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Discontinued Operations (Exelon)
 6 Months Ended
Jun. 30, 2022
Discontinued Operations and Disposal Groups [Abstract]  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] Discontinued Operations (Exelon)
On February 21, 2021, Exelon's Board of Directors approved a plan to separate the Utility Registrants and Generation, creating two publicly traded companies ("the separation"). Exelon completed the separation on February 1, 2022, through the distribution of 326,663,937 common stock shares of Constellation, the new publicly traded company, to Exelon shareholders. Under the separation plan, Exelon shareholders retained their current shares of Exelon stock and received one share of Constellation common stock for every three shares of Exelon common stock held on January 20, 2022, the record date for the distribution, in a transaction that is tax-free to Exelon and its shareholders for U.S. federal income tax purposes.
Constellation was newly formed and incorporated in Pennsylvania on June 15, 2021 for the purposes of separation and holds Generation (including Generation's subsidiaries).
Pursuant to the separation:
•Exelon entered into four term loans consisting of a 364-day term loan for $1.15 billion and three 18-month term loans for $300 million, $300 million and $250 million, respectively. Exelon issued these term loans primarily to fund the cash payment to Constellation and for general corporate purposes. See Note 10 — Debt and Credit Agreements for additional information.
•Exelon made a cash payment of $1.75 billion to Constellation on January 31, 2022.
•Exelon contributed its equity ownership interest in Generation to Constellation. Exelon no longer retains any equity ownership interest in Generation or Constellation.
•Exelon transferred certain corporate assets and employee-related obligations to Constellation.
•Exelon received cash from Generation of $258 million to settle the intercompany loan on January 31, 2022. See Note 10 — Debt and Credit Agreements for additional information.
Continuing Involvement
In order to govern the ongoing relationships between Exelon and Constellation after the separation, and to facilitate an orderly transition, Exelon and Constellation have entered into several agreements, including the following:
•Separation Agreement – governs the rights and obligations between Exelon and Constellation regarding certain actions to be taken in connection with the separation, among others, including the allocation of assets and liabilities between Exelon and Constellation.
•Transition Services Agreement (TSA) – governs the terms and conditions of the services that Exelon will provide to Constellation and Constellation will provide to Exelon for an expected period of two years, provided that certain services may be longer than the term and services may be extended with approval from both parties. The services include specified accounting, finance, information technology, human resources, employee benefits and other services that have historically been provided on a centralized basis by BSC. For the three months ended June 30, 2022, the amounts Exelon billed Constellation and Constellation billed Exelon for these services were $69 million recorded in Other income, net and $11 million recorded in Operating and maintenance expense, respectively. Additionally, for the period from February 1, 2022 to June 30, 2022, the amounts Exelon billed Constellation and Constellation billed Exelon for these services were $125 million recorded in Other income, net and $20 million recorded in Operating and maintenance expense, respectively.
•Tax Matters Agreement (TMA) – governs the respective rights, responsibilities and obligations of Exelon and Constellation with respect to all tax matters, including tax liabilities and benefits, tax attributes, tax returns, tax contests and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns. See Note 7. Income Taxes for additional information.
In addition, the Utility Registrants will continue to incur expenses from transactions with Generation after the separation. Prior to the separation, such expenses were primarily recorded as Purchased power from affiliates and an immaterial amount recorded as Operating and maintenance expense from affiliates at the Utility Registrants. After the separation, such expenses are primarily recorded as Purchased power and an immaterial amount recorded as Operating and maintenance expense at the Utility Registrants.
•ComEd had an ICC-approved RFP contract with Generation to provide a portion of ComEd’s electric supply requirements. ComEd also purchased RECs and ZECs from Generation.
•PECO received electric supply from Generation under contracts executed through PECO’s competitive procurement process. In addition, PECO had a ten-year agreement with Generation to sell solar AECs.
•BGE received a portion of its energy requirements from Generation under its MDPSC-approved market-based SOS and gas commodity programs.
•Pepco received electric supply from Generation under contracts executed through Pepco’s competitive procurement process approved by the MDPSC and DCPSC.
•DPL received a portion of its energy requirements from Generation under its MDPSC and DEPSC approved market-based SOS commodity programs.
•ACE received electric supply from Generation under contracts executed through ACE’s competitive procurement process approved by the NJBPU.
ComEd and PECO also have receivables with Generation as a result of the nuclear decommissioning contractual construct whereby, to the extent NDT funds are greater than the underlying ARO at the end of decommissioning, such amounts are due back to ComEd and PECO, as applicable, for payment to their respective customers. See Note 9 — Asset Retirement Obligations of the Combined Notes to Consolidated Financial Statements of the 2021 Recast Form 10-K and Note 15 — Related Party Transactions for additional information.
Discontinued Operations
The separation represented a strategic shift that would have a major effect on Exelon’s operations and financial results. Accordingly, the separation meets the criteria for discontinued operations.
The following table presents the results of Constellation that have been reclassified from continuing operations and included in discontinued operations within Exelon’s Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2022 and June 30, 2021.
These results are primarily Generation, which is comprised of Exelon’s Mid-Atlantic, Midwest, New York, ERCOT, and Other Power Regions reportable segments, and include the impact of transaction costs, certain BSC costs, including any transition costs, that were historically allocated and directly attributable to Generation, transactions between Generation and the Utility Registrants, and tax-related adjustments. Transaction costs include costs for
external bankers, accountants, appraisers, lawyers, external counsels and other advisors, among others, who are involved in the negotiation, appraisal, due diligence and regulatory approval of the separation. Transition costs are primarily employee-related costs such as recruitment expenses, costs to establish certain stand-alone functions and information technology systems, professional services fees and other separation-related costs during the transition to separate Generation. For the purposes of reporting discontinued operations, these results also include transactions between Generation and the Utility Registrants that were historically eliminated within Exelon’s Consolidated Statements of Operations as these transactions will be ongoing after the separation. Certain BSC costs that were historically allocated to Generation are presented as part of continuing operations in Exelon’s Consolidated Statements of Operations as these costs do not qualify as expenses of the discontinued operations per the accounting rules.
Three Months Ended
June 30,		Six Months Ended
June 30,
202120222021
Operating revenues
Competitive business revenues$3,900 $1,855 $9,165 
Competitive business revenues from affiliates255 161 549 
Total operating revenues4,155 2,016 9,714 
Operating expenses
Competitive businesses purchased power and fuel1,947 1,138 6,557 
Operating and maintenance(a)
1,382 371 2,287 
Depreciation and amortization930 94 1,869 
Taxes other than income taxes118 44 239 
Total operating expenses4,377 1,647 10,952 
Gain on sales of assets and businesses8 10 79 
Operating income (loss)(214)379 (1,159)
Other income and (deductions)
Interest expense, net(72)(20)(140)
Other, net508 (281)675 
Total other income and (deductions) 436 (301)535 
Income (loss) before income taxes222 78 (624)
Income taxes71 (40)13 
Equity in losses of unconsolidated affiliates(1)(1)(3)
Net income (loss)150 117 (640)
Net income attributable to noncontrolling interests75 1 99 
Net income (loss) from discontinued operations$75 $116 $(739)
__________
(a)Includes transaction and transition costs related to the separation of $52 million for the six months ended June 30, 2022 and $4 million and $7 million for the three and six months ended June 30, 2021, respectively. See discussion above for additional information.
There were no assets and liabilities of discontinued operations included in Exelon’s Consolidated Balance Sheet as of June 30, 2022. Constellation had net assets of $11,573 million that separated on February 1, 2022 that resulted in a reduction to Exelon’s equity during the six months ended June 30, 2022. Refer to the Distribution of Constellation line in Exelon’s Consolidated Statement of Changes in Shareholders’ Equity for further information.
The following table presents the assets and liabilities of discontinued operations in Exelon’s Consolidated Balance Sheet as of December 31, 2021:
December 31, 2021
ASSETS
Current assets
Cash and cash equivalents$510 
Restricted cash and cash equivalents72 
Accounts receivable
Customer accounts receivable1,724
Customer allowance for credit losses(55)
Customer accounts receivable, net1,669 
Other accounts receivable596
Other allowance for credit losses(4)
Other accounts receivable, net592 
Mark-to-market derivative assets2,169 
Inventories, net
Fossil fuel and emission allowances284 
Materials and supplies1,004 
Renewable energy credits529 
Assets held for sale 13 
Other993 
Total current assets of discontinued operations7,835 
Property, plant, and equipment (net of accumulated depreciation and amortization of $15,888)
19,661 
Deferred debits and other assets
Nuclear decommissioning trust funds15,938 
Investments193 
Mark-to-market derivative assets949 
Other1,768 
Total property, plant, and equipment, deferred debits, and other assets of discontinued operations38,509 
Total assets of discontinued operations$46,344 
December 31, 2021
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term borrowings$2,082 
Long-term debt due within one year1,220 
Accounts payable1,757 
Accrued expenses818 
Mark-to-market derivative liabilities981 
Renewable energy credit obligation779 
Liabilities held for sale 3 
Other300 
Total current liabilities of discontinued operations7,940 
Long-term debt4,575 
Deferred credits and other liabilities
Deferred income taxes and unamortized investment tax credits3,583 
Asset retirement obligations12,819 
Pension obligations939 
Non-pension postretirement benefit obligations876 
Spent nuclear fuel obligation1,210 
Mark-to-market derivative liabilities513 
Other1,161 
Total long-term debt, deferred credits, and other liabilities of discontinued operations25,676 
Total liabilities of discontinued operations$33,616 
The following table presents selected financial information regarding cash flows of the discontinued operations that are included within Exelon’s Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and June 30, 2021.
Six Months Ended
June 30,
20222021
Non-cash items included in net income (loss) from discontinued operations:
Depreciation, amortization, and accretion, including nuclear fuel and energy contract amortization$207 $2,686 
Asset impairments— 493 
Gain on sales of assets and businesses9 (79)
Deferred income taxes and amortization of investment tax credits(143)(268)
Net fair value changes related to derivatives(59)(490)
Net realized and unrealized losses (gains) on NDT fund investments205 (376)
Net unrealized losses (gains) on equity investments16 (96)
Other decommissioning-related activity36 (636)
Cash flows from investing activities:
Capital expenditures(227)(731)
Collection of DPP169 2,209 
Supplemental cash flow information:
Decrease in capital expenditures not paid(128)(66)
Increase in DPP348 1,958 
Increase in PP&E related to ARO update335 —