UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C FORM 10-Q

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C 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, 2017 or 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 EXELON CORPORATION (a Pennsylvania corporation) 10 South Dearborn Street P.O. Box Chicago, Illinois (800) EXELON GENERATION COMPANY, LLC (a Pennsylvania limited liability company) 300 Exelon Way Kennett Square, Pennsylvania (610) COMMONWEALTH EDISON COMPANY (an Illinois corporation) 440 South LaSalle Street Chicago, Illinois (312) PECO ENERGY COMPANY (a Pennsylvania corporation) P.O. Box Market Street Philadelphia, Pennsylvania (215) BALTIMORE GAS AND ELECTRIC COMPANY (a Maryland corporation) 2 Center Plaza 110 West Fayette Street Baltimore, Maryland (410) PEPCO HOLDINGS LLC (a Delaware limited liability company) 701 Ninth Street, N.W. Washington, District of Columbia (202) POTOMAC ELECTRIC POWER COMPANY (a District of Columbia and Virginia corporation) 701 Ninth Street, N.W. Washington, District of Columbia (202) DELMARVA POWER & LIGHT COMPANY (a Delaware and Virginia corporation) 500 North Wakefield Drive Newark, Delaware (202) ATLANTIC CITY ELECTRIC COMPANY (a New Jersey corporation) 500 North Wakefield Drive

2 Newark, Delaware (202)

3 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 ( 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. Exelon Corporation Large Accelerated Filer Accelerated Filer Non-accelerated Filer x Smaller Reporting Company Emerging Growth Company 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 September 30, 2017 was: Exelon Corporation Common Stock, without par value 960,852,473 Exelon Generation Company, LLC not applicable Commonwealth Edison Company Common Stock, $12.50 par value 127,021,214 PECO Energy Company Common Stock, without par value 170,478,507 Baltimore Gas and Electric Company Common Stock, without par value 1,000 Pepco Holdings LLC not applicable Potomac Electric Power Company Common Stock, $.01 par value 100 Delmarva Power & Light Company Common Stock, $2.25 par value 1,000 Atlantic City Electric Company Common Stock, $3.00 par value 8,546,017

4 TABLE OF CONTENTS Page No. GLOSSARY OF TERMS AND ABBREVIATIONS 6 FILING FORMAT 12 CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION 12 WHERE TO FIND MORE INFORMATION 12 PART I. FINANCIAL INFORMATION 13 ITEM 1. FINANCIAL STATEMENTS 13 Exelon Corporation Consolidated Statements of Operations and Comprehensive Income 14 Consolidated Statements of Cash Flows 15 Consolidated Balance Sheets 16 Consolidated Statement of Changes in Shareholders Equity 18 Exelon Generation Company, LLC Consolidated Statements of Operations and Comprehensive Income 19 Consolidated Statements of Cash Flows 20 Consolidated Balance Sheets 21 Consolidated Statement of Changes in Equity 23 Commonwealth Edison 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 PECO Energy Company Consolidated Statements of Operations and Comprehensive Income 29 Consolidated Statements of Cash Flows 30 Consolidated Balance Sheets 31 Consolidated Statement of Changes in Shareholder's Equity 33 Baltimore Gas and Electric Company Consolidated Statements of Operations and Comprehensive Income 34 Consolidated Statements of Cash Flows 35 Consolidated Balance Sheets 36 Consolidated Statement of Changes in Shareholders Equity 38 Pepco Holdings LLC Consolidated Statements of Operations and Comprehensive Income 39 Consolidated Statements of Cash Flows 40 Consolidated Balance Sheets 41 Consolidated Statement of Changes in Equity 43 3

5 Page No. Potomac Electric Power Company Statements of Operations and Comprehensive Income 44 Statements of Cash Flows 45 Balance Sheets 46 Statement of Changes in Shareholder's Equity 48 Delmarva Power & Light Company Statements of Operations and Comprehensive Income 49 Statements of Cash Flows 50 Balance Sheets 51 Statement of Changes in Shareholder s Equity 53 Atlantic City Electric Company Consolidated Statements of Operations and Comprehensive Income 54 Consolidated Statements of Cash Flows 55 Consolidated Balance Sheets 56 Consolidated Statement of Changes in Shareholder s Equity 58 Combined Notes to Consolidated Financial Statements Basis of Presentation New Accounting Standards Variable Interest Entities Mergers, Acquisitions and Dispositions Regulatory Matters Impairment of Long-Lived Assets Early Nuclear Plant Retirements Intangible Assets Fair Value of Financial Assets and Liabilities Derivative Financial Instruments Debt and Credit Agreements Income Taxes Nuclear Decommissioning Retirement Benefits Severance Changes in Accumulated Other Comprehensive Income Earnings Per Share and Equity Commitments and Contingencies Supplemental Financial Information Segment Information 173 4

6 ITEM 2. Page No. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 180 Exelon Corporation 180 Executive Overview 180 Financial Results of Operations 181 Significant 2017 Transactions and Developments 189 Exelon's Strategy and Outlook for 2017 and Beyond 194 Liquidity Considerations 195 Other Key Business Drivers and Management Strategies 196 Critical Accounting Policies and Estimates 202 Results of Operations By Registrant 203 Exelon Generation Company, LLC 204 Commonwealth Edison Company 212 PECO Energy Company 218 Baltimore Gas and Electric Company 224 Pepco Holdings LLC 231 Potomac Electric Power Company 234 Delmarva Power & Light Company 240 Atlantic City Electric Company 248 Liquidity and Capital Resources 253 Contractual Obligations and Off-Balance Sheet Arrangements 266 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 266 ITEM 4. CONTROLS AND PROCEDURES 275 PART II. OTHER INFORMATION 276 ITEM 1. LEGAL PROCEEDINGS 276 ITEM 1A. RISK FACTORS 276 ITEM 4. MINE SAFETY DISCLOSURES 276 ITEM 6. EXHIBITS 276 SIGNATURES 279 Exelon Corporation 279 Exelon Generation Company, LLC 280 Commonwealth Edison Company 281 PECO Energy Company 282 Baltimore Gas and Electric Company 283 Pepco Holdings LLC 284 Potomac Electric Power Company 285 Delmarva Power & Light Company 286 Atlantic City Electric Company 287 5

7 Exelon Corporation and Related Entities GLOSSARY OF TERMS AND ABBREVIATIONS Exelon Exelon Corporation Generation Exelon Generation Company, LLC ComEd Commonwealth Edison Company PECO PECO Energy Company BGE Baltimore Gas and Electric Company PepcoHoldingsorPHI Pepco Holdings LLC (formerly Pepco Holdings, Inc.) Pepco Potomac Electric Power Company PepcoEnergyServicesorPES Pepco Energy Services, Inc. and its subsidiaries PCI Potomac Capital Investment Corporation and its subsidiaries DPL Delmarva Power & Light Company ACE Atlantic City Electric Company ACEFundingorATF Atlantic City Electric Transition Funding LLC BSC Exelon Business Services Company, LLC PHISCO PHI Service Company ExelonCorporate Exelon in its corporate capacity as a holding company PHICorporate PHI in its corporate capacity as a holding company Registrants Exelon, Generation, ComEd, PECO, BGE, PHI, Pepco, DPL and ACE, collectively UtilityRegistrants ComEd, PECO, BGE, Pepco, DPL and ACE, collectively AmerGen AmerGen Energy Company, LLC AntelopeValley Antelope Valley Solar Ranch One BondCo RSB BondCo LLC CENG Constellation Energy Nuclear Group, LLC ConEdisonSolutions Constellation Constellation Energy Group, Inc. EGTP ExGen Texas Power, LLC EGR ExGen Renewables I, LLC Entergy Entergy Nuclear FitzPatrick, LLC ExelonTransmissionCompany Exelon Transmission Company, LLC The competitive retail electricity and natural gas business of Consolidated Edison Solutions, Inc., a subsidiary of Consolidated Edison, Inc. ExelonWind Exelon Wind, LLC and Exelon Generation Acquisition Company, LLC FitzPatrick James A. FitzPatrick nuclear generating station LegacyPHI PHI, Pepco, DPL and ACE, collectively PECL.P. PECO Energy Capital, L.P. PECOTrustIII PECO Capital Trust III PECOTrustIV PECO Energy Capital Trust IV PETT PECO Energy Transition Trust RPG Renewable Power Generation SolGen SolGen, LLC TMI Three Mile Island nuclear facility UII Unicom Investments, Inc. Ventures Exelon Ventures Company, LLC 6

8 Other Terms and Abbreviations Note oftheexelon2016form10-k GLOSSARY OF TERMS AND ABBREVIATIONS Act11 Pennsylvania Act 11 of 2012 Act129 Pennsylvania Act 129 of 2008 AEC Reference to specific Combined Note to Consolidated Financial Statements within Exelon s 2016 Annual Report on Form 10-K Alternative Energy Credit that is issued for each megawatt hour of generation from a qualified alternative energy source AEPS Pennsylvania Alternative Energy Portfolio Standards AEPSAct Pennsylvania Alternative Energy Portfolio Standards Act of 2004, as amended AESO Alberta Electric Systems Operator AFUDC Allowance for Funds Used During Construction AGE Albany Green Energy Project AMI Advanced Metering Infrastructure AOCI Accumulated Other Comprehensive Income ARC Asset Retirement Cost ARO Asset Retirement Obligation ASC Accounting Standards Codification BGS Basic Generation Service BlockContracts Forward Purchase Energy Block Contracts CAIR Clean Air Interstate Rule CAISO California ISO CAMR Federal Clean Air Mercury Rule CAP Customer Assistance Program CERCLA CES Clean Energy Standard CFL Compact Fluorescent Light CleanAirAct Clean Air Act of 1963, as amended Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended CleanWaterAct Federal Water Pollution Control Amendments of 1972, as amended CompetitionAct Pennsylvania Electricity Generation Customer Choice and Competition Act of 1996 Conectiv Conectiv, LLC, a wholly owned subsidiary of PHI and the parent of DPL and ACE ConectivEnergy CPUC California Public Utilities Commission CSAPR Cross-State Air Pollution Rule Conectiv Energy Holdings, Inc. and substantially all of its subsidiaries, which were sold to Calpine in July 2010 D.C.CircuitCourt United States Court of Appeals for the District of Columbia Circuit DCPSC District of Columbia Public Service Commission DCPLUG District of Columbia Power Line Undergrounding DefaultElectricitySupply DOE United States Department of Energy DOJ United States Department of Justice DPSC Delaware Public Service Commission The supply of electricity by PHI s electric utility subsidiaries at regulated rates to retail customers who do not elect to purchase electricity from a competitive supplier, and which, depending on the jurisdiction, is also known as Standard Offer Service or BGS 7

9 Other Terms and Abbreviations GLOSSARY OF TERMS AND ABBREVIATIONS DRP Direct Stock Purchase and Dividend Reinvestment Plan DSP Default Service Provider DSPProgram Default Service Provider Program EDCs Electric distribution companies EDF Electricite de France SA and its subsidiaries EE&C Energy Efficiency and Conservation/Demand Response EGS Electric Generation Supplier EIMA Energy Infrastructure Modernization Act (Illinois Senate Bill 1652 and Illinois House Bill 3036) EmPowerMaryland 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 FASB Financial Accounting Standards Board FEJA Illinois Public Act 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 HealthCareReformActs Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act of 2010 HSRAct The Hart-Scott-Rodino Antitrust Improvements Act of 1976 IBEW International Brotherhood of Electrical Workers ICC Illinois Commerce Commission ICE Intercontinental Exchange IllinoisAct Illinois Electric Service Customer Choice and Rate Relief Law of 1997 IllinoisEPA Illinois Environmental Protection Agency IllinoisSettlementLegislation Legislation enacted in 2007 affecting electric utilities in Illinois Integrys Integrys Energy Services, Inc. IPA Illinois Power Agency IRC Internal Revenue Code IRS Internal Revenue Service ISO Independent System Operator ISO-NE 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 8

10 Other Terms and Abbreviations GLOSSARY OF TERMS AND ABBREVIATIONS LLRW Low-Level Radioactive Waste LTPlan 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 MDE Maryland Department of the Environment MDPSC Maryland Public Service Commission MGP Manufactured Gas Plant MISO Midcontinent Independent System Operator, Inc. mmcf Million Cubic Feet Moody s Moody s Investor Service MOPR Minimum Offer Price Rule MRV Market-Related Value MW Megawatt MWh Megawatt hour NAAQS National Ambient Air Quality Standards n.m. not meaningful NAV Net Asset Value NDT Nuclear Decommissioning Trust NEIL Nuclear Electric Insurance Limited NERC North American Electric Reliability Corporation NGS Natural Gas Supplier NJBPU New Jersey Board of Public Utilities NJDEP New Jersey Department of Environmental Protection Non-RegulatoryAgreementsUnits NOSA Nuclear Operating Services Agreement Nuclear generating units or portions thereof whose decommissioning-related activities are not subject to contractual elimination under regulatory accounting 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 PADEP Pennsylvania Department of Environmental Protection PAPUC Pennsylvania Public Utility Commission PGC Purchased Gas Cost Clause PJM PJM Interconnection, LLC 9

11 Other Terms and Abbreviations GLOSSARY OF TERMS AND ABBREVIATIONS POLR Provider of Last Resort POR Purchase of Receivables PPA Power Purchase Agreement Price-AndersonAct Price-Anderson Nuclear Industries Indemnity Act of 1957 PreferredStock PRP Potentially Responsible Parties Originally issued shares of non-voting, non-convertible and non-transferable Series A preferred stock, par value $0.01 per share 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 RegulatoryAgreementUnits RES Retail Electric Suppliers RFP Request for Proposal Renewable Energy Credit which is issued for each megawatt hour of generation from a qualified renewable energy source Nuclear generating units or portions thereof whose decommissioning-related activities are subject to contractual elimination under regulatory accounting Rider Reconcilable Surcharge Recovery Mechanism RGGI Regional Greenhouse Gas Initiative RMC Risk Management Committee ROE Return on equity RPM PJM Reliability Pricing Model RPS Renewable Energy Portfolio Standards RSSA Reliability Support Services Agreement RTEP Regional Transmission Expansion Plan RTO Regional Transmission Organization S&P Standard & Poor s Ratings Services SEC United States Securities and Exchange Commission SenateBill1 Maryland Senate Bill 1 SERC SERC Reliability Corporation (formerly Southeast Electric Reliability Council) SGIG Smart Grid Investment Grant from DOE SILO Sale-In, Lease-Out SMPIP Smart Meter Procurement and Installation Plan SNF Spent Nuclear Fuel SOS Standard Offer Service SPFPA Security, Police and Fire Professionals of America SPP Southwest Power Pool TransitionBondCharge TransitionBonds Transition Bonds issued by ACE Funding Revenue ACE receives, and pays to ACE Funding, to fund the principal and interest payments on Transition Bonds and related taxes, expenses and fees UGSOA United Government Security Officers of America Upstream Natural gas exploration and production activities VIE Variable Interest Entity 10

12 GLOSSARY OF TERMS AND ABBREVIATIONS Other Terms and Abbreviations WECC Western Electric Coordinating Council ZEC Zero Emission Credit ZES Zero Emission Standard 11

13 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 2016 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 24, 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 18, 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 forwardlooking 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 The public may obtain information on the operation of the Public Reference Room by calling the SEC at SEC These documents are also available to the public from commercial document retrieval services, the website maintained by the SEC at and the Registrants websites at Information contained on the Registrants websites shall not be deemed incorporated into, or to be a part of, this Report. 12

14 PART I. FINANCIAL INFORMATION Item 1. Financial Statements 13

15 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) Operating revenues Competitive businesses revenues $ 4,456 $ 4,535 $ 12,924 $ 12,243 Rate-regulated utility revenues 4,313 4,467 12,225 11,243 Total operating revenues 8,769 9,002 25,149 23,486 Operating expenses Competitive businesses purchased power and fuel 2,316 2,584 7,268 6,599 Rate-regulated utility purchased power and fuel 1,226 1,170 3,259 2,863 Operating and maintenance 2,300 2,338 7,732 7,677 Depreciation and amortization 1,002 1,195 2,814 2,821 Taxes other than income ,313 1,168 Total operating expenses 7,300 7,736 22,386 21,128 (Loss) Gain on sales of assets (1) Bargain purchase gain Operating income 1,475 1,267 3,000 2,399 Other income and (deductions) Interest expense, net (377) (506) (1,165) (1,148) Interest expense to affiliates (9) (10) (29) (31) Other, net Total other income and (deductions) (149) (396) (469) (802) Income before income taxes 1, ,531 1,597 Income taxes Equity in losses of unconsolidated affiliates (7) (5) (25) (16) Net income , Net income attributable to noncontrolling interests and preference stock dividends Net income attributable to common shareholders $ 824 $ 490 $ 1,899 $ 930 Comprehensive income, net of income taxes Net income $ 867 $ 526 $ 1,911 $ 956 Other comprehensive income (loss), net of income taxes Pension and non-pension postretirement benefit plans: Prior service benefit reclassified to periodic benefit cost (14) (12) (42) (35) Actuarial loss reclassified to periodic benefit cost Pension and non-pension postretirement benefit plan valuation adjustment 3 (55) (3) Unrealized gain (loss) on cash flow hedges 3 5 (4) Unrealized gain (loss) on equity investments 1 (4) 5 (10) Unrealized gain on foreign currency translation Unrealized gain on marketable securities 1 2 Other comprehensive income Comprehensive income ,980 1,052 Comprehensive income attributable to noncontrolling interests and preference stock dividends Comprehensive income attributable to common shareholders $ 868 $ 531 $ 1,970 $ 1,031 Average shares of common stock outstanding: Basic Diluted Earnings per average common share:

16 Basic $ 0.86 $ 0.53 $ 2.02 $ 1.01 Diluted $ 0.85 $ 0.53 $ 2.01 $ 1.00 Dividends declared per common share $ 0.33 $ 0.32 $ 0.98 $ 0.95 See the Combined Notes to Consolidated Financial Statements 14

17 EXELON CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, (In millions) Cash flows from operating activities Net income $ 1,911 $ 956 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation, amortization and accretion, including nuclear fuel and energy contract amortization 3,999 4,009 Impairment of long-lived assets and losses on regulatory assets Gain on sales of assets (5) (41) Bargain purchase gain (233) Deferred income taxes and amortization of investment tax credits Net fair value changes related to derivatives Net realized and unrealized gains on nuclear decommissioning trust fund investments (429) (243) Other non-cash operating activities 603 1,224 Changes in assets and liabilities: Accounts receivable 224 (296) Inventories (87) 21 Accounts payable and accrued expenses (593) 296 Option premiums received (paid), net 35 (24) Collateral (posted) received, net (100) 757 Income taxes Pension and non-pension postretirement benefit contributions (344) (283) Other assets and liabilities (547) (537) Net cash flows provided by operating activities 5,677 7,363 Cash flows from investing activities Capital expenditures (5,556) (6,368) Proceeds from nuclear decommissioning trust fund sales 6,848 7,914 Investment in nuclear decommissioning trust funds (7,044) (8,093) Acquisition of businesses, net (208) (6,896) Proceeds from sales of long-lived assets Proceeds from termination of direct financing lease investment 360 Changes in restricted cash (67) (75) Other investing activities (2) (110) Net cash flows used in investing activities (5,810) (13,219) Cash flows from financing activities Changes in short-term borrowings (570) (1,014) Proceeds from short-term borrowings with maturities greater than 90 days Repayments on short-term borrowings with maturities greater than 90 days (610) (452) Issuance of long-term debt 2,616 4,488 Retirement of long-term debt (1,728) (944) Retirement of long-term debt to financing trust (250) Restricted proceeds from issuance of long-term debt (30) Redemption of preference stock (190) Sale of noncontrolling interest 396 Dividends paid on common stock (921) (873) Common stock issued from treasury stock 1,150 Proceeds from employee stock plans Other financing activities (64) 35 Net cash flows provided by financing activities 701 1,251 Increase (Decrease) in cash and cash equivalents 568 (4,605) Cash and cash equivalents at beginning of period 635 6,502

18 Cash and cash equivalents at end of period $ 1,203 $ 1,897 See the Combined Notes to Consolidated Financial Statements 15

19 EXELON CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions) September 30, 2017 December 31, 2016 ASSETS Current assets Cash and cash equivalents $ 1,203 $ 635 Restricted cash and cash equivalents Deposit with IRS 1,250 1,250 Accounts receivable, net Customer 3,854 4,158 Other 950 1,201 Mark-to-market derivative assets Unamortized energy contract assets Inventories, net Fossil fuel and emission allowances Materials and supplies 1,281 1,274 Regulatory assets 1,264 1,342 Other 1, Total current assets 12,724 12,412 Property, plant and equipment, net 73,067 71,555 Deferred debits and other assets Regulatory assets 10,238 10,046 Nuclear decommissioning trust funds 12,966 11,061 Investments Goodwill 6,677 6,677 Mark-to-market derivative assets Unamortized energy contract assets Pledged assets for Zion Station decommissioning Other 1,277 1,472 Total deferred debits and other assets 32,682 30,937 Total assets (a) $ 118,473 $ 114,904 See the Combined Notes to Consolidated Financial Statements 16

20 EXELON CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions) September 30, 2017 December 31, 2016 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Short-term borrowings $ 710 $ 1,267 Long-term debt due within one year 3,164 2,430 Accounts payable 3,132 3,441 Accrued expenses 3,080 3,460 Payables to affiliates 5 8 Regulatory liabilities Mark-to-market derivative liabilities Unamortized energy contract liabilities Renewable energy credit obligation PHI merger related obligation Other Total current liabilities 12,395 13,457 Long-term debt 31,701 31,575 Long-term debt to financing trusts Deferred credits and other liabilities Deferred income taxes and unamortized investment tax credits 19,250 18,138 Asset retirement obligations 9,733 9,111 Pension obligations 4,055 4,248 Non-pension postretirement benefit obligations 1,977 1,848 Spent nuclear fuel obligation 1,142 1,024 Regulatory liabilities 4,549 4,187 Mark-to-market derivative liabilities Unamortized energy contract liabilities Payable for Zion Station decommissioning 14 Other 1,899 1,827 Total deferred credits and other liabilities 43,671 41,619 Total liabilities (a) 88,156 87,292 Commitments and contingencies Shareholders equity Common stock (No par value, 2000 shares authorized, 961 shares and 924 shares outstanding at September 30, 2017 and December 31, 2016, respectively) 18,862 18,794 Treasury stock, at cost (2 shares and 35 shares at September 30, 2017 and December 31, 2016, respectively) (123) (2,327) Retained earnings 11,950 12,030 Accumulated other comprehensive loss, net (2,589) (2,660) Total shareholders equity 28,100 25,837 Noncontrolling interests 2,217 1,775 Total equity 30,317 27,612 Total liabilities and shareholders equity $ 118,473 $ 114,904 (a) Exelon s consolidated assets include $9,520 million and $8,893 million at September 30, 2017 and December 31, 2016, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Exelon s consolidated liabilities include $3,688 million and $3,356 million at September 30, 2017 and December 31, 2016, 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 17

21 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, ,778 $ 18,794 $ (2,327) $ 12,030 $ (2,660) $ 1,775 $ 27,612 Net income 1, ,911 Long-term incentive plan activity 2, Employee stock purchase plan issuances Common stock issued from treasury stock 2,204 (1,054) 1,150 Changes in equity of noncontrolling interests (11) (11) Sale of noncontrolling interests (36) Common stock dividends (925) (925) Other comprehensive income (loss), net of income taxes 71 (2) 69 Balance, September 30, ,685 $ 18,862 $ (123) $ 11,950 $ (2,589) $ 2,217 $ 30,317 See the Combined Notes to Consolidated Financial Statements 18

22 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) Operating revenues Operating revenues $ 4,455 $ 4,533 $ 12,918 $ 12,234 Operating revenues from affiliates ,129 Total operating revenues 4,751 5,035 13,812 13,363 Operating expenses Purchased power and fuel 2,315 2,584 7,267 6,599 Purchased power and fuel from affiliates Operating and maintenance 1,203 1,189 4,335 3,855 Operating and maintenance from affiliates Depreciation and amortization ,046 1,329 Taxes other than income Total operating expenses 4,256 4,693 13,628 12,651 (Loss) gain on sales of assets (2) 3 31 Bargain purchase gain Operating income Other income and (deductions) Interest expense, net (103) (67) (313) (243) Interest expense to affiliates (10) (10) (29) (30) Other, net Total other income and (deductions) Income before income taxes Income taxes Equity in losses of unconsolidated affiliates (8) (6) (26) (16) Net income Net income attributable to noncontrolling interests Net income attributable to membership interest $ 305 $ 236 $ 479 $ 538 Comprehensive income, net of income taxes Net income $ 348 $ 271 $ 491 $ 556 Other comprehensive income (loss), net of income taxes Unrealized gain (loss) on cash flow hedges 1 5 (3) Unrealized gain (loss) on equity investments 4 (4) Unrealized gain on foreign currency translation Unrealized gain on marketable securities 1 1 Other comprehensive income Comprehensive income Comprehensive income attributable to noncontrolling interests Comprehensive income attributable to membership interest $ 309 $ 245 $ 497 $ 545 See the Combined Notes to Consolidated Financial Statements 19

23 EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, (In millions) Cash flows from operating activities Net income $ 491 $ 556 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation, amortization and accretion, including nuclear fuel and energy contract amortization 2,231 2,516 Impairment of long-lived assets Gain on sales of assets (3) (31) Bargain purchase gain (233) Deferred income taxes and amortization of investment tax credits (184) (133) Net fair value changes related to derivatives Net realized and unrealized gains on nuclear decommissioning trust fund investments (429) (243) Other non-cash operating activities Changes in assets and liabilities: Accounts receivable Receivables from and payables to affiliates, net 27 (56) Inventories (43) 18 Accounts payable and accrued expenses (257) 9 Option premiums received (paid), net 35 (24) Collateral (posted) received, net (77) 759 Income taxes Pension and non-pension postretirement benefit contributions (122) (122) Other assets and liabilities (203) (204) Net cash flows provided by operating activities 2,270 3,723 Cash flows from investing activities Capital expenditures (1,654) (2,651) Proceeds from nuclear decommissioning trust fund sales 6,848 7,914 Investment in nuclear decommissioning trust funds (7,044) (8,093) Acquisition of businesses, net (208) (255) Proceeds from sale of long-lived assets Changes in restricted cash (28) (39) Other investing activities (35) (184) Net cash flows used in investing activities (1,903) (3,278) Cash flows from financing activities Changes in short-term borrowings (620) Proceeds from short-term borrowings with maturities greater than 90 days Repayments of short-term borrowings with maturities greater than 90 days (110) (152) Issuance of long-term debt Retirement of long-term debt (541) (164) Changes in Exelon intercompany money pool 91 (785) Distributions to member (494) (167) Contributions from member Sale of noncontrolling interest 396 Other financing activities (31) 92 Net cash flows used in financing activities (297) (501) Increase (Decrease) in cash and cash equivalents 70 (56) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period $ 360 $ 375 See the Combined Notes to Consolidated Financial Statements

24 20

25 EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions) September 30, 2017 December 31, 2016 ASSETS Current assets Cash and cash equivalents $ 360 $ 290 Restricted cash and cash equivalents Accounts receivable, net Customer 2,339 2,433 Other Mark-to-market derivative assets Receivables from affiliates Unamortized energy contract assets Inventories, net Fossil fuel and emission allowances Materials and supplies Other 1, Total current assets 6,439 6,528 Property, plant and equipment, net 24,793 25,585 Deferred debits and other assets Nuclear decommissioning trust funds 12,966 11,061 Investments Goodwill Mark-to-market derivative assets Prepaid pension asset 1,535 1,595 Pledged assets for Zion Station decommissioning Unamortized energy contract assets Deferred income taxes 8 16 Other Total deferred debits and other assets 16,512 14,861 Total assets (a) $ 47,744 $ 46,974 See the Combined Notes to Consolidated Financial Statements 21

26 EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions) September 30, 2017 December 31, 2016 LIABILITIES AND EQUITY Current liabilities Short-term borrowings $ 92 $ 699 Long-term debt due within one year 1,659 1,117 Accounts payable 1,492 1,610 Accrued expenses Payables to affiliates Borrowings from Exelon intercompany money pool Mark-to-market derivative liabilities Unamortized energy contract liabilities Renewable energy credit obligation Other Total current liabilities 5,059 5,683 Long-term debt 6,956 7,202 Long-term debt to affiliate Deferred credits and other liabilities Deferred income taxes and unamortized investment tax credits 5,596 5,585 Asset retirement obligations 9,548 8,922 Non-pension postretirement benefit obligations Spent nuclear fuel obligation 1,142 1,024 Payables to affiliates 2,972 2,608 Mark-to-market derivative liabilities Unamortized energy contract liabilities Payable for Zion Station decommissioning 14 Other Total deferred credits and other liabilities 21,019 19,911 Total liabilities (a) 33,947 33,718 Commitments and contingencies Equity Member s equity Membership interest 9,357 9,261 Undistributed earnings 2,260 2,275 Accumulated other comprehensive loss, net (36) (54) Total member s equity 11,581 11,482 Noncontrolling interests 2,216 1,774 Total equity 13,797 13,256 Total liabilities and equity $ 47,744 $ 46,974 (a) Generation s consolidated assets include $9,477 million and $8,817 million at September 30, 2017 and December 31, 2016, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Generation s consolidated liabilities include $3,576 million and $3,170 million at September 30, 2017 and December 31, 2016, 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 22

27 EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) (In millions) Membership Interest Member s Equity Undistributed Earnings Accumulated Other Comprehensive Loss, net Noncontrolling Interests Total Equity Balance, December 31, 2016 $ 9,261 $ 2,275 $ (54) $ 1,774 $ 13,256 Net income Changes in equity of noncontrolling interests (11) (11) Sale of noncontrolling interest (36) Distribution of net retirement benefit obligation to member Allocation of tax benefit from member Distributions to member (494) (494) Other comprehensive income (loss), net of income taxes 18 (2) 16 Balance, September 30, 2017 $ 9,357 $ 2,260 $ (36) $ 2,216 $ 13,797 See the Combined Notes to Consolidated Financial Statements 23

28 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) Operating revenues Electric operating revenues $ 1,568 $ 1,493 $ 4,215 $ 4,019 Operating revenues from affiliates Total operating revenues 1,571 1,497 4,227 4,031 Operating expenses Purchased power ,178 1,104 Purchased power from affiliate Operating and maintenance Operating and maintenance from affiliate Depreciation and amortization Taxes other than income Total operating expenses 1,167 1,109 3,191 3,050 Gain on sales of assets 1 6 Operating income , Other income and (deductions) Interest expense, net (86) (194) (265) (364) Interest expense to affiliates (3) (3) (10) (10) Other, net 5 (80) 14 (72) Total other income and (deductions) (84) (277) (261) (446) Income before income taxes Income taxes Net income $ 189 $ 37 $ 447 $ 297 Comprehensive income $ 189 $ 37 $ 447 $ 297 See the Combined Notes to Consolidated Financial Statements 24

29 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, (In millions) Cash flows from operating activities Net income $ 447 $ 297 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization Deferred income taxes and amortization of investment tax credits Other non-cash operating activities Changes in assets and liabilities: Accounts receivable 31 (55) Receivables from and payables to affiliates, net 346 (9) Inventories 6 4 Accounts payable and accrued expenses (706) 145 Collateral posted, net (22) (2) Income taxes (205) 206 Pension and non-pension postretirement benefit contributions (38) (35) Other assets and liabilities Net cash flows provided by operating activities 1,120 1,749 Cash flows from investing activities Capital expenditures (1,698) (1,950) Changes in restricted cash (50) Other investing activities Net cash flows used in investing activities (1,731) (1,919) Cash flows from financing activities Changes in short-term borrowings (284) Issuance of long-term debt 1,000 1,200 Retirement of long-term debt (425) (665) Contributions from parent Dividends paid on common stock (316) (275) Other financing activities (14) (17) Net cash flows provided by financing activities Increase (Decrease) in cash and cash equivalents 201 (23) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period $ 257 $ 44 See the Combined Notes to Consolidated Financial Statements 25

30 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions) September 30, 2017 December 31, 2016 ASSETS Current assets Cash and cash equivalents $ 257 $ 56 Restricted cash 52 2 Accounts receivable, net Customer Other Receivables from affiliates Inventories, net Regulatory assets Other Total current assets 1,401 1,554 Property, plant and equipment, net 20,353 19,335 Deferred debits and other assets Regulatory assets 1, Investments 6 6 Goodwill 2,625 2,625 Receivables from affiliates 2,438 2,170 Prepaid pension asset 1,236 1,343 Other Total deferred debits and other assets 7,895 7,446 Total assets $ 29,649 $ 28,335 See the Combined Notes to Consolidated Financial Statements 26

31 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions) September 30, 2017 December 31, 2016 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Long-term debt due within one year $ 840 $ 425 Accounts payable Accrued expenses 305 1,250 Payables to affiliates Customer deposits Regulatory liabilities Mark-to-market derivative liability Other Total current liabilities 2,246 2,938 Long-term debt 6,760 6,608 Long-term debt to financing trust Deferred credits and other liabilities Deferred income taxes and unamortized investment tax credits 6,091 5,364 Asset retirement obligations Non-pension postretirement benefits obligations Regulatory liabilities 3,735 3,369 Mark-to-market derivative liability Other Total deferred credits and other liabilities 10,994 9,859 Total liabilities 20,205 19,610 Commitments and contingencies Shareholders equity Common stock 1,588 1,588 Other paid-in capital 6,738 6,150 Retained deficit unappropriated (1,639) (1,639) Retained earnings appropriated 2,757 2,626 Total shareholders equity 9,444 8,725 Total liabilities and shareholders equity $ 29,649 $ 28,335 See the Combined Notes to Consolidated Financial Statements 27

32 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, 2016 $ 1,588 $ 6,150 $ (1,639) $ 2,626 $ 8,725 Net income Appropriation of retained earnings for future dividends (447) 447 Common stock dividends (316) (316) Contributions from parent Parent tax matter indemnification Balance, September 30, 2017 $ 1,588 $ 6,738 $ (1,639) $ 2,757 $ 9,444 See the Combined Notes to Consolidated Financial Statements 28

33 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) Operating revenues Electric operating revenues $ 660 $ 738 $ 1,798 $ 1,966 Natural gas operating revenues Operating revenues from affiliates Total operating revenues ,141 2,293 Operating expenses Purchased power Purchased fuel Purchased power from affiliate Operating and maintenance Operating and maintenance from affiliates Depreciation and amortization Taxes other than income Total operating expenses ,643 1,740 Operating income Other income and (deductions) Interest expense, net (28) (27) (84) (83) Interest expense to affiliates (3) (3) (9) (9) Other, net Total other income and (deductions) (29) (28) (87) (86) Income before income taxes Income taxes Net income $ 112 $ 122 $ 327 $ 346 Comprehensive income $ 112 $ 122 $ 327 $ 346 See the Combined Notes to Consolidated Financial Statements 29

34 PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, (In millions) Cash flows from operating activities Net income $ 327 $ 346 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization Deferred income taxes and amortization of investment tax credits Other non-cash operating activities Changes in assets and liabilities: Accounts receivable 45 (50) Receivables from and payables to affiliates, net (10) 9 Inventories (5) 5 Accounts payable and accrued expenses (41) (12) Income taxes Pension and non-pension postretirement benefit contributions (23) (29) Other assets and liabilities (29) (49) Net cash flows provided by operating activities Cash flows from investing activities Capital expenditures (537) (448) Changes in Exelon intercompany money pool 74 Other investing activities 6 10 Net cash flows used in investing activities (457) (438) Cash flows from financing activities Issuance of long-term debt Restricted proceeds from issuance of long-term debt (30) Contributions from parent Dividends paid on common stock (216) (208) Other financing activities (4) (3) Net cash flows provided by financing activities Increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period $ 330 $ 516 See the Combined Notes to Consolidated Financial Statements 30

35 PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions) September 30, 2017 December 31, 2016 ASSETS Current assets Cash and cash equivalents $ 330 $ 63 Restricted cash and cash equivalents 4 4 Accounts receivable, net Customer Other Receivables from affiliates 4 Receivable from Exelon intercompany pool Inventories, net Fossil fuel Materials and supplies Prepaid utility taxes 41 9 Regulatory assets Other Total current assets Property, plant and equipment, net 7,875 7,565 Deferred debits and other assets Regulatory assets 1,773 1,681 Investments Receivable from affiliates Prepaid pension asset Other Total deferred debits and other assets 2,689 2,509 Total assets $ 11,480 $ 10,831 See the Combined Notes to Consolidated Financial Statements 31

36 PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions) September 30, 2017 December 31, 2016 LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities Long-term debt due within one year $ 500 $ Accounts payable Accrued expenses Payables to affiliates Customer deposits Regulatory liabilities Other Total current liabilities 1, Long-term debt 2,402 2,580 Long-term debt to financing trusts Deferred credits and other liabilities Deferred income taxes and unamortized investment tax credits 3,170 3,006 Asset retirement obligations Non-pension postretirement benefits obligations Regulatory liabilities Other Total deferred credits and other liabilities 4,136 3,925 Total liabilities 7,938 7,416 Commitments and contingencies Shareholder s equity Common stock 2,489 2,473 Retained earnings 1, Accumulated other comprehensive income, net 1 1 Total shareholder s equity 3,542 3,415 Total liabilities and shareholder's equity $ 11,480 $ 10,831 See the Combined Notes to Consolidated Financial Statements 32