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, 2014

¨	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, 2014 was:


Exelon Corporation Common Stock, without par value		859,464,772
Exelon Generation Company, LLC		not applicable
Commonwealth Edison Company Common Stock, $12.50 par value		127,016,934
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. Mergers, Acquisitions, and Dispositions		41

	5. Regulatory Matters		44

	6. Investment in Constellation Energy Nuclear Group, LLC		61

	7. Impairment of Long-Lived Assets		65

	8. Fair Value of Financial Assets and Liabilities		67


		Page No.

	9. Derivative Financial Instruments		84

	10. Debt and Credit Agreements		101

	11. Income Taxes		107

	12. Nuclear Decommissioning		110

	13. Retirement Benefits		115

	14. Severance		118

	15. Changes in Accumulated Other Comprehensive Income		121

	16. Common Stock		126

	17. Earnings Per Share and Equity		127

	18. Commitments and Contingencies		128

	19. Supplemental Financial Information		147

	20. Segment Information		153

	21. Subsequent Events		158

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		159

	Exelon Corporation		159

	General		159

	Executive Overview		160

	Critical Accounting Policies and Estimates		181

	Results of Operations		181

	Liquidity and Capital Resources		209

	Contractual Obligations and Off-Balance Sheet Arrangements		220

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		222

ITEM 4.	CONTROLS AND PROCEDURES		231

PART II.	OTHER INFORMATION		232

ITEM 1.	LEGAL PROCEEDINGS		232

ITEM 1A.	RISK FACTORS		232

ITEM 4.	MINE SAFETY DISCLOSURES		236

ITEM 6.	EXHIBITS		236

SIGNATURES			238

	Exelon Corporation		238

	Exelon Generation Company, LLC		238

	Commonwealth Edison Company		239

	PECO Energy Company		239

	Baltimore Gas and Electric Company		239

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.
Antelope Valley		Antelope Valley Solar Ranch One
Exelon Transmission Company		Exelon Transmission Company, LLC
Exelon Wind		Exelon Wind, LLC and Exelon Generation Acquisition Company, LLC
Ventures		Exelon Ventures Company, LLC
AmerGen		AmerGen Energy Company, LLC
BondCo		RSB BondCo LLC
PEC L.P.		PECO Energy Capital, L.P.
PECO Trust III		PECO Capital Trust III
PECO Trust IV		PECO Energy Capital Trust IV
PETT		PECO Energy Transition Trust
Registrants		Exelon, Generation, ComEd, PECO and BGE, collectively

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
Note “—” of the Exelon 2013 Form 10-K		Reference to specific Combined Note to Consolidated Financial Statements within Exelon’s 2013 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
AMP		Advanced Metering Program
ARC		Asset Retirement Cost
ARO		Asset Retirement Obligation
ARP		Title IV Acid Rain Program
ARRA of 2009		American Recovery and Reinvestment Act of 2009
Block contracts		Forward Purchase Energy Block Contracts
CAIR		Clean Air Interstate Rule
CAISO		California ISO
CAMR		Federal Clean Air Mercury Rule

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
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
CPI		Consumer Price Index
CPUC		California Public Utilities Commission
CSAPR		Cross-State Air Pollution Rule
CTC		Competitive Transition Charge
D.C. Circuit Court		United States Court of Appeals for the District of Columbia Circuit
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
EGTP		ExGen Texas Power, LLC
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

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
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
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
PHI		Pepco Holdings, Inc.
PJM		PJM Interconnection, LLC
POLR		Provider of Last Resort
POR		Purchase of Receivables
PPA		Power Purchase Agreement

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
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
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
SGIG		Smart Grid Investment Grant
SGIP		Smart Grid Initiative Program
SILO		Sale-In, Lease-Out
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
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 Exelon Corporation, Exelon Generation Company, LLC, Commonwealth Edison Company, PECO Energy Company and Baltimore Gas and Electric Company (Registrants). Information contained herein relating to any individual Registrant is filed by such Registrant on its own behalf. No Registrant makes any representation as to information relating to any other Registrant.

FORWARD-LOOKING STATEMENTS

This Report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by the Registrants include those factors discussed herein, as well as the items discussed in (1) Exelon’s 2013 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 22; (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)	2014			2013			2014			2013
Operating revenues	$	6,912		$	6,502		$	20,173		$	18,725
Operating expenses
Purchased power and fuel		2,591			2,404			8,943			7,199
Purchased power and fuel from affiliates		57			339			456			944
Operating and maintenance		1,982			1,735			6,005			5,391
Depreciation and amortization		577			530			1,732			1,606
Taxes other than income		306			277			887			825

Total operating expenses		5,513			5,285			18,023			15,965

Equity in earnings (loss) of unconsolidated affiliates		1			37			(20	)		7
Gain on consolidation of CENG		—			—			261			—

Operating income		1,400			1,254			2,391			2,767

Other income and (deductions)
Interest expense, net		(247	)		(228	)		(691	)		(1,091	)
Interest expense to affiliates, net		(11	)		(6	)		(31	)		(19	)
Other, net		354			155			702			311

Total other income and (deductions)		96			(79	)		(20	)		(799	)

Income before income taxes		1,496			1,175			2,371			1,968
Income taxes		422			439			646			733

Net income		1,074			736			1,725			1,235
Net income (loss) attributable to noncontrolling interest, preferred security dividends and redemption and preference stock dividends		81			(2	)		121			11

Net income attributable to common shareholders		993			738			1,604			1,224

Comprehensive income, net of income taxes
Net income		1,074			736			1,725			1,235
Other comprehensive income (loss), net of income taxes
Pension and non-pension postretirement benefit plans:
Prior service (benefit) cost reclassified to periodic benefit cost		(11	)		1			(18	)		—
Actuarial loss reclassified to periodic cost		38			49			109			151
Pension and non-pension postretirement benefit plans valuation adjustment		(8	)		(8	)		240			69
Deferred compensation unit valuation adjustment		—			—			—			10
Unrealized (loss) on cash flow hedges		(19	)		(46	)		(92	)		(169	)
Unrealized gain (loss) on equity investments		(3	)		16			8			51
Unrealized (loss) on foreign currency translation		(5	)		—			(6	)		(5	)
Unrealized (loss) on marketable securities		(3	)		—			(2	)		(1	)
Reversal of CENG equity method AOCI		—			—			(116	)		—

Other comprehensive income (loss)		(11	)		12			123			106

Comprehensive income	$	1,063		$	748		$	1,848		$	1,341

Average shares of common stock outstanding:
Basic		861			857			860			856
Diluted		863			860			863			860


Earnings per average common share:
Basic	$	1.15		$	0.86		$	1.87		$	1.43
Diluted	$	1.15		$	0.86		$	1.86		$	1.42

Dividends per common share	$	0.31		$	0.31		$	0.93		$	1.15

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)	2014			2013
Cash flows from operating activities
Net income	$	1,725		$	1,235
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		2,856			2,844
Impairment of long-lived assets		162			171
Gain on consolidation of CENG		(268	)		—
Gain on sale of assets		(356	)		(17	)
Deferred income taxes and amortization of investment tax credits		459			(164	)
Net fair value changes related to derivatives		522			(229	)
Net realized and unrealized gains on nuclear decommissioning trust fund investments		(141	)		(95	)
Other non-cash operating activities		698			584
Changes in assets and liabilities:
Accounts receivable		198			54
Inventories		(316	)		(103	)
Accounts payable, accrued expenses and other current liabilities		(322	)		(243	)
Option premiums received (paid), net		21			(38	)
Counterparty collateral posted, net		(615	)		(73	)
Income taxes		72			863
Pension and non-pension postretirement benefit contributions		(516	)		(360	)
Other assets and liabilities		(536	)		(35	)

Net cash flows provided by operating activities		3,643			4,394

Cash flows from investing activities
Capital expenditures		(4,114	)		(3,887	)
Proceeds from nuclear decommissioning trust fund sales		5,464			3,344
Investment in nuclear decommissioning trust funds		(5,550	)		(3,518	)
Acquisition of businesses		(67	)		—
Proceeds from sale of long-lived assets		660			32
Proceeds from termination of direct financing lease investment		335			—
Proceeds from sale of investments		7			20
Purchases of investments		(3	)		(3	)
Cash consolidated from CENG		129			—
Change in restricted cash		(151	)		(23	)
Other investing activities		(86	)		65

Net cash flows used in investing activities		(3,376	)		(3,970	)

Cash flows from financing activities
Payment of accounts receivable agreement		—			(210	)
Changes in short-term borrowings		236			205
Issuance of long-term debt		3,212			2,031
Retirement of long-term debt		(1,214	)		(1,156	)
Redemption of preferred securities		—			(93	)
Distributions to noncontrolling interest of consolidated VIE		(415	)		—
Dividends paid on common stock		(799	)		(981	)
Proceeds from employee stock plans		25			40
Other financing activities		(158	)		(102	)

Net cash flows provided by (used in) financing activities		887			(266	)

Increase in cash and cash equivalents		1,154			158
Cash and cash equivalents at beginning of period		1,609			1,486

Cash and cash equivalents at end of period	$	2,763		$	1,644

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	2,763	$	1,609
Restricted cash and cash equivalents		318		167
Accounts receivable, net
Customer		2,815		2,981
Other		898		1,175
Mark-to-market derivative assets		744		727
Unamortized energy contract assets		225		374
Inventories, net
Fossil fuel		546		276
Materials and supplies		1,045		829
Deferred income taxes		38		573
Regulatory assets		774		760
Assets held for sale		649		14
Other		1,022		652

Total current assets		11,837		10,137

Property, plant and equipment, net		51,630		47,330
Deferred debits and other assets
Regulatory assets		5,589		5,910
Nuclear decommissioning trust funds		10,349		8,071
Investments		562		1,165
Investments in affiliates		26		22
Investment in CENG		—		1,925
Goodwill		2,672		2,625
Mark-to-market derivative assets		524		607
Unamortized energy contracts assets		571		710
Pledged assets for Zion Station decommissioning		365		458
Other		1,139		964

Total deferred debits and other assets		21,797		22,457

Total assets^(a)	$	85,264	$	79,924

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2014			December 31, 2013
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	562		$	341
Long-term debt due within one year		2,064			1,509
Accounts payable		2,502			2,484
Accrued expenses		1,462			1,633
Payables to affiliates		22			116
Deferred income taxes		26			40
Regulatory liabilities		364			327
Mark-to-market derivative liabilities		249			159
Unamortized energy contract liabilities		195			261
Other		985			858

Total current liabilities		8,431			7,728

Long-term debt		19,200			17,623
Long-term debt to financing trusts		648			648
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		13,181			12,905
Asset retirement obligations		7,003			5,194
Pension obligations		1,809			1,876
Non-pension postretirement benefit obligations		1,459			2,190
Spent nuclear fuel obligation		1,021			1,021
Regulatory liabilities		4,593			4,388
Mark-to-market derivative liabilities		291			300
Unamortized energy contract liabilities		214			266
Payable for Zion Station decommissioning		260			305
Other		2,104			2,540

Total deferred credits and other liabilities		31,935			30,985

Total liabilities^(a)		60,214			56,984

Commitments and contingencies
Shareholders’ equity
Common stock (No par value, 2,000 shares authorized, 859 shares and 857 shares outstanding at September 30, 2014 and December 31, 2013, respectively)		16,679			16,741
Treasury stock, at cost (35 shares at both September 30, 2014 and December 31, 2013)		(2,327	)		(2,327	)
Retained earnings		11,160			10,358
Accumulated other comprehensive loss, net		(1,917	)		(2,040	)

Total shareholders’ equity		23,595			22,732
BGE preference stock not subject to mandatory redemption		193			193
Noncontrolling interest		1,262			15

Total equity		25,050			22,940

Total liabilities and shareholders’ equity	$	85,264		$	79,924

(a)

Exelon’s consolidated assets include $7,773 million and $1,755 million at September 30, 2014 and December 31, 2013, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Exelon’s consolidated liabilities include $2,594 million and $658 million at September 30, 2014 and December 31, 2013, 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

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 Interest			Preferred and Preference Stock			Total Equity
Balance, December 31, 2013		892,034	$	16,741		$	(2,327	)	$	10,358		$	(2,040	)	$	15		$	193		$	22,940
Net income		—		—			—			1,604			—			111			10			1,725
Long-term incentive plan activity		1,439		49			—			—			—			—			—			49
Employee stock purchase plan issuances		735		25			—			—			—			—			—			25
Tax benefit on stock compensation		—		(7	)		—			—			—			—			—			(7	)
Acquisition of noncontrolling interest		—		—			—			—			—			3			—			3
Common stock dividends		—		—			—			(802	)		—			—			—			(802	)
Preferred and preference stock dividends		—		—			—			—			—			—			(10	)		(10	)
Fair value of financing contract payments		—		(131	)		—			—			—			—			—			(131	)
Noncontrolling interest established upon consolidation of CENG		—		—			—			—			—			1,548			—			1,548
Transfer of CENG pension and non-pension post retirement benefit obligations		—		2			—			—			—			—			—			2
Consolidated VIE dividend to noncontrolling interest		—		—			—			—			—			(415	)		—			(415	)
Reversal of CENG equity method AOCI, net of income taxes of $77		—		—			—			—			(116	)		—			—			(116	)
Other comprehensive income net of income taxes of $(154)		—		—			—			—			239			—			—			239

Balance, September 30, 2014		894,208	$	16,679		$	(2,327	)	$	11,160		$	(1,917	)	$	1,262		$	193		$	25,050

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)	2014			2013			2014			2013
Operating revenues
Operating revenues	$	4,300		$	3,871		$	11,944		$	10,729
Operating revenues from affiliates		112			384			647			1,129

Total operating revenues		4,412			4,255			12,591			11,858

Operating expenses
Purchased power and fuel		1,821			1,837			6,595			5,341
Purchased power and fuel from affiliates		59			342			476			953
Operating and maintenance		1,114			936			3,308			2,943
Operating and maintenance from affiliates		152			140			457			434
Depreciation and amortization		253			218			719			643
Taxes other than income		127			98			350			292

Total operating expenses		3,526			3,571			11,905			10,606

Equity in earnings (losses) of unconsolidated affiliates		1			37			(20	)		7
Gain on consolidation of CENG		—			—			261			—

Operating income		887			721			927			1,259

Other income and (deductions)
Interest expense		(77	)		(69	)		(224	)		(210	)
Interest expense to affiliates, net		(12	)		(13	)		(37	)		(47	)
Other, net		342			134			661			229

Total other income and (deductions)		253			52			400			(28	)

Income before income taxes		1,140			773			1,327			1,231
Income taxes		291			288			290			436

Net income		849			485			1,037			795
Net income (loss) attributable to noncontrolling interests		78			(5	)		111			(6	)

Net income attributable to membership interest		771			490			926			801

Comprehensive income, net of income taxes
Net income		849			485			1,037			795
Other comprehensive income (loss), net of income taxes
Unrealized loss on cash flow hedges		(16	)		(49	)		(86	)		(316	)
Unrealized gain (loss) on equity investments		(3	)		16			8			52
Unrealized gain (loss) on foreign currency translation		(5	)		1			(6	)		(5	)
Unrealized loss on marketable securities		(2	)		—			(3	)		(1	)
Reversal of CENG equity method AOCI		—			—			(116	)		—

Other comprehensive loss		(26	)		(32	)		(203	)		(270	)

Comprehensive income	$	823		$	453		$	834		$	525

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)	2014			2013
Cash flows from operating activities
Net income	$	1,037		$	795
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		1,853			1,937
Impairment of long-lived assets		138			157
Gain on consolidation of CENG		(268	)		—
Gain on sale of assets		(355	)		(13	)
Deferred income taxes and amortization of investment tax credits		154			183
Net fair value changes related to derivatives		509			(222	)
Net realized and unrealized gains on nuclear decommissioning trust fund investments		(141	)		(95	)
Other non-cash operating activities		251			231
Changes in assets and liabilities:
Accounts receivable		153			57
Receivables from and payables to affiliates, net		72			2
Inventories		(286	)		(81	)
Accounts payable, accrued expenses and other current liabilities		(311	)		(162	)
Option premiums received (paid), net		21			(38	)
Counterparty collateral paid, net		(634	)		(123	)
Income taxes		172			315
Pension and non-pension postretirement benefit contributions		(214	)		(123	)
Other assets and liabilities		(367	)		(163	)

Net cash flows provided by operating activities		1,784			2,657

Cash flows from investing activities
Capital expenditures		(1,961	)		(1,995	)
Proceeds from nuclear decommissioning trust fund sales		5,464			3,344
Investment in nuclear decommissioning trust funds		(5,550	)		(3,518	)
Acquisition of businesses		(67	)		—
Proceeds from sale of long-lived assets		660			32
Change in restricted cash		(116	)		(30	)
Changes in Exelon intercompany money pool		44			—
Cash consolidated from CENG		129			—
Other investing activities		(34	)		18

Net cash flows used in investing activities		(1,431	)		(2,149	)

Cash flows from financing activities
Change in short-term borrowings		7			12
Issuance of long-term debt		1,112			831
Retirement of long-term debt		(552	)		(471	)
Distribution to member		(440	)		(550	)
Distributions to noncontrolling interest of consolidated VIE		(415	)		—
Contribution from member		55			—
Other financing activities		(67	)		(73	)

Net cash flows used in financing activities		(300	)		(251	)

Increase in cash and cash equivalents		53			257
Cash and cash equivalents at beginning of period		1,258			671

Cash and cash equivalents at end of period	$	1,311		$	928

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	1,311	$	1,258
Restricted cash and cash equivalents		187		71
Accounts receivable, net
Customer		1,705		1,689
Other		325		353
Mark-to-market derivative assets		744		727
Receivables from affiliates		56		108
Receivable from Exelon intercompany money pool		—		44
Unamortized energy contract assets		225		374
Inventories, net
Fossil fuel		426		164
Materials and supplies		865		671
Deferred income taxes		144		475
Assets held for sale		649		14
Other		821		491

Total current assets		7,458		6,439

Property, plant and equipment, net		23,143		20,111
Deferred debits and other assets
Nuclear decommissioning trust funds		10,349		8,071
Investments		154		400
Investment in CENG		—		1,925
Goodwill		47		—
Mark-to-market derivative assets		507		600
Prepaid pension asset		1,711		1,873
Pledged assets for Zion Station decommissioning		365		458
Unamortized energy contract assets		571		710
Other		714		645

Total deferred debits and other assets		14,418		14,682

Total assets^(a)	$	45,019	$	41,232

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2014		December 31, 2013
	(Unaudited)
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings	$	14	$	22
Long-term debt due within one year		73		561
Long-term debt to affiliates due within one year		560		—
Accounts payable		1,318		1,322
Accrued expenses		840		976
Payables to affiliates		124		181
Deferred income taxes		1		25
Mark-to-market derivative liabilities		235		142
Unamortized energy contract liabilities		192		249
Other		478		389

Total current liabilities		3,835		3,867

Long-term debt		6,741		5,645
Long-term debt to affiliate		946		1,523
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		6,202		6,295
Asset retirement obligations		6,853		5,047
Non-pension postretirement benefit obligations		949		850
Spent nuclear fuel obligation		1,021		1,021
Payables to affiliates		2,850		2,740
Mark-to-market derivative liabilities		104		120
Unamortized energy contract liabilities		214		266
Payable for Zion Station decommissioning		260		305
Other		718		811

Total deferred credits and other liabilities		19,171		17,455

Total liabilities^(a)		30,693		28,490

Commitments and contingencies
Equity
Member’s equity
Membership interest		8,953		8,898
Undistributed earnings		4,099		3,613
Accumulated other comprehensive income, net		11		214

Total member’s equity		13,063		12,725
Noncontrolling interest		1,263		17

Total equity		14,326		12,742

Total liabilities and equity	$	45,019	$	41,232

(a)

Generation’s consolidated assets include $7,703 million and $1,695 million at September 30, 2014 and December 31, 2013, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Generation’s consolidated liabilities include $2,338 million and $362 million at September 30, 2014 and December 31, 2013, 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

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, 2013	$	8,898	$	3,613		$	214		$	17		$	12,742
Net income		—		926			—			111			1,037
Acquisition of noncontrolling interest		—		—			—			2			2
Allocation of tax benefit from member		55		—			—			—			55
Distribution to member		—		(440	)		—			—			(440	)
Noncontrolling interest established upon consolidation of CENG		—		—			—			1,548			1,548
Consolidated VIE dividend to noncontrolling interest		—		—			—			(415	)		(415	)
Reversal of CENG equity method AOCI, net of income taxes of $77		—		—			(116	)		—			(116	)
Other comprehensive loss, net of income taxes of $53		—		—			(87	)		—			(87	)

Balance, September 30, 2014	$	8,953	$	4,099		$	11		$	1,263		$	14,326

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)	2014			2013			2014			2013
Operating revenues
Operating revenues	$	1,221		$	1,155		$	3,482		$	3,393
Operating revenues from affiliates		1			1			2			2

Total operating revenues		1,222			1,156			3,484			3,395

Operating expenses
Purchased power		325			158			741			522
Purchased power from affiliate		1			143			174			409
Operating and maintenance		320			296			923			907
Operating and maintenance from affiliate		39			37			117			113
Depreciation and amortization		174			164			521			501
Taxes other than income		76			80			225			225

Total operating expenses		935			878			2,701			2,677

Operating income		287			278			783			718

Other income and (deductions)
Interest expense		(78	)		(71	)		(231	)		(493	)
Interest expense to affiliates, net		(3	)		(3	)		(10	)		(10	)
Other, net		4			7			14			18

Total other income and (deductions)		(77	)		(67	)		(227	)		(485	)

Income before income taxes		210			211			556			233
Income taxes		84			85			221			93

Net income	$	126		$	126		$	335		$	140

Comprehensive income	$	126		$	126		$	335		$	140

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)	2014			2013
Cash flows from operating activities
Net income	$	335		$	140
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		521			501
Deferred income taxes and amortization of investment tax credits		154			(152	)
Other non-cash operating activities		116			26
Changes in assets and liabilities:
Accounts receivable		(109	)		(21	)
Receivables from and payables to affiliates, net		(55	)		(32	)
Inventories		(12	)		(12	)
Accounts payable, accrued expenses and other current liabilities		59			48
Income taxes		15			262
Pension and non-pension postretirement benefit contributions		(237	)		(120	)
Other assets and liabilities		62			210

Net cash flows provided by operating activities		849			850

Cash flows from investing activities
Capital expenditures		(1,173	)		(1,074	)
Proceeds from sales of investments		7			5
Purchases of investments		(3	)		(3	)
Change in restricted cash		(2	)		(3	)
Other investing activities		23			33

Net cash flows used in investing activities		(1,148	)		(1,042	)

Cash flows from financing activities
Changes in short-term borrowings		344			153
Issuance of long-term debt		650			350
Retirement of long-term debt		(617	)		(252	)
Contributions from parent		168			—
Dividends paid on common stock		(230	)		(165	)
Other financing activities		(8	)		(4	)

Net cash flows provided by financing activities		307			82

Increase (Decrease) in cash and cash equivalents		8			(110	)
Cash and cash equivalents at beginning of period		36			144

Cash and cash equivalents at end of period	$	44		$	34

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	44	$	36
Restricted cash		4		2
Accounts receivable, net
Customer		486		451
Other		455		581
Receivables from affiliates		3		3
Inventories, net		121		109
Regulatory assets		330		329
Other		37		29

Total current assets		1,480		1,540

Property, plant and equipment, net		15,389		14,666
Deferred debits and other assets
Regulatory assets		928		933
Investments		—		5
Investments in affiliates		6		6
Goodwill		2,625		2,625
Receivables from affiliates		2,551		2,469
Prepaid pension asset		1,588		1,583
Other		278		291

Total deferred debits and other assets		7,976		7,912

Total assets	$	24,845	$	24,118

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2014		December 31, 2013
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	528	$	184
Long-term debt due within one year		260		617
Accounts payable		571		449
Accrued expenses		254		307
Payables to affiliates		28		83
Customer deposits		128		133
Regulatory liabilities		187		170
Deferred income taxes		117		16
Mark-to-market derivative liability		14		17
Other		73		72

Total current liabilities		2,160		2,048

Long-term debt		5,448		5,058
Long-term debt to financing trust		206		206
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		4,170		4,116
Asset retirement obligations		103		99
Non-pension postretirement benefits obligations		278		381
Regulatory liabilities		3,643		3,512
Mark-to-market derivative liability		164		176
Other		868		994

Total deferred credits and other liabilities		9,226		9,278

Total liabilities		17,040		16,590

Commitments and contingencies
Shareholders’ equity
Common stock		1,588		1,588
Other paid-in capital		5,362		5,190
Retained earnings		855		750

Total shareholders’ equity		7,805		7,528

Total liabilities and shareholders’ equity	$	24,845	$	24,118

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			Total Shareholders’ Equity
Balance, December 31, 2013	$	1,588	$	5,190	$	(1,639	)	$	2,389		$	7,528
Net income		—		—		335			—			335
Appropriation of retained earnings for future dividends		—		—		(335	)		335			—
Common stock dividends		—		—		—			(230	)		(230	)
Contribution from parent		—		168		—			—			168
Parent tax matter indemnification		—		4		—			—			4

Balance, September 30, 2014	$	1,588	$	5,362	$	(1,639	)	$	2,494		$	7,805

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)	2014			2013			2014			2013
Operating revenues
Operating revenues	$	693		$	727		$	2,342		$	2,294
Operating revenues from affiliates		—			1			1			1

Total operating revenues		693			728			2,343			2,295

Operating expenses
Purchased power and fuel		228			207			798			632
Purchased power from affiliate		27			82			162			321
Operating and maintenance		181			162			597			480
Operating and maintenance from affiliates		23			24			71			74
Depreciation and amortization		59			57			176			171
Taxes other than income		42			41			122			121

Total operating expenses		560			573			1,926			1,799

Operating income		133			155			417			496

Other income and (deductions)
Interest expense		(26	)		(26	)		(76	)		(77	)
Interest expense to affiliates, net		(3	)		(3	)		(9	)		(9	)
Other, net		2			1			5			4

Total other income and (deductions)		(27	)		(28	)		(80	)		(82	)

Income before income taxes		106			127			337			414
Income taxes		25			35			82			122

Net income		81			92			255			292
Preferred security dividends and redemption		—			—			—			7

Net income attributable to common shareholder	$	81		$	92		$	255		$	285

Comprehensive income	$	81		$	92		$	255		$	292

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)	2014			2013
Cash flows from operating activities
Net income	$	255		$	292
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		176			171
Deferred income taxes and amortization of investment tax credits		7			35
Other non-cash operating activities		70			84
Changes in assets and liabilities:
Accounts receivable		63			41
Receivables from and payables to affiliates, net		(20	)		(25	)
Inventories		5			4
Accounts payable, accrued expenses and other current liabilities		19			9
Income taxes		16			66
Pension and non-pension postretirement benefit contributions		(12	)		(10	)
Other assets and liabilities		(75	)		(47	)

Net cash flows provided by operating activities		504			620

Cash flows from investing activities
Capital expenditures		(461	)		(374	)
Changes in intercompany money pool		—			(1	)
Change in restricted cash		—			(1	)
Other investing activities		9			8

Net cash flows used in investing activities		(452	)		(368	)

Cash flows from financing activities
Payment of accounts receivable agreement		—			(210	)
Issuance of long-term debt		300			550
Contributions from parent		24			—
Dividends paid on common stock		(240	)		(248	)
Dividends paid on preferred securities		—			(1	)
Redemption of preferred securities		—			(93	)
Other financing activities		(7	)		(3	)

Net cash flows provided by (used in) financing activities		77			(5	)

Increase in cash and cash equivalents		129			247
Cash and cash equivalents at beginning of period		217			362

Cash and cash equivalents at end of period	$	346		$	609

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	346	$	217
Restricted cash and cash equivalents		2		2
Accounts receivable, net
Customer		258		360
Other		105		103
Receivables from affiliates		3		4
Inventories, net
Fossil fuel		52		60
Materials and supplies		24		21
Deferred income taxes		83		83
Prepaid utility taxes		44		3
Regulatory assets		21		17
Other		44		36

Total current assets		982		906

Property, plant and equipment, net		6,648		6,384
Deferred debits and other assets
Regulatory assets		1,520		1,448
Investments		23		23
Investments in affiliates		8		8
Receivable from affiliates		479		447
Prepaid pension asset		352		363
Other		39		38

Total deferred debits and other assets		2,421		2,327

Total assets	$	10,051	$	9,617

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2014		December 31, 2013
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Long-term debt due within one year	$	250	$	250
Accounts payable		303		285
Accrued expenses		121		106
Payables to affiliates		38		58
Customer deposits		53		49
Regulatory liabilities		79		106
Other		26		37

Total current liabilities		870		891

Long-term debt		2,246		1,947
Long-term debt to financing trusts		184		184
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		2,574		2,487
Asset retirement obligations		30		29
Non-pension postretirement benefits obligations		291		286
Regulatory liabilities		655		629
Other		97		99

Total deferred credits and other liabilities		3,647		3,530

Total liabilities		6,947		6,552

Commitments and contingencies
Shareholder’s equity
Common stock		2,439		2,415
Retained earnings		664		649
Accumulated other comprehensive income, net		1		1

Total shareholder’s equity		3,104		3,065

Total liabilities and shareholder’s equity	$	10,051	$	9,617

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY

(Unaudited)


(In millions)	Common Stock		Retained Earnings			Accumulated Other Comprehensive Income, net		Total Shareholder’s Equity
Balance, December 31, 2013	$	2,415	$	649		$	1	$	3,065
Net income		—		255			—		255
Common stock dividends		—		(240	)		—		(240	)
Allocation of tax benefit from parent	$	24	$	—		$	—	$	24

Balance, September 30, 2014	$	2,439	$	664		$	1	$	3,104

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)	2014			2013			2014			2013
Operating revenues
Operating revenues	$	694		$	735		$	2,383		$	2,261
Operating revenues from affiliates		3			2			21			10

Total operating revenues		697			737			2,404			2,271

Operating expenses
Purchased power and fuel		216			202			808			703
Purchased power from affiliate		81			144			286			356
Operating and maintenance		142			125			468			391
Operating and maintenance from affiliates		23			21			73			59
Depreciation and amortization		78			78			275			252
Taxes other than income		55			53			168			162

Total operating expenses		595			623			2,078			1,923

Operating income		102			114			326			348

Other income and (deductions)
Interest expense		(22	)		(25	)		(69	)		(82	)
Interest expense to affiliates, net		(4	)		(4	)		(12	)		(12	)
Other, net		4			4			14			13

Total other income and (deductions)		(22	)		(25	)		(67	)		(81	)

Income before income taxes		80			89			259			267
Income taxes		31			36			103			107

Net income		49			53			156			160
Preference stock dividends		3			3			10			10

Net income attributable to common shareholder	$	46		$	50		$	146		$	150

Comprehensive income	$	49		$	53		$	156		$	160

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)	2014			2013
Cash flows from operating activities
Net income	$	156		$	160
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		275			252
Deferred income taxes and amortization of investment tax credits		57			105
Other non-cash operating activities		129			105
Changes in assets and liabilities:
Accounts receivable		101			(28	)
Receivables from and payables to affiliates, net		(11	)		(12	)
Inventories		(21	)		(15	)
Accounts payable, accrued expenses and other current liabilities		(50	)		(5	)
Counterparty collateral received, net		16			—
Income taxes		53			6
Pension and non-pension postretirement benefit contributions		(13	)		(16	)
Other assets and liabilities		(67	)		(119	)

Net cash flows provided by operating activities		625			433

Cash flows from investing activities
Capital expenditures		(458	)		(391	)
Change in restricted cash		(37	)		(20	)
Other investing activities		15			2

Net cash flows used in investing activities		(480	)		(409	)

Cash flows from financing activities
Changes in short-term borrowings		(115	)		40
Issuance of long-term debt		—			300
Retirement of long-term debt		(35	)		(433	)
Dividends paid on preference stock		(10	)		(10	)
Other financing activities		11			(3	)

Net cash flows used in financing activities		(149	)		(106	)

Decrease in cash and cash equivalents		(4	)		(82	)
Cash and cash equivalents at beginning of period		31			89

Cash and cash equivalents at end of period	$	27		$	7

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	27	$	31
Restricted cash and cash equivalents		65		28
Accounts receivable, net
Customer		366		480
Other		90		114
Income taxes receivable		—		30
Inventories, net
Gas held in storage		68		53
Materials and supplies		34		28
Deferred income taxes		5		2
Prepaid utility taxes		2		57
Regulatory assets		206		181
Other		6		7

Total current assets		869		1,011

Property, plant and equipment, net		6,126		5,864
Deferred debits and other assets
Regulatory assets		500		524
Investments		4		5
Investments in affiliates		8		8
Prepaid pension asset		382		423
Other		26		26

Total deferred debits and other assets		920		986

Total assets^(a)	$	7,915	$	7,861

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2014		December 31, 2013
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	20	$	135
Long-term debt due within one year		72		70
Accounts payable		207		270
Accrued expenses		167		111
Deferred income taxes		52		27
Payables to affiliates		56		55
Customer deposits		93		76
Regulatory liabilities		45		48
Other		45		35

Total current liabilities		757		827

Long-term debt		1,904		1,941
Long-term debt to financing trust		258		258
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		1,805		1,773
Asset retirement obligations		18		19
Non-pension postretirement benefits obligations		213		217
Regulatory liabilities		199		204
Other		60		67

Total deferred credits and other liabilities		2,295		2,280

Total liabilities^(a)		5,214		5,306

Commitments and contingencies
Shareholders’ equity
Common stock		1,360		1,360
Retained earnings		1,151		1,005

Total shareholder’s equity		2,511		2,365

Preference stock not subject to mandatory redemption		190		190

Total equity		2,701		2,555

Total liabilities and shareholders’ equity	$	7,915	$	7,861

(a)

BGE’s consolidated assets include $50 million and $31 million at September 30, 2014 and December 31, 2013, respectively, of BGE’s consolidated VIE that can only be used to settle the liabilities of the VIE. BGE’s consolidated liabilities include $237 million and $269 million at September 30, 2014 and December 31, 2013, respectively, of BGE’s consolidated VIE for which the VIE creditors do not have recourse to BGE. See Note 3 — Variable Interest Entities.

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

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