Edgar Filing: EXELON CORP

Document

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, 2018



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



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

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

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

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

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

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

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

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

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

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

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 o

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 o

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



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

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

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

The number of shares outstanding of each registrant’s common stock as of June 30, 2018 was:



Exelon Corporation Common Stock, without par value	965,906,701
Exelon Generation Company, LLC	not applicable
Commonwealth Edison Company Common Stock, $12.50 par value	127,021,285
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, $0.01 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.
GLOSSARY OF TERMS AND ABBREVIATIONS		4
FILING FORMAT		9
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION		9
WHERE TO FIND MORE INFORMATION		9
PART I.	FINANCIAL INFORMATION	10
ITEM 1.	FINANCIAL STATEMENTS	10
	Exelon Corporation
	Consolidated Statements of Operations and Comprehensive Income	11
	Consolidated Statements of Cash Flows	12
	Consolidated Balance Sheets	13
	Consolidated Statement of Changes in Shareholders’ Equity	15
	Exelon Generation Company, LLC
	Consolidated Statements of Operations and Comprehensive Income	16
	Consolidated Statements of Cash Flows	17
	Consolidated Balance Sheets	18
	Consolidated Statement of Changes in Equity	20
	Commonwealth Edison Company
	Consolidated Statements of Operations and Comprehensive Income	21
	Consolidated Statements of Cash Flows	22
	Consolidated Balance Sheets	23
	Consolidated Statement of Changes in Shareholders' Equity	25
	PECO Energy Company
	Consolidated Statements of Operations and Comprehensive Income	26
	Consolidated Statements of Cash Flows	27
	Consolidated Balance Sheets	28
	Consolidated Statement of Changes in Shareholder's Equity	30
	Baltimore Gas and Electric Company
	Consolidated Statements of Operations and Comprehensive Income	31
	Consolidated Statements of Cash Flows	32
	Consolidated Balance Sheets	33
	Consolidated Statement of Changes in Shareholders’ Equity	35
	Pepco Holdings LLC
	Consolidated Statements of Operations and Comprehensive Income	36
	Consolidated Statements of Cash Flows	37
	Consolidated Balance Sheets	38
	Consolidated Statement of Changes in Equity	40



		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	57
	2. New Accounting Standards	62
	3. Variable Interest Entities	64
	4. Mergers, Acquisitions and Dispositions	69
	5. Revenue from Contracts with Customers	72
	6. Regulatory Matters	75
	7. Impairment of Long-Lived Assets	92
	8. Early Plant Retirements	93
	9. Fair Value of Financial Assets and Liabilities	97
	10. Derivative Financial Instruments	119
	11. Debt and Credit Agreements	136
	12. Income Taxes	137
	13. Nuclear Decommissioning	144
	14. Retirement Benefits	147
	15. Changes in Accumulated Other Comprehensive Income	150
	16. Earnings Per Share and Equity	155
	17. Commitments and Contingencies	156
	18. Supplemental Financial Information	167
	19. Segment Information	174
	20. Subsequent Events	188



		Page No.
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	190
	Exelon Corporation	190
	Executive Overview	190
	Financial Results of Operations	192
	Significant 2018 Transactions and Developments	200
	Exelon's Strategy and Outlook for 2018 and Beyond	205
	Liquidity Considerations	207
	Other Key Business Drivers and Management Strategies	208
	Critical Accounting Policies and Estimates	214
	Results of Operations By Registrant	216
	Exelon Generation Company, LLC	217
	Commonwealth Edison Company	227
	PECO Energy Company	234
	Baltimore Gas and Electric Company	241
	Pepco Holdings LLC	248
	Potomac Electric Power Company	251
	Delmarva Power & Light Company	258
	Atlantic City Electric Company	266
	Liquidity and Capital Resources	272
	Contractual Obligations and Off-Balance Sheet Arrangements	287
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	288
ITEM 4.	CONTROLS AND PROCEDURES	296
PART II.	OTHER INFORMATION	297
ITEM 1.	LEGAL PROCEEDINGS	297
ITEM 1A.	RISK FACTORS	297
ITEM 4.	MINE SAFETY DISCLOSURES	297
ITEM 6.	EXHIBITS	298
SIGNATURES		301
	Exelon Corporation	301
	Exelon Generation Company, LLC	302
	Commonwealth Edison Company	303
	PECO Energy Company	304
	Baltimore Gas and Electric Company	305
	Pepco Holdings LLC	306
	Potomac Electric Power Company	307
	Delmarva Power & Light Company	308
	Atlantic City Electric Company	309

Table of Contents



GLOSSARY OF TERMS AND ABBREVIATIONS
Exelon Corporation and Related Entities
Exelon		Exelon Corporation
Generation		Exelon Generation Company, LLC
ComEd		Commonwealth Edison Company
PECO		PECO Energy Company
BGE		Baltimore Gas and Electric Company
Pepco Holdings or PHI		Pepco Holdings LLC (formerly Pepco Holdings, Inc.)
Pepco		Potomac Electric Power Company
DPL		Delmarva Power & Light Company
ACE		Atlantic City Electric Company
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
ACE Funding or ATF		Atlantic City Electric Transition Funding LLC
Antelope Valley		Antelope Valley Solar Ranch One
BSC		Exelon Business Services Company, LLC
CENG		Constellation Energy Nuclear Group, LLC
Conectiv		Conectiv, LLC, a wholly owned subsidiary of PHI and the parent of DPL and ACE
ConEdison Solutions		The competitive retail electricity and natural gas business of Consolidated Edison Solutions, Inc., a subsidiary of Consolidated Edison, Inc.
Constellation		Constellation Energy Group, Inc.
EEDC		Exelon Energy Delivery Company, LLC
EGR IV		ExGen Renewables IV, LLC
EGTP		ExGen Texas Power, LLC
Entergy		Entergy Nuclear FitzPatrick, LLC
Exelon Corporate		Exelon in its corporate capacity as a holding company
Exelon Transmission Company		Exelon Transmission Company, LLC
Exelon Wind		Exelon Wind, LLC and Exelon Generation Acquisition Company, LLC
FitzPatrick		James A. FitzPatrick nuclear generating station
PCI		Potomac Capital Investment Corporation and its subsidiaries
PEC L.P.		PECO Energy Capital, L.P.
PECO Trust III		PECO Capital Trust III
PECO Trust IV		PECO Energy Capital Trust IV
Pepco Energy Services or PES		Pepco Energy Services, Inc. and its subsidiaries
PHI Corporate		PHI in its corporate capacity as a holding company
PHISCO		PHI Service Company
RPG		Renewable Power Generation
SolGen		SolGen, LLC

Table of Contents



GLOSSARY OF TERMS AND ABBREVIATIONS
Other Terms and Abbreviations
TMI		Three Mile Island nuclear facility
UII		Unicom Investments, Inc.
Note “—” of the Exelon 2017 Form 10-K		Reference to specific Combined Note to Consolidated Financial Statements within Exelon’s 2017 Annual Report on Form 10-K
AEC		Alternative Energy Credit that is issued for each megawatt hour of generation from a qualified alternative energy source
AESO		Alberta Electric Systems Operator
AFUDC		Allowance for Funds Used During Construction
AGE		Albany Green Energy Project
AMI		Advanced Metering Infrastructure
AMP		Advanced Metering Program
AOCI		Accumulated Other Comprehensive Income
ARC		Asset Retirement Cost
ARO		Asset Retirement Obligation
ARP		Alternative Revenue Program
BGS		Basic Generation Service
CAISO		California Independent System Operator
CAP		Customer Assistance Program
CCGTs		Combined-Cycle Gas Turbines
CERCLA		Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
CES		Clean Energy Standard
Clean Air Act		Clean Air Act of 1963, as amended
Clean Water Act		Federal Water Pollution Control Amendments of 1972, as amended
Conectiv Energy		Conectiv Energy Holdings, Inc. and substantially all of its subsidiaries, which were sold to Calpine in July 2010
CSAPR		Cross-State Air Pollution Rule
D.C. Circuit Court		United States Court of Appeals for the District of Columbia Circuit
DC PLUG		District of Columbia Power Line Undergrounding Initiative
DCPSC		District of Columbia Public Service Commission
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 Basic Generation Service
DOE		United States Department of Energy
DOEE		Department of Energy & Environment
DOJ		United States Department of Justice
DPSC		Delaware Public Service Commission
DRP		Direct Stock Purchase and Dividend Reinvestment Plan
DSP		Default Service Provider
EDF		Electricite de France SA and its subsidiaries

Table of Contents



GLOSSARY OF TERMS AND ABBREVIATIONS
Other Terms and Abbreviations
EE&C		Energy Efficiency and Conservation/Demand Response
EIMA		Energy Infrastructure Modernization Act (Illinois Senate Bill 1652 and Illinois House Bill 3036)
EmPower		A Maryland demand-side management program for Pepco and DPL
EPA		United States Environmental Protection Agency
EPSA		Electric Power Supply Association
ERCOT		Electric Reliability Council of Texas
ERISA		Employee Retirement Income Security Act of 1974, as amended
EROA		Expected Rate of Return on Assets
ESPP		Employee Stock Purchase Plan
FASB		Financial Accounting Standards Board
FEJA		Illinois Public Act 99-0906 or Future Energy Jobs Act
FERC		Federal Energy Regulatory Commission
FRCC		Florida Reliability Coordinating Council
GAAP		Generally Accepted Accounting Principles in the United States
GCR		Gas Cost Rate
GHG		Greenhouse Gas
GSA		Generation Supply Adjustment
GWh		Gigawatt hour
IBEW		International Brotherhood of Electrical Workers
ICC		Illinois Commerce Commission
ICE		Intercontinental Exchange
Illinois EPA		Illinois Environmental Protection Agency
Illinois Settlement Legislation		Legislation enacted in 2007 affecting electric utilities in Illinois
IPA		Illinois Power Agency
IRC		Internal Revenue Code
IRS		Internal Revenue Service
ISO		Independent System Operator
ISO-NE		Independent System Operator New England Inc.
ISO-NY		Independent System Operator New York
kV		Kilovolt
kW		Kilowatt
kWh		Kilowatt-hour
LIBOR		London Interbank Offered Rate
LLRW		Low-Level Radioactive Waste
LT Plan		Long-term renewable resources procurement plan
LTIP		Long-Term Incentive Plan
MAPP		Mid-Atlantic Power Pathway
MATS		U.S. EPA Mercury and Air Toxics Rule
MBR		Market Based Rates Incentive

Table of Contents



GLOSSARY OF TERMS AND ABBREVIATIONS
Other Terms and Abbreviations
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
n.m.		not meaningful
NAAQS		National Ambient Air Quality Standards
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
NLRB		National Labor Relations Board
Non-Regulatory Agreements Units		Nuclear generating units or portions thereof whose decommissioning-related activities are not subject to contractual elimination under regulatory accounting
NOSA		Nuclear Operating Services Agreement
NPDES		National Pollutant Discharge Elimination System
NRC		Nuclear Regulatory Commission
NSPS		New Source Performance Standards
NUGs		Non-utility generators
NWPA		Nuclear Waste Policy Act of 1982
NYMEX		New York Mercantile Exchange
NYPSC		New York Public Service Commission
OCI		Other Comprehensive Income
OIESO		Ontario Independent Electricity System Operator
OPC		Office of People’s Counsel
OPEB		Other Postretirement Employee Benefits
PA DEP		Pennsylvania Department of Environmental Protection
PAPUC		Pennsylvania Public Utility Commission
PGC		Purchased Gas Cost Clause
PJM		PJM Interconnection, LLC
POLR		Provider of Last Resort
POR		Purchase of Receivables
PPA		Power Purchase Agreement
Price-Anderson Act		Price-Anderson Nuclear Industries Indemnity Act of 1957

Table of Contents



GLOSSARY OF TERMS AND ABBREVIATIONS
Other Terms and Abbreviations
PRP		Potentially Responsible Parties
PSEG		Public Service Enterprise Group Incorporated
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
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
SERC		SERC Reliability Corporation (formerly Southeast Electric Reliability Council)
SILO		Sale-In, Lease-Out
SNF		Spent Nuclear Fuel
SOS		Standard Offer Service
SPFPA		Security, Police and Fire Professionals of America
SPP		Southwest Power Pool
TCJA		Tax Cuts and Jobs Act
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
ZEC		Zero Emission Credit, or Zero Emission Certificate
ZES		Zero Emission Standard

Table of Contents

FILING FORMAT

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

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This Report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by the Registrants include those factors discussed herein, as well as the items discussed in (1) the Registrants' combined 2017 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, Commitments and Contingencies; (2) this Quarterly Report on Form 10-Q in (a) Part II, Other Information, ITEM 1A. Risk Factors; (b) Part 1, Financial Information, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements: Note 17, Commitments and Contingencies; and (3) other factors discussed in filings with the SEC by the Registrants. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Report. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this Report.

WHERE TO FIND MORE INFORMATION

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

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
(In millions, except per share data)	2018			2017			2018			2017
Operating revenues
Competitive businesses revenues	$	4,305		$	3,950		$	9,417		$	8,500
Rate-regulated utility revenues	3,797			3,657			8,368			7,776
Revenues from alternative revenue programs	(26		)	58			(16		)	137
Total operating revenues	8,076			7,665			17,769			16,413
Operating expenses
Competitive businesses purchased power and fuel	2,277			2,158			5,566			4,952
Rate-regulated utility purchased power and fuel	1,038			928			2,476			2,033
Operating and maintenance	2,307			2,945			4,691			5,383
Depreciation and amortization	1,088			915			2,179			1,811
Taxes other than income	428			420			874			857
Total operating expenses	7,138			7,366			15,786			15,036
Gain on sales of assets and businesses	4			1			60			5
Bargain purchase gain	—			—			—			226
Operating income	942			300			2,043			1,608
Other income and (deductions)
Interest expense, net	(367		)	(426		)	(732		)	(789		)
Interest expense to affiliates	(6		)	(10		)	(13		)	(20		)
Other, net	44			177			17			434
Total other income and (deductions)	(329		)	(259		)	(728		)	(375		)
Income before income taxes	613			41			1,315			1,233
Income taxes	66			(62		)	125			149
Equity in losses of unconsolidated affiliates	(5		)	(9		)	(11		)	(18		)
Net income	542			94			1,179			1,066
Net income (loss) attributable to noncontrolling interests	3			(1		)	54			(20		)
Net income attributable to common shareholders	$	539		$	95		$	1,125		$	1,086
Comprehensive income, net of income taxes
Net income	$	542		$	94		$	1,179		$	1,066
Other comprehensive income (loss), net of income taxes
Pension and non-pension postretirement benefit plans:
Prior service benefit reclassified to periodic benefit cost	(17		)	(14		)	(33		)	(28		)
Actuarial loss reclassified to periodic benefit cost	61			49			123			98
Pension and non-pension postretirement benefit plan valuation adjustment	(1		)	(2		)	18			(58		)
Unrealized gain (loss) on cash flow hedges	4			(1		)	12			5
Unrealized gain on investments in unconsolidated affiliates	2			—			3			3
Unrealized (loss) gain on foreign currency translation	(5		)	2			(6		)	3
Unrealized gain on marketable securities	—			1			—			2
Other comprehensive income (loss)	44			35			117			25
Comprehensive income	586			129			1,296			1,091
Comprehensive income (loss) attributable to noncontrolling interests	4			(1		)	56			(22		)
Comprehensive income attributable to common shareholders	$	582		$	130		$	1,240		$	1,113

Average shares of common stock outstanding:
Basic	967			934			967			931
Diluted	969			936			968			932
Earnings per average common share:
Basic	$	0.56		$	0.10		$	1.16		$	1.17
Diluted	$	0.56		$	0.10		$	1.16		$	1.17
Dividends declared per common share	$	0.35		$	0.33		$	0.69		$	0.66

See the Combined Notes to Consolidated Financial Statements

Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Six Months Ended June 30,
(In millions)	2018			2017
Cash flows from operating activities
Net income	$	1,179		$	1,066
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion, including nuclear fuel and energy contract amortization	3,000			2,591
Impairment of long-lived assets and losses on regulatory assets	41			445
Gain on sales of assets and businesses	(60		)	(5		)
Bargain purchase gain	—			(226		)
Deferred income taxes and amortization of investment tax credits	(2		)	113
Net fair value changes related to derivatives	151			230
Net realized and unrealized losses (gains) on nuclear decommissioning trust fund investments	80			(284		)
Other non-cash operating activities	479			415
Changes in assets and liabilities:
Accounts receivable	(105		)	301
Inventories	60			(23		)
Accounts payable and accrued expenses	(342		)	(810		)
Option premiums paid, net	(36		)	(8		)
Collateral received (posted), net	81			(173		)
Income taxes	129			58
Pension and non-pension postretirement benefit contributions	(345		)	(325		)
Other assets and liabilities	(441		)	(470		)
Net cash flows provided by operating activities	3,869			2,895
Cash flows from investing activities
Capital expenditures	(3,807		)	(3,845		)
Proceeds from nuclear decommissioning trust fund sales	3,822			5,213
Investment in nuclear decommissioning trust funds	(3,924		)	(5,339		)
Acquisition of assets and businesses, net	(57		)	(212		)
Proceeds from sales of assets and businesses	89			211
Other investing activities	31			(9		)
Net cash flows used in investing activities	(3,846		)	(3,981		)
Cash flows from financing activities
Changes in short-term borrowings	200			422
Proceeds from short-term borrowings with maturities greater than 90 days	126			576
Repayments on short-term borrowings with maturities greater than 90 days	(1		)	(510		)
Issuance of long-term debt	1,488			981
Retirement of long-term debt	(1,309		)	(1,049		)
Dividends paid on common stock	(666		)	(607		)
Common stock issued from treasury stock	—			1,150
Proceeds from employee stock plans	27			43
Other financing activities	(50		)	(23		)
Net cash flows (used in) provided by financing activities	(185		)	983
Decrease in cash, cash equivalents and restricted cash	(162		)	(103		)
Cash, cash equivalents and restricted cash at beginning of period	1,190			914
Cash, cash equivalents and restricted cash at end of period	$	1,028		$	811

See the Combined Notes to Consolidated Financial Statements

Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)



(In millions)	June 30, 2018		December 31, 2017
ASSETS
Current assets
Cash and cash equivalents	$	694	$	898
Restricted cash and cash equivalents	206		207
Accounts receivable, net
Customer	4,094		4,445
Other	1,407		1,132
Mark-to-market derivative assets	799		976
Unamortized energy contract assets	46		60
Inventories, net
Fossil fuel and emission allowances	270		340
Materials and supplies	1,320		1,311
Regulatory assets	1,293		1,267
Other	1,360		1,260
Total current assets	11,489		11,896
Property, plant and equipment, net	75,284		74,202
Deferred debits and other assets
Regulatory assets	8,023		8,021
Nuclear decommissioning trust funds	13,110		13,272
Investments	636		640
Goodwill	6,677		6,677
Mark-to-market derivative assets	457		337
Unamortized energy contract assets	379		395
Other	1,194		1,330
Total deferred debits and other assets	30,476		30,672
Total assets^(a)	$	117,249	$	116,770

See the Combined Notes to Consolidated Financial Statements

Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)



(In millions)	June 30, 2018			December 31, 2017
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	1,252		$	929
Long-term debt due within one year	1,158			2,088
Accounts payable	3,113			3,532
Accrued expenses	1,665			1,837
Payables to affiliates	5			5
Regulatory liabilities	701			523
Mark-to-market derivative liabilities	268			232
Unamortized energy contract liabilities	171			231
Renewable energy credit obligation	257			352
PHI merger related obligation	63			87
Other	973			982
Total current liabilities	9,626			10,798
Long-term debt	33,179			32,176
Long-term debt to financing trusts	389			389
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits	11,484			11,235
Asset retirement obligations	10,222			10,029
Pension obligations	3,412			3,736
Non-pension postretirement benefit obligations	2,132			2,093
Spent nuclear fuel obligation	1,157			1,147
Regulatory liabilities	9,677			9,865
Mark-to-market derivative liabilities	507			409
Unamortized energy contract liabilities	538			609
Other	2,087			2,097
Total deferred credits and other liabilities	41,216			41,220
Total liabilities^(a)	84,410			84,583
Commitments and contingencies
Shareholders’ equity
Common stock (No par value, 2,000 shares authorized, 966 shares and 963 shares outstanding at June 30, 2018 and December 31, 2017, respectively)	19,008			18,964
Treasury stock, at cost (2 shares at June 30, 2018 and December 31, 2017)	(123		)	(123		)
Retained earnings	14,551			14,081
Accumulated other comprehensive loss, net	(2,921		)	(3,026		)
Total shareholders’ equity	30,515			29,896
Noncontrolling interests	2,324			2,291
Total equity	32,839			32,187
Total liabilities and shareholders’ equity	$	117,249		$	116,770

__________

(a)

Exelon’s consolidated assets include $9,612 million and $9,597 million at June 30, 2018 and December 31, 2017, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Exelon’s consolidated liabilities include $3,544 million and $3,618 million at June 30, 2018 and December 31, 2017, respectively, of certain VIEs for which the VIE creditors do not have recourse to Exelon. See Note 3 — Variable Interest Entities for additional information.

See the Combined Notes to Consolidated Financial Statements

Table of Contents

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)



(In millions, shares in thousands)	Issued Shares	Common Stock		Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss, net			Noncontrolling Interests			Total Shareholders' Equity
Balance, December 31, 2017	965,168	$	18,964	$	(123	)	$	14,081		$	(3,026	)	$	2,291		$	32,187
Net income	—	—		—			1,125			—			54			1,179
Long-term incentive plan activity	1,868	17		—			—			—			—			17
Employee stock purchase plan issuances	703	27		—			—			—			—			27
Changes in equity of noncontrolling interests	—	—		—			—			—			(23		)	(23		)
Common stock dividends	—	—		—			(669		)	—			—			(669		)
Other comprehensive income, net of income taxes	—	—		—			—			115			2			117
Impact of adoption of Recognition and Measurement of Financial Assets and Liabilities standard	—	—		—			14			(10		)	—			4
Balance, June 30, 2018	967,739	$	19,008	$	(123	)	$	14,551		$	(2,921	)	$	2,324		$	32,839

See the Combined Notes to Consolidated Financial Statements

Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2018			2017			2018			2017
Operating revenues
Operating revenues	$	4,306		$	3,948		$	9,419		$	8,495
Operating revenues from affiliates	273			268			671			598
Total operating revenues	4,579			4,216			10,090			9,093
Operating expenses
Purchased power and fuel	2,277			2,156			5,566			4,952
Purchased power and fuel from affiliates	3			1			7			3
Operating and maintenance	1,247			1,826			2,425			3,138
Operating and maintenance from affiliates	171			186			331			365
Depreciation and amortization	466			334			914			637
Taxes other than income	134			140			272			282
Total operating expenses	4,298			4,643			9,515			9,377
Gain on sales of assets and businesses	1			—			54			4
Bargain purchase gain	—			—			—			226
Operating income (loss)	282			(427		)	629			(54		)
Other income and (deductions)
Interest expense, net	(93		)	(120		)	(184		)	(209		)
Interest expense to affiliates	(9		)	(9		)	(18		)	(19		)
Other, net	29			181			(15		)	440
Total other income and (deductions)	(73		)	52			(217		)	212
Income (loss) before income taxes	209			(375		)	412			158
Income taxes	23			(148		)	32			(25		)
Equity in losses of unconsolidated affiliates	(5		)	(9		)	(12		)	(19		)
Net income (loss)	181			(236		)	368			164
Net income (loss) attributable to noncontrolling interests	3			(1		)	54			(20		)
Net income (loss) attributable to membership interest	$	178		$	(235	)	$	314		$	184
Comprehensive income, net of income taxes
Net income (loss)	$	181		$	(236	)	$	368		$	164
Other comprehensive income (loss), net of income taxes
Unrealized gain (loss) on cash flow hedges	5			(1		)	12			5
Unrealized gain on investments in unconsolidated affiliates	2			—			3			4
Unrealized (loss) gain on foreign currency translation	(5		)	2			(6		)	3
Other comprehensive income	2			1			9			12
Comprehensive income (loss)	183			(235		)	377			176
Comprehensive income (loss) attributable to noncontrolling interests	4			(1		)	56			(22		)
Comprehensive income (loss) attributable to membership interest	$	179		$	(234	)	$	321		$	198

See the Combined Notes to Consolidated Financial Statements

Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Six Months Ended June 30,
(In millions)	2018			2017
Cash flows from operating activities
Net income	$	368		$	164
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion, including nuclear fuel and energy contract amortization	1,735			1,415
Impairment of long-lived assets	41			445
Gain on sales of assets and businesses	(54		)	(4		)
Bargain purchase gain	—			(226		)
Deferred income taxes and amortization of investment tax credits	(149		)	(167		)
Net fair value changes related to derivatives	158			235
Net realized and unrealized losses (gains) on nuclear decommissioning trust fund investments	80			(284		)
Other non-cash operating activities	85			121
Changes in assets and liabilities:
Accounts receivable	258			151
Receivables from and payables to affiliates, net	7			8
Inventories	34			(5		)
Accounts payable and accrued expenses	(272		)	(327		)
Option premiums paid, net	(36		)	(8		)
Collateral received (posted), net	91			(163		)
Income taxes	58			(99		)
Pension and non-pension postretirement benefit contributions	(129		)	(116		)
Other assets and liabilities	(212		)	(166		)
Net cash flows provided by operating activities	2,063			974
Cash flows from investing activities
Capital expenditures	(1,298		)	(1,189		)
Proceeds from nuclear decommissioning trust fund sales	3,822			5,213
Investment in nuclear decommissioning trust funds	(3,924		)	(5,339		)
Acquisition of assets and businesses, net	(57		)	(212		)
Proceeds from sales of assets and businesses	89			210
Changes in Exelon intercompany money pool	(185		)	—
Other investing activities	4			(32		)
Net cash flows used in investing activities	(1,549		)	(1,349		)
Cash flows from financing activities
Changes in short-term borrowings	—			(51		)
Proceeds from short-term borrowings with maturities greater than 90 days	1			76
Repayments of short-term borrowings with maturities greater than 90 days	(1		)	(10		)
Issuance of long-term debt	13			779
Retirement of long-term debt	(76		)	(295		)
Changes in Exelon intercompany money pool	(54		)	196
Distributions to member	(377		)	(330		)
Other financing activities	(24		)	(7		)
Net cash flows (used in) provided by financing activities	(518		)	358
Decrease in cash, cash equivalents and restricted cash	(4		)	(17		)
Cash, cash equivalents and restricted cash at beginning of period	554			448
Cash, cash equivalents and restricted cash at end of period	$	550		$	431

See the Combined Notes to Consolidated Financial Statements

Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)



(In millions)	June 30, 2018		December 31, 2017
ASSETS
Current assets
Cash and cash equivalents	$	420	$	416
Restricted cash and cash equivalents	130		138
Accounts receivable, net
Customer	2,435		2,697
Other	276		321
Mark-to-market derivative assets	799		976
Receivables from affiliates	146		140
Unamortized energy contract assets	46		60
Inventories, net
Fossil fuel and emission allowances	214		264
Materials and supplies	953		937
Other	1,148		933
Total current assets	6,567		6,882
Property, plant and equipment, net	24,479		24,906
Deferred debits and other assets
Nuclear decommissioning trust funds	13,110		13,272
Investments	423		433
Goodwill	47		47
Mark-to-market derivative assets	457		334
Prepaid pension asset	1,522		1,502
Unamortized energy contract assets	378		395
Deferred income taxes	6		16
Other	679		670
Total deferred debits and other assets	16,622		16,669
Total assets^(a)	$	47,668	$	48,457

See the Combined Notes to Consolidated Financial Statements

Table of Contents

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)



(In millions)	June 30, 2018			December 31, 2017
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings	$	—		$	2
Long-term debt due within one year	321			346
Accounts payable	1,264			1,773
Accrued expenses	976			1,022
Payables to affiliates	128			123
Borrowings from Exelon intercompany money pool	—			54
Mark-to-market derivative liabilities	245			211
Unamortized energy contract liabilities	36			43
Renewable energy credit obligation	257			352
Other	295			265
Total current liabilities	3,522			4,191
Long-term debt	7,661			7,734
Long-term debt to affiliate	904			910
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits	3,673			3,811
Asset retirement obligations	10,037			9,844
Non-pension postretirement benefit obligations	907			916
Spent nuclear fuel obligation	1,157			1,147
Payables to affiliates	2,916			3,065
Mark-to-market derivative liabilities	270			174
Unamortized energy contract liabilities	34			48
Other	648			658
Total deferred credits and other liabilities	19,642			19,663
Total liabilities^(a)	31,729			32,498
Commitments and contingencies
Equity
Member’s equity
Membership interest	9,357			9,357
Undistributed earnings	4,292			4,349
Accumulated other comprehensive loss, net	(33		)	(37		)
Total member’s equity	13,616			13,669
Noncontrolling interests	2,323			2,290
Total equity	15,939			15,959
Total liabilities and equity	$	47,668		$	48,457

__________

(a)

Generation’s consolidated assets include $9,575 million and $9,556 million at June 30, 2018 and December 31, 2017, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Generation’s consolidated liabilities include $3,456 million and $3,516 million at June 30, 2018 and December 31, 2017, respectively, of certain VIEs for which the VIE creditors do not have recourse to Generation. See Note 3 — Variable Interest Entities for additional information.

See the Combined Notes to Consolidated Financial Statements

Table of Contents

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, 2017	$	9,357	$	4,349		$	(37	)	$	2,290		$	15,959
Net income	—		314			—			54			368
Changes in equity of noncontrolling interests	—		—			—			(23		)	(23		)
Distributions to member	—		(377		)	—			—			(377		)
Other comprehensive income, net of income taxes	—		—			7			2			9
Impact of adoption of Recognition and Measurement of Financial Assets and Liabilities standard	—		6			(3		)	—			3
Balance, June 30, 2018	$	9,357	$	4,292		$	(33	)	$	2,323		$	15,939

See the Combined Notes to Consolidated Financial Statements

Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2018			2017			2018			2017
Operating revenues
Electric operating revenues	$	1,410		$	1,336		$	2,903		$	2,615
Revenues from alternative revenue programs	(17		)	18			(12		)	32
Operating revenues from affiliates	5			3			19			9
Total operating revenues	1,398			1,357			2,910			2,656
Operating expenses
Purchased power	373			360			784			689
Purchased power from affiliate	104			18			298			24
Operating and maintenance	255			312			509			620
Operating and maintenance from affiliate	69			65			129			127
Depreciation and amortization	231			211			459			419
Taxes other than income	79			72			156			144
Total operating expenses	1,111			1,038			2,335			2,023
Gain on sales of assets	1			—			5			—
Operating income	288			319			580			633
Other income and (deductions)
Interest expense, net	(82		)	(98		)	(168		)	(179		)
Interest expense to affiliates	(3		)	(3		)	(7		)	(6		)
Other, net	4			4			12			8
Total other income and (deductions)	(81		)	(97		)	(163		)	(177		)
Income before income taxes	207			222			417			456
Income taxes	43			104			88			197
Net income	$	164		$	118		$	329		$	259
Comprehensive income	$	164		$	118		$	329		$	259

See the Combined Notes to Consolidated Financial Statements

Table of Contents

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Six Months Ended June 30,
(In millions)	2018			2017
Cash flows from operating activities
Net income	$	329		$	259
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization	459			419
Deferred income taxes and amortization of investment tax credits	84			235
Other non-cash operating activities	117			58
Changes in assets and liabilities:
Accounts receivable	(133		)	12
Receivables from and payables to affiliates, net	15			(4		)
Inventories	5			(2		)
Accounts payable and accrued expenses	(41		)	(182		)
Collateral posted, net	(13		)	(8		)
Income taxes	(15		)	4
Pension and non-pension postretirement benefit contributions	(39		)	(37		)
Other assets and liabilities	(166		)	34
Net cash flows provided by operating activities	602			788
Cash flows from investing activities
Capital expenditures	<