Edgar Filing: EXELON CORP

Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2013

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


Commission File Number	Name of Registrant; State 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 (312) 394-7398

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

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

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

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


	Large Accelerated Filer	Accelerated Filer	Non-accelerated Filer	Smaller Reporting Company
Exelon Corporation	x
Exelon Generation Company, LLC			x
Commonwealth Edison Company			x
PECO Energy Company			x
Baltimore Gas and Electric Company			x

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

The number of shares outstanding of each registrant’s common stock as of September 30, 2013 was:


Exelon Corporation Common Stock, without par value		856,903,972
Exelon Generation Company, LLC		not applicable
Commonwealth Edison Company Common Stock, $12.50 par value		127,016,855
PECO Energy Company Common Stock, without par value		170,478,507
Baltimore Gas and Electric Company Common Stock, without par value		1,000

TABLE OF CONTENTS


		Page No.

FILING FORMAT			7

FORWARD-LOOKING STATEMENTS			7

WHERE TO FIND MORE INFORMATION			7

PART I.	FINANCIAL INFORMATION		8

ITEM 1.	FINANCIAL STATEMENTS		8

	Exelon Corporation

	Consolidated Statements of Operations and Comprehensive Income		9

	Consolidated Statements of Cash Flows		10

	Consolidated Balance Sheets		11

	Consolidated Statement of Changes in Shareholders’ Equity		13

	Exelon Generation Company, LLC

	Consolidated Statements of Operations and Comprehensive Income		14

	Consolidated Statements of Cash Flows		15

	Consolidated Balance Sheets		16

	Consolidated Statement of Changes in Equity		18

	Commonwealth Edison Company

	Consolidated Statements of Operations and Comprehensive Income		19

	Consolidated Statements of Cash Flows		20

	Consolidated Balance Sheets		21

	Consolidated Statement of Changes in Shareholders’ Equity		23

	PECO Energy Company

	Consolidated Statements of Operations and Comprehensive Income		24

	Consolidated Statements of Cash Flows		25

	Consolidated Balance Sheets		26

	Consolidated Statement of Changes in Shareholders’ Equity		28

	Baltimore Gas and Electric Company

	Consolidated Statements of Operations and Comprehensive Income		29

	Consolidated Statements of Cash Flows		30

	Consolidated Balance Sheets		31

	Consolidated Statement of Changes in Shareholders’ Equity		33

	Combined Notes to Consolidated Financial Statements		34

	1. Basis of Presentation		34

	2. New Accounting Pronouncements		35

	3. Variable Interest Entities		36

	4. Merger and Acquisitions		39

	5. Regulatory Matters		46

	6. Investment in Constellation Energy Nuclear Group, LLC		61

	7. Impairment of Long-Lived Assets		64

	8. Goodwill		65


		Page No.

	9. Fair Value of Financial Assets and Liabilities		66

	10. Derivative Financial Instruments		92

	11. Debt and Credit Agreements		108

	12. Income Taxes		114

	13. Nuclear Decommissioning		118

	14. Retirement Benefits		122

	15. Stock-Based Compensation Plans		125

	16. Changes in Accumulated Other Comprehensive Income		129

	17. Earnings Per Share and Equity		132

	18. Commitments and Contingencies		133

	19. Supplemental Financial Information		150

	20. Segment Information		156

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		161

	Exelon Corporation		161

	General		161

	Executive Overview		162

	Critical Accounting Policies and Estimates		181

	Results of Operations		182

	Liquidity and Capital Resources		211

	Contractual Obligations and Off-Balance Sheet Arrangements		222

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		223

ITEM 4.	CONTROLS AND PROCEDURES		232

PART II.	OTHER INFORMATION		233

ITEM 1.	LEGAL PROCEEDINGS		233

ITEM 1A.	RISK FACTORS		233

ITEM 4.	MINE SAFETY DISCLOSURES		233

ITEM 6.	EXHIBITS		233

SIGNATURES			236

	Exelon Corporation		236

	Exelon Generation Company, LLC		236

	Commonwealth Edison Company		236

	PECO Energy Company		237

	Baltimore Gas and Electric Company		237

CERTIFICATION EXHIBITS			238

	Exelon Corporation		238, 248

	Exelon Generation Company, LLC		240, 250

	Commonwealth Edison Company		242, 252

	PECO Energy Company		244, 254

	Baltimore Gas and Electric Company		246, 256


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
BSC		Exelon Business Services Company, LLC
Exelon Corporate		Exelon in its corporate capacity as a holding company
CENG		Constellation Energy Nuclear Group, LLC
Constellation		Constellation Energy Group, Inc.
Exelon Transmission Company		Exelon Transmission Company, LLC
Exelon Wind		Exelon Wind, LLC and Exelon Generation Acquisition Company, LLC
Ventures		Exelon Ventures Company, LLC
AmerGen		AmerGen Energy Company, LLC
BondCo		RSB BondCo LLC
PEC L.P.		PECO Energy Capital, L.P.
PECO Trust III		PECO Capital Trust III
PECO Trust IV		PECO Energy Capital Trust IV
PETT		PECO Energy Transition Trust
Registrants		Exelon, Generation, ComEd, PECO and BGE, collectively

Other Terms and Abbreviations
Note "—" of the Exelon 2012 Form 10-K		Reference to specific Combined Note to Consolidated Financial Statements within Exelon's 2012 Annual Report on Form 10-K
1998 restructuring settlement		PECO's 1998 settlement of its restructuring case mandated by the Competition Act
Act 11		Pennsylvania Act 11 of 2012
Act 129		Pennsylvania Act 129 of 2008
AEC		Alternative Energy Credit that is issued for each megawatt hour of generation from a qualified alternative energy source
AEPS		Pennsylvania Alternative Energy Portfolio Standards
AEPS Act		Pennsylvania Alternative Energy Portfolio Standards Act of 2004, as amended
AESO		Alberta Electric Systems Operator
AFUDC		Allowance for Funds Used During Construction
ALJ		Administrative Law Judge
AMI		Advanced Metering Infrastructure
ARC		Asset Retirement Cost
ARO		Asset Retirement Obligation
ARP		Title IV Acid Rain Program
ARRA of 2009		American Recovery and Reinvestment Act of 2009
Block contracts		Forward Purchase Energy Block Contracts
CAIR		Clean Air Interstate Rule
CAISO		California ISO
CAMR		Federal Clean Air Mercury Rule
CERCLA		Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
CFL		Compact Fluorescent Light
Clean Air Act		Clean Air Act of 1963, as amended
Clean Water Act		Federal Water Pollution Control Amendments of 1972, as amended
Competition Act		Pennsylvania Electricity Generation Customer Choice and Competition Act of 1996


GLOSSARY OF TERMS AND ABBREVIATIONS

Other Terms and Abbreviations
CPI		Consumer Price Index
CPUC		California Public Utilities Commission
CSAPR		Cross-State Air Pollution Rule
CTC		Competitive Transition Charge
DOE		United States Department of Energy
DOJ		United States Department of Justice
DSP		Default Service Provider
DSP Program		Default Service Provider Program
EDF		Electricite de France SA
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)
EPA		United States Environmental Protection Agency
ERCOT		Electric Reliability Council of Texas
ERISA		Employee Retirement Income Security Act of 1974, as amended
EROA		Expected Rate of Return on Assets
ESPP		Employee Stock Purchase Plan
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
FRCC		Florida Reliability Coordinating Council
FTC		Federal Trade Commission
GAAP		Generally Accepted Accounting Principles in the United States
GHG		Greenhouse Gas
GRT		Gross Receipts Tax
GSA		Generation Supply Adjustment
GWh		Gigawatt hour
HAP		Hazardous air pollutants
Health Care Reform Acts		Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act of 2010
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
IPA		Illinois Power Agency
IRC		Internal Revenue Code
IRS		Internal Revenue Service
ISO		Independent System Operator
ISO-NE		ISO New England Inc.
ISO-NY		ISO New York
kV		Kilovolt
kW		Kilowatt
kWh		Kilowatt-hour
LIBOR		London Interbank Offered Rate
LILO		Lease-In, Lease-Out
LLRW		Low-Level Radioactive Waste
LTIP		Long-Term Incentive Plan
MATS		U.S. EPA Mercury and Air Toxics Rule


GLOSSARY OF TERMS AND ABBREVIATIONS

Other Terms and Abbreviations
MBR		Market Based Rates Incentive
MDE		Maryland Department of the Environment
MDPSC		Maryland Public Service Commission
MGP		Manufactured Gas Plant
MISO		Midcontinent Independent System Operator, Inc.
mmcf		Million Cubic Feet
Moody's		Moody's Investor Service
MOPR		Minimum Offer Price Rule
MRV		Market-Related Value
MW		Megawatt
MWh		Megawatt hour
NAAQS		National Ambient Air Quality Standards
n.m.		not meaningful
NAV		Net Asset Value
NDT		Nuclear Decommissioning Trust
NEIL		Nuclear Electric Insurance Limited
NERC		North American Electric Reliability Corporation
NGS		Natural Gas Supplier
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
NOV		Notice of Violation
NPDES		National Pollutant Discharge Elimination System
NRC		Nuclear Regulatory Commission
NSPS		New Source Performance Standards
NWPA		Nuclear Waste Policy Act of 1982
NYMEX		New York Mercantile Exchange
OCI		Other Comprehensive Income
OIESO		Ontario Independent Electricity System Operator
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
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 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


GLOSSARY OF TERMS AND ABBREVIATIONS

Other Terms and Abbreviations
RGGI		Regional Greenhouse Gas Initiative
RMC		Risk Management Committee
RPM		PJM Reliability Pricing Model
RPS		Renewable Energy Portfolio Standards
RTEP		Regional Transmission Expansion Plan
RTO		Regional Transmission Organization
S&P		Standard & Poor's Ratings Services
SEC		United States Securities and Exchange Commission
Senate Bill 1		Maryland Senate Bill 1
SERC		SERC Reliability Corporation (formerly Southeast Electric Reliability Council)
SERP		Supplemental Employee Retirement Plan
SFC		Supplier Forward Contract
SGIG		Smart Grid Investment Grant
SGIP		Smart Grid Initiative Program
SILO		Sale-In, Lease-Out
SMP		Smart Meter Program
SMPIP		Smart Meter Procurement and Installation Plan
SNF		Spent Nuclear Fuel
SOS		Standard Offer Service
SPP		Southwest Power Pool
Tax Relief Act of 2010		Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
TEG		Termoelectrica del Golfo
TEP		Termoelectrica Penoles
Upstream		Natural gas exploration and production activities
VIE		Variable Interest Entity
WECC		Western Electric Coordinating Council

FILING FORMAT

This combined Form 10-Q is being filed separately by the Registrants. Information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf. No Registrant makes any representation as to information relating to any other Registrant.

FORWARD-LOOKING STATEMENTS

This Report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by Exelon Corporation, Exelon Generation Company, LLC, Commonwealth Edison Company, PECO Energy Company and Baltimore Gas and Electric Company (Registrants) include those factors discussed herein, as well as the items discussed in (1) Exelon’s 2012 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 19; (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 18; 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.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions, except per share data)	2013			2012			2013			2012
Operating revenues	$	6,502		$	6,579		$	18,725		$	17,235
Operating expenses
Purchased power and fuel		2,743			3,026			8,143			7,398
Operating and maintenance		1,735			2,170			5,391			5,979
Depreciation and amortization		530			500			1,606			1,376
Taxes other than income		277			290			825			737

Total operating expenses		5,285			5,986			15,965			15,490

Equity in earnings (loss) of unconsolidated affiliates		37			10			7			(69	)
Operating income		1,254			603			2,767			1,676

Other income and (deductions)
Interest expense		(228	)		(240	)		(1,091	)		(678	)
Interest expense to affiliates, net		(6	)		(6	)		(19	)		(19	)
Other, net		155			101			311			253

Total other income and (deductions)		(79	)		(145	)		(799	)		(444	)

Income before income taxes		1,175			458			1,968			1,232
Income taxes		439			161			733			445

Net income		736			297			1,235			787
Net income (loss) attributable to noncontrolling interests, preferred security dividends and redemption and preference stock dividends		(2	)		1			11			5

Net income attributable to common shareholders		738			296			1,224			782

Comprehensive income (loss), net of income taxes
Net income		736			297			1,235			787
Other comprehensive income (loss), net of income taxes
Pension and non-pension postretirement benefit plans:
Prior service benefit reclassified to periodic benefit cost		1			—			—			1
Actuarial loss reclassified to periodic cost		49			44			151			126
Transition obligation reclassified to periodic cost		—			—			—			2
Pension and non-pension postretirement benefit plans valuation adjustment		(8	)		(67	)		69			(78	)
Deferred compensation unit valuation adjustment		—			—			10			—
Change in unrealized loss on cash flow hedges		(46	)		(88	)		(169	)		(29	)
Change in unrealized income on equity investments		16			17			51			23
Change in unrealized gain (loss) on foreign currency translation		—			2			(5	)		—
Change in unrealized loss on marketable securities		—			—			(1	)		—

Other comprehensive income (loss)		12			(92	)		106			45

Comprehensive income	$	748		$	205		$	1,341		$	832

Average shares of common stock outstanding:
Basic		857			854			856			804
Diluted		860			857			860			806

Earnings per average common share:
Basic	$	0.86		$	0.35		$	1.43		$	0.97
Diluted	$	0.86		$	0.35		$	1.42		$	0.97

Dividends per common share	$	0.31		$	0.53		$	1.15		$	1.58

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2013			2012
Cash flows from operating activities
Net income	$	1,235		$	787
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization, depletion and accretion, including nuclear fuel and energy contract amortization		2,844			2,909
Impairment of assets held for sale		—			278
Deferred income taxes and amortization of investment tax credits		(164	)		263
Net fair value changes related to derivatives		(229	)		(377	)
Net realized and unrealized gains on nuclear decommissioning trust fund investments		(95	)		(142	)
Other non-cash operating activities		738			1,235
Changes in assets and liabilities:
Accounts receivable		54			228
Inventories		(103	)		12
Accounts payable, accrued expenses and other current liabilities		(243	)		(817	)
Option premiums paid, net		(38	)		(122	)
Counterparty collateral (posted) received, net		(73	)		408
Income taxes		863			465
Pension and non-pension postretirement benefit contributions		(360	)		(131	)
Other assets and liabilities		(35	)		(422	)

Net cash flows provided by operating activities		4,394			4,574

Cash flows from investing activities
Capital expenditures		(3,887	)		(4,162	)
Proceeds from nuclear decommissioning trust fund sales		3,344			6,262
Investment in nuclear decommissioning trust funds		(3,518	)		(6,422	)
Cash and restricted cash acquired from Constellation		—			964
Proceeds from sale of long-lived assets		32			—
Proceeds from sales of investments		20			26
Purchases of investments		(3	)		(13	)
Change in restricted cash		(23	)		(38	)
Other investing activities		65			41

Net cash flows used in investing activities		(3,970	)		(3,342	)

Cash flows from financing activities
Payment of accounts receivable agreement		(210	)		—
Changes in short-term debt		205			(139	)
Issuance of long-term debt		2,031			1,558
Retirement of long-term debt		(1,156	)		(731	)
Redemption of preferred securities		(93	)		—
Dividends paid on common stock		(981	)		(1,226	)
Dividends paid to former Constellation shareholders		—			(51	)
Proceeds from employee stock plans		40			61
Other financing activities		(102	)		(20	)

Net cash flows used in financing activities		(266	)		(548	)

Increase in cash and cash equivalents		158			684
Cash and cash equivalents at beginning of period		1,486			1,016

Cash and cash equivalents at end of period	$	1,644		$	1,700

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2013		December 31, 2012
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	1,600	$	1,411
Cash and cash equivalents of variable interest entities		44		75
Restricted cash and investments		60		86
Restricted cash and investments of variable interest entities		87		47
Accounts receivable, net
Customer ($0 and $289 gross accounts receivable pledged as collateral as of September 30, 2013 and December 31, 2012, respectively)		2,584		2,795
Other		1,232		1,141
Accounts receivable, net, variable interest entities		177		292
Mark-to-market derivative assets		730		938
Unamortized energy contract assets		460		886
Inventories, net
Fossil fuel		288		246
Materials and supplies		821		768
Deferred income taxes		292		131
Regulatory assets		877		764
Other		699		560

Total current assets		9,951		10,140

Property, plant and equipment, net		46,495		45,186
Deferred debits and other assets
Regulatory assets		6,509		6,497
Nuclear decommissioning trust funds		7,776		7,248
Investments		1,154		1,184
Investments in affiliates		23		22
Investment in CENG		1,939		1,849
Goodwill		2,625		2,625
Mark-to-market derivative assets		779		937
Unamortized energy contracts assets		803		1,073
Pledged assets for Zion Station decommissioning		486		614
Other		1,121		1,186

Total deferred debits and other assets		23,215		23,235

Total assets	$	79,661	$	78,561

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2013			December 31, 2012
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	214		$	—
Short-term notes payable — accounts receivable agreement		—			210
Long-term debt due within one year		1,461			975
Long-term debt due within one year of variable interest entities		182			72
Accounts payable		2,369			2,446
Accounts payable of variable interest entities		108			202
Accrued expenses		1,540			1,800
Deferred income taxes		50			58
Regulatory liabilities		314			368
Mark-to-market derivative liabilities		126			352
Unamortized energy contract liabilities		305			455
Other		838			853

Total current liabilities		7,507			7,791

Long-term debt		17,583			17,190
Long-term debt to financing trusts		648			648
Long-term debt of variable interest entities		339			508
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		11,931			11,551
Asset retirement obligations		5,118			5,074
Pension obligations		3,094			3,428
Non-pension postretirement benefit obligations		2,764			2,662
Spent nuclear fuel obligation		1,021			1,020
Regulatory liabilities		4,204			3,981
Mark-to-market derivative liabilities		218			281
Unamortized energy contract liabilities		314			528
Payable for Zion Station decommissioning		339			432
Other		2,514			1,650

Total deferred credits and other liabilities		31,517			30,607

Total liabilities		57,594			56,744

Commitments and contingencies
Preferred securities of subsidiary		—			87
Shareholders’ equity
Common stock (No par value, 2,000 shares authorized, 857 shares and 855 shares outstanding at September 30, 2013 and December 31, 2012, respectively)		16,716			16,632
Treasury stock, at cost (35 shares at September 30, 2013 and December 31, 2012, respectively)		(2,327	)		(2,327	)
Retained earnings		10,131			9,893
Accumulated other comprehensive loss, net		(2,661	)		(2,767	)

Total shareholders’ equity		21,859			21,431
BGE preference stock not subject to mandatory redemption		193			193
Noncontrolling interest		15			106

Total equity		22,067			21,730

Total liabilities and shareholders’ equity	$	79,661		$	78,561

See the Combined Notes to Consolidated Financial Statements

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			Non-controlling Interest			Preferred and Preference Stock			Total Equity
Balance, December 31, 2012		889,525	$	16,632	$	(2,327	)	$	9,893		$	(2,767	)	$	106		$	193		$	21,730
Net income (loss)		—		—		—			1,224			—			(6	)		17			1,235
Long-term incentive plan activity		2,122		84		—			—			—			—			—			84
Common stock dividends		—		—		—			(986	)		—			—			—			(986	)
Impairment of long-lived assets		—		—		—			—			—			(4	)		—			(4	)
Consolidated VIE dividend to non-controlling interest		—		—		—			—			—			(63	)		—			(63	)
Deconsolidation of VIE		—		—		—			—			—			(18	)		—			(18	)
Redemption of preferred securities		—		—		—			—			—			—			(6	)		(6	)
Preferred and preference stock dividends		—		—		—			—			—			—			(11	)		(11	)
Other comprehensive income net of income taxes of $(70)		—		—		—			—			106			—			—			106

Balance, September 30, 2013		891,647	$	16,716	$	(2,327	)	$	10,131		$	(2,661	)	$	15		$	193		$	22,067

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2013			2012			2013			2012
Operating revenues
Operating revenues	$	3,871		$	3,558		$	10,729		$	9,276
Operating revenues from affiliates		384			473			1,129			1,263

Total operating revenues		4,255			4,031			11,858			10,539

Operating expenses
Purchased power and fuel		2,179			2,122			6,294			5,018
Operating and maintenance		936			1,289			2,943			3,319
Operating and maintenance from affiliates		140			140			434			467
Depreciation and amortization		218			207			643			564
Taxes other than income		98			109			292			272

Total operating expenses		3,571			3,867			10,606			9,640

Equity in earnings (loss) of unconsolidated affiliates		37			10			7			(69	)
Operating income		721			174			1,259			830

Other income and (deductions)
Interest expense		(82	)		(85	)		(257	)		(223	)
Other, net		134			83			229			185

Total other income and (deductions)		52			(2	)		(28	)		(38	)

Income before income taxes		773			172			1,231			792
Income taxes		288			85			436			373

Net income		485			87			795			419
Net loss attributable to noncontrolling interests		(5	)		(4	)		(6	)		(6	)

Net income attributable to membership interest		490			91			801			425

Comprehensive income (loss), net of income taxes
Net income		485			87			795			419
Other comprehensive (loss) income, net of income taxes
Change in unrealized loss on cash flow hedges		(49	)		(171	)		(316	)		(185	)
Change in unrealized income on equity investments		16			17			52			23
Change in unrealized income (loss) on foreign currency translation		1			2			(5	)		—
Change in unrealized loss on marketable securities		—			—			(1	)		(1	)

Other comprehensive loss		(32	)		(152	)		(270	)		(163	)

Comprehensive income (loss)	$	453		$	(65	)	$	525		$	256

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2013			2012
Cash flows from operating activities
Net income	$	795		$	419
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization, depletion and accretion, including nuclear fuel and energy contract amortization		1,937			2,178
Impairment on assets held for sale		—			278
Deferred income taxes and amortization of investment tax credits		183			69
Net fair value changes related to derivatives		(222	)		(345	)
Net realized and unrealized gains on nuclear decommissioning trust fund investments		(95	)		(142	)
Other non-cash operating activities		375			422
Changes in assets and liabilities:
Accounts receivable		57			189
Receivables from and payables to affiliates, net		2			(58	)
Inventories		(81	)		34
Accounts payable, accrued expenses and other current liabilities		(162	)		(546	)
Option premiums paid, net		(38	)		(122	)
Counterparty collateral (paid) received, net		(123	)		315
Income taxes		315			565
Pension and non-pension postretirement benefit contributions		(123	)		(48	)
Other assets and liabilities		(163	)		(195	)

Net cash flows provided by operating activities		2,657			3,013

Cash flows from investing activities
Capital expenditures		(1,995	)		(2,602	)
Proceeds from nuclear decommissioning trust fund sales		3,344			6,262
Investment in nuclear decommissioning trust funds		(3,518	)		(6,422	)
Change in restricted cash		(30	)		—
Proceeds from sale of long-lived assets		32			—
Cash acquired from Constellation		—			708
Other investing activities		18			(2	)

Net cash flows used in investing activities		(2,149	)		(2,056	)

Cash flows from financing activities
Issuance of long-term debt		831			957
Retirement of long-term debt		(471	)		(138	)
Change in short-term debt		12			(41	)
Distribution to member		(550	)		(1,384	)
Other financing activities		(73	)		(17	)

Net cash flows used in financing activities		(251	)		(623	)

Increase in cash and cash equivalents		257			334
Cash and cash equivalents at beginning of period		671			496

Cash and cash equivalents at end of period	$	928		$	830

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2013		December 31, 2012
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	884	$	596
Cash and cash equivalents of variable interest entities		44		75
Restricted cash and cash equivalents of variable interest entities		37		16
Accounts receivable, net
Customer		1,489		1,482
Other		417		472
Accounts receivable, net, variable interest entities		175		292
Mark-to-market derivative assets		730		938
Mark-to-market derivative assets with affiliates		—		226
Receivables from affiliates		107		141
Unamortized energy contract assets		460		886
Inventories, net
Fossil fuel		169		130
Materials and supplies		661		626
Deferred income taxes		177		—
Other		455		331

Total current assets		5,805		6,211

Property, plant and equipment, net		19,797		19,531
Deferred debits and other assets
Nuclear decommissioning trust funds		7,776		7,248
Investments		401		420
Investment in CENG		1,939		1,849
Mark-to-market derivative assets		766		924
Prepaid pension asset		1,927		1,975
Pledged assets for Zion Station decommissioning		486		614
Unamortized energy contract assets		803		1,073
Other		798		836

Total deferred debits and other assets		14,896		14,939

Total assets	$	40,498	$	40,681

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2013		December 31, 2012
	(Unaudited)
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings	$	21	$	—
Long-term debt due within one year		544		24
Long-term debt due within one year of variable interest entities		104		4
Accounts payable		1,254		1,346
Accounts payable of variable interest entities		108		202
Accrued expenses		925		1,116
Payables to affiliates		162		193
Deferred income taxes		44		128
Mark-to-market derivative liabilities		110		334
Unamortized energy contract liabilities		276		378
Other		348		372

Total current liabilities		3,896		4,097

Long-term debt		5,545		5,245
Long-term debt to affiliate		1,528		2,007
Long-term debt of variable interest entities		88		203
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		5,899		5,398
Asset retirement obligations		4,983		4,938
Non-pension postretirement benefit obligations		843		755
Spent nuclear fuel obligation		1,021		1,020
Payables to affiliates		2,593		2,397
Mark-to-market derivative liabilities		112		232
Unamortized energy contract liabilities		311		516
Payable for Zion Station decommissioning		339		432
Other		789		776

Total deferred credits and other liabilities		16,890		16,464

Total liabilities		27,947		28,016

Commitments and contingencies
Equity
Member’s equity
Membership interest		8,872		8,876
Undistributed earnings		3,419		3,168
Accumulated other comprehensive income, net		243		513

Total member’s equity		12,534		12,557
Noncontrolling interest		17		108

Total equity		12,551		12,665

Total liabilities and equity	$	40,498	$	40,681

See the Combined Notes to Consolidated Financial Statements

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 Income, net			Noncontrolling Interest			Total Equity
Balance, December 31, 2012	$	8,876		$	3,168		$	513		$	108		$	12,665
Net income (loss)		—			801			—			(6	)		795
Noncontrolling interest acquired		(3	)		—			—			—			(3	)
Distribution to member		—			(550	)		—			—			(550	)
Consolidated VIE dividend to non-controlling interest		—			—			—			(63	)		(63	)
Deconsolidation of VIE		(1	)		—			—			(18	)		(19	)
Impairment of long-lived assets		—			—			—			(4	)		(4	)
Other comprehensive loss, net of income taxes of $177		—			—			(270	)		—			(270	)

Balance, September 30, 2013	$	8,872		$	3,419		$	243		$	17		$	12,551

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2013			2012			2013			2012
Operating revenues
Operating revenues	$	1,155		$	1,484		$	3,393		$	4,152
Operating revenues from affiliates		1			—			2			2

Total operating revenues		1,156			1,484			3,395			4,154

Operating expenses
Purchased power		158			498			522			1,255
Purchased power from affiliate		143			180			409			631
Operating and maintenance		296			313			907			882
Operating and maintenance from affiliate		37			37			113			118
Depreciation and amortization		164			157			501			458
Taxes other than income		80			81			225			224

Total operating expenses		878			1,266			2,677			3,568

Operating income		278			218			718			586

Other income and (deductions)
Interest expense		(71	)		(71	)		(493	)		(221	)
Interest expense to affiliates, net		(3	)		(3	)		(10	)		(9	)
Other, net		7			5			18			12

Total other income and (deductions)		(67	)		(69	)		(485	)		(218	)

Income before income taxes		211			149			233			368
Income taxes		85			59			93			149

Net income		126			90			140			219

Other comprehensive income, net of income taxes
Change in unrealized gain on marketable securities		—			—			—			1

Other comprehensive income		—			—			—			1

Comprehensive income	$	126		$	90		$	140		$	220

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2013			2012
Cash flows from operating activities
Net income	$	140		$	219
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		501			458
Deferred income taxes and amortization of investment tax credits		(152	)		198
Other non-cash operating activities		26			310
Changes in assets and liabilities:
Accounts receivable		(21	)		22
Receivables from and payables to affiliates, net		(32	)		(32	)
Inventories		(12	)		(11	)
Accounts payable, accrued expenses and other current liabilities		48			(49	)
Counterparty collateral received, net		50			93
Income taxes		262			116
Pension and non-pension postretirement benefit contributions		(120	)		(19	)
Other assets and liabilities		160			(124	)

Net cash flows provided by operating activities		850			1,181

Cash flows from investing activities
Capital expenditures		(1,074	)		(896	)
Proceeds from sales of investments		5			26
Purchases of investments		(3	)		(13	)
Change in restricted cash		(3	)		—
Other investing activities		33			12

Net cash flows used in investing activities		(1,042	)		(871	)

Cash flows from financing activities
Changes in short-term debt		153			35
Issuance of long-term debt		350			—
Retirement of long-term debt		(252	)		(450	)
Dividends paid on common stock		(165	)		(95	)
Other financing activities		(4	)		(3	)

Net cash flows provided by (used in) financing activities		82			(513	)

Decrease in cash and cash equivalents		(110	)		(203	)
Cash and cash equivalents at beginning of period		144			234

Cash and cash equivalents at end of period	$	34		$	31

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2013		December 31, 2012
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	34	$	144
Restricted cash		3		—
Accounts receivable, net
Customer		443		539
Other		525		452
Inventories, net		103		91
Deferred income taxes		18		83
Counterparty collateral deposited		3		53
Regulatory assets		335		388
Other		31		25

Total current assets		1,495		1,775

Property, plant and equipment, net		14,444		13,826
Deferred debits and other assets
Regulatory assets		819		666
Investments		5		8
Investments in affiliates		6		6
Goodwill		2,625		2,625
Receivables from affiliates		2,361		2,039
Prepaid pension asset		1,631		1,661
Other		300		299

Total deferred debits and other assets		7,747		7,304

Total assets	$	23,686	$	22,905

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2013		December 31, 2012
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	153	$	—
Long-term debt due within one year		617		252
Accounts payable		474		379
Accrued expenses		238		295
Payables to affiliates		61		97
Customer deposits		133		136
Regulatory liabilities		171		170
Mark-to-market derivative liability		16		18
Mark-to-market derivative liability with affiliate		—		226
Other		84		82

Total current liabilities		1,947		1,655

Long-term debt		5,057		5,315
Long-term debt to financing trust		206		206
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		4,057		4,272
Asset retirement obligations		99		99
Non-pension postretirement benefits obligations		354		273
Regulatory liabilities		3,393		3,229
Mark-to-market derivative liability		106		49
Other		994		484

Total deferred credits and other liabilities		9,003		8,406

Total liabilities		16,213		15,582

Commitments and contingencies
Shareholders’ equity
Common stock		1,588		1,588
Other paid-in capital		5,189		5,014
Retained earnings		696		721

Total shareholders’ equity		7,473		7,323

Total liabilities and shareholders’ equity	$	23,686	$	22,905

See the Combined Notes to Consolidated Financial Statements

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			Accumulated Other Comprehensive Income, net		Total Shareholders’ Equity
Balance, December 31, 2012	$	1,588	$	5,014	$	(1,639	)	$	2,360		$	—	$	7,323
Net income		—		—		140			—			—		140
Appropriation of retained earnings for future dividends		—		—		(140	)		140			—		—
Common stock dividends		—		—		—			(165	)		—		(165	)
Parent tax matter indemnification		—		175		—			—			—		175

Balance, September 30, 2013	$	1,588	$	5,189	$	(1,639	)	$	2,335		$	—	$	7,473

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2013			2012			2013			2012
Operating revenues
Operating revenues	$	727		$	805		$	2,294		$	2,393
Operating revenues from affiliates		1			1			1			3

Total operating revenues		728			806			2,295			2,396

Operating expenses
Purchased power and fuel		207			155			632			626
Purchased power from affiliate		82			171			321			407
Operating and maintenance		162			172			480			491
Operating and maintenance from affiliates		24			27			74			83
Depreciation and amortization		57			55			171			161
Taxes other than income		41			48			121			122

Total operating expenses		573			628			1,799			1,890

Operating income		155			178			496			506

Other income and (deductions)
Interest expense		(26	)		(29	)		(77	)		(85	)
Interest expense to affiliates, net		(3	)		(3	)		(9	)		(9	)
Other, net		1			2			4			6

Total other income and (deductions)		(28	)		(30	)		(82	)		(88	)

Income before income taxes		127			148			414			418
Income taxes		35			25			122			118

Net income		92			123			292			300
Preferred security dividends and redemption		—			1			7			3

Net income attributable to common shareholder		92			122			285			297

Comprehensive income, net of income taxes
Net income		92			123			292			300
Other comprehensive income, net of income taxes
Change in unrealized gains on marketable securities		—			—			—			1

Other comprehensive income		—			—			—			1

Comprehensive income	$	92		$	123		$	292		$	301

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2013			2012
Cash flows from operating activities
Net income	$	292		$	300
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		171			161
Deferred income taxes and amortization of investment tax credits		35			27
Other non-cash operating activities		84			96
Changes in assets and liabilities:
Accounts receivable		41			36
Receivables from and payables to affiliates, net		(25	)		15
Inventories		4			10
Accounts payable, accrued expenses and other current liabilities		9			(75	)
Income taxes		66			127
Pension and non-pension postretirement benefit contributions		(10	)		(12	)
Other assets and liabilities		(47	)		(57	)

Net cash flows provided by operating activities		620			628

Cash flows from investing activities
Capital expenditures		(374	)		(274	)
Changes in intercompany money pool		(1	)		5
Change in restricted cash		(1	)		2
Other investing activities		8			8

Net cash flows used in investing activities		(368	)		(259	)

Cash flows from financing activities
Payment of accounts receivable agreement		(210	)		—
Issuance of long-term debt		550			350
Dividends paid on common stock		(248	)		(258	)
Dividends paid on preferred securities		(1	)		(3	)
Redemption of preferred securities		(93	)		—
Other financing activities		(3	)		(4	)

Net cash flows (used in) provided by financing activities		(5	)		85

Increase in cash and cash equivalents		247			454
Cash and cash equivalents at beginning of period		362			194

Cash and cash equivalents at end of period	$	609		$	648

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2013		December 31, 2012
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	609	$	362
Restricted cash and cash equivalents		1		—
Accounts receivable, net ($0 and $289 gross accounts receivable pledged as collateral as of September 30, 2013 and December 31, 2012, respectively)
Customer		250		364
Other		116		161
Inventories, net
Fossil fuel		58		65
Materials and supplies		21		19
Deferred income taxes		48		40
Receivable from Exelon intercompany money pool		1		—
Prepaid utility taxes		38		21
Regulatory assets		22		32
Other		46		30

Total current assets		1,210		1,094

Property, plant and equipment, net		6,270		6,078
Deferred debits and other assets
Regulatory assets		1,419		1,378
Investments		22		22
Investments in affiliates		8		8
Receivable from affiliates		410		360
Prepaid pension asset		368		373
Other		38		40

Total deferred debits and other assets		2,265		2,181

Total assets	$	9,745	$	9,353

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2013		December 31, 2012
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term notes payable — accounts receivable agreement	$	—	$	210
Long-term debt due within one year		300		300
Accounts payable		249		244
Accrued expenses		91		82
Payables to affiliates		51		76
Customer deposits		49		51
Regulatory liabilities		111		169
Other		28		26

Total current liabilities		879		1,158

Long-term debt		2,196		1,647
Long-term debt to financing trusts		184		184
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		2,440		2,331
Asset retirement obligations		29		29
Non-pension postretirement benefits obligations		301		284
Regulatory liabilities		592		538
Other		105		113

Total deferred credits and other liabilities		3,467		3,295

Total liabilities		6,726		6,284

Commitments and contingencies
Preferred securities		—		87
Shareholder's equity
Common stock		2,388		2,388
Retained earnings		630		593
Accumulated other comprehensive income, net		1		1

Total shareholder's equity		3,019		2,982

Total liabilities and shareholders' equity	$	9,745	$	9,353

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(In millions)	Common Stock		Retained Earnings			Accumulated Other Comprehensive Income, net		Total Shareholders’ Equity
Balance, December 31, 2012	$	2,388	$	593		$	1	$	2,982
Net income		—		292			—		292
Common stock dividends		—		(248	)		—		(248	)
Preferred security dividends		—		(1	)		—		(1	)
Redemption of preferred securities		—		(6	)		—		(6	)

Balance, September 30, 2013	$	2,388	$	630		$	1	$	3,019

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2013			2012			2013			2012
Operating revenues
Operating revenues	$	735		$	716		$	2,261		$	2,023
Operating revenues from affiliates		2			4			10			9

Total operating revenues		737			720			2,271			2,032

Operating expenses
Purchased power and fuel		202			253			703			747
Purchased power from affiliate		144			120			356			296
Operating and maintenance		125			172			391			460
Operating and maintenance from affiliates		21			29			59			97
Depreciation and amortization		78			68			252			218
Taxes other than income		53			48			162			143

Total operating expenses		623			690			1,923			1,961

Operating income		114			30			348			71

Other income and (deductions)
Interest expense		(29	)		(35	)		(94	)		(110	)
Other, net		4			5			13			18

Total other income and (deductions)		(25	)		(30	)		(81	)		(92	)

Income (loss) before income taxes		89			—			267			(21	)
Income taxes		36			—			107			(7	)

Net income (loss)		53			—			160			(14	)
Preference stock dividends		3			4			10			10

Net income (loss) attributable to common shareholder		50			(4	)		150			(24	)

Comprehensive income (loss)	$	53		$	—		$	160		$	(14	)

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2013			2012
Cash flows from operating activities
Net (loss) income	$	160		$	(14	)
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Depreciation, amortization and accretion		252			218
Deferred income taxes and amortization of investment tax credits		105			101
Other non-cash operating activities		105			148
Changes in assets and liabilities:
Accounts receivable		(28	)		—
Receivables from and payables to affiliates, net		(12	)		2
Inventories		(15	)		21
Accounts payable, accrued expenses and other current liabilities		(5	)		4
Income taxes		6			(50	)
Pension and non-pension postretirement benefit contributions		(16	)		(13	)
Other assets and liabilities		(119	)		(77	)

Net cash flows provided by operating activities		433			340

Cash flows from investing activities
Capital expenditures		(391	)		(419	)
Change in restricted cash		(20	)		(19	)
Other investing activities		2			8

Net cash flows used in investing activities		(409	)		(430	)

Cash flows from financing activities
Changes in short-term debt		40			—
Issuance of long-term debt		300			250
Repayment of long-term debt		(433	)		(141	)
Dividends paid on preference stock		(10	)		(10	)
Contributions from parent		—			66
Other financing activities		(3	)		(3	)

Net cash flows (used in) provided by financing activities		(106	)		162

Increase (decrease) in cash and cash equivalents		(82	)		72
Cash and cash equivalents at beginning of period		89			49

Cash and cash equivalents at end of period	$	7		$	121

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2013		December 31, 2012
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	7	$	89
Restricted cash and cash equivalents of variable interest entity		50		30
Accounts receivable, net
Customer		404		409
Other		132		111
Income taxes receivable		—		3
Inventories, net
Gas held in storage		61		51
Materials and supplies		36		31
Deferred income taxes		5		1
Prepaid utility taxes		76		57
Regulatory assets		184		190
Other		7		8

Total current assets		962		980

Property, plant and equipment, net		5,713		5,498
Deferred debits and other assets
Regulatory assets		509		522
Investments		5		5
Investments in affiliates		8		8
Prepaid pension asset		434		467
Other		26		26

Total deferred debits and other assets		982		1,028

Total assets	$	7,657	$	7,506

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS


(In millions)	September 30, 2013		December 31, 2012
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	40	$	—
Long-term debt due within one year		—		400
Long-term debt of variable interest entity due within one year		69		67
Accounts payable		184		195
Accrued expenses		127		106
Deferred income taxes		9		—
Payables to affiliates		54		65
Customer deposits		72		71
Regulatory liabilities		31		29
Other		58		47

Total current liabilities		644		980

Long-term debt		1,746		1,446
Long-term debt to financing trust		258		258
Long-term debt of variable interest entity		230		265
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		1,759		1,658
Asset retirement obligations		7		8
Non-pension postretirement benefits obligations		221		229
Regulatory liabilities		218		214
Other		66		90

Total deferred credits and other liabilities		2,271		2,199

Total liabilities		5,149		5,148

Commitments and contingencies
Shareholders’ equity
Common stock		1,360		1,360
Retained earnings		958		808

Total shareholder's equity		2,318		2,168

Preference stock not subject to mandatory redemption		190		190

Total equity		2,508		2,358

Total liabilities and shareholders’ equity	$	7,657	$	7,506

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(In millions)	Common Stock		Retained Earnings			Total Shareholders’ Equity			Preference stock not subject to mandatory redemption		Total Equity
Balance, December 31, 2012	$	1,360	$	808		$	2,168		$	190	$	2,358
Net income		—		160			160			—		160
Preference stock dividends		—		(10	)		(10	)		—		(10	)

Balance, September 30, 2013	$	1,360	$	958		$	2,318		$	190	$	2,508

See the Combined Notes to Consolidated Financial Statements

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data, unless otherwise noted)

1. Basis of Presentation (Exelon, Generation, ComEd, PECO and BGE)

Exelon is a utility services holding company engaged through its principal subsidiaries in the energy generation and energy distribution businesses. Prior to March 12, 2012, Exelon’s principal, wholly owned subsidiaries included ComEd, PECO and Generation. On March 12, 2012, Constellation merged into Exelon with Exelon continuing as the surviving corporation pursuant to the transactions contemplated by the Agreement and Plan of Merger (the “Merger Agreement”). As a result of the merger transaction, Generation now includes the former Constellation generation and customer supply operations. BGE, formerly Constellation’s regulated utility subsidiary, is now a subsidiary of Exelon. Refer to Note 4 — Merger and Acquisitions for further information regarding the merger transaction.

The energy generation business includes:

•

Generation: Physical delivery and marketing of owned and contracted electric generation capacity and provision of renewable and other energy-related products and services, and natural gas exploration and production activities. Generation has six reportable segments consisting of the Mid-Atlantic, Midwest, New England, New York, ERCOT and Other regions.

The energy delivery businesses include:

•

ComEd: Purchase and regulated retail sale of electricity and the provision of distribution and transmission services in northern Illinois, including the City of Chicago.

•

PECO: Purchase and regulated retail sale of electricity and the provision of distribution and transmission services in southeastern Pennsylvania, including the City of Philadelphia, and the purchase and regulated retail sale of natural gas and the provision of distribution services in the Pennsylvania counties surrounding the City of Philadelphia.

•

BGE: Purchase and regulated retail sale of electricity and the provision of distribution and transmission services in central Maryland, including the City of Baltimore, and the purchase and regulated retail sale of natural gas and the provision of distribution services in central Maryland, including the City of Baltimore.

For financial statement purposes, beginning on March 12, 2012, disclosures that solely relate to Constellation or BGE activities now also apply to Exelon, unless otherwise noted. When appropriate, Exelon, Generation, ComEd, PECO and BGE are named specifically for their related activities and disclosures.

Exelon did not apply push-down accounting to BGE. As a result, BGE continues to maintain its reporting requirements as an SEC registrant. The information disclosed for BGE represents the activity of the standalone entity for the three and nine months ended September 30, 2013 and 2012 and the financial position as of September 30, 2013 and December 31, 2012. However, for Exelon’s financial reporting, Exelon is reporting BGE activity for the three and nine months ended September 30, 2013 and from March 12, 2012 through September 30, 2012 and the financial position as of September 30, 2013 and December 31, 2012.

Each of the Registrant’s Consolidated Financial Statements includes the accounts of its subsidiaries. All intercompany transactions have been eliminated.

For the nine months ended September 30, 2013, BGE recorded a $2 million correcting adjustment to decrease amortization expense related to regulatory assets that were originally recorded during 2012 and a $4 million correcting adjustment to decrease operating and maintenance expense for an overstatement of BGE’s life insurance obligation related to post-employment benefits in prior years. Exelon and BGE have concluded that these correcting adjustments are not material to their respective results of operations or cash flows for the nine

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Dollars in millions, except per share data, unless otherwise noted)

months ended September 30, 2013 or any prior period presented. Exelon and BGE do not expect these correcting adjustments to have a material impact on their respective results of operations or cash flows for the year ended December 31, 2013.

The accompanying consolidated financial statements as of September 30, 2013 and 2012 and for the three and nine months then ended are unaudited but, in the opinion of the management of each Registrant include all adjustments that are considered necessary for a fair statement of the Registrants’ respective financial statements in accordance with GAAP. All adjustments are of a normal, recurring nature, except as otherwise disclosed. The December 31, 2012 Consolidated Balance Sheets were obtained from audited financial statements. Certain prior year amounts in Exelon’s and BGE’s Consolidated Statements of Cash Flows, Exelon’s, Generation's and BGE’s Consolidated Statements of Operations and Comprehensive Income and in Exelon’s, Generation's, ComEd’s, and BGE’s Consolidated Balance Sheets have been reclassified between line items for comparative purposes. BGE recorded an adjustment to its Consolidated Statement of Cash Flows for the nine months ended September 30, 2012 to reflect the change in operating cash flows and capital expenditures related to amounts not paid of approximately $17 million. The reclassifications did not materially affect any of the Registrants’ net income or cash flows from operating or investing activities. Financial results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for fiscal year ended December 31, 2013. These Combined Notes to Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These notes should be read in conjunction with the Notes to Combined Consolidated Financial Statements of all Registrants included in ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA of their respective 2012 Form 10-K Reports.

2. New Accounting Pronouncements (Exelon, Generation, ComEd, PECO and BGE)

The following recently issued accounting standards were adopted by or are effective for the Registrants during 2013.

Presentation of Items Reclassified out of Accumulated Other Comprehensive Income

In February 2013, the FASB issued authoritative guidance requiring entities to present either in the notes or parenthetically on the face of the financial statements, reclassifications from each component of accumulated other comprehensive income and the affected income statement line items. Entities only need to disclose the affected income statement line item for components reclassified to net income in their entirety; otherwise, a cross-reference to the related note should be provided. This guidance was effective for the Registrants for periods beginning after December 15, 2012 and was required to be applied prospectively. As this guidance provides only disclosure requirements, the adoption of this standard did not impact the Registrants’ results of operations, cash flows or financial positions. See Note 16 — Changes in Accumulated Other Comprehensive Income for the new disclosures.

Disclosures About Offsetting Assets and Liabilities

In December 2011, the FASB issued (and amended in January 2013), authoritative guidance requiring entities to disclose both gross and net information about recognized derivative instruments, including bifurcated embedded derivatives, repurchase and reverse repurchase agreements, and securities borrowing or lending transactions that are offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the balance sheet. This guidance was effective for the Registrants for periods beginning on or after January 1, 2013 and is required to be applied retrospectively. This guidance is primarily applicable to certain derivative transactions for Exelon and Generation. As this guidance provides only disclosure requirements, the adoption of this standard did not impact the Registrants’ results of operations, cash flows or financial positions. See No