Related Party Transactions

12 Months Ended

Dec. 31, 2011

Related Party Transactions

Related Party Transactions

16  Related Party Transactions

Constellation Energy

CENG

We have a unit contingent power purchase agreement (PPA) with CENG under which we purchase between 85-90% of the output of CENG's nuclear plants that is not sold to third parties under pre-existing PPAs through 2014. Beginning on January 1, 2015 and continuing to the end of the life of the respective plants, we will purchase 50.01% of the output of CENG's nuclear plants, and EDF will purchase 49.99% of that output.

        In addition to the PPA, we have a power services agency agreement (PSA) and an administrative service agreement (ASA) with CENG. The PSA is a five-year agreement under which we will provide scheduling, asset management and billing services to CENG and recognize average annual revenue of approximately $16 million. The ASA expires in 2017 and under the agreement we provide certain administrative services to CENG including back office, human resources and information technology. The ASA includes both a consumption-based pricing structure as well as a fixed-price structure which are subject to change in future years based on the level of service needed. The fixed price fee for 2011 is approximately $48 million and will increase annually in line with inflation. The charges under this agreement are intended to represent the actual cost of the services provided to CENG by us.

        The impact of transactions under these agreements is summarized below:

	Increase (Decrease) in Earnings
			Accounts Receivable/ (Accounts Payable)— December 31, 2011
Agreement	Year Ended December 31, 2011					Year Ended December 31, 2010			Period from November 6, 2009 through December 31, 2009			Income Statement Classification
PPA	$	(888.4	)	$	(900.8	)	$	(122.5	)	Fuel and purchased energy expenses	$	(47.5	)
PSA		16.1			16.1			2.7		Nonregulated revenues		—
ASA		48.0			66.0			10.0		Operating expenses		4.0

        Upon the closing of the merger with Exelon, the ASA will be amended to reflect actual post-merger costs determined on the same basis that Exelon charges its affiliates for similar services. In addition, the PSA will be amended to reflect the cost of the service, with such cost not to exceed approximately $358,000 per month.

        In May 2011, CENG issued an unsecured revolving promissory note to borrow up to an aggregate principal amount of $62.5 million from a subsidiary of Constellation Energy. CENG also issued an unsecured revolving promissory note to EDF on substantially identical terms, such that any request for borrowings by CENG must be submitted 50% to Constellation Energy and 50% to EDF.

        Interest accrues on the amounts borrowed on a daily basis at a fixed rate per year equal to the rate at which deposits of United States dollars are offered by prime banks in the London interbank market, plus 250 basis points. Amounts are due at the earlier of October 31, 2012 or the date upon which the note is accelerated in accordance with the terms of the agreement.

        As of December 31, 2011, CENG has borrowed $30.0 million from Constellation Energy.

        During 2011, CENG executed settlement agreements with the DOE that detail a framework and procedure for recovery of damages incurred or to be incurred through the end of 2013. Constellation Energy, through its share of the settlement proceeds, recognized a total of $93.8 million in 2011 for costs incurred to store spent nuclear fuel. We discuss this settlement in more detail in Note 2.

UNE

We sold our interest in UNE during 2010. We discuss this transaction in more detail in Note 4.

CEP

In August 2011, we sold a majority of our interests in Constellation Energy Partners LLC (CEP) to PostRock Energy Corporation (PostRock). As a result of this transaction, we recorded a pre-tax gain of $23.0 million.

        Additionally, in December 2011, we sold our remaining Class B member interests to PostRock. We recorded a pre-tax gain of $10.7 million on this transaction.

        We discuss these transactions in more detail in Note 2.

BGE—Income Statement

        BGE is obligated to provide market-based standard offer service to all of its electric customers for varying periods. Bidding to supply BGE's market-based standard offer service to electric customers will occur from time to time through a competitive bidding process approved by the Maryland PSC.

        Our NewEnergy business will supply a portion of BGE's market-based standard offer service obligation to electric customers through May 31, 2014.

        The cost of BGE's purchased energy from nonregulated subsidiaries of Constellation Energy to meet its standard offer service obligation was as follows:

Year Ended December 31,	2011		2010		2009
	(In millions)
Electricity purchased for resale expenses	$	348.2	$	428.0	$	623.5

        In addition, Constellation Energy charges BGE for the costs of certain corporate functions. Certain costs, both capital and expense, are directly assigned to BGE. We allocate other corporate function costs based on a total percentage of expected use by BGE. We believe this method of allocation is reasonable and approximates the cost BGE would have incurred as an unaffiliated entity.

        The following table presents all of the costs Constellation Energy charged to BGE in each period, both directly-charged and allocated.

Year ended December 31,	2011		2010		2009
	(In millions)
Charges to BGE	$	178.6	$	184.8	$	164.7

        Other nonregulated affiliates of BGE also charge BGE for the costs of certain services provided.

BGE—Balance Sheet

        Through January 7, 2010, BGE participated in a cash pool under a Master Demand Note agreement with Constellation Energy. Under this arrangement, participating subsidiaries may invest in or borrow from the pool at market interest rates. Constellation Energy administers the pool and invests excess cash in short-term investments or issues commercial paper to manage consolidated cash requirements.

        As part of the ring-fencing measures required by the Maryland PSC in its order approving the transaction with EDF, BGE ceased participation in the cash pool on January 7, 2010.

        BGE's Consolidated Balance Sheets include intercompany amounts related to BGE's purchases to meet its standard offer service obligation, BGE's charges to Constellation Energy and its nonregulated affiliates for certain services it provides them, Constellation Energy and its nonregulated affiliates' charges to BGE, and the participation of BGE's employees in the Constellation Energy defined benefit plans.