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 June 30, 2016

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


Commission File Number	Name of Registrant; State or Other Jurisdiction of Incorporation; Address of Principal Executive Offices; and Telephone Number	IRS Employer Identification Number

1-16169	EXELON CORPORATION		23-2990190
	(a Pennsylvania corporation) 10 South Dearborn Street P.O. Box 805379 Chicago, Illinois 60680-5379 (800) 483-3220

333-85496	EXELON GENERATION COMPANY, LLC		23-3064219
	(a Pennsylvania limited liability company) 300 Exelon Way Kennett Square, Pennsylvania 19348-2473 (610) 765-5959

1-1839	COMMONWEALTH EDISON COMPANY		36-0938600
	(an Illinois corporation) 440 South LaSalle Street Chicago, Illinois 60605-1028 (312) 394-4321

000-16844	PECO ENERGY COMPANY		23-0970240
	(a Pennsylvania corporation) P.O. Box 8699 2301 Market Street Philadelphia, Pennsylvania 19101-8699 (215) 841-4000

1-1910	BALTIMORE GAS AND ELECTRIC COMPANY		52-0280210
	(a Maryland corporation) 2 Center Plaza 110 West Fayette Street Baltimore, Maryland 21201-3708 (410) 234-5000

001-31403	PEPCO HOLDINGS LLC		52-2297449
	(a Delaware limited liability company) 701 Ninth Street, N.W. Washington, District of Columbia 20068 (202) 872-2000

001-01072	POTOMAC ELECTRIC POWER COMPANY		53-0127880
	(a District of Columbia and Virginia corporation) 701 Ninth Street, N.W. Washington, District of Columbia 20068 (202) 872-2000

001-01405	DELMARVA POWER & LIGHT COMPANY (a Delaware and Virginia corporation) 500 North Wakefield Drive Newark, Delaware 19702 (202) 872-2000		51-0084283

001-03559	ATLANTIC CITY ELECTRIC COMPANY		21-0398280
	(a New Jersey corporation) 500 North Wakefield Drive Newark, Delaware 19702 (202) 872-2000

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

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

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


	Large Accelerated Filer	Accelerated Filer	Non-accelerated Filer	Smaller Reporting Company
Exelon Corporation	x
Exelon Generation Company, LLC			x
Commonwealth Edison Company			x
PECO Energy Company			x
Baltimore Gas and Electric Company			x
Pepco Holdings LLC	x
Potomac Electric Power Company			x
Delmarva Power & Light Company			x
Atlantic City Electric Company			x

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

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


Exelon Corporation Common Stock, without par value		922,872,373
Exelon Generation Company, LLC		not applicable
Commonwealth Edison Company Common Stock, $12.50 par value		127,017,042
PECO Energy Company Common Stock, without par value		170,478,507
Baltimore Gas and Electric Company Common Stock, without par value		1,000
Pepco Holdings LLC		not applicable
Potomac Electric Power Company Common Stock, $.01 par value		100
Delmarva Power & Light Company Common Stock, $2.25 par value		1,000
Atlantic City Electric Company Common Stock, $3.00 par value		8,546,017

TABLE OF CONTENTS


		Page No.

FILING FORMAT			9

FORWARD-LOOKING STATEMENTS			9

WHERE TO FIND MORE INFORMATION			9

PART I.	FINANCIAL INFORMATION		10

ITEM 1.	FINANCIAL STATEMENTS		10

	Exelon Corporation

	Consolidated Statements of Operations and Comprehensive Income		11

	Consolidated Statements of Cash Flows		12

	Consolidated Balance Sheets		13

	Consolidated Statement of Changes in Shareholders’ Equity		15

	Exelon Generation Company, LLC

	Consolidated Statements of Operations and Comprehensive Income		16

	Consolidated Statements of Cash Flows		17

	Consolidated Balance Sheets		18

	Consolidated Statement of Changes in Equity		20

	Commonwealth Edison Company

	Consolidated Statements of Operations and Comprehensive Income		21

	Consolidated Statements of Cash Flows		22

	Consolidated Balance Sheets		23

	Consolidated Statement of Changes in Shareholders’ Equity		25

	PECO Energy Company

	Consolidated Statements of Operations and Comprehensive Income		26

	Consolidated Statements of Cash Flows		27

	Consolidated Balance Sheets		28

	Consolidated Statement of Changes in Shareholder’s Equity		30

	Baltimore Gas and Electric Company

	Consolidated Statements of Operations and Comprehensive Income		31

	Consolidated Statements of Cash Flows		32

	Consolidated Balance Sheets		33

	Consolidated Statement of Changes in Shareholders’ Equity		35

	Pepco Holdings LLC

	Consolidated Statements of Operations and Comprehensive Income		36

	Consolidated Statements of Cash Flows		37

	Consolidated Balance Sheets		38

	Consolidated Statement of Changes in Equity		40


	Page No.

Potomac Electric Power Company

Statements of Operations and Comprehensive Income		41

Statements of Cash Flows		42

Balance Sheets		43

Statement of Changes in Shareholder’s Equity		45

Delmarva Power & Light Company

Statements of Operations and Comprehensive Income		46

Statements of Cash Flows		47

Balance Sheets		48

Statement of Changes in Shareholder’s Equity		50

Atlantic City Electric Company

Consolidated Statements of Operations and Comprehensive Income		51

Consolidated Statements of Cash Flows		52

Consolidated Balance Sheets		53

Consolidated Statement of Changes in Shareholder’s Equity		55

Combined Notes to Consolidated Financial Statements		56

1. Significant Accounting Policies		56

2. New Accounting Pronouncements		59

3. Variable Interest Entities		63

4. Mergers, Acquisitions and Dispositions		70

5. Regulatory Matters		77

6. Impairment of Long-Lived Assets		93

7. Early Nuclear Plant Retirements		95

8. Fair Value of Financial Assets and Liabilities		97

9. Derivative Financial Instruments		121

10. Debt and Credit Agreements		140

11. Income Taxes		144

12. Nuclear Decommissioning		150

13. Retirement Benefits		153

14. Severance		156

15. Changes in Accumulated Other Comprehensive Income		159

16. Mezzanine Equity		163

17. Earnings Per Share and Equity		164

18. Commitments and Contingencies		165

19. Supplemental Financial Information		179

20. Segment Information		186


		Page No.

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		196

	Exelon Corporation		196

	General		196

	Executive Overview		197

	Critical Accounting Policies and Estimates		221

	Results of Operations		221

	Liquidity and Capital Resources		268

	Contractual Obligations and Off-Balance Sheet Arrangements		280

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		281

ITEM 4.	CONTROLS AND PROCEDURES		290

PART II.	OTHER INFORMATION		292

ITEM 1.	LEGAL PROCEEDINGS		292

ITEM 1A.	RISK FACTORS		292

ITEM 4.	MINE SAFETY DISCLOSURES		293

ITEM 6.	EXHIBITS		293

SIGNATURES			296

	Exelon Corporation		296

	Exelon Generation Company, LLC		296

	Commonwealth Edison Company		296

	PECO Energy Company		297

	Baltimore Gas and Electric Company		297

	Pepco Holdings LLC		297

	Potomac Electric Power Company		298

	Delmarva Power & Light Company		298

	Atlantic City Electric Company		298

GLOSSARY OF TERMS AND ABBREVIATIONS


Exelon Corporation and Related Entities
Exelon		Exelon Corporation
Generation		Exelon Generation Company, LLC
ComEd		Commonwealth Edison Company
PECO		PECO Energy Company
BGE		Baltimore Gas and Electric Company
Pepco Holdings or PHI		Pepco Holdings LLC (formerly Pepco Holdings, Inc.)
Pepco		Potomac Electric Power Company
Pepco Energy Services or PES		Pepco Energy Services, Inc. and its subsidiaries
PCI		Potomac Capital Investment Corporation and its subsidiaries
DPL		Delmarva Power & Light Company
ACE		Atlantic City Electric Company
ACE Funding or ATF		Atlantic City Electric Transition Funding LLC
BSC		Exelon Business Services Company, LLC
PHISCO		PHI Service Company
Exelon Corporate		Exelon in its corporate capacity as a holding company
PHI Corporate		PHI in its corporate capacity as a holding company
CENG		Constellation Energy Nuclear Group, LLC
Constellation		Constellation Energy Group, Inc.
Antelope Valley		Antelope Valley Solar Ranch One
Exelon Transmission Company		Exelon Transmission Company, LLC
Exelon Wind		Exelon Wind, LLC and Exelon Generation Acquisition Company, LLC
Ventures		Exelon Ventures Company, LLC
AmerGen		AmerGen Energy Company, LLC
BondCo		RSB BondCo LLC
PEC L.P.		PECO Energy Capital, L.P.
PECO Trust III		PECO Capital Trust III
PECO Trust IV		PECO Energy Capital Trust IV
PETT		PECO Energy Transition Trust
Registrants		Exelon, Generation, ComEd, PECO, BGE, PHI, Pepco, DPL and ACE, collectively
Utility Registrants		ComEd, PECO, BGE, Pepco, DPL and ACE, collectively
Legacy PHI		PHI, Pepco, DPL and ACE, collectively


Other Terms and Abbreviations
Note “—” of the Exelon 2015 Form 10-K		Reference to specific Combined Note to Consolidated Financial Statements within Exelon’s 2015 Annual Report on Form 10-K
Note “—” of the PHI 2015 Form 10-K		Reference to specific Note to Consolidated Financial Statements within Legacy PHI’s 2015 Annual Report on Form 10-K
1998 restructuring settlement		PECO’s 1998 settlement of its restructuring case mandated by the Competition Act
Act 11		Pennsylvania Act 11 of 2012
Act 129		Pennsylvania Act 129 of 2008
AEC		Alternative Energy Credit that is issued for each megawatt hour of generation from a qualified alternative energy source
AEPS		Pennsylvania Alternative Energy Portfolio Standards
AEPS Act		Pennsylvania Alternative Energy Portfolio Standards Act of 2004, as amended
AESO		Alberta Electric Systems Operator

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
AFUDC		Allowance for Funds Used During Construction
ALJ		Administrative Law Judge
AMI		Advanced Metering Infrastructure
AMP		Advanced Metering Program
ARC		Asset Retirement Cost
ARO		Asset Retirement Obligation
ARP		Title IV Acid Rain Program
ARRA of 2009		American Recovery and Reinvestment Act of 2009
ASC		Accounting Standards Codification
BGS		Basic Generation Service (the supply of electricity by ACE to retail customers in New Jersey who have not elected to purchase electricity from a competitive supplier)
Block contracts		Forward Purchase Energy Block Contracts
CAIR		Clean Air Interstate Rule
CAISO		California ISO
CAMR		Federal Clean Air Mercury Rule
CERCLA		Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
CFL		Compact Fluorescent Light
Clean Air Act		Clean Air Act of 1963, as amended
Clean Water Act		Federal Water Pollution Control Amendments of 1972, as amended
Competition Act		Pennsylvania Electricity Generation Customer Choice and Competition Act of 1996
Conectiv		Conectiv, LLC, a wholly owned subsidiary of PHI and the parent of DPL and ACE
Conectiv Energy		Conectiv Energy Holdings, Inc. and substantially all of its subsidiaries, which were sold to Calpine in July 2010
Contract EDCs		Pepco, DPL and BGE, the Maryland utilities required by the MDPSC to enter into a contract for new generation
CPI		Consumer Price Index
CPUC		California Public Utilities Commission
CSAPR		Cross-State Air Pollution Rule
CTA		Consolidated tax adjustment
CTC		Competitive Transition Charge
D.C. Circuit Court		United States Court of Appeals for the District of Columbia Circuit
DCPSC		District of Columbia Public Service Commission
DC PLUG		District of Columbia Power Line Undergrounding
Default Electricity Supply		The supply of electricity by PHI’s electric utility subsidiaries at regulated rates to retail customers who do not elect to purchase electricity from a competitive supplier, and which, depending on the jurisdiction, is also known as Standard Offer Service or BGS
Default Electricity Supply Revenue		Revenue primarily from Default Electricity Supply
DOE		United States Department of Energy
DOJ		United States Department of Justice
DPSC		Delaware Public Service Commission
DRP		Direct Stock Purchase and Dividend Reinvestment Plan
DSP		Default Service Provider
DSP Program		Default Service Provider Program

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
EDCs		Electric distribution companies
EDF		Electricite de France SA and its subsidiaries
EE&C		Energy Efficiency and Conservation/Demand Response
EGS		Electric Generation Supplier
EGTP		ExGen Texas Power, LLC
EIMA		Energy Infrastructure Modernization Act (Illinois Senate Bill 1652 and Illinois House Bill 3036)
EmPower Maryland		A Maryland demand-side management program for Pepco and DPL
EPA		United States Environmental Protection Agency
ERCOT		Electric Reliability Council of Texas
ERISA		Employee Retirement Income Security Act of 1974, as amended
EROA		Expected Rate of Return on Assets
ESPP		Employee Stock Purchase Plan
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
FRCC		Florida Reliability Coordinating Council
FTC		Federal Trade Commission
GAAP		Generally Accepted Accounting Principles in the United States
GCR		Gas Cost Rate
GHG		Greenhouse Gas
GRT		Gross Receipts Tax
GSA		Generation Supply Adjustment
GWh		Gigawatt hour
HAP		Hazardous air pollutants
Health Care Reform Acts		Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act of 2010
HSR Act		The Hart-Scott-Rodino Antitrust Improvements Act of 1976
IBEW		International Brotherhood of Electrical Workers
ICC		Illinois Commerce Commission
ICE		Intercontinental Exchange
Illinois Act		Illinois Electric Service Customer Choice and Rate Relief Law of 1997
Illinois EPA		Illinois Environmental Protection Agency
Illinois Settlement Legislation		Legislation enacted in 2007 affecting electric utilities in Illinois
Integrys		Integrys Energy Services, Inc.
IPA		Illinois Power Agency
IRC		Internal Revenue Code
IRS		Internal Revenue Service
ISO		Independent System Operator
ISO-NE		ISO New England Inc.
ISO-NY		ISO New York
kV		Kilovolt
kW		Kilowatt
kWh		Kilowatt-hour
LIBOR		London Interbank Offered Rate
LILO		Lease-In, Lease-Out
LLRW		Low-Level Radioactive Waste
LTIP		Long-Term Incentive Plan
MAPP		Mid-Atlantic Power Pathway
MATS		U.S. EPA Mercury and Air Toxics Rule

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
MBR		Market Based Rates Incentive
MDE		Maryland Department of the Environment
MDPSC		Maryland Public Service Commission
MGP		Manufactured Gas Plant
MISO		Midcontinent Independent System Operator, Inc.
mmcf		Million Cubic Feet
Moody’s		Moody’s Investor Service
MOPR		Minimum Offer Price Rule
MRV		Market-Related Value
MW		Megawatt
MWh		Megawatt hour
NAAQS		National Ambient Air Quality Standards
n.m.		not meaningful
NAV		Net Asset Value
NDT		Nuclear Decommissioning Trust
NEIL		Nuclear Electric Insurance Limited
NERC		North American Electric Reliability Corporation
NGS		Natural Gas Supplier
NJBPU		New Jersey Board of Public Utilities
NJDEP		New Jersey Department of Environmental Protection
Non-Regulatory Agreements Units		Nuclear generating units or portions thereof whose decommissioning-related activities are not subject to contractual elimination under regulatory accounting
NOSA		Nuclear Operating Services Agreement
NOV		Notice of Violation
NPDES		National Pollutant Discharge Elimination System
NRC		Nuclear Regulatory Commission
NSPS		New Source Performance Standards
NUGs		Non-utility generators
NWPA		Nuclear Waste Policy Act of 1982
NYMEX		New York Mercantile Exchange
OCI		Other Comprehensive Income
OIESO		Ontario Independent Electricity System Operator
OPC		Office of People’s Counsel
OPEB		Other Postretirement Employee Benefits
PA DEP		Pennsylvania Department of Environmental Protection
PAPUC		Pennsylvania Public Utility Commission
PGC		Purchased Gas Cost Clause
PHI Retirement Plan		PHI’s noncontributory retirement plan
PJM		PJM Interconnection, LLC
POLR		Provider of Last Resort
POR		Purchase of Receivables
PPA		Power Purchase Agreement
Price-Anderson Act		Price-Anderson Nuclear Industries Indemnity Act of 1957
Preferred Stock		Originally issued shares of non-voting, non-convertible and non-transferable Series A preferred stock, par value $0.01 per share
PRP		Potentially Responsible Parties
PSEG		Public Service Enterprise Group Incorporated
PURTA		Pennsylvania Public Realty Tax Act

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
PV		Photovoltaic
RCRA		Resource Conservation and Recovery Act of 1976, as amended
REC		Renewable Energy Credit which is issued for each megawatt hour of generation from a qualified renewable energy source
Regulatory Agreement Units		Nuclear generating units or portions thereof whose decommissioning-related activities are subject to contractual elimination under regulatory accounting
RES		Retail Electric Suppliers
RFP		Request for Proposal
Rider		Reconcilable Surcharge Recovery Mechanism
RGGI		Regional Greenhouse Gas Initiative
RMC		Risk Management Committee
ROE		Return on equity
RPM		PJM Reliability Pricing Model
RPS		Renewable Energy Portfolio Standards
RSSA		Reliability Support Services Agreement
RTEP		Regional Transmission Expansion Plan
RTO		Regional Transmission Organization
S&P		Standard & Poor’s Ratings Services
SEC		United States Securities and Exchange Commission
Senate Bill 1		Maryland Senate Bill 1
SERC		SERC Reliability Corporation (formerly Southeast Electric Reliability Council)
SERP		Supplemental Employee Retirement Plan
SGIG		Smart Grid Investment Grant from DOE
SGIP		Smart Grid Initiative Program
SILO		Sale-In, Lease-Out
SMPIP		Smart Meter Procurement and Installation Plan
SNF		Spent Nuclear Fuel
SOCAs		Standard Offer Capacity Agreements required to be entered into by ACE pursuant to a New Jersey law enacted to promote the construction of qualified electric generation facilities in New Jersey
SOS		Standard Offer Service
SPP		Southwest Power Pool
Tax Relief Act of 2010		Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
Transition Bond Charge		Revenue ACE receives, and pays to ACE Funding, to fund the principal and interest payments on Transition Bonds and related taxes, expenses and fees
Transition Bonds		Transition Bonds issued by ACE Funding
Upstream		Natural gas exploration and production activities
VIE		Variable Interest Entity
WECC		Western Electric Coordinating Council

FILING FORMAT

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

FORWARD-LOOKING STATEMENTS

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

WHERE TO FIND MORE INFORMATION

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions, except per share data)	2016			2015			2016			2015
Operating revenues
Competitive businesses revenues	$	3,234		$	4,080		$	7,708		$	9,714
Rate-regulated utility revenues		3,676			2,434			6,777			5,631

Total operating revenues		6,910			6,514			14,485			15,345
Operating expenses
Competitive businesses purchased power and fuel		1,576			1,848			4,016			5,274
Rate-regulated utility purchased power and fuel		878			601			1,692			1,645
Operating and maintenance		2,505			2,042			5,341			4,123
Depreciation and amortization		941			602			1,626			1,212
Taxes other than income		394			294			720			598

Total operating expenses		6,294			5,387			13,395			12,852

Gain on sales of assets		31			7			40			8

Operating income		647			1,134			1,130			2,501

Other income and (deductions)
Interest expense, net		(366	)		(145	)		(643	)		(480	)
Interest expense to affiliates		(10	)		(10	)		(20	)		(21	)
Other, net		144			(17	)		258			64

Total other income and (deductions)		(232	)		(172	)		(405	)		(437	)

Income before income taxes		415			962			725			2,064
Income taxes		102			327			285			690
Equity in losses of unconsolidated affiliates		(7	)		(2	)		(10	)		(2	)

Net income		306			633			430			1,372

Net income (loss) attributable to noncontrolling interests and preference stock dividends		39			(5	)		(10	)		41

Net income attributable to common shareholders	$	267		$	638		$	440		$	1,331

Comprehensive income, net of income taxes
Net income	$	306		$	633		$	430		$	1,372
Other comprehensive income (loss), net of income taxes
Pension and non-pension postretirement benefit plans:
Prior service benefit reclassified to periodic benefit cost		(12	)		(11	)		(23	)		(23	)
Actuarial loss reclassified to periodic benefit cost		46			55			93			110
Pension and non-pension postretirement benefit plan valuation adjustment		(1	)		—			(3	)		(29	)
Unrealized (loss) gain on cash flow hedges		—			3			(7	)		9
Unrealized loss on equity investments		(4	)		—			(7	)		—
Unrealized gain (loss) on foreign currency translation		—			3			6			(9	)
Unrealized gain on marketable securities		2			—			—			—

Other comprehensive income		31			50			59			58

Comprehensive income		337			683			489			1,430

Comprehensive income (loss) attributable to noncontrolling interests and preference stock dividends		39			(5	)		(10	)		41

Comprehensive income attributable to common shareholders	$	298		$	688		$	499		$	1,389

Average shares of common stock outstanding:
Basic		924			863			923			862
Diluted		926			866			926			866
Earnings per average common share:
Basic	$	0.29		$	0.74		$	0.48		$	1.54
Diluted	$	0.29		$	0.74		$	0.48		$	1.54

Dividends declared per common share	$	0.32		$	0.31		$	0.63		$	0.62

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(In millions)	2016			2015
Cash flows from operating activities
Net income	$	430		$	1,372
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization, depletion and accretion, including nuclear fuel and energy contract amortization		2,396			1,957
Impairment of long-lived assets and losses on regulatory assets		239			24
Gain on sales of assets		(40	)		(8	)
Deferred income taxes and amortization of investment tax credits		261			211
Net fair value changes related to derivatives		194			(507	)
Net realized and unrealized gains on nuclear decommissioning trust fund investments		(114	)		(2	)
Other non-cash operating activities		1,056			579
Changes in assets and liabilities:
Accounts receivable		86			253
Inventories		89			159
Accounts payable and accrued expenses		(363	)		(540	)
Option premiums received, net		(10	)		22
Collateral received, net		710			659
Income taxes		470			247
Pension and non-pension postretirement benefit contributions		(258	)		(301	)
Other assets and liabilities		(593	)		(156	)

Net cash flows provided by operating activities		4,553			3,969

Cash flows from investing activities
Capital expenditures		(4,489	)		(3,460	)
Proceeds from nuclear decommissioning trust fund sales		4,977			3,314
Investment in nuclear decommissioning trust funds		(5,094	)		(3,437	)
Acquisition of businesses, net of cash acquired		(6,642	)		(28	)
Proceeds from sales of long-lived assets		45			145
Proceeds from termination of direct financing lease investment		360			—
Change in restricted cash		15			(3	)
Other investing activities		(49	)		(77	)

Net cash flows used in investing activities		(10,877	)		(3,546	)

Cash flows from financing activities
Changes in short-term borrowings		(798	)		94
Proceeds from short-term borrowings with maturities greater than 90 days		194			—
Repayments on short-term borrowings with maturities greater than 90 days		(315	)		—
Issuance of long-term debt		3,174			5,907
Retirement of long-term debt		(217	)		(1,708	)
Dividends paid on common stock		(582	)		(537	)
Proceeds from employee stock plans		17			16
Other financing activities		(4	)		(59	)

Net cash flows provided by financing activities		1,469			3,713

(Decrease) Increase in cash and cash equivalents		(4,855	)		4,136
Cash and cash equivalents at beginning of period		6,502			1,878

Cash and cash equivalents at end of period	$	1,647		$	6,014

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2016		December 31, 2015
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	1,647	$	6,502
Restricted cash and cash equivalents		201		205
Accounts receivable, net
Customer		3,671		3,187
Other		988		912
Mark-to-market derivative assets		759		1,365
Unamortized energy contract assets		69		86
Inventories, net
Fossil fuel and emission allowances		317		462
Materials and supplies		1,183		1,104
Regulatory assets		1,559		759
Other		1,101		752

Total current assets		11,495		15,334

Property, plant and equipment, net		70,693		57,439
Deferred debits and other assets
Regulatory assets		10,121		6,065
Nuclear decommissioning trust funds		10,737		10,342
Investments		502		639
Goodwill		6,696		2,672
Mark-to-market derivative assets		546		758
Unamortized energy contract assets		461		484
Pledged assets for Zion Station decommissioning		161		206
Other		1,366		1,445

Total deferred debits and other assets		30,590		22,611

Total assets^(a)	$	112,778	$	95,384

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2016			December 31, 2015
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	951		$	533
Long-term debt due within one year		2,693			1,500
Accounts payable		2,826			2,883
Accrued expenses		2,757			2,376
Payables to affiliates		8			8
Regulatory liabilities		503			369
Mark-to-market derivative liabilities		152			205
Unamortized energy contract liabilities		508			100
Renewable energy credit obligation		316			302
PHI merger related obligation		155			—
Other		1,025			842

Total current liabilities		11,894			9,118

Long-term debt		31,541			23,645
Long-term debt to financing trusts		641			641
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		17,662			13,776
Asset retirement obligations		9,256			8,585
Pension obligations		3,767			3,385
Non-pension postretirement benefit obligations		1,900			1,618
Spent nuclear fuel obligation		1,023			1,021
Regulatory liabilities		4,389			4,201
Mark-to-market derivative liabilities		442			374
Unamortized energy contract liabilities		1,011			117
Payable for Zion Station decommissioning		54			90
Other		1,876			1,491

Total deferred credits and other liabilities		41,380			34,658

Total liabilities^(a)		85,456			68,062

Commitments and contingencies
Contingently redeemable noncontrolling interests		24			28
Shareholders’ equity
Common stock (No par value, 2000 shares authorized, 923 shares and 920 shares outstanding at June 30, 2016 and December 31, 2015, respectively)		18,722			18,676
Treasury stock, at cost (35 shares at June 30, 2016 and December 31, 2015, respectively)		(2,327	)		(2,327	)
Retained earnings		11,926			12,068
Accumulated other comprehensive loss, net		(2,565	)		(2,624	)

Total shareholders’ equity		25,756			25,793
BGE preference stock not subject to mandatory redemption		193			193
Noncontrolling interests		1,349			1,308

Total equity		27,298			27,294

Total liabilities and shareholders’ equity	$	112,778		$	95,384

(a)

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

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(In millions, shares in thousands)	Issued Shares		Common Stock			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss, net			Noncontrolling Interests			Preference Stock			Total Shareholders’ Equity
Balance, December 31, 2015		954,668	$	18,676		$	(2,327	)	$	12,068		$	(2,624	)	$	1,308		$	193		$	27,294
Net income		—		—			—			440			—			(17	)		7			430
Long-term incentive plan activity		2,349		47			—			—			—			—			—			47
Employee stock purchase plan issuances		599		17			—			—			—			—			—			17
Tax benefit on stock compensation		—		(18	)		—			—			—			—			—			(18	)
Changes in equity of noncontrolling interests		—		—			—			—			—			2			—			2
Adjustment of contingently redeemable noncontrolling interest due to release of contingency		—		—			—			—			—			56			—			56
Common stock dividends		—		—			—			(582	)		—			—			—			(582	)
Preference stock dividends		—		—			—			—			—			—			(7	)		(7	)
Other comprehensive income, net of income taxes		—		—			—			—			59			—			—			59

Balance, June 30, 2016		957,616	$	18,722		$	(2,327	)	$	11,926		$	(2,565	)	$	1,349		$	193		$	27,298

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2016			2015			2016			2015
Operating revenues
Operating revenues	$	3,231		$	4,079		$	7,702		$	9,709
Operating revenues from affiliates		358			153			627			365

Total operating revenues		3,589			4,232			8,329			10,074

Operating expenses
Purchased power and fuel		1,575			1,848			4,015			5,274
Purchased power and fuel from affiliates		2			1			5			8
Operating and maintenance		1,369			1,149			2,665			2,311
Operating and maintenance from affiliates		161			159			332			308
Depreciation and amortization		408			255			697			509
Taxes other than income		118			124			244			246

Total operating expenses		3,633			3,536			7,958			8,656

Gain on sales of assets		31			7			31			6

Operating (loss) income		(13	)		703			402			1,424

Other income and (deductions)
Interest expense, net		(89	)		(90	)		(176	)		(180	)
Interest expense to affiliates		(10	)		(9	)		(20	)		(21	)
Other, net		117			(31	)		210			62

Total other income and (deductions)		18			(130	)		14			(139	)

Income before income taxes		5			573			416			1,285
Income taxes		(31	)		181			120			407
Equity in losses of unconsolidated affiliates		(8	)		(2	)		(11	)		(3	)

Net income		28			390			285			875
Net income (loss) attributable to noncontrolling interests		36			(8	)		(17	)		34

Net (loss) income attributable to membership interest	$	(8	)	$	398		$	302		$	841

Comprehensive income, net of income taxes
Net income	$	28		$	390		$	285		$	875
Other comprehensive income (loss), net of income taxes
Unrealized gain (loss) on cash flow hedges		1			2			(4	)		(3	)
Unrealized loss on equity investments		(2	)		—			(4	)		—
Unrealized gain (loss) on foreign currency translation		—			3			6			(9	)
Unrealized gain on marketable securities		1			1			—			1

Other comprehensive income (loss)		—			6			(2	)		(11	)

Comprehensive income		28			396			283			864

Comprehensive income (loss) attributable to noncontrolling interests		36			(8	)		(17	)		34

Comprehensive (loss) income attributable to membership interest	$	(8	)	$	404		$	300		$	830

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(In millions)	2016			2015
Cash flows from operating activities
Net income	$	285		$	875
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization, depletion and accretion, including nuclear fuel and energy contract amortization		1,467			1,255
Impairment of long-lived assets		179			(1	)
Gain on sales of assets		(31	)		(6	)
Deferred income taxes and amortization of investment tax credits		(59	)		65
Net fair value changes related to derivatives		199			(396	)
Net realized and unrealized gains on nuclear decommissioning trust fund investments		(114	)		(2	)
Other non-cash operating activities		169			134
Changes in assets and liabilities:
Accounts receivable		123			291
Receivables from and payables to affiliates, net		(77	)		(11	)
Inventories		57			134
Accounts payable and accrued expenses		(228	)		(369	)
Option premiums received, net		(10	)		22
Collateral received, net		720			682
Income taxes		41			27
Pension and non-pension postretirement benefit contributions		(117	)		(122	)
Other assets and liabilities		(217	)		(155	)

Net cash flows provided by operating activities		2,387			2,423

Cash flows from investing activities
Capital expenditures		(2,051	)		(1,764	)
Proceeds from nuclear decommissioning trust fund sales		4,977			3,314
Investment in nuclear decommissioning trust funds		(5,094	)		(3,437	)
Acquisition of businesses		(1	)		(28	)
Proceeds from sale of long-lived assets		30			144
Change in restricted cash		25			(16	)
Other investing activities		(96	)		(63	)

Net cash flows used in investing activities		(2,210	)		(1,850	)

Cash flows from financing activities
Change in short-term borrowings		—			15
Proceeds from short-term borrowings with maturities greater than 90 days		194			—
Repayments of short-term borrowings with maturities greater than 90 days		(15	)		—
Issuance of long-term debt		173			1,307
Retirement of long-term debt		(131	)		(39	)
Retirement of long-term debt to affiliate		—			(550	)
Changes in Exelon intercompany money pool		(429	)		638
Distribution to member		(111	)		(2,262	)
Contribution from member		45			—
Other financing activities		39			(6	)

Net cash flows used in financing activities		(235	)		(897	)

Decrease in cash and cash equivalents		(58	)		(324	)
Cash and cash equivalents at beginning of period		431			780

Cash and cash equivalents at end of period	$	373		$	456

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2016		December 31, 2015
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	373	$	431
Restricted cash and cash equivalents		98		123
Accounts receivable, net
Customer		2,076		2,095
Other		325		360
Mark-to-market derivative assets		759		1,365
Receivables from affiliates		184		83
Unamortized energy contract assets		69		86
Inventories, net
Fossil fuel and emission allowances		266		384
Materials and supplies		840		880
Other		735		535

Total current assets		5,725		6,342

Property, plant and equipment, net		26,656		25,843
Deferred debits and other assets
Nuclear decommissioning trust funds		10,737		10,342
Investments		294		210
Goodwill		47		47
Mark-to-market derivative assets		499		733
Prepaid pension asset		1,673		1,689
Pledged assets for Zion Station decommissioning		161		206
Unamortized energy contract assets		460		484
Deferred income taxes		13		6
Other		632		627

Total deferred debits and other assets		14,516		14,344

Total assets^(a)	$	46,897	$	46,529

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2016			December 31, 2015
	(Unaudited)
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings	$	208		$	29
Long-term debt due within one year		174			90
Accounts payable		1,271			1,583
Accrued expenses		743			935
Payables to affiliates		110			104
Borrowings from Exelon intercompany money pool		817			1,252
Mark-to-market derivative liabilities		134			182
Unamortized energy contract liabilities		75			100
Renewable energy credit obligation		316			302
Other		339			356

Total current liabilities		4,187			4,933

Long-term debt		7,965			7,936
Long-term debt to affiliate		927			933
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		5,750			5,845
Asset retirement obligations		9,081			8,431
Non-pension postretirement benefit obligations		935			924
Spent nuclear fuel obligation		1,023			1,021
Payables to affiliates		2,643			2,577
Mark-to-market derivative liabilities		237			150
Unamortized energy contract liabilities		94			117
Payable for Zion Station decommissioning		54			90
Other		634			602

Total deferred credits and other liabilities		20,451			19,757

Total liabilities^(a)		33,530			33,559

Commitments and contingencies
Contingently redeemable noncontrolling interests		24			28
Equity
Member’s equity
Membership interest		9,168			8,997
Undistributed earnings		2,892			2,701
Accumulated other comprehensive loss, net		(65	)		(63	)

Total member’s equity		11,995			11,635
Noncontrolling interests		1,348			1,307

Total equity		13,343			12,942

Total liabilities and equity	$	46,897		$	46,529

(a)

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

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)


	Member’s Equity
(In millions)	Membership Interest		Undistributed Earnings			Accumulated Other Comprehensive Loss, net			Noncontrolling Interests			Total Equity
Balance, December 31, 2015	$	8,997	$	2,701		$	(63	)	$	1,307		$	12,942
Net income (loss)		—		302			—			(17	)		285
Acquisition of noncontrolling interests		—		—			—			2			2
Adjustment of contingently redeemable noncontrolling interests due to release of contingency		—		—			—			56			56
Contribution from member		171		—			—			—			171
Distribution to member		—		(111	)		—			—			(111	)
Other comprehensive loss, net of income taxes		—		—			(2	)		—			(2	)

Balance, June 30, 2016	$	9,168	$	2,892		$	(65	)	$	1,348		$	13,343

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2016			2015			2016			2015
Operating revenues
Electric operating revenues	$	1,283		$	1,147		$	2,527		$	2,331
Operating revenues from affiliates		3			1			8			2

Total operating revenues		1,286			1,148			2,535			2,333

Operating expenses
Purchased power		326			269			668			586
Purchased power from affiliate		13			6			18			15
Operating and maintenance		318			337			623			670
Operating and maintenance from affiliate		50			47			113			92
Depreciation and amortization		190			177			379			352
Taxes other than income		65			69			141			146

Total operating expenses		962			905			1,942			1,861

Gain on sale of assets		—			—			5			—

Operating income		324			243			598			472

Other income and (deductions)
Interest expense, net		(88	)		(78	)		(170	)		(158	)
Interest expense to affiliates		(3	)		(3	)		(7	)		(7	)
Other, net		3			5			7			9

Total other income and (deductions)		(88	)		(76	)		(170	)		(156	)

Income before income taxes		236			167			428			316
Income taxes		91			68			168			127

Net income	$	145		$	99		$	260		$	189

Comprehensive income	$	145		$	99		$	260		$	189

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(In millions)	2016			2015
Cash flows from operating activities
Net income	$	260		$	189
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		379			352
Deferred income taxes and amortization of investment tax credits		222			36
Other non-cash operating activities		83			222
Changes in assets and liabilities:
Accounts receivable		(36	)		(57	)
Receivables from and payables to affiliates, net		1			(10	)
Inventories		7			(19	)
Accounts payable and accrued expenses		(42	)		(53	)
Collateral received (posted), net		(10	)		—
Income taxes		261			239
Pension and non-pension postretirement benefit contributions		(35	)		(125	)
Other assets and liabilities		38			26

Net cash flows provided by operating activities		1,128			800

Cash flows from investing activities
Capital expenditures		(1,334	)		(1,061	)
Other investing activities		21			17

Net cash flows used in investing activities		(1,313	)		(1,044	)

Cash flows from financing activities
Changes in short-term borrowings		(259	)		199
Issuance of long-term debt		1,200			400
Retirement of long-term debt		—			(260	)
Contributions from parent		113			45
Dividends paid on common stock		(183	)		(150	)
Other financing activities		(17	)		(5	)

Net cash flows provided by financing activities		854			229

Increase (Decrease) in cash and cash equivalents		669			(15	)
Cash and cash equivalents at beginning of period		67			66

Cash and cash equivalents at end of period	$	736		$	51

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2016		December 31, 2015
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	736	$	67
Restricted cash		2		2
Accounts receivable, net
Customer		557		533
Other		237		272
Receivables from affiliates		206		199
Inventories, net		155		164
Regulatory assets		213		218
Other		68		63

Total current assets		2,174		1,518

Property, plant and equipment, net		18,416		17,502
Deferred debits and other assets
Regulatory assets		923		895
Investments		6		6
Goodwill		2,625		2,625
Receivables from affiliates		2,205		2,172
Prepaid pension asset		1,432		1,490
Other		324		324

Total deferred debits and other assets		7,515		7,512

Total assets	$	28,105	$	26,532

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2016		December 31, 2015
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	35	$	294
Long-term debt due within one year		665		665
Accounts payable		609		660
Accrued expenses		929		706
Payables to affiliates		65		62
Customer deposits		128		131
Regulatory liabilities		153		155
Mark-to-market derivative liability		18		23
Other		77		70

Total current liabilities		2,679		2,766

Long-term debt		7,030		5,844
Long-term debt to financing trust		205		205
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		5,142		4,914
Asset retirement obligations		114		111
Non-pension postretirement benefits obligations		249		259
Regulatory liabilities		3,524		3,459
Mark-to-market derivative liability		203		224
Other		521		507

Total deferred credits and other liabilities		9,753		9,474

Total liabilities		19,667		18,289

Commitments and contingencies
Shareholders’ equity
Common stock		1,588		1,588
Other paid-in capital		5,795		5,677
Retained earnings		1,055		978

Total shareholders’ equity		8,438		8,243

Total liabilities and shareholders’ equity	$	28,105	$	26,532

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(In millions)	Common Stock		Other Paid-In Capital		Retained Deficit Unappropriated			Retained Earnings Appropriated			Total Shareholders’ Equity
Balance, December 31, 2015	$	1,588	$	5,677	$	(1,639	)	$	2,617		$	8,243
Net income		—		—		260			—			260
Appropriation of retained earnings for future dividends		—		—		(260	)		260			—
Common stock dividends		—		—		—			(183	)		(183	)
Contribution from parent		—		113		—			—			113
Parent tax matter indemnification		—		5		—			—			5

Balance, June 30, 2016	$	1,588	$	5,795	$	(1,639	)	$	2,694		$	8,438

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2016			2015			2016			2015
Operating revenues
Electric operating revenues	$	585		$	582		$	1,228		$	1,259
Natural gas operating revenues		77			79			273			386
Operating revenues from affiliates		2			—			4			1

Total operating revenues		664			661			1,505			1,646

Operating expenses
Purchased power		130			161			295			377
Purchased fuel		23			28			100			188
Purchased power from affiliate		64			48			142			110
Operating and maintenance		157			166			333			363
Operating and maintenance from affiliates		33			26			72			51
Depreciation and amortization		67			69			134			131
Taxes other than income		38			39			80			80

Total operating expenses		512			537			1,156			1,300

Gain on sales of assets		—			—			—			1

Operating income		152			124			349			347

Other income and (deductions)
Interest expense, net		(28	)		(25	)		(56	)		(50	)
Interest expense to affiliates		(3	)		(3	)		(6	)		(6	)
Other, net		2			1			4			3

Total other income and (deductions)		(29	)		(27	)		(58	)		(53	)

Income before income taxes		123			97			291			294
Income taxes		23			27			67			85

Net income attributable to common shareholder	$	100		$	70		$	224		$	209

Comprehensive income	$	100		$	70		$	224		$	209

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(In millions)	2016			2015
Cash flows from operating activities
Net income	$	224		$	209
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		134			131
Deferred income taxes and amortization of investment tax credits		51			4
Other non-cash operating activities		27			45
Changes in assets and liabilities:
Accounts receivable		(1	)		(18	)
Receivables from and payables to affiliates, net		(2	)		(2	)
Inventories		19			21
Accounts payable and accrued expenses		(19	)		3
Income taxes		31			57
Pension and non-pension postretirement benefit contributions		(29	)		(15	)
Other assets and liabilities		(96	)		(60	)

Net cash flows provided by operating activities		339			375

Cash flows from investing activities
Capital expenditures		(299	)		(289	)
Change in restricted cash		—			(1	)
Other investing activities		8			9

Net cash flows used in investing activities		(291	)		(281	)

Cash flows from financing activities
Changes in Exelon intercompany money pool		—			41
Dividends paid on common stock		(139	)		(139	)
Other financing activities		(1	)		—

Net cash flows used in financing activities		(140	)		(98	)

Decrease in cash and cash equivalents		(92	)		(4	)
Cash and cash equivalents at beginning of period		295			30

Cash and cash equivalents at end of period	$	203		$	26

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2016		December 31, 2015
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	203	$	295
Restricted cash and cash equivalents		3		3
Accounts receivable, net
Customer		248		258
Other		126		146
Receivables from affiliates		5		2
Inventories, net
Fossil fuel		24		43
Materials and supplies		26		26
Prepaid utility taxes		84		11
Regulatory assets		48		34
Other		34		24

Total current assets		801		842

Property, plant and equipment, net		7,303		7,141
Deferred debits and other assets
Regulatory assets		1,636		1,583
Investments		26		28
Receivable from affiliates		438		405
Prepaid pension asset		361		347
Other		21		21

Total deferred debits and other assets		2,482		2,384

Total assets	$	10,586	$	10,367

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2016		December 31, 2015
	(Unaudited)
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities
Long-term debt due within one year	$	300	$	300
Accounts payable		269		281
Accrued expenses		100		109
Payables to affiliates		56		55
Customer deposits		60		58
Regulatory liabilities		128		112
Other		39		29

Total current liabilities		952		944

Long-term debt		2,281		2,280
Long-term debt to financing trusts		184		184
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		2,920		2,792
Asset retirement obligations		27		27
Non-pension postretirement benefits obligations		288		287
Regulatory liabilities		529		527
Other		84		90

Total deferred credits and other liabilities		3,848		3,723

Total liabilities		7,265		7,131

Commitments and contingencies
Shareholder’s equity
Common stock		2,455		2,455
Retained earnings		865		780
Accumulated other comprehensive income, net		1		1

Total shareholder’s equity		3,321		3,236

Total liabilities and shareholder’s equity	$	10,586	$	10,367

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY

(Unaudited)


(In millions)	Common Stock		Retained Earnings			Accumulated Other Comprehensive Income, net		Total Shareholder’s Equity
Balance, December 31, 2015	$	2,455	$	780		$	1	$	3,236
Net income		—		224			—		224
Common stock dividends		—		(139	)		—		(139	)

Balance, June 30, 2016	$	2,455	$	865		$	1	$	3,321

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2016			2015			2016			2015
Operating revenues
Electric operating revenues	$	582		$	541		$	1,260		$	1,254
Natural gas operating revenues		94			86			340			402
Operating revenues from affiliates		4			1			9			8

Total operating revenues		680			628			1,609			1,664

Operating expenses
Purchased power		108			130			235			338
Purchased fuel		20			13			95			155
Purchased power from affiliate		133			96			304			233
Operating and maintenance		177			120			345			276
Operating and maintenance from affiliates		31			29			65			55
Depreciation and amortization		97			87			206			192
Taxes other than income		55			54			114			111

Total operating expenses		621			529			1,364			1,360

Operating income		59			99			245			304

Other income and (deductions)
Interest expense, net		(20	)		(20	)		(40	)		(42	)
Interest expense to affiliates		(4	)		(4	)		(8	)		(8	)
Other, net		5			4			11			8

Total other income and (deductions)		(19	)		(20	)		(37	)		(42	)

Income before income taxes		40			79			208			262
Income taxes		6			32			73			105

Net income		34			47			135			157
Preference stock dividends		3			3			6			6

Net income attributable to common shareholder	$	31		$	44		$	129		$	151


Comprehensive income	$	34		$	47		$	135		$	157
Comprehensive income attributable to preference stock dividends		3			3			6			6

Comprehensive income attributable to common shareholder	$	31		$	44		$	129		$	151

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(In millions)	2016			2015
Cash flows from operating activities
Net income	$	135		$	157
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		206			192
Impairment of long-lived assets and losses on regulatory assets		52			—
Deferred income taxes and amortization of investment tax credits		17			54
Other non-cash operating activities		60			76
Changes in assets and liabilities:
Accounts receivable		11			25
Receivables from and payables to affiliates, net		6			(2	)
Inventories		6			23
Accounts payable and accrued expenses		(5	)		(59	)
Collateral received (posted), net		—			(23	)
Income taxes		46			(6	)
Pension and non-pension postretirement benefit contributions		(42	)		(9	)
Other assets and liabilities		(3	)		61

Net cash flows provided by operating activities		489			489

Cash flows from investing activities
Capital expenditures		(392	)		(304	)
Change in restricted cash		5			21
Other investing activities		12			8

Net cash flows used in investing activities		(375	)		(275	)

Cash flows from financing activities
Changes in short-term borrowings		(2	)		(120	)
Retirement of long-term debt		(39	)		(37	)
Dividends paid on preference stock		(6	)		(6	)
Dividends paid on common stock		(90	)		(77	)
Contributions from parent		21			—
Other financing activities		(2	)		(14	)

Net cash flows used in financing activities		(118	)		(254	)

Decrease in cash and cash equivalents		(4	)		(40	)
Cash and cash equivalents at beginning of period		9			64

Cash and cash equivalents at end of period	$	5		$	24

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2016		December 31, 2015
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	5	$	9
Restricted cash and cash equivalents		19		24
Accounts receivable, net
Customer		289		300
Other		70		112
Inventories, net
Gas held in storage		22		36
Materials and supplies		41		33
Prepaid utility taxes		—		61
Regulatory assets		261		267
Other		7		3

Total current assets		714		845

Property, plant and equipment, net		6,747		6,597
Deferred debits and other assets
Regulatory assets		520		514
Investments		12		12
Prepaid pension asset		323		319
Other		9		8

Total deferred debits and other assets		864		853

Total assets^(a)	$	8,325	$	8,295

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	June 30, 2016		December 31, 2015
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	208	$	210
Long-term debt due within one year		380		378

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