Fair Value Disclosures (Tables)

6 Months Ended

Jun. 30, 2014

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 June 30, 2014 and December 31, 2013. 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 June 30, 2014
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
Preferred Stock	$	3	$	—	$	—	$	3
Cash equivalents and restricted cash equivalents
Treasury funds		200		200		—		—
Executive deferred compensation plan assets
Money market funds		15		15		—		—
Life insurance contracts		67		—		47		20

	$	285	$	215	$	47	$	23

LIABILITIES

Executive deferred compensation plan liabilities
Life insurance contracts	$	30	$	—	$	30	$	—

	$	30	$	—	$	30	$	—

(a)	There were no transfers of instruments between level 1 and level 2 valuation categories during the six months ended June 30, 2014.


	Fair Value Measurements at December 31, 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)
Natural gas (c)	$	1	$	1	$	—	$	—
Cash equivalents and restricted cash equivalents
Treasury funds		34		34		—		—
Executive deferred compensation plan assets
Money market funds		15		15		—		—
Life insurance contracts		66		—		47		19

	$	116	$	50	$	47	$	19

LIABILITIES

Executive deferred compensation plan liabilities
Life insurance contracts	$	30	$	—	$	30	$	—

	$	30	$	—	$	30	$	—

(a)	There were no transfers of instruments between level 1 and level 2 valuation categories during the year ended December 31, 2013.

(b)	The fair values of derivative assets 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.

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 six months ended June 30, 2014 and 2013 are shown below:


	Six Months Ended June 30, 2014
	Preferred Stock		Life Insurance Contracts
	*(millions of dollars)*

Beginning balance as of January 1	$	—	$	19
Total gains (losses) (realized and unrealized):
Included in income		—		2
Included in accumulated other comprehensive loss		—		—
Included in regulatory liabilities		—		—
Purchases		—		—
Issuances		3		(1	)
Settlements		—		—
Transfers in (out) of level 3		—		—

Ending balance as of June 30	$	3	$	20


	Six Months Ended June 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		—			(1	)		—
Settlements		4			(1	)		—
Transfers in (out) of level 3		—			—			—

Ending balance as of June 30	$	—		$	19		$	(10	)

Gains or (Losses) 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:


	Six Months Ended June 30,
	2014		2013
	*(millions of dollars)*

Total net gains included in income for the period	$	2	$	3


Change in unrealized gains relating to assets still held at reporting date	$	2	$	2

Fair Value of Financial Liabilities Measured on Recurring Basis


	Fair Value Measurements at June 30, 2014
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)	$	5,528	$	—	$	4,971	$	557
Transition bonds (b)		262		—		262		—
Long-term project funding		22		—		—		22

	$	5,812	$	—	$	5,233	$	579

(a)	The carrying amount for Long-term debt was $4,873 million as of June 30, 2014.

(b)	The carrying amount for Transition bonds, including amounts due within one year, was $235 million as of June 30, 2014.


	Fair Value Measurements at December 31, 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)	$	4,850	$	—	$	4,289	$	561
Transition bonds (b)		284		—		284		—
Long-term project funding		12		—		—		12

	$	5,146	$	—	$	4,573	$	573

(a)	The carrying amount for Long-term debt was $4,456 million as of December 31, 2013.

(b)	The carrying amount for Transition bonds, including amounts due within one year, was $255 million as of December 31, 2013.

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 June 30, 2014 and December 31, 2013. 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 June 30, 2014
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 and restricted cash equivalents
Treasury funds	$	27	$	27	$	—	$	—
Executive deferred compensation plan assets
Money market funds		13		13		—		—
Life insurance contracts		61		—		42		19

	$	101	$	40	$	42	$	19

LIABILITIES

Executive deferred compensation plan liabilities
Life insurance contracts	$	7	$	—	$	7	$	—

	$	7	$	—	$	7	$	—

(a)	There were no transfers of instruments between level 1 and level 2 valuation categories during the six months ended June 30, 2014.


	Fair Value Measurements at December 31, 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 and restricted cash equivalents
Treasury funds	$	3	$	3	$	—	$	—
Executive deferred compensation plan assets
Money market funds		13		13		—		—
Life insurance contracts		61		—		43		18

	$	77	$	16	$	43	$	18

LIABILITIES

Executive deferred compensation plan liabilities
Life insurance contracts	$	7	$	—	$	7	$	—

	$	7	$	—	$	7	$	—

(a)	There were no transfers of instruments between level 1 and level 2 valuation categories during the year ended December 31, 2013.

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 six months ended June 30, 2014 and 2013 are shown below:


	Life Insurance Contracts
	Six Months Ended June 30,
	2014			2013
	*(millions of dollars)*
Beginning balance as of January 1	$	18		$	18
Total gains (losses) (realized and unrealized):
Included in income		2			3
Included in accumulated other comprehensive loss		—			—
Purchases		—			—
Issuances		(1	)		(1	)
Settlements		—			(1	)
Transfers in (out) of level 3		—			—

Ending balance as of June 30	$	19		$	19

Gains or (Losses) 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:


	Six Months Ended June 30,
	2014		2013
	*(millions of dollars)*
Total gains included in income for the period	$	2	$	3

Change in unrealized gains relating to assets still held at reporting date	$	2	$	2

Fair Value of Financial Liabilities Measured on Recurring Basis


	Fair Value Measurements at June 30, 2014
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)	$	2,530	$	—	$	2,530	$	—
Long-term project funding		5		—		—		5

	$	2,535	$	—	$	2,530	$	5

(a)	The carrying amount for Long-term debt was $2,123 million as of June 30, 2014.


	Fair Value Measurements at December 31, 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)	$	2,127	$	—	$	2,127	$	—

	$	2,127	$	—	$	2,127	$	—

(a)	The carrying amount for Long-term debt was $1,899 million as of December 31, 2013.

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 June 30, 2014 and December 31, 2013. 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 June 30, 2014
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 and restricted cash equivalents
Treasury funds	$	150	$	150	$	—	$	—
Executive deferred compensation plan assets
Money market funds		1		1		—		—
Life insurance contracts		1		—		—		1

	$	152	$	151	$	—	$	1

LIABILITIES

Executive deferred compensation plan liabilities
Life insurance contracts	$	1	$	—	$	1	$	—

	$	1	$	—	$	1	$	—

(a)	There were no transfers of instruments between level 1 and level 2 valuation categories during the six months ended June 30, 2014.


	Fair Value Measurements at December 31, 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)
Natural gas (c)	$	1	$	1	$	—	$	—
Executive deferred compensation plan assets
Money market funds		1		1		—		—
Life insurance contracts		1		—		—		1

	$	3	$	2	$	—	$	1

LIABILITIES

Executive deferred compensation plan liabilities
Life insurance contracts	$	1	$	—	$	1	$	—

	$	1	$	—	$	1	$	—

(a)	There were no transfers of instruments between level 1 and level 2 valuation categories during the year ended December 31, 2013.

(b)	The fair value of derivative assets 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.

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 six months ended June 30, 2014 and 2013 are shown below:


	Six Months Ended June 30, 2014		Six Months Ended June 30, 2013
	Life Insurance Contracts		Natural Gas			Life Insurance Contracts
	*(millions of dollars)*
Balance as of January 1	$	1	$	(4	)	$	1
Total gains (losses) (realized and unrealized):
Included in income		—		—			—
Included in accumulated other comprehensive loss		—		—			—
Included in regulatory liabilities		—		—			—
Purchases		—		—			—
Issuances		—		—			—
Settlements		—		4			—
Transfers in (out) of Level 3		—		—			—

Balance as of June 30	$	1	$	—		$	1

Fair Value of Financial Liabilities Measured on Recurring Basis


	Fair Value Measurements at June 30, 2014
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)	$	1,204	$	—	$	1,095	$	109

	$	1,204	$	—	$	1,095	$	109

(a)	The carrying amount for Long-term debt was $1,171 million as of June 30, 2014.


	Fair Value Measurements at December 31, 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)	$	960	$	—	$	850	$	110

	$	960	$	—	$	850	$	110

(a)	The carrying amount for Long-term debt was $967 million as of December 31, 2013.

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 June 30, 2014 and December 31, 2013. 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 June 30, 2014
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 and restricted cash equivalents
Treasury funds	$	23	$	23	$	—	$	—

	$	23	$	23	$	—	$	—

LIABILITIES

Executive deferred compensation plan liabilities
Life insurance contracts	$	1	$	—	$	1	$	—

	$	1	$	—	$	1	$	—

(a)	There were no transfers of instruments between level 1 and level 2 valuation categories during the six months ended June 30, 2014.


	Fair Value Measurements at December 31, 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 and restricted cash equivalents
Treasury funds	$	24	$	24	$	—	$	—

	$	24	$	24	$	—	$	—

(a)	There were no transfers of instruments between level 1 and level 2 valuation categories during the year ended December 31, 2013.

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 six months ended June 30, 2013 is shown below:


	Six Months Ended June 30, 2013
	Capacity
	*(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	)
Purchases		—
Issuances		—
Settlements		—
Transfers in (out) of level 3		—

Ending balance as of June 30	$	(10	)

Fair Value of Financial Liabilities Measured on Recurring Basis


	Fair Value Measurements at June 30, 2014
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)	$	989	$	—	$	761	$	228
Transition bonds (b)		262		—		262		—

	$	1,251	$	—	$	1,023	$	228

(a)	The carrying amount for Long-term debt was $860 million as of June 30, 2014.

(b)	The carrying amount for Transition bonds, including amounts due within one year, was $235 million as of June 30, 2014.


	Fair Value Measurements at December 31, 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)	$	959	$	—	$	744	$	215
Transition bonds (b)		285		—		285		—

	$	1,244	$	—	$	1,029	$	215

(a)	The carrying amount for Long-term debt was $860 million as of December 31, 2013.

(b)	The carrying amount for Transition bonds, including amounts due within one year, was $255 million as of December 31, 2013.

- Definition

Tabular disclosure of liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). Where the quoted price in an active market for the identical liability is not available, the Level 1 input is the quoted price of an identical liability when traded as an asset.

+ References+ Details

- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

+ References+ Details