Pension and Other Postretirement Benefits (Tables)

12 Months Ended

Dec. 31, 2015

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, 2015 and 2014:


	Pension Benefits						Other Postretirement Benefits
	2015			2014			2015			2014
	*(millions of dollars)*
Change in Benefit Obligation
Benefit obligation as of January 1	$	2,638		$	2,238		$	632		$	574
Service cost		57			44			7			7
Interest cost		109			109			24			26
Actuarial loss (gain)		(151	)		401			(61	)		59
Benefits paid		(163	)		(154	)		(39	)		(34	)

Benefit obligation as of December 31	$	2,490		$	2,638		$	563		$	632


Change in Plan Assets
Fair value of plan assets as of January 1	$	2,236		$	2,116		$	367		$	368
Actual return on plan assets		(61	)		268			1			21
Company and participant contributions		6			6			5			6
Benefits paid by plan		(163	)		(154	)		(25	)		(28	)

Fair value of plan assets as of December 31	$	2,018		$	2,236		$	348		$	367

Funded Status at end of year (plan assets less plan obligations)	$	(472	)	$	(402	)	$	(215	)	$	(265	)

Amounts Recognized in Consolidated Balance Sheets

The following table provides the amounts recorded in PHI’s consolidated balance sheets as of December 31, 2015 and 2014:


	Pension Benefits						Other Postretirement Benefits
	2015			2014			2015			2014
	*(millions of dollars)*
Regulatory asset	$	870		$	871		$	40		$	75
Current liabilities		(6	)		(6	)		—			—
Pension benefit obligation		(466	)		(396	)		—			—
Other postretirement benefit obligations		—			—			(215	)		(265	)
Deferred income tax liabilities		(162	)		(193	)		70			77
Accumulated other comprehensive loss, net of tax		28			37			—			—

Net amount recorded	$	264		$	313		$	(105	)	$	(113	)

Schedule of Amounts Included in AOCL and Regulatory Assets

Amounts included in AOCL (pre-tax) and Regulatory assets at December 31, 2015 and 2014 consist of:


	Pension Benefits				Other Postretirement Benefits
	2015		2014		2015			2014
	*(millions of dollars)*
Unrecognized net actuarial loss	$	910	$	925	$	128		$	176
Unamortized prior service cost (credit)		6		8		(88	)		(101	)

Total	$	916	$	933	$	40		$	75

Accumulated other comprehensive loss ($28 million and $37 million, net of tax, at December 31, 2015 and 2014, respectively)	$	46	$	62	$	—		$	—
Regulatory assets		870		871		40			75

Total	$	916	$	933	$	40		$	75

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, 2015, 2014 and 2013:


	Pension Benefits									Other Postretirement Benefits
	2015			2014			2013			2015			2014			2013
	*(millions of dollars)*
Amounts amortized during the year:
Amortization of prior service (cost) credit	$	(2	)	$	(2	)	$	(2	)	$	13		$	13		$	11
Amortization of net actuarial loss		(65	)		(45	)		(67	)		(8	)		(3	)		(12	)
Amounts arising during the year:
Current year prior service cost (credit)		—			—			3			—			—			(124	)
Current year actuarial loss (gain)		50			276			(218	)		(39	)		62			(109	)

Total recognized in AOCL and Regulatory assets for the year ended December 31	$	(17	)	$	229		$	(284	)	$	(34	)	$	72		$	(234	)

Components of Net Periodic Benefit Costs

The table below provides the components of net periodic benefit costs recognized for the years ended December 31, 2015, 2014 and 2013:


	Pension Benefits									Other Postretirement Benefits
	2015			2014			2013			2015			2014			2013
	*(millions of dollars)*
Service cost	$	57		$	44		$	53		$	7		$	7		$	8
Interest cost		109			109			100			24			26			29
Expected return on plan assets		(140	)		(141	)		(145	)		(22	)		(24	)		(20	)
Amortization of prior service cost (credit)		2			2			2			(13	)		(13	)		(11	)
Amortization of net actuarial loss		65			45			67			8			3			12

Net periodic benefit cost	$	93		$	59		$	77		$	4		$	(1	)	$	18

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, 2015, 2014 and 2013:


	2015		2014		2013
	*(millions of dollars)*
Pepco	$	30	$	22	$	34
DPL		15		7		18
ACE		15		13		17
Other subsidiaries		37		16		26

Total	$	97	$	58	$	95

Weighted Average Assumptions Used to Determine Benefit Obligations

The following weighted average assumptions were used to determine the benefit obligations at December 31, 2015 and 2014:


	Pension Benefits						Other Postretirement Benefits
	2015			2014			2015			2014
Discount rate		4.65% /4.55	% (a)		4.20	%		4.55	%		4.15	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%		5.00	%
Health care cost trend rate assumed for current year – pre 65		—			—			6.33	%		6.67	%
Health care cost trend rate assumed for current year – post 65		—			—			5.40	%		5.50	%
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			2020

(a)	The discount rate for the qualified and nonqualified pension plans was 4.65% and 4.55%, respectively.

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	$	15	$	(18	)

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, 2015, 2014 and 2013:


	Pension Benefits									Other Postretirement Benefits
	2015			2014			2013			2015			2014			2013
Discount rate		4.20	%		5.05	%		4.15	%		4.15	%		5.00	%		4.10%/4.95	% (a)
Expected long-term return on plan assets		6.50	%		7.00	%		7.00	%		6.75	%		7.25	%		7.00	%
Rate of compensation increase		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%		5.00	%
Health care cost trend rate		—			—			—			6.67	%		7.00	%		7.50	%

(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 included in and excluded from the fair value hierarchy levels, as of December 31, 2015 and 2014:


			Fair Value Measurements at December 31, 2015
	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)*
Asset Category
Pension Plan Assets:
Equity:
Domestic (a)	$	311	$	120	$	191	$	—
International (b)		216		215		—		1
Fixed Income (c)		820		—		810		10
Cash Equivalents (d)		50		50		—		—

		1,397	$	385	$	1,001	$	11

Investments measured at fair value using net asset value as a practical expedient:
Equity:
Domestic (a)		33
Fixed Income (c)		504
Other:
Private Equity		38
Real Estate		46

Pension Plan Assets Total	$	2,018


Other Postretirement Plan Assets:
Equity (e)	$	197	$	197	$	—	$	—
Fixed Income (f)		120		120		—		—
Cash Equivalents		9		9		—		—

		326	$	326	$	—	$	—

Investments measured at fair value using net asset value as a practical expedient:
Equity (e)		22

Postretirement Plan Assets Total	$	348

(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, 2014
	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)*
Asset Category
Pension Plan Assets:
Equity:
Domestic (a)	$	341	$	128	$	213	$	—
International (b)		255		254		—		1
Fixed Income (c)		916		—		905		11
Cash Equivalents (d)		45		45		—		—

		1,557	$	427	$	1,118	$	12

Investments measured at fair value using net asset value as a practical expedient:
Equity:
Domestic (a)		35
Fixed Income (c)		543
Other:
Private Equity		47
Real Estate		54

Pension Plan Assets Total	$	2,236


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

		340	$	340	$	—	$	—

Investments measured at fair value using net asset value as a practical expedient:
Equity (e)		27

Postretirement Plan Assets Total	$	367

(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.

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, 2015 and 2014 are shown below:


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

Balance as of January 1, 2015	$	1	$	11		$	12
Transfer in (out) of Level 3		—		—			—
Purchases		—		—			—
Sales		—		—			—
Settlements		—		(1	)		(1	)
Unrealized gain (loss)		—		—			—
Realized gain		—		—			—

Balance as of December 31, 2015	$	1	$	10		$	11


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

Balance as of January 1, 2014	$	1	$	11		$	12
Transfer in (out) of Level 3		—		—			—
Purchases		—		—			—
Sales		—		—			—
Settlements		—		—			—
Unrealized gain (loss)		—		—			—
Realized gain		—		—			—

Balance as of December 31, 2014	$	1	$	11		$	12

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)*
2016	$	143	$	38
2017		143		38
2018		148		38
2019		153		38
2020		158		38
2021 through 2025		836		189

Pension Benefits [Member]

Summary of Plan Asset Allocations

The PHI Retirement Plan asset allocations at December 31, 2015 and 2014, by asset category, were as follows:


Asset Category	Plan Assets at December 31,						Target Plan Asset Allocation
	2015			2014			2015			2014
Equity		28	%		28	%		27	%		27	%
Fixed Income		66	%		65	%		68	%		68	%
Other (real estate, private equity)		6	%		7	%		5	%		5	%

Total		100	%		100	%		100	%		100	%