Nuclear Decommissioning (Exelon and Generation)

9 Months Ended

Sep. 30, 2019

Environmental Remediation Obligations [Abstract]

Nuclear Decommissioning (Exelon and Generation)

Nuclear Decommissioning (Exelon and Generation)

Nuclear Decommissioning Asset Retirement Obligations (Exelon and Generation)

Generation has a legal obligation to decommission its nuclear power plants following the expiration of their operating licenses. To estimate its decommissioning obligation related to its nuclear generating stations for financial accounting and reporting purposes, Generation uses a probability-weighted, discounted cash flow model which, on a unit-by-unit basis, considers multiple outcome scenarios that include significant estimates and assumptions, and are based on decommissioning cost studies, cost escalation rates, probabilistic cash flow models and discount rates. Generation updates its ARO annually, unless circumstances warrant more frequent updates, based on its review of updated cost studies and its annual evaluation of cost escalation factors and probabilities assigned to various scenarios.

The financial statement impact for changes in the ARO, on an individual unit basis, due to the changes in and timing of estimated cash flows generally result in a corresponding change in the unit’s ARC within Property, plant and equipment on Exelon’s and Generation’s Consolidated Balance Sheets. If the ARO decreases for a Non-Regulatory Agreement unit without any remaining ARC, the corresponding change is recorded as decrease in Operating and maintenance expense within Exelon’s and Generation’s Consolidated Statements of Operations and Comprehensive Income.

The following table provides a rollforward of the nuclear decommissioning ARO reflected in Exelon’s and Generation’s Consolidated Balance Sheets from December 31, 2018 to September 30, 2019:

Nuclear decommissioning ARO at December 31, 2018 (a)(b)	$	10,005
Sale of Oyster Creek	(755		)
Accretion expense	361
Net increase due to changes in, and timing of, estimated future cash flows	211
Costs incurred related to decommissioning plants	(52		)
Nuclear decommissioning ARO at September 30, 2019 (a)	$	9,770

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(a) Includes $127 million and $22 million as the current portion of the ARO at September 30, 2019 and December 31, 2018, respectively, which is included in Other current liabilities in Exelon’s and Generation’s Consolidated Balance Sheets.

(b) Includes $772 million of ARO related to Oyster Creek which was classified as Liabilities held for sale in Exelon's and Generation's Consolidated Balance Sheets at December 31, 2018. See Note 3 — Mergers, Acquisitions and Dispositions for additional information.

During the nine months ended September 30, 2019, Exelon's and Generation’s total nuclear ARO decreased by approximately $235 million, primarily reflecting the sale of Oyster Creek, partially offset by the accretion of the ARO liability due to the passage of time and the net impacts of ARO updates completed during the first and third quarters of 2019.

The first quarter 2019 ARO update included an increase of approximately $330 million for a change in the assumed retirement timing probabilities for certain economically challenged nuclear plants and a $110 million decrease for the impacts of revised decommissioning cost estimates for TMI which incorporate site specific decommissioning planning activities associated with the early retirement of TMI on September 20, 2019. The TMI ARO adjustment resulted in an $85 million decrease in Operating and maintenance expense within Exelon’s and Generation’s Consolidated Statements of Operations and Comprehensive Income. See Note 8 — Early Plant Retirements for additional information.

The third quarter 2019 ARO update included a decrease of approximately $300 million due to lower estimated costs to decommission Nine Mile Point, Ginna, Braidwood, Byron and LaSalle nuclear units resulting from the completion of updated cost studies, partially offset by an increase of approximately $280 million for other impacts that included updated cost escalation rates, primarily for labor, equipment and materials, and current discount rates. The third quarter ARO adjustment resulted in a $65 million decrease in Operating and maintenance expense within Exelon and Generation's Consolidated Statements of Operations and Comprehensive Income.

NDT Funds (Exelon and Generation)

Exelon and Generation had NDT funds totaling $12,862 million and $12,695 million at September 30, 2019 and December 31, 2018, respectively. The NDT funds included $890 million at December 31, 2018, related to Oyster Creek NDT funds which were classified as Assets held for sale in Exelon's and Generation's Consolidated Balance Sheets. See Note 3 — Mergers, Acquisitions and Dispositions for additional information regarding the sale of Oyster Creek. The NDT funds also include $156 million and $144 million for the current portion of the NDT funds at September 30, 2019 and December 31, 2018, respectively, which are included in Other current assets in Exelon's and Generation's Consolidated Balance Sheets. See Note 17 — Supplemental Financial Information for additional information on activities of the NDT funds.

NRC Minimum Funding Requirements (Exelon and Generation)

NRC regulations require that licensees of nuclear generating facilities demonstrate reasonable assurance that funds will be available in specified minimum amounts to decommission the facility at the end of its life.

Generation filed its biennial decommissioning funding status report with the NRC on April 1, 2019 for all units except for Zion Station which is included in a separate report to the NRC submitted by ZionSolutions, LLC. The status report demonstrated adequate decommissioning funding assurance as of December 31, 2018 for all units except for Clinton and Peach Bottom Unit 1. As of February 28, 2019, Clinton demonstrated adequate minimum funding assurance due to market recovery and no further action is required. This demonstration was also included in the

April 1, 2019 submittal. As a former PECO plant, financial assurance for decommissioning Peach Bottom Unit 1 is provided by the NDT fund, collections from PECO ratepayers, and the ability to adjust those collections in accordance with the approved PAPUC tariff. No additional actions are required aside from the PAPUC filing in accordance with the tariff. See Note 15 — Asset Retirement Obligations of the Exelon 2018 Form 10-K for information regarding the amount collected from PECO ratepayers for decommissioning cost.