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Fair Value of Financial Assets and Liabilities (All Registrants)

3 Months Ended

Mar. 31, 2020

Fair Value of Financial Assets and Liabilities (All Registrants)

Exelon measures and classifies fair value measurements in accordance with the hierarchy as defined by GAAP. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:


•	Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the Registrants have the ability to liquidate as of the reporting date.


•	Level 2 - inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.


•	Level 3 - unobservable inputs, such as internally developed pricing models or third-party valuations for the asset or liability due to little or no market activity for the asset or liability.

Fair Value of Financial Liabilities Recorded at Amortized Cost

The following tables present the carrying amounts and fair values of the Registrants’ short-term liabilities, long-term debt, SNF obligation and trust preferred securities (long-term debt to financing trusts or junior subordinated debentures) as of March 31, 2020 and December 31, 2019. The Registrants have no financial liabilities classified as Level 1.

The carrying amounts of the Registrants’ short-term liabilities as presented on their Consolidated Balance Sheets are representative of their fair value (Level 2) because of the short-term nature of these instruments.



	March 31, 2020								December 31, 2019
	Carrying Amount		Fair Value						Carrying Amount		Fair Value
	Carrying Amount		Level 2		Level 3		Total		Carrying Amount		Level 2		Level 3		Total
Long-Term Debt, including amounts due within one year^(a)
Exelon	$	37,656	$	36,908	$	2,556	$	39,464	$	36,039	$	37,453	$	2,580	$	40,033
Generation	8,449		7,034		1,330		8,364		7,974		7,304		1,366		8,670
ComEd	9,478		10,483		—		10,483		8,491		9,848		—		9,848
PECO	3,406		3,762		50		3,812		3,405		3,868		50		3,918
BGE	3,271		3,572		—		3,572		3,270		3,649		—		3,649
PHI	6,708		5,602		1,176		6,778		6,563		5,902		1,164		7,066
Pepco	3,015		3,009		483		3,492		2,864		3,198		388		3,586
DPL	1,575		1,334		271		1,605		1,567		1,408		311		1,719
ACE	1,325		991		421		1,412		1,327		1,026		464		1,490
Long-Term Debt to Financing Trusts^(a)
Exelon	$	390	$	—	$	387	$	387	$	390	$	—	$	428	$	428
ComEd	205		—		204		204		205		—		227		227
PECO	184		—		183		183		184		—		201		201
SNF Obligation
Exelon	$	1,204	$	723	$	—	$	723	$	1,199	$	1,055	$	—	$	1,055
Generation	1,204		723		—		723		1,199		1,055		—		1,055

____


(a)	Includes unamortized debt issuance costs which are not fair valued.

Recurring Fair Value Measurements

The following tables present assets and liabilities measured and recorded at fair value in the Registrants' Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2020 and December 31, 2019:

Exelon and Generation



	Exelon														Generation
As of March 31, 2020	Level 1			Level 2			Level 3			Not subject to leveling		Total			Level 1			Level 2			Level 3			Not subject to leveling		Total
Assets
Cash equivalents^(a)	$	1,399		$	—		$	—		$	—	$	1,399		$	591		$	—		$	—		$	—	$	591
NDT fund investments
Cash equivalents^(b)	373			79			—			—		452			373			79			—			—		452
Equities	2,603			1,377			—			1,080		5,060			2,603			1,377			—			1,080		5,060
Fixed income
Corporate debt	—			1,412			258			—		1,670			—			1,412			258			—		1,670
U.S. Treasury and agencies	1,723			141			—			—		1,864			1,723			141			—			—		1,864
Foreign governments	—			37			—			—		37			—			37			—			—		37
State and municipal debt	—			87			—			—		87			—			87			—			—		87
Other^(c)	—			26			—			872		898			—			26			—			872		898
Fixed income subtotal	1,723			1,703			258			872		4,556			1,723			1,703			258			872		4,556
Private credit	—			—			240			546		786			—			—			240			546		786
Private equity	—			—			—			444		444			—			—			—			444		444
Real estate	—			—			—			636		636			—			—			—			636		636
NDT fund investments subtotal^(d)	4,699			3,159			498			3,578		11,934			4,699			3,159			498			3,578		11,934
Rabbi trust investments
Cash equivalents	51			—			—			—		51			4			—			—			—		4
Mutual funds	75			—			—			—		75			23			—			—			—		23
Fixed income	—			11			—			—		11			—			—			—			—		—
Life insurance contracts	—			72			42			—		114			—			22			—			—		22
Rabbi trust investments subtotal	126			83			42			—		251			27			22			—			—		49
Commodity derivative assets
Economic hedges	714			3,135			2,039			—		5,888			714			3,135			2,039			—		5,888
Proprietary trading	—			29			57			—		86			—			29			57			—		86
Effect of netting and allocation of collateral^(e)(f)	(868		)	(2,770		)	(1,062		)	—		(4,700		)	(868		)	(2,770		)	(1,062		)	—		(4,700		)
Commodity derivative assets subtotal	(154		)	394			1,034			—		1,274			(154		)	394			1,034			—		1,274
Total assets	6,070			3,636			1,574			3,578		14,858			5,163			3,575			1,532			3,578		13,848



	Exelon														Generation
As of March 31, 2020	Level 1			Level 2			Level 3			Not subject to leveling		Total			Level 1			Level 2			Level 3			Not subject to leveling		Total
Liabilities
Commodity derivative liabilities
Economic hedges	(990		)	(3,476		)	(1,743		)	—		(6,209		)	(990		)	(3,476		)	(1,429		)	—		(5,895		)
Proprietary trading	—			(28		)	(20		)	—		(48		)	—			(28		)	(20		)	—		(48		)
Effect of netting and allocation of collateral^(e)(f)	994			3,318			1,277			—		5,589			994			3,318			1,277			—		5,589
Commodity derivative liabilities subtotal	4			(186		)	(486		)	—		(668		)	4			(186		)	(172		)	—		(354		)
Deferred compensation obligation	—			(126		)	—			—		(126		)	—			(34		)	—			—		(34		)
Total liabilities	4			(312		)	(486		)	—		(794		)	4			(220		)	(172		)	—		(388		)
Total net assets	$	6,074		$	3,324		$	1,088		$	3,578	$	14,064		$	5,167		$	3,355		$	1,360		$	3,578	$	13,460



	Exelon														Generation
As of December 31, 2019	Level 1			Level 2			Level 3			Not subject to leveling		Total			Level 1			Level 2			Level 3			Not subject to leveling		Total
Assets
Cash equivalents^(a)	$	639		$	—		$	—		$	—	$	639		$	214		$	—		$	—		$	—	$	214
NDT fund investments
Cash equivalents^(b)	365			87			—			—		452			365			87			—			—		452
Equities	3,353			1,753			—			1,388		6,494			3,353			1,753			—			1,388		6,494
Fixed income
Corporate debt	—			1,469			257			—		1,726			—			1,469			257			—		1,726
U.S. Treasury and agencies	1,808			131			—			—		1,939			1,808			131			—			—		1,939
Foreign governments	—			42			—			—		42			—			42			—			—		42
State and municipal debt	—			90			—			—		90			—			90			—			—		90
Other^(c)	—			33			—			953		986			—			33			—			953		986
Fixed income subtotal	1,808			1,765			257			953		4,783			1,808			1,765			257			953		4,783
Private credit	—			—			254			508		762			—			—			254			508		762
Private equity	—			—			—			402		402			—			—			—			402		402
Real estate	—			—			—			607		607			—			—			—			607		607
NDT fund investments subtotal^(d)	5,526			3,605			511			3,858		13,500			5,526			3,605			511			3,858		13,500
Rabbi trust investments
Cash equivalents	50			—			—			—		50			4			—			—			—		4
Mutual funds	81			—			—			—		81			25			—			—			—		25
Fixed income	—			12			—			—		12			—			—			—			—		—
Life insurance contracts	—			78			41			—		119			—			25			—			—		25
Rabbi trust investments subtotal	131			90			41			—		262			29			25			—			—		54
Commodity derivative assets
Economic hedges	768			2,491			1,485			—		4,744			768			2,491			1,485			—		4,744
Proprietary trading	—			37			60			—		97			—			37			60			—		97
Effect of netting and allocation of collateral^(e)(f)	(908		)	(2,162		)	(588		)	—		(3,658		)	(908		)	(2,162		)	(588		)	—		(3,658		)
Commodity derivative assets subtotal	(140		)	366			957			—		1,183			(140		)	366			957			—		1,183
Total assets	6,156			4,061			1,509			3,858		15,584			5,629			3,996			1,468			3,858		14,951



	Exelon														Generation
As of December 31, 2019	Level 1			Level 2			Level 3			Not subject to leveling		Total			Level 1			Level 2			Level 3			Not subject to leveling		Total
Liabilities
Commodity derivative liabilities
Economic hedges	(1,071		)	(2,855		)	(1,228		)	—		(5,154		)	(1,071		)	(2,855		)	(927		)	—		(4,853		)
Proprietary trading	—			(34		)	(15		)	—		(49		)	—			(34		)	(15		)	—		(49		)
Effect of netting and allocation of collateral^(e)(f)	1,071			2,714			802			—		4,587			1,071			2,714			802			—		4,587
Commodity derivative liabilities subtotal	—			(175		)	(441		)	—		(616		)	—			(175		)	(140		)	—		(315		)
Deferred compensation obligation	—			(147		)	—			—		(147		)	—			(41		)	—			—		(41		)
Total liabilities	—			(322		)	(441		)	—		(763		)	—			(216		)	(140		)	—		(356		)
Total net assets	$	6,156		$	3,739		$	1,068		$	3,858	$	14,821		$	5,629		$	3,780		$	1,328		$	3,858	$	14,595

_________

(a)

Exelon excludes cash of $483 million and $373 million at March 31, 2020 and December 31, 2019, respectively, and restricted cash of $110 million at both March 31, 2020 and December 31, 2019, and includes long-term restricted cash of $121 million and $177 million at March 31, 2020 and December 31, 2019, respectively, which is reported in Other deferred debits in the Consolidated Balance Sheets. Generation excludes cash of $317 million and $177 million at March 31, 2020 and December 31, 2019, respectively, and restricted cash of $63 million and $58 million at March 31, 2020 and December 31, 2019, respectively.


(b)	Includes $78 million and $90 million of cash received from outstanding repurchase agreements at March 31, 2020 and December 31, 2019, respectively, and is offset by an obligation to repay upon settlement of the agreement as discussed in (d) below.

(c)

Includes a derivative liability of $2 million and a derivative asset of $2 million, which have total notional amounts of $826 million and $724 million at March 31, 2020 and December 31, 2019, respectively. The notional principal amounts for these instruments provide one measure of the transaction volume outstanding as of the fiscal years ended and do not represent the amount of Exelon and Generation's exposure to credit or market loss.

(d)

Excludes net liabilities of $110 million and $147 million at March 31, 2020 and December 31, 2019, respectively. These items consist of receivables related to pending securities sales, interest and dividend receivables, repurchase agreement obligations, and payables related to pending securities purchases. The repurchase agreements are generally short-term in nature with durations generally of 30 days or less.

(e)

Collateral posted/(received) from counterparties totaled $126 million, $548 million and $215 million allocated to Level 1, Level 2 and Level 3 mark-to-market derivatives, respectively, as of March 31, 2020. Collateral posted/(received) from counterparties, net of collateral paid to counterparties, totaled $163 million, $551 million and $214 million allocated to Level 1, Level 2 and Level 3 mark-to-market derivatives, respectively, as of December 31, 2019.


(f)	Of the collateral posted/(received), $644 million and $511 million represents variation margin on the exchanges as of March 31, 2020 and December 31, 2019, respectively.

As of March 31, 2020, Exelon and Generation have outstanding commitments to invest in fixed income, private credit, private equity and real estate investments of approximately $80 million, $131 million, $338 million, and $428 million, respectively. These commitments will be funded by Generation’s existing NDT funds.

Exelon and Generation hold investments without readily determinable fair values with carrying amounts of $76 million and $66 million as of March 31, 2020, respectively. Changes in fair value, cumulative adjustments and impairments were not material for the three months ended March 31, 2020.

ComEd, PECO and BGE



	ComEd											PECO										BGE
As of March 31, 2020	Level 1		Level 2			Level 3			Total			Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total
Assets
Cash equivalents^(a)	$	729	$	—		$	—		$	729		$	8	$	—		$	—	$	8		$	—	$	—		$	—	$	—
Rabbi trust investments
Mutual funds	—		—			—			—			7		—			—		7			8		—			—		8
Life insurance contracts	—		—			—			—			—		10			—		10			—		—			1		1
Rabbi trust investments subtotal	—		—			—			—			7		10			—		17			8		—			1		9
Total assets	729		—			—			729			15		10			—		25			8		—			1		9
Liabilities
Deferred compensation obligation	—		(7		)	—			(7		)	—		(8		)	—		(8		)	—		(5		)	—		(5		)
Mark-to-market derivative liabilities^(b)	—		—			(314		)	(314		)	—		—			—		—			—		—			—		—
Total liabilities	—		(7		)	(314		)	(321		)	—		(8		)	—		(8		)	—		(5		)	—		(5		)
Total net assets (liabilities)	$	729	$	(7	)	$	(314	)	$	408		$	15	$	2		$	—	$	17		$	8	$	(5	)	$	1	$	4



	ComEd											PECO										BGE
As of December 31, 2019	Level 1		Level 2			Level 3			Total			Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total
Assets
Cash equivalents^(a)	$	280	$	—		$	—		$	280		$	15	$	—		$	—	$	15		$	—	$	—		$	—	$	—
Rabbi trust investments
Mutual funds	—		—			—			—			8		—			—		8			8		—			—		8
Life insurance contracts	—		—			—			—			—		11			—		11			—		—			—		—
Rabbi trust investments subtotal	—		—			—			—			8		11			—		19			8		—			—		8
Total assets	280		—			—			280			23		11			—		34			8		—			—		8
Liabilities
Deferred compensation obligation	—		(8		)	—			(8		)	—		(9		)	—		(9		)	—		(5		)	—		(5		)
Mark-to-market derivative liabilities^(b)	—		—			(301		)	(301		)	—		—			—		—			—		—			—		—
Total liabilities	—		(8		)	(301		)	(309		)	—		(9		)	—		(9		)	—		(5		)	—		(5		)
Total net assets (liabilities)	$	280	$	(8	)	$	(301	)	$	(29	)	$	23	$	2		$	—	$	25		$	8	$	(5	)	$	—	$	3

_________

(a)

ComEd excludes cash of $67 million and $90 million at March 31, 2020 and December 31, 2019, respectively, and restricted cash of $38 million and $33 million at March 31, 2020 and December 31, 2019, respectively, and includes long-term restricted cash of $108 million and $163 million at March 31, 2020 and December 31, 2019, respectively, which is reported in Other deferred debits in the Consolidated Balance Sheets. PECO excludes cash of $30 million and $12 million at March 31, 2020 and December 31, 2019, respectively. BGE excludes cash of $11 million and $24 million at March 31, 2020 and December 31, 2019, respectively, and restricted cash of $1 million at both March 31, 2020 and December 31, 2019.


(b)	The Level 3 balance consists of the current and noncurrent liability of $36 million and $278 million, respectively, at March 31, 2020, and $32 million and $269 million, respectively, at December 31, 2019, related to floating-to-fixed energy swap contracts with unaffiliated suppliers.

PHI, Pepco, DPL and ACE



	As of March 31, 2020										As of December 31, 2019
PHI	Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total
Assets
Cash equivalents^(a)	$	63	$	—		$	—	$	63		$	124	$	—		$	—	$	124
Rabbi trust investments
Cash equivalents	44		—			—		44			44		—			—		44
Mutual funds	13		—			—		13			14		—			—		14
Fixed income	—		11			—		11			—		12			—		12
Life insurance contracts	—		25			42		67			—		24			41		65
Rabbi trust investments subtotal	57		36			42		135			58		36			41		135
Total assets	120		36			42		198			182		36			41		259
Liabilities
Deferred compensation obligation	—		(16		)	—		(16		)	—		(19		)	—		(19		)
Total liabilities	—		(16		)	—		(16		)	—		(19		)	—		(19		)
Total net assets	$	120	$	20		$	42	$	182		$	182	$	17		$	41	$	240



	Pepco										DPL								ACE
As of March 31, 2020	Level 1		Level 2			Level 3		Total			Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents^(a)	$	34	$	—		$	—	$	34		$	—	$	—	$	—	$	—	$	15	$	—	$	—	$	15
Rabbi trust investments
Cash equivalents	44		—			—		44			—		—		—		—		—		—		—		—
Fixed income	—		1			—		1			—		—		—		—		—		—		—		—
Life insurance contracts	—		25			42		67			—		—		—		—		—		—		—		—
Rabbi trust investments subtotal	44		26			42		112			—		—		—		—		—		—		—		—
Total assets	78		26			42		146			—		—		—		—		15		—		—		15
Liabilities
Deferred compensation obligation	—		(2		)	—		(2		)	—		—		—		—		—		—		—		—
Total liabilities	—		(2		)	—		(2		)	—		—		—		—		—		—		—		—
Total net assets	$	78	$	24		$	42	$	144		$	—	$	—	$	—	$	—	$	15	$	—	$	—	$	15



	Pepco										DPL								ACE
As of December 31, 2019	Level 1		Level 2			Level 3		Total			Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents^(a)	$	34	$	—		$	—	$	34		$	—	$	—	$	—	$	—	$	16	$	—	$	—	$	16
Rabbi trust investments
Cash equivalents	43		—			—		43			—		—		—		—		—		—		—		—
Fixed income	—		2			—		2			—		—		—		—		—		—		—		—
Life insurance contracts	—		24			41		65			—		—		—		—		—		—		—		—
Rabbi trust investments subtotal	43		26			41		110			—		—		—		—		—		—		—		—
Total assets	77		26			41		144			—		—		—		—		16		—		—		16
Liabilities
Deferred compensation obligation	—		(2		)	—		(2		)	—		—		—		—		—		—		—		—
Total liabilities	—		(2		)	—		(2		)	—		—		—		—		—		—		—		—
Total net assets (liabilities)	$	77	$	24		$	41	$	142		$	—	$	—	$	—	$	—	$	16	$	—	$	—	$	16

_________

(a)

PHI excludes cash of $35 million and $57 million at March 31, 2020 and December 31, 2019, respectively, and includes long-term restricted cash of $12 million and $14 million at March 31, 2020 and December 31, 2019, respectively, which is reported in Other deferred debits in the Consolidated Balance Sheets. Pepco excludes cash of $17 million and $29 million at March 31, 2020 and December 31, 2019, respectively. DPL excludes cash of $6 million and $13 million at March 31, 2020 and December 31, 2019, respectively. ACE excludes cash of $8 million and $12 million at March 31, 2020 and December 31, 2019, respectively, and includes long-term restricted cash of $12 million and $14 million at March 31, 2020 and December 31, 2019, respectively, which is reported in Other deferred debits in the Consolidated Balance Sheets.

Reconciliation of Level 3 Assets and Liabilities

The following tables present the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis during the three months ended March 31, 2020 and 2019:



	Exelon			Generation										ComEd				PHI and Pepco
Three Months Ended March 31, 2020	Total			NDT Fund Investments			Mark-to-Market Derivatives				Total Generation			Mark-to-Market Derivatives				Life Insurance Contracts		Eliminated in Consolidation
Balance as of December 31, 2019	$	1,068		$	511		$	817			$	1,328		$	(301	)		$	41	$	—
Total realized / unrealized gains (losses)
Included in net income	10			(1		)	10			^(a)	9			—				1		—
Included in noncurrent payables to affiliates	—			(1		)	—				(1		)	—				—		1
Included in regulatory assets	(14		)	—			—				—			(13		)	^(b)	—		(1		)
Change in collateral	1			—			1				1			—				—		—
Purchases, sales, issuances and settlements
Purchases	42			3			39				42			—				—		—
Sales	(22		)	—			(22		)		(22		)	—				—		—
Settlements	(14		)	(14		)	—				(14		)	—				—		—
Transfers into Level 3	2			—			2			^(c)	2			—				—		—
Transfers out of Level 3	15			—			15			^(c)	15			—				—		—
Balance as of March 31, 2020	$	1,088		$	498		$	862			$	1,360		$	(314	)		$	42	$	—
The amount of total gains (losses) included in income attributed to the change in unrealized gains (losses) related to assets and liabilities as of March 31, 2020	$	187		$	(1	)	$	187			$	186		$	—			$	1	$	—



	Exelon			Generation										ComEd				PHI and Pepco
Three Months Ended March 31, 2019	Total			NDT Fund Investments			Mark-to-Market Derivatives				Total Generation			Mark-to-Market Derivatives				Life Insurance Contracts		Eliminated in Consolidation
Balance as of December 31, 2018	$	907		$	543		$	575			$	1,118		$	(249	)		$	38	$	—
Total realized / unrealized gains (losses)
Included in net income	(228		)	2			(231		)	^(a)	(229		)	—				1		—
Included in noncurrent payables to affiliates	—			11			—				11			—				—		(11		)
Included in regulatory assets	20			—			—				—			9			^(b)	—		11
Change in collateral	81			—			81				81			—				—		—
Purchases, sales, issuances and settlements
Purchases	58			1			57				58			—				—		—
Sales	—			—			—				—			—				—		—
Settlements	(17		)	(17		)	—				(17		)	—				—		—
Transfers into Level 3	—			—			—			^(c)	—			—				—		—
Transfers out of Level 3	17			—			17			^(c)	17			—				—		—
Balance as of March 31, 2019	$	838		$	540		$	499			$	1,039		$	(240	)		$	39	$	—
The amount of total (losses) gains included in income attributed to the change in unrealized gains (losses) related to assets and liabilities as of March 31, 2019	$	(148	)	$	2		$	(151	)		$	(149	)	$	—			$	1	$	—

__________


(a)	Includes a reduction for the reclassification of $177 million and $80 million of realized losses due to the settlement of derivative contracts for the three months ended March 31, 2020 and 2019, respectively.

(b)

Includes $23 million of decreases in fair value and an increase for realized losses due to settlements of $10 million recorded in purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the three months ended March 31, 2020. Includes $14 million of decreases in fair value and an increase for realized losses due to settlements of $5 million recorded in purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the three months ended March 31, 2019.


(c)	Transfers into and out of Level 3 generally occur when the contract tenor becomes less and more observable respectively, primarily due to changes in market liquidity or assumptions for certain commodity contracts.

The following tables present the income statement classification of the total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis during the three months ended March 31, 2020 and 2019:



	Exelon										Generation								PHI and Pepco
	Operating Revenues		Purchased Power and Fuel			Operating and Maintenance		Other, net			Operating Revenues		Purchased Power and Fuel			Other, net			Operating and Maintenance
Total realized gains (losses) for the three months ended March 31, 2020	$	72	$	(62	)	$	1	$	(1	)	$	72	$	(62	)	$	(1	)	$	1
Total unrealized gains (losses) for the three months ended March 31, 2020	205		(18		)	1		(1		)	205		(18		)	(1		)	1



	Exelon										Generation								PHI and Pepco
	Operating Revenues			Purchased Power and Fuel			Operating and Maintenance		Other, net		Operating Revenues			Purchased Power and Fuel			Other, net		Operating and Maintenance
Total realized (losses) gains for the three months ended March 31, 2019	$	(128	)	$	(103	)	$	1	$	2	$	(128	)	$	(103	)	$	2	$	1
Total unrealized (losses) gains for the three months ended March 31, 2019	(91		)	(60		)	1		2		(91		)	(60		)	2		1

Valuation Techniques Used to Determine Fair Value

Exelon’s valuation techniques used to measure the fair value of the assets and liabilities shown in the tables below are in accordance with the policies discussed in Note 17 — Fair Value of Financial Assets and Liabilities of the Exelon 2019 Form 10-K.

Valuation Techniques Used to Determine Net asset Value (Exelon and Generation)

Certain NDT Fund Investments are not classified within the fair value hierarchy and are included under the heading “Not subject to leveling” in the table above. These investments are measured at fair value using NAV per share as a practical expedient and include commingled funds, mutual funds which are not publicly quoted, managed private credit funds, private equity and real estate funds.

For commingled funds and mutual funds, which are not publicly quoted, the fair value is primarily derived from the quoted prices in active markets on the underlying securities and can typically be redeemed monthly with 30 or less days of notice and without further restrictions. For managed private credit funds, the fair value is determined using a combination of valuation models including cost models, market models, and income models and typically cannot be redeemed until maturity of the term loan. Private equity and real estate investments include those in limited partnerships that invest in operating companies and real estate holding companies that are not publicly traded on a stock exchange, such as, leveraged buyouts, growth capital, venture capital, distressed investments, investments in natural resources, and direct investments in pools of real estate properties. These investments typically cannot be redeemed and are generally liquidated over a period of 8 to 10 years from the initial investment date, which is based on Exelon’s understanding of the investment funds. Private equity and real estate valuations are reported by the fund manager and are based on the valuation of the underlying investments, which include inputs such as cost, operating results, discounted future cash flows, market based comparable data, and independent appraisals from sources with professional qualifications. These valuation inputs are unobservable.

Mark-to-Market Derivatives (Exelon, Generation and ComEd)

The table below discloses the significant inputs to the forward curve used to value mark-to-market derivatives.



Type of trade	Fair Value at March 31, 2020			Fair Value at December 31, 2019			Valuation Technique	Unobservable Input	2020 Range & Arithmetic Average				2019 Range & Arithmetic Average
Mark-to-market derivatives — Economic Hedges (Exelon and Generation)^(a)(b)	$	610		$	558		Discounted Cash Flow	Forward power price	$6	-	$136	$27	$9	-	$180	$29
								Forward gas price	$1.02	-	$8.10	$2.43	$0.83	-	$10.72	$2.55
							Option Model	Volatility percentage	8%	-	304%	70%	8%	-	236%	70%

Mark-to-market derivatives — Proprietary trading (Exelon and Generation)^(a)(b)	$	37		$	45		Discounted Cash Flow	Forward power price	$15	-	$136	$31	$25	-	$180	$33

Mark-to-market derivatives (Exelon and ComEd)	$	(314	)	$	(301	)	Discounted Cash Flow	Forward heat rate^(c)	9x	-	10x	9.22x	9x	-	10x	9.68x
								Marketability reserve	3%	-	7%	5.11%	3%	-	7%	4.95%
								Renewable factor	90%	-	122%	99%	91%	-	123%	99%

_________


(a)	The valuation techniques, unobservable inputs, ranges and arithmetic averages are the same for the asset and liability positions.


(b)	The fair values do not include cash collateral posted on level three positions of $215 million and $214 million as of March 31, 2020 and December 31, 2019, respectively.


(c)	Quoted forward natural gas rates are utilized to project the forward power curve for the delivery of energy at specified future dates. The natural gas curve is extrapolated beyond its observable period to the end of the contract’s delivery.

The inputs listed above, which are as of the balance sheet date, would have a direct impact on the fair values of the above instruments if they were adjusted. The significant unobservable inputs used in the fair value measurement of Generation’s commodity derivatives are forward commodity prices and for options is price volatility. Increases (decreases) in the forward commodity price in isolation would result in significantly higher (lower) fair values for long positions (contracts that give Generation the obligation or option to purchase a commodity), with offsetting impacts to short positions (contracts that give Generation the obligation or right to sell a commodity). Increases (decreases) in volatility would increase (decrease) the value for the holder of the option (writer of the option). Generally, a change in the estimate of forward commodity prices is unrelated to a change in the estimate of volatility of prices. An increase to the reserves listed above would decrease the fair value of the positions. An increase to the heat rate or renewable factors would increase the fair value accordingly. Generally, interrelationships exist between market prices of natural gas and power. As such, an increase in natural gas pricing would potentially have a similar impact on forward power markets.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details