Edgar Filing: EXELON CORP

Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2015

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


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

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

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

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

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


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

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

The number of shares outstanding of each registrant’s common stock as of September 30, 2015 was:


Exelon Corporation Common Stock, without par value		919,564,380
Exelon Generation Company, LLC		not applicable
Commonwealth Edison Company Common Stock, $12.50 par value		127,016,973
PECO Energy Company Common Stock, without par value		170,478,507
Baltimore Gas and Electric Company Common Stock, without par value		1,000

TABLE OF CONTENTS


		Page No.

FILING FORMAT			7

FORWARD-LOOKING STATEMENTS			7

WHERE TO FIND MORE INFORMATION			7

PART I.	FINANCIAL INFORMATION		8

ITEM 1.	FINANCIAL STATEMENTS		8

	Exelon Corporation

	Consolidated Statements of Operations and Comprehensive Income		9

	Consolidated Statements of Cash Flows		10

	Consolidated Balance Sheets		11

	Consolidated Statement of Changes in Shareholders’ Equity		13

	Exelon Generation Company, LLC

	Consolidated Statements of Operations and Comprehensive Income		14

	Consolidated Statements of Cash Flows		15

	Consolidated Balance Sheets		16

	Consolidated Statement of Changes in Equity		18

	Commonwealth Edison Company

	Consolidated Statements of Operations and Comprehensive Income		19

	Consolidated Statements of Cash Flows		20

	Consolidated Balance Sheets		21

	Consolidated Statement of Changes in Shareholders’ Equity		23

	PECO Energy Company

	Consolidated Statements of Operations and Comprehensive Income		24

	Consolidated Statements of Cash Flows		25

	Consolidated Balance Sheets		26

	Consolidated Statement of Changes in Shareholders’ Equity		28

	Baltimore Gas and Electric Company

	Consolidated Statements of Operations and Comprehensive Income		29

	Consolidated Statements of Cash Flows		30

	Consolidated Balance Sheets		31

	Consolidated Statement of Changes in Shareholders’ Equity		33

	Combined Notes to Consolidated Financial Statements		34

	1. Basis of Presentation		34

	2. New Accounting Pronouncements		35

	3. Variable Interest Entities		38

	4. Mergers, Acquisitions and Dispositions		44

	5. Regulatory Matters		47

	6. Investment in Constellation Energy Nuclear Group, LLC		60


		Page No.

	7. Impairment of Long-Lived Assets		61

	8. Implications of Potential Early Plant Retirements		63

	9. Fair Value of Financial Assets and Liabilities		64

	10. Derivative Financial Instruments		82

	11. Debt and Credit Agreements		99

	12. Income Taxes		105

	13. Nuclear Decommissioning		109

	14. Retirement Benefits		112

	15. Severance		114

	16. Changes in Accumulated Other Comprehensive Income		115

	17. Common Stock		120

	18. Earnings Per Share and Equity		120

	19. Commitments and Contingencies		121

	20. Supplemental Financial Information		132

	21. Segment Information		138

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		143

	Exelon Corporation		143

	General		143

	Executive Overview		144

	Critical Accounting Policies and Estimates		171

	Results of Operations		172

	Liquidity and Capital Resources		200

	Contractual Obligations and Off-Balance Sheet Arrangements		210

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		212

ITEM 4.	CONTROLS AND PROCEDURES		220

PART II.	OTHER INFORMATION		222

ITEM 1.	LEGAL PROCEEDINGS		222

ITEM 1A.	RISK FACTORS		222

ITEM 4.	MINE SAFETY DISCLOSURES		222

ITEM 6.	EXHIBITS		222

SIGNATURES			224

	Exelon Corporation		224

	Exelon Generation Company, LLC		224

	Commonwealth Edison Company		225

	PECO Energy Company		225

	Baltimore Gas and Electric Company		225

GLOSSARY OF TERMS AND ABBREVIATIONS


Exelon Corporation and Related Entities
Exelon		Exelon Corporation
Generation		Exelon Generation Company, LLC
ComEd		Commonwealth Edison Company
PECO		PECO Energy Company
BGE		Baltimore Gas and Electric Company
BSC		Exelon Business Services Company, LLC
Exelon Corporate		Exelon’s holding company
CENG		Constellation Energy Nuclear Group, LLC
Constellation		Constellation Energy Group, Inc.
Antelope Valley, AVSR		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
ComEd Financing III		ComEd Financing III
PEC L.P.		PECO Energy Capital, L.P.
PECO Trust III		PECO Energy Capital Trust III
PECO Trust IV		PECO Energy Capital Trust IV
BGE Trust II		BGE Capital Trust II
PETT		PECO Energy Transition Trust
Registrants		Exelon, Generation, ComEd, PECO and BGE, collectively


Other Terms and Abbreviations
Note “—” of the Exelon 2014 Form 10-K		Reference to a specific Combined Note to Consolidated Financial Statements within Exelon’s 2014 Annual Report on Form 10-K
1998 restructuring settlement		PECO’s 1998 settlement of its restructuring case mandated by the Competition Act
Act 11		Pennsylvania Act 11 of 2012
Act 129		Pennsylvania Act 129 of 2008
AEC		Alternative Energy Credit that is issued for each megawatt hour of generation from a qualified alternative energy source
AEPS		Pennsylvania Alternative Energy Portfolio Standards
AEPS Act		Pennsylvania Alternative Energy Portfolio Standards Act of 2004, as amended
AESO		Alberta Electric Systems Operator
AFUDC		Allowance for Funds Used During Construction
ALJ		Administrative Law Judge
AMI		Advanced Metering Infrastructure
AMP		Advanced Metering Program
ARC		Asset Retirement Cost
ARO		Asset Retirement Obligation
ARP		Title IV Acid Rain Program
ARRA of 2009		American Recovery and Reinvestment Act of 2009
Block contracts		Forward Purchase Energy Block Contracts
CAIR		Clean Air Interstate Rule
CAISO		California ISO
CAMR		Federal Clean Air Mercury Rule

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
CERCLA		Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended
CFL		Compact Fluorescent Light
Clean Air Act		Clean Air Act of 1963, as amended
Clean Water Act		Federal Water Pollution Control Amendments of 1972, as amended
Competition Act		Pennsylvania Electricity Generation Customer Choice and Competition Act of 1996
CPI		Consumer Price Index
CPUC		California Public Utilities Commission
CSAPR		Cross-State Air Pollution Rule
CTC		Competitive Transition Charge
DC Circuit Court		United States Court of Appeals for the District of Columbia Circuit
DOE		United States Department of Energy
DOJ		United States Department of Justice
DSP		Default Service Provider
DSP Program		Default Service Provider Program
EDF		Electricite de France SA
EE&C		Energy Efficiency and Conservation/Demand Response
EGR		ExGen Renewables I, LLC
EGS		Electric Generation Supplier
EGTP		ExGen Texas Power, LLC
EIMA		Illinois Energy Infrastructure Modernization Act
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
GDP		Gross Domestic Product
GHG		Greenhouse Gas
GRT		Gross Receipts Tax
GSA		Generation Supply Adjustment
GWh		Gigawatt hour
HAP		Hazardous air pollutants
Health Care Reform Acts		Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act of 2010
IBEW		International Brotherhood of Electrical Workers
ICC		Illinois Commerce Commission
ICE		Intercontinental Exchange
Illinois Act		Illinois Electric Service Customer Choice and Rate Relief Law of 1997
Illinois EPA		Illinois Environmental Protection Agency
Illinois Settlement Legislation		Legislation enacted in 2007 affecting electric utilities in Illinois
Integrys		Integrys Energy Services, Inc.
IPA		Illinois Power Agency
IRC		Internal Revenue Code

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
IRS		Internal Revenue Service
ISO		Independent System Operator
ISO-NE		ISO New England Inc.
ISO-NY		New York Independent System Operator
kV		Kilovolt
kW		Kilowatt
kWh		Kilowatt-hour
LIBOR		London Interbank Offered Rate
LILO		Lease-In, Lease-Out
LLRW		Low-Level Radioactive Waste
LTIP		Long-Term Incentive Plan
MATS		U.S. EPA Mercury and Air Toxics Standard Rule
MBR		Market Based Rates Incentive
MDE		Maryland Department of the Environment
MDPSC		Maryland Public Service Commission
MGP		Manufactured Gas Plant
MISO		Midcontinent Independent System Operator, Inc.
mmcf		Million Cubic Feet
Moody’s		Moody’s Investor Service
MOPR		Minimum Offer Price Rule
MRV		Market-Related Value
MW		Megawatt
MWh		Megawatt hour
NAAQS		National Ambient Air Quality Standards
n.m.		not meaningful
NAV		Net Asset Value
NDT		Nuclear Decommissioning Trust
NEIL		Nuclear Electric Insurance Limited
NERC		North American Electric Reliability Corporation
NGS		Natural Gas Supplier
NJDEP		New Jersey Department of Environmental Protection
Non-Regulatory Agreements Units		Nuclear generating units or portions thereof whose decommissioning-related activities are not subject to contractual elimination under regulatory accounting including the CENG units (Calvert Cliffs, Nine Mile Point, and R.E. Ginna), Clinton, Oyster Creek, Three Mile Island, Zion (a former ComEd unit), and portions of Peach Bottom (a former PECO unit)
NOSA		Nuclear Operating Services Agreement
NOV		Notice of Violation
NPDES		National Pollutant Discharge Elimination System
NRC		Nuclear Regulatory Commission
NSPS		New Source Performance Standards
NWPA		Nuclear Waste Policy Act of 1982
NYMEX		New York Mercantile Exchange
OCI		Other Comprehensive Income
OIESO		Ontario Independent Electricity System Operator
OPEB		Other Postretirement Employee Benefits
PA DEP		Pennsylvania Department of Environmental Protection
PAPUC		Pennsylvania Public Utility Commission
PGC		Purchased Gas Cost Clause

GLOSSARY OF TERMS AND ABBREVIATIONS


Other Terms and Abbreviations
PHI		Pepco Holdings, Inc.
PJM		PJM Interconnection, LLC
POLR		Provider of Last Resort
POR		Purchase of Receivables
PPA		Power Purchase Agreement
PPL		PPL Holtwood, LLC
Price-Anderson Act		Price-Anderson Nuclear Industries Indemnity Act of 1957
PRP		Potentially Responsible Parties
PSEG		Public Service Enterprise Group Incorporated
PURTA		Pennsylvania Public Realty Tax Act
PV		Photovoltaic
RCRA		Resource Conservation and Recovery Act of 1976, as amended
REC		Renewable Energy Credit which is issued for each megawatt hour of generation from a qualified renewable energy source
Regulatory Agreement Units		Nuclear generating units whose decommissioning-related activities are subject to contractual elimination under regulatory accounting including the former ComEd units (Braidwood, Bryon, Dresden, LaSalle, Quad Cities) and the former PECO units (Limerick, Peach Bottom, Salem)
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 Common Equity
RPM		PJM Reliability Pricing Model
RPS		Renewable Energy Portfolio Standards
RTEP		Regional Transmission Expansion Plan
RTO		Regional Transmission Organization
S&P		Standard & Poor’s Ratings Services
SEC		United States Securities and Exchange Commission
Senate Bill 1		Maryland Senate Bill 1
SERC		SERC Reliability Corporation (formerly Southeast Electric Reliability Council)
SERP		Supplemental Employee Retirement Plan
SGIG		Smart Grid Investment Grant
SGIP		Smart Grid Initiative Program
SILO		Sale-In, Lease-Out
SMP		Smart Meter Program
SMPIP		Smart Meter Procurement and Installation Plan
SNF		Spent Nuclear Fuel
SOA		Society of Actuaries
SOS		Standard Offer Service
SPP		Southwest Power Pool
Tax Relief Act of 2010		Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
Upstream		Natural gas and oil exploration and production activities
VIE		Variable Interest Entity
WECC		Western Electric Coordinating Council

FILING FORMAT

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

FORWARD-LOOKING STATEMENTS

This Report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by the Registrants include those factors discussed herein, as well as the items discussed in (1) Exelon’s 2014 Annual Report on Form 10-K in (a) ITEM 1A. Risk Factors, (b) ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) ITEM 8. Financial Statements and Supplementary Data: Note 22; (2) this Quarterly Report on Form 10-Q in (a) Part II, Other Information, ITEM 1A. Risk Factors, (b) Part 1, Financial Information, ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part I, Financial Information, ITEM 1. Financial Statements: Note 19; and (3) other factors discussed in filings with the SEC by the Registrants. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Report. None of the Registrants undertakes any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this Report.

WHERE TO FIND MORE INFORMATION

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions, except per share data)	2015			2014			2015			2014
Operating revenues	$	7,401		$	6,912		$	22,746		$	20,173
Operating expenses
Purchased power and fuel		3,291			2,591			10,210			8,943
Purchased power and fuel from affiliates		—			57			—			456
Operating and maintenance		1,996			1,982			6,119			6,005
Depreciation and amortization		606			577			1,818			1,732
Taxes other than income		310			306			908			887

Total operating expenses		6,203			5,513			19,055			18,023

Equity in losses of unconsolidated affiliates		—			—			—			(20	)
Gain on sales of assets		2			339			10			356
Gain on consolidation and acquisition of businesses		—			—			—			261

Operating income		1,200			1,738			3,701			2,747

Other income and (deductions)
Interest expense, net		(243	)		(247	)		(724	)		(691	)
Interest expense to affiliates		(10	)		(11	)		(31	)		(31	)
Other, net		(244	)		16			(179	)		346

Total other income and (deductions)		(497	)		(242	)		(934	)		(376	)

Income before income taxes		703			1,496			2,767			2,371
Income taxes		115			422			805			646
Equity in losses of unconsolidated affiliates		(1	)		—			(3	)		—

Net income		587			1,074			1,959			1,725

Net income (loss) attributable to noncontrolling interest and preference stock dividends		(42	)		81			—			121

Net income attributable to common shareholders	$	629		$	993		$	1,959		$	1,604

Comprehensive income, net of income taxes
Net income	$	587		$	1,074		$	1,959		$	1,725
Other comprehensive income (loss), net of income taxes
Pension and non-pension postretirement benefit plans:
Prior service benefit reclassified to periodic benefit cost		(11	)		(11	)		(35	)		(18	)
Actuarial loss reclassified to periodic cost		55			38			165			109
Pension and non-pension postretirement benefit plans valuation adjustment		—			(8	)		(29	)		240
Unrealized gain (loss) on cash flow hedges		(3	)		(19	)		4			(92	)
Unrealized gain (loss) on equity investments		—			(3	)		—			8
Unrealized gain (loss) on foreign currency translation		(8	)		(5	)		(17	)		(6	)
Unrealized loss on marketable securities		(1	)		(3	)		—			(2	)
Reversal of CENG equity method AOCI		—			—			—			(116	)

Other comprehensive income (loss)		32			(11	)		88			123

Comprehensive income	$	619		$	1,063		$	2,047		$	1,848

Average shares of common stock outstanding:
Basic		913			861			879			860
Diluted		915			863			883			863

Earnings per average common share:
Basic	$	0.69		$	1.15		$	2.23		$	1.87
Diluted	$	0.69		$	1.15		$	2.22		$	1.86

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

Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2015			2014
Cash flows from operating activities
Net income	$	1,959		$	1,725
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		2,930			2,856
Impairment of long-lived assets		25			162
Gain on consolidation and acquisition of businesses		—			(268	)
Gain on sales of assets		(10	)		(356	)
Deferred income taxes and amortization of investment tax credits		241			459
Net fair value changes related to derivatives		(363	)		522
Net realized and unrealized (gains) losses on nuclear decommissioning trust fund investments		221			(141	)
Other non-cash operating activities		856			698
Changes in assets and liabilities:
Accounts receivable		175			198
Inventories		65			(316	)
Accounts payable, accrued expenses and other current liabilities		(147	)		(322	)
Option premiums received, net		27			21
Counterparty collateral received (posted), net		305			(615	)
Income taxes		300			72
Pension and non-pension postretirement benefit contributions		(430	)		(516	)
Other assets and liabilities		(480	)		(536	)

Net cash flows provided by operating activities		5,674			3,643

Cash flows from investing activities
Capital expenditures		(5,443	)		(4,114	)
Proceeds from nuclear decommissioning trust fund sales		4,551			5,464
Investment in nuclear decommissioning trust funds		(4,737	)		(5,550	)
Acquisition of businesses		(28	)		(67	)
Proceeds from sale of long-lived assets		145			660
Proceeds from termination of direct financing lease investment		—			335
Proceeds from sales of investments		—			7
Cash and restricted cash acquired from consolidations and acquisitions		—			129
Change in restricted cash		(70	)		(151	)
Other investing activities		(107	)		(89	)

Net cash flows used in investing activities		(5,689	)		(3,376	)

Cash flows from financing activities
Changes in short-term borrowings		230			236
Issuance of long-term debt		5,909			3,212
Retirement of long-term debt		(1,745	)		(1,214	)
Issuance of common stock		1,868			—
Distributions to noncontrolling interest of consolidated VIE		—			(415	)
Dividends paid on common stock		(819	)		(799	)
Proceeds from employee stock plans		24			25
Other financing activities		(65	)		(158	)

Net cash flows provided by financing activities		5,402			887

Increase in cash and cash equivalents		5,387			1,154
Cash and cash equivalents at beginning of period		1,878			1,609

Cash and cash equivalents at end of period	$	7,265		$	2,763

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2015		December 31, 2014
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	7,265	$	1,878
Restricted cash and cash equivalents		341		271
Accounts receivable, net
Customer		3,215		3,482
Other		1,107		1,227
Mark-to-market derivative assets		1,116		1,279
Unamortized energy contract assets		135		254
Inventories, net
Fossil fuel and emission allowances		442		579
Materials and supplies		1,074		1,024
Deferred income taxes		211		244
Regulatory assets		779		847
Assets held for sale		4		147
Other		1,178		865

Total current assets		16,867		12,097

Property, plant and equipment, net		55,814		52,087
Deferred debits and other assets
Regulatory assets		6,000		6,076
Nuclear decommissioning trust funds		10,103		10,537
Investments		620		544
Goodwill		2,672		2,672
Mark-to-market derivative assets		801		773
Deferred income taxes		2		—
Unamortized energy contracts assets		513		549
Pledged assets for Zion Station decommissioning		237		319
Other		1,499		1,160

Total deferred debits and other assets		22,447		22,630

Total assets^(a)	$	95,128	$	86,814

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2015			December 31, 2014
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	675		$	460
Long-term debt due within one year		897			1,802
Accounts payable		2,987			3,048
Accrued expenses		1,576			1,539
Payables to affiliates		8			8
Regulatory liabilities		365			310
Mark-to-market derivative liabilities		204			234
Unamortized energy contract liabilities		118			238
Other		1,017			1,123

Total current liabilities		7,847			8,762

Long-term debt		24,541			19,362
Long-term debt to financing trusts		648			648
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		13,480			13,019
Asset retirement obligations		8,405			7,295
Pension obligations		3,014			3,366
Non-pension postretirement benefit obligations		1,877			1,742
Spent nuclear fuel obligation		1,021			1,021
Regulatory liabilities		4,180			4,550
Mark-to-market derivative liabilities		360			403
Unamortized energy contract liabilities		136			211
Payable for Zion Station decommissioning		99			155
Other		2,231			2,147

Total deferred credits and other liabilities		34,803			33,909

Total liabilities^(a)		67,839			62,681

Commitments and contingencies
Shareholders’ equity
Common stock (No par value, 2,000 shares authorized, 920 shares and 860 shares outstanding at September 30, 2015 and December 31, 2014, respectively)		18,647			16,709
Treasury stock, at cost (35 shares at both September 30, 2015 and December 31, 2014)		(2,327	)		(2,327	)
Retained earnings		12,046			10,910
Accumulated other comprehensive loss, net		(2,596	)		(2,684	)

Total shareholders’ equity		25,770			22,608
BGE preference stock not subject to mandatory redemption		193			193
Noncontrolling interest		1,326			1,332

Total equity		27,289			24,133

Total liabilities and shareholders’ equity	$	95,128		$	86,814

(a)

Exelon’s consolidated assets include $8,190 million and $8,160 million at September 30, 2015 and December 31, 2014, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Exelon’s consolidated liabilities include $3,242 million and $2,723 million at September 30, 2015 and December 31, 2014, respectively, of certain VIEs for which the VIE creditors do not have recourse to Exelon. See Note 3 — Variable Interest Entities.

See the Combined Notes to Consolidated Financial Statements

EXELON CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(In millions, shares in thousands)	Issued Shares		Common Stock			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss, net			Noncontrolling Interest			Preference Stock			Total Equity
Balance, December 31, 2014		894,568	$	16,709		$	(2,327	)	$	10,910		$	(2,684	)	$	1,332		$	193		$	24,133
Net income		—		—			—			1,959			—			(10	)		10			1,959
Long-term incentive plan activity		1,394		47			—			—			—			—			—			47
Employee stock purchase plan issuances		1,083		24			—			—			—			—			—			24
Issuance of common stock		57,500		1,868			—			—			—			—			—			1,868
Tax benefit on stock compensation		—		(1	)		—			—			—			—			—			(1	)
Changes in equity of noncontrolling interest		—		—			—			—			—			4			—			4
Common stock dividends		—		—			—			(823	)		—			—			—			(823	)
Preference stock dividends		—		—			—			—			—			—			(10	)		(10	)
Other comprehensive income, net of income taxes		—		—			—			—			88			—			—			88

Balance, September 30, 2015		954,545	$	18,647		$	(2,327	)	$	12,046		$	(2,596	)	$	1,326		$	193		$	27,289

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2015			2014			2015			2014
Operating revenues
Operating revenues	$	4,562		$	4,300		$	14,270		$	11,944
Operating revenues from affiliates		206			112			571			647

Total operating revenues		4,768			4,412			14,841			12,591

Operating expenses
Purchased power and fuel		2,516			1,821			7,789			6,595
Purchased power and fuel from affiliates		3			59			11			476
Operating and maintenance		1,088			1,114			3,399			3,308
Operating and maintenance from affiliates		153			152			461			457
Depreciation and amortization		264			253			774			719
Taxes other than income		123			127			369			350

Total operating expenses		4,147			3,526			12,803			11,905

Equity in earnings (losses) of unconsolidated affiliates		—			1			—			(20	)
Gain on sales of assets		1			338			7			355
Gain on consolidation and acquisition of businesses		—			—			—			261

Operating income		622			1,225			2,045			1,282

Other income and (deductions)
Interest expense		(56	)		(77	)		(236	)		(224	)
Interest expense to affiliates, net		(12	)		(12	)		(33	)		(37	)
Other, net		(257	)		4			(193	)		306

Total other income and (deductions)		(325	)		(85	)		(462	)		45

Income before income taxes		297			1,140			1,583			1,327
Income taxes		(36	)		291			371			290
Equity in losses of unconsolidated affiliates		(1	)		—			(4	)		—

Net income		332			849			1,208			1,037
Net income (loss) attributable to noncontrolling interests		(45	)		78			(10	)		111

Net income attributable to membership interest	$	377		$	771		$	1,218		$	926

Comprehensive income, net of income taxes
Net income	$	332		$	849		$	1,208		$	1,037
Other comprehensive income (loss), net of income taxes
Unrealized loss on cash flow hedges		(3	)		(16	)		(7	)		(86	)
Unrealized gain (loss) on equity investments		—			(3	)		—			8
Unrealized loss on foreign currency translation		(8	)		(5	)		(17	)		(6	)
Unrealized loss on marketable securities		(2	)		(2	)		—			(3	)
Reversal of CENG equity method AOCI		—			—			—			(116	)

Other comprehensive loss		(13	)		(26	)		(24	)		(203	)

Comprehensive income	$	319		$	823		$	1,184		$	834

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2015			2014
Cash flows from operating activities
Net income	$	1,208		$	1,037
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		1,887			1,853
Impairment of long-lived assets		1			138
Gain on consolidation and acquisitions of businesses		—			(268	)
Gain on sales of assets		(7	)		(355	)
Deferred income taxes and amortization of investment tax credits		21			154
Net fair value changes related to derivatives		(252	)		509
Net realized and unrealized (gains) losses on nuclear decommissioning trust fund investments		221			(141	)
Other non-cash operating activities		227			251
Changes in assets and liabilities:
Accounts receivable		252			153
Receivables from and payables to affiliates, net		16			72
Inventories		69			(286	)
Accounts payable, accrued expenses and other current liabilities		(156	)		(311	)
Option premiums received, net		27			21
Counterparty collateral received (posted), net		376			(634	)
Income taxes		(70	)		172
Pension and non-pension postretirement benefit contributions		(189	)		(214	)
Other assets and liabilities		(425	)		(367	)

Net cash flows provided by operating activities		3,206			1,784

Cash flows from investing activities
Capital expenditures		(2,774	)		(1,961	)
Proceeds from nuclear decommissioning trust fund sales		4,551			5,464
Investment in nuclear decommissioning trust funds		(4,737	)		(5,550	)
Acquisition of businesses		(28	)		(67	)
Proceeds from sale of long-lived assets		144			660
Change in restricted cash		(84	)		(116	)
Changes in Exelon intercompany money pool		—			44
Cash and restricted cash acquired from consolidations and acquisitions		—			129
Other investing activities		(92	)		(34	)

Net cash flows used in investing activities		(3,020	)		(1,431	)

Cash flows from financing activities
Change in short-term borrowings		—			7
Issuance of long-term debt		1,307			1,112
Retirement of long-term debt		(64	)		(552	)
Retirement of long-term debt to affiliate		(550	)		—
Changes in Exelon intercompany money pool		1,205			—
Distribution to member		(2,368	)		(440	)
Distributions to noncontrolling interest of consolidated VIE		—			(415	)
Contribution from member		55			55
Other financing activities		(6	)		(67	)

Net cash flows used in financing activities		(421	)		(300	)

Increase (decrease) in cash and cash equivalents		(235	)		53
Cash and cash equivalents at beginning of period		780			1,258

Cash and cash equivalents at end of period	$	545		$	1,311

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2015		December 31, 2014
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	545	$	780
Restricted cash and cash equivalents		242		158
Accounts receivable, net
Customer		2,056		2,295
Other		487		318
Mark-to-market derivative assets		1,116		1,276
Receivables from affiliates		84		113
Unamortized energy contract assets		135		254
Inventories, net
Fossil fuel and emission allowances		357		465
Materials and supplies		863		847
Deferred income taxes		201		327
Assets held for sale		4		147
Other		960		658

Total current assets		7,050		7,638

Property, plant and equipment, net		24,982		22,945
Deferred debits and other assets
Nuclear decommissioning trust funds		10,103		10,537
Investments		197		104
Goodwill		47		47
Mark-to-market derivative assets		764		771
Prepaid pension asset		1,703		1,704
Pledged assets for Zion Station decommissioning		237		319
Unamortized energy contract assets		513		549
Deferred income taxes		2		3
Other		881		731

Total deferred debits and other assets		14,447		14,765

Total assets^(a)	$	46,479	$	45,348

See the Combined Notes to Consolidated Financial Statements

EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2015			December 31, 2014
	(Unaudited)
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings	$	21		$	36
Long-term debt due within one year		97			58
Long-term debt to affiliates due within one year		—			556
Accounts payable		1,676			1,759
Accrued expenses		835			886
Payables to affiliates		106			107
Borrowings from Exelon intercompany money pool		1,205			—
Mark-to-market derivative liabilities		182			214
Unamortized energy contract liabilities		118			238
Other		546			605

Total current liabilities		4,786			4,459

Long-term debt		7,964			6,709
Long-term debt to affiliate		935			943
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		6,030			6,034
Asset retirement obligations		8,254			7,146
Non-pension postretirement benefit obligations		926			915
Spent nuclear fuel obligation		1,021			1,021
Payables to affiliates		2,538			2,880
Mark-to-market derivative liabilities		139			105
Unamortized energy contract liabilities		136			211
Payable for Zion Station decommissioning		99			155
Other		727			719

Total deferred credits and other liabilities		19,870			19,186

Total liabilities^(a)		33,555			31,297

Commitments and contingencies
Equity
Member’s equity
Membership interest		9,006			8,951
Undistributed earnings		2,653			3,803
Accumulated other comprehensive loss, net		(60	)		(36	)

Total member’s equity		11,599			12,718
Noncontrolling interest		1,325			1,333

Total equity		12,924			14,051

Total liabilities and equity	$	46,479		$	45,348

(a)

Generation’s consolidated assets include $8,130 million and $8,119 million at September 30, 2015 and December 31, 2014, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Generation’s consolidated liabilities include $3,070 million and $2,507 million at September 30, 2015 and December 31, 2014, 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 Interest			Total Equity
Balance, December 31, 2014	$	8,951	$	3,803		$	(36	)	$	1,333		$	14,051
Net income		—		1,218			—			(10	)		1,208
Changes in equity of noncontrolling interest		—		—			—			2			2
Allocation of tax benefit from member		55		—			—			—			55
Distribution to member		—		(2,368	)		—			—			(2,368	)
Other comprehensive loss, net of income taxes		—		—			(24	)		—			(24	)

Balance, September 30, 2015	$	9,006	$	2,653		$	(60	)	$	1,325		$	12,924

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2015			2014			2015			2014
Operating revenues
Operating revenues	$	1,375		$	1,221		$	3,706		$	3,482
Operating revenues from affiliates		1			1			3			2

Total operating revenues		1,376			1,222			3,709			3,484

Operating expenses
Purchased power		388			325			974			741
Purchased power from affiliate		2			1			17			174
Operating and maintenance		353			320			1,023			923
Operating and maintenance from affiliate		51			39			143			117
Depreciation and amortization		176			174			528			521
Taxes other than income		79			76			225			225

Total operating expenses		1,049			935			2,910			2,701

Operating income		327			287			799			783

Other income and (deductions)
Interest expense, net		(80	)		(78	)		(238	)		(231	)
Interest expense to affiliates		(3	)		(3	)		(10	)		(10	)
Other, net		4			4			14			14

Total other income and (deductions)		(79	)		(77	)		(234	)		(227	)

Income before income taxes		248			210			565			556
Income taxes		99			84			226			221

Net income		149			126			339			335

Comprehensive income	$	149		$	126		$	339		$	335

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2015			2014
Cash flows from operating activities
Net income	$	339		$	335
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		528			521
Deferred income taxes and amortization of investment tax credits		107			154
Other non-cash operating activities		312			116
Changes in assets and liabilities:
Accounts receivable		(114	)		(109	)
Receivables from and payables to affiliates, net		(23	)		(55	)
Inventories		(23	)		(12	)
Accounts payable, accrued expenses and other current liabilities		(20	)		59
Income taxes		389			15
Pension and non-pension postretirement benefit contributions		(142	)		(237	)
Other assets and liabilities		(7	)		62

Net cash flows provided by operating activities		1,346			849

Cash flows from investing activities
Capital expenditures		(1,670	)		(1,173	)
Proceeds from sales of investments		—			7
Change in restricted cash		2			(2	)
Other investing activities		22			20

Net cash flows used in investing activities		(1,646	)		(1,148	)

Cash flows from financing activities
Changes in short-term borrowings		300			344
Issuance of long-term debt		400			650
Retirement of long-term debt		(260	)		(617	)
Contributions from parent		75			168
Dividends paid on common stock		(226	)		(230	)
Other financing activities		(4	)		(8	)

Net cash flows provided by financing activities		285			307

Increase (decrease) in cash and cash equivalents		(15	)		8
Cash and cash equivalents at beginning of period		66			36

Cash and cash equivalents at end of period	$	51		$	44

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2015		December 31, 2014
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	51	$	66
Restricted cash		2		4
Accounts receivable, net
Customer		557		477
Other		334		648
Receivables from affiliates		14		14
Inventories, net		148		125
Regulatory assets		232		349
Other		84		40

Total current assets		1,422		1,723

Property, plant and equipment, net		17,001		15,793
Deferred debits and other assets
Regulatory assets		913		852
Goodwill		2,625		2,625
Receivables from affiliates		2,336		2,571
Prepaid pension asset		1,537		1,551
Other		295		277

Total deferred debits and other assets		7,706		7,876

Total assets	$	26,129	$	25,392

See the Combined Notes to Consolidated Financial Statements

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2015		December 31, 2014
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	604	$	304
Long-term debt due within one year		665		260
Accounts payable		693		598
Accrued expenses		337		331
Payables to affiliates		60		84
Customer deposits		130		128
Regulatory liabilities		144		125
Deferred income taxes		—		63
Mark-to-market derivative liability		22		20
Other		68		73

Total current liabilities		2,723		1,986

Long-term debt		5,435		5,698
Long-term debt to financing trust		206		206
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		4,677		4,498
Asset retirement obligations		110		103
Non-pension postretirement benefits obligations		262		263
Regulatory liabilities		3,441		3,655
Mark-to-market derivative liability		221		187
Other		954		889

Total deferred credits and other liabilities		9,665		9,595

Total liabilities		18,029		17,485

Commitments and contingencies
Shareholders’ equity
Common stock		1,588		1,588
Other paid-in capital		5,548		5,468
Retained earnings		964		851

Total shareholders’ equity		8,100		7,907

Total liabilities and shareholders’ equity	$	26,129	$	25,392

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, 2014	$	1,588	$	5,468	$	(1,639	)	$	2,490		$	7,907
Net income		—		—		339			—			339
Appropriation of retained earnings for future dividends		—		—		(339	)		339			—
Common stock dividends		—		—		—			(226	)		(226	)
Contribution from parent		—		75		—			—			75
Parent tax matter indemnification		—		5		—			—			5

Balance, September 30, 2015	$	1,588	$	5,548	$	(1,639	)	$	2,603		$	8,100

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2015			2014			2015			2014
Operating revenues
Operating revenues	$	739		$	693		$	2,385		$	2,342
Operating revenues from affiliates		1			—			1			1

Total operating revenues		740			693			2,386			2,343

Operating expenses
Purchased power and fuel		217			228			782			798
Purchased power from affiliate		61			27			171			162
Operating and maintenance		166			181			529			597
Operating and maintenance from affiliates		30			23			80			71
Depreciation and amortization		68			59			198			176
Taxes other than income		44			42			125			122

Total operating expenses		586			560			1,885			1,926

Gain on sale of assets		—			—			1			—

Operating income		154			133			502			417

Other income and (deductions)
Interest expense, net		(25	)		(26	)		(75	)		(76	)
Interest expense to affiliates		(3	)		(3	)		(9	)		(9	)
Other, net		1			2			3			5

Total other income and (deductions)		(27	)		(27	)		(81	)		(80	)

Income before income taxes		127			106			421			337
Income taxes		37			25			122			82

Net income attributable to common shareholder		90			81			299			255

Comprehensive income	$	90		$	81		$	299		$	255

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2015			2014
Cash flows from operating activities
Net income	$	299		$	255
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		198			176
Deferred income taxes and amortization of investment tax credits		11			7
Other non-cash operating activities		69			70
Changes in assets and liabilities:
Accounts receivable		(15	)		63
Receivables from and payables to affiliates, net		—			(20	)
Inventories		8			5
Accounts payable, accrued expenses and other current liabilities		(17	)		19
Income taxes		69			16
Pension and non-pension postretirement benefit contributions		(37	)		(12	)
Other assets and liabilities		(18	)		(75	)

Net cash flows provided by operating activities		567			504

Cash flows from investing activities
Capital expenditures		(435	)		(461	)
Change in restricted cash		(1	)		—
Other investing activities		11			9

Net cash flows used in investing activities		(425	)		(452	)

Cash flows from financing activities
Issuance of long-term debt		—			300
Contributions from parent		16			24
Change in Exelon intercompany money pool		55			—
Dividends paid on common stock		(209	)		(240	)
Other financing activities		(2	)		(7	)

Net cash flows provided by (used in) financing activities		(140	)		77

Increase in cash and cash equivalents		2			129
Cash and cash equivalents at beginning of period		30			217

Cash and cash equivalents at end of period	$	32		$	346

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2015		December 31, 2014
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	32	$	30
Restricted cash and cash equivalents		3		2
Accounts receivable, net
Customer		283		320
Other		122		141
Receivables from affiliates		4		3
Inventories, net
Fossil fuel		43		57
Materials and supplies		28		22
Deferred income taxes		69		69
Prepaid utility taxes		42		10
Regulatory assets		32		29
Other		25		31

Total current assets		683		714

Property, plant and equipment, net		7,027		6,801
Deferred debits and other assets
Regulatory assets		1,557		1,529
Investments		28		31
Receivable from affiliates		388		490
Prepaid pension asset		353		344
Other		36		34

Total deferred debits and other assets		2,362		2,428

Total assets	$	10,072	$	9,943

See the Combined Notes to Consolidated Financial Statements

PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2015		December 31, 2014
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	298	$	337
Accrued expenses		123		91
Payables to affiliates		53		52
Borrowings from Exelon intercompany money pool		55		—
Customer deposits		56		52
Regulatory liabilities		104		90
Other		30		31

Total current liabilities		719		653

Long-term debt		2,246		2,246
Long-term debt to financing trusts		184		184
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		2,752		2,671
Asset retirement obligations		26		29
Non-pension postretirement benefits obligations		288		287
Regulatory liabilities		536		657
Other		94		95

Total deferred credits and other liabilities		3,696		3,739

Total liabilities		6,845		6,822

Commitments and contingencies
Shareholder’s equity
Common stock		2,455		2,439
Retained earnings		771		681
Accumulated other comprehensive income, net		1		1

Total shareholder’s equity		3,227		3,121

Total liabilities and shareholder’s equity	$	10,072	$	9,943

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 Equity
Balance, December 31, 2014	$	2,439	$	681		$	1	$	3,121
Net income		—		299			—		299
Allocation of tax benefit from parent		16		—			—		16
Common stock dividends		—		(209	)		—		(209	)

Balance, September 30, 2015	$	2,455	$	771		$	1	$	3,227

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2015			2014			2015			2014
Operating revenue
Operating revenue	$	722		$	694		$	2,378		$	2,383
Operating revenue from affiliates		3			3			10			21

Total operating revenues		725			697			2,388			2,404

Operating expenses
Purchased power and fuel		170			216			664			808
Purchased power from affiliate		141			81			373			286
Operating and maintenance		138			142			412			468
Operating and maintenance from affiliates		31			23			87			73
Depreciation and amortization		79			78			271			275
Taxes other than income		57			55			169			168

Total operating expenses		616			595			1,976			2,078

Gain on sale of assets		1			—			1			—

Operating income		110			102			413			326

Other income and (deductions)
Interest expense, net		(21	)		(22	)		(62	)		(69	)
Interest expense to affiliates		(4	)		(4	)		(11	)		(12	)
Other, net		4			4			13			14

Total other income and (deductions)		(21	)		(22	)		(60	)		(67	)

Income before income taxes		89			80			353			259
Income taxes		35			31			141			103

Net income		54			49			212			156
Preference stock dividends		3			3			10			10

Net income attributable to common shareholder		51			46			202			146

Comprehensive income	$	54		$	49		$	212		$	156

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2015			2014
Cash flows from operating activities
Net income	$	212		$	156
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion		271			275
Deferred income taxes and amortization of investment tax credits		79			57
Other non-cash operating activities		111			129
Changes in assets and liabilities:
Accounts receivable		62			101
Receivables from and payables to affiliates, net		(8	)		(11	)
Inventories		10			(21	)
Accounts payable, accrued expenses and other current liabilities		49			(50	)
Counterparty collateral (posted) received, net		(27	)		16
Income taxes		(6	)		53
Pension and non-pension postretirement benefit contributions		(14	)		(13	)
Other assets and liabilities		(43	)		(67	)

Net cash flows provided by operating activities		696			625

Cash flows from investing activities
Capital expenditures		(506	)		(458	)
Change in restricted cash		2			(37	)
Other investing activities		13			15

Net cash flows used in investing activities		(491	)		(480	)

Cash flows from financing activities
Changes in short-term borrowings		(70	)		(115	)
Retirement of long-term debt		(37	)		(35	)
Contributions from parent		6			—
Dividends paid on preference stock		(10	)		(10	)
Dividends paid on common stock		(116	)		—
Other financing activities		(15	)		11

Net cash flows used in financing activities		(242	)		(149	)

Decrease in cash and cash equivalents		(37	)		(4	)
Cash and cash equivalents at beginning of period		64			31

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

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2015		December 31, 2014
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	27	$	64
Restricted cash and cash equivalents		48		50
Accounts receivable, net
Customer		318		390
Other		77		82
Receivables from affiliates		1		—
Inventories, net
Gas held in storage		42		57
Materials and supplies		35		30
Deferred income taxes		8		6
Prepaid utility taxes		4		59
Regulatory assets		257		214
Other		5		5

Total current assets		822		957

Property, plant and equipment, net		6,459		6,204
Deferred debits and other assets
Regulatory assets		485		510
Investments		12		12
Prepaid pension asset		331		370
Other		25		25

Total deferred debits and other assets		853		917

Total assets^(a)	$	8,134	$	8,078

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions)	September 30, 2015		December 31, 2014
	(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	50	$	120
Long-term debt due within one year		77		75
Accounts payable		201		215
Accrued expenses		159		131
Deferred income taxes		63		52
Payables to affiliates		47		66
Customer deposits		99		92
Regulatory liabilities		69		44
Other		32		51

Total current liabilities		797		846

Long-term debt		1,828		1,867
Long-term debt to financing trust		258		258
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits		1,937		1,865
Asset retirement obligations		15		17
Non-pension postretirement benefits obligations		209		212
Regulatory liabilities		186		200
Other		59		60

Total deferred credits and other liabilities		2,406		2,354

Total liabilities^(a)		5,289		5,325

Commitments and contingencies
Shareholders’ equity
Common stock		1,366		1,360
Retained earnings		1,289		1,203

Total shareholders’ equity		2,655		2,563
Preference stock not subject to mandatory redemption		190		190

Total equity		2,845		2,753

Total liabilities and shareholders’ equity	$	8,134	$	8,078

(a)

BGE’s consolidated assets include $49 million and $24 million at September 30, 2015 and December 31, 2014, respectively, of BGE’s consolidated VIE that can only be used to settle the liabilities of the VIE. BGE’s consolidated liabilities include $162 million and $197 million at September 30, 2015 and December 31, 2014, respectively, of BGE’s consolidated VIE for which the VIE creditors do not have recourse to BGE. See Note 3 — Variable Interest Entities.

See the Combined Notes to Consolidated Financial Statements

BALTIMORE GAS AND ELECTRIC COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(In millions)	Common Stock		Retained Earnings			Total Shareholders’ Equity			Preference Stock Not Subject to Mandatory Redemption		Total Equity
Balance, December 31, 2014	$	1,360	$	1,203		$	2,563		$	190	$	2,753
Net income		—		212			212			—		212
Allocation of tax benefit from parent		6		—			6			—		6
Preference stock dividends		—		(10	)		(10	)		—		(10	)
Common stock dividends		—		(116	)		(116	)		—		(116	)

Balance, September 30, 2015	$	1,366	$	1,289		$	2,655		$	190	$	2,845

See the Combined Notes to Consolidated Financial Statements

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Index to Combined Notes to Consolidated Financial Statements

The notes to the consolidated financial statements that follow are a combined presentation. The following list indicates the registrants to which the footnotes apply:

Applicable Notes

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