Variable Interest Entities (Exelon, Generation, ComEd, PECO and BGE)

12 Months Ended

Dec. 31, 2013

Variable Interest Entities Disclosure [Line Items]

Variable Interest Entities (Exelon, Generation, ComEd, PECO and BGE)

2.Variable Interest Entities (Exelon, Generation, ComEd, PECO and BGE)

Under the applicable authoritative guidance, a VIE is a legal entity that possesses any of the following characteristics: an insufficient amount of equity at risk to finance its activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or equity owners who do not have the obligation to absorb expected losses or the right to receive the expected residual returns of the entity. Companies are required to consolidate a VIE if they are its primary beneficiary, which is the enterprise that has the power to direct the activities that most significantly impact the entity's economic performance.

AtDecember 31, 2013 and 2012, the Exelon, Generation, and BGE consolidated four and five VIEs or VIE groups, respectively, for which the applicable Registrant was the primary beneficiary. As of December 31, 2013, the Registrants had one VIE for which the Registrants were the primary beneficiary, however, the VIE is immaterial and was not included in the consolidated financial statements or in the consolidated VIE table below. As of December 31, 2013 and 2012, the Registrants had significant interests in eight and nine other VIEs for which the Registrants do not have the power to direct the entities' activities, respectively, and accordingly, were not the primary beneficiary.

Consolidated Variable Interest Entities

The carrying amounts and classification of the consolidated VIEs' assets and liabilities included in theRegistrants' consolidated financial statements at December 31, 2013 and 2012 are as follows:

		December 31, 2013						December 31, 2012
		Exelon (a)		Generation		BGE		Exelon (a)(b)		Generation (b)		BGE
Current assets		$	484	$	446	$	28	$	550	$	519	$	30
Noncurrent assets			1,905		1,884		3		1,719		1,680		-
	Total assets	$	2,389	$	2,330	$	31	$	2,269	$	2,199	$	30
Current liabilities		$	566	$	481	$	74	$	684	$	612	$	71
Noncurrent liabilities			774		562		195		775		470		265
	Total liabilities	$	1,340	$	1,043	$	269	$	1,459	$	1,082	$	336

________________

• Includes certain purchase accounting adjustments not pushed down to the BGE standalone entity.
• Includes total assets of $146 million and total liabilities of $42 million as of December 31, 2012 related to a retail supply company that is not a consolidated VIE as of December 31, 2013. See additional information below.

Except as specifically noted below, the assets in the table above are restricted for settlement of the VIE obligations and the liabilities in the preceding table can only be settled using VIE resources.

RSB BondCo LLC. In 2007, BGE formed RSB BondCo LLC (BondCo), a special purpose bankruptcy remote limited liability company, to acquire and hold rate stabilization property and to issue and service bonds secured by the rate stabilization property. In June 2007, BondCo purchased rate stabilization property from BGE, including the right to assess, collect, and receive non-bypassable rate stabilization charges payable by all residential electric customers of BGE. These charges are being assessed in order to recover previously incurred power purchase costs that BGE deferred pursuant to Senate Bill 1.BGE has determined that BondCo is a VIE for which it is the primary beneficiary. As a result, BGE consolidates BondCo.

BondCo's assets are restricted and can only be used to settle the obligations of BondCo. Further, BGE is required to remit all payments it receives from customers for rate stabilization charges to BondCo. During 2013, 2012, and 2011, BGE remitted $83 million, $85 million, and $92 million, respectively, to BondCo.

BGE did not provide any additional financial support to BondCo during 2013. Further, BGE does not have any contractual commitments or obligations to provide additional financial support to BondCo unless additional rate stabilization bonds are issued. The BondCo creditors do not have any recourse to the general credit of BGE in the event the rate stabilization charges are not sufficient to cover the bond principal and interest payments of BondCo.

Retail Gas Group. During 2009, Constellation formed two new entities, which now are part of Generation, and combined them with its existing retail gas activities into a retail gas entity group for the purpose of entering into a collateralized gas supply agreement with a third-party gas supplier. While Generation owns 100% of these entities, it has been determined that the retail gas entity group is a VIE because there is not sufficient equity to fund the group's activities without the additional credit support that is provided in the form of a parental guarantee. Generation is the primary beneficiary of the retail gas entity group; accordingly, Generation consolidates the retail gas entity group as a VIE.

The third-party gas supply arrangement is collateralized as follows:

• The assets of the retail gas entity group must be used to settle obligations under the third-party gas supply agreement before it can make any distributions to Generation,
• The third-party gas supplier has a collateral interest in all of the assets and equity of the retail gas entity group, and
• As of December 31, 2013 Exelon provided a $75 million parental guarantee to the third-party gas supplier in support of the retail gas entity group.

Other than credit support provided by the parental guarantee, Exelon or Generation do not have any contractual or other obligations to provide additional financial support under the collateralized third-party gas supply agreement. The third-party gas supply creditors do not have any recourse to Exelon's or Generation's general credit other than the parental guarantee.

Solar Project Entity Group.In 2011, Constellation formed a group of solar project limited liability companies to build, own, and operate solar power facilities, which are now part of Generation. Additionally, on September 30, 2011, Generation acquired all of the equity interests in Antelope Valley Solar Ranch One (AntelopeValley) from First Solar, Inc., a 230-MW solar PV project under construction in northern Los Angeles County, California. While Generation owns100% of these entities, it has been determined that certain of the individual solar project 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 the solar project entities that qualify as VIEs because Generation controls the design, construction, and operation of the solar power facilities. Generation provides capital funding to these solar VIE entities for ongoing construction of the solar power facilities. In addition, these solar VIE entities have an aggregate amount of outstanding debt with third parties of $536 million, as of December 31, 2013, for which the creditors have no recourse to Generation, however there is limited recourse to Generation with respect to remaining equity contributions necessary to complete the Antelope Valley project. For additional information on these project-specific financing arrangements refer to Note 13 – Debt and Credit Agreements.

Retail Power Supply Entity.In August 2013, Generation executed an agreement to terminate its energy supply contract with a retail power supply company that was previously a consolidated VIE. Generation did not have an ownership interest in the entity, but was the primary beneficiary through the energy supply contract. As a result of the termination, Generation no longer has a variable interest in the retail power supply company and ceased consolidation of the entity during the third quarter of 2013. Upon deconsolidation, there was no gain or loss recognized. The assets, liabilities, and non-controlling interest were removed from Exelon's and Generation's balance sheet and the change in non-controlling interest is also reflected on the Statement of Changes in Shareholders' Equity and the Statement of Changes in Member's Equity for Exelon and Generation, respectively.

Wind Project Entity Group.Generation owns and operates a number of wind project limited liability entities, the majority of which were acquired on December 9, 2010 when Generation completed the acquisition of all of the equity interests of John Deere Renewables, LLC (now known as Exelon Wind). Generation has evaluated the significant agreements and ownership structures and risks of each of its wind projects and underlying entities, and determined that certain of the entities are VIEsbecause either the projects have non-controlling interest holders that absorb variability from the wind projects, 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 the wind project entities that qualify as VIEs because Generation controls the design, construction, and operation of the wind power facilities.  While Generation owns 100% ofthe majority of the wind project entities,10of the projects have non-controlling equity interests held by third parties, that currently range between 1% and 6%. Of these10projects, Generation's current economic interests in nine of the projects are significantly greater than its stated contractual governance rights and all of these projects have reversionary interest provisions that provide the non-controlling interest holder with a purchase option,certain of which areconsidered bargain purchase prices, which, if exercised, transfers ownership of the projects to the non-controlling interest holder upon either the passage of time or the achievement of targeted financial returns.  The ownership agreements with the non-controlling interests state that Generation is to provide financial support to the projects in proportion to its current economic interests in the projects that currently range between 94% and 99%. However, no additional support to these projects beyond what was contractually required has been provided during 2013. As of December 31, 2013, the carrying amount of the assets and liabilities that are consolidated as a result of Generation being the primary beneficiary of the wind VIE entities primarily relate to the wind generating assets, PPA intangible assets and working capital amounts.

As of December 31, 2013 and 2012,ComEd and PECO did not have any consolidated VIEs.

Unconsolidated Variable Interest Entities

Exelon's and Generation's variable interests in unconsolidated VIEs generally include three transaction types: (1) equity investments, (2) energy purchase and sale contracts, and (3) fuel purchase commitments. For the equity investments, the carrying amount of the investments is reflected on their Consolidated Balance Sheets in Investments in affiliates. For the energy purchase and sale contracts and the fuel purchase commitments (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. Further, Exelon and Generation have not provided material debt or equity support, liquidity arrangements or performance guarantees associated with these commercial agreements.

As of December 31, 2013 and 2012, Exelon and Generation had significant unconsolidated variable interests in eight and nine, respectively, VIEs for which they were not the primary beneficiary; including certain equity investments and certain commercial agreements. The change in the number of unconsolidated variable interests is driven by the completion of certain obligations which cause the entities to no longer be unconsolidated variable interests offset by the addition of an equity investment in a residential solar provider. The following tables present summary information about the significant unconsolidated VIE entities:

		Commercial		Equity
		Agreement		Investment
December 31, 2013		VIEs		VIEs		Total
Total assets (a)		$	128	$	332	$	460
Total liabilities (a)			17		123		140
Registrants' ownership interest (a)			0		86		86
Other ownership interests (a)			111		123		234
Registrants' maximum exposure to loss:
	Carrying amount of equity investments		7		67		74
	Contract intangible asset		9		0		9
	Debt and payment guarantees		0		5		5
	Net assets pledged for Zion Station decommissioning (b)		44		0		44
		Commercial		Equity
		Agreement		Investment
December 31, 2012		VIEs		VIEs		Total
Total assets (a)		$	386	$	354	$	740
Total liabilities (a)			219		114		333
Registrants' ownership interest (a)			0		97		97
Other ownership interests (a)			167		143		310
Registrants' maximum exposure to loss:
	Letters of credit		5		0		5
	Carrying amount of equity investments		0		77		77
	Contract intangible asset		8		0		8
	Debt and payment guarantees		0		5		5
	Net assets pledged for Zion Station decommissioning (b)		50		0		50

Exelon Generation Co L L C [Member]

Variable Interest Entities Disclosure [Line Items]

Variable Interest Entities (Exelon, Generation, ComEd, PECO and BGE)

• These items represent amounts on the unconsolidated VIE balance sheets, not on Exelon's or Generation's Consolidated Balance Sheets. These items are included to provide information regarding the relative size of the unconsolidated VIEs.
• These items represent amounts on Exelon's and Generation's ConsolidatedBalance Sheets related to the asset sale agreement with ZionSolutions, LLC. The net assets pledged for Zion Station decommissioning includes gross pledged assets of $458 million and $614 million as of December 31, 2013 and December 31, 2012, respectively; offset by payables to ZionSolutions LLC of $414 million and $564 million as of December 31, 2013 and December 31, 2012, respectively. These items are included to provide information regarding the relative size of the ZionSolutions LLC unconsolidated VIE. See Note 15 – Asset Retirement Obligations for further discussion.

For each unconsolidated VIE, Exelon and Generation assess the risk of a loss equal to their maximum exposure to be remote and, accordingly Exelon and Generation have not recognized a liability associated with any portion of the maximum exposure to loss. In addition, there are no agreements with, or commitments by, third parties that would materially affect the fair value or risk of their variable interests in these variable interest entities.

Energy Purchase and Sale Agreements. In March 2005, Constellation, to which Generation is now a successor, closed a transaction in which Generation assumed from a counterparty two power sales contracts with previously existing VIEs. The VIEs previously were created by the counterparty to issue debt in order to monetize the value of the original contracts to purchase and sell power. Under the power sales contracts, Generation sold power to the VIEs which, in turn, sold that power to an electric distribution utility through 2013. In connection with this transaction, a third-party acquired the equity of the VIEs and Generation loaned that party a portion of the purchase price. If the electric distribution utility were to default under its obligation to buy power from the VIEs, the equity holder could transfer its equity interests to Generation in lieu of repaying the loan. In this event, Generation would have the right to seek recovery of its losses from the electric distribution utility.As a result, Generation has concluded that consolidation was not required. During 2013, the third-party repaid their obligations of the loan with Generation which caused the entities to no longer be unconsolidated VIEs.

ZionSolutions. Generation has an asset sale agreement with EnergySolutions, Inc. and certain of its subsidiaries, including ZionSolutions, LLC (ZionSolutions), which is further discussed in Note 15 – Asset Retirement Obligations. Under this agreement, ZionSolutions can put the assets and liabilities back to Generation when decommissioning is complete. Generation has evaluated this agreement and determined that, through the put option, it has a variable interest in ZionSolutions but is not the primary beneficiary. As a result, Generation has concluded that consolidation is not required.Other than the asset sale agreement, Exelon or Generation do not have any contractual or other obligations to provide additional financial support and ZionSolutions' creditors do not have any recourse to Exelon's or Generation's general credit.

Fuel Purchase Commitments. Generation's customer supply operations include the physical delivery and marketing of power obtained through its generating capacity, and long-, intermediate- and short-term contracts. Generation also has contracts to purchase fuel supplies for nuclear and fossil generation. These contracts and Generation's membership in NEIL are discussed in further detail in Note 22 – Commitments and Contingencies. Generation has evaluated these contracts and its membership with NEIL and determined that it either has no variable interest in an entity or, where Generation does have a variable interest in an entity, the variable interest is not significant and it is not the primary beneficiary; therefore, consolidation is not required.

For contracts where Generation has a variable interest, the level of variability being absorbed through the contracts is not considered significant because of the small proportion of the entities' activities encompassed by the contracts with Generation. Further, Generation has considered which interest holder has the power to direct the activities that most significantly affect the economic performance of the VIE and thus is considered the primary beneficiary and is required to consolidate the entity. The primary beneficiary must also have exposure to significant losses or the right to receive significant benefits from the VIE. In general, the most significant activity of the VIEs is the operation and maintenance of the facilities. Facilities represent power plants, sources of uranium and fossil fuels, or plants used in the uranium conversion, enrichment and fabrication process. Generation does not have control over the operation and maintenance of the facilities considered VIEs, and it does not bear operational risk of the facilities. Furthermore, Generation has no debt or equity investments in the entities and Generation does not provide any other financial support through liquidity arrangements, guarantees or other commitments other than purchase commitments described in Note 22 —Commitments and Contingencies. Upon consideration of these factors, Generation does not consider itself to have significant variable interests in these entities or be the primary beneficiary of these VIEs and, accordingly, has determined that consolidation is not required.

Investment in Energy Development Projects.Generation has several equity investments in energy generating facilities.Generation has evaluated the significant agreements, ownership structures and risks of each of itsequity investments, and determined that certain of the entities are VIEsbecause Generation guarantees the debt of the entity, provides equity support, or provides operating services to the entity. Generation has reviewed the entities and has determined that Generation is not the primary beneficiary of the entities that qualify as VIEs because Generation does not have the power to direct the activities of the VIEs that most significantly impact the VIEs economic performance.

Residential Solar Provider. Generation has an equity investment in a residential solar provider. Generation has evaluated the significant agreements, ownership structure and risks of the entity, and determined that the entity is a VIE because it does not have sufficient equity at risk to fund its operations. Generation has determined that its equity investment in the entity is a variable interest. However, Generation has concluded that we are not the primary beneficiary because Generation does not have the power to direct the activities of the VIE that most significantly impact the entity's economic performance.Exelon or Generation do not have any contractual or other obligations to provide additional financial support and the residential solar provider's creditors do not have any recourse to Exelon's or Generation's general credit.

ComEd, PECO and BGE

ComEd's,PECO's, and BGE's retail operations frequently include the purchase of electricity and RECs through procurement contracts of varying durations. See Note 3 – Regulatory Matters and Note 22 – Commitments and Contingencies for additional information on these contracts. ComEd, PECO and BGE have evaluated these types of contracts and have historically determined that either there is no significant variable interest in the entity, or where either ComEd, PECO or BGE does have a significant variable interest in a VIE, ComEd, PECO or BGE wouldnot be the primary beneficiary and, therefore, consolidation would not be required.

For contracts where ComEd, PECO or BGE is considered to have a significant variable interest, consideration is given to which interest holder has the power to direct the activities that most significantly affect the economic performance of the VIE. In general, the most significant activity of the VIEs is the operation and maintenance of their production or procurement processes related to electricity, RECs, AECs or natural gas. ComEd, PECO and BGE do not have control over the operation and maintenance of the entities and they do not bear operational risk related to the associated activities. Generally, the carrying amounts of assets and liabilities in ComEd's, PECO's, and BGE's Consolidated Balance Sheets that relate to their involvement with VIEs as a result of commercial arrangements represent the amounts owed by the utilities for the purchases associated with the current billing cycles under the contracts. As of December 31, 2013, the total amount of accounts payable owed by the utilities under agreements with these VIEs was not material.In addition, variability from these contracts is mitigated by the fact that the utilities are able to recover costs incurred under purchase agreements through customer rates. Furthermore, ComEd, PECO and BGE do not have any debt or equity investments in these VIEs and do not provide any other financial support through liquidity arrangements, guarantees or other commitments other than purchase commitments described in Note 22 – Commitments and Contingencies. Accordingly, none of ComEd,PECO or BGE considersitself to be the primary beneficiary of any VIEs as a result of commercial arrangements.

The financing trust of ComEd, ComEd Financing III, the financing trusts of PECO, PECO Trust III and PECO Trust IV, and the financing trust of BGE, BGE Capital Trust II are not consolidated in Exelon's, ComEd's, PECO's or BGE's financial statements. These financing trusts were created to issue mandatorily redeemable trust preferred securities. ComEd, PECO, and BGE have concluded that they do not have a significant variable interest in ComEd Financing III, PECO Trust III, PECO Trust IV or BGE Capital Trust II as each Registrant financed its equity interest in the financing trusts through the issuance of subordinated debt and, therefore, has no equity at risk.  See Note 13 – Debt and Credit Agreements for additional information.