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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=Content-Type content="text/html; charset=utf-8">
<META content="MSHTML 6.00.6000.16825" name=GENERATOR></HEAD>
<BODY>
<P style="FONT-FAMILY: times"><FONT size=2><B>Note 3. Derivative
Instruments </B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> EME uses derivative
instruments to reduce EME's exposure to market risks that arise from
fluctuations in electricity, capacity and fuel prices, emission allowances and
transmission rights. Additionally, EME's financial results can be affected by
fluctuations in interest rates. To the extent that EME does not use derivative
instruments to hedge these market risks, the unhedged portions will be subject
to the risks and benefits of spot market price movements. Hedge transactions are
primarily entered into using derivative instruments including: </FONT></P>
<UL>
<DL compact>
<DT style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"><FONT size=2>•</FONT>
<DD style="FONT-FAMILY: times"><FONT size=2>futures contracts cleared on the
Intercontinental Trading Exchange and the New York Mercantile Exchange or
executed bilaterally with counterparties, </FONT><FONT
size=2><BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"><FONT size=2>•</FONT>
<DD style="FONT-FAMILY: times"><FONT size=2>forward sales transactions
entered into on a bilateral basis with third parties, including electric
utilities, power marketing companies and financial institutions,
</FONT><FONT size=2><BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"><FONT size=2>•</FONT>
<DD style="FONT-FAMILY: times"><FONT size=2>full requirements services
contracts or load requirements services contracts for the procurement of
power for electric utilities' customers, with such services providing for
the delivery of a bundled product including, but not limited to, energy,
transmission, capacity, and ancillary services, generally for a fixed unit
price, </FONT><FONT size=2><BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"><FONT size=2>•</FONT>
<DD style="FONT-FAMILY: times"><FONT size=2>capacity transactions, and
</FONT><FONT size=2><BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"><FONT size=2>•</FONT>
<DD style="FONT-FAMILY: times"><FONT size=2>interest rate swaps entered into
on a bilateral basis with counterparties. </FONT></DD></DL></UL>
<P style="FONT-FAMILY: times"><FONT
size=2> The extent to which EME
hedges its market price risk depends on several factors. First, EME evaluates
over-the-counter market prices to determine if forward market prices are
sufficiently attractive compared to the risks associated with the fluctuating
spot market. Second, EME evaluates the sufficiency of its credit capacity at EME
and Midwest Generation and whether the forward sales markets have sufficient
liquidity to enable EME to identify appropriate counterparties for hedge
transactions. Hedge transactions entered into by EME are accounted for under
SFAS No. 133. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> SFAS No. 133, as
amended and interpreted by accounting literature, establishes accounting and
reporting standards for derivative instruments (including certain derivative
instruments embedded in <!-- SEQ.=8,FOLIO='13',FILE='DISK114:[09ZCF1.09ZCF45001]XC45001A.;2',USER='CMATTI',CD=';5-AUG-2009;18:40' --><A
name=page_xxx45001_1_14></A>other contracts). SFAS No. 133 requires a
company to record derivatives on its balance sheets as either assets or
liabilities measured at fair value unless otherwise exempted from derivative
treatment as a normal sale and purchase. Under SFAS No. 133, all changes in
the fair value of derivative instruments are recognized currently in earnings,
unless specific hedge criteria are met, which requires that EME formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> SFAS No. 133 sets
forth the accounting requirements for cash flow hedges. SFAS No. 133
provides that the effective portion of gains or losses on derivative instruments
designated and qualifying as cash flow hedges be reported as a component of
other comprehensive income and be reclassified into earnings in the same period
during which the hedged forecasted transaction affects earnings. The remaining
gains or losses on the derivative instruments, if any, must be recognized
currently in earnings. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Many of the derivative
instruments entered into for risk management purposes (also referred to as
non-trading purposes) meet the requirements for hedge accounting under SFAS
No. 133. However, not all derivative instruments entered into for risk
management purposes will qualify for hedge accounting treatment. Furthermore,
EME utilizes derivative contracts that are designed to adjust financial and/or
physical positions that reduce costs or increase gross margin. Accordingly, risk
management positions may not be designated as cash flow hedges and are thus
marked to market through current period earnings (derivatives that are entered
into for risk management, but which are not designated as cash flow hedges, are
referred to as economic hedges). </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> SFAS No. 133 affects
the timing of income recognition, but has no effect on cash flow. To the extent
that income varies under SFAS No. 133 from accrual accounting
(i.e., revenue recognition based on the settlement of transactions), EME
records unrealized gains or losses. EME classifies unrealized gains and losses
from commodity contracts in operating revenues or fuel expenses based on the
item being hedged. In addition, the results of derivative activities are
recorded in cash flows from operating activities in the consolidated statements
of cash flows. </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Derivative instruments
that are utilized for trading purposes are measured at fair value and included
in the balance sheet as derivative assets or liabilities. In the absence of
quoted market prices, derivative instruments are valued at fair value as
determined through the methodology outlined in Note 2—Fair Value
Measurements. Resulting gains and losses are recognized in operating revenues in
the accompanying consolidated income statements in the period of change in
accordance with EITF No. 02-3, "Issues Involved in Accounting for
Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy
Trading and Risk Management Activities." </FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Where EME's derivative
instruments are subject to a master netting agreement and the criteria of FASB
Interpretation (FIN) No. 39 "Offsetting of Amounts Related to Certain
Contracts" are met, EME presents its derivative assets and liabilities on a net
basis in its balance sheet. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><!-- SEQ.=9,FOLIO='14',FILE='DISK114:[09ZCF1.09ZCF45001]XC45001A.;2',USER='CMATTI',CD=';5-AUG-2009;18:40' --><A
name=page_xxx45001_1_15></A></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Notional Volumes of Derivative
Instruments </I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The following table
summarizes the notional volumes of derivatives used for hedging and trading
activities at June 30, 2009: </FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=51></TD>
<TD style="FONT-FAMILY: times" width=20></TD>
<TD style="FONT-FAMILY: times" align=left width=50></TD>
<TD style="FONT-FAMILY: times" width=20></TD>
<TD style="FONT-FAMILY: times" align=left width=49></TD>
<TD style="FONT-FAMILY: times" width=20></TD>
<TD style="FONT-FAMILY: times" align=left width=74></TD>
<TD style="FONT-FAMILY: times" width=20></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=33></TD>
<TD style="FONT-FAMILY: times" width=20></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=30></TD>
<TD style="FONT-FAMILY: times" width=39></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=29></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=2> </FONT></TH>
<TH style="FONT-FAMILY: times" align=left><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=2> </FONT></TH>
<TH style="FONT-FAMILY: times" align=left><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=2> </FONT></TH>
<TH style="FONT-FAMILY: times" align=left><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=5><FONT size=1><B>Hedging Activities </B></FONT></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" noWrap align=left>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 40pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Commodity
<!-- COMMAND=ADD_SCROPPEDRULE,40pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=left>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 40pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Instrument
<!-- COMMAND=ADD_SCROPPEDRULE,40pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 48pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Classification
<!-- COMMAND=ADD_SCROPPEDRULE,48pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=left>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 31pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Unit of<BR>Measure
<!-- COMMAND=ADD_SCROPPEDRULE,31pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 37pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Cash Flow<BR>Hedges
<!-- COMMAND=ADD_SCROPPEDRULE,37pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 34pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Economic<BR>Hedges
<!-- COMMAND=ADD_SCROPPEDRULE,34pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 32pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Trading<BR>Activities
<!-- COMMAND=ADD_SCROPPEDRULE,32pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=2>Electricity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Forwards</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Sales</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>GWh</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>16,809</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(1)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>20,215</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(3)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>21,651</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=2>Electricity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Forwards</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Purchases</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>GWh</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>19,088</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(3)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>23,238</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=2>Electricity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Capacity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Sales</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>MW-Day<BR></FONT><FONT
size=1>(in thousands)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>386</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(2)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>91</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(2)</SUP></FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=2>Electricity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Capacity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Purchases</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>MW-Day<BR></FONT><FONT
size=1>(in thousands)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>25</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(2)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>5</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(2)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>554</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(2)</SUP></FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=2>Electricity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Congestion</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Sales</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>GWh</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>136</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(4)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>7,570</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(4)</SUP></FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=2>Electricity</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Congestion</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Purchases</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>GWh</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>3,328</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(4)</SUP></FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>171,875</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2><SUP>(4)</SUP></FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=2>Natural gas</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Forwards</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Sales</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>billion cubic feet</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>9.8</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>42.0</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=2>Natural gas</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Forwards</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Purchases</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>billion cubic feet</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>44.8</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=2>Fuel oil</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Forwards</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Sales</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Barrels</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>90,000</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=2>Fuel oil</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Forwards</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Purchases</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Barrels</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>—</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>600,000</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>140,000</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT
size=2> </FONT></TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE --><!-- COMMAND=ADD_LINERULETXT,NOSHADE COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" -->
<HR align=left width="26%" color=#000000 noShade SIZE=1>
<DL compact>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(1)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>EME's hedge products include
forward and futures contracts that qualify for hedge accounting under SFAS
No. 133. This category excludes power contracts for the Illinois Plants
which meet the normal sales and purchase exception under SFAS No. 133 and
are accounted for on the accrual method. <BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(2)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>EME's hedge transactions for
capacity result from bilateral trades. Capacity sold in the PJM RPM auction is
not accounted for as a derivative under SFAS No. 133. <BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(3)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>EME also entered into transactions
that adjust financial and physical positions, or day-ahead and real-time
positions to reduce costs or increase gross margin. These positions largely
offset each other. The net sales positions of these categories are primarily
related to hedge transactions that are not designated as cash flow hedges
under SFAS No. 133. <BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(4)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>Congestion contracts are financial
transmission rights, transmission congestion contracts or congestion revenue
rights. These positions are similar to a swap, where the buyer is entitled to
receive a stream of revenues (or charges) based on the hourly day-ahead price
differences between two locations. </FONT></DD></DL>
<P style="FONT-FAMILY: times"><FONT
size=2> In addition, Viento
Funding II, Inc., an EME subsidiary, in conjunction with the closing
of its wind portfolio financing, entered into seven-year amortizing interest
rate swaps accounted for as cash flow hedges with a total notional amount of
approximately $170 million at June 30, 2009. The interest rate swaps
entitle Viento Funding II to receive a floating (six-month LIBOR) rate and
pay a fixed rate of 3.175%. The interest rate swap agreements expire in
June 2016. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><!-- SEQ.=10,FOLIO='15',FILE='DISK114:[09ZCF1.09ZCF45001]XC45001A.;2',USER='CMATTI',CD=';5-AUG-2009;18:40' --><A
name=page_xxx45001_1_16></A></FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Fair Value of Derivative
Instruments </I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The following table
summarizes the gross fair value of derivative instruments at June 30, 2009:
</FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=10></TD>
<TD style="FONT-FAMILY: times" align=left width=160></TD>
<TD style="FONT-FAMILY: times" width=5></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=35></TD>
<TD style="FONT-FAMILY: times" width=5></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=33></TD>
<TD style="FONT-FAMILY: times" width=5></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=33></TD>
<TD style="FONT-FAMILY: times" width=5></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=35></TD>
<TD style="FONT-FAMILY: times" width=5></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=33></TD>
<TD style="FONT-FAMILY: times" width=5></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=26></TD>
<TD style="FONT-FAMILY: times" width=5></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=33></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=8><FONT size=1><B>Derivative Assets </B></FONT></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times"
align=middle colSpan=8><FONT size=1><B>Derivative Liabilities
</B></FONT></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=middle colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 93pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Short-term
<!-- COMMAND=ADD_SCROPPEDRULE,93pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 91pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Long-term
<!-- COMMAND=ADD_SCROPPEDRULE,91pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 30pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Subtotal
<!-- COMMAND=ADD_SCROPPEDRULE,30pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 93pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Short-term
<!-- COMMAND=ADD_SCROPPEDRULE,93pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 91pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Long-term
<!-- COMMAND=ADD_SCROPPEDRULE,91pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 30pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Subtotal
<!-- COMMAND=ADD_SCROPPEDRULE,30pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 37pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Net Assets
<!-- COMMAND=ADD_SCROPPEDRULE,37pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left colSpan=2><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=20><FONT
size=1><B>(in millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Non-trading activities</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Cash flow hedges</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>346</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>125</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>471</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>15</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>17</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>32</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>439</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Economic hedges</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>245</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>80</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>325</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>232</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>63</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>295</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>30</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Trading activities</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>485</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>178</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>663</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>432</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>103</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>535</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>128</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times" colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>1,076</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>383</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>1,459</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>679</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>183</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>862</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>597</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=white>
<TD style="FONT-FAMILY: times" colSpan=2>
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Netting and collateral received</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(853</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(218</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(1,071</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(672</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(170</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(842</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(229</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times" colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times"><FONT size=0> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Total</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>223</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>165</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>388</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>7</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>13</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>20</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>368</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times" colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE -->
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Income Statement Impact of
Derivative Instruments </I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The following table
provides the activity of accumulated other comprehensive income for the six
months ended June 30, 2009, containing the information about the changes in
the fair value of cash flow hedges and reclassification from accumulated other
comprehensive income into results of operations: </FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=275></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=57></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=left width=99></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=2> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 51pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Cash Flow<BR>Hedge Activity<SUP>(1)</SUP> <!-- COMMAND=ADD_SCROPPEDRULE,51pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 69pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Income<BR>Statement Location <!-- COMMAND=ADD_SCROPPEDRULE,69pt --></B></FONT></DIV></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=2><FONT
size=1><B>(in millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=left><FONT
size=1> </FONT><BR></TH></TR>
<TR vAlign=bottom bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Accumulated other comprehensive income
derivative gain at December 31, 2008</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>398</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=bottom bgColor=white>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Effective portion of changes in fair
value</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>109</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=bottom bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Reclassification from accumulated other
comprehensive income to net income</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>(55</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>)</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Operating
revenues<SUP>(2)</SUP></FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align=right
colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR>
<TR vAlign=bottom bgColor=white>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Accumulated other comprehensive income
derivative gain at June 30, 2009</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>452</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR style="FONT-SIZE: 1.5pt" vAlign=top>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="BORDER-BOTTOM: #000000 2.25pt double; FONT-FAMILY: times"
align=right colSpan=2> </TD>
<TD style="FONT-FAMILY: times"> </TD>
<TD style="FONT-FAMILY: times"> </TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE --><!-- COMMAND=ADD_LINERULETXT,NOSHADE COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" -->
<HR align=left width="26%" color=#000000 noShade SIZE=1>
<DL compact>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(1)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>Unrealized derivative gains are
before income taxes. The after-tax amounts recorded in accumulated other
comprehensive income at June 30, 2009 and December 31, 2008 were
$269 million and $240 million, respectively. <BR><BR></FONT>
<DT style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"><FONT size=1>(2)</FONT>
<DD style="FONT-FAMILY: times"><FONT size=1>Represents reclassification of
unrealized gains to operating revenues. </FONT></DD></DL>
<P style="FONT-FAMILY: times"><FONT
size=2> Under SFAS No. 133,
the portion of a cash flow hedge that does not offset the change in the value of
the transaction being hedged, which is commonly referred to as the ineffective
portion, is immediately recognized in earnings. EME recorded net gains (losses)
of $5 million and $(18) million during the second quarters of 2009 and
2008, respectively, and $5 million and $(31) million during the six
months ended June 30, 2009 and 2008, respectively, representing the amount
of cash flow hedge ineffectiveness and are reflected in operating revenues in
the income statement. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><!-- SEQ.=11,FOLIO='16',FILE='DISK114:[09ZCF1.09ZCF45001]XC45001B.;2',USER='CMATTI',CD=';5-AUG-2009;18:40' --><A
name=page_xxx45001_1_17></A></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> The effect of realized
and unrealized gains from derivative instruments used for economic hedging and
trading purposes on the consolidated statement of income for the periods ended
June 30, 2009 is presented below: </FONT></P><!-- User-specified TAGGED TABLE -->
<DIV align=center>
<TABLE cellSpacing=0 cellPadding=0 border=0>
<TBODY>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD style="FONT-FAMILY: times" align=left width=162></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=left width=83></TD>
<TD style="FONT-FAMILY: times" width=12></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=46></TD>
<TD style="FONT-FAMILY: times" width=15></TD>
<TD style="FONT-FAMILY: times" align=right width=5></TD>
<TD style="FONT-FAMILY: times" width=44></TD>
<TD style="FONT-FAMILY: times"
width=3></TD><!-- TABLE COLUMN WIDTHS END --></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" noWrap align=left>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 16pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Type <!-- COMMAND=ADD_SCROPPEDRULE,16pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 69pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Income<BR>Statement Location <!-- COMMAND=ADD_SCROPPEDRULE,69pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 50pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Three Months<BR>Ended<BR>June 30, 2009 <!-- COMMAND=ADD_SCROPPEDRULE,50pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" noWrap align=middle colSpan=2>
<DIV
style="MARGIN-BOTTOM: 0pt; WIDTH: 46pt; BORDER-BOTTOM: #000000 1pt solid"><FONT
size=1><B>Six Months<BR>Ended<BR>June 30, 2009 <!-- COMMAND=ADD_SCROPPEDRULE,46pt --></B></FONT></DIV></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=bottom>
<TH style="FONT-FAMILY: times" align=left><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=left><FONT
size=1> </FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH>
<TH style="FONT-FAMILY: times" align=middle colSpan=5><FONT
size=1><B>(in millions)</B></FONT><BR></TH>
<TH style="FONT-FAMILY: times"><FONT size=1> </FONT></TH></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT
size=2><!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->Economic
hedges</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Operating revenue</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>3</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>$</FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>16</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top bgColor=#cceeff>
<TD style="FONT-FAMILY: times">
<P style="MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT
size=2><!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" --></FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2>Fuel expense</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>14</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2>14</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD></TR>
<TR vAlign=top>
<TD style="FONT-FAMILY: times">
<P
style="MARGIN-TOP: 12pt; MARGIN-LEFT: 10pt; TEXT-INDENT: -10pt; FONT-FAMILY: times"><FONT
size=2></FONT><FONT size=2>Trading activities</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times">
<P
style="MARGIN-TOP: 12pt; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; FONT-FAMILY: times"
align=left><FONT size=2></FONT><FONT size=2>Operating
revenue</FONT></P></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2><BR>17</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times"><FONT size=2> </FONT></TD>
<TD style="FONT-FAMILY: times" align=right><FONT size=2><BR>27</FONT></TD>
<TD style="FONT-FAMILY: times"><FONT
size=2> </FONT></TD></TR></TBODY></TABLE></DIV><!-- end of user-specified TAGGED TABLE -->
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Contingent Features/Credit
Related Exposure </I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Certain derivative
instruments contain margin and collateral deposit requirements. Since EME's
credit ratings are below investment grade, EME has historically provided
collateral in the form of cash and letters of credit for the benefit of
counterparties related to the net of accounts payable, accounts receivable,
unrealized losses and unrealized gains in connection with derivative activities.
Certain derivative contracts do not require margin, but contain provisions that
require EME or Midwest Generation to comply with the terms and conditions of
their respective credit facilities. The credit facilities each contain financial
covenants. Some hedge contracts include provisions related to a change in
control or material adverse effect resulting from amendments or modifications to
the related credit facility. Failure by EME or Midwest Generation to comply with
these provisions may result in a termination event under the hedge contracts,
enabling the counterparties to terminate and liquidate all outstanding
transactions and demand immediate payment of amounts owed to them. EMMT also has
hedge contracts that do not require margin, but provide that each party can
request additional credit support in the form of adequate assurance of
performance in the case of an adverse development affecting the other party. The
aggregate fair value of all derivative instruments with credit-risk-related
contingent features is in an asset position on June 30, 2009 and,
accordingly, the contingent features described above do not currently have a
liquidity exposure. Future increases in power prices could expose EME or Midwest
Generation to termination payments or additional collateral postings under the
contingent features described above. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><B><I>Margin and Collateral Deposits
</I></B></FONT></P>
<P style="FONT-FAMILY: times"><FONT
size=2> Margin and collateral
deposits include cash deposited with counterparties and brokers as credit
support under energy contracts. The amount of margin and collateral deposits
generally varies based on changes in fair value of the related positions. In
accordance with FIN No. 39-1, "Amendment of FASB Interpretation
No. 39," EME presents a portion of its margin and cash collateral deposits
net with its derivative positions on EME's consolidated balance sheets. Amounts
recognized for cash collateral provided to others that have been offset against
net derivative liabilities totaled $46 million and $51 million at
June 30, 2009 and December 31, 2008, respectively. Amounts recognized
for cash collateral received from others that have been offset against net
derivative assets totaled $275 million and $225 million at
June 30, 2009 and December 31, 2008, respectively. </FONT></P>
<P style="FONT-FAMILY: times"><FONT size=2><!-- SEQ.=12,FOLIO='17',FILE='DISK114:[09ZCF1.09ZCF45001]XC45001B.;2',USER='CMATTI',CD=';5-AUG-2009;18:40' --></FONT></P></BODY></HTML>
Note 3. Derivative
Instruments
EME uses derivative
instruments to reduce EME's exposure to market risks
false
false
|
No definition available.
No authoritative reference available.
false
false
1
2
false
UnKnown
UnKnown
UnKnown
false
true