The Registrants are exposed to certain risks related to ongoing business operations. The primary risks managed by using derivative instruments are commodity price risk and interest rate risk.

To the extent the amount of energy Exelon generates differs from the amount of energy it has contracted to sell, the Registrants are exposed to market fluctuations in the prices of electricity, fossil fuels and other commodities. The Registrants employ established policies and procedures to manage their risks associated with market fluctuations by entering into physical contracts as well as financial derivative contracts including swaps, futures, forwards, options and short-term and long-term commitments to purchase and sell energy and energy-related products. The Registrants believe these instruments, which are classified as either economic hedges or non-derivatives, mitigate exposure to fluctuations in commodity prices.

Derivative accounting guidance requires that derivative instruments be recognized as either assets or liabilities at fair value, with changes in fair value of the derivative recognized in earnings each period. Other accounting treatments are available through special election and designation, provided they meet specific, restrictive criteria both at the time of designation and on an ongoing basis. These alternative permissible accounting treatments include normal purchase normal sale (NPNS), cash flow hedge, and fair value hedge. For commodity transactions, effective with the date of merger with Constellation, Generation will no longer utilize the special election provided for by the cash flow hedge designation and de-designated all of its existing cash flow hedges prior to the merger. Because the underlying forecasted transactions remain probable, the fair value of the effective portion of these cash flow hedges was frozen in accumulated OCI and will be reclassified to results of operations when the forecasted purchase or sale of the energy commodity occurs, or becomes probable of not occurring. None of Constellation's designated cash flow hedges for commodity transactions prior to the merger were re-designated as cash flow hedges. The effect of this decision is that all economic hedges for commodities are recorded at fair value through earnings for the combined company, referred to as economic hedges in the following tables. The Registrants have applied the NPNS scope exception to certain derivative contracts for the forward sale of generation, power procurement agreements, and natural gas supply agreements. Non-derivative contracts for access to additional generation and certain sales to load-serving entities are accounted for primarily under the accrual method of accounting, which is further discussed in Note 18 of the Exelon 2011 Form 10-K. Additionally, Generation is exposed to certain market risks through its proprietary trading activities. The proprietary trading activities are a complement to Generation's energy marketing portfolio but represent a small portion of Generation's overall energy marketing activities.

Economic Hedging. The Registrants are exposed to commodity price risk primarily relating to changes in the market price of electricity, fossil fuels, and other commodities associated with price movements resulting from changes in supply and demand, fuel costs, market liquidity, weather conditions, governmental regulatory and environmental policies, and other factors. Within Exelon, Generation has the most exposure to commodity price risk. Generation uses a variety of derivative and non-derivative instruments to manage the commodity price risk of its electric generation facilities, including power sales, fuel and energy purchases, and other energy-related products marketed and purchased. In order to manage these risks, Generation may enter into fixed-price derivative or non-derivative contracts to hedge the variability in future cash flows from forecasted sales of energy and purchases of fuel and energy. The objectives for entering into such hedges include fixing the price for a portion of anticipated future electricity sales at a level that provides an acceptable return on electric generation operations, fixing the price of a portion of anticipated fuel purchases for the operation of power plants, and fixing the price for a portion of anticipated energy purchases to supply load-serving customers. The portion of forecasted transactions hedged may vary based upon management's policies and hedging objectives, the market, weather conditions, operational and other factors. Generation is also exposed to differences between the locational settlement prices of certain economic hedges and the hedged generating units. This price difference is actively managed through other instruments which include derivative congestion products, whose changes in fair value are recognized in earnings each period, and auction revenue rights.

In general, increases and decreases in forward market prices have a positive and negative impact, respectively, on Generation's owned and contracted generation positions that have not been hedged. Generation hedges commodity price risk on a ratable basis over three-year periods. As of September 30, 2012, the percentage of expected generation hedged was 98%-101%, 87%-90%, 55%-58% and 20%-23% for 2012, 2013, 2014, and 2015, respectively. The percentage of expected generation hedged is the amount of equivalent sales divided by the expected generation. Expected generation represents the amount of energy estimated to be generated or purchased through owned or contracted capacity excluding owned generation to be retired or sold in 2012. Equivalent sales represent all hedging products, which include economic hedges and certain non-derivative contracts including, sales to ComEd, PECO and BGE to serve their retail load.

ComEd has locked in a fixed price for a significant portion of its commodity price risk through the five-year financial swap contract with Generation that expires on May 31, 2013, which is discussed in more detail below. In addition, the contracts that Generation has entered into with ComEd and that ComEd has entered into with Generation and other suppliers as part of the ComEd power procurement process, which are further discussed in Note 2 of the Exelon 2011 Form 10-K, qualify for the NPNS exception. Based on the Illinois Settlement Legislation and ICC-approved procurement methodologies permitting ComEd to recover its electricity procurement costs from retail customers with no mark-up, ComEd's price risk related to power procurement is limited.

In order to fulfill a requirement of the Illinois Settlement Legislation, Generation and ComEd entered into a five-year financial swap contract effective August 28, 2007. The financial swap is designed to hedge spot market purchases, which, along with ComEd's remaining energy procurement contracts, meet its load service requirements. The remaining swap contract volume is 3,000 MWs through May 2013. The terms of the financial swap contract require Generation to pay the around-the-clock market price for a portion of ComEd's electricity supply requirement, while ComEd pays a fixed price. The contract is to be settled net, for the difference between the fixed and market pricing, and the financial terms only cover energy costs and do not cover capacity or ancillary services. The financial swap contract is a derivative financial instrument that was originally designated by Generation as a cash flow hedge. As discussed previously, effective with the date of merger with Constellation, Generation de-designated this swap as a cash flow hedge and began recording changes in fair value through current earnings as of that date. Generation records the fair value of the swap on its balance sheet and originally recorded changes in fair value to OCI. The value frozen in OCI as of the date of merger for this swap is reclassified into Generation's earnings as the swap settles. ComEd has not elected hedge accounting for this derivative financial instrument. Since the financial swap contract was deemed prudent by the Illinois Settlement Legislation, ComEd receives full cost recovery for the contract in rates and, therefore, the change in fair value each period is recorded as a regulatory asset or liability on ComEd's Consolidated Balance Sheets. See Note 2 of the Exelon 2011 Form 10-K for additional information regarding the Illinois Settlement Legislation. In Exelon's consolidated financial statements, all financial statement effects of the financial swap recorded by Generation and ComEd are eliminated.

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. These contracts are designed to lock in a portion of the long-term commodity price risk resulting from the renewable energy resource procurement requirements in the Illinois Settlement Legislation. ComEd has not elected hedge accounting for these derivative financial instruments. ComEd records the fair value of the swap contracts on its balance sheet. Because ComEd receives full cost recovery for energy procurement and related costs from retail customers, the change in fair value each period is recorded by ComEd as a regulatory asset or liability.

PECO has contracts to procure electric supply that were executed through the competitive procurement process outlined in its PAPUC-approved DSP Program, which is further discussed in Note 4 - Regulatory Matters. Based on Pennsylvania legislation and the DSP Program permitting PECO to recover its electric supply procurement costs from retail customers with no mark-up, PECO's price risk related to electric supply procurement is limited. PECO locked in fixed prices for a significant portion of its commodity price risk through full requirements contracts and block contracts. PECO's full requirements contracts and block contracts, which are considered derivatives, qualify for the normal purchases and normal sales scope exception under current derivative authoritative guidance. For block contracts designated as normal purchases after inception, the mark-to-market balances previously recorded on PECO's Consolidated Balance Sheet were amortized over the terms of the contracts, which ended on December 31, 2011.

PECO's natural gas procurement policy is designed to achieve a reasonable balance of long-term and short-term gas purchases under different pricing approaches in order to achieve system supply reliability at the least cost. PECO's reliability strategy is two-fold. First, PECO must assure that there is sufficient transportation capacity to satisfy delivery requirements. Second, PECO must ensure that a firm source of supply exists to utilize the capacity resources. All of PECO's natural gas supply and asset management agreements that are derivatives either qualify for the normal purchases and normal sales scope exception and have been designated as such, or have no mark-to-market balances because the derivatives are index priced. Additionally, in accordance with the 2012 PAPUC PGC settlement and to reduce the exposure of PECO and its customers to natural gas price volatility, PECO has continued its program to purchase natural gas for both winter and summer supplies using a layered approach of locking-in prices ahead of each season with long-term gas purchase agreements (those with primary terms of at least twelve months). Under the terms of the 2012 PGC settlement, PECO is required to lock in (i.e., economically hedge) the price of a minimum volume of its long-term gas commodity purchases. PECO's gas-hedging program is designed to cover about 30% of planned natural gas purchases in support of projected firm sales. The hedging program for natural gas procurement has no direct impact on PECO's financial position or results of operations as natural gas costs are fully recovered from customers under the PGC.

Proprietary Trading. Generation also enters into certain energy-related derivatives for proprietary trading purposes. Proprietary trading includes all contracts entered into with the intent of benefiting from shifts or changes in market prices as opposed to those entered into with the intent of hedging or managing risk. Proprietary trading activities are subject to limits established by Exelon's RMC. The proprietary trading activities, which included settled physical sales volumes of 4,352 GWh and 9,981 GWh for the three and nine months ended September 30, 2012, respectively, and 1,679 GWh and 4,508 GWh for the three and nine months ended September 30, 2011, respectively, are a complement to Generation's energy marketing portfolio but represent a small portion of Generation's revenue from energy marketing activities. ComEd, PECO and BGE do not enter into derivatives for proprietary trading purposes.

The Registrants use a combination of fixed-rate and variable-rate debt to manage interest rate exposure. The Registrants may also utilize fixed-to-floating interest rate swaps, which are typically designated as fair value hedges, as a means to manage their interest rate exposure. In addition, the Registrants may utilize interest rate derivatives to lock in interest rate levels in anticipation of future financings, which are typically designated as cash flow hedges. These strategies are employed to manage interest rate risks. For interest rate hedges that qualify and are designated as cash flow hedges, the portion of the derivative gain or loss that is effective in offsetting the change in value of the underlying exposure is deferred in accumulated OCI and later reclassified into earnings when the underlying interest rate transaction occurs. For interest rate hedges that qualify and are designated as fair value hedges, only the ineffective portion of the derivative gain or loss will impact earnings. Assuming the fair value and cash flow hedges are effective, a hypothetical 50 bps increase in the interest rates associated with variable-rate debt and interest rate swaps would result in approximately $ 2 million decrease in Exelon Consolidated pre-tax income for the nine months ended September 30, 2012. Below is a summary of the interest rate hedges as of September 30, 2012.

		Generation								Other		Exelon
Description		Derivatives Designated as Hedging Instruments		Economic Hedges (a)		Proprietary Trading (a)		Subtotal		Derivatives Designated as Hedging Instruments		Total
Mark-to-market derivative assets (Current Assets)	$	-	$	3	$	19	$	22	$	-	$	22
Mark-to-market derivative assets (Noncurrent Assets)		42		10		37		89		14		103
Total mark-to-market derivative assets	$	42	$	13	$	56	$	111	$	14	$	125

Mark-to-market derivative liabilities (Current Liabilities)	$	(1)	$	(2)	$	(19)	$	(22)	$	0	$	(22)
Mark-to-market derivative liabilities (Noncurrent Liabilities)		(36)		0		(37)		(73)		0		(73)
Total mark-to-market derivative liabilities	$	(37)	$	(2)	$	(56)	$	(95)	$	0	$	(95)

Total mark-to-market derivative net assets (liabilities)	$	5	$	11	$	0	$	16	$	14	$	30

(a) Generation enters into interest rate derivative contracts to economically hedge risk associated with the interest rate component of commodity positions. The characterization of the interest rate derivative contracts between the economic hedge and proprietary trading activity in the above table is driven by the corresponding characterization of the underlying commodity position that gives rise to the interest rate exposure. Generation does not utilize interest rate derivatives with the objective of benefiting from shifts or change in market interest rates.

Fair Value Hedges. For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. Exelon includes the gain or loss on the hedged items and the offsetting loss or gain on the related interest rate swaps in interest expense as follows:

At September 30, 2012 and December 31, 2011, Exelon had $650 million and $100 million, respectively, of notional amounts of fixed-to-floating fair value hedges outstanding related to interest rate swaps, with unrealized gain of $55 million and $14 million, respectively, which expire in 2015. Upon merger closing, $550 million of fixed-to-floating interest rate swaps previously at Constellation with a fair value of $44 million, as of March 12, 2012, were re-designated as fair value hedges. During the nine months ended September 30, 2012 and September 30, 2011, the impact of loss on the results of operations as a result of ineffectiveness from fair value hedges was immaterial.

At September 30, 2012, Exelon had $150 million of notional amounts of fixed-to-floating interest rate swaps that are marked-to-market, with unrealized gain of $5 million. These swaps, which were acquired as part of the merger with Constellation, expire in 2014. During the period from March 12 to September 30, 2012, the impact on the results of operations was immaterial.

Cash Flow Hedges. In connection with the DOE guaranteed loan for the Antelope Valley acquisition, as discussed in Note 9 – Debt and Credit Agreements, Generation entered into a floating-to-fixed forward starting interest rate swap with a notional amount of $485 million and a mandatory early termination date of April 5, 2014, by which date Generation anticipates that the DOE loan to be fully drawn. The swap hedges approximately 75% of Generation's future interest rate exposure associated with the financing and was designated as a cash flow hedge. As such, the effective portion of the hedge will be recorded in other comprehensive income within Generation's Consolidated Balance Sheets, with any ineffectiveness recorded in Generation's Consolidated Statements of Operations and Comprehensive Income. Net gains (or losses) from settlement of the hedges, to the extent effective, will be amortized as an adjustment to the interest expense over the term of the DOE guaranteed loan.

As Generation draws down on the loan, a portion of the cash flow hedge will be de-designated and the related gains or losses will be reflected in earnings. In order to mitigate this earnings impact, a series of offsetting hedge transactions will be executed as Generation draws on the loan.

Antelope Valley received its first loan advance on April 5, 2012, and several additional advances subsequently, as described in Note 9 - Debt and Credit Agreements. Generation has entered into a series of fixed-to-floating interest rate swaps with an aggregated notional amount of $119 million, 75% of the loan advance amount to offset portions of the original interest rate hedge, which are de-designated as a cash flow hedge. The remaining cash flow hedge has a notional amount of $365 million. At September 30, 2012, Generation's mark-to-market non-current derivative liability relating to the interest rate swap in connection with the loan agreement to fund Antelope Valley was $32 million.

During the third quarter of 2011, a subsidiary of Constellation entered into floating-to-fixed forward starting interest rate swaps to manage a portion of the interest rate exposure for anticipated long-term borrowings to finance a solar project. The swaps have a total notional amount of $31 million as of September 30, 2012 and expire in 2027. Upon the closing of the merger with Constellation, the swaps were re-designated as cash flow hedges. At September 30, 2012, the subsidiary had a $4 million non-current derivative liability related to these swaps.

During the three and nine months ended September 30, 2012 and 2011, the impact on the results of operations as a result of ineffectiveness from cash flow hedges was immaterial.

Fair value accounting guidance requires the fair value of derivative instruments to be shown in the Notes to the Consolidated Financial Statements on a gross basis, even when the derivative instruments are subject to master netting agreements and qualify for net presentation in the Consolidated Balance Sheet. In the table below, Generation's cash flow hedges, other derivatives and proprietary trading derivatives are shown gross and the impact of the netting of fair value balances with the same counterparty, as well as netting of collateral, is aggregated in the collateral and netting column. Excluded from the tables below are economic hedges that qualify for the NPNS scope exception and other non-derivative contracts that are accounted for under the accrual method of accounting.

The following table provides a summary of the derivative fair value balances recorded by the Registrants as of September 30, 2012:

		Generation								ComEd		Other			Exelon
		Generation								ComEd		Other			Exelon
						Collateral
		Economic		Proprietary		and				Economic			Intercompany		Total
Derivatives		Hedges (a)		Trading		Netting(b)		Subtotal (c)		Hedges (a)(d)			Eliminations (a)		Derivatives

Mark-to-market
	derivative assets (current assets)	$	3,399	$	3,694	$	(6,187)	$	906	$	0		$	0	$	906
Mark-to-market
	derivative assets with affiliate (current assets)		352		0		0		352		0			(352)		0
Mark-to-market
	derivative assets (noncurrent assets)		2,133		1,147		(2,343)		937		0			0		937

Total mark-to-market
	derivative assets	$	5,884	$	4,841	$	(8,530)	$	2,195	$	0		$	(352)	$	1,843

Mark-to-market
	derivative liabilities (current liabilities)	$	(2,951)	$	(3,675)	$	6,144	$	(482)	$	(17)		$	0	$	(499)
Mark-to-market
	derivative liability with affiliate (current liabilities)		0		0		0		0		(352)			352		0
Mark-to-market
	derivative liabilities (noncurrent liabilities)		(1,369)		(1,106)		2,193		(282)		(53)			0		(335)

Total mark-to-market
	derivative liabilities	$	(4,320)	$	(4,781)	$	8,337	$	(764)	$	(422)		$	352	$	(834)

Total mark-to-market
	derivative net assets (liabilities)	$	1,564	$	60	$	(193)	$	1,431	$	(422)		$	0	$	1,009

(a) Includes current assets for Generation and current liabilities for ComEd of $352 million related to the fair value of the five-year financial swap contract between Generation and ComEd, as described above.

(b) Represents the netting of fair value balances with the same counterparty and the application of collateral.

(c) Current and noncurrent assets are shown net of collateral of $92 million and $263 million, respectively, and current and noncurrent liabilities are shown net of collateral of $(49) million and $(113) million, respectively. The total cash collateral received, net of cash collateral posted and offset against mark-to-market assets and liabilities was $193 million at September 30, 2012.

(d) Includes current and noncurrent liabilities relating to floating-to-fixed energy swap contracts with unaffiliated suppliers.

The following table provides a summary of the derivative fair value balances recorded by the Registrants as of December 31, 2011:

		Generation										ComEd		Other				Exelon
		Generation										ComEd		Other				Exelon
								Collateral
		Cash Flow		Economic		Proprietary		and				Economic		Economic		Intercompany		Total
	Derivatives	Hedges (a)		Hedges		Trading		Netting(b)		Subtotal (c)		Hedges (a) (d)		Hedges		Eliminations (a)		Derivatives
Mark-to-market
	derivative assets (current assets)	$	438	$	1,195	$	217	$	(1,418)	$	432	$	0	$	0	$	0	$	432
Mark-to-market
	derivative assets with affiliate (current assets)		503		0		0		0		503		0		0		(503)		0
Mark-to-market
	derivative assets (noncurrent assets)		419		582		71		(437)		635		0		15		0		650
Mark-to-market
	derivative assets with affiliate (noncurrent assets)		191		0		0		0		191		0		0		(191)		0

Total mark-to-market
	derivative assets	$	1,551	$	1,777	$	288	$	(1,855)	$	1,761	$	0	$	15	$	(694)	$	1,082

Mark-to-market
	derivative liabilities (current liabilities)	$	(9)	$	(965)	$	(194)	$	1,065	$	(103)	$	(9)	$	0	$	0	$	(112)
Mark-to-market
	derivative liability with affiliate (current liabilities)		0		0		0		0		0		(503)		0		503		0
Mark-to-market
	derivative liabilities (noncurrent liabilities)		(4)		(186)		(70)		250		(10)		(97)		0		0		(107)
Mark-to-market
	derivative liability with affiliate (noncurrent liabilities)		0		0		0		0		0		(191)		0		191		0

Total mark-to-market
	derivative liabilities	$	(13)	$	(1,151)	$	(264)	$	1,315	$	(113)	$	(800)	$	0	$	694	$	(219)

Total mark-to-market
	derivative net assets (liabilities)	$	1,538	$	626	$	24	$	(540)	$	1,648	$	(800)	$	15	$	0	$	863

(a) Includes current and noncurrent assets for Generation and current and noncurrent liabilities for ComEd of $503 million and $191 million, respectively, related to the fair value of the five-year financial swap contract between Generation and ComEd, as described above. For Generation excludes $19 million noncurrent liability relating to an interest rate swap in connection with a loan agreement to fund Antelope Valley as discussed above.

(b) Represents the netting of fair value balances with the same counterparty and the application of collateral.

(c) Current and noncurrent assets are shown net of collateral of $338 million and $187 million, respectively, and current and noncurrent liabilities are shown inclusive of collateral of $15 million and $0 million, respectively. The total cash collateral received net of cash collateral posted and offset against mark-to-market assets and liabilities was $540 million at December 31, 2011.

(d) Includes current and noncurrent liabilities relating to floating-to-fixed energy swap contracts with unaffiliated suppliers.

Cash Flow Hedges (Exelon and Generation). Economic hedges that qualify as cash flow hedges primarily consist of forward power sales and power swaps on base load generation. As discussed previously, effective prior to the merger with Constellation, Generation de-designated all of its cash flow hedges relating to commodity price risk. Because the underlying forecasted transactions remain probable, the fair value of the effective portion of these cash flow hedges was frozen in accumulated OCI and will be reclassified to results of operations when the forecasted purchase or sale of the energy commodity occurs, or becomes probable of not occurring. Generation began recording prospective changes in the fair value of these instruments through current earnings from the date of de-designation. The net unrealized gains associated with the de-designated cash flow hedges prior to the merger was $1,928 million including $693 million related to the intercompany swap with ComEd. Approximately $906 million of these net pre-tax unrealized gains within accumulated OCI are expected to be reclassified from accumulated OCI during the next twelve months by Generation, including approximately $383 million related to the financial swap with ComEd. Generation expects the settlement of the majority of its cash flow hedges, including the ComEd financial swap contract, will occur during 2012 through 2014.

Exelon discontinues hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item, in the case of forward-starting hedges, or when it is no longer probable that the forecasted transaction will occur. For the three months ended September 30, 2012 and 2011, amounts reclassified into earnings as a result of the discontinuance of cash flow hedges were immaterial.

The tables below provide the activity of accumulated OCI related to cash flow hedges for the three and nine months ended September 30, 2012, containing information about the changes in the fair value of cash flow hedges and the reclassification from accumulated OCI into results of operations. The amounts reclassified from accumulated OCI, when combined with the impacts of the actual physical power sales, result in the ultimate recognition of net revenues at the contracted price.

			Total Cash Flow Hedge OCI Activity, Net of Income Tax
			Total Cash Flow Hedge OCI Activity, Net of Income Tax
			Generation			Exelon
Three Months Ended September 30, 2012		Income Statement Location	Energy-Related Hedges			Total Cash Flow Hedges
Accumulated OCI derivative gain at June 30, 2012			$	923	(a)(c)	$	547
Reclassifications from accumulated OCI to net
	income	Operating Revenues		(171)	(b)		(88)	(d)
Ineffective portion recognized in income		Operating Revenues		0			0

Accumulated OCI derivative gain at September 30,
	2012		$	752	(a)(c)	$	459

(a) Includes $232 million and $315 million of gains, net of taxes, related to the fair value of the five-year financial swap contract with ComEd, as of September 30, 2012 and June 30, 2012, respectively.

(b) Includes $83 million of losses, net of taxes, reclassified from accumulated OCI to recognize gains in net income related to the settlements of the five-year financial swap contract with ComEd.

(c) Excludes $22 million of losses and $22 million of losses net of taxes, related to interest rate swaps and treasury rate locks for the three months ended September 30, 2012 and three months ended June 30, 2012.

(d) Includes $0 million of losses, net of taxes, related to the effective portion of changes in fair value of interest rate swaps and treasury rate locks.

		Total Cash Flow Hedge OCI Activity, Net of Income Tax
		Total Cash Flow Hedge OCI Activity, Net of Income Tax

		Generation			Exelon
Nine Months Ended September 30, 2012	Income Statement Location	Energy-Related Hedges			Total Cash Flow Hedges
Accumulated OCI derivative gain at December 31, 2011		$	925	(a)(c)	$	488
Effective portion of changes in fair value			432	(e)		301	(d)
Reclassifications from accumulated OCI to net income	Operating Revenues		(608)	(b)		(332)
Ineffective portion recognized in income	Operating Revenues		3			3

Accumulated OCI derivative gain at September 30, 2012		$	752	(a)(c)	$	459

(a) Includes $232 million and $420 million of gains, net of taxes, related to the fair value of the five-year financial swap contract with ComEd, as of September 30, 2012 and December 31, 2011.

(b) Includes $276 million of losses, net of taxes, reclassified from accumulated OCI to recognize gains in net income related to the settlements of the five-year financial swap contract with ComEd.

(c) Excludes $22 million of losses and $10 million of losses, net of taxes, related to interest rate swaps and treasury locks for the nine months ended September 30, 2012 and year ended December 31, 2011, respectively.

(d) Includes $12 million of losses, net of taxes, related to the effective portion of changes in fair value of interest rate swaps and treasury rate locks.

(e) Includes $88 million of gains, net of taxes, related to the effective portion of changes in fair value of the five-year financial swap contract with ComEd through the date of de-designation prior to the merger.

			Total Cash Flow Hedge OCI Activity, Net of Income Tax
			Total Cash Flow Hedge OCI Activity, Net of Income Tax
			Generation			Exelon
Three Months Ended September 30, 2011		Income Statement Location	Energy-Related Hedges			Total Cash Flow Hedges
Accumulated OCI derivative gain at June 30,
	2011		$	688	(a) (d)	$	209
Effective portion of changes in fair value				(26)	(b)		(26)
Reclassifications from accumulated OCI to net
	income	Operating Revenues		(98)	(c)		(45)
Ineffective portion recognized in income		Purchased Power		7			7
Accumulated OCI derivative gain at September 30, 2011			$	571	(a)(d)	$	145

(a) Includes $400 million and $458 million of gains, net of taxes, related to the fair value of the five-year financial swap contract with ComEd, $1 million of gains, net of taxes, related to the fair value of the block contracts with PECO as of September 30, 2011 and June 30, 2011, respectively.

(b) Includes a $5 million loss, net of taxes, related to the effective portion of changes in fair value of the five-year financial swap contract with ComEd for the three months ended September 30, 2011. The PECO block contracts were designated as normal sales as of May 31, 2010. As such, there were no effective changes in fair value of the block contracts with PECO for the three months ended September 30, 2011 as the mark-to-market balances previously recorded will be amortized over the term of the contract.

(c) Includes a $53 million loss, net of taxes, reclassified from accumulated OCI to recognize gains in net income related to the settlements of the five-year financial swap contract with ComEd for the three months ended September 30, 2011.

(d) Excludes $6 million loss and $2 million of gains, net of taxes, related to interest rate swaps and treasury rate locks as of September 30, 2011 and June 30, 2011, respectively.

			Total Cash Flow Hedge OCI Activity, Net of Income Tax
			Total Cash Flow Hedge OCI Activity, Net of Income Tax
				Generation			Exelon
Nine Months Ended September 30, 2011		Income Statement Location		Energy-Related Hedges			Total Cash Flow Hedges
Accumulated OCI derivative gain at
	December 31, 2010			$	1,011	(a) (d)	$	400
Effective portion of changes in fair value					(69)	(b)		(73)
Reclassifications from accumulated OCI to
	net income	Operating Revenues			(373)	(c)		(184)
Ineffective portion recognized in income		Purchased Power			2			2
Accumulated OCI derivative gain at September 30 2011				$	571	(a)(d)	$	145

(a) Includes $400 million and $589 million of gains, net of taxes, related to the fair value of the five-year financial swap contract with ComEd, and $1 million and $3 million of gains, net of taxes, related to the fair value of the block contracts with PECO as of September 30, 2011 and December 31, 2010, respectively.

(b) Includes a $2 million loss, net of taxes, related to the effective portion of changes in fair value of the five-year financial swap contract with ComEd for the nine months ended September 30, 2011. The PECO block contracts were designated as normal sales as of May 31, 2010. As such, there were no additional effective changes in fair value of PECO's block contracts as the mark-to-market balances previously recorded are being amortized over the term of the contract.

(c) Includes a $187 million loss, net of taxes, reclassified from accumulated OCI to recognize gains in net income related to the settlements of the five-year financial swap contract with ComEd and a $2 million loss, net of taxes, reclassified from accumulated OCI to recognize gains in net income related to the fair value of the block contracts with PECO for the nine months ended September 30, 2011.

(d) Excludes $6 million loss and $2 million of gains, net of taxes, related to interest rate swaps and treasury rate locks as of September 30, 2011 and December 31, 2010.

During the three and nine months ended September 30, 2012, Generation's cash flow hedge activity impact to pre-tax earnings based on the reclassification adjustment from accumulated OCI to earnings was a $283 million and a $ 1,005 million pre-tax gain, respectively, and a $162 million and $617 million pre-tax gain for the three and nine months ended September 30, 2011. Given that the cash flow hedges had primarily consisted of forward power sales and power swaps and did not include gas options or sales, the ineffectiveness of Generation's cash flow hedges was primarily the result of differences between the locational settlement prices of the cash flow hedges and the hedged generating units. This price difference was actively managed through other instruments, which include financial transmission rights, whose changes in fair value are recognized in earnings each period, and auction revenue rights. Changes in cash flow hedge ineffectiveness, primarily due to changes in market prices were $5 million for the nine months ended September 30, 2012. There was no ineffectiveness for the three months ended September 30, 2012 as Generation will not incur changes in cash flow hedge ineffectiveness in future periods as all commodity cash flow hedge positions were de-designated prior to the merger date.

Exelon's energy-related cash flow hedge activity impact to pre-tax earnings based on the reclassification adjustment from accumulated OCI to earnings was a $145 million and $548 million pre-tax gain for the three and nine months ended September 30, 2012, respectively, and a $74 million and $305 million pre-tax gain for the three and nine months ended 2011, respectively. Changes in cash flow hedge ineffectiveness, primarily due to changes in market prices were $5 million for the nine months ended September 30, 2012. There was no ineffectiveness for the three months ended September 30, 2012 as Generation will not incur changes in cash flow hedge ineffectiveness in future periods as all commodity cash flow hedge positions were de-designated prior to the merger date.

Economic Hedges (Exelon and Generation). These instruments represent hedges that mitigate exposure to fluctuations in commodity prices and include financial options, futures, swaps, and physical forward sales and purchases. For the three and nine months ended September 30, 2012 and 2011, the following net pre-tax mark-to-market gains (losses) of certain purchase and sale contracts were reported in operating revenues or purchased power and fuel expense at Exelon and Generation in the Consolidated Statements of Operations and Comprehensive Income and are included in “Net fair value changes related to derivatives” in Exelon's and Generation's Consolidated Statements of Cash Flows. In the 3rd quarter of 2012, Generation completed a non-cash exchange by issuing a new in-the-money derivative with a new counterparty in exchange for novating to them existing in-the-money trades with the old counterparty for a total of $51 million. This transaction did not have any Income Statement effect to Generation. In the tables below, “Change in fair value” represents the change in fair value of the derivative contracts held at the reporting date. The “Reclassification to realized at settlement” represents the recognized change in fair value that was reclassified to realized due to settlement of the derivative during the period.

	Generation							Intercompany Eliminations	Exelon
				Purchased
	Operating			Power				Operating
Three Months Ended September 30, 2012	Revenues		and Fuel		Total			Revenues (a)	Total
Change in fair value	$	(255)	$	129	$	(126)	$	35	$	(91)
Reclassification to realized at settlement		20		122		142		(19)		123
Net mark-to-market gains (losses)	$	(235)	$	251	$	16	$	16	$	32

	Generation							Intercompany Eliminations	Exelon
				Purchased
	Operating			Power				Operating
Nine Months Ended September 30, 2012	Revenues		and Fuel		Total			Revenues (a)	Total
Change in fair value	$	(85)	$	121	$	36	$	62	$	98
Reclassification to realized at settlement		(81)		326		245		(29)		216
Net mark-to-market gains (losses)	$	(166)	$	447	$	281	$	33	$	314

	Exelon and Generation
				Purchased
	Operating			Power
Three Months Ended September 30, 2011 (As Reported)	Revenues		and Fuel		Total
Change in fair value	$	0	$	22	$	22
Reclassification to realized at settlement		0		(101)		(101)
Net mark-to-market (losses) (b)	$	0	$	(79)	$	(79)

	Exelon and Generation
				Purchased
	Operating			Power
Nine Months Ended September 30, 2011 (As Reported)	Revenues		and Fuel		Total
Change in fair value	$	0	$	13	$	13
Reclassification to realized at settlement		0		(372)		(372)
Net mark-to-market (losses) (b)	$	0	$	(359)	$	(359)

	Exelon and Generation
				Purchased
	Operating			Power
Three Months Ended September 30, 2011 (Pro Forma)	Revenues		and Fuel		Total
Change in fair value	$	31	$	(9)	$	22
Reclassification to realized at settlement		(105)		4		(101)
Net mark-to-market (losses) (b)	$	(74)	$	(5)	$	(79)

	Exelon and Generation
				Purchased
	Operating			Power
Nine Months Ended September 30, 2011 (Pro Forma)	Revenues		and Fuel		Total
Change in fair value	$	44	$	(31)	$	13
Reclassification to realized at settlement		(374)		2		(372)
Net mark-to-market (losses) (b)	$	(330)	$	(29)	$	(359)

Proprietary Trading Activities (Exelon and Generation). For the three and nine months ended September 30, 2012 and 2011, Exelon and Generation recognized the following net unrealized mark-to-market gains (losses), net realized mark-to-market gains (losses) and total net mark-to-market gains (losses) (before income taxes) relating to mark-to-market activity on derivative instruments entered into for proprietary trading purposes. Gains and losses associated with proprietary trading are reported as operating revenue in Exelon's and Generation's Consolidated Statements of Operations and Comprehensive Income and are included in “Net fair value changes related to derivatives” in Exelon's and Generation's Consolidated Statements of Cash Flows. In the tables below, “Change in fair value” represents the change in fair value of the derivative contracts held at the reporting date. The “Reclassification to realized at settlement” represents the recognized change in fair value that was reclassified to realized due to settlement of the derivative during the period.

The Registrants would be exposed to credit-related losses in the event of non-performance by counterparties that enter into derivative instruments. The credit exposure of derivative contracts, before collateral, is represented by the fair value of contracts at the reporting date. For energy-related derivative instruments, Generation enters into enabling agreements that allow for payment netting with its counterparties, which reduces Generation's exposure to counterparty risk by providing for the offset of amounts payable to the counterparty against amounts receivable from the counterparty. Typically, each enabling agreement is for a specific commodity and so, with respect to each individual counterparty, netting is limited to transactions involving that specific commodity product, except where master netting agreements exist with a counterparty that allow for cross product netting. In addition to payment netting language in the enabling agreement, Generation's credit department establishes credit limits, margining thresholds and collateral requirements for each counterparty, which are defined in the derivative contracts. Counterparty credit limits are based on an internal credit review that considers a variety of factors, including the results of a scoring model, leverage, liquidity, profitability, credit ratings and risk management capabilities. To the extent that a counterparty's margining thresholds are exceeded, the counterparty is required to post collateral with Generation as specified in each enabling agreement. Generation's credit department monitors current and forward credit exposure to counterparties and their affiliates, both on an individual and an aggregate basis.

The following tables provide information on Generation's credit exposure for all derivative instruments, NPNS, and applicable payables and receivables, net of collateral and instruments that are subject to master netting agreements, as of September 30, 2012. The tables further delineate that exposure by credit rating of the counterparties and provide guidance on the concentration of credit risk to individual counterparties. The figures in the tables below do not include credit risk exposure from uranium procurement contracts or exposure through RTOs, ISOs, NYMEX, ICE and Nodal commodity exchanges, further discussed in Item 3. Quantitative and Qualitative Disclosures About Market Risk. Additionally, the figures in the tables below do not include exposures with affiliates, including net receivables with ComEd, PECO and BGE of $53 million, $53 million and $11 million, respectively.

	Total						Number of		Net Exposure of
	Exposure						Counterparties		Counterparties
	Before Credit		Credit		Net		Greater than 10%		Greater than 10%
Rating as of September 30, 2012	Collateral		Collateral		Exposure		of Net Exposure		of Net Exposure
Investment grade	$	1,968	$	492	$	1,476		0	$	0
Non-investment grade		46		25		21		0		0
No external ratings
Internally rated - investment grade		501		16		485		1		267
Internally rated - non-investment
grade		90		2		88		0		0
Total	$	2,605	$	535	$	2,070		1	$	267

ComEd's power procurement contracts provide suppliers with a certain amount of unsecured credit. The credit position is based on forward market prices compared to the benchmark prices. The benchmark prices are the forward prices of energy projected through the contract term and are set at the point of supplier bid submittals. If the forward market price of energy exceeds the benchmark price, the suppliers are required to post collateral for the secured credit portion after adjusting for any unpaid deliveries and unsecured credit allowed under the contract. The unsecured credit used by the suppliers represents ComEd's net credit exposure. As of September 30, 2012, ComEd's credit exposure to suppliers was immaterial.

ComEd is permitted to recover its costs of procuring energy through the Illinois Settlement Legislation as well as the ICC-approved procurement tariffs. ComEd's counterparty credit risk is mitigated by its ability to recover realized energy costs through customer rates. See Note 2 of the Exelon 2011 Form 10-K for further information.

PECO's supplier master agreements that govern the terms of its electric supply procurement contracts, which define a supplier's performance assurance requirements, allow a supplier to meet its credit requirements with a certain amount of unsecured credit. The amount of unsecured credit is determined based on the supplier's lowest credit rating from the major credit rating agencies and the supplier's tangible net worth. The credit position is based on the initial market price, which is the forward price of energy on the day a transaction is executed, compared to the current forward price curve for energy. To the extent that the forward price curve for energy exceeds the initial market price, the supplier is required to post collateral to the extent the credit exposure is greater than the supplier's unsecured credit limit. As of September 30, 2012, PECO had no net credit exposure to suppliers.

PECO is permitted to recover its costs of procuring electric supply through its PAPUC-approved DSP Program. PECO's counterparty credit risk is mitigated by its ability to recover realized energy costs through customer rates. See Note 4 - Regulatory Matters for further information.

PECO's natural gas procurement plan is reviewed and approved annually on a prospective basis by the PAPUC. PECO's counterparty credit risk under its natural gas supply and asset management agreements is mitigated by its ability to recover its natural gas costs through the PGC, which allows PECO to adjust rates quarterly to reflect realized natural gas prices. PECO does not obtain collateral from suppliers under its natural gas supply and asset management agreements; however, the natural gas asset managers have provided $14 million in parental guarantees related to these agreements. As of September 30, 2012, PECO had credit exposure of $8 million under its natural gas supply and asset management agreements with investment grade suppliers.

BGE is permitted to recover its costs of procuring energy through the MDPSC-approved procurement tariffs. BGE's counterparty credit risk is mitigated by its ability to recover realized energy costs through customer rates. See Note 6 of BGE's 2011 Form 10-K for further information.

BGE's full requirement wholesale electric power agreements that govern the terms of its electric supply procurement contracts, which define a supplier's performance assurance requirements, allow a supplier, or its guarantor, to meet its credit requirements with a certain amount of unsecured credit. The amount of unsecured credit is determined based on the supplier's lowest credit rating from the major credit rating agencies and the supplier's tangible net worth, subject to an unsecured credit cap. The credit position is based on the initial market price, which is the forward price of energy on the day a transaction is executed, compared to the current forward price curve for energy. To the extent that the forward price curve for energy exceeds the initial market price, the supplier is required to post collateral to the extent the credit exposure is greater than the supplier's unsecured credit limit. The seller's credit exposure is calculated each business day. As of September 30, 2012, BGE had no net credit exposure to suppliers.

BGE's regulated gas business is exposed to market-price risk. This market-price risk is mitigated by BGE's recovery of its costs to procure natural gas through a gas cost adjustment clause approved by the MDPSC. BGE does make off-system sales after BGE has satisfied its customers' demand, which are not covered by the gas cost adjustment clause. At September 30, 2012, BGE had credit exposure of $1 million related to off-system sales which is mitigated by parental guarantees, letters of credit, or right to offset clauses within other contracts with those third party suppliers.

Collateral and Contingent-Related Features (Exelon, Generation, ComEd, PECO and BGE)

As part of the normal course of business, Generation routinely enters into physical or financially settled contracts for the purchase and sale of electric capacity, energy, fuels and emissions allowances. Certain of Generation's derivative instruments contain provisions that require Generation to post collateral. Generation also enters into commodity transactions on NYMEX, ICE, and Nodal Exchanges (“the exchanges”). The exchanges act as the counterparty to each trade. Transactions on the exchanges must adhere to comprehensive collateral and margining requirements. This collateral may be posted in the form of cash or credit support with thresholds contingent upon Generation's credit rating from each of the major credit rating agencies. The collateral and credit support requirements vary by contract and by counterparty. These credit-risk-related contingent features stipulate that if Generation were to be downgraded or lose its investment grade credit rating (based on its senior unsecured debt rating), it would be required to provide additional collateral. This incremental collateral requirement allows for the offsetting of derivative instruments that are assets with the same counterparty, where the contractual right of offset exists under applicable master netting agreements. In the absence of expressly agreed-to provisions that specify the collateral that must be provided, collateral requested will be a function of the facts and circumstances of the situation at the time of the demand. Generation believes an amount of several months of future payments (i.e. capacity payments) rather than a calculation of fair value is the best estimate for the contingent collateral obligation, which has been factored into the disclosure below.

The aggregate fair value of all derivative instruments with credit-risk-related contingent features in a liability position that are not fully collateralized (excluding transactions on the exchanges that are fully collateralized) is detailed in the table below:

Credit-Risk Related Contingent Feature		September 30, 2012
Gross Fair Value of Derivative Contracts Containing this Feature (a)	Offsetting Fair Value of In-the-Money Contracts Under Master Netting Arrangements (b)	Net Fair Value of Derivative Contracts Containing This Feature (c)


($2,720)	$2,156	($564)


Credit-Risk Related Contingent Feature		December 31, 2011
Gross Fair Value of Derivative Contracts Containing this Feature (a)	Offsetting Fair Value of In-the-Money Contracts Under Master Netting Arrangements (b)	Net Fair Value of Derivative Contracts Containing This Feature (c)


($1,014)	$928	($86)

Generation has cash collateral posted of $415 million and letters of credit posted of $973 million and cash collateral held of $607 million and letters of credit held of $109 million as of September 30, 2012 and cash collateral held of $542 million and letters of credit held of $89 million at December 31, 2011. In the event of a credit downgrade below investment grade (i.e. BB+ or Ba1), Exelon Generation Company, LLC and Constellation Energy Commodities Group, Inc. could be required to post additional collateral of $2,004 million as of September 30, 2012 and $1,612 million as of December 31, 2011. These amounts represent the potential additional collateral required after giving consideration to offsetting derivative and non-derivative positions under master netting agreements.

Generation's interest rate swaps contain provisions that, in the event of a merger, if Generation's debt ratings were to materially weaken, it would be in violation of these provisions, resulting in the ability of the counterparty to terminate the agreement prior to maturity. Collateralization would not be required under any circumstance. Termination of the agreement could result in a settlement payment by Exelon or the counterparty on any interest rate swap in a net liability position. The settlement amount would be equal to the fair value of the swap on the termination date. As of September 30, 2012, Generation's swaps were in an asset position, with a fair value of $16 million.

See Note 18 of the Exelon 2011 Form 10-K for further information regarding the letters of credit supporting the cash collateral.

Generation entered into SFCs with certain utilities, including PECO and BGE, with one-sided collateral postings only from Generation. If market prices fall below the benchmark price levels in these contracts, the utilities are not required to post collateral. However, when market prices rise above the benchmark price levels, counterparty suppliers, including Generation, are required to post collateral once certain unsecured credit limits are exceeded. Under the terms of the financial swap contract between Generation and ComEd, if a party is downgraded below investment grade by Moody's or S&P, collateral postings would be required by that party depending on how market prices compare to the benchmark price levels. Under the terms of the financial swap contract, collateral postings will never exceed $200 million from either ComEd or Generation. Under the terms of ComEd's standard block energy contracts, collateral postings are one-sided from suppliers, including Generation, should exposures between market prices and benchmark prices exceed established unsecured credit limits outlined in the contracts. As of September 30, 2012, ComEd held neither cash nor letters of credit for the purpose of collateral from suppliers in association with energy procurement contracts. Under the terms of ComEd's annual renewable energy contracts, collateral postings are required to cover a fixed value for RECs only. In addition, under the terms of ComEd's long-term renewable energy contracts, collateral postings are required from suppliers for both RECs and energy. The REC portion is a fixed value and the energy portion is one-sided from suppliers should the forward market prices exceed contract prices. As of September 30, 2012, ComEd held approximately $19 million in the form of cash and letters of credit as margin for both the annual and long-term REC obligations. See Note 2 of the Exelon 2011 Form 10-K for further information.

PECO's natural gas procurement contracts contain provisions that could require PECO to post collateral. This collateral may be posted in the form of cash or credit support with thresholds contingent upon PECO's credit rating from the major credit rating agencies. The collateral and credit support requirements vary by contract and by counterparty. As of September 30, 2012, PECO was not required to post collateral for any of these agreements. If PECO lost its investment grade credit rating as of September 30, 2012, PECO could have been required to post approximately $30 million of collateral to its counterparties.

PECO's supplier master agreements that govern the terms of its DSP Program contracts do not contain provisions that would require PECO to post collateral.

BGE's full requirements wholesale power agreements that govern the terms of its electric supply procurement contracts do not contain provisions that would require BGE to post collateral.

BGE's natural gas procurement contracts contain provisions that could require BGE to post collateral. This collateral may be posted in the form of cash or credit support with thresholds contingent upon BGE's credit rating from the major credit rating agencies. The collateral and credit support requirements vary by contract and by counterparty. As of September 30, 2012, BGE was not required to post collateral for any of these agreements. If BGE lost its investment grade credit rating as of September 30, 2012, BGE could have been required to post approximately $51 million of collateral to its counterparties.

Exelon's interest rate swaps contain provisions that, in the event of a merger, if Exelon's debt ratings were to materially weaken, it would be in violation of these provisions, resulting in the ability of the counterparty to terminate the agreement prior to maturity. Collateralization would not be required under any circumstance. Termination of the agreement could result in a settlement payment by Exelon or the counterparty on any interest rate swap in a net liability position. The settlement amount would be equal to the fair value of the swap on the termination date less charges. As of September 30, 2012, Exelon's swaps were in an asset position, with a fair value of $30 million.

Accounting for the Offsetting of Amounts Related to Certain Contracts (Exelon and Generation)

As of September 30, 2012 and December 31, 2011, $1 million of cash collateral posted and $2 million of cash collateral received was not offset against derivative positions because they were not associated with energy-related derivatives.