Income Taxes (Tables)

Provision for Consolidated Income Taxes – Continuing Operations


	For the Year Ended December 31,
	2013			2012			2011
	*(millions of dollars)*
Current Tax (Benefit) Expense
Federal	$	(128	)	$	(166	)	$	(72	)
State and local		(9	)		(40	)		12

Total Current Tax (Benefit) Expense		(137	)		(206	)		(60	)

Deferred Tax Expense (Benefit)
Federal		393			254			163
State and local		65			58			15
Investment tax credit amortization		(2	)		(3	)		(4	)

Total Deferred Tax Expense		456			309			174

Total Consolidated Income Tax Expense Related to Continuing Operations	$	319		$	103		$	114

Reconciliation of Consolidated Income Tax Expense – Continuing Operations


	For the Year Ended December 31,
	2013					2012					2011
	*(millions of dollars)*
Income tax at Federal statutory rate	$	150		35.0	%	$	112		35.0	%	$	118		35.0	%
Increases (decreases) resulting from:
State income taxes, net of Federal effect		27		6.3	%		19		6.0	%		23		6.7	%
Asset removal costs		(14	)	(3.3	)%		(11	)	(3.4	)%		(7	)	(2.1	)%
Change in estimates and interest related to uncertain and effectively settled tax positions		56		13.1	%		(8	)	(2.6	)%		(5	)	(1.6	)%
Establishment of valuation allowances related to deferred tax assets		101		23.5	%		—		—			—		—
Other, net		(1	)	(0.2	)%		(9	)	(2.9	)%		(15	)	(4.1	)%

Consolidated Income Tax Expense Related to Continuing Operations	$	319		74.4	%	$	103		32.1	%	$	114		33.9	%

Components of Consolidated Deferred Tax Liabilities (Assets)


	At December 31,
	2013			2012
	*(millions of dollars)*
Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	2,628		$	2,299
Deferred electric service and electric restructuring liabilities		91			110
Cross-border energy lease investments		(6	)		756
Federal and state net operating losses		(350	)		(394	)
Valuation allowances on state net operating losses		21			21
Pension and other postretirement benefits		135			128
Deferred taxes on amounts to be collected through future rates		75			58
Other (a)		285			204	(b)

Total Deferred Tax Liabilities, net		2,879			3,182	(b)
Deferred tax assets included in Current Assets		51			28
Deferred tax liabilities included in Other Current Liabilities		(2	)		(2	)

Total Consolidated Deferred Tax Liabilities, net non-current	$	2,928		$	3,208	(b)

(a)

PCI established valuation allowances against certain of these other deferred taxes totaling $101 million in the first quarter of 2013. Management determined during the fourth quarter of 2013 to abandon the further pursuit of the related deferred tax assets and, accordingly, these assets were charged off against the valuation allowances.

(b)

The amounts for Other, Total Deferred Tax Liabilities, net and Total Consolidated Deferred Tax Liabilities, net non-current, are presented after the effect of the revision to prior period financial statements discussed in Note (2), “ Significant Accounting Policies – Revision to Prior Period Financial Statements.”

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2013			2012			2011
	*(millions of dollars)*
Balance as of January 1,	$	200		$	357		$	395
Tax positions related to current year:
Additions		3			1			2
Reductions		—			—			—
Tax positions related to prior years:
Additions		646	(a)		79			20
Reductions		(12	)		(235	)(b)		(57	)
Settlements		(6	)		(2	)		(3	)

Balance as of December 31,	$	831		$	200		$	357

(a)	These additions of unrecognized tax benefits in 2013 primarily relate to the cross-border energy lease investments of PCI.

(b)	These reductions of unrecognized tax benefits in 2012 primarily relate to a resolution reached with the IRS for determining deductible mixed service costs for additions to property, plant and equipment.


	2013		2012		2011
	*(millions of dollars)*
Gross Receipts/Delivery	$	133	$	135	$	145
Property		77		75		71
County Fuel and Energy		153		160		170
Environmental, Use and Other		65		62		65

Total	$	428	$	432	$	451

Potomac Electric Power Co [Member]

Provision for Income Taxes


	For the Year Ended December 31,
	2013			2012			2011
	*(millions of dollars)*
Current Tax Benefit
Federal	$	(39	)	$	(84	)	$	(19	)
State and local		(1	)		(27	)		(16	)

Total Current Tax Benefit		(40	)		(111	)		(35	)

Deferred Tax Expense (Benefit)
Federal		96			127			54
State and local		24			33			19
Investment tax credit amortization		(1	)		(1	)		(2	)

Total Deferred Tax Expense		119			159			71

Total Income Tax Expense	$	79		$	48		$	36

Reconciliation of Income Tax Expense


	For the Year Ended December 31,
	2013					2012					2011
	*(millions of dollars)*
Income tax at Federal statutory rate	$	80		35.0	%	$	61		35.0	%	$	47		35.0	%
Increases (decreases) resulting from:
State income taxes, net of Federal effect		13		5.7	%		10		5.7	%		8		5.5	%
Asset removal costs		(14	)	(6.1	)%		(11	)	(6.3	)%		(7	)	(5.0	)%
Change in estimates and interest related to uncertain and effectively settled tax positions		(3	)	(1.3	)%		(11	)	(6.3	)%		(9	)	(6.6	)%
Other, net		3		1.2	%		(1	)	(0.5	)%		(3	)	(2.2	)%

Income Tax Expense	$	79		34.5	%	$	48		27.6	%	$	36		26.7	%

Components of Deferred Income Tax Liabilities (Assets)


	At December 31,
	2013			2012
	*(millions of dollars)*
Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	1,240		$	1,105
Pension and other postretirement benefits		105			111
Deferred taxes on amounts to be collected through future rates		43			28
Federal and state net operating losses		(169	)		(174	)
Other		145			140

Total Deferred Tax Liabilities, net		1,364			1,210
Deferred tax assets included in Current Assets		48			9

Total Deferred Tax Liabilities, net non-current	$	1,412		$	1,219

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2013			2012			2011
	*(millions of dollars)*
Balance as of January 1	$	91		$	173		$	190
Tax positions related to current year:
Additions		1			—			—
Reductions		—			—			—
Tax positions related to prior years:
Additions		12			60			12
Reductions		(3	)		(142	)(a)		(26	)
Settlements		—			—			(3	)

Balance as of December 31	$	101		$	91		$	173

(a)	These reductions of unrecognized tax benefits in 2012 primarily relate to a resolution reached with the IRS for determining deductible mixed service costs for additions to property, plant and equipment.

Taxes other than income taxes for each year are shown below. These amounts are recoverable through rates.


	2013		2012		2011
	*(millions of dollars)*
Gross Receipts/Delivery	$	108	$	106	$	109
Property		45		46		44
County Fuel and Energy		153		160		170
Environmental, Use and Other		62		60		59

Total	$	368	$	372	$	382

Delmarva Power & Light Co/De [Member]

Provision for Income Taxes


	For the Year Ended December 31,
	2013			2012			2011
	*(millions of dollars)*
Current Tax (Benefit) Expense
Federal	$	(8	)	$	(9	)	$	(22	)
State and local		—			(1	)		8

Total Current Tax Benefit		(8	)		(10	)		(14	)

Deferred Tax Expense (Benefit)
Federal		53			44			53
State and local		12			11			4
Investment tax credit amortization		(1	)		(1	)		(1	)

Total Deferred Tax Expense		64			54			56

Total Income Tax Expense	$	56		$	44		$	42

Reconciliation of Income Tax Expense


	For the Year Ended December 31,
	2013					2012					2011
	*(millions of dollars)*
Income tax at Federal statutory rate	$	51		35.0	%	$	41		35.0	%	$	40		35.0	%
Increases (decreases) resulting from:
State income taxes, net of Federal effect		8		5.5	%		6		5.1	%		6		5.3	%
Change in estimates and interest related to uncertain and effectively settled tax positions		—		—			—		—			(3	)	(2.7	)%
Other, net		(3	)	(1.9	)%		(3	)	(2.5	)%		(1	)	(0.4	)%

Income Tax Expense	$	56		38.6	%	$	44		37.6	%	$	42		37.2	%

Components of Deferred Income Tax Liabilities (Assets)


	As of December 31,
	2013			2012
	*(millions of dollars)*
Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	712		$	623
Deferred taxes on amounts to be collected through future rates		16			15
Federal and state net operating losses		(125	)		(80	)
Pension and other postretirement benefits		80			85
Electric restructuring liabilities		(5	)		(5	)
Other		80			49

Total Deferred Tax Liabilities, net		758			687
Deferred tax assets included in Current Assets		59			11
Deferred tax liabilities included in Other Current Liabilities		(1	)		(1	)

Total Deferred Tax Liabilities, net non-current	$	816		$	697

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2013		2012			2011
	*(millions of dollars)*
Balance as of January 1	$	9	$	35		$	40
Tax positions related to current year:
Additions		—		—			—
Reductions		—		—			—
Tax positions related to prior years:
Additions		—		—			7
Reductions		—		(26	)(a)		(12	)
Settlements		—		—			—

Balance as of December 31	$	9	$	9		$	35

(a)	These reductions of unrecognized tax benefits in 2012 primarily relate to a resolution reached with the IRS for determining deductible mixed service costs for additions to property, plant and equipment.

These amounts are recoverable through rates.


	2013		2012		2011
	*(millions of dollars)*
Gross Receipts/Delivery	$	15	$	14	$	15
Property		24		21		19
Environmental, Use and Other		1		1		3

Total	$	40	$	36	$	37

Atlantic City Electric Co [Member]

Provision for Consolidated Income Taxes


	For the Year Ended December 31,
	2013			2012			2011
	*(millions of dollars)*
Current Tax (Benefit) Expense
Federal	$	(23	)	$	(31	)	$	(9	)
State and local		(10	)		(12	)		1

Total Current Tax Benefit		(33	)		(43	)		(8	)

Deferred Tax Expense (Benefit)
Federal		28			46			35
State and local		25			16			7
Investment tax credit amortization		(1	)		(1	)		(1	)

Total Deferred Tax Expense		52			61			41

Total Consolidated Income Tax Expense	$	19		$	18		$	33

Reconciliation of Consolidated Income Tax Expense


	For the Year Ended December 31,
	2013					2012					2011
	*(millions of dollars)*
Income tax at Federal statutory rate	$	24		35.0	%	$	19		35.0	%	$	25		35.0	%
Increases (decreases) resulting from:
State income taxes, net of Federal effect		5		7.2	%		3		5.7	%		4		6.0	%
Change in estimates and interest related to uncertain and effectively settled tax positions		(9	)	(13.0	)%		(1	)	(1.9	)%		5		6.9	%
Plant basis adjustments		(2	)	(2.9	)%		(1	)	(1.9	)%		—		—
Investment tax credit amortization		(1	)	(1.4	)%		(1	)	(1.9	)%		(1	)	(1.3	)%
Other, net		2		2.6	%		(1	)	(1.0	)%		—		(0.8	)%

Consolidated Income Tax Expense	$	19		27.5	%	$	18		34.0	%	$	33		45.8	%

Components of Consolidated Deferred Income Tax Liabilities (Assets)


	As of December 31,
	2013			2012
	*(millions of dollars)*
Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	627		$	538
Deferred taxes on amounts to be collected through future rates		16			15
Payment for termination of purchased power contracts with NUGs		43			47
Deferred electric service and electric restructuring liabilities		96			116
Pension and other postretirement benefits		29			34
Purchased energy		2			3
Federal and state net operating loss		(49	)		(54	)
Other		55			58

Total Deferred Tax Liabilities, net		819			757
Deferred tax assets included in Current Assets		15			10
Deferred tax liabilities included in Other Current Liabilities		(1	)		(1	)

Total Consolidated Deferred Tax Liabilities, net non-current	$	833		$	766

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2013			2012			2011
	*(millions of dollars)*
Balance as of January 1	$	17		$	79		$	83
Tax positions related to current year:
Additions		2			1			2
Reductions		—			—			—
Tax positions related to prior years:
Additions		1			8			4
Reductions		(5	)		(69	)(a)		(10	)
Settlements		(6	)		(2	)		—

Balance as of December 31	$	9		$	17		$	79

(a)	These reductions of unrecognized tax benefits in 2012 primarily relate to a resolution reached with the IRS for determining deductible mixed service costs for additions to property, plant and equipment.

These amounts are recoverable through rates.


	2013		2012		2011
	*(millions of dollars)*
Gross Receipts/Delivery	$	10	$	14	$	20
Property		3		3		3
Environmental, Use and Other		1		1		2

Total	$	14	$	18	$	25