Pension and Other Postretirement Benefits (Tables)

12 Months Ended

Dec. 31, 2014

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, 2014 and 2013:


	Pension Benefits						Other Postretirement Benefits
	2014			2013			2014			2013
	*(millions of dollars)*
Change in Benefit Obligation
Benefit obligation as of January 1	$	2,238		$	2,494		$	574		$	775
Service cost		44			53			7			8
Interest cost		109			100			26			29
Amendments		—			3			—			(124	)
Actuarial loss (gain)		401			(277	)		59			(71	)
Benefits paid		(154	)		(135	)		(34	)		(43	)

Benefit obligation as of December 31	$	2,638		$	2,238		$	632		$	574

Change in Plan Assets
Fair value of plan assets as of January 1	$	2,116		$	2,039		$	368		$	321
Actual return on plan assets		268			86			21			56
Company and participant contributions		6			126			12			34
Benefits paid		(154	)		(135	)		(34	)		(43	)

Fair value of plan assets as of December 31	$	2,236		$	2,116		$	367		$	368

Funded Status at end of year (plan assets less plan obligations)	$	(402	)	$	(122	)	$	(265	)	$	(206	)

Amounts Recognized in Consolidated Balance Sheets

The following table provides the amounts recorded in PHI’s consolidated balance sheets as of December 31, 2014 and 2013:


	Pension Benefits						Other Postretirement Benefits
	2014			2013			2014			2013
	*(millions of dollars)*
Regulatory asset	$	871		$	664		$	75		$	3
Current liabilities		(6	)		(6	)		—			—
Pension benefit obligation		(396	)		(116	)		—			—
Other postretirement benefit obligations		—			—			(265	)		(206	)
Deferred income taxes liabilities		(193	)		(217	)		77			82
Accumulated other comprehensive loss, net of tax		37			25			—			—

Net amount recorded	$	313		$	350		$	(113	)	$	(121	)

Schedule of Amounts Included in AOCL and Regulatory Assets

Amounts included in AOCL (pre-tax) and Regulatory assets at December 31, 2014 and 2013, consist of:


	Pension Benefits				Other Postretirement Benefits
	2014		2013		2014			2013
	*(millions of dollars)*
Unrecognized net actuarial loss	$	925	$	694	$	176		$	117
Unamortized prior service cost (credit)		8		10		(101	)		(114	)

Total	$	933	$	704	$	75		$	3

Accumulated other comprehensive loss ($37 million and $25 million, net of tax, at December 31, 2014 and 2013, respectively)	$	62	$	40	$	—		$	—
Regulatory assets		871		664		75			3

Total	$	933	$	704	$	75		$	3

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, 2014, 2013 and 2012:


	Pension Benefits									Other Postretirement Benefits
	2014			2013			2012			2014			2013			2012
	*(millions of dollars)*
Amounts amortized during the year:
Amortization of prior service (cost) credit	$	(2	)	$	(2	)	$	(1	)	$	13		$	11		$	4
Amortization of net actuarial (loss)		(45	)		(67	)		(64	)		(3	)		(12	)		(14	)
Amounts arising during the year:
Current year prior service cost (credit)		—			3			—			—			(124	)		—
Current year actuarial loss (gain)		276			(218	)		220			62			(109	)		4

Total recognized in AOCL and Regulatory assets for the year ended December 31	$	229		$	(284	)	$	155		$	72		$	(234	)	$	(6	)

Components of Net Periodic Benefit Costs

The table below provides the components of net periodic benefit costs recognized for the years ended December 31, 2014, 2013 and 2012:


	Pension Benefits									Other Postretirement Benefits
	2014			2013			2012			2014			2013			2012
	*(millions of dollars)*
Service cost	$	44		$	53		$	35		$	7		$	8		$	7
Interest cost		109			100			107			26			29			35
Expected return on plan assets		(141	)		(145	)		(132	)		(24	)		(20	)		(18	)
Amortization of prior service cost (credit)		2			2			1			(13	)		(11	)		(4	)
Amortization of net actuarial loss		45			67			64			3			12			14
Termination benefits		—			—			—			—			—			1

Net periodic benefit cost	$	59		$	77		$	75		$	(1	)	$	18		$	35

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, 2014, 2013 and 2012:


	2014		2013		2012
	*(millions of dollars)*
Pepco	$	22	$	34	$	39
DPL		7		18		23
ACE		13		17		24
Other subsidiaries		16		26		24

Total	$	58	$	95	$	110

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
	2014			2013			2014			2013
Discount rate		4.20	%		5.05	%		4.15	%		5.00	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%		5.00	%
Health care cost trend rate assumed for current year – pre 65		—			—			6.67	%		7.00	%
Health care cost trend rate assumed for current year – post 65		—			—			5.50	%		5.60	%
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			2020

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	$	18	$	(20	)

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
	2014			2013			2012			2014			2013			2012
Discount rate		5.05	%		4.15	%		5.00	%		5.00	%		4.10%/4.95	% (a)		4.90	%
Expected long-term return on plan assets		7.00	%		7.00	%		7.25	%		7.25	%		7.00	%		7.25	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%
Health care cost trend rate		—			—			—			7.00	%		7.50	%		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, 2014 and 2013:


	Fair Value Measurements at December 31, 2014
	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category	*(millions of dollars)*
Pension Plan Assets:
Equity
Domestic (a)	$	376	$	128	$	213	$	35
International (b)		255		254		—		1
Fixed Income (c)		1,459		—		1,448		11
Other
Private Equity		47		—		—		47
Real Estate		54		—		—		54
Cash Equivalents (d)		45		45		—		—

Pension Plan Assets Subtotal		2,236		427		1,661		148

Other Postretirement Plan Assets:
Equity (e)		235		208		27		—
Fixed Income (f)		126		126		—		—
Cash Equivalents		6		6		—		—

Postretirement Plan Assets Subtotal		367		340		27		—

Total Pension and Other Postretirement Plan Assets	$	2,603	$	767	$	1,688	$	148

(a)	Domestic equity assets predominantly include domestic common stock and commingled funds.

(b)	International equity assets predominantly include foreign common and preferred stock and warrants.

(c)	Fixed income assets predominantly include corporate bonds, government bonds, municipal/provincial bonds, collateralized mortgage obligations and commingled funds.

(d)	Cash equivalents predominantly include cash investments in short-term investment funds.

(e)	Equity assets include domestic and international commingled funds.

(f)	Fixed income assets include fixed income commingled funds.


	Fair Value Measurements at December 31, 2013
	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset Category	*(millions of dollars)*
Pension Plan Assets:
Equity
Domestic (a)	$	389	$	142	(g)	$	213	$	34
International (b)		260		258	(g)		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 Plan Assets	$	2,484	$	783		$	1,541	$	160

(a)	Domestic equity assets predominantly include domestic common stock and commingled funds.

(b)	International equity assets predominantly include foreign common and preferred stock and warrants.

(c)	Fixed income assets predominantly include corporate bonds, government bonds, municipal/provincial bonds, collateralized mortgage obligations and commingled funds.

(d)	Cash equivalents predominantly include cash investments in short-term investment funds.

(e)	Equity assets include domestic and international commingled funds.

(f)	Fixed income assets include fixed income commingled funds.

(g)	Certain equity assets totaling $43 million have been reclassified from domestic equity to international equity to conform to the currect period presentation.

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, 2014 and 2013 are shown below:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Equity			Fixed Income		Private Equity			Real Estate			Total Level 3
	*(millions of dollars)*
Balance as of January 1, 2014	$	35		$	11	$	53		$	61		$	160
Transfer in (out) of Level 3		—			—		—			—			—
Purchases		—			—		3			1			4
Sales		(3	)		—		—			(5	)		(8	)
Settlements		—			—		(6	)		(9	)		(15	)
Unrealized gain (loss)		2			—		(12	)		2			(8	)
Realized gain		2			—		9			4			15

Balance as of December 31, 2014	$	36		$	11	$	47		$	54		$	148


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Equity			Fixed Income			Private Equity			Real Estate			Total Level 3
	*(millions of dollars)*
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

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)*
2015	$	134	$	38
2016		140		38
2017		142		39
2018		148		39
2019		153		39
2020 through 2023		826		193

Pension Benefits [Member]

Summary of Plan Asset Allocations

The PHI Retirement Plan asset allocations at December 31, 2014 and 2013, by asset category, were as follows:


Asset Category	Plan Assets at December 31,						Target Plan Asset Allocation
	2014			2013			2014			2013
Equity		28	%		31	%		27	%		28	%
Fixed Income		65	%		62	%		68	%		66	%
Other (real estate, private equity)		7	%		7	%		5	%		6	%

Total		100	%		100	%		100	%		100	%