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Pepco Holdings 10-Q 2017
FORM 10-Q
Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

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

For the Quarterly Period Ended June 30, 2017

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

     51-0084283  
  

(a Delaware and Virginia corporation)

500 North Wakefield Drive

Newark, Delaware 19702

(202) 872-2000

  

001-03559

  

ATLANTIC CITY ELECTRIC COMPANY

     21-0398280  
  

(a New Jersey corporation)

500 North Wakefield Drive

Newark, Delaware 19702

(202) 872-2000

  


Table of Contents

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  ☒    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  ☒    No  ☐

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

 

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

Exelon Corporation

             

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

             

Atlantic City Electric Company

             

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

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

The number of shares outstanding of each registrant’s common stock as of June 30, 2017 was:

 

Exelon Corporation Common Stock, without par value

   960,087,898

Exelon Generation Company, LLC

   not applicable

Commonwealth Edison Company Common Stock, $12.50 par value

   127,017,160

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


Table of Contents

TABLE OF CONTENTS

 

    Page No.  
GLOSSARY OF TERMS AND ABBREVIATIONS     4  
FILING FORMAT     9  
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION     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  

 

1


Table of Contents
    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. Basis of Presentation

    56  
 

2. New Accounting Standards

    58  
 

3. Variable Interest Entities

    61  
 

4. Mergers, Acquisitions and Dispositions

    67  
 

5. Regulatory Matters

    76  
 

6. Impairment of Long-Lived Assets

    95  
 

7. Early Nuclear Plant Retirements

    96  
 

8. Fair Value of Financial Assets and Liabilities

    99  
 

9. Derivative Financial Instruments

    123  
 

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. Earnings Per Share and Equity

    163  
 

17. Commitments and Contingencies

    164  
 

18. Supplemental Financial Information

    177  
 

19. Segment Information

    184  
 

20. Subsequent Events

    192  

 

2


Table of Contents
    Page No.  
ITEM 2.  

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

    193  
 

Exelon Corporation

    193  
 

Executive Overview

    193  
 

Financial Results of Operations

    195  
 

Significant 2017 Transactions and Developments

    204  
 

Exelon’s Strategy and Outlook for 2017 and Beyond

    209  
 

Liquidity Considerations

    210  
 

Other Key Business Drivers and Management Strategies

    211  
 

Critical Accounting Policies and Estimates

    218  
 

Results of Operations By Registrant

    218  
 

Exelon Generation Company, LLC

    219  
 

Commonwealth Edison Company

    228  
 

PECO Energy Company

    235  
 

Baltimore Gas and Electric Company

    241  
 

Pepco Holdings LLC

    247  
 

Potomac Electric Power Company

    251  
 

Delmarva Power & Light Company

    258  
 

Atlantic City Electric Company

    266  
 

Liquidity and Capital Resources

    271  
 

Contractual Obligations and Off-Balance Sheet Arrangements

    285  
ITEM 3.  

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    286  
ITEM 4.  

CONTROLS AND PROCEDURES

    296  
PART II.  

OTHER INFORMATION

    297  
ITEM 1.  

LEGAL PROCEEDINGS

    297  
ITEM 1A.  

RISK FACTORS

    297  
ITEM 2.  

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

    297  
ITEM 4.  

MINE SAFETY DISCLOSURES

    298  
ITEM 6.  

EXHIBITS

    298  
SIGNATURES     300  
 

Exelon Corporation

    300  
 

Exelon Generation Company, LLC

    300  
 

Commonwealth Edison Company

    300  
 

PECO Energy Company

    301  
 

Baltimore Gas and Electric Company

    301  
 

Pepco Holdings LLC

    301  
 

Potomac Electric Power Company

    302  
 

Delmarva Power & Light Company

    302  
 

Atlantic City Electric Company

    302  

 

3


Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

 

Exelon Corporation and Related Entities

Exelon

  

Exelon Corporation

Generation

  

Exelon Generation Company, LLC

ComEd

  

Commonwealth Edison Company

PECO

  

PECO Energy Company

BGE

  

Baltimore Gas and Electric Company

Pepco Holdings or PHI

  

Pepco Holdings LLC (formerly Pepco Holdings, Inc.)

Pepco

  

Potomac Electric Power Company

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

Registrants

  

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

Utility Registrants

  

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

AmerGen

  

AmerGen Energy Company, LLC

Antelope Valley

  

Antelope Valley Solar Ranch One

BondCo

  

RSB BondCo LLC

CENG

  

Constellation Energy Nuclear Group, LLC

ConEdison Solutions

  

The competitive retail electricity and natural gas business of Consolidated Edison Solutions, Inc., a subsidiary of Consolidated Edison, Inc.

Constellation

  

Constellation Energy Group, Inc.

EGTP

  

ExGen Texas Power, LLC

EGR

  

ExGen Renewables I, LLC

Entergy

  

Entergy Nuclear FitzPatrick, LLC

Exelon Transmission Company

  

Exelon Transmission Company, LLC

Exelon Wind

  

Exelon Wind, LLC and Exelon Generation Acquisition Company, LLC

FitzPatrick

  

James A. FitzPatrick nuclear generating station

Legacy PHI

  

PHI, Pepco, DPL and ACE, collectively

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

RPG

  

Renewable Power Generation

SolGen

  

SolGen, LLC

TMI

  

Three Mile Island nuclear facility

UII

  

Unicom Investments, Inc.

Ventures

  

Exelon Ventures Company, LLC

 

Other Terms and Abbreviations

Note “—” of the Exelon 2016 Form 10-K

   Reference to specific Combined Note to Consolidated Financial Statements within Exelon’s 2016 Annual Report on Form 10-K

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

 

4


Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

AEPS

   Pennsylvania Alternative Energy Portfolio Standards

AEPS Act

   Pennsylvania Alternative Energy Portfolio Standards Act of 2004, as amended

AESO

   Alberta Electric Systems Operator

AFUDC

   Allowance for Funds Used During Construction

AMI

   Advanced Metering Infrastructure

AOCI

   Accumulated Other Comprehensive Income

ARC

   Asset Retirement Cost

ARO

   Asset Retirement Obligation

ASC

   Accounting Standards Codification

BGS

   Basic Generation Service

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

CES

   Clean Energy Standard

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

CPUC

   California Public Utilities Commission

CSAPR

   Cross-State Air Pollution Rule

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

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

EDCs

   Electric distribution companies

EDF

   Electricite de France SA and its subsidiaries

EE&C

   Energy Efficiency and Conservation/Demand Response

EGS

   Electric Generation Supplier

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

 

5


Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

EPA

   United States Environmental Protection Agency

EPSA

   Electric Power Supply Association

ERCOT

   Electric Reliability Council of Texas

ERISA

   Employee Retirement Income Security Act of 1974, as amended

EROA

   Expected Rate of Return on Assets

FASB

   Financial Accounting Standards Board

FEJA

   Illinois Public Act 99-0906 or Future Energy Jobs Act

FERC

   Federal Energy Regulatory Commission

FRCC

   Florida Reliability Coordinating Council

GAAP

   Generally Accepted Accounting Principles in the United States

GCR

   Gas Cost Rate

GHG

   Greenhouse Gas

GSA

   Generation Supply Adjustment

GWh

   Gigawatt hour

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

   Independent System Operator New England Inc.

ISO-NY

   Independent System Operator New York

kV

   Kilovolt

kW

   Kilowatt

kWh

   Kilowatt-hour

LIBOR

   London Interbank Offered Rate

LLRW

   Low-Level Radioactive Waste

LT Plan

   Long-term renewable resources procurement plan

LTIP

   Long-Term Incentive Plan

MAPP

   Mid-Atlantic Power Pathway

MATS

   U.S. EPA Mercury and Air Toxics Rule

MBR

   Market Based Rates Incentive

MDE

   Maryland Department of the Environment

MDPSC

   Maryland Public Service Commission

MGP

   Manufactured Gas Plant

MISO

   Midcontinent Independent System Operator, Inc.

mmcf

   Million Cubic Feet

Moody’s

   Moody’s Investor Service

MOPR

   Minimum Offer Price Rule

MRV

   Market-Related Value

MW

   Megawatt

 

6


Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

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

NPDES

   National Pollutant Discharge Elimination System

NRC

   Nuclear Regulatory Commission

NSPS

   New Source Performance Standards

NUGs

   Non-utility generators

NWPA

   Nuclear Waste Policy Act of 1982

NYMEX

   New York Mercantile Exchange

NYPSC

   New York Public Service Commission

OCI

   Other Comprehensive Income

OIESO

   Ontario Independent Electricity System Operator

OPC

   Office of People’s Counsel

OPEB

   Other Postretirement Employee Benefits

PA DEP

   Pennsylvania Department of Environmental Protection

PAPUC

   Pennsylvania Public Utility Commission

PGC

   Purchased Gas Cost Clause

PJM

   PJM Interconnection, LLC

POLR

   Provider of Last Resort

POR

   Purchase of Receivables

PPA

   Power Purchase Agreement

Price-Anderson Act

   Price-Anderson Nuclear Industries Indemnity Act of 1957

Preferred Stock

   Originally issued shares of non-voting, non-convertible and non-transferable Series A preferred stock, par value $0.01 per share

PRP

   Potentially Responsible Parties

PSEG

   Public Service Enterprise Group Incorporated

PURTA

   Pennsylvania Public Realty Tax Act

PV

   Photovoltaic

RCRA

   Resource Conservation and Recovery Act of 1976, as amended

REC

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

Regulatory Agreement Units

   Nuclear generating units 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

 

7


Table of Contents

GLOSSARY OF TERMS AND ABBREVIATIONS

 

Other Terms and Abbreviations

RMC

   Risk Management Committee

ROE

   Return on equity

RPM

   PJM Reliability Pricing Model

RPS

   Renewable Energy Portfolio Standards

RSSA

   Reliability Support Services Agreement

RTEP

   Regional Transmission Expansion Plan

RTO

   Regional Transmission Organization

S&P

   Standard & Poor’s Ratings Services

SEC

   United States Securities and Exchange Commission

Senate Bill 1

   Maryland Senate Bill 1

SERC

   SERC Reliability Corporation (formerly Southeast Electric Reliability Council)

SGIG

   Smart Grid Investment Grant from DOE

SILO

   Sale-In, Lease-Out

SMPIP

   Smart Meter Procurement and Installation Plan

SNF

   Spent Nuclear Fuel

SOS

   Standard Offer Service

SPFPA

   Security, Police and Fire Professionals of America

SPP

   Southwest Power Pool

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

UGSOA

   United Government Security Officers of America

Upstream

   Natural gas exploration and production activities

VIE

   Variable Interest Entity

WECC

   Western Electric Coordinating Council

ZEC

   Zero Emission Credit

ZES

   Zero Emission Standard

 

8


Table of Contents

FILING FORMAT

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

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This Report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by the Registrants include those factors discussed herein, as well as the items discussed in (1) the Registrants’ combined 2016 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 24, Commitments and Contingencies; (2) this Quarterly Report on Form 10-Q in (a) Part II, Other Information, ITEM 1A. Risk Factors; (b) Part 1, Financial Information, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements: Note 17, Commitments and Contingencies; and (3) other factors discussed in filings with the SEC by the Registrants. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Report. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this Report.

WHERE TO FIND MORE INFORMATION

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

 

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Table of Contents

 

 

PART I.  FINANCIAL INFORMATION

Item 1.    Financial Statements

 

 

 

 

10


Table of Contents

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)        2017             2016             2017             2016      

Operating revenues

        

Competitive businesses revenues

   $ 3,908     $ 3,234     $ 8,468     $ 7,708  

Rate-regulated utility revenues

     3,715       3,676       7,913       6,777  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     7,623       6,910       16,381       14,485  

Operating expenses

        

Competitive businesses purchased power and fuel

     2,158       1,576       4,952       4,016  

Rate-regulated utility purchased power and fuel

     928       878       2,033       1,692  

Operating and maintenance

     2,971       2,505       5,431       5,341  

Depreciation and amortization

     915       941       1,811       1,626  

Taxes other than income

     420       394       857       720  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     7,392       6,294       15,084       13,395  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gain on sales of assets

     1       31       5       40  

Bargain purchase gain

                 226        
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     232       647       1,528       1,130  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense, net

     (426     (366     (789     (643

Interest expense to affiliates

     (10     (10     (20     (20

Other, net

     205       144       488       258  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (231     (232     (321     (405
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     1       415       1,207       725  

Income taxes

     (72     102       143       285  

Equity in losses of unconsolidated affiliates

     (9     (7     (18     (10
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     64       306       1,046       430  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     (16     39       (30     (10
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders

   $ 80     $ 267     $ 1,076     $ 440  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income, net of income taxes

        

Net income

   $ 64     $ 306     $ 1,046     $ 430  

Other comprehensive income (loss), net of income taxes

        

Pension and non-pension postretirement benefit plans:

        

Prior service benefit reclassified to periodic benefit cost

     (14     (12     (28     (23

Actuarial loss reclassified to periodic benefit cost

     49       46       98       93  

Pension and non-pension postretirement benefit plan valuation adjustment

     (2     (1     (58     (3

Unrealized (loss) gain on cash flow hedges

     (1           5       (7

Unrealized (loss) gain on equity investments

           (4     3       (7

Unrealized gain on foreign currency translation

     2             3       6  

Unrealized gain on marketable securities

     1       2       2        
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

     35       31       25       59  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     99       337       1,071       489  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     (16     39       (32     (10
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to common shareholders

   $ 115     $ 298     $ 1,103     $ 499  
  

 

 

   

 

 

   

 

 

   

 

 

 

Average shares of common stock outstanding:

        

Basic

     934       924       931       923  

Diluted

     936       926       932       926  

Earnings per average common share:

        

Basic

   $ 0.09     $ 0.29     $ 1.16     $ 0.48  

Diluted

   $ 0.09     $ 0.29     $ 1.15     $ 0.48  
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per common share

   $ 0.33     $ 0.32     $ 0.66     $ 0.63  
  

 

 

   

 

 

   

 

 

   

 

 

 

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)        2017             2016      

Cash flows from operating activities

    

Net income

   $ 1,046     $ 430  

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

    

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

     2,591       2,396  

Impairment of long-lived assets and losses on regulatory assets

     445       239  

Gain on sales of assets

     (5     (40

Bargain purchase gain

     (226      

Deferred income taxes and amortization of investment tax credits

     107       261  

Net fair value changes related to derivatives

     230       194  

Net realized and unrealized gains on nuclear decommissioning trust fund investments

     (284     (114

Other non-cash operating activities

     415       1,056  

Changes in assets and liabilities:

    

Accounts receivable

     342       86  

Inventories

     (23     89  

Accounts payable and accrued expenses

     (811     (363

Option premiums paid, net

     (8     (10

Collateral (posted) received, net

     (173     710  

Income taxes

     58       470  

Pension and non-pension postretirement benefit contributions

     (325     (258

Other assets and liabilities

     (481     (593
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     2,898       4,553  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (3,845     (4,489

Proceeds from nuclear decommissioning trust fund sales

     5,213       4,977  

Investment in nuclear decommissioning trust funds

     (5,339     (5,094

Acquisition of businesses, net

     (212     (6,642

Proceeds from sales of long-lived assets

     211       45  

Proceeds from termination of direct financing lease investment

           360  

Change in restricted cash

     1       15  

Other investing activities

     (9     (49
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (3,980     (10,877
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in short-term borrowings

     422       (798

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

     576       194  

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

     (510     (315

Issuance of long-term debt

     981       3,174  

Retirement of long-term debt

     (1,049     (217

Dividends paid on common stock

     (607     (582

Common stock issued from treasury stock

     1,150        

Proceeds from employee stock plans

     43       17  

Other financing activities

     (23     (4
  

 

 

   

 

 

 

Net cash flows provided by financing activities

     983       1,469  
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (99     (4,855

Cash and cash equivalents at beginning of period

     635       6,502  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 536     $ 1,647  
  

 

 

   

 

 

 

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,
2017
     December 31,
2016
 
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 536      $ 635  

Restricted cash and cash equivalents

     252        253  

Deposit with IRS

     1,250        1,250  

Accounts receivable, net

     

Customer

     3,825        4,158  

Other

     958        1,201  

Mark-to-market derivative assets

     833        917  

Unamortized energy contract assets

     84        88  

Inventories, net

     

Fossil fuel and emission allowances

     334        364  

Materials and supplies

     1,267        1,274  

Regulatory assets

     1,293        1,342  

Other

     1,600        930  
  

 

 

    

 

 

 

Total current assets

     12,232        12,412  
  

 

 

    

 

 

 

Property, plant and equipment, net

     72,748        71,555  

Deferred debits and other assets

     

Regulatory assets

     9,945        10,046  

Nuclear decommissioning trust funds

     12,641        11,061  

Investments

     638        629  

Goodwill

     6,677        6,677  

Mark-to-market derivative assets

     464        492  

Unamortized energy contract assets

     419        447  

Pledged assets for Zion Station decommissioning

     75        113  

Other

     1,265        1,472  
  

 

 

    

 

 

 

Total deferred debits and other assets

     32,124        30,937  
  

 

 

    

 

 

 

Total assets(a)

   $ 117,104      $ 114,904  
  

 

 

    

 

 

 

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,
2017
    December 31,
2016
 
LIABILITIES AND SHAREHOLDERS’ EQUITY     

Current liabilities

    

Short-term borrowings

   $ 1,757     $ 1,267  

Long-term debt due within one year

     3,619       2,430  

Accounts payable

     3,134       3,441  

Accrued expenses

     2,878       3,460  

Payables to affiliates

     8       8  

Regulatory liabilities

     574       602  

Mark-to-market derivative liabilities

     244       282  

Unamortized energy contract liabilities

     340       407  

Renewable energy credit obligation

     308       428  

PHI merger related obligation

     126       151  

Other

     977       981  
  

 

 

   

 

 

 

Total current liabilities

     13,965       13,457  
  

 

 

   

 

 

 

Long-term debt

     30,315       31,575  

Long-term debt to financing trusts

     641       641  

Deferred credits and other liabilities

    

Deferred income taxes and unamortized investment tax credits

     18,521       18,138  

Asset retirement obligations

     9,848       9,111  

Pension obligations

     4,082       4,248  

Non-pension postretirement benefit obligations

     1,955       1,848  

Spent nuclear fuel obligation

     1,139       1,024  

Regulatory liabilities

     4,398       4,187  

Mark-to-market derivative liabilities

     417       392  

Unamortized energy contract liabilities

     705       830  

Payable for Zion Station decommissioning

           14  

Other

     1,828       1,827  
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     42,893       41,619  
  

 

 

   

 

 

 

Total liabilities(a)

     87,814       87,292  
  

 

 

   

 

 

 

Commitments and contingencies

    

Shareholders’ equity

    

Common stock (No par value, 2000 shares authorized, 960 shares and 924 shares outstanding at June 30, 2017 and December 31, 2016, respectively)

     18,860       18,794  

Treasury stock, at cost (2 shares and 35 shares at June 30, 2017 and December 31, 2016, respectively)

     (123     (2,327

Retained earnings

     11,442       12,030  

Accumulated other comprehensive loss, net

     (2,633     (2,660
  

 

 

   

 

 

 

Total shareholders’ equity

     27,546       25,837  

Noncontrolling interests

     1,744       1,775  
  

 

 

   

 

 

 

Total equity

     29,290       27,612  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 117,104     $ 114,904  
  

 

 

   

 

 

 

 

(a)

Exelon’s consolidated assets include $8,385 million and $8,893 million at June 30, 2017 and December 31, 2016, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Exelon’s consolidated liabilities include $3,021 million and $3,356 million at June 30, 2017 and December 31, 2016, 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
    Total
Shareholders’

Equity
 

Balance, December 31, 2016

    958,778     $ 18,794     $ (2,327   $ 12,030     $ (2,660   $ 1,775     $ 27,612  

Net income (loss)

                      1,076             (30     1,046  

Long-term incentive plan activity

    2,494       23                               23  

Employee stock purchase plan issuances

    648       43                               43  

Common stock issued from treasury stock

                2,204       (1,054                 1,150  

Changes in equity of noncontrolling interests

                                  1       1  

Common stock dividends

                      (610                 (610

Other comprehensive income (loss), net of income taxes

                            27       (2     25  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2017

    961,920     $ 18,860     $ (123   $ 11,442     $ (2,633   $ 1,744     $ 29,290  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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)        2017             2016             2017             2016      

Operating revenues

        

Operating revenues

   $ 3,906     $ 3,231     $ 8,463     $ 7,702  

Operating revenues from affiliates

     268       358       598       627  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     4,174       3,589       9,061       8,329  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power and fuel

     2,156       1,575       4,952       4,015  

Purchased power and fuel from affiliates

     1       2       3       5  

Operating and maintenance

     1,824       1,369       3,132       2,665  

Operating and maintenance from affiliates

     186       161       365       332  

Depreciation and amortization

     334       408       637       697  

Taxes other than income

     140       118       282       244  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     4,641       3,633       9,371       7,958  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gain on sales of assets

           31       4       31  

Bargain purchase gain

                 226        
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

     (467     (13     (80     402  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense, net

     (120     (89     (209     (176

Interest expense to affiliates

     (9     (10     (19     (20

Other, net

     181       117       440       210  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     52       18       212       14  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (415     5       132       416  

Income taxes

     (158     (31     (31     120  

Equity in losses of unconsolidated affiliates

     (9     (8     (19     (11
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

     (266     28       144       285  

Net (loss) income attributable to noncontrolling interests

     (16     36       (30     (17
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to membership interest

   $ (250   $ (8   $ 174     $ 302  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income, net of income taxes

        

Net (loss) income

   $ (266   $ 28     $ 144     $ 285  

Other comprehensive income (loss), net of income taxes

        

Unrealized (loss) gain on cash flow hedges

     (1     1       5       (4

Unrealized (loss) gain on equity investments

           (2     4       (4

Unrealized gain on foreign currency translation

     2             3       6  

Unrealized gain on marketable securities

           1              
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     1             12       (2
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income

     (265     28       156       283  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income attributable to noncontrolling interests

     (16     36       (32     (17
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income attributable to membership interest

   $ (249   $ (8   $ 188     $ 300  
  

 

 

   

 

 

   

 

 

   

 

 

 

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)        2017             2016      

Cash flows from operating activities

    

Net income

   $ 144     $ 285  

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

    

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

     1,415       1,467  

Impairment of long-lived assets

     445       179  

Gain on sales of assets

     (4     (31

Bargain purchase gain

     (226      

Deferred income taxes and amortization of investment tax credits

     (173     (59

Net fair value changes related to derivatives

     235       199  

Net realized and unrealized gains on nuclear decommissioning trust fund investments

     (284     (114

Other non-cash operating activities

     121       169  

Changes in assets and liabilities:

    

Accounts receivable

     192       123  

Receivables from and payables to affiliates, net

     8       (77

Inventories

     (5     57  

Accounts payable and accrued expenses

     (328     (228

Option premiums paid, net

     (8     (10

Collateral (posted) received, net

     (163     720  

Income taxes

     (99     41  

Pension and non-pension postretirement benefit contributions

     (116     (117

Other assets and liabilities

     (180     (217
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     974       2,387  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (1,189     (2,051

Proceeds from nuclear decommissioning trust fund sales

     5,213       4,977  

Investment in nuclear decommissioning trust funds

     (5,339     (5,094

Acquisition of businesses, net

     (212     (1

Proceeds from sale of long-lived assets

     210       30  

Change in restricted cash

     (8     25  

Other investing activities

     (32     (96
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (1,357     (2,210
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in short-term borrowings

     (51      

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

     76       194  

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

     (10     (15

Issuance of long-term debt

     779       173  

Retirement of long-term debt

     (295     (131

Changes in Exelon intercompany money pool

     196       (429

Distribution to member

     (330     (111

Contribution from member

           45  

Other financing activities

     (7     39  
  

 

 

   

 

 

 

Net cash flows provided by (used in) financing activities

     358       (235
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (25     (58

Cash and cash equivalents at beginning of period

     290       431  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 265     $ 373  
  

 

 

   

 

 

 

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, 2017      December 31, 2016  
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 265      $ 290  

Restricted cash and cash equivalents

     166        158  

Accounts receivable, net

     

Customer

     2,242        2,433  

Other

     447        558  

Mark-to-market derivative assets

     833        917  

Receivables from affiliates

     143        156  

Unamortized energy contract assets

     84        88  

Inventories, net

     

Fossil fuel and emission allowances

     272        292  

Materials and supplies

     901        935  

Other

     1,241        701  
  

 

 

    

 

 

 

Total current assets

     6,594        6,528  
  

 

 

    

 

 

 

Property, plant and equipment, net

     25,261        25,585  

Deferred debits and other assets

     

Nuclear decommissioning trust funds

     12,641        11,061  

Investments

     426        418  

Goodwill

     47        47  

Mark-to-market derivative assets

     453        476  

Prepaid pension asset

     1,590        1,595  

Pledged assets for Zion Station decommissioning

     75        113  

Unamortized energy contract assets

     418        447  

Deferred income taxes

     5        16  

Other

     620        688  
  

 

 

    

 

 

 

Total deferred debits and other assets

     16,275        14,861  
  

 

 

    

 

 

 

Total assets(a)

   $ 48,130      $ 46,974  
  

 

 

    

 

 

 

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, 2017     December 31, 2016  
LIABILITIES AND EQUITY     

Current liabilities

    

Short-term borrowings

   $ 716     $ 699  

Long-term debt due within one year

     1,828       1,117  

Accounts payable

     1,527       1,610  

Accrued expenses

     722       989  

Payables to affiliates

     132       137  

Borrowings from Exelon intercompany money pool

     251       55  

Mark-to-market derivative liabilities

     225       263  

Unamortized energy contract liabilities

     61       72  

Renewable energy credit obligation

     308       428  

Other

     294       313  
  

 

 

   

 

 

 

Total current liabilities

     6,064       5,683  
  

 

 

   

 

 

 

Long-term debt

     7,010       7,202  

Long-term debt to affiliate

     916       922  

Deferred credits and other liabilities

    

Deferred income taxes and unamortized investment tax credits

     5,578       5,585  

Asset retirement obligations

     9,655       8,922  

Non-pension postretirement benefit obligations

     922       930  

Spent nuclear fuel obligation

     1,139       1,024  

Payables to affiliates

     2,871       2,608  

Mark-to-market derivative liabilities

     180       153  

Unamortized energy contract liabilities

     67       80  

Payable for Zion Station decommissioning

           14  

Other

     598       595  
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     21,010       19,911  
  

 

 

   

 

 

 

Total liabilities(a)

     35,000       33,718  
  

 

 

   

 

 

 

Commitments and contingencies

    

Equity

    

Member’s equity

    

Membership interest

     9,308       9,261  

Undistributed earnings

     2,119       2,275  

Accumulated other comprehensive loss, net

     (40     (54
  

 

 

   

 

 

 

Total member’s equity

     11,387       11,482  

Noncontrolling interests

     1,743       1,774  
  

 

 

   

 

 

 

Total equity

     13,130       13,256  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 48,130     $ 46,974  
  

 

 

   

 

 

 

 

(a)

Generation’s consolidated assets include $8,342 million and $8,817 million at June 30, 2017 and December 31, 2016, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Generation’s consolidated liabilities include $2,900 million and $3,170 million at June 30, 2017 and December 31, 2016, 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

 

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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, 2016

   $ 9,261     $ 2,275     $ (54   $ 1,774     $ 13,256  

Net income (loss)

           174             (30     144  

Changes in equity of noncontrolling interests

                       1       1  

Distribution of net retirement benefit obligation to member

     49                         49  

Allocation of tax benefit from member

     (2                       (2

Distribution to member

           (330                 (330

Other comprehensive income (loss), net of income taxes

                 14       (2     12  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2017

   $ 9,308     $ 2,119     $ (40   $ 1,743     $ 13,130  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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)        2017             2016             2017             2016      

Operating revenues

        

Electric operating revenues

   $ 1,354     $ 1,283     $ 2,647     $ 2,527  

Operating revenues from affiliates

     3       3       9       8  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating revenues

     1,357       1,286       2,656       2,535  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

        

Purchased power

     360       326       689       668  

Purchased power from affiliate

     18       13       24       18  

Operating and maintenance

     312       318       620       623  

Operating and maintenance from affiliate

     65       50       127       113  

Depreciation and amortization

     211       190       419       379  

Taxes other than income

     72       65       144       141  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     1,038       962       2,023       1,942  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gain on sales of assets

                       5  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     319       324       633       598  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (deductions)

        

Interest expense, net

     (98     (88     (179     (170

Interest expense to affiliates

     (3     (3     (6     (7

Other, net

     4       3       8       7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and (deductions)

     (97     (88     (177     (170
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     222       236       456       428  

Income taxes

     104       91       197       168  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 118     $ 145     $ 259     $ 260  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 118     $ 145     $ 259     $ 260  
  

 

 

   

 

 

   

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Six Months Ended
June 30,
 
(In millions)        2017             2016      

Cash flows from operating activities

    

Net income

   $ 259     $ 260  

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

    

Depreciation and amortization

     419       379  

Deferred income taxes and amortization of investment tax credits

     235       222  

Other non-cash operating activities

     58       83  

Changes in assets and liabilities:

    

Accounts receivable

     12       (36

Receivables from and payables to affiliates, net

     (4     1  

Inventories

     (2     7  

Accounts payable and accrued expenses

     (182     (42

Collateral (posted) received, net

     (8     (10

Income taxes

     4       261  

Pension and non-pension postretirement benefit contributions

     (37     (35

Other assets and liabilities

     34       38  
  

 

 

   

 

 

 

Net cash flows provided by operating activities

     788       1,128  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (1,168     (1,334

Change in restricted cash

     (10      

Other investing activities

     12       21  
  

 

 

   

 

 

 

Net cash flows used in investing activities

     (1,166     (1,313
  

 

 

   

 

 

 

Cash flows from financing activities

    

Changes in short-term borrowings

     389       (259

Issuance of long-term debt

           1,200  

Contributions from parent

     184       113  

Dividends paid on common stock

     (211     (183

Other financing activities

     (1     (17
  

 

 

   

 

 

 

Net cash flows provided by financing activities

     361       854  
  

 

 

   

 

 

 

(Decrease) increase in cash and cash equivalents

     (17     669  

Cash and cash equivalents at beginning of period

     56       67  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 39     $ 736  
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    June 30,
2017
     December 31,
2016
 
ASSETS      

Current assets

     

Cash and cash equivalents

   $ 39      $ 56  

Restricted cash

     12        2  

Accounts receivable, net

     

Customer

     529        528  

Other

     211        218  

Receivables from affiliates

     386        356  

Inventories, net

     160        159  

Regulatory assets

     182        190  

Other

     57        45  
  

 

 

    

 

 

 

Total current assets

     1,576        1,554  
  

 

 

    

 

 

 

Property, plant and equipment, net

     20,019        19,335  

Deferred debits and other assets

     

Regulatory assets

     1,050        977  

Investments

     6        6  

Goodwill

     2,625        2,625  

Receivables from affiliates

     2,364        2,170  

Prepaid pension asset

     1,283        1,343  

Other

     237        325  
  

 

 

    

 

 

 

Total deferred debits and other assets

     7,565        7,446  
  

 

 

    

 

 

 

Total assets

   $ 29,160      $ 28,335  
  

 

 

    

 

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(In millions)    June 30,
2017
    December 31,
2016
 
LIABILITIES AND SHAREHOLDERS’ EQUITY     

Current liabilities

    

Short-term borrowings

   $ 389     $  

Long-term debt due within one year

     1,125       425  

Accounts payable

     547       645  

Accrued expenses

     1,107       1,250  

Payables to affiliates

     67       65  

Customer deposits

     115       121  

Regulatory liabilities

     269       329  

Mark-to-market derivative liability

     19       19  

Other

     112       84  
  

 

 

   

 

 

 

Total current liabilities

     3,750       2,938  
  

 

 

   

 

 

 

Long-term debt

     5,911       6,608  

Long-term debt to financing trust

     205       205  

Deferred credits and other liabilities

    

Deferred income taxes and unamortized investment tax credits

     5,600       5,364  

Asset retirement obligations

     122       119  

Non-pension postretirement benefits obligations

     229       239  

Regulatory liabilities

     3,585       3,369  

Mark-to-market derivative liability

     237       239  

Other

     541       529  
  

 

 

   

 

 

 

Total deferred credits and other liabilities

     10,314       9,859  
  

 

 

   

 

 

 

Total liabilities

     20,180       19,610  
  

 

 

   

 

 

 

Commitments and contingencies

    

Shareholders’ equity

    

Common stock

     1,588       1,588  

Other paid-in capital

     6,357       6,150  

Retained deficit unappropriated

     (1,639     (1,639

Retained earnings appropriated

     2,674       2,626  
  

 

 

   

 

 

 

Total shareholders’ equity

     8,980       8,725  
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

   $ 29,160     $ 28,335  
  

 

 

   

 

 

 

See the Combined Notes to Consolidated Financial Statements

 

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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, 2016

   $ 1,588      $ 6,150      $ (1,639   $ 2,626     $ 8,725  

Net income

                   259             259  

Appropriation of retained earnings for future dividends

                   (259     259        

Common stock dividends

                         (211     (211

Contribution from parent

            184                    184  

Parent tax matter indemnification

            23                    23  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance, June 30, 2017

   $ 1,588      $ 6,357      $ (1,639   $ 2,674     $ 8,980  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

 

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)        2017             2016             2017             2016      

Operating revenues

        

Electric operating revenues

   $ 548     $ 585     $ 1,138     $ 1,228  

Natural gas operating revenues

     80       77       285       273  

Operating revenues from affiliates

     2       2       3       4