Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2013

Income (Loss) from Discontinued Operations, Net of Income Taxes

PHI’s income (loss) from discontinued operations, net of income taxes, is comprised of the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013			2012
	(millions of dollars)
Cross-border energy lease investments	$	7	$	17	$	(327	)	$	33
Pepco Energy Services’ retail electric and natural gas supply businesses		1		8		5			25
Income (loss) from discontinued operations, net of income taxes	$	8	$	25	$	(322	)	$	58

Income Recognized from Cross-Border Energy Lease Investments

The operating results for the cross-border energy lease investments are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013			2012
	(millions of dollars)
Operating revenue from PHI’s cross-border energy lease investments	$	—	$	13	$	7		$	39
Non-cash charge to reduce carrying value of PHI’s cross-border energy lease investments		—		—		(373	)		—
Total operating revenue	$	—	$	13	$	(366	)	$	39
Income (loss) from operations of discontinued operations, net of income taxes (a)	$	—	$	8	$	(325	)	$	24
Net gains (losses) associated with the early termination of the cross-border energy lease investments, net of income taxes (b)		7		9		(2	)		9
Income (loss) from discontinued operations, net of income taxes	$	7	$	17	$	(327	)	$	33

(a) Includes income tax expense (benefit) of approximately zero and $1 million for the three months ended September 30, 2013 and 2012, respectively, and approximately $(44) million and $3 million for the nine months ended September 30, 2013 and 2012, respectively.

(b) Includes income tax expense (benefit) of approximately $4 million and $30 million for the three months ended September 30, 2013 and 2012, respectively, and approximately $(1) million and $30 million for the nine months ended September 30, 2013 and 2012, respectively.

Cross-Border Energy Lease Investments

As of September 30, 2013 and December 31, 2012, the assets held for disposition and liabilities associated with assets held for disposition related to the cross-border energy lease investments are:

	September 30, 2013		December 31, 2012
	(millions of dollars)
Scheduled lease payments to PHI, net of non-recourse debt	$	—	$	1,852
Less: Unearned and deferred income		—		(615	)
Assets held for disposition	$	—	$	1,237
Liabilities associated with assets held for disposition	$	1	$	1

Net Investment in Leases by Published Credit Ratings

The table below shows PHI’s net investment in these leases by the published credit ratings of the lessees as of September 30, 2013 and December 31, 2012:

Lessee Rating (a)	September 30, 2013		December 31, 2012
	(millions of dollars)
Rated Entities
AA/Aa and above	$	—	$	766
A		—		471
Total	$	—	$	1,237

(a) Excludes the credit ratings associated with collateral posted by the lessees in these transactions.

Discontinued Operations [Member]

Operating Results for Retail Natural Gas Supply Business

The operating results for the retail electric and natural gas supply businesses of Pepco Energy Services are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(millions of dollars)
Operating revenue	$	—	$	76	$	84	$	346
Income from operations of discontinued operations, net of income taxes	$	1	$	8	$	4	$	25
Net gains associated with the accelerated disposition of retail electric and natural gas contracts, net of income taxes		—		—		1		—
Income from discontinued operations, net of income taxes (a)	$	1	$	8	$	5	$	25

(a) Includes income tax expense of approximately $1 million and $5 million for the three months ended September 30, 2013 and 2012, respectively, and approximately $3 million and $17 million for the nine months ended September 30, 2013 and 2012, respectively.

Schedule of Derivative Gain (Loss) Amounts Recognized in Income

For the three and nine months ended September 30, 2013 and 2012, the amount of the pre-tax derivative gain (loss) for the retail electric and natural gas supply businesses of Pepco Energy Services recognized in income is provided in the table below:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(millions of dollars)
Reclassification of mark-to-market to realized on settlement of contracts	$	—	$	5	$	10	$	22
Unrealized mark-to-market gain (loss)		—		3		—		(2	)
Total net gain	$	—	$	8	$	10	$	20