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Fair Value of Financial Assets and Liabilities (All Registrants)

12 Months Ended

Dec. 31, 2023

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, and trust preferred securities (long-term debt to financing trusts or junior subordinated debentures) at December 31, 2023 and 2022. The Registrants have no financial liabilities classified as Level 1 or measured using the NAV practical expedient.

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


	December 31, 2023										December 31, 2022
	Carrying Amount		Fair Value								Carrying Amount		Fair Value
			Level 1		Level 2		Level 3		Total				Level 1		Level 2		Level 3		Total
Long-Term Debt, including amounts due within one year(a)
Exelon	$	41,095	$	—	$	33,804	$	3,442	$	37,246	$	37,074	$	—	$	29,902	$	2,327	$	32,229
ComEd	11,486		—		10,210		—		10,210		10,518		—		9,006		—		9,006
PECO	5,134		—		4,562		—		4,562		4,612		—		3,864		50		3,914
BGE	4,602		—		4,145		—		4,145		4,207		—		3,613		—		3,613
PHI	8,648		—		4,160		3,442		7,602		8,120		—		4,507		2,277		6,784
Pepco	4,096		—		2,311		1,600		3,911		3,751		—		2,229		1,205		3,434
DPL	2,080		—		694		1,134		1,828		1,938		—		1,164		458		1,622
ACE	1,833		—		939		708		1,647		1,757		—		909		614		1,523
Long-Term Debt to Financing Trusts
Exelon	$	390	$	—	$	—	$	390	$	390	$	390	$	—	$	—	$	384	$	384
ComEd	205		—		—		208		208		205		—		—		204		204
PECO	184		—		—		182		182		184		—		—		180		180

__________

(a)Includes unamortized debt issuance costs, unamortized debt discount and premium, net, purchase accounting fair value adjustments, and finance lease liabilities which are not fair valued. Refer to Note 16 — Debt and Credit Agreements for unamortized debt issuance costs, unamortized debt discount and premium, net, and purchase accounting fair value adjustments and Note 10 — Leases for finance lease liabilities.

Exelon uses the following methods and assumptions to estimate fair value of financial liabilities recorded at carrying cost:


Type	Level	Registrants	Valuation
Long-Term Debt, including amounts due within one year
Taxable Debt Securities	2	All	The fair value is determined by a valuation model that is based on a conventional discounted cash flow methodology and utilizes assumptions of current market pricing curves. Exelon obtains credit spreads based on trades of existing Exelon debt securities as well as other issuers in the utility sector with similar credit ratings. The yields are then converted into discount rates of various tenors that are used for discounting the respective cash flows of the same tenor for each bond or note.
Variable Rate Financing Debt	2	Exelon, DPL	Debt rates are reset on a regular basis and the carrying value approximates fair value.
Non-Government Backed Fixed Rate Nonrecourse Debt	2	Exelon	Fair value is based on market and quoted prices for its own and other nonrecourse debt with similar risk profiles. Given the low trading volume in the nonrecourse debt market, the price quotes used to determine fair value will reflect certain qualitative factors, such as market conditions, investor demand, new developments that might significantly impact the project cash flows or off-taker credit, and other circumstances related to the project.
Taxable Private Placement Debt Securities	3	Exelon, Pepco, DPL, ACE	Rates are obtained similar to the process for taxable debt securities. Due to low trading volume and qualitative factors such as market conditions, low volume of investors, and investor demand, these debt securities are Level 3.
Long-Term Debt to Financing Trusts
Long Term Debt to Financing Trusts	3	Exelon, ComEd, PECO	Fair value is based on publicly traded securities issued by the financing trusts. Due to low trading volume of these securities and qualitative factors, such as market conditions, investor demand, and circumstances related to each issue, this debt is classified as Level 3.

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 at December 31, 2023 and 2022. Exelon and the Utility Registrants have immaterial and no financial assets or liabilities measured using the NAV practical expedient, respectively:

Exelon


	At December 31, 2023								At December 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	618	$	—	$	—	$	618	$	664	$	—	$	—	$	664
Rabbi trust investments
Cash equivalents	67		—		—		67		62		—		—		62
Mutual funds	53		—		—		53		49		—		—		49
Fixed income	—		7		—		7		—		7		—		7
Life insurance contracts	—		61		43		104		—		58		40		98
Rabbi trust investments subtotal	120		68		43		231		111		65		40		216

Interest rate derivative assets
Derivatives designated as hedging instruments	—		11		—		11		—		6		—		6
Economic hedges	—		1		—		1		—		5		—		5
Interest rate derivative assets subtotal	—		12		—		12		—		11		—		11
Total assets	738		80		43		861		775		76		40		891
Liabilities
Commodity derivative liabilities	—		—		(133)		(133)		—		—		(84)		(84)
Interest rate derivative liabilities
Derivatives designated as hedging instruments	—		(24)		—		(24)		—		(4)		—		(4)
Economic hedges	—		(22)		—		(22)		—		(3)		—		(3)
Interest rate derivative liabilities subtotal	—		(46)		—		(46)		—		(7)		—		(7)
Deferred compensation obligation	—		(75)		—		(75)		—		(75)		—		(75)
Total liabilities	—		(121)		(133)		(254)		—		(82)		(84)		(166)
Total net assets (liabilities)	$	738	$	(41)	$	(90)	$	607	$	775	$	(6)	$	(44)	$	725

__________

(a)Excludes cash of $334 million and $345 million at December 31, 2023 and 2022, respectively, and restricted cash of $149 million and $81 million at December 31, 2023 and 2022, respectively, and includes long-term restricted cash of $174 million and $117 million at December 31, 2023 and 2022, respectively, which is reported in Other deferred debits in the Consolidated Balance Sheets.

ComEd, PECO, and BGE


	ComEd								PECO								BGE
At December 31, 2023	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)	$	453	$	—	$	—	$	453	$	9	$	—	$	—	$	9	$	—	$	—	$	—	$	—
Rabbi trust investments
Mutual funds	—		—		—		—		9		—		—		9		9		—		—		9
Life insurance contracts	—		—		—		—		—		18		—		18		—		—		—		—
Rabbi trust investments subtotal	—		—		—		—		9		18		—		27		9		—		—		9

Total assets	453		—		—		453		18		18		—		36		9		—		—		9
Liabilities
Commodity derivative liabilities(b)	—		—		(133)		(133)		—		—		—		—		—		—		—		—
Deferred compensation obligation	—		(8)		—		(8)		—		(8)		—		(8)		—		(4)		—		(4)
Total liabilities	—		(8)		(133)		(141)		—		(8)		—		(8)		—		(4)		—		(4)
Total net assets (liabilities)	$	453	$	(8)	$	(133)	$	312	$	18	$	10	$	—	$	28	$	9	$	(4)	$	—	$	5


	ComEd								PECO								BGE
At December 31, 2022	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)	$	392	$	—	$	—	$	392	$	10	$	—	$	—	$	10	$	23	$	—	$	—	$	23
Rabbi trust investments
Mutual funds	—		—		—		—		7		—		—		7		7		—		—		7
Life insurance contracts	—		—		—		—		—		15		—		15		—		—		—		—
Rabbi trust investments subtotal	—		—		—		—		7		15		—		22		7		—		—		7
Total assets	392		—		—		392		17		15		—		32		30		—		—		30
Liabilities
Commodity derivative liabilities(b)	—		—		(84)		(84)		—		—		—		—		—		—		—		—
Deferred compensation obligation	—		(8)		—		(8)		—		(7)		—		(7)		—		(4)		—		(4)
Total liabilities	—		(8)		(84)		(92)		—		(7)		—		(7)		—		(4)		—		(4)
Total net assets (liabilities)	$	392	$	(8)	$	(84)	$	300	$	17	$	8	$	—	$	25	$	30	$	(4)	$	—	$	26

__________

(a)ComEd excludes cash of $86 million and $42 million at December 31, 2023 and 2022, respectively, and restricted cash of $147 million and $77 million at December 31, 2023 and 2022, respectively, and includes long-term restricted cash of $174 million and $117 million at December 31, 2023 and 2022, respectively, which is reported in Other deferred debits in the Consolidated Balance Sheets. PECO excludes cash of $42 million and $58 million at December 31, 2023 and 2022, respectively. BGE excludes cash of $47 million and $43 million at December 31, 2023 and 2022, respectively, and restricted cash of $1 million and $1 million at December 31, 2023 and 2022, respectively.

(b)The Level 3 balance consists of the current and noncurrent liability of $27 million and $106 million, respectively, at December 31, 2023, and $5 million and $79 million, respectively, at December 31, 2022 related to floating-to-fixed energy swap contracts with unaffiliated suppliers.

PHI, Pepco, DPL, and ACE


	At December 31, 2023								At December 31, 2022
PHI	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(a)	$	107	$	—	$	—	$	107	$	205	$	—	$	—	$	205
Rabbi trust investments
Cash equivalents	64		—		—		64		59		—		—		59
Mutual funds	9		—		—		9		11		—		—		11
Fixed income	—		7		—		7		—		7		—		7
Life insurance contracts	—		21		41		62		—		22		39		61
Rabbi trust investments subtotal	73		28		41		142		70		29		39		138
Total assets	180		28		41		249		275		29		39		343
Liabilities
Deferred compensation obligation	—		(13)		—		(13)		—		(14)		—		(14)
Total liabilities	—		(13)		—		(13)		—		(14)		—		(14)
Total net assets	$	180	$	15	$	41	$	236	$	275	$	15	$	39	$	329


	Pepco								DPL								ACE
At December 31, 2023	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)	$	23	$	—	$	—	$	23	$	1	$	—	$	—	$	1	$	—	$	—	$	—	$	—
Rabbi trust investments
Cash equivalents	63		—		—		63		—		—		—		—		—		—		—		—
Life insurance contracts	—		21		41		62		—		—		—		—		—		—		—		—
Rabbi trust investments subtotal	63		21		41		125		—		—		—		—		—		—		—		—
Total assets	86		21		41		148		1		—		—		1		—		—		—		—
Liabilities
Deferred compensation obligation	—		(1)		—		(1)		—		—		—		—		—		—		—		—



Total liabilities	—		(1)		—		(1)		—		—		—		—		—		—		—		—
Total net assets	$	86	$	20	$	41	$	147	$	1	$	—	$	—	$	1	$	—	$	—	$	—	$	—


	Pepco								DPL								ACE
At December 31, 2022	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)	$	51	$	—	$	—	$	51	$	121	$	—	$	—	$	121	$	1	$	—	$	—	$	1

Rabbi trust investments
Cash equivalents	59		—		—		59		—		—		—		—		—		—		—		—

Life insurance contracts	—		22		38		60		—		—		—		—		—		—		—		—
Rabbi trust investments subtotal	59		22		38		119		—		—		—		—		—		—		—		—
Total assets	110		22		38		170		121		—		—		121		1		—		—		1
Liabilities
Deferred compensation obligation	—		(1)		—		(1)		—		—		—		—		—		—		—		—



Total liabilities	—		(1)		—		(1)		—		—		—		—		—		—		—		—
Total net assets	$	110	$	21	$	38	$	169	$	121	$	—	$	—	$	121	$	1	$	—	$	—	$	1

__________

(a)PHI excludes cash of $96 million and $165 million at December 31, 2023 and 2022, respectively, and restricted cash of $1 million and $3 million at December 31, 2023 and 2022, respectively. Pepco excludes cash of $48 million and $45 million at December 31, 2023 and 2022, respectively, and restricted cash of $1 million and $3 million at December 31, 2023 and 2022, respectively. DPL excludes cash of $15 million and $31 million at December 31, 2023 and 2022, respectively. ACE excludes cash of $21 million and $71 million at December 31, 2023 and 2022, respectively.

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 years ended December 31, 2023 and 2022:


	Exelon		ComEd			PHI and Pepco
For the year ended December 31, 2023	Total		Commodity Derivatives			Life Insurance Contracts
Balance at December 31, 2022	$	(44)	$	(84)		$	40
Total realized / unrealized gains (losses)
Included in net income(a)	3		—			1
Included in regulatory assets/liabilities	(49)		(49)		(b)	—




Balance at December 31, 2023	$	(90)	$	(133)	(c)	$	41
The amount of total gains included in income attributed to the change in unrealized gains (losses) related to assets and liabilities as of December 31, 2023	$	3	$	—		$	1


	Exelon		ComEd			PHI and Pepco
For the year ended December 31, 2022	Total		Commodity Derivatives			Life Insurance Contracts
Balance at December 31, 2021	$	(182)	$	(219)		$	35
Total realized / unrealized gains (losses)
Included in net income(a)	5		—			5
Included in regulatory assets/liabilities	135		135		(b)	—


Transfers into Level 3	(2)		—			—

Balance at December 31, 2022	$	(44)	$	(84)		$	40
The amount of total gains included in income attributed to the change in unrealized gains (losses) related to assets and liabilities as of December 31, 2022	$	5	$	—		$	5

__________

(a)Classified in Operating and maintenance expense in the Consolidated Statements of Operations and Comprehensive Income.

(b)Includes $83 million of decreases in fair value and an increase for realized gains due to settlements of $34 million recorded in Purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the year ended December 31, 2023. Includes $136 million of increases in fair value and a decrease for realized losses due to settlements of $1 million recorded in Purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the year ended December 31, 2022.

(c)The balance of the current and noncurrent asset was effectively zero as of December 31, 2023. The balance consists of a current and noncurrent liability of $27 million and $106 million, respectively, as of December 31, 2023.

Valuation Techniques Used to Determine Fair Value

Cash Equivalents (All Registrants). Investments with original maturities of three months or less when purchased, including mutual and money market funds, are considered cash equivalents. The fair values are based on observable market prices and, therefore, are included in the recurring fair value measurements hierarchy as Level 1.

Rabbi Trust Investments (Exelon, PECO, BGE, PHI, Pepco, DPL, and ACE). The Rabbi trusts were established to hold assets related to deferred compensation plans existing for certain active and retired members of Exelon’s executive management and directors. The Rabbi trusts' assets are included in Investments in the Registrants’ Consolidated Balance Sheets and consist primarily of money market funds, mutual funds, fixed income securities, and life insurance policies. Money market funds and mutual funds are publicly quoted and have been categorized as Level 1 given the clear observability of the prices. The fair values of fixed income securities are based on evaluated prices that reflect observable market information, such as actual trade information or similar securities, adjusted for observable differences and are categorized in Level 2. The life insurance policies are valued using the cash surrender value of the policies, net of loans against those policies, which is provided by a third-party. Certain life insurance policies, which consist primarily of mutual funds that are priced based on observable market data, have been categorized as Level 2 because the life insurance policies can be liquidated at the reporting date for the value of the underlying assets. Life insurance policies that are valued using unobservable inputs have been categorized as Level 3, where the fair value is determined based on the cash surrender value of the policy, which contains unobservable inputs and assumptions. Because Exelon relies on its third-party insurance provider to develop the inputs without adjustment for the valuations of its Level 3 investments, quantitative information about significant unobservable inputs used in valuing these investments is not reasonably available to Exelon. Therefore, Exelon has not disclosed such inputs.

Interest Rate Derivatives (Exelon) Exelon may utilize fixed-to-floating or floating-to-fixed interest rate swaps as a means to manage interest rate risk. These interest rate swaps are typically accounted for as economic hedges. In addition, Exelon may utilize interest rate derivatives to lock in interest rate levels in anticipation of future financings. These interest rate derivatives are typically designated as cash flow hedges. Exelon determines the current fair value by calculating the net present value of expected payments and receipts under the swap agreement, based on and discounted by the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk and other market parameters. As these inputs are based on observable data and valuations of similar instruments, the interest rate swaps are categorized as Level 2 in the fair value hierarchy. See Note 15 — Derivative Financial Instruments for additional information on mark-to-market derivatives.

Deferred Compensation Obligations (All Registrants). The Registrants’ deferred compensation plans allow participants to defer certain cash compensation into a notional investment account. The Registrants include such plans in other current and noncurrent liabilities in their Consolidated Balance Sheets. The value of the Registrants’ deferred compensation obligations is based on the market value of the participants’ notional investment accounts. The underlying notional investments are comprised primarily of equities, mutual funds, commingled funds, and fixed income securities which are based on directly and indirectly observable market prices. Since the deferred compensation obligations themselves are not exchanged in an active market, they are categorized as Level 2 in the fair value hierarchy.

The value of certain employment agreement obligations (which are included with the Deferred Compensation Obligation in the tables above) are based on a known and certain stream of payments to be made over time and are categorized as Level 2 within the fair value hierarchy.

Commodity Derivatives (Exelon and ComEd). On December 17, 2010, ComEd entered into several 20-year floating to fixed energy swap contracts with unaffiliated suppliers for the procurement of long-term renewable energy and associated RECs. Delivery under the contracts began in June 2012. The fair value of these swaps has been designated as a Level 3 valuation due to the long tenure of the positions and the internal modeling assumptions. The modeling assumptions include using forward power prices. See Note 15 — Derivative Financial Instruments for additional information on mark-to-market derivatives.

The following table discloses the significant unobservable inputs to the forward curve used to value mark-to-market derivatives:


Type of trade	Fair Value as of December 31, 2023		Fair Value as of December 31, 2022		Valuation Technique	Unobservable Input	2023 Range & Arithmetic Average							2022 Range & Arithmetic Average
Commodity derivatives	$	(133)	$	(84)	Discounted Cash Flow	Forward power price(a)	$	30.27	-	$	73.71	$	43.35	$	34.78	-	$	75.71	$	48.44

__________

(a)An increase to the forward power price would increase the fair value.

- 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.

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