

         x   

Atlantic City Electric Company

         x   

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

The number of shares outstanding of each registrant’s common stock as of June 30, 2016 was:

 

Exelon Corporation Common Stock, without par value

   922,872,373

Exelon Generation Company, LLC

   not applicable

Commonwealth Edison Company Common Stock, $12.50 par value

   127,017,042

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, $.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


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TABLE OF CONTENTS

 

    Page No.  
FILING FORMAT     9   
FORWARD-LOOKING STATEMENTS     9   
WHERE TO FIND MORE INFORMATION     9   
PART I.  

FINANCIAL INFORMATION

    10   
ITEM 1.  

FINANCIAL STATEMENTS

    10   
 

Exelon Corporation

 
 

Consolidated Statements of Operations and Comprehensive Income

    11   
 

Consolidated Statements of Cash Flows

    12   
 

Consolidated Balance Sheets

    13   
 

Consolidated Statement of Changes in Shareholders’ Equity

    15   
 

Exelon Generation Company, LLC

 
 

Consolidated Statements of Operations and Comprehensive Income

    16   
 

Consolidated Statements of Cash Flows

    17   
 

Consolidated Balance Sheets

    18   
 

Consolidated Statement of Changes in Equity

    20   
 

Commonwealth Edison Company

 
 

Consolidated Statements of Operations and Comprehensive Income

    21   
 

Consolidated Statements of Cash Flows

    22   
 

Consolidated Balance Sheets

    23   
 

Consolidated Statement of Changes in Shareholders’ Equity

    25   
 

PECO Energy Company

 
 

Consolidated Statements of Operations and Comprehensive Income

    26   
 

Consolidated Statements of Cash Flows

    27   
 

Consolidated Balance Sheets

    28   
 

Consolidated Statement of Changes in Shareholder’s Equity

    30   
 

Baltimore Gas and Electric Company

 
 

Consolidated Statements of Operations and Comprehensive Income

    31   
 

Consolidated Statements of Cash Flows

    32   
 

Consolidated Balance Sheets

    33   
 

Consolidated Statement of Changes in Shareholders’ Equity

    35   
 

Pepco Holdings LLC

 
 

Consolidated Statements of Operations and Comprehensive Income

    36   
 

Consolidated Statements of Cash Flows

    37   
 

Consolidated Balance Sheets

    38   
 

Consolidated Statement of Changes in Equity

    40   

 

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    Page No.  
 

Potomac Electric Power Company

 
 

Statements of Operations and Comprehensive Income

    41   
 

Statements of Cash Flows

    42   
 

Balance Sheets

    43   
 

Statement of Changes in Shareholder’s Equity

    45   
 

Delmarva Power & Light Company

 
 

Statements of Operations and Comprehensive Income

    46   
 

Statements of Cash Flows

    47   
 

Balance Sheets

    48   
 

Statement of Changes in Shareholder’s Equity

    50   
 

Atlantic City Electric Company

 
 

Consolidated Statements of Operations and Comprehensive Income

    51   
 

Consolidated Statements of Cash Flows

    52   
 

Consolidated Balance Sheets

    53   
 

Consolidated Statement of Changes in Shareholder’s Equity

    55   
 

Combined Notes to Consolidated Financial Statements

    56   
 

1. Significant Accounting Policies

    56   
 

2. New Accounting Pronouncements

    59   
 

3. Variable Interest Entities

    63   
 

4. Mergers, Acquisitions and Dispositions

    70   
 

5. Regulatory Matters

    77   
 

6. Impairment of Long-Lived Assets

    93   
 

7. Early Nuclear Plant Retirements

    95   
 

8. Fair Value of Financial Assets and Liabilities

    97   
 

9. Derivative Financial Instruments

    121   
 

10. Debt and Credit Agreements

    140   
 

11. Income Taxes

    144   
 

12. Nuclear Decommissioning

    150   
 

13. Retirement Benefits

    153   
 

14. Severance

    156   
 

15. Changes in Accumulated Other Comprehensive Income

    159   
 

16. Mezzanine Equity

    163   
 

17. Earnings Per Share and Equity

    164   
 

18. Commitments and Contingencies

    165   
 

19. Supplemental Financial Information

    179   
 

20. Segment Information

    186   

 

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    Page No.  
ITEM 2.  

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

    196   
 

Exelon Corporation

    196   
 

General

    196   
 

Executive Overview

    197   
 

Critical Accounting Policies and Estimates

    221   
 

Results of Operations

    221   
 

Liquidity and Capital Resources

    268   
 

Contractual Obligations and Off-Balance Sheet Arrangements

    280   
ITEM 3.  

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    281   
ITEM 4.  

CONTROLS AND PROCEDURES

    290   
PART II.  

OTHER INFORMATION

    292   
ITEM 1.  

LEGAL PROCEEDINGS

    292   
ITEM 1A.  

RISK FACTORS

    292   
ITEM 4.  

MINE SAFETY DISCLOSURES

    293   
ITEM 6.  

EXHIBITS

    293   
SIGNATURES     296   
 

Exelon Corporation

    296   
 

Exelon Generation Company, LLC

    296   
 

Commonwealth Edison Company

    296   
 

PECO Energy Company

    297   
 

Baltimore Gas and Electric Company

    297   
 

Pepco Holdings LLC

    297   
 

Potomac Electric Power Company

    298   
 

Delmarva Power & Light Company

    298   
 

Atlantic City Electric Company

    298   

 

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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

Pepco Energy Services or PES

  

Pepco Energy Services, Inc. and its subsidiaries

PCI

  

Potomac Capital Investment Corporation and its subsidiaries

DPL

  

Delmarva Power & Light Company

ACE

  

Atlantic City Electric Company

ACE Funding or ATF

  

Atlantic City Electric Transition Funding LLC

BSC

  

Exelon Business Services Company, LLC

PHISCO

  

PHI Service Company

Exelon Corporate

  

Exelon in its corporate capacity as a holding company

PHI Corporate

  

PHI in its corporate capacity as a holding company

CENG

  

Constellation Energy Nuclear Group, LLC

Constellation

  

Constellation Energy Group, Inc.

Antelope Valley

  

Antelope Valley Solar Ranch One

Exelon Transmission Company

  

Exelon Transmission Company, LLC

Exelon Wind

  

Exelon Wind, LLC and Exelon Generation Acquisition Company, LLC

Ventures

  

Exelon Ventures Company, LLC

AmerGen

  

AmerGen Energy Company, LLC

BondCo

  

RSB BondCo LLC

PEC L.P.

  

PECO Energy Capital, L.P.

PECO Trust III

  

PECO Capital Trust III

PECO Trust IV

  

PECO Energy Capital Trust IV

PETT

  

PECO Energy Transition Trust

Registrants

  

Exelon, Generation, ComEd, PECO, BGE, PHI, Pepco, DPL and ACE, collectively

Utility Registrants

  

ComEd, PECO, BGE, Pepco, DPL and ACE, collectively

Legacy PHI

  

PHI, Pepco, DPL and ACE, collectively

 

Other Terms and Abbreviations

Note “—” of the Exelon 2015 Form 10-K

   Reference to specific Combined Note to Consolidated Financial Statements within Exelon’s 2015 Annual Report on Form 10-K

Note “—” of the PHI 2015
Form 10-K

   Reference to specific Note to Consolidated Financial Statements within Legacy PHI’s 2015 Annual Report on Form 10-K

1998 restructuring settlement

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

Act 11

   Pennsylvania Act 11 of 2012

Act 129

   Pennsylvania Act 129 of 2008

AEC

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

AEPS

   Pennsylvania Alternative Energy Portfolio Standards

AEPS Act

   Pennsylvania Alternative Energy Portfolio Standards Act of 2004, as amended

AESO

   Alberta Electric Systems Operator

 

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GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

AFUDC

   Allowance for Funds Used During Construction

ALJ

   Administrative Law Judge

AMI

   Advanced Metering Infrastructure

AMP

   Advanced Metering Program

ARC

   Asset Retirement Cost

ARO

   Asset Retirement Obligation

ARP

   Title IV Acid Rain Program

ARRA of 2009

   American Recovery and Reinvestment Act of 2009

ASC

   Accounting Standards Codification

BGS

   Basic Generation Service (the supply of electricity by ACE to retail customers in New Jersey who have not elected to purchase electricity from a competitive supplier)

Block contracts

   Forward Purchase Energy Block Contracts

CAIR

   Clean Air Interstate Rule

CAISO

   California ISO

CAMR

   Federal Clean Air Mercury Rule

CERCLA

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

CFL

   Compact Fluorescent Light

Clean Air Act

   Clean Air Act of 1963, as amended

Clean Water Act

   Federal Water Pollution Control Amendments of 1972, as amended

Competition Act

   Pennsylvania Electricity Generation Customer Choice and Competition Act of 1996

Conectiv

   Conectiv, LLC, a wholly owned subsidiary of PHI and the parent of DPL and ACE

Conectiv Energy

   Conectiv Energy Holdings, Inc. and substantially all of its subsidiaries, which were sold to Calpine in July 2010

Contract EDCs

   Pepco, DPL and BGE, the Maryland utilities required by the MDPSC to enter into a contract for new generation

CPI

   Consumer Price Index

CPUC

   California Public Utilities Commission

CSAPR

   Cross-State Air Pollution Rule

CTA

   Consolidated tax adjustment

CTC

   Competitive Transition Charge

D.C. Circuit Court

   United States Court of Appeals for the District of Columbia Circuit

DCPSC

   District of Columbia Public Service Commission

DC PLUG

   District of Columbia Power Line Undergrounding

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

Default Electricity Supply Revenue

   Revenue primarily from Default Electricity Supply

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

 

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GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

EDCs

   Electric distribution companies

EDF

   Electricite de France SA and its subsidiaries

EE&C

   Energy Efficiency and Conservation/Demand Response

EGS

   Electric Generation Supplier

EGTP

   ExGen Texas Power, LLC

EIMA

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

EmPower Maryland

   A Maryland demand-side management program for Pepco and DPL

EPA

   United States Environmental Protection Agency

ERCOT

   Electric Reliability Council of Texas

ERISA

   Employee Retirement Income Security Act of 1974, as amended

EROA

   Expected Rate of Return on Assets

ESPP

   Employee Stock Purchase Plan

FASB

   Financial Accounting Standards Board

FERC

   Federal Energy Regulatory Commission

FRCC

   Florida Reliability Coordinating Council

FTC

   Federal Trade Commission

GAAP

   Generally Accepted Accounting Principles in the United States

GCR

   Gas Cost Rate

GHG

   Greenhouse Gas

GRT

   Gross Receipts Tax

GSA

   Generation Supply Adjustment

GWh

   Gigawatt hour

HAP

   Hazardous air pollutants

Health Care Reform Acts

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

HSR Act

   The Hart-Scott-Rodino Antitrust Improvements Act of 1976

IBEW

   International Brotherhood of Electrical Workers

ICC

   Illinois Commerce Commission

ICE

   Intercontinental Exchange

Illinois Act

   Illinois Electric Service Customer Choice and Rate Relief Law of 1997

Illinois EPA

   Illinois Environmental Protection Agency

Illinois Settlement Legislation

   Legislation enacted in 2007 affecting electric utilities in Illinois

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

LILO

   Lease-In, Lease-Out

LLRW

   Low-Level Radioactive Waste

LTIP

   Long-Term Incentive Plan

MAPP

   Mid-Atlantic Power Pathway

MATS

   U.S. EPA Mercury and Air Toxics Rule

 

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GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

MBR

   Market Based Rates Incentive

MDE

   Maryland Department of the Environment

MDPSC

   Maryland Public Service Commission

MGP

   Manufactured Gas Plant

MISO

   Midcontinent Independent System Operator, Inc.

mmcf

   Million Cubic Feet

Moody’s

   Moody’s Investor Service

MOPR

   Minimum Offer Price Rule

MRV

   Market-Related Value

MW

   Megawatt

MWh

   Megawatt hour

NAAQS

   National Ambient Air Quality Standards

n.m.

   not meaningful

NAV

   Net Asset Value

NDT

   Nuclear Decommissioning Trust

NEIL

   Nuclear Electric Insurance Limited

NERC

   North American Electric Reliability Corporation

NGS

   Natural Gas Supplier

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

NOV

   Notice of Violation

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

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

PHI Retirement Plan

   PHI’s noncontributory retirement plan

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

PURTA

   Pennsylvania Public Realty Tax Act

 

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GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

PV

   Photovoltaic

RCRA

   Resource Conservation and Recovery Act of 1976, as amended

REC

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

Regulatory Agreement Units

   Nuclear generating units 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)

SERP

   Supplemental Employee Retirement Plan

SGIG

   Smart Grid Investment Grant from DOE

SGIP

   Smart Grid Initiative Program

SILO

   Sale-In, Lease-Out

SMPIP

   Smart Meter Procurement and Installation Plan

SNF

   Spent Nuclear Fuel

SOCAs

   Standard Offer Capacity Agreements required to be entered into by ACE pursuant to a New Jersey law enacted to promote the construction of qualified electric generation facilities in New Jersey

SOS

   Standard Offer Service

SPP

   Southwest Power Pool

Tax Relief Act of 2010

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

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 exploration and production activities

VIE

   Variable Interest Entity

WECC

   Western Electric Coordinating Council

 

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FILING FORMAT

This combined Form 10-Q 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.

FORWARD-LOOKING STATEMENTS

This Report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by the Registrants include those factors discussed herein, as well as the items discussed in (1) Exelon’s 2015 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 23; (2) PHI’s 2015 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 16; (3) this Quarterly Report on Form 10-Q in (a) Part II, Other Information, ITEM 1A. Risk Factors, (b) Part 1, Financial Information, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements: Note 18; and (4) other factors discussed in filings with the SEC by the Registrants. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Report. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this Report.

WHERE TO FIND MORE INFORMATION

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

 

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PART I.  FINANCIAL INFORMATION

Item 1.    Financial Statements

 

 

 

 

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EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(In millions, except per share data)        2016             2015         2016     2015  

Operating revenues

        

Competitive businesses revenues

   $ 3,234      $ 4,080      $ 7,708      $ 9,714   

Rate-regulated utility revenues

     3,676        2,434        6,777        5,631   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     6,910        6,514        14,485        15,345   

Operating expenses

        

Competitive businesses purchased power and fuel

     1,576        1,848        4,016        5,274   

Rate-regulated utility purchased power and fuel

     878        601        1,692        1,645   

Operating and maintenance

     2,505        2,042        5,341        4,123   

Depreciation and amortization

     941        602        1,626        1,212   

Taxes other than income

     394        294        720        598   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     6,294        5,387        13,395        12,852   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gain on sales of assets

     31        7        40        8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     647        1,134        1,130        2,501   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense, net

     (366     (145     (643     (480

Interest expense to affiliates

     (10     (10     (20     (21

Other, net

     144        (17     258        64   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (232     (172     (405     (437
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     415        962        725        2,064   

Income taxes

     102        327        285        690   

Equity in losses of unconsolidated affiliates

     (7     (2     (10     (2
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     306        633        430        1,372   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to noncontrolling interests and preference stock dividends

     39        (5     (10     41   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders

   $ 267      $ 638      $ 440      $ 1,331   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income, net of income taxes

        

Net income

   $ 306      $ 633      $ 430      $ 1,372   

Other comprehensive income (loss), net of income taxes

        

Pension and non-pension postretirement benefit plans:

        

Prior service benefit reclassified to periodic benefit cost

     (12     (11     (23     (23

Actuarial loss reclassified to periodic benefit cost

     46        55        93        110   

Pension and non-pension postretirement benefit plan valuation adjustment

     (1            (3     (29

Unrealized (loss) gain on cash flow hedges

            3        (7     9   

Unrealized loss on equity investments

     (4            (7       

Unrealized gain (loss) on foreign currency translation

            3        6        (9

Unrealized gain on marketable securities

     2                        
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

     31        50        59        58   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     337        683        489        1,430   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to noncontrolling interests and preference stock dividends

     39        (5     (10     41   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to common shareholders

   $ 298      $ 688      $ 499      $ 1,389   
  

 

 

   

 

 

   

 

 

   

 

 

 

Average shares of common stock outstanding:

        

Basic

     924        863        923        862   

Diluted

     926        866        926        866   

Earnings per average common share:

        

Basic

   $ 0.29      $ 0.74      $ 0.48      $ 1.54   

Diluted

   $ 0.29      $ 0.74      $ 0.48      $ 1.54   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per common share

   $ 0.32      $ 0.31      $ 0.63      $ 0.62   
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

11


Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

 

     Six Months Ended
June 30,
 
(In millions)        2016             2015      

Cash flows from operating activities

    

Net income

   $ 430      $ 1,372   

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

    

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

     2,396        1,957   

Impairment of long-lived assets and losses on regulatory assets

     239        24   

Gain on sales of assets

     (40     (8

Deferred income taxes and amortization of investment tax credits

     261        211   

Net fair value changes related to derivatives

     194        (507

Net realized and unrealized gains on nuclear decommissioning trust fund investments

     (114     (2

Other non-cash operating activities

     1,056        579   

Changes in assets and liabilities:

    

Accounts receivable

     86        253   

Inventories

     89        159   

Accounts payable and accrued expenses

     (363     (540

Option premiums received, net

     (10     22   

Collateral received, net

     710        659   

Income taxes

     470        247   

Pension and non-pension postretirement benefit contributions

     (258     (301

Other assets and liabilities

     (593     (156
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     4,553        3,969   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (4,489     (3,460

Proceeds from nuclear decommissioning trust fund sales

     4,977        3,314   

Investment in nuclear decommissioning trust funds

     (5,094     (3,437

Acquisition of businesses, net of cash acquired

     (6,642     (28

Proceeds from sales of long-lived assets

     45        145   

Proceeds from termination of direct financing lease investment

     360          

Change in restricted cash

     15        (3

Other investing activities

     (49     (77
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (10,877     (3,546
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in short-term borrowings

     (798     94   

Proceeds from short-term borrowings with maturities greater than 90 days

     194          

Repayments on short-term borrowings with maturities greater than 90 days

     (315       

Issuance of long-term debt

     3,174        5,907   

Retirement of long-term debt

     (217     (1,708

Dividends paid on common stock

     (582     (537

Proceeds from employee stock plans

     17        16   

Other financing activities

     (4     (59
  

 

 

   

 

 

 

Net cash flows provided by financing activities

     1,469        3,713   
  

 

 

   

 

 

 

(Decrease) Increase in cash and cash equivalents

     (4,855     4,136   

Cash and cash equivalents at beginning of period

     6,502        1,878   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,647      $ 6,014   
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

12


Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    June 30,
2016
     December 31,
2015
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 1,647       $ 6,502   

Restricted cash and cash equivalents

     201         205   

Accounts receivable, net

     

Customer

     3,671         3,187   

Other

     988         912   

Mark-to-market derivative assets

     759         1,365   

Unamortized energy contract assets

     69         86   

Inventories, net

     

Fossil fuel and emission allowances

     317         462   

Materials and supplies

     1,183         1,104   

Regulatory assets

     1,559         759   

Other

     1,101         752   
  

 

 

    

 

 

 

Total current assets

     11,495         15,334   
  

 

 

    

 

 

 

Property, plant and equipment, net

     70,693         57,439   

Deferred debits and other assets

     

Regulatory assets

     10,121         6,065   

Nuclear decommissioning trust funds

     10,737         10,342   

Investments

     502         639   

Goodwill

     6,696         2,672   

Mark-to-market derivative assets

     546         758   

Unamortized energy contract assets

     461         484   

Pledged assets for Zion Station decommissioning

     161         206   

Other

     1,366         1,445   
  

 

 

    

 

 

 

Total deferred debits and other assets

     30,590         22,611   
  

 

 

    

 

 

 

Total assets(a)

   $ 112,778       $ 95,384   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

13


Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)   June 30,
2016
    December 31,
2015
 
    (Unaudited)        
LIABILITIES AND SHAREHOLDERS’ EQUITY    

Current liabilities

   

Short-term borrowings

  $ 951      $ 533   

Long-term debt due within one year

    2,693        1,500   

Accounts payable

    2,826        2,883   

Accrued expenses

    2,757        2,376   

Payables to affiliates

    8        8   

Regulatory liabilities

    503        369   

Mark-to-market derivative liabilities

    152        205   

Unamortized energy contract liabilities

    508        100   

Renewable energy credit obligation

    316        302   

PHI merger related obligation

    155          

Other

    1,025        842   
 

 

 

   

 

 

 

Total current liabilities

    11,894        9,118   
 

 

 

   

 

 

 

Long-term debt

    31,541        23,645   

Long-term debt to financing trusts

    641        641   

Deferred credits and other liabilities

   

Deferred income taxes and unamortized investment tax credits

    17,662        13,776   

Asset retirement obligations

    9,256        8,585   

Pension obligations

    3,767        3,385   

Non-pension postretirement benefit obligations

    1,900        1,618   

Spent nuclear fuel obligation

    1,023        1,021   

Regulatory liabilities

    4,389        4,201   

Mark-to-market derivative liabilities

    442        374   

Unamortized energy contract liabilities

    1,011        117   

Payable for Zion Station decommissioning

    54        90   

Other

    1,876        1,491   
 

 

 

   

 

 

 

Total deferred credits and other liabilities

    41,380        34,658   
 

 

 

   

 

 

 

Total liabilities(a)

    85,456        68,062   
 

 

 

   

 

 

 

Commitments and contingencies

   

Contingently redeemable noncontrolling interests

    24        28   

Shareholders’ equity

   

Common stock (No par value, 2000 shares authorized, 923 shares and 920 shares outstanding at June 30, 2016 and December 31, 2015, respectively)

    18,722        18,676   

Treasury stock, at cost (35 shares at June 30, 2016 and December 31, 2015, respectively)

    (2,327     (2,327

Retained earnings

    11,926        12,068   

Accumulated other comprehensive loss, net

    (2,565     (2,624
 

 

 

   

 

 

 

Total shareholders’ equity

    25,756        25,793   

BGE preference stock not subject to mandatory redemption

    193        193   

Noncontrolling interests

    1,349        1,308   
 

 

 

   

 

 

 

Total equity

    27,298        27,294   
 

 

 

   

 

 

 

Total liabilities and shareholders’ equity

  $ 112,778      $ 95,384   
 

 

 

   

 

 

 

 

(a)

Exelon’s consolidated assets include $8,240 million and $8,268 million at June 30, 2016 and December 31, 2015, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Exelon’s consolidated liabilities include $3,461 million and $3,264 million at June 30, 2016 and December 31, 2015, respectively, of certain VIEs for which the VIE creditors do not have recourse to Exelon. See Note 3 — Variable Interest Entities.

See the Combined Notes to Consolidated Financial Statements

 

14


Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(In millions, shares

in thousands)

  Issued
Shares
    Common
Stock
    Treasury
Stock
    Retained
Earnings
    Accumulated
Other
Comprehensive
Loss, net
    Noncontrolling
Interests
    Preference
Stock
    Total
Shareholders’

Equity
 

Balance, December 31, 2015

    954,668      $ 18,676      $ (2,327   $ 12,068      $ (2,624   $ 1,308      $ 193      $ 27,294   

Net income

                         440               (17     7        430   

Long-term incentive plan activity

    2,349        47                                           47   

Employee stock purchase plan issuances

    599        17                                           17   

Tax benefit on stock compensation

           (18                                        (18

Changes in equity of noncontrolling interests

                                       2               2   

Adjustment of contingently redeemable noncontrolling interest due to release of contingency

                                       56               56   

Common stock dividends

                         (582                          (582

Preference stock dividends

                                              (7     (7

Other comprehensive income, net of income taxes

                                59                      59   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2016

    957,616      $ 18,722      $ (2,327   $ 11,926      $ (2,565   $ 1,349      $ 193      $ 27,298   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

15


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(In millions)        2016             2015         2016     2015  

Operating revenues

        

Operating revenues

   $ 3,231      $ 4,079      $ 7,702      $ 9,709   

Operating revenues from affiliates

     358        153        627        365   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     3,589        4,232        8,329        10,074   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power and fuel

     1,575        1,848        4,015        5,274   

Purchased power and fuel from affiliates

     2        1        5        8   

Operating and maintenance

     1,369        1,149        2,665        2,311   

Operating and maintenance from affiliates

     161        159        332        308   

Depreciation and amortization

     408        255        697        509   

Taxes other than income

     118        124        244        246   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     3,633        3,536        7,958        8,656   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gain on sales of assets

     31        7        31        6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

     (13     703        402        1,424   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense, net

     (89     (90     (176     (180

Interest expense to affiliates

     (10     (9     (20     (21

Other, net

     117        (31     210        62   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     18        (130     14        (139
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     5        573        416        1,285   

Income taxes

     (31     181        120        407   

Equity in losses of unconsolidated affiliates

     (8     (2     (11     (3
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     28        390        285        875   

Net income (loss) attributable to noncontrolling interests

     36        (8     (17     34   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to membership interest

   $ (8   $ 398      $ 302      $ 841   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income, net of income taxes

        

Net income

   $ 28      $ 390      $ 285      $ 875   

Other comprehensive income (loss), net of income taxes

        

Unrealized gain (loss) on cash flow hedges

     1        2        (4     (3

Unrealized loss on equity investments

     (2            (4       

Unrealized gain (loss) on foreign currency translation

            3        6        (9

Unrealized gain on marketable securities

     1        1               1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

            6        (2     (11
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     28        396        283        864   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to noncontrolling interests

     36        (8     (17     34   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income attributable to membership interest

   $ (8   $ 404      $ 300      $ 830   
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

16


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Six Months Ended
June 30,
 
(In millions)    2016     2015  

Cash flows from operating activities

    

Net income

   $ 285      $ 875   

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

    

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

     1,467        1,255   

Impairment of long-lived assets

     179        (1

Gain on sales of assets

     (31     (6

Deferred income taxes and amortization of investment tax credits

     (59     65   

Net fair value changes related to derivatives

     199        (396

Net realized and unrealized gains on nuclear decommissioning trust fund investments

     (114     (2

Other non-cash operating activities

     169        134   

Changes in assets and liabilities:

    

Accounts receivable

     123        291   

Receivables from and payables to affiliates, net

     (77     (11

Inventories

     57        134   

Accounts payable and accrued expenses

     (228     (369

Option premiums received, net

     (10     22   

Collateral received, net

     720        682   

Income taxes

     41        27   

Pension and non-pension postretirement benefit contributions

     (117     (122

Other assets and liabilities

     (217     (155
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     2,387        2,423   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (2,051     (1,764

Proceeds from nuclear decommissioning trust fund sales

     4,977        3,314   

Investment in nuclear decommissioning trust funds

     (5,094     (3,437

Acquisition of businesses

     (1     (28

Proceeds from sale of long-lived assets

     30        144   

Change in restricted cash

     25        (16

Other investing activities

     (96     (63
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (2,210     (1,850
  

 

 

   

 

 

 

Cash flows from financing activities

    

Change in short-term borrowings

            15   

Proceeds from short-term borrowings with maturities greater than 90 days

     194          

Repayments of short-term borrowings with maturities greater than 90 days

     (15       

Issuance of long-term debt

     173        1,307   

Retirement of long-term debt

     (131     (39

Retirement of long-term debt to affiliate

            (550

Changes in Exelon intercompany money pool

     (429     638   

Distribution to member

     (111     (2,262

Contribution from member

     45          

Other financing activities

     39        (6
  

 

 

   

 

 

 

Net cash flows used in financing activities

     (235     (897
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (58     (324

Cash and cash equivalents at beginning of period

     431        780   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 373      $ 456   
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

17


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    June 30,
2016
     December 31,
2015
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 373       $ 431   

Restricted cash and cash equivalents

     98         123   

Accounts receivable, net

     

Customer

     2,076         2,095   

Other

     325         360   

Mark-to-market derivative assets

     759         1,365   

Receivables from affiliates

     184         83   

Unamortized energy contract assets

     69         86   

Inventories, net

     

Fossil fuel and emission allowances

     266         384   

Materials and supplies

     840         880   

Other

     735         535   
  

 

 

    

 

 

 

Total current assets

     5,725         6,342   
  

 

 

    

 

 

 

Property, plant and equipment, net

     26,656         25,843   

Deferred debits and other assets

     

Nuclear decommissioning trust funds

     10,737         10,342   

Investments

     294         210   

Goodwill

     47         47   

Mark-to-market derivative assets

     499         733   

Prepaid pension asset

     1,673         1,689   

Pledged assets for Zion Station decommissioning

     161         206   

Unamortized energy contract assets

     460         484   

Deferred income taxes

     13         6   

Other

     632         627   
  

 

 

    

 

 

 

Total deferred debits and other assets

     14,516         14,344   
  

 

 

    

 

 

 

Total assets(a)

   $ 46,897       $ 46,529   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

18


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    June 30,
2016
    December 31,
2015
 
     (Unaudited)        
LIABILITIES AND EQUITY     

Current liabilities

    

Short-term borrowings

   $ 208      $ 29   

Long-term debt due within one year

     174        90   

Accounts payable

     1,271        1,583   

Accrued expenses

     743        935   

Payables to affiliates

     110        104   

Borrowings from Exelon intercompany money pool

     817        1,252   

Mark-to-market derivative liabilities

     134        182   

Unamortized energy contract liabilities

     75        100   

Renewable energy credit obligation

     316        302   

Other

     339        356   
  

 

 

   

 

 

 

Total current liabilities

     4,187        4,933   
  

 

 

   

 

 

 

Long-term debt

     7,965        7,936   

Long-term debt to affiliate

     927        933   

Deferred credits and other liabilities

    

Deferred income taxes and unamortized investment tax credits

     5,750        5,845   

Asset retirement obligations

     9,081        8,431   

Non-pension postretirement benefit obligations

     935        924   

Spent nuclear fuel obligation

     1,023        1,021   

Payables to affiliates

     2,643        2,577   

Mark-to-market derivative liabilities

     237        150   

Unamortized energy contract liabilities

     94        117   

Payable for Zion Station decommissioning

     54        90   

Other

     634        602   
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     20,451        19,757   
  

 

 

   

 

 

 

Total liabilities(a)

     33,530        33,559   
  

 

 

   

 

 

 

Commitments and contingencies

    

Contingently redeemable noncontrolling interests

     24        28   

Equity

    

Member’s equity

    

Membership interest

     9,168        8,997   

Undistributed earnings

     2,892        2,701   

Accumulated other comprehensive loss, net

     (65     (63
  

 

 

   

 

 

 

Total member’s equity

     11,995        11,635   

Noncontrolling interests

     1,348        1,307   
  

 

 

   

 

 

 

Total equity

     13,343        12,942   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 46,897      $ 46,529   
  

 

 

   

 

 

 

 

(a)

Generation’s consolidated assets include $8,172 million and $8,235 million at June 30, 2016 and December 31, 2015, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Generation’s consolidated liabilities include $3,211 million and $3,135 million at June 30, 2016 and December 31, 2015, respectively, of certain VIEs for which the VIE creditors do not have recourse to Generation. See Note 3 — Variable Interest Entities.

See the Combined Notes to Consolidated Financial Statements

 

19


Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)

 

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

Balance, December 31, 2015

  $ 8,997      $ 2,701      $ (63   $ 1,307      $ 12,942   

Net income (loss)

           302               (17     285   

Acquisition of noncontrolling interests

                         2        2   

Adjustment of contingently redeemable noncontrolling interests due to release of contingency

                         56        56   

Contribution from member

    171                             171   

Distribution to member

           (111                   (111

Other comprehensive loss, net of income taxes

                  (2            (2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2016

  $ 9,168      $ 2,892      $ (65   $ 1,348      $ 13,343   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

20


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(In millions)        2016             2015             2016             2015      

Operating revenues

        

Electric operating revenues

   $ 1,283      $ 1,147      $ 2,527      $ 2,331   

Operating revenues from affiliates

     3        1        8        2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     1,286        1,148        2,535        2,333   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power

     326        269        668        586   

Purchased power from affiliate

     13        6        18        15   

Operating and maintenance

     318        337        623        670   

Operating and maintenance from affiliate

     50        47        113        92   

Depreciation and amortization

     190        177        379        352   

Taxes other than income

     65        69        141        146   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     962        905        1,942        1,861   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gain on sale of assets

                   5          
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     324        243        598        472   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense, net

     (88     (78     (170     (158

Interest expense to affiliates

     (3     (3     (7     (7

Other, net

     3        5        7        9   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (88     (76     (170     (156
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     236        167        428        316   

Income taxes

     91        68        168        127   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 145      $ 99      $ 260      $ 189   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 145      $ 99      $ 260      $ 189   
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

21


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Six Months Ended
June 30,
 
(In millions)    2016     2015  

Cash flows from operating activities

    

Net income

   $ 260      $ 189   

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

    

Depreciation, amortization and accretion

     379        352   

Deferred income taxes and amortization of investment tax credits

     222        36   

Other non-cash operating activities

     83        222   

Changes in assets and liabilities:

    

Accounts receivable

     (36     (57

Receivables from and payables to affiliates, net

     1        (10

Inventories

     7        (19

Accounts payable and accrued expenses

     (42     (53

Collateral received (posted), net

     (10       

Income taxes

     261        239   

Pension and non-pension postretirement benefit contributions

     (35     (125

Other assets and liabilities

     38        26   
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     1,128        800   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (1,334     (1,061

Other investing activities

     21        17   
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (1,313     (1,044
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in short-term borrowings

     (259     199   

Issuance of long-term debt

     1,200        400   

Retirement of long-term debt

            (260

Contributions from parent

     113        45   

Dividends paid on common stock

     (183     (150

Other financing activities

     (17     (5
  

 

 

   

 

 

 

Net cash flows provided by financing activities

     854        229   
  

 

 

   

 

 

 

Increase (Decrease) in cash and cash equivalents

     669        (15

Cash and cash equivalents at beginning of period

     67        66   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 736      $ 51   
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

22


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    June 30,
2016
     December 31,
2015
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 736       $ 67   

Restricted cash

     2         2   

Accounts receivable, net

     

Customer

     557         533   

Other

     237         272   

Receivables from affiliates

     206         199   

Inventories, net

     155         164   

Regulatory assets

     213         218   

Other

     68         63   
  

 

 

    

 

 

 

Total current assets

     2,174         1,518   
  

 

 

    

 

 

 

Property, plant and equipment, net

     18,416         17,502   

Deferred debits and other assets

     

Regulatory assets

     923         895   

Investments

     6         6   

Goodwill

     2,625         2,625   

Receivables from affiliates

     2,205         2,172   

Prepaid pension asset

     1,432         1,490   

Other

     324         324   
  

 

 

    

 

 

 

Total deferred debits and other assets

     7,515         7,512   
  

 

 

    

 

 

 

Total assets

   $ 28,105       $ 26,532   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

23


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    June 30,
2016
     December 31,
2015
 
     (Unaudited)         
LIABILITIES AND SHAREHOLDERS’ EQUITY      

Current liabilities

     

Short-term borrowings

   $ 35       $ 294   

Long-term debt due within one year

     665         665   

Accounts payable

     609         660   

Accrued expenses

     929         706   

Payables to affiliates

     65         62   

Customer deposits

     128         131   

Regulatory liabilities

     153         155   

Mark-to-market derivative liability

     18         23   

Other

     77         70   
  

 

 

    

 

 

 

Total current liabilities

     2,679         2,766   
  

 

 

    

 

 

 

Long-term debt

     7,030         5,844   

Long-term debt to financing trust

     205         205   

Deferred credits and other liabilities

     

Deferred income taxes and unamortized investment tax credits

     5,142         4,914   

Asset retirement obligations

     114         111   

Non-pension postretirement benefits obligations

     249         259   

Regulatory liabilities

     3,524         3,459   

Mark-to-market derivative liability

     203         224   

Other

     521         507   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     9,753         9,474   
  

 

 

    

 

 

 

Total liabilities

     19,667         18,289   
  

 

 

    

 

 

 

Commitments and contingencies

     

Shareholders’ equity

     

Common stock

     1,588         1,588   

Other paid-in capital

     5,795         5,677   

Retained earnings

     1,055         978   
  

 

 

    

 

 

 

Total shareholders’ equity

     8,438         8,243   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 28,105       $ 26,532   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

24


Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(In millions)    Common
Stock
     Other
Paid-In

Capital
     Retained Deficit
Unappropriated
    Retained
Earnings
Appropriated
    Total
Shareholders’
Equity
 

Balance, December 31, 2015

   $ 1,588       $ 5,677       $ (1,639   $ 2,617      $ 8,243   

Net income

                     260               260   

Appropriation of retained earnings for future dividends

                     (260     260          

Common stock dividends

                            (183     (183

Contribution from parent

             113                       113   

Parent tax matter indemnification

             5                       5   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance, June 30, 2016

   $ 1,588       $ 5,795       $ (1,639   $ 2,694      $ 8,438   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

25


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(In millions)      2016         2015         2016         2015    

Operating revenues

        

Electric operating revenues

   $ 585      $ 582      $ 1,228      $ 1,259   

Natural gas operating revenues

     77        79        273        386   

Operating revenues from affiliates

     2               4        1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     664        661        1,505        1,646   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power

     130        161        295        377   

Purchased fuel

     23        28        100        188   

Purchased power from affiliate

     64        48        142        110   

Operating and maintenance

     157        166        333        363   

Operating and maintenance from affiliates

     33        26        72        51   

Depreciation and amortization

     67        69        134        131   

Taxes other than income

     38        39        80        80   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     512        537        1,156        1,300   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gain on sales of assets

                          1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     152        124        349        347   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense, net

     (28     (25     (56     (50

Interest expense to affiliates

     (3     (3     (6     (6

Other, net

     2        1        4        3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (29     (27     (58     (53
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     123        97        291        294   

Income taxes

     23        27        67        85   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholder

   $ 100      $ 70      $ 224      $ 209   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 100      $ 70      $ 224      $ 209   
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

26


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Six Months Ended
June 30,
 
(In millions)       2016           2015     

Cash flows from operating activities

    

Net income

   $ 224      $ 209   

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

    

Depreciation, amortization and accretion

     134        131   

Deferred income taxes and amortization of investment tax credits

     51        4   

Other non-cash operating activities

     27        45   

Changes in assets and liabilities:

    

Accounts receivable

     (1     (18

Receivables from and payables to affiliates, net

     (2     (2

Inventories

     19        21   

Accounts payable and accrued expenses

     (19     3   

Income taxes

     31        57   

Pension and non-pension postretirement benefit contributions

     (29     (15

Other assets and liabilities

     (96     (60
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     339        375   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (299     (289

Change in restricted cash

            (1

Other investing activities

     8        9   
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (291     (281
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in Exelon intercompany money pool

            41   

Dividends paid on common stock

     (139     (139

Other financing activities

     (1       
  

 

 

   

 

 

 

Net cash flows used in financing activities

     (140     (98
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (92     (4

Cash and cash equivalents at beginning of period

     295        30   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 203      $ 26   
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

27


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    June 30,
2016
     December 31,
2015
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 203       $ 295   

Restricted cash and cash equivalents

     3         3   

Accounts receivable, net

     

Customer

     248         258   

Other

     126         146   

Receivables from affiliates

     5         2   

Inventories, net

     

Fossil fuel

     24         43   

Materials and supplies

     26         26   

Prepaid utility taxes

     84         11   

Regulatory assets

     48         34   

Other

     34         24   
  

 

 

    

 

 

 

Total current assets

     801         842   
  

 

 

    

 

 

 

Property, plant and equipment, net

     7,303         7,141   

Deferred debits and other assets

     

Regulatory assets

     1,636         1,583   

Investments

     26         28   

Receivable from affiliates

     438         405   

Prepaid pension asset

     361         347   

Other

     21         21   
  

 

 

    

 

 

 

Total deferred debits and other assets

     2,482         2,384   
  

 

 

    

 

 

 

Total assets

   $ 10,586       $ 10,367   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

28


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    June 30,
2016
     December 31,
2015
 
     (Unaudited)         
LIABILITIES AND SHAREHOLDER’S EQUITY      

Current liabilities

     

Long-term debt due within one year

   $ 300       $ 300   

Accounts payable

     269         281   

Accrued expenses

     100         109   

Payables to affiliates

     56         55   

Customer deposits

     60         58   

Regulatory liabilities

     128         112   

Other

     39         29   
  

 

 

    

 

 

 

Total current liabilities

     952         944   
  

 

 

    

 

 

 

Long-term debt

     2,281         2,280   

Long-term debt to financing trusts

     184         184   

Deferred credits and other liabilities

     

Deferred income taxes and unamortized investment tax credits

     2,920         2,792   

Asset retirement obligations

     27         27   

Non-pension postretirement benefits obligations

     288         287   

Regulatory liabilities

     529         527   

Other

     84         90   
  

 

 

    

 

 

 

Total deferred credits and other liabilities

     3,848         3,723   
  

 

 

    

 

 

 

Total liabilities

     7,265         7,131   
  

 

 

    

 

 

 

Commitments and contingencies

     

Shareholder’s equity

     

Common stock

     2,455         2,455   

Retained earnings

     865         780   

Accumulated other comprehensive income, net

     1         1   
  

 

 

    

 

 

 

Total shareholder’s equity

     3,321         3,236   
  

 

 

    

 

 

 

Total liabilities and shareholder’s equity

   $ 10,586       $ 10,367   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

29


Table of Contents

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY

(Unaudited)

 

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

Balance, December 31, 2015

   $ 2,455       $ 780      $ 1       $ 3,236   

Net income

             224                224   

Common stock dividends

             (139             (139
  

 

 

    

 

 

   

 

 

    

 

 

 

Balance, June 30, 2016

   $ 2,455       $ 865      $ 1       $ 3,321   
  

 

 

    

 

 

   

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

30


Table of Contents

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
(In millions)        2016             2015             2016             2015      

Operating revenues

        

Electric operating revenues

   $ 582      $ 541      $ 1,260      $ 1,254   

Natural gas operating revenues

     94        86        340        402   

Operating revenues from affiliates

     4        1        9        8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     680        628        1,609        1,664   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power

     108        130        235        338   

Purchased fuel

     20        13        95        155   

Purchased power from affiliate

     133        96        304        233   

Operating and maintenance

     177        120        345        276   

Operating and maintenance from affiliates

     31        29        65        55   

Depreciation and amortization

     97        87        206        192   

Taxes other than income

     55        54        114        111   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     621        529        1,364        1,360   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     59        99        245        304   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense, net

     (20     (20     (40     (42

Interest expense to affiliates

     (4     (4     (8     (8

Other, net

     5        4        11        8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (19     (20     (37     (42
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     40        79        208        262   

Income taxes

     6        32        73        105   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     34        47        135        157   

Preference stock dividends

     3        3        6        6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholder

   $ 31      $ 44      $ 129      $ 151   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 34      $ 47      $ 135      $ 157   

Comprehensive income attributable to preference stock dividends

     3        3        6        6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to common shareholder

   $ 31      $ 44      $ 129      $ 151   
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Six Months Ended
June 30,
 
(In millions)        2016             2015      

Cash flows from operating activities

    

Net income

   $ 135      $ 157   

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

    

Depreciation, amortization and accretion

     206        192   

Impairment of long-lived assets and losses on regulatory assets

     52          

Deferred income taxes and amortization of investment tax credits

     17        54   

Other non-cash operating activities

     60        76   

Changes in assets and liabilities:

    

Accounts receivable

     11        25   

Receivables from and payables to affiliates, net

     6        (2

Inventories

     6        23   

Accounts payable and accrued expenses

     (5     (59

Collateral received (posted), net

            (23

Income taxes

     46        (6

Pension and non-pension postretirement benefit contributions

     (42     (9

Other assets and liabilities

     (3     61   
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     489        489   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (392     (304

Change in restricted cash

     5        21   

Other investing activities

     12        8   
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (375     (275
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in short-term borrowings

     (2     (120

Retirement of long-term debt

     (39     (37

Dividends paid on preference stock

     (6     (6

Dividends paid on common stock

     (90     (77

Contributions from parent

     21          

Other financing activities

     (2     (14
  

 

 

   

 

 

 

Net cash flows used in financing activities

     (118     (254
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (4     (40

Cash and cash equivalents at beginning of period

     9        64   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 5      $ 24   
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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Table of Contents

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    June 30,
2016
     December 31,
2015
 
     (Unaudited)         
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 5       $ 9   

Restricted cash and cash equivalents

     19         24   

Accounts receivable, net

     

Customer

     289         300   

Other

     70         112   

Inventories, net

     

Gas held in storage

     22         36   

Materials and supplies

     41         33   

Prepaid utility taxes

             61   

Regulatory assets

     261         267   

Other

     7         3   
  

 

 

    

 

 

 

Total current assets

     714         845   
  

 

 

    

 

 

 

Property, plant and equipment, net

     6,747         6,597   

Deferred debits and other assets

     

Regulatory assets

     520         514   

Investments

     12         12   

Prepaid pension asset

     323         319   

Other

     9         8   
  

 

 

    

 

 

 

Total deferred debits and other assets

     864         853   
  

 

 

    

 

 

 

Total assets(a)

   $ 8,325       $ 8,295   
  

 

 

    

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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Table of Contents

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    June 30,
2016
     December 31,
2015
 
     (Unaudited)         
LIABILITIES AND SHAREHOLDERS’ EQUITY      

Current liabilities

     

Short-term borrowings

   $ 208       $ 210   

Long-term debt due within one year

     380         378   

Accounts payable

     222         209   

Accrued expenses

     101        <