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Fair Value of Financial Assets and Liabilities (All Registrants)

3 Months Ended

Mar. 31, 2023

Fair Value of Financial Assets and Liabilities (All Registrants)

Exelon measures and classifies fair value measurements in accordance with the hierarchy as defined by GAAP. 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 liquidate as of the reporting date.

•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.

•Level 3 — unobservable inputs, such as internally developed pricing models or third-party valuations for the asset or liability due to little or no market activity for the asset or liability.

Fair Value of Financial Liabilities Recorded at Amortized Cost

The following tables present the carrying amounts and fair values of the Registrants’ short-term liabilities, long-term debt, and trust preferred securities (long-term debt to financing trusts or junior subordinated debentures) as of March 31, 2023 and December 31, 2022. The Registrants have no financial liabilities classified as Level 1 or measured using the NAV practical expedient.

The carrying amounts of the Registrants’ short-term liabilities as presented in their Consolidated Balance Sheets are representative of their fair value (Level 2) because of the short-term nature of these instruments.


	March 31, 2023								December 31, 2022
	Carrying Amount		Fair Value						Carrying Amount		Fair Value
			Level 2		Level 3		Total				Level 2		Level 3		Total
Long-Term Debt, including amounts due within one year(a)
Exelon	$	40,088	$	33,224	$	2,870	$	36,094	$	37,074	$	29,902	$	2,327	$	32,229
ComEd	11,480		10,236		—		10,236		10,518		9,006		—		9,006
PECO	4,613		3,946		50		3,996		4,612		3,864		50		3,914
BGE	4,208		3,685		—		3,685		4,207		3,613		—		3,613
PHI	8,553		4,632		2,820		7,452		8,120		4,507		2,277		6,784
Pepco	3,995		2,295		1,507		3,802		3,751		2,229		1,205		3,434
DPL	2,061		1,183		604		1,787		1,938		1,164		458		1,622
ACE	1,831		935		709		1,644		1,757		909		614		1,523
Long-Term Debt to Financing Trusts
Exelon	$	390	$	—	$	392	$	392	$	390	$	—	$	384	$	384
ComEd	205		—		207		207		205		—		204		204
PECO	184		—		185		185		184		—		180		180

__________

(a)Includes unamortized debt issuance costs, unamortized debt discount and premium, net, purchase accounting fair value adjustments, and finance lease liabilities which are not fair valued. Refer to Note 16 — Debt and Credit Agreements of the 2022 Form 10-K for unamortized debt issuance costs, unamortized debt discount and premium, net, and purchase accounting fair value adjustments and Note 10 — Leases of the 2022 Form 10-K for finance lease liabilities.

Recurring Fair Value Measurements

The following tables present assets and liabilities measured and recorded at fair value in the Registrants' Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2023 and December 31, 2022. The Registrants have no financial assets or liabilities measured using the NAV practical expedient:

Exelon


	As of March 31, 2023						As of December 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	523	$	—	$	—	$	523	$	664	$	—	$	—	$	664
Rabbi trust investments
Cash equivalents	65		—		—		65		62		—		—		62
Mutual funds	49		—		—		49		49		—		—		49
Fixed income	—		7		—		7		—		7		—		7
Life insurance contracts	—		56		41		97		—		58		40		98
Rabbi trust investments subtotal	114		63		41		218		111		65		40		216

Interest rate derivative assets
Derivatives designated as hedging instruments	—		—		—		—		—		6		—		6
Economic hedges	—		3		—		3		—		5		—		5
Interest rate derivative assets subtotal	—		3		—		3		—		11		—		11
Total assets	637		66		41		744		775		76		40		891
Liabilities
Mark-to-market derivative liabilities	—		—		(98)		(98)		—		—		(84)		(84)
Interest rate derivative liabilities
Derivatives designated as hedging instruments	—		(1)		—		(1)		—		(4)		—		(4)
Economic hedges	—		(1)		—		(1)		—		(3)		—		(3)
Interest rate derivative liabilities subtotal	—		(2)		—		(2)		—		(7)		—		(7)
Deferred compensation obligation	—		(75)		—		(75)		—		(75)		—		(75)
Total liabilities	—		(77)		(98)		(175)		—		(82)		(84)		(166)
Total net assets (liabilities)	$	637	$	(11)	$	(57)	$	569	$	775	$	(6)	$	(44)	$	725

__________

(a)Exelon excludes cash of $482 million and $345 million as of March 31, 2023 and December 31, 2022, respectively, and restricted cash of $78 million and $81 million as of March 31, 2023 and December 31, 2022, respectively, and includes long-term restricted cash of $180 million and $117 million as of March 31, 2023 and December 31, 2022, respectively, which is reported in Other deferred debits and other assets in the Consolidated Balance Sheets.

ComEd, PECO, and BGE


	ComEd								PECO								BGE
As of March 31, 2023	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	454	$	—	$	—	$	454	$	11	$	—	$	—	$	11	$	1	$	—	$	—	$	1
Rabbi trust investments

Mutual funds	—		—		—		—		8		—		—		8		9		—		—		9
Life insurance contracts	—		—		—		—		—		15		—		15		—		—		—		—
Rabbi trust investments subtotal	—		—		—		—		8		15		—		23		9		—		—		9

Total assets	454		—		—		454		19		15		—		34		10		—		—		10
Liabilities
Mark-to-market derivative liabilities(b)	—		—		(98)		(98)		—		—		—		—		—		—		—		—
Deferred compensation obligation	—		(8)		—		(8)		—		(8)		—		(8)		—		(4)		—		(4)
Total liabilities	—		(8)		(98)		(106)		—		(8)		—		(8)		—		(4)		—		(4)
Total net assets (liabilities)	$	454	$	(8)	$	(98)	$	348	$	19	$	7	$	—	$	26	$	10	$	(4)	$	—	$	6


	ComEd								PECO								BGE
As of December 31, 2022	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	392	$	—	$	—	$	392	$	10	$	—	$	—	$	10	$	23	$	—	$	—	$	23
Rabbi trust investments
Mutual funds	—		—		—		—		7		—		—		7		7		—		—		7
Life insurance contracts	—		—		—		—		—		15		—		15		—		—		—		—
Rabbi trust investments subtotal	—		—		—		—		7		15		—		22		7		—		—		7
Total assets	392		—		—		392		17		15		—		32		30		—		—		30
Liabilities
Mark-to-market derivative liabilities(b)	—		—		(84)		(84)		—		—		—		—		—		—		—		—
Deferred compensation obligation	—		(8)		—		(8)		—		(7)		—		(7)		—		(4)		—		(4)
Total liabilities	—		(8)		(84)		(92)		—		(7)		—		(7)		—		(4)		—		(4)
Total net assets (liabilities)	$	392	$	(8)	$	(84)	$	300	$	17	$	8	$	—	$	25	$	30	$	(4)	$	—	$	26

__________

(a)ComEd excludes cash of $51 million and $42 million as of March 31, 2023 and December 31, 2022, respectively, and restricted cash of $73 million and $77 million as of March 31, 2023 and December 31, 2022, respectively, and includes long-term restricted cash of $180 million and $117 million as of March 31, 2023 and December 31, 2022, respectively, which is reported in Other deferred debits and other assets in the Consolidated Balance Sheets. PECO excludes cash of $25 million and $58 million as of March 31, 2023 and December 31, 2022, respectively. BGE excludes cash of $19 million and $43 million as of March 31, 2023 and December 31, 2022, respectively, and restricted cash of $1 million and $1 million as of March 31, 2023 and December 31, 2022, respectively.

(b)The Level 3 balance consists of the current and noncurrent liability of $22 million and $76 million, respectively, as of March 31, 2023 and $5 million and $79 million, respectively, as of December 31, 2022 related to floating-to-fixed energy swap contracts with unaffiliated suppliers.

PHI, Pepco, DPL, and ACE


	As of March 31, 2023								As of December 31, 2022
PHI	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	35	$	—	$	—	$	35	$	205	$	—	$	—	$	205
Rabbi trust investments
Cash equivalents	62		—		—		62		59		—		—		59
Mutual funds	10		—		—		10		11		—		—		11
Fixed income	—		7		—		7		—		7		—		7
Life insurance contracts	—		20		39		59		—		22		39		61
Rabbi trust investments subtotal	72		27		39		138		70		29		39		138
Total assets	107		27		39		173		275		29		39		343
Liabilities
Deferred compensation obligation	—		(13)		—		(13)		—		(14)		—		(14)



Total liabilities	—		(13)		—		(13)		—		(14)		—		(14)
Total net assets	$	107	$	14	$	39	$	160	$	275	$	15	$	39	$	329


	Pepco								DPL								ACE
As of March 31, 2023	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	26	$	—	$	—	$	26	$	1	$	—	$	—	$	1	$	1	$	—	$	—	$	1




Rabbi trust investments
Cash equivalents	61		—		—		61		—		—		—		—		—		—		—		—

Life insurance contracts	—		20		39		59		—		—		—		—		—		—		—		—
Rabbi trust investments subtotal	61		20		39		120		—		—		—		—		—		—		—		—
Total assets	87		20		39		146		1		—		—		1		1		—		—		1
Liabilities
Deferred compensation obligation	—		(1)		—		(1)		—		—		—		—		—		—		—		—



Total liabilities	—		(1)		—		(1)		—		—		—		—		—		—		—		—
Total net assets	$	87	$	19	$	39	$	145	$	1	$	—	$	—	$	1	$	1	$	—	$	—	$	1


	Pepco								DPL								ACE
As of December 31, 2022	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	51	$	—	$	—	$	51	$	121	$	—	$	—	$	121	$	1	$	—	$	—	$	1
Rabbi trust investments
Cash equivalents	59		—		—		59		—		—		—		—		—		—		—		—


Life insurance contracts	—		22		38		60		—		—		—		—		—		—		—		—
Rabbi trust investments subtotal	59		22		38		119		—		—		—		—		—		—		—		—
Total assets	110		22		38		170		121		—		—		121		1		—		—		1
Liabilities
Deferred compensation obligation	—		(1)		—		(1)		—		—		—		—		—		—		—		—



Total liabilities	—		(1)		—		(1)		—		—		—		—		—		—		—		—
Total net assets	$	110	$	21	$	38	$	169	$	121	$	—	$	—	$	121	$	1	$	—	$	—	$	1

__________

(a)PHI excludes cash of $358 million and $165 million as of March 31, 2023 and December 31, 2022, respectively, and restricted cash of $3 million and $3 million as of March 31, 2023 and December 31, 2022, respectively. Pepco excludes cash of $124 million and $45 million as of March 31, 2023 and December 31, 2022, respectively, and restricted cash of $3 million and $3 million as of March 31, 2023 and December 31, 2022, respectively. DPL excludes cash of $142 million and $31 million as of March 31, 2023 and December 31, 2022, respectively. ACE excludes cash of $70 million and $71 million as of March 31, 2023 and December 31, 2022, respectively.

Reconciliation of Level 3 Assets and Liabilities

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 months ended March 31, 2023 and 2022:


	Exelon		ComEd			PHI and Pepco
Three Months Ended March 31, 2023	Total		Mark-to-Market Derivatives			Life Insurance Contracts
Balance as of December 31, 2022	$	(44)	$	(84)		$	40
Total realized / unrealized gains
Included in net income(a)	1		—			1


Included in regulatory assets/liabilities	(14)		(14)		(b)	—








Balance as of March 31, 2023	$	(57)	$	(98)	(c)	$	41
The amount of total gains included in income attributed to the change in unrealized gains related to assets and liabilities as of March 31, 2023	$	1	$	—		$	1


	Exelon		ComEd			PHI and Pepco
Three Months Ended March 31, 2022	Total		Mark-to-Market Derivatives			Life Insurance Contracts
Balance as of December 31, 2021	$	(182)	$	(219)		$	35
Total realized / unrealized gains
Included in net income(a)	1		—			1


Included in regulatory assets	75		75		(b)	—







Transfers out of Level 3	(1)		—			—
Balance as of March 31, 2022	$	(107)	$	(144)		$	36
The amount of total gains included in income attributed to the change in unrealized gain related to assets and liabilities as of March 31, 2022	$	1	$	—		$	1

__________

(a)Classified in Operating and maintenance expense in the Consolidated Statements of Operations and Comprehensive Income.

(b)Includes $25 million of decreases in fair value and an increase for realized gains due to settlements of $11 million recorded in Purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the three months ended March 31, 2023. Includes $69 million of increases in fair value and an increase for realized losses due to settlements of $6 million recorded in Purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the three months ended March 31, 2022.

(c)The balance consists of a current and noncurrent liability of $22 million and $76 million, respectively, as of March 31, 2023.

Valuation Techniques Used to Determine Fair Value

Exelon’s valuation techniques used to measure the fair value of the assets and liabilities shown in the tables below are in accordance with the policies discussed in Note 17 — Fair Value of Financial Assets and Liabilities of the 2022 Form 10-K.

Mark-to-Market Derivatives (Exelon and ComEd)

The table below discloses the significant unobservable inputs to the forward curve used to value mark-to-market derivatives.


Type of trade	Fair Value as of March 31, 2023		Fair Value as of December 31, 2022		Valuation Technique	Unobservable Input	2023 Range & Arithmetic Average				2022 Range & Arithmetic Average
Mark-to-market derivatives	$	(98)	$	(84)	Discounted Cash Flow	Forward power price(a)	$22.49	-	$83.26	$47.69	$34.78	-	$75.71	$48.44

________

(a)An increase to the forward power price would increase the fair value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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