Variable Interest Entities (Exelon, Generation, PHI and ACE)

9 Months Ended

Sep. 30, 2021

Variable Interest Entities (Exelon, Generation, PHI, and ACE)

At September 30, 2021 and December 31, 2020, Exelon, Generation, PHI, and ACE collectively consolidated several VIEs or VIE groups for which the applicable Registrant was the primary beneficiary (see Consolidated VIEs below) and had significant interests in several other VIEs for which the applicable Registrant does not have the power to direct the entities’ activities and, accordingly, was not the primary beneficiary (see Unconsolidated VIEs below). Consolidated and unconsolidated VIEs are aggregated to the extent that the entities have similar risk profiles.

Consolidated VIEs

The table below shows the carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in the consolidated financial statements of Exelon, Generation, PHI, and ACE as of September 30, 2021 and December 31, 2020. The assets, except as noted in the footnotes to the table below, can only be used to settle obligations of the VIEs. The liabilities, except as noted in the footnote to the table below, are such that creditors, or beneficiaries, do not have recourse to the general credit of Exelon, Generation, PHI, and ACE.


	September 30, 2021								December 31, 2020
	Exelon		Generation		PHI(a)		ACE		Exelon		Generation		PHI(a)		ACE
Cash and cash equivalents	$	38	$	38	$	—	$	—	$	98	$	98	$	—	$	—
Restricted cash and cash equivalents	47		42		5		5		47		44		3		3
Accounts receivable
Customer	25		25		—		—		148		148		—		—
Other	7		7		—		—		36		36		—		—
Unamortized energy contract assets	21		21		—		—		22		22		—		—
Inventories, net

Materials and supplies	14		14		—		—		244		244		—		—
Assets held for sale(b)	—		—		—		—		101		101		—		—
Other current assets	517		513		4		—		674		669		5		—
Total current assets	669		660		9		5		1,370		1,362		8		3
Property, plant, and equipment, net	2,052		2,052		—		—		5,803		5,803		—		—
Nuclear decommissioning trust funds	—		—		—		—		3,007		3,007		—		—

Unamortized energy contract assets	210		210		—		—		249		249		—		—
Other noncurrent assets	22		13		9		9		52		42		10		10
Total noncurrent assets	2,284		2,275		9		9		9,111		9,101		10		10
Total assets(c)	$	2,953	$	2,935	$	18	$	14	$	10,481	$	10,463	$	18	$	13
Long-term debt due within one year	$	80	$	70	$	10	$	6	$	94	$	68	$	26	$	21
Accounts payable	11		11		—		—		81		81		—		—
Accrued expenses	14		14		—		—		70		70		—		—

Unamortized energy contract liabilities	—		—		—		—		4		4		—		—
Liabilities held for sale(b)	—		—		—		—		16		16		—		—
Other current liabilities	—		—		—		—		5		5		—		—
Total current liabilities	105		95		10		6		270		244		26		21
Long-term debt	832		832		—		—		889		889		—		—
Asset retirement obligations	149		149		—		—		2,318		2,318		—		—


Other noncurrent liabilities	3		3		—		—		129		129		—		—
Total noncurrent liabilities	984		984		—		—		3,336		3,336		—		—
Total liabilities(d)	$	1,089	$	1,079	$	10	$	6	$	3,606	$	3,580	$	26	$	21

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(a)Includes certain purchase accounting adjustments from the PHI merger not pushed down to ACE.

(b)In the fourth quarter of 2020, Generation entered into an agreement for the sale of a significant portion of Generation's solar business, and as a result of this transaction, Exelon and Generation reclassified the consolidated VIEs' solar assets and liabilities as held for sale. Completion of the transaction occurred in the first quarter of 2021. Refer to Note 2 — Mergers, Acquisitions, and Dispositions for additional information on the solar business.

(c)Exelon’s and Generation’s balances include unrestricted assets for current unamortized energy contract assets of $21 million and $22 million, non-current unamortized energy contract assets of $210 million and $249 million, assets held for sale of $0 million and $9 million, and other unrestricted assets of $0 million and $1 million as of September 30, 2021 and December 31, 2020, respectively.

(d)Exelon’s and Generation’s balances include liabilities with recourse of $1 million and $8 million as of September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021 and December 31, 2020, Exelon's and Generation's consolidated VIEs included the following:


Consolidated VIE or VIE groups:	Reason entity is a VIE:	Reason Generation is primary beneficiary:
CENG - A joint venture between Generation and EDF. Generation had a 50.01% equity ownership in CENG as of December 31, 2020 and acquired EDF's 49.99% equity interest on August 6,2021 resulting in CENG no longer being classified as a consolidated VIE beginning in the third quarter of 2021. See additional discussion below.	Disproportionate relationship between equity interest and operational control as a result of the NOSA described further below.	Generation conducts the operational activities.
EGRP - A collection of wind and solar project entities. Generation has a 51% equity ownership in EGRP. See additional discussion below.	Similar structure to a limited partnership and the limited partners do not have kick out rights with respect to the general partner.	Generation conducts the operational activities.
Bluestem Wind Energy Holdings, LLC - A Tax Equity structure which is consolidated by EGRP. Generation has a noncontrolling interest.	Similar structure to a limited partnership and the limited partners do not have kick out rights with respect to the general partner.	Generation conducts the operational activities.
Antelope Valley - A solar generating facility, which is 100% owned by Generation. Antelope Valley sells all of its output to PG&E through a PPA.	The PPA contract absorbs variability through a performance guarantee.	Generation conducts all activities.
Equity investment in distributed energy company - Generation has a 31% equity ownership. This distributed energy company has an interest in an unconsolidated VIE. (See Unconsolidated VIEs disclosure below). Generation fully impaired this investment in 2019.	Similar structure to a limited partnership and the limited partners do not have kick out rights with respect to the general partner.	Generation conducts the operational activities.
NER - A bankruptcy remote, special purpose entity which is 100% owned by Generation, which purchases certain of Generation’s customer accounts receivable arising from the sale of retail electricity. NER’s assets will be available first and foremost to satisfy the claims of the creditors of NER. See Note 6 - Accounts Receivable for additional information on the sale of receivables.	Equity capitalization is insufficient to support its operations.	Generation conducts all activities.

CENG - On April 1, 2014, Generation, CENG, and subsidiaries of CENG executed the NOSA pursuant to which Generation conducts all activities associated with the operations of the CENG fleet and provides corporate and administrative services to CENG and the CENG fleet for the remaining life of the CENG nuclear plants as if they were a part of the Generation nuclear fleet, subject to the CENG member rights of EDF.

On November 20, 2019, Generation received notice of EDF's intention to exercise the put option to sell its 49.99% equity interest in CENG to Generation and the put automatically exercised on January 19, 2020. On August 6, 2021, Generation and EDF entered into a settlement agreement pursuant to which Generation purchased EDF's equity interest in CENG and resulted in CENG no longer being classified as a consolidated VIE beginning in the third quarter of 2021. Refer to Note 2 — Mergers, Acquisitions, and Dispositions for additional information.

Exelon and Generation, where indicated, provide the following support to CENG:

•Generation executed an Indemnity Agreement pursuant to which Generation agreed to indemnify EDF against third-party claims that may arise from any future nuclear incident (as defined in the Price-Anderson Act) in connection with the CENG nuclear plants or their operations. Exelon guarantees Generation’s obligations under this Indemnity Agreement. See Note 19 — Commitments and Contingencies of the Exelon 2020 Form 10-K for more details.

•Exelon has executed an agreement to provide up to $245 million to support the operations of CENG as well as a $165 million guarantee of CENG’s cash pooling agreement with its subsidiaries.

Prior to August 6, 2021, Generation and EDF shared in the $688 million of contingent payment obligations for the payment of contingent retrospective premium adjustments for the nuclear liability insurance. Following the execution of the settlement agreement, EDF no longer shares in the obligation.

EGRP - EGRP is a collection of wind and solar project entities and some of these project entities are VIEs that are consolidated by EGRP. Generation owns a number of limited liability companies that build, own, and operate solar and wind power facilities some of which are owned by EGRP. While Generation or EGRP owns 100% of the solar entities and 100% of the majority of the wind entities, it has been determined that certain of the solar and wind entities are VIEs because the entities require additional subordinated financial support in the form of a parental guarantee of debt, loans from the customers in order to obtain the necessary funds for construction of the solar facilities, or the customers absorb price variability from the entities through the fixed price power and/or REC purchase agreements. Generation is the primary beneficiary of these solar and wind entities that qualify as VIEs because Generation controls the design, construction, and operation of the facilities. There is limited recourse to Generation related to certain solar and wind entities.

In 2017, Generation’s interests in EGRP were contributed to and are pledged for the ExGen Renewables IV non-recourse debt project financing structure. Refer to Note 17 — Debt and Credit Agreements of the Exelon 2020 Form 10-K for additional information on ExGen Renewables IV.

As of September 30, 2021 and December 31, 2020, Exelon's, PHI's, and ACE's consolidated VIE consists of:


Consolidated VIEs:	Reason entity is a VIE:	Reason ACE is the primary beneficiary:
ACE Funding - A special purpose entity formed by ACE for the purpose of securitizing authorized portions of ACE’s recoverable stranded costs through the issuance and sale of Transition Bonds. Proceeds from the sale of each series of Transition Bonds by ATF were transferred to ACE in exchange for the transfer by ACE to ATF of the right to collect a non-bypassable Transition Bond Charge from ACE customers pursuant to bondable stranded costs rate orders issued by the NJBPU in an amount sufficient to fund the principal and interest payments on Transition Bonds and related taxes, expenses and fees.	ACE’s equity investment is a variable interest as, by design, it absorbs any initial variability of ATF. The bondholders also have a variable interest for the investment made to purchase the Transition Bonds.	ACE controls the servicing activities.

Unconsolidated VIEs

Exelon’s and Generation’s variable interests in unconsolidated VIEs generally include equity investments and energy purchase and sale contracts. For the equity investments, the carrying amount of the investments is reflected in Exelon’s and Generation’s Consolidated Balance Sheets in Investments. For the energy purchase and sale contracts (commercial agreements), the carrying amount of assets and liabilities in Exelon’s and Generation’s Consolidated Balance Sheets that relate to their involvement with the VIEs are predominately related to working capital accounts and generally represent the amounts owed by, or owed to, Exelon and Generation for the deliveries associated with the current billing cycles under the commercial agreements.

As of September 30, 2021 and December 31, 2020, Exelon and Generation had significant unconsolidated variable interests in several VIEs for which Exelon or Generation, as applicable, was not the primary beneficiary. These interests include certain equity method investments and certain commercial agreements.

The following table presents summary information about Exelon's and Generation’s significant unconsolidated VIE entities:


	September 30, 2021						December 31, 2020
	Commercial Agreement VIEs		Equity Investment VIEs		Total		Commercial Agreement VIEs		Equity Investment VIEs		Total
Total assets(a)	$	781	$	370	$	1,151	$	777	$	401	$	1,178
Total liabilities(a)	80		209		289		61		223		284
Exelon's ownership interest in VIE(a)	—		143		143		—		157		157
Other ownership interests in VIE(a)	701		18		719		716		21		737

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(a)These items represent amounts in the unconsolidated VIE balance sheets, not in Exelon’s or Generation’s Consolidated Balance Sheets. These items are included to provide information regarding the relative size of the unconsolidated VIEs. Exelon and Generation do not have any exposure to loss as they do not have a carrying amount in the equity investment VIEs as of September 30, 2021 and December 31, 2020.

As of September 30, 2021 and December 31, 2020, Exelon's and Generation's unconsolidated VIEs consist of:


Unconsolidated VIE groups:	Reason entity is a VIE:	Reason Generation is not the primary beneficiary:
Equity investments in distributed energy companies - 1) Generation has a 90% equity ownership in a distributed energy company. 2) Generation, via a consolidated VIE, has a 90% equity ownership in another distributed energy company (See Consolidated VIEs disclosure above). Generation fully impaired this investment in 2019.	Similar structures to a limited partnership and the limited partners do not have kick out rights with respect to the general partner.	Generation does not conduct the operational activities.
Energy Purchase and Sale agreements - Generation has several energy purchase and sale agreements with generating facilities.	PPA contracts that absorb variability through fixed pricing.	Generation does not conduct the operational activities.