Pension and Other Postretirement Benefits (Tables)

12 Months Ended

Dec. 31, 2013

Schedule of Changes in Benefit Obligations and Plan Assets

The following table shows changes in the benefit obligation and plan assets for the years ended December 31, 2013 and 2012:


	Pension Benefits						Other Postretirement Benefits
	2013			2012			2013			2012
	*(millions of dollars)*
Change in Benefit Obligation
Benefit obligation as of January 1	$	2,494		$	2,124		$	775		$	750
Service cost		53			35			8			7
Interest cost		100			107			29			35
Amendments		3			—			(124	)		—
Actuarial (gain) loss		(277	)		341			(71	)		24
Benefits paid (a)		(135	)		(113	)		(43	)		(41	)

Benefit obligation as of December 31	$	2,238		$	2,494		$	574		$	775

Change in Plan Assets
Fair value of plan assets as of January 1	$	2,039		$	1,694		$	321		$	281
Actual return on plan assets		86			252			56			38
Company and participant contributions		126			206			34			43
Benefits paid (a)		(135	)		(113	)		(43	)		(41	)

Fair value of plan assets as of December 31	$	2,116		$	2,039		$	368		$	321

Funded Status at end of year (plan assets less plan obligations)	$	(122	)	$	(455	)	$	(206	)	$	(454	)

(a)	Other Postretirement Benefits paid is net of Medicare Part D subsidy receipts of zero and $4 million in 2013 and 2012, respectively.

Amounts Recognized in Consolidated Balance Sheets

The following table provides the amounts recorded in PHI’s consolidated balance sheets as of December 31, 2013 and 2012:


	Pension Benefits						Other Postretirement Benefits
	2013			2012			2013			2012
	*(millions of dollars)*
Regulatory asset	$	664		$	934		$	3		$	237
Current liabilities		(6	)		(6	)		—			—
Pension benefit obligation		(116	)		(449	)		—			—
Other postretirement benefit obligations		—			—			(206	)		(454	)
Deferred income tax liabilities, net		(217	)		(216	)		82			88
Accumulated other comprehensive loss, net of tax		25			32			—			—

Net amount recorded	$	350		$	295		$	(121	)	$	(129	)

Schedule of Amounts Included in AOCL and Regulatory Assets

Amounts included in AOCL (pre-tax) and Regulatory assets at December 31, 2013 and 2012, consist of:


	Pension Benefits				Other Postretirement Benefits
	2013		2012		2013			2012
	*(millions of dollars)*
Unrecognized net actuarial loss	$	694	$	979	$	117		$	238
Unamortized prior service cost (credit)		10		9		(114	)		(1	)

Total	$	704	$	988	$	3		$	237

Accumulated other comprehensive loss ($25 million and $32 million, net of tax, at December 31, 2013 and 2012, respectively)	$	40	$	54	$	—		$	—
Regulatory assets		664		934		3			237

Total	$	704	$	988	$	3		$	237

Summary of Changes in Plan Assets and Benefit Obligations Recognized in AOCL and Regulatory Assets

The table below provides the changes in plan assets and benefit obligations recognized in AOCL and Regulatory assets for the years ended December 31, 2013, 2012 and 2011.


	Pension Benefits									Other Postretirement Benefits
	2013			2012			2011			2013			2012			2011
	*(millions of dollars)*
Amounts amortized during the year:
Amortization of prior service (cost) credit	$	(2	)	$	(1	)	$	—		$	11		$	4		$	5
Amortization of net actuarial (loss)		(67	)		(64	)		(47	)		(12	)		(14	)		(14	)
Amounts arising during the year:
Current year prior service cost (credit)		3			—			19			(124	)		—			6
Current year actuarial (gain) loss		(218	)		220			177			(109	)		4			53

Total recognized in AOCL and Regulatory assets for the year ended December 31	$	(284	)	$	155		$	149		$	(234	)	$	(6	)	$	50

Components of Net Periodic Benefit Cost

The table below provides the components of net periodic benefit costs recognized for the years ended December 31, 2013, 2012 and 2011:


	Pension Benefits									Other Postretirement Benefits
	2013			2012			2011			2013			2012			2011
	*(millions of dollars)*
Service cost	$	53		$	35		$	35		$	8		$	7		$	5
Interest cost		100			107			107			29			35			37
Expected return on plan assets		(145	)		(132	)		(128	)		(20	)		(18	)		(19	)
Amortization of prior service cost (credit)		2			1			—			(11	)		(4	)		(5	)
Amortization of net actuarial loss		67			64			47			12			14			14
Termination benefits		—			—			—			—			1			1

Net periodic benefit cost	$	77		$	75		$	61		$	18		$	35		$	33

Split of Combined Pension and Other Postretirement Net Periodic Benefit Costs

The table below provides the split of the combined pension and other postretirement net periodic benefit costs among subsidiaries for the years ended December 31, 2013, 2012 and 2011:


	2013		2012		2011
	*(millions of dollars)*
Pepco	$	34	$	39	$	43
DPL		18		23		23
ACE		17		24		21
Other subsidiaries		26		24		7

Total	$	95	$	110	$	94

Weighted Average Assumptions Used to Determine Benefit Obligations

The following weighted average assumptions were used to determine the benefit obligations at December 31:


	Pension Benefits						Other Postretirement Benefits
	2013			2012			2013			2012
Discount rate		5.05	%		4.15	%		5.00	%		4.10	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%		5.00	%
Health care cost trend rate assumed for current year – pre 65		—			—			7.00	%		7.50	%
Health care cost trend rate assumed for current year – post 65		—			—			5.60	%		7.50	%
Rate to which the cost trend rate is assumed to decline for all eligible retirees (the ultimate trend rate)		—			—			5.00	%		5.00	%
Year that the cost trend rate reaches the ultimate trend rate		—			—			2020			2018

Summary of Effect of One Percent Change in Assumed Health Care Cost

A one-percentage-point change in assumed health care cost trend rates would have the following effects, in millions of dollars:


	1-Percentage- Point Increase		1-Percentage- Point Decrease
Increase (decrease) in total service and interest cost	$	1	$	(1	)
Increase (decrease) in postretirement benefit obligation	$	17	$	(19	)

Weighted Average Assumptions Used to Determine Net Periodic Benefit Costs

The following weighted average assumptions were used to determine the net periodic benefit cost for the years ended December 31:


	Pension Benefits									Other Postretirement Benefits
	2013			2012			2011			2013			2012			2011
Discount rate		4.15	%		5.00	%		5.65	%		4.10%/4.95	% (a)		4.90	%		5.60	%
Expected long-term return on plan assets		7.00	%		7.25	%		7.75	%		7.00	%		7.25	%		7.75	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%
Health care cost trend rate		—			—			—			7.50	%		8.00	%		8.00	%

(a)	The discount rate was updated for remeasurement to 4.95% on July 1, 2013.

Schedule of Fair Value of Plan Assets

The following tables present the fair values of PHI’s pension and other postretirement benefit plan assets by asset category within the fair value hierarchy levels, as of December 31, 2013 and 2012:


	Fair Value Measurements at December 31, 2013
	*(millions of dollars)*
Asset Category	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Pension Plan Assets:
Equity
Domestic (a)	$	432	$	185	$	213	$	34
International (b)		217		215		1		1
Fixed Income (c)		1,309		—		1,298		11
Other
Private Equity		53		—		—		53
Real Estate		61		—		—		61
Cash Equivalents (d)		44		44		—		—

Pension Plan Assets Subtotal		2,116		444		1,512		160

Other Postretirement Plan Assets:
Equity (e)		233		204		29		—
Fixed Income (f)		113		113		—		—
Cash Equivalents		22		22		—		—

Postretirement Plan Assets Subtotal		368		339		29		—

Total Pension and Other Postretirement Assets	$	2,484	$	783	$	1,541	$	160

(a)	Predominantly includes domestic common stock and commingled funds.

(b)	Predominantly includes foreign common and preferred stock and warrants.

(c)	Predominantly includes corporate bonds, government bonds, municipal/provincial bonds, collateralized mortgage obligations and commingled funds.

(d)	Predominantly includes cash investment in short-term investment funds.

(e)	Includes domestic and international commingled funds.

(f)	Includes fixed income commingled funds.


	Fair Value Measurements at December 31, 2012
	*(millions of dollars)*
Asset Category	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Pension Plan Assets:
Equity
Domestic (a)	$	367	$	169	$	170	$	28
International (b)		254		250		1		3
Fixed Income (c)		1,256		—		1,243		13
Other
Private Equity		56		—		—		56
Real Estate		74		—		—		74
Cash Equivalents (d)		32		32		—		—

Pension Plan Assets Subtotal		2,039		451		1,414		174

Other Postretirement Plan Assets:
Equity (e)		199		171		28		—
Fixed Income (f)		115		115		—		—
Cash Equivalents		7		7		—		—

Postretirement Plan Assets Subtotal		321		293		28		—

Total Pension and Other Postretirement Plan Assets	$	2,360	$	744	$	1,442	$	174

(a)	Predominantly includes domestic common stock and commingled funds.

(b)	Predominantly includes foreign common and preferred stock and warrants.

(c)	Predominantly includes corporate bonds, government bonds, municipal/provincial bonds, collateralized mortgage obligations and commingled funds.

(d)	Predominantly includes cash investment in short-term investment funds.

(e)	Includes domestic and international commingled funds.

(f)	Includes fixed income commingled funds.

Reconciliation of Fair Value Measurements Using Significant Unobservable Inputs

Reconciliations of the beginning and ending balances of PHI’s fair value measurements using significant unobservable inputs (level 3) for investments in the pension plan for the years ended December 31, 2013 and 2012 are shown below:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	*(millions of dollars)*
	Equity			Fixed Income			Private Equity			Real Estate			Total Level 3
Balance as of January 1, 2013	$	31		$	13		$	56		$	74		$	174
Transfer in (out) of Level 3		—			(3	)		—			—			(3	)
Purchases		—			—			2			2			4
Sales		(5	)		(1	)		—			(13	)		(19	)
Settlements		—			2			(4	)		(10	)		(12	)
Unrealized gain/(loss)		7			—			(7	)		7			7
Realized gain		2			—			6			1			9

Balance as of December 31, 2013	$	35		$	11		$	53		$	61		$	160


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	*(millions of dollars)*
	Equity			Fixed Income			Private Equity			Real Estate			Total Level 3
Balance as of January 1, 2012	$	27		$	9		$	64		$	65		$	165
Transfer in (out) of Level 3		—			2			—			—			2
Purchases		4			2			4			5			15
Sales		(4	)		(1	)		—			—			(5	)
Settlements		(1	)		1			(8	)		(5	)		(13	)
Unrealized gain/(loss)		4			—			(11	)		8			1
Realized gain		1			—			7			1			9

Balance as of December 31, 2012	$	31		$	13		$	56		$	74		$	174

Schedule of Estimated Benefit Payments

Estimated future benefit payments to participants in PHI’s pension and other postretirement benefit plans, which reflect expected future service as appropriate, are as follows:


Years	Pension Benefits		Other Postretirement Benefits
	*(millions of dollars)*
2014	$	159	$	38
2015		136		39
2016		139		39
2017		142		40
2018		147		40
2019 through 2023	$	795	$	201

Pension Benefits [Member]

Summary of Plan Asset Allocations

The PHI Retirement Plan asset allocations at December 31, 2013 and 2012, by asset category, were as follows:


Asset Category	Plan Assets at December 31,						Target Plan Asset Allocation
	2013			2012			2013			2012
Equity		31	%		30	%		28	%		32	%
Fixed Income		62	%		62	%		66	%		62	%
Other (real estate, private equity)		7	%		8	%		6	%		6	%

Total		100	%		100	%		100	%		100	%