Fair Value of Financial Assets and Liabilities (Exelon, Generation, ComEd and PECO)

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Assets and Liabilities [Abstract]

Fair Value of Financial Assets and Liabilities (Exelon, Generation, ComEd and PECO)

7. Fair Value of Financial Assets and Liabilities (Exelon, Generation, ComEd, PECO and BGE)

Fair Value of Financial Liabilities Recorded at the Carrying Amount

The following tables present the carrying amounts and fair values of the Registrants' short-term liabilities, long-term debt, SNF obligation and preferred securities as of September 30, 2012 and December 31, 2011:

Exelon

		September 30, 2012								December 31, 2011
		Carrying		Fair Value						Carrying		Fair
		Amount			Level 1		Level 2		Level 3	Amount		Value
Short-term liabilities		$	289	$	4	$	285	$	0	$	737	$	737
Long-term debt (including amounts
	due within one year)		18,715		0		20,762		38		12,627		14,488
Long-term debt to financing trusts			649		0		650		0		390		358
SNF obligation			1,020		0		780		0		1,019		886
Preferred securities of subsidiary			87		0		83		0		87		79

Generation

		September 30, 2012								December 31, 2011
		Carrying		Fair Value						Carrying		Fair
		Amount			Level 1		Level 2		Level 3	Amount		Value
Short-term liabilities		$	11	$	0	$	11	$	0	$	2	$	2
Long-term debt (including amounts
	due within one year)		7,383		0		7,839		20		3,677		4,231
SNF obligation			1,020		0		780		0		1,019		886

ComEd

		September 30, 2012								December 31, 2011
		Carrying		Fair Value						Carrying		Fair
		Amount			Level 1		Level 2		Level 3	Amount		Value
Short-term liabilities		$	35	$	0	$	35	$	0	$	0	$	0
Long-term debt (including amounts
	due within one year)		5,217		0		6,297		18		5,665		6,540
Long-term debt to financing trust			206		0		208		0		206		184

PECO

		September 30, 2012								December 31, 2011
		Carrying		Fair Value						Carrying		Fair
		Amount			Level 1		Level 2		Level 3	Amount		Value
Short-term liabilities		$	225	$	0	$	225	$	0	$	225	$	225
Long-term debt (including amounts
	due within one year)		2,322		0		2,682		0		1,972		2,295
Long-term debt to financing trusts			184		0		180		0		184		174
Preferred securities			87		0		83		0		87		79

BGE

		September 30, 2012						December 31, 2011
		Carrying		Fair Value				Carrying		Fair
		Amount			Level 1	Level 2	Level 3	Amount		Value
Long-term debt (including amounts
	due within one year)		2,210		0	2,547	0		2,101		2,377
Long-term debt to financing trusts			258		0	264	0		258		256

Short-Term Liabilities. The short-term liabilities included in the tables above are comprised of short-term borrowings (Level 2), short-term notes payable related to PECO's accounts receivable agreement (Level 2), and dividends payable (Level 1). The Registrants' carrying amounts of the short-term liabilities are representative of fair value because of the short-term nature of these instruments. See Note 9 - Debt and Credit Agreements for additional information on PECO's accounts receivable agreement.

Long-Term Debt.The fair value amounts of Exelon's taxable debt securities are determined by a valuation model that is based on a conventional discounted cash flow methodology and utilizes assumptions of current market pricing curves. In order to incorporate the credit risk of the Registrants into the discount rates, Exelon obtains pricing (i.e., U.S. Treasury rate plus credit spread) based on trades of existing Exelon debt securities as well as debt securities of other issuers in the electric utility sector with similar credit ratings in both the primary and secondary market, across the Registrants' debt maturity spectrum. The credit spreads of various tenors obtained from this information are added to the appropriate benchmark U.S. Treasury rates in order to determine the current market yields for the various tenors. The yields are then converted into discount rates of various tenors that are used for discounting the respective cash flows of the same tenor for each bond or note.

The Registrants also have tax-exempt debt. Due to lowtradingvolume in this market, qualitative factors, such as market conditions, investor demand, and circumstances related to the issuer (i.e., political and regulatory environment), may be incorporated into the credit spreads that are used to obtain the fair value as described above.

SNF Obligation. The carrying amount of Generation's SNF obligation is derived from a contract with the DOE to provide for disposal of SNF from Generation's nuclear generating stations. When determining the fair value of the obligation, the future carrying amount of the SNF obligation in 2025 is calculated by compounding the current book value of the SNF obligation at the 13-week Treasury rate. The compounded obligation amount is discounted back to present value using Generation's discount rate, which is calculated using the same methodology as described above for the taxable debt securities, and an estimated maturity date of 2025.

Preferred Securities of Subsidiary, Long-Term Debt to Financing Trusts and Junior Subordinated Debentures. The fair value of these securitiesis determined using observable market prices on the last trade date of the quarter as these securities are actively traded, less accrued interest. The securities are registered with the SEC and are public.

Recurring Fair Value Measurements

Exelon records the fair value of assets and liabilities in accordance with the hierarchy established by the authoritative guidance for fair value measurements. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

• Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities that the Registrants have the ability to access as of the reporting date. Financial assets and liabilities utilizing Level 1 inputs include active exchange-traded equity securities, certain exchange-based derivatives, and money market funds.
• Level 2 — inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, non-exchange-based derivatives, commingled and mutual investment funds priced at NAV per fund share and fair value hedges.
• Level 3 — unobservable inputs, such as internally developed pricing models for the asset or liability due to little or no market activity for the asset or liability. Financial assets and liabilities utilizing Level 3 inputs include infrequently traded non-exchange-based derivatives and investments priced using an alternative pricing mechanism.

There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2012.

Exelon

The following tables present assets and liabilities measured and recorded at fair value on Exelon's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of September 30, 2012 and December 31, 2011:

As of September 30, 2012	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	1,117	$	0	$	0	$	1,117
Nuclear decommissioning trust fund investments
Cash equivalents		319		0		0		319
Equity
Equity securities		1,452		0		0		1,452
Commingled funds		0		1,906		0		1,906
Equity funds subtotal		1,452		1,906		0		3,358
Fixed income
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies		1,100		0		0		1,100
Debt securities issued by states of the United States
and political subdivisions of the states		0		355		0		355
Debt securities issued by foreign governments		0		84		0		84
Corporate debt securities		0		1,734		0		1,734
Federal agency mortgage-backed securities		0		31		0		31
Commercial mortgage-backed securities (non-agency)		0		47		0		47
Residential mortgage-backed securities (non-agency)		0		15		0		15
Mutual funds		0		9		0		9
Fixed income subtotal		1,100		2,275		0		3,375
Direct lending securities		0		0		70		70
Other debt obligations		0		16		0		16
Nuclear decommissioning trust fund investments subtotal(b)		2,871		4,197		70		7,138
Pledged assets for Zion Station decommissioning
Equity
Equity securities		21		0		0		21
Commingled funds		0		20		0		20
Equity funds subtotal		21		20		0		41
Fixed income
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies		78		15		0		93
Debt securities issued by states of the United States
and political subdivisions of the states		0		58		0		58
Corporate debt securities		0		260		0		260
Federal agency mortgage-backed securities		0		60		0		60
Commercial mortgage-backed securities (non-agency)		0		6		0		6
Commingled funds		0		43		0		43
Fixed income subtotal		78		442		0		520
Direct lending securities		0		0		64		64
Other debt obligations		0		1		0		1
Pledged assets for Zion Station decommissioning subtotal(c)		99		463		64		626
Rabbi trust investments
Cash equivalents		2		0		0		2
Mutual funds(d)(e)		69		0		0		69
Rabbi trust investments subtotal		71		0		0		71
Commodity mark-to-market derivative assets
Economic hedges		994		3,872		666		5,532
Proprietary trading		1,631		3,070		140		4,841
Effect of netting and allocation of collateral(f)		(2,597)		(5,695)		(238)		(8,530)
Commodity mark-to-market assets subtotal(g)		28		1,247		568		1,843
Interest rate mark-to-market derivative assets		0		125		0		125
Other investments		2		0		17		19
Total assets		4,188		6,032		719		10,939
Liabilities
Commodity mark-to-market derivative liabilities
Economic hedges		(1,225)		(2,814)		(351)		(4,390)
Proprietary trading		(1,678)		(2,881)		(222)		(4,781)
Effect of netting and allocation of collateral(f)		2,772		5,336		229		8,337
Commodity mark-to-market liabilities subtotal(g)(h)		(131)		(359)		(344)		(834)
Interest rate mark-to-market derivative liabilities		0		(95)		0		(95)
Deferred compensation		0		(101)		0		(101)
Total liabilities		(131)		(555)		(344)		(1,030)
Total net assets	$	4,057	$	5,477	$	375	$	9,909
As of December 31, 2011	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	861	$	0	$	0	$	861
Nuclear decommissioning trust fund investments
Cash equivalents		562		0		0		562
Equity
Equity securities		1,275		0		0		1,275
Commingled funds		0		1,822		0		1,822
Equity funds subtotal		1,275		1,822		0		3,097
Fixed income
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies		1,014		33		0		1,047
Debt securities issued by states of the United States
and political subdivisions of the states		0		541		0		541
Debt securities issued by foreign governments		0		16		0		16
Corporate debt securities		0		778		0		778
Federal agency mortgage-backed securities		0		357		0		357
Commercial mortgage-backed securities (non-agency)		0		83		0		83
Residential mortgage-backed securities (non-agency)		0		5		0		5
Mutual funds		0		47		0		47
Fixed income subtotal		1,014		1,860		0		2,874
Direct lending securities		0		0		13		13
Other debt obligations		0		18		0		18
Nuclear decommissioning trust fund investments subtotal(b)		2,851		3,700		13		6,564
Pledged assets for Zion decommissioning
Equity
Equity securities		35		0		0		35
Commingled funds		0		30		0		30
Equity funds subtotal		35		30		0		65
Fixed income
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies		54		26		0		80
Debt securities issued by states of the United States
and political subdivisions of the states		0		65		0		65
Corporate debt securities		0		314		0		314
Federal agency mortgage-backed securities		0		121		0		121
Commercial mortgage-backed securities (non-agency)		0		10		0		10
Commingled funds		0		20		0		20
Fixed income subtotal		54		556		0		610
Direct lending securities		0		0		37		37
Other debt obligations		0		13		0		13
Pledged assets for Zion Station decommissioning subtotal(c)		89		599		37		725
Rabbi trust investments
Cash equivalents		2		0		0		2
Mutual funds(d)(e)		34		0		0		34
Rabbi trust investments subtotal		36		0		0		36
Commodity mark-to-market derivative assets
Cash flow hedges		0		857		0		857
Economic hedges		0		1,653		124		1,777
Proprietary trading		0		240		48		288
Effect of netting and allocation of collateral(f)		0		(1,827)		(28)		(1,855)
Commodity mark-to-market assets(g)		0		923		144		1,067
Interest rate mark-to-market derivative assets		0		15		0		15
Total assets		3,837		5,237		194		9,268
Liabilities
Commodity mark-to-market derivative liabilities
Cash flow hedges		0		(13)		0		(13)
Economic hedges		(1)		(1,137)		(119)		(1,257)
Proprietary trading		0		(236)		(28)		(264)
Effect of netting and allocation of collateral(f)		0		1,295		20		1,315
Commodity mark-to-market liabilities (h)		(1)		(91)		(127)		(219)
Interest rate mark-to-market liabilities		0		(19)		0		(19)
Deferred compensation		0		(73)		0		(73)
Total liabilities		(1)		(183)		(127)		(311)
Total net assets	$	3,836	$	5,054	$	67	$	8,957

$

(a)       Excludes certain cash equivalents considered to be held-to-maturity and not reported at fair value.

(b)       Excludes net assets (liabilities)of $2 million and$(57) million at September 30, 2012 and December 31, 2011, respectively. Theseitems consist of receivables related to pending securities sales, interest and dividend receivables, and payables related to pending securities purchases.

(c)       Excludes net assets of$5 million and $9 million at September 30, 2012 and December 31, 2011, respectively. These items consist of receivables related to pending securities sales, interest and dividend receivables, and payables related to pending securities purchases.

(d)       The mutual funds held by the Rabbi trusts include $54 millionrelated to deferred compensation and $15 million related to Supplemental Executive Retirement Plan. These funds are classified as Level 1 as they are valued based upon quoted prices (unadjusted) in active markets.

(e)       Excludes $28million and $25million of the cash surrender value of life insurance investments at September 30, 2012 and December 31, 2011, respectively.

(f)       Includes collateral postings (received) from counterparties. Collateral (received) from counterparties, net of collateral paid to counterparties, totaled $175 million, $(359) million and $(9) million allocated to Level 1, Level 2 and Level 3 mark-to-market derivatives, respectively, as of September 30, 2012. Collateral (received) from counterparties, net of collateral paid to counterparties, totaled $532 million and $8 million allocated to Level 2 and Level 3 mark-to-market derivatives, respectively, as of December 31, 2011.

(g)       The Level 3 balance does not include current and noncurrent assets for Generation and current and noncurrent liabilities for ComEd of $352 million and $0 million at September 30, 2012 and $503 million and $191 million at December 31, 2011, respectively, related to the fair value of Generation's financial swap contract with ComEd.

(h)       The Level 3 balance includes the current and noncurrent liability of $17 million and $53 million at September 30, 2012, respectively, and $9 million and $97 million at December 31, 2011, respectively, related to floating-to-fixed energy swap contracts with unaffiliated suppliers.

The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis during the three and nine months ended September 30, 2012 and 2011:

Three Months Ended September 30, 2012		Nuclear Decommissioning Trust Fund Investments		Pledged Assets for Zion Station Decommissioning		Mark-to-Market Derivatives			Other Investments		Total
Balance as of June 30, 2012		$	54	$	59	$	295		$	17	$	425
Total realized / unrealized gains (losses)
	Included in net income		0		0		(97)	(a)		0		(97)
	Included in regulatory assets		2		0		41	(b)		0		43
	Included in payable for Zion Station decommissioning		0		1		0			0		1
Change in collateral			0		-		(15)			0		(15)
Purchases, sales, issuances and settlements
	Purchases (c)		14		4		-			0		18
Balance as of September 30, 2012		$	70	$	64	$	224		$	17	$	375
The amount of total losses included in income
	attributed to the change in unrealized gains (losses) related to assets and liabilities held for the three months ended September 30, 2012	$	0	$	0	$	(42)		$	0	$	(42)
Nine Months Ended September 30, 2012		Nuclear Decommissioning Trust Fund Investments		Pledged Assets for Zion Station Decommissioning		Mark-to-Market Derivatives			Other Investments		Total
Balance as of December 31, 2011		$	13	$	37	$	17		$	0	$	67
Total realized / unrealized gains (losses)
	Included in net income		0		0		(157)	(a)		0		(157)
	Included in other comprehensive income		0		0		1			0		1
	Included in regulatory assets		2		0		36	(b)		0		38
Change in collateral			0		0		(7)			0		(7)
Purchases, sales, issuances and settlements
	Purchases (c)		55		36		329			17		437
	Sales		0		(9)		0			0		(9)
Transfers into Level 3			0		0		(34)			0		(34)
Transfers out of Level 3			0		0		39			0		39
Balance as of September 30, 2012		$	70	$	64	$	224		$	17	$	375
The amount of total losses included in income
	attributed to the change in unrealized gains (losses) related to assets and liabilities held for the nine months ended September 30, 2012	$	0	$	0	$	(16)		$	0	$	(16)

(a)       Includes the reclassification of $55 million and $141million of realized losses due to the settlement of derivative contracts recorded in results of operations for the three and nine months ended September 30, 2012.

(b)       Excludes$35 million of decreases in fair value and $86million of increases in fair value and $119 million and $427millionof realized losses due to settlements for the three and nine months ended September 30, 2012 of Generation's financial swap contract with ComEd, which eliminates upon consolidation in Exelon's Consolidated Financial Statements.

(c)       Includes $323 million of fair value from contracts and $17 million of other investments acquired as a result of the merger.

Three Months Ended September 30, 2011			Nuclear Decommissioning Trust Fund Investments		Pledged Assets for Zion Station Decommissioning		Mark-to-Market Derivatives			Total
Balance as of June 30, 2011			$	0	$	34	$	(16)		$	18
Total realized / unrealized gains (losses)
	Included in income			0		0		(8)	(a)		(8)
	Included in other comprehensive income			0		0		(15)	(b)		(15)
	Included in regulatory assets			0		0		(18)			(18)
	Included in payable for Zion Station decommissioning			0		(3)		0			(3)
Change in collateral				0		0		8			8
Purchases, sales, issuances and settlements
	Purchases			6		17		0			23
	Sales			0		(10)		0			(10)
Transfers out of Level 3				0		0		24			24
Balance as of September 30, 2011			$	6	$	38	$	(25)		$	19
The amount of total gains included in income attributed to
	the change in unrealized losses related to assets and liabilities held for the three months ended September 30, 2011		$	0	$	0	$	(5)		$	-5
Nine Months Ended September 30, 2011		Nuclear Decommissioning Trust Fund Investments			Pledged Assets for Zion Decommissioning		Mark-to-Market Derivatives			Total
Balance as of December 31, 2010			$	0	$	0	$	50		$	50
Total realized / unrealized gains (losses)
	Included in other comprehensive income			0		0		(27)	(a)		(27)
	Included in regulatory assets			0		0		(51)	(b)		(51)
Change in collateral				0		0		15			15
Purchases, sales, issuances and settlements
	Purchases			6		60		4			70
	Sales			0		(22)		0			(22)
Transfers out of Level 3				0		0		(16)			(16)
Balance as of September 30, 2011			$	6	$	38	$	(25)		$	19
The amount of total gains included in income
	attributed to the change in unrealized gains (losses) related to assets and liabilities held for the nine months ended September 30, 2011		$	0	$	0	$	18		$	18

(a) Includes the reclassification of $4 million and $19 million of realized losses due to the settlement of derivative contracts recorded in results of operations for the three and nine months ended September 30, 2011, respectively.

(b) Excludes $7 million and $4 million of decreases in fair value and $88 million and $309 million of realized losses due to settlements associated with Generation's financial swap contract with ComEd and $3 million of changes in the fair value of Generation's block contracts with PECO for the nine months ended September 30, 2011. All items eliminate upon consolidation if Exelon's Consolidated Financial Statements.

The following tables present the income statement classification of the total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis during the three and nine months ended September 30, 2012 and 2011:

		Operating Revenue		Purchased Power and Fuel
Total gains (losses) included in income for the three months ended
	September 30, 2012	$	(106)	$	9
Total gains (losses) included in income for the nine months ended
	September 30, 2012	$	(195)	$	38
Change in the unrealized gains (losses) relating to assets and liabilities
	held for the three months ended September 30, 2012	$	(48)	$	6
Change in the unrealized gains (losses) relating to assets and liabilities
	held for the nine months ended September 30, 2012	$	(45)	$	29
		Operating Revenue		Purchased Power and Fuel
Total gains (losses) included in income for the three months ended
	September 30, 2011	$	(5)	$	(3)
Total gains (losses) included in income for the nine months ended
	September 30, 2011	$	2	$	(2)
Change in the unrealized gains (losses) relating to assets and liabilities held
	for the three months ended September 30, 2011	$	1	$	(6)
Change in the unrealized gains (losses) relating to assets and liabilities held
	for the nine months ended September 30, 2011	$	22	$	(4)

Generation

The following tables present assets and liabilities measured and recorded at fair value on Generation's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of September 30, 2012 and December 31, 2011:

As of September 30, 2012	Level 1		Level 2		Level 3			Total
Assets
Cash equivalents	$	518	$	0	$	0	$	518
Nuclear decommissioning trust fund investments
Cash equivalents		319		0		0		319
Equity
Equity securities		1,452		0		0		1,452
Commingled funds		0		1,906		0		1,906
Equity funds subtotal		1,452		1,906		0		3,358
Fixed income
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies		1,100		0		0		1,100
Debt securities issued by states of the United States and
political subdivisions of the states		0		355		0		355
Debt securities issued by foreign governments		0		84		0		84
Corporate debt securities		0		1,734		0		1,734
Federal agency mortgage-backed securities		0		31		0		31
Commercial mortgage-backed securities (non-agency)		0		47		0		47
Residential mortgage-backed securities (non-agency)		0		15		0		15
Mutual funds		0		9		0		9
Fixed income subtotal		1,100		2,275		0		3,375
Direct lending securities		0		0		70		70
Other debt obligations		0		16		0		16
Nuclear decommissioning trust fund investments subtotal(b)		2,871		4,197		70		7,138
Pledged assets for Zion Station decommissioning
Equity
Equity securities		21		0		0		21
Commingled funds		0		20		0		20
Equity funds subtotal		21		20		0		41
Fixed income
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies		78		15		0		93
Debt securities issued by states of the United States and
political subdivisions of the states		0		58		0		58
Corporate debt securities		0		260		0		260
Federal agency mortgage-backed securities		0		60		0		60
Commercial mortgage-backed securities (non-agency)		0		6		0		6
Commingled funds		0		43		0		43
Fixed income subtotal		78		442		0		520
Direct lending securities		0		0		64		64
Other debt obligations		0		1		0		1
Pledged assets for Zion Station decommissioning subtotal(c)		99		463		64		626
Rabbi trust investments
Cash equivalents		1		0		0		1
Mutual funds (d) (e)		13		0		0		13
Rabbi trust investments subtotal		14		0		0		14
Commodity mark-to-market derivative assets
Economic hedges		994		3,872		1,018		5,884
Proprietary trading		1,631		3,070		140		4,841
Effect of netting and allocation of collateral(f)		(2,597)		(5,695)		(238)		(8,530)
Commodity mark-to-market assets subtotal(g)		28		1,247		920		2,195
Interest Rate mark-to-market derivative assets		0		111		0		111
Other investments		2		0		17		19
Total assets		3,532		6,018		1,071		10,621
Liabilities
Commodity mark-to-market derivative liabilities
Economic hedges		(1,225)		(2,814)		(281)		(4,320)
Proprietary trading		(1,678)		(2,881)		(222)		(4,781)
Effect of netting and allocation of collateral(f)		2,772		5,336		229		8,337
Commodity mark-to-market liabilities subtotal		(131)		(359)		(274)		(764)
Interest rate mark-to-market derivative liabilities		0		(95)		0		(95)
Deferred compensation		0		(27)		0		(27)
Total liabilities		(131)		(481)		(274)		(886)
Total net assets	$	3,401	$	5,537	$	797	$	9,735
As of December 31, 2011	Level 1		Level 2		Level 3			Total
Assets
Cash equivalents(a)	$	466	$	0	$	0	$	466
Nuclear decommissioning trust fund investments
Cash equivalents		562		0		0		562
Equity
Equity securities		1,275		0		0		1,275
Commingled funds		0		1,822		0		1,822
Equity funds subtotal		1,275		1,822		0		3,097
Fixed income
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies		1,014		33		0		1,047
Debt securities issued by states of the United States and
political subdivisions of the states		0		541		0		541
Debt securities issued by foreign governments		0		16		0		16
Corporate debt securities		0		778		0		778
Federal agency mortgage-backed securities		0		357		0		357
Commercial mortgage-backed securities (non-agency)		0		83		0		83
Residential mortgage-backed securities (non-agency)		0		5		0		5
Mutual funds		0		47		0		47
Fixed income subtotal		1,014		1,860		0		2,874
Direct lending securities		0		0		13		13
Other debt obligations		0		18		0		18
Nuclear decommissioning trust fund investments subtotal(b)		2,851		3,700		13		6,564
Pledged assets for Zion Station decommissioning
Equity
Equity securities		35		0		0		35
Commingled funds		0		30		0		30
Equity funds subtotal		35		30		0		65
Fixed income
Debt securities issued by the U.S. Treasury and other U.S.
government corporations and agencies		54		26		0		80
Debt securities issued by states of the United States and
political subdivisions of the states		0		65		0		65
Corporate debt securities		0		314		0		314
Federal agency mortgage-backed securities		0		121		0		121
Commercial mortgage-backed securities (non-agency)		0		10		0		10
Commingled funds		0		20		0		20
Fixed income subtotal		54		556		0		610
Direct lending securities		0		0		37		37
Other debt obligations		0		13		0		13
Pledged assets for Zion Station decommissioning subtotal(c)		89		599		37		725
Rabbi trust investments(d)(e)		4		0		0		4
Commodity mark-to-market derivative assets
Cash flow hedges		0		857		694		1,551
Other derivatives		0		1,653		124		1,777
Proprietary trading		0		240		48		288
Effect of netting and allocation of collateral(f)		0		(1,827)		(28)		(1,855)
Commodity mark-to-market assets subtotal(g)		0		923		838		1,761
Total assets		3,410		5,222		888		9,520
Liabilities
Commodity mark-to-market derivative liabilities
Cash flow hedges		0		(13)		0		(13)
Other derivatives		(1)		(1,137)		(13)		(1,151)
Proprietary trading		0		(236)		(28)		(264)
Effect of netting and allocation of collateral(f)		0		1,295		20		1,315
Commodity mark-to-market liabilities subtotal		(1)		(91)		(21)		(113)
Interest rate mark-to-market derivative liabilities		0		(19)		0		(19)
Deferred compensation		0		(18)		0		(18)
Total liabilities		(1)		(128)		(21)		(150)
Total net assets	$	3,409	$	5,094	$	867	$	9,370

(a)       Excludes certain cash equivalentsconsidered to be held-to-maturity and not reported at fair value.

(b)       Excludes net assets (liabilities) of $2 million and$(57) million at September 30, 2012 and December 31, 2011, respectively. These items consist of receivables related to pending securities sales, interest and dividend receivables, and payables related to pending securities purchases.

(c)       Excludes net assets of $5 million and$9 million at September 30, 2012 December 31, 2011, respectively. These items consist of receivables related to pending securities sales, interest and dividend receivables, and payables related to pending securities purchases.

(d)       The $13 millionmutual funds held by the Rabbi trusts are classified as Level 1 as they are valued based upon quoted prices (unadjusted) in active markets.

(e)       Excludes $8 millionand $7 million of the cash surrender value of life insurance investments at September 30, 2012 and December 31, 2011, respectively.

(f)       Includes collateral postings (received) from counterparties. Collateral (received) from counterparties, net of collateral paid to counterparties, totaled $175 million, $(359) million and $(9) million allocated to Level 1, Level 2 and Level 3 mark-to-market derivatives, respectively, as of September 30, 2012. Collateral (received) from counterparties, net of collateral paid to counterparties, totaled $532 million and $8 million allocated to Level 2 and Level 3 mark-to-market derivatives, respectively, as of December 31, 2011.

(g)       The Level 3 balance includes current and noncurrent assets for Generation of $352 million and $0 million at September 30, 2012 and $503 million and $191 million at December 31, 2011, respectively, related to the fair value of Generation's financial swap contract with ComEd, which eliminatesupon consolidation in Exelon's Consolidated Financial Statements.

The following tables present the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis during the three and nine months ended September 30, 2012 and 2011:

Three Months Ended September 30, 2012		Nuclear Decommissioning Trust Fund Investments			Pledged Assets for Zion Station Decommissioning	Mark-to-Market Derivatives				Other Investments	Total
Balance as of June 30, 2012		$	54	$	59	$	912			17	$	1,042
Total unrealized / realized gains (losses)
	Included in income		-		-		(112)	(a)		-		(112)
	Included in other comprehensive income		-		-		(139)	(b)		-		(139)
	Included in noncurrent payables to affiliates		2		-		-			-		2
	Included in payable for Zion Station decommissioning		-		1		-			-		1
Change in collateral			-		-		(15)			-		(15)
Purchases, sales, issuances and settlements
	Purchases (c)		14		4		-			-		18
Balance as of September 30, 2012		$	70	$	64	$	646		$	17	$	797
The amount of total losses included in income
	attributed to the change in unrealized gains (losses) related to assets and liabilities held for the three months ended September 30, 2012	$	-	$	-	$	(77)		$	-	$	(77)
Nine Months Ended September 30, 2012		Nuclear Decommissioning Trust Fund Investments			Pledged Assets for Zion Station Decommissioning	Mark-to-Market Derivatives				Other Investments	Total
Balance as of December 31, 2011		$	13	$	37	$	817			-	$	867
Total unrealized / realized gains (losses)
	Included in income		-		-		(187)	(a)		-		(187)
	Included in other comprehensive income		-		-		(311)	(b)		-		(311)
	Included in noncurrent payables to affiliates		2		-		-			-		2
Change in collateral			-		-		(7)			-		(7)
Purchases, sales, issuances and settlements
	Purchases (c)		55		36		329			17		437
	Sales		-		(9)		-			-		(9)
Transfers into Level 3			-		-		(34)					(34)
Transfers out of Level 3			-		-		39			-		39
Balance as of September 30, 2012		$	70	$	64	$	646		$	17	$	797
The amount of total losses included in income
	attributed to the change in unrealized gains (losses) related to assets and liabilities held for the nine months ended September 30, 2012	$	-	$	-	$	(77)		$	-	$	(77)

(a) Includes the reclassification of $35million and $110 million of realized losses due to the settlement of derivative contracts recorded in results of operations for the three and nine months ended September 30, 2012, respectively.

(b)       Includes $35 million of decreases in fair value and $86million of increases in fair value and realized losses due to settlements of $119 million and $427million associated with Generation's financial swap contract with ComEd for the three and nine months ended September 30, 2012, respectively. This position was de-designated as a cash flow hedge prior to the merger date. All prospective changes in fair value and reclassifications of realized amounts are being recorded to income offset by the amortization of the frozen mark in OCI. All items eliminate upon consolidation in Exelon's Consolidated Financial Statements.

(c)        Includes $323million of fair value from contracts and $17 million of other investments acquired as a result of the merger.

Three Months Ended September 30, 2011		Nuclear Decommissioning Trust Fund Investments		Pledged Assets for Zion Station Decommissioning		Mark-to-Market Derivatives			Total
Balance as of June 30, 2011		$	0	$	34	$	776		$	810
Total realized / unrealized gains (losses)
	Included in income		0		0		(8)	(a)		(8)
	Included in other comprehensive income		0		0		(110)	(b)		(110)
	Included in payable for Zion Station decommissioning		0		(3)		0			(3)
Changes in collateral			0		0		8			8
Purchases, sales, issuances and settlements
	Purchases		6		17		0			23
	Sales		0		(10)		0			(10)
Transfers out of Level 3 - Asset			0		0		24			24
Balance as of September 30, 2011		$	6	$	38	$	690		$	734
The amount of total gains included in income attributed to
	the change in unrealized (losses) related to assets and liabilities held for the three months ended September 30, 2011	$	0	$	0	$	(5)		$	(5)
Nine Months Ended September 30, 2011		Nuclear Decommissioning Trust Fund Investments		Pledged Assets for Zion Station Decommissioning		Mark-to-Market Derivatives			Total
Balance as of December 31, 2010		$	0	$	0	$	1,030		$	1,030
Total realized / unrealized gains (losses)
	Included in other comprehensive income		0		0		(343)	(b)		(343)
Changes in collateral			0		0		15			15
	Purchases		6		60		4			70
	Sales		0		(22)		0			(22)
Transfers out of Level 3 - Liability			0		0		(16)			(16)
Balance as of September 30, 2011		$	6	$	38	$	690		$	734
The amount of total gains included in income attributed to
	the change in unrealized gains related to assets and liabilities held for the nine months ended September 30, 2011	$	0	$	0	$	18		$	18

(a)        Includes the reclassification of $4 million and $19 million of realized losses due to the settlement of derivative contracts recorded in results of operations for the three and nine months ended September 30, 2011, respectively.

(b) Includes $7million and $4 million of decreases in fair value realized losses reclassified from OCI due to settlements of $88 million and $309 million associated with Generation's financial swap contract with ComEd for the three and nine months ended September 30, 2011, and $3 million of decreases in fair value due to settlement of Generation's block contracts with PECO for thethree and nine months ended September 30, 2011. All items eliminate upon consolidation in Exelon's Consolidated Financial Statements.

The following tables present the income statement classification of the total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis during the three and nine months ended September 30, 2012 and 2011:

		Operating Revenue		Purchased Power and Fuel
Total gains (losses) included in income for the three months ended September 30, 2012		$	(121)	$	9
Total gains (losses) included in income for the nine months ended
	September 30, 2012	$	(225)	$	38
Change in the unrealized gains (losses) relating to assets and liabilities held for
	the three months ended September 30, 2012	$	(83)	$	6
Change in the unrealized gains (losses) relating to assets and liabilities held for
	the nine months ended September 30, 2012	$	(95)	$	18
		Operating Revenue		Purchased Power and Fuel
Total gains (losses) included in income for the three months ended
	September 30, 2011	$	(5)	$	(3)
Total gains (losses) included in income for the nine months ended September 30, 2011		$	2	$	(2)
Change in the unrealized gains (losses) relating to assets and liabilities
	held for the three months ended September 30, 2011	$	1	$	(6)
Change in the unrealized gains (losses) relating to assets and liabilities held for
	the nine months ended September 30, 2011	$	22	$	(4)

ComEd

The following tables present assets and liabilities measured and recorded at fair value on ComEd's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of September 30, 2012 and December 31, 2011:

As of September 30, 2012		Level 1		Level 2		Level 3		Total
Assets
Rabbi trust investments
Mutual funds			9		0		0		9
	Rabbi trust investment subtotal		9		0		0		9
Total assets			9		0		0		9
Liabilities
Deferred compensation obligation			0		(9)		0		(9)
Mark-to-market derivative liabilities (b)(c)			0		0		(422)		(422)
Total liabilities			0		(9)		(422)		(431)
Total net assets (liabilities)		$	9	$	(9)	$	(422)	$	(422)
As of December 31, 2011		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents (a)		$	173	$	0	$	0	$	173
Rabbi trust investments
Cash equivalents			2		0		0		2
Mutual funds			19		0		0		19
	Rabbi trust investment subtotal		21		0		0		21
Total assets			194		0		0		194
Liabilities
Deferred compensation obligation			0		(8)		0		(8)
Mark-to-market derivative liabilities (b)(c)			0		0		(800)		(800)
Total liabilities			0		(8)		(800)		(808)
Total net assets (liabilities)		$	194	$	(8)	$	(800)	$	(614)

(a)Excludes certain cash equivalents considered to be held-to-maturity and not reported at fair value.

(b)       The Level 3 balance includes the current and noncurrent liability of $352 million and$0 million at September 30, 2012, respectively, and $503 million and $191 million at December 31, 2011, respectively, related to the fair value of ComEd's financial swap contract with Generation which eliminates upon consolidation in Exelon's Consolidated Financial Statements.

(c)       The Level 3 balance includes the current and noncurrent liability of $17 million and $53 million at September 30, 2012, respectively,and $9 million and $97 million at December 31, 2011, respectively, related to floating-to-fixed energy swap contracts with unaffiliated suppliers.

The following tables present the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis during the three and nine months ended and September 30, 2012:

Three Months Ended September 30, 2012	Mark-to-Market Derivatives
Balance as of June 30, 2012	$	(617)
Total realized / unrealized gains included in regulatory assets (a)(b)		195
Balance as of September 30, 2012	$	(422)
Nine Months Ended September 30, 2012	Mark-to-Market Derivatives
Balance as of December 31, 2011	$	(800)
Total realized / unrealized gains included in regulatory assets (a)(b)		378
Balance as of September 30, 2012	$	(422)

(a)Includes$35 million ofincreases in fair value and $86million of decreases in fair value and realized gains due to settlements of $119 million and $427 million associated with ComEd's financial swap contract with Generation for the three and nine months ended September 30, 2012, respectively. All items eliminate upon consolidation in Exelon's Consolidated Financial Statements.

(b)       Includes $40 millionand $33 million of increases in the fair value and realized losses due to settlements of $1 million and $2 million recorded in purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the three and nine months ended September 30, 2012, respectively.

Three Months Ended September 30, 2011	Mark-to-Market Derivatives
Balance as of June 30, 2011	$	(788)
Total realized / unrealized gains included in regulatory assets (a)(b)		76
Balance as of September 30, 2011	$	(712)
Nine Months Ended September 30, 2011	Mark-to-Market Derivatives
Balance as of December 31, 2010	$	(971)
Total realized / unrealized gains included in regulatory assets (a)(b)		259
Balance as of September 30, 2011	$	(712)

• Includes$7 million and $4 million of increases in fair value and $88 million and $309 million of realized gains due to settlements associated with ComEd's financial swap contract with Generation for the three and nine months ended September 30, 2011, respectively. All items eliminate upon consolidation in Exelon's Consolidated Financial Statements.
• Includes $19 million and $54 million of decreases in fair value of floating-to-fixed energy swap contracts with unaffiliated suppliers for the three and nine months ended September 30, 2011, respectively.

PECO

The following tables present assets and liabilities measured and recorded at fair value on PECO's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of September 30, 2012 and December 31, 2011:

As of September 30, 2012	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	528	$	0	$	0	$	528
Rabbi trust investments - mutual funds(b)(c)		9		0		0		9
Total assets		537		0		0		537
Liabilities
Deferred compensation obligation		0		(18)		0		(18)
Total liabilities		0		(18)		0		(18)
Total net assets (liabilities)	$	537	$	(18)	$	0	$	519
As of December 31, 2011	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	175	$	0	$	0	$	175
Rabbi trust investments - mutual funds(b)(c)		9		0		0		9
Total assets		184		0		0		184
Liabilities
Deferred compensation obligation		0		(21)		0		(21)
Total liabilities		0		(21)		0		(21)
Total net assets (liabilities)	$	184	$	(21)	$	0	$	163

(a)       Excludes certain cash equivalents considered to be held-to-maturity and not reported at fair value.

(b)       The mutual funds held by the Rabbi trusts are classified as Level 1 as they are valued based upon quoted prices (unadjusted) in active markets.

(c)       Excludes $14 millionand $13 million of the cash surrender value of life insurance investments at September 30, 2012 and December 31, 2011, respectively.

PECO had no Level 3 assets or liabilities measured at fair value on a recurring basis during the three and nine months ended September 30, 2012.

The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis during the three andnine months ended September 30, 2011:

Three Months Ended September 30, 2011	Mark-to-Market Derivatives
Balance as of June 30, 2011	$	(4)
Total realized gains included in regulatory assets		1
Balance as of September 30, 2011	$	(3)
Nine Months Ended September 30, 2011	Mark-to-Market Derivatives
Balance as of December 31, 2010	$	(9)
Total realized gains included in regulatory assets		6	(a)
Balance as of September 30, 2011	$	(3)

(a) Includes an increase of $3 million related to the settlement of PECO's block contract with Generation for the nine months ended September 30, 2011, which eliminate upon consolidation in Exelon's Consolidated Financial Statements.

BGE

The following tables present assets and liabilities measured and recorded at fair value on BGE's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of September 30, 2012 and December 31, 2011:

As of September 30, 2012	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	52	$	0	$	0	$	52
Rabbi trust investments - mutual funds		5		0		0		5
Total assets		57		0		0		57
Liabilities
Deferred compensation obligation		0		(5)		0		(5)
Total liabilities		0		(5)		0		(5)
Total net assets (liabilities)	$	57	$	(5)	$	0	$	52
As of December 31, 2011	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	33	$	0	$	0	$	33
Total assets		33		0		0		33
Liabilities
Total net assets (liabilities)	$	33	$	0	$	0	$	33

Valuation Techniques Used to Determine Fair Value

The following describes the valuation techniques used to measure the fair value of the assets and liabilities shown in the tables above.

Cash Equivalents (Exelon, Generation, ComEd, PECO and BGE).The Registrants' cash equivalents include investments with maturities of three months or less when purchased. The cash equivalents shown in the fair value tables are comprised of investments in mutual and money market funds. The fair values of the shares of these funds are based on observable market prices and, therefore, have been categorized in Level 1 in the fair value hierarchy.

Nuclear Decommissioning Trust Fund Investments and Pledged Assets for Zion Station Decommissioning (Exelon and Generation).The trust fund investments have been established to satisfy Generation's nuclear decommissioning obligations as required by the NRC. The NDT funds hold debt and equity securities directly and indirectly through commingled funds. Generation's investment policies place limitations on the types and investment grade ratings of the securities that may be held by the trusts. These policies limit the trust funds' exposures to investments in highly illiquid markets and other alternative investments. Investments with maturities of three months or less when purchased, including certain short-term fixed income securitiesare considered cash equivalents and included in the recurring fair value measurements hierarchy as Level 1.

With respect to individually held equity securities, the trustees obtain prices from pricing services, whose prices are obtained from direct feeds from market exchanges, which Generation is able to independently corroborate. The fair values of equity securities held directly by the trust funds are based on quoted prices in active markets and are categorized in Level 1. Equity securities held individually are primarily traded on the New York Stock Exchange and NASDAQ-Global Select Market, which contain only actively traded securities due to the volume tradingrequirements imposed by these exchanges.

For fixed income securities, multiple prices from pricing services are obtained whenever possible, which enables cross-provider validations in addition to checks for unusual daily movements. A primary price source is identified based on asset type, class or issue for each security. The trustees monitor prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the portfolio managers challenge an assigned price and the trustees determine that another price source is considered to be preferable. Generation has obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices. Additionally, Generation selectively corroborates the fair values of securities by comparison to other market-based price sources. U.S. Treasury securities are categorized as Level 1 because they trade in a highly liquid and transparent market. The fair values of fixed income securities, excluding U.S. Treasury securities, are based on evaluated prices that reflect observable market information, such as actual trade information or similar securities, adjusted for observable differences and are categorized in Level 2.

Equity and fixed income commingled funds and fixed income mutual funds are maintained by investment companies and hold certain investments in accordance with a stated set of fund objectives. The fair values of fixed income commingled and mutual funds held within the trust funds, which generally hold short-term fixed income securities and are not subject to restrictions regarding the purchase or sale of shares, are derived from observable prices. The objectives of the remaining equity commingled funds in which Exelon and Generation invest primarily seek to track the performance of certain equity indices by purchasing equity securities to replicate the capitalization and characteristics of the indices. In general, equity commingled funds are redeemable on the 15th of the month and the last business day of the month; however, the fund manager may designate any day as a valuation date for the purpose of purchasing or redeeming units. Commingled and mutual funds are categorized in Level 2 because the fair value of the funds are based on NAVs per fund share (the unit of account), primarily derived from the quoted prices in active markets on the underlying equity securities. See Note 11 — Nuclear Decommissioning for further discussion on the NDT fund investments.

Direct lending funds are investments in managed funds which invest in private companies for long-term capital appreciation. The fair value of these securities is determined using either an enterprise value model or a bond valuation model. Investments in direct lending funds are categorized as Level 3 because the fair value of these securities is based largely on inputs that are unobservable and utilize complex valuation models.

Rabbi Trust Investments (Exelon, Generation, ComEd, PECO and BGE).The Rabbi trusts were established to hold assets related to deferred compensation plans existing for certain active and retired members of Exelon's executive management and directors. The investments in the Rabbi trusts are included in investments in the Registrants' Consolidated Balance Sheets. The investments are in fixed-income commingled funds and mutual funds, including short-term investment funds. These funds are maintained by investment companies and hold certain investments in accordance with a stated set of fund objectives, which are consistent with Exelon's overall investment strategy. The values of some of these funds are publicly quoted. For fixed-income commingled funds and mutual funds which are not publicly quoted, the fund administrators value the funds using the net asset value per fund share, derived from the quoted prices in active markets of the underlying securities. These funds have been categorized as Level 2. Fixed-income commingled funds and mutual funds which are publicly quoted, such as money market funds, have been categorized as Level 1 given the clear observability of the prices.

Mark-to-Market Derivatives (Exelon, Generation, ComEd and PECO).Derivative contracts are traded in both exchange-based and non-exchange-based markets. Exchange-based derivatives that are valued using unadjusted quoted prices in active markets are categorized in Level 1 in the fair value hierarchy. Certain non-exchange-based derivatives' pricing is verified using indicative price quotations available through brokers or over-the-counter, on-line exchanges and are categorized in Level 2. These price quotations reflect the average of the bid-ask, mid-point prices and are obtained from sources that the Registrants believe provide the most liquid market for the commodity. The price quotations are reviewed and corroborated to ensure the prices are observable and representative of an orderly transaction between market participants. This includes consideration of actual transaction volumes, market delivery points, bid-ask spreads and contract duration. The remainder of non-exchange-based derivative contracts is valued using the Black model, an industry standard option valuation model. The Black model takes into account inputs such as contract terms, including maturity, and market parameters, including assumptions of the future prices of energy, interest rates, volatility, credit worthiness and credit spread. For non-exchange-based derivatives that trade in liquid markets, such as generic forwards, swaps and options, model inputs are generally observable. Such instruments are categorized in Level 2. The Registrants' non-exchange-based derivatives are predominately at liquid trading points. For non-exchange-based derivatives that trade in less liquid markets with limited pricing information, such as the financial swap contract between Generation and ComEd, model inputs generally would include both observable and unobservable inputs. These valuations may include an estimated basis adjustment from an illiquid trading point to a liquid trading point for which active price quotations are available. Such instruments are categorized in Level 3.

Exelon may utilize fixed-to-floating interest rate swaps, which are typically designated as fair value hedges, as a means to achieve its targeted level of variable-rate debt as a percent of total debt. In addition, the Registrants may utilize interest rate derivatives to lock in interest rate levels in anticipation of future financings. These interest rate derivatives are typically designated as cash flow hedges.Exelon determines the current fair value by calculating the net present value of expected payments and receipts under the swap agreement, based on and discounted by the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk and other market parameters. As these inputs are based on observable data and valuations of similar instruments, the interest rate swaps are categorized in Level 2 in the fair value hierarchy. See Note 8—Derivative Financial Instruments for further discussion on mark-to-market derivatives.

Deferred Compensation Obligations (Exelon, Generation, ComEd, PECO and BGE).The Registrants' deferred compensation plans allow participants to defer certain cash compensation into a notional investment account. The Registrants include such plans in other current and noncurrent liabilities in their Consolidated Balance Sheets. The value of the Registrants' deferred compensation obligations is based on the market value of the participants' notional investment accounts. The notional investments are comprised primarily of mutual funds, which are based on observable market prices. However, since the deferred compensation obligations themselves are not exchanged in an active market, they are categorized in Level 2 in the fair value hierarchy.

Additional Information Regarding Level 3 Fair Value Measurements (Exelon, Generation, ComEd)

For valuations that include both observable and unobservable inputs, if the unobservable input is determined to be significant to the overall inputs, the entire valuation is categorized in Level 3. This includes derivatives valued using indicative price quotations whose contract tenure extends into unobservable periods. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks such as liquidity, volatility and contract duration. Such instruments are categorized in Level 3 as the model inputs generally are not observable. Exelon's RMC approves risk management policies and objectives for risk assessment, control and valuation, counterparty credit approval, and the monitoring and reporting of risk exposures. The RMC is chaired by the chief risk officer and includes the chief executive officer, chief financial officer, corporate controller, general counsel, treasurer, vice president of strategy, vice president of audit services and officers representing Exelon's business units. The RMC reports to the Risk Oversight Committee of the Exelon Board of Directors on the scope of the risk management activities and is responsible for approving all valuation procedures at Exelon. Forward price curves for the power market utilized by the front office to manage the portfolio are reviewed and verified by the middle office and used for financial reporting by the back office. The Registrants consider credit and nonperformance risk in the valuation of derivative contracts categorized in Level 2 and 3, including both historical and current market data in its assessment of credit and nonperformance risk by counterparty. Due to master netting agreements and collateral posting requirements, the impacts of credit and nonperformance risk were not material to the financial statements. Transfers in and out of levels are recognized as of the end of the reporting period in which the transfer occurred. Given derivatives categorized within Level 1 are valued using exchange-based quoted prices within observable periods. Transfers between Level 2 and Level 1 generally do not occur. Transfers into Level 2 from Level 3 generally occur when the contract tenure becomes more observable.

Disclosed below is detail surrounding the Registrants' significant Level 3 valuations. The most significant position is the long term intercompany swap with ComEd, which is further discussed in Note 8 –Derivative Financial Instruments. The calculated fair value includes marketability discounts for margining provisions and notional size. Generation's remaining Level 3 balance generally consists of forward sales and purchases of power and natural gas, coal purchases, and transmission congestion contracts. Generation utilizes various inputs and factors including market data and assumptions that market participants would use in pricing assets or liabilities as well as assumptions about the risks inherent in the inputs to the valuation technique. The inputs and factors include forward commodity prices, commodity price volatility, contractual volumes, delivery location, interest rates, credit quality of counterpartiesand credit enhancements.

For commodity derivatives, the primary input to the valuation models is the forward commodity price curve for each instrument. Forward commodity price curves are derived by the traders and portfolio managers and verified by risk management considering published exchange transaction prices, executed bilateral transactions, broker quotes, and other observable or public data sources. The relevant forward commodity curve used to value each of the derivatives depends on a number of factors, including commodity type, delivery location, and delivery period. Price volatility varies by commodity and location. When appropriate, Generation discounts future cash flows using risk free interest rates with adjustments to reflect the credit quality of each counterparty for assets and Generation's own credit quality for liabilities. The level of observability of a forward commodity price is generally a product of the delivery location and delivery period. Certain delivery locations including PJM West Hub (for power) and Henry Hub (for natural gas) are highly liquid and prices are observable for up to three years in the future.The forward curve for a less liquid location is estimated by using the forward curve from the liquid location and applying a spread to represent the cost to transport the commodity to the delivery location. This spread does not typically represent a majority of the instrument's market price. As a result, the change in fair value is closely tied to liquid market movements and not a change in the applied spread. The change in fair value associated with a change in the spread is generally immaterial. An average spread calculated across all Level 3 power and gas delivery locations is generally less than $4.00 and $0.25 for power and natural gas, respectively.Many of the commodity derivatives are short term in nature and thus a majority of the fair value may be based on observable inputs even though the contract as a whole must be classified as Level 3. See Item 3.–Quantitative and Qualitative Disclosures About Market Risk for information regarding the maturity by year of the Registrant's mark-to-market derivative assets and liabilities.

In 2010, ComEd entered into several 20-year floating to fixed energy swap contracts with unaffiliated suppliers for the procurement of long-term renewable energy and associated RECs. See Note 8 –Derivative Financial Instruments for more information. The fair value of these swaps has been designated as a Level 3 valuation due to the long tenure of the positions and internal modeling assumptions. The modeling assumptions include using natural gas heat rates to project long term forward power curves adjusted by a renewable factor that incorporates time of day and seasonality factors to reflect accurate renewable energy pricing. In addition, marketability reserves are applied to the positions based on the tenor and supplier risk. The table below discloses the significant inputs to the forward curve used to value these positions.

Type of trade	Fair Value at September 30, 2012 (d)		Valuation Technique	Unobservable Input	Range
Mark-to-market derivatives – Economic Hedges (Generation) (a)	$	386	Discounted Cash Flow	Forward power price	$	8		-	$	76
				Forward gas price	$	3.04		-	$	6.35
			Option Model	Volatility percentage		26	%	-		120	%
Mark-to-market derivatives – Proprietary trading (Generation) (a)	$	(83)	Discounted Cash Flow	Forward power price	$	13		-	$	108
			Option Model	Volatility percentage		22	%	-		67	%
Mark-to-market derivatives – Transactions with affiliates (Generation and ComEd) (b)	$	352	Discounted Cash Flow	Marketability reserve		7.3	%	-		8.7	%
Mark-to-market derivatives (ComEd)	$	(70)	Discounted Cash Flow	Forward heat rate (c)		8.5	%	-		9.5	%
				Marketability reserve		3.5	%	-		8.3	%
				Renewable factor		80	%	-		126	%

• The valuation techniques, unobservable inputs and ranges are the same for the asset and liability positions.
• Includes current assets for Generation and current liabilities for ComEd of $352 million, related to the fair value of the five-year financial swap contract between Generation and ComEd, which eliminates in consolidation.
• Quoted forward natural gas rates are utilized to project the forward power curve for the delivery of energy at specified future dates. The natural gas curve is extrapolated beyond its observable period to the end of the contract's delivery.
• The fair values below do not include cash collateral held on level three positions of $9million as of September 30, 2012.

The inputs listed above would have a direct impact on the fair values of the above instruments if they were adjusted. The significant unobservable inputs used in the fair value measurement of Generation's commodity derivatives are forward commodity prices and for options is price volatility. Increases (decreases) in the forward commodity price in isolation would result in significantly higher (lower) fair values for long positions (contracts that give us the obligation or option to purchase a commodity), with offsetting impacts to short positions (contracts that give us the obligation or right to sell a commodity). Increases (decreases) in volatility would increase (decrease) the value for the holder of the option (writer of the option). Generally, a change in the estimate of forward commodity prices is unrelated to a change in the estimate of volatility of prices. An increase to the reserves listed above would decrease the fair value of the positions. An increase to the heat rate or renewablefactors would increase the fair value accordingly. Generally, interrelationships exist between market prices of natural gas and power. As such, an increase in natural gas pricing would potentially have a similar impact on forward power markets.