Fair Value Disclosures (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value of Financial Assets and Liabilities Measured on Recurring Basis

The following tables set forth, by level within the fair value hierarchy, PHI’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2013 and December 31, 2012. As required by the guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. PHI’s assessment of the significance of a particular input to the fair value measurement requires the exercise of judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

	Fair Value Measurements at September 30, 2013
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
ASSETS
Derivative instruments (b)
Capacity (d)	$	4	$	—	$	—	$	4
Cash equivalents
Treasury fund		69		69		—		—
Executive deferred compensation plan assets
Money market funds		17		17		—		—
Life insurance contracts		62		—		44		18
	$	152	$	86	$	44	$	22
LIABILITIES
Derivative instruments (b)
Natural gas (c)	$	1	$	1	$	—	$	—
Capacity (d)		14		—		—		14
Executive deferred compensation plan liabilities
Life insurance contracts		28		—		28		—
	$	43	$	1	$	28	$	14

(a) There were no transfers of instruments between level 1 and level 2 valuation categories during the nine months ended September 30, 2013.

(b) The fair values of derivative assets and liabilities reflect netting by counterparty before the impact of collateral.

(c) Represents natural gas swaps purchased by DPL as part of a natural gas hedging program approved by the DPSC.

(d) Represents derivatives associated with the ACE SOCAs.

	Fair Value Measurements at December 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
ASSETS
Derivative instruments (b)
Capacity (d)	$	8	$	—	$	—	$	8
Cash equivalents
Treasury fund		27		27		—		—
Executive deferred compensation plan assets
Money market funds		17		17		—		—
Life insurance contracts		60		—		42		18
	$	112	$	44	$	42	$	26
LIABILITIES
Derivative instruments (b)
Natural gas (c)	$	4	$	—	$	—	$	4
Capacity (d)		11		—		—		11
Executive deferred compensation plan liabilities
Life insurance contracts		28		—		28		—
	$	43	$	—	$	28	$	15

(a) There were no transfers of instruments between level 1 and level 2 valuation categories during the year ended December 31, 2012.

(b) The fair values of derivative assets and liabilities reflect netting by counterparty before the impact of collateral.

(c) Represents natural gas options purchased by DPL as part of a natural gas hedging program approved by the DPSC.

(d) Represents derivatives associated with the ACE SOCAs.

Summary of Primary Unobservable Inputs Used to Determine Fair Value of Level 3 Instruments and Range of Values that Could be Used for those Inputs

The tables below summarize the primary unobservable inputs used to determine the fair value of PHI’s level 3 instruments and the range of values that could be used for those inputs as of September 30, 2013 and December 31, 2012:

Type of Instrument	Fair Value at September 30, 2013			Valuation Technique	Unobservable Input	Range
	(millions of dollars)
Capacity contracts, net	$	(10	)	Discounted cash flow	Discount rate	5% - 9%

Type of Instrument	Fair Value at December 31, 2012			Valuation Technique	Unobservable Input	Range
	(millions of dollars)
Natural gas options	$	(4	)	Option model	Volatility factor	1.57 - 2.00
Capacity contracts, net		(3	)	Discounted cash flow	Discount rate	5% - 9%

Reconciliations of Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Reconciliations of the beginning and ending balances of PHI’s fair value measurements using significant unobservable inputs (Level 3) for the nine months ended September 30, 2013 and 2012 are shown below:

	Nine Months Ended September 30, 2013
	Natural Gas			Life Insurance Contracts			Capacity
	(millions of dollars)
Beginning balance as of January 1	$	(4	)	$	18		$	(3	)
Total gains (losses) (realized and unrealized):
Included in income		—			3			—
Included in accumulated other comprehensive loss		—			—			—
Included in regulatory liabilities and regulatory assets		—			—			(7	)
Purchases		—			—			—
Issuances		—			(3	)		—
Settlements		4			—			—
Transfers in (out) of level 3		—			—			—
Ending balance as of September 30	$	—		$	18		$	(10	)

	Nine Months Ended September 30, 2012
	Natural Gas			Life Insurance Contracts			Capacity
	(millions of dollars)
Beginning balance as of January 1	$	(15	)	$	17		$	—
Total gains (losses) (realized and unrealized):
Included in income		—			3			—
Included in accumulated other comprehensive loss		—			—			—
Included in regulatory liabilities and regulatory assets		(2	)		—			(1	)
Purchases		—			—			—
Issuances		—			(3	)		—
Settlements		10			—			—
Transfers in (out) of level 3		—			—			—
Ending balance as of September 30	$	(7	)	$	17		$	(1	)

Gains on Level 3 Instruments Included in Income

The breakdown of realized and unrealized gains on level 3 instruments included in income as a component of Other Income or Other Operation and Maintenance expense for the periods below were as follows:

	Nine Months Ended September 30,
	2013		2012
	(millions of dollars)
Total net gains included in income for the period	$	3	$	3
Change in unrealized gains relating to assets still held at reporting date	$	3	$	3

Fair Value of Financial Liabilities Measured on Recurring Basis

Fair Value Measurements at September 30, 2013
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
LIABILITIES
Debt instruments
Long-term debt (a)	$	4,953	$	—	$	4,387	$	566
Transition Bonds issued by ACE Funding (b)		299		—		299		—
Long-term project funding		12		—		—		12
	$	5,264	$	—	$	4,686	$	578

(a) The carrying amount for Long-term debt is $4,457 million as of September 30, 2013.

(b) The carrying amount for Transition Bonds issued by ACE Funding, including amounts due within one year, is $267 million as of September 30, 2013.

	Fair Value Measurements at December 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
LIABILITIES
Debt instruments
Long-term debt (b)	$	5,004	$	—	$	4,517	$	487
Transition Bonds issued by ACE Funding (c)		341		—		341		—
Long-term project funding		13		—		—		13
	$	5,358	$	—	$	4,858	$	500

(a) Certain debt instruments that were categorized as level 1 at December 31, 2012, have been reclassified as level 2 to conform to the current period presentation.

(b) The carrying amount for Long-term debt is $4,177 million as of December 31, 2012.

(c) The carrying amount for Transition Bonds issued by ACE Funding, including amounts due within one year, is $295 million as of December 31, 2012.

Delmarva Power & Light Co/De [Member]

Fair Value of Financial Assets and Liabilities Measured on Recurring Basis

The following tables set forth, by level within the fair value hierarchy, DPL’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2013 and December 31, 2012. As required by the guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. DPL’s assessment of the significance of a particular input to the fair value measurement requires the exercise of judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

	Fair Value Measurements at September 30, 2013
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
ASSETS
Executive deferred compensation plan assets
Money market funds	$	1	$	1	$	—	$	—
Life insurance contracts		1		—		—		1
	$	2	$	1	$	—	$	1
LIABILITIES
Derivative instruments (b)
Natural gas (c)	$	1	$	1	$	—	$	—
Executive deferred compensation plan liabilities
Life insurance contracts		1		—		1		—
	$	2	$	1	$	1	$	—

(a) There were no transfers of instruments between level 1 and level 2 valuation categories during the nine months ended September 30, 2013.

(b) The fair value of derivative liabilities reflect netting by counterparty before the impact of collateral.

(c) Represents natural gas swaps purchased by DPL as part of a natural gas hedging program approved by the DPSC.

	Fair Value Measurements at December 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
ASSETS
Executive deferred compensation plan assets
Money market funds	$	2	$	2	$	—	$	—
Life insurance contracts		1		—		—		1
	$	3	$	2	$	—	$	1
LIABILITIES
Derivative instruments (b)
Natural gas (c)	$	4	$	—	$	—	$	4
	$	4	$	—	$	—	$	4

(a) There were no transfers of instruments between level 1 and level 2 valuation categories during the year ended December 31, 2012.

(b) The fair value of derivative liabilities reflect netting by counterparty before the impact of collateral.

(c) Represents natural gas options purchased by DPL as part of a natural gas hedging program approved by the DPSC.

Summary of Primary Unobservable Inputs Used to Determine Fair Value of Level 3 Instruments and Range of Values that Could be Used for those Inputs

The table below summarizes the primary unobservable input used to determine the fair value of DPL’s level 3 instruments and the range of values that could be used for the input as of December 31, 2012:

Type of Instrument	Fair Value at December 31, 2012			Valuation Technique	Unobservable Input	Range
	(millions of dollars)
Natural gas options	$	(4	)	Option model	Volatility factor	1.57 – 2.00

Reconciliations of Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Reconciliations of the beginning and ending balances of DPL’s fair value measurements using significant unobservable inputs (level 3) for the nine months ended September 30, 2013 and 2012, are shown below:

	Nine Months Ended September 30, 2013
	Natural Gas			Life Insurance Contracts
	(millions of dollars)
Beginning balance as of January 1	$	(4	)	$	1
Total gains (losses) (realized and unrealized):
Included in income		—			—
Included in accumulated other comprehensive loss		—			—
Included in regulatory assets		—			—
Purchases		—			—
Issuances		—			—
Settlements		4			—
Transfers in (out) of level 3		—			—
Ending balance as of September 30	$	—		$	1

	Nine Months Ended September 30, 2012
	Natural Gas			Life Insurance Contracts
	(millions of dollars)
Beginning balance as of January 1	$	(15	)	$	1
Total gains (losses) (realized and unrealized):
Included in income		—			—
Included in accumulated other comprehensive loss		—			—
Included in regulatory assets		(2	)		—
Purchases		—			—
Issuances		—			—
Settlements		10			—
Transfers in (out) of level 3		—			—
Ending balance as of September 30	$	(7	)	$	1

Fair Value of Financial Liabilities Measured on Recurring Basis

The fair value of Long-term debt categorized as level 3 is based on a discounted cash flow methodology using observable inputs, such as the U.S. Treasury yield, and unobservable inputs, such as credit spreads, because quoted prices for the debt or similar debt in active markets were insufficient.

	Fair Value Measurements at September 30, 2013
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
LIABILITIES
Debt instruments
Long-term debt (a)	$	928	$	—	$	817	$	111
	$	928	$	—	$	817	$	111

(a) The carrying amount for Long-term debt is $917 million as of September 30, 2013.

	Fair Value Measurements at December 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
LIABILITIES
Debt instruments
Long-term debt (a)	$	990	$	—	$	877	$	113
	$	990	$	—	$	877	$	113

(a) The carrying amount for Long-term debt is $917 million as of December 31, 2012.

Atlantic City Electric Co [Member]

Fair Value of Financial Assets and Liabilities Measured on Recurring Basis

The following tables set forth, by level within the fair value hierarchy, ACE’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2013 and December 31, 2012. As required by the guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. ACE’s assessment of the significance of a particular input to the fair value measurement requires the exercise of judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

	Fair Value Measurements at September 30, 2013
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
ASSETS
Derivative instruments (b)
Capacity (c)	$	4	$	—	$	—	$	4
Cash equivalents
Treasury fund		27		27		—		—
	$	31	$	27	$	—	$	4
LIABILITIES
Derivative instruments (b)
Capacity (c)	$	14	$	—	$	—	$	14
	$	14	$	—	$	—	$	14

(a) There were no transfers of instruments between level 1 and level 2 valuation categories during the nine months ended September 30, 2013.

(b) The fair values of derivative assets and liabilities reflect netting by counterparty before the impact of collateral.

(c) Represents derivatives associated with the ACE SOCAs.

	Fair Value Measurements at December 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
ASSETS
Derivative instruments (b)
Capacity (c)	$	8	$	—	$	—	$	8
Cash equivalents
Treasury fund		27		27		—		—
	$	35	$	27	$	—	$	8
LIABILITIES
Derivative instruments (b)
Capacity (c)	$	11	$	—	$	—	$	11
Executive deferred compensation plan liabilities
Life insurance contracts		1		—		1		—
	$	12	$	—	$	1	$	11

(a) There were no transfers of instruments between level 1 and level 2 valuation categories during the year ended December 31, 2012.

(b) The fair values of derivative assets and liabilities reflect netting by counterparty before the impact of collateral.

(c) Represents derivatives associated with the ACE SOCAs.

Summary of Primary Unobservable Inputs Used to Determine Fair Value of Level 3 Instruments and Range of Values that Could be Used for those Inputs

The tables below summarize the primary unobservable inputs used to determine the fair value of ACE’s level 3 instruments and the range of values that could be used for those inputs as of September 30, 2013 and December 31, 2012:

Type of Instrument	Fair Value at September 30, 2013			Valuation Technique	Unobservable Input	Range
	(millions of dollars)
Capacity contracts, net	$	(10	)	Discounted cash flow	Discount rate	5% - 9%

Type of Instrument	Fair Value at December 31, 2012			Valuation Technique	Unobservable Input	Range
	(millions of dollars)
Capacity contracts, net	$	(3	)	Discounted cash flow	Discount rate	5% - 9%

Reconciliations of Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

A reconciliation of the beginning and ending balances of ACE’s fair value measurements using significant unobservable inputs (level 3) for the nine months ended September 30, 2013 and 2012 is shown below:

	Capacity
	Nine Months Ended September 30,
	2013			2012
	(millions of dollars)
Beginning balance as of January 1	$	(3	)	$	—
Total gains (losses) (realized and unrealized):
Included in income		—			—
Included in accumulated other comprehensive loss		—			—
Included in regulatory liabilities and regulatory assets		(7	)		(1	)
Purchases		—			—
Issuances		—			—
Settlements		—			—
Transfers in (out) of level 3		—			—
Ending balance as of September 30	$	(10	)	$	(1	)

Fair Value of Financial Liabilities Measured on Recurring Basis

The fair value of Long-term debt categorized as level 3 is based on a discounted cash flow methodology using observable inputs, such as the U.S. Treasury yield, and unobservable inputs, such as credit spreads, because quoted prices for the debt or similar debt in active markets were insufficient.

	Fair Value Measurements at September 30, 2013
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
LIABILITIES
Debt instruments
Long-term debt (a)	$	978	$	—	$	760	$	218
Transition Bonds issued by ACE Funding (b)		299		—		299		—
	$	1,277	$	—	$	1,059	$	218

(a) The carrying amount for Long-term debt is $860 million as of September 30, 2013.

(b) The carrying amount for Transition Bonds issued by ACE Funding, including amounts due within one year, is $267 million as of September 30, 2013.

	Fair Value Measurements at December 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
LIABILITIES
Debt instruments
Long-term debt (a)	$	1,016	$	—	$	884	$	132
Transition Bonds issued by ACE Funding (b)		341		—		341		—
	$	1,357	$	—	$	1,225	$	132

(a) The carrying amount for Long-term debt is $829 million as of December 31, 2012.

(b) The carrying amount for Transition Bonds issued by ACE Funding, including amounts due within one year, is $295 million as of December 31, 2012.

The carrying amounts of all other financial instruments in the accompanying consolidated financial statements approximate fair value.

Potomac Electric Power Co [Member]

Fair Value of Financial Assets and Liabilities Measured on Recurring Basis

The following tables set forth, by level within the fair value hierarchy, Pepco’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2013 and December 31, 2012. As required by the guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Pepco’s assessment of the significance of a particular input to the fair value measurement requires the exercise of judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

	Fair Value Measurements at September 30, 2013
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
ASSETS
Cash equivalents
Treasury fund	$	3	$	3	$	—	$	—
Executive deferred compensation plan assets
Money market funds		15		15		—		—
Life insurance contracts		57		—		40		17
	$	75	$	18	$	40	$	17
LIABILITIES
Executive deferred compensation plan liabilities
Life insurance contracts	$	8	$	—	$	8	$	—
	$	8	$	—	$	8	$	—

(a) There were no transfers of instruments between level 1 and level 2 valuation categories during the nine months ended September 30, 2013.

	Fair Value Measurements at December 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
ASSETS
Executive deferred compensation plan assets
Money market funds	$	15	$	15	$	—	$	—
Life insurance contracts		56		—		38		18
	$	71	$	15	$	38	$	18
LIABILITIES
Executive deferred compensation plan liabilities
Life insurance contracts	$	9	$	—	$	9	$	—
	$	9	$	—	$	9	$	—

(a) There were no transfers of instruments between level 1 and level 2 valuation categories during the year ended December 31, 2012.

Reconciliations of Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Reconciliations of the beginning and ending balances of Pepco’s fair value measurements using significant unobservable inputs (level 3) for the nine months ended September 30, 2013 and 2012, are shown below:

	Life Insurance Contracts
	Nine Months Ended September 30,
	2013			2012
	(millions of dollars)
Beginning balance as of January 1	$	18		$	17
Total gains (losses) (realized and unrealized):
Included in income		3			3
Included in accumulated other comprehensive loss		—			—
Purchases		—			—
Issuances		(3	)		(3	)
Settlements		(1	)		—
Transfers in (out) of level 3		—			—
Ending balance as of September 30	$	17		$	17

Gains on Level 3 Instruments Included in Income

The breakdown of realized and unrealized gains on level 3 instruments included in income as a component of Other Operation and Maintenance expense for the periods below were as follows:

	Nine Months Ended September 30,
	2013		2012
	(millions of dollars)
Total gains included in income for the period	$	3	$	3
Change in unrealized gains relating to assets still held at reporting date	$	3	$	3

Fair Value of Financial Liabilities Measured on Recurring Basis

The fair value of Long-term debt categorized as level 2 is based on a blend of quoted prices for the debt and quoted prices for similar debt on the measurement date. The blend places more weight on current pricing information when determining the final fair value measurement. The fair value information is provided by brokers and Pepco reviews the methodologies and results.

	Fair Value Measurements at September 30, 2013
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
LIABILITIES
Debt instruments
Long-term debt (a)	$	2,237	$	—	$	2,237	$	—
	$	2,237	$	—	$	2,237	$	—

(a) The carrying amount for Long-term debt is $1,950 million as of September 30, 2013.

	Fair Value Measurements at December 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	(millions of dollars)
LIABILITIES
Debt instruments
Long-term debt (b)	$	2,160	$	—	$	2,160	$	—
	$	2,160	$	—	$	2,160	$	—

(a) Certain debt instruments that were categorized as level 1 at December 31, 2012, have been reclassified as level 2 to conform to the current period presentation.

(b) The carrying amount for Long-term debt is $1,701 million as of December 31, 2012.