Discontinued Operations (Exelon)

12 Months Ended

Dec. 31, 2023

Discontinued Operations and Disposal Groups [Abstract]

On February 21, 2021, Exelon's Board of Directors approved a plan to separate the Utility Registrants and Generation, creating two publicly traded companies ("the separation"). Exelon completed the separation on February 1, 2022, through the distribution of 326,663,937 common stock shares of Constellation, the new publicly traded company, to Exelon shareholders. Under the separation plan, Exelon shareholders retained their current shares of Exelon stock and received one share of Constellation common stock for every three shares of Exelon common stock held on January 20, 2022, the record date for the distribution, in a transaction that was tax-free to Exelon and its shareholders for U.S. federal income tax purposes.

Constellation was newly formed and incorporated in Pennsylvania on June 15, 2021 for the purposes of separation and holds Generation (including Generation's subsidiaries).

Pursuant to the separation:

•Exelon entered into four term loans consisting of a 364-day term loan for $1.15 billion and three 18-month term loans for $300 million, $300 million, and $250 million, respectively. Exelon issued these term loans primarily to fund the cash payment to Constellation and for general corporate purposes. See Note 16 — Debt and Credit Agreements for additional information.

•Exelon made a cash payment of $1.75 billion to Constellation on January 31, 2022.

•Exelon contributed its equity ownership interest in Generation to Constellation. Exelon no longer retains any equity ownership interest in Generation or Constellation.

•Exelon transferred certain corporate assets and employee-related obligations to Constellation.

•Exelon received cash from Generation of $258 million to settle the intercompany loan on January 31, 2022. See Note 16 — Debt and Credit Agreements for additional information.

Continuing Involvement

In order to govern the ongoing relationships between Exelon and Constellation after the separation, and to facilitate an orderly transition, Exelon and Constellation have entered into several agreements, including the following:

•Separation Agreement – governs the rights and obligations between Exelon and Constellation regarding certain actions to be taken in connection with the separation, among others, including the allocation of assets and liabilities between Exelon and Constellation.

•Transition Services Agreement (TSA) – governs the terms and conditions of the services that Exelon provides to Constellation and Constellation provides to Exelon for an expected period of two years, provided that certain services may be longer than the term and services may be extended with approval from both parties. The services include specified accounting, finance, information technology, human resources, employee benefits, and other services that have historically been provided on a centralized basis by BSC. For the year ended December 31, 2023, the amounts Exelon billed Constellation and Constellation billed Exelon for these services were $151 million recorded in Other income, net and $14 million recorded in Operating and maintenance expense, respectively. For the period from February 1, 2022 to December 31, 2022, the amounts Exelon billed Constellation and Constellation billed Exelon for these services were $266 million recorded in Other income, net and $43 million recorded in Operating and maintenance expense, respectively.

•Tax Matters Agreement (TMA) – governs the respective rights, responsibilities and obligations of Exelon and Constellation with respect to all tax matters, including tax liabilities and benefits, tax attributes, tax returns, tax contests and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns. See Note 13 — Income Taxes for additional information.

In addition, the Utility Registrants will continue to incur expenses from transactions with Constellation after the separation. Prior to the separation, such expenses were primarily recorded as Purchased power from affiliates and an immaterial amount recorded as Operating and maintenance expense from affiliates at the Utility Registrants. After the separation, such expenses are primarily recorded as Purchased power and an immaterial amount recorded as Operating and maintenance expense at the Utility Registrants.

•ComEd had an ICC-approved RFP contract with Constellation to provide a portion of ComEd’s electric supply requirements. ComEd also purchased RECs and ZECs from Constellation.

•PECO received electric supply from Constellation under contracts executed through PECO’s competitive procurement process. In addition, PECO had a ten-year agreement with Constellation to sell solar AECs.

•BGE received a portion of its energy requirements from Constellation under its MDPSC-approved market-based SOS and gas commodity programs.

•Pepco received electric supply from Constellation under contracts executed through Pepco’s competitive procurement process approved by the MDPSC and DCPSC.

•DPL received a portion of its energy requirements from Constellation under its MDPSC and DEPSC approved market-based SOS commodity programs.

•ACE received electric supply from Constellation under contracts executed through ACE’s competitive procurement process approved by the NJBPU.

ComEd and PECO also have receivables with Constellation for estimated excess funds at the end of decommissioning the Regulatory Agreement Units, such amounts are due back to ComEd and PECO, as applicable, for payment to their respective customers. See Note 3 — Regulatory Matters and Note 23 — Related Party Transactions for additional information.

Discontinued Operations

The separation represented a strategic shift that had a major effect on Exelon’s operations and financial results. Accordingly, the separation met the criteria for discontinued operations.

There were no results from discontinued operations for the year ended December 31, 2023. The following table presents the results of Constellation that have been reclassified from continuing operations and included in discontinued operations within Exelon’s Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2022 and 2021.

These results are primarily Generation, which is comprised of Exelon’s Mid-Atlantic, Midwest, New York, ERCOT, and Other Power Regions reportable segments, and include the impact of transaction costs, certain BSC costs, including any transition costs, that were historically allocated and directly attributable to Generation, transactions between Generation and the Utility Registrants, and tax-related adjustments. Transaction costs include costs for external bankers, accountants, appraisers, lawyers, external counsels and other advisors, among others, who are involved in the negotiation, appraisal, due diligence and regulatory approval of the separation. Transition costs are primarily employee-related costs such as recruitment expenses, costs to establish certain stand-alone functions and information technology systems, professional services fees, and other separation-related costs during the transition to separate Generation. For the purposes of reporting discontinued operations, these results also include transactions between Generation and the Utility Registrants that were historically eliminated within Exelon’s Consolidated Statements of Operations, as these transactions will be ongoing after the separation. Certain BSC costs that were historically allocated to Generation are presented as part of continuing operations in Exelon’s Consolidated Statements of Operations as these costs do not qualify as expenses of the discontinued operations per the accounting rules.


	For the Years Ended December 31,
	2022		2021
Operating revenues
Competitive business revenues	$	1,855	$	18,466
Competitive business revenues from affiliates	161		1,189
Total operating revenues	2,016		19,655
Operating expenses
Competitive businesses purchased power and fuel	1,138		12,163
Operating and maintenance(a)	371		4,174
Depreciation and amortization	94		3,003
Taxes other than income taxes	44		475
Total operating expenses	1,647		19,815
Gain on sales of assets and businesses	10		201
Operating income	379		41
Other income and (deductions)
Interest expense, net	(20)		(282)
Other, net	(281)		795
Total other income and (deductions)	(301)		513
Income before income taxes	78		554
Income taxes	(40)		332
Equity in losses of unconsolidated affiliates	(1)		(9)
Net income	117		213
Net income attributable to noncontrolling interests	1		123
Net income from discontinued operations	$	116	$	90

__________

(a)Includes transaction and transition costs related to the separation of $52 million and $43 million for the years ended December 31, 2022 and 2021, respectively.

There were no assets or liabilities of discontinued operations included in Exelon's Consolidated Balance Sheet as of December 31, 2023 and 2022. Constellation had net assets of $11,573 million that separated on February 1, 2022 that resulted in a reduction to Exelon's equity during the year ended December 31, 2022. Refer to the Distribution of Constellation line in Exelon's Consolidated Statement of Changes in Shareholders' Equity for further information.

There were no discontinued operations included within Exelon's Consolidated Statements of Cash Flows for the year ended December 31, 2023. The following table presents selected financial information regarding cash flows of the discontinued operations that are included within Exelon’s Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021.


	For the Years Ended December 31,
	2022		2021
Non-cash items included in net income from discontinued operations:
Depreciation, amortization, and accretion, including nuclear fuel and energy contract amortization	$	207	$	4,540
Asset impairments	—		545
Loss (gain) on sales of assets and businesses	9		(201)
Deferred income taxes and amortization of investment tax credits	(143)		(224)
Net fair value changes related to derivatives	(59)		(568)
Net realized and unrealized losses (gains) on NDT fund investments	205		(586)
Net unrealized losses on equity investments	16		160
Other decommissioning-related activity	36		(946)
Cash flows from investing activities:
Capital expenditures	(227)		(1,341)
Collection of DPP	169		3,902
Supplemental cash flow information:
(Decrease) increase in capital expenditures not paid	$	(128)	$	96
Increase in DPP	348		3,652
Increase in PP&E related to ARO update	335		618