Investment in Constellation Energy Nuclear Group, LLC (Exelon and Generation)

12 Months Ended

Dec. 31, 2013

Equity Method Investments and Joint Ventures [Line Items]

Investment in Constellation Energy Nuclear Group, LLC (Exelon and Generation)

5. Investment in Constellation Energy Nuclear Group, LLC (Exelon and Generation)

As a result of the Constellation merger, Generation owns a 50.01% interest in CENG, a nuclear generation business. Generation's total equity in earnings (losses) ontheinvestment in CENG is as follows:

	Year Ended			Period March 12,
	Ended December 31,			through December 31,
	2013		2012
Equity investment income	$	123	$	73
Amortization of basis difference in CENG		(114)		(172)
Total equity in earnings (losses) - CENG	$	9	$	(99)

As of March 12, 2012, Generation had an initial basis difference of approximately $204 million between the initial carrying value of its investment in CENG and its underlying equity in CENG.  This basis difference resulted from the requirement to record the investment in CENG at fair value under purchase accounting while the underlying assets and liabilities within CENG continue to be accounted for on a historical cost basis.Generationis amortizing this basis difference over the respective useful lives of the assets and liabilities of CENG or as those assets and liabilities affect the earnings of CENG.

Based on tax sharing provisions contained in the operating agreement for CENG, Generation may be eligible for distributions from its investment in CENG in excess of its 50.01% ownership interest. Through purchase accounting, Generation has recorded the fair value of expected future distributions. When these distributions are realized, Generation will record a reduction in its investment in CENG. Any distributions in excess of Generation's investment in CENG would be recorded in earnings.

Generation has various agreements with CENG to purchase power and to provide certain services. For further information regarding these agreements see Note 25 – Related Party Transactions.

On July 29, 2013, Exelon, Generation and subsidiaries of Generation entered into a Master Agreement with EDF, EDF Inc. (EDFI) (a subsidiary of EDF) and CENG. The Master Agreement contemplates that the parties will execute a series of additional agreements at a closing that will occur following the receipt of regulatory approvals and the satisfaction of other customary closing conditions. Exelon currently expects that the closing will occur early in the second quarter of 2014.

The Master Agreement requires CENG to make two pre-closing cash distributions to EDF and Generation, if CENG has cash in excess of reserves and the amount of an outstanding credit facility are available, through one of its wholly owned subsidiaries, as owners of the joint venture. Generation received the first distribution of $115 million in December 2013 and recorded it as a reduction to the Investment in CENG on Exelon's and Generation's Consolidated Balance Sheets. A second distribution will occur prior to the closing provided that CENG has sufficient available cash.

At the closing, Generation, CENG and subsidiaries of CENG will execute a Nuclear Operating Services Agreement (NOSA) pursuant to which Generation will operate the CENG nuclear generation fleet owned by CENG subsidiaries and provide corporate and administrative services for the remaining life of the CENG nuclear plants as if they were a part of the Generation nuclear fleet, subject to EDFI's rights as a member of CENG. CENG will reimburse Generation for its direct and allocated costs for such services. The NOSA will replace the SSA. At the closing, Nine Mile Point Nuclear Station, a subsidiary of CENG, will also assign to Generation its obligations as Operator of Nine Mile Point Unit 2 under an operating agreement with the co-owner. In addition, at the closing the PSAA will be amended and extended until the permanent cessation of power generation by the CENG generation plants.

In addition, at closing, Generation will make a $400 million loan to CENG, bearing interest at 5.25% per annum and payable out of specified available cash flows of CENG and in any event, payable upon the settlement of the Put Option Agreement discussed below, if the put option is exercised, or payable upon the maturity date of the note(which will be 20 years from the closing), whichever occurs first. Immediately following receipt of the proceeds of such loan, CENG will make a $400 million special distribution to EDFI. The parties will also execute a Fourth Amended and Restated Operating Agreement for CENG, pursuant to which, among other things, CENG will commit to make preferred distributions to Generation (after repayment of the $400 million loan) quarterly out of specified available cash flows, until Generation has received aggregate distributions of $400 million plus a return of 8.5% per annum from the date of the special distribution to EDFI.

Generation and EDFI will also enter into a Put Option Agreement at closing pursuant to which EDFI will have the option, exercisable beginning on January 1, 2016 and thereafter until June 30, 2022, to sell its 49.99% interest in CENG to Generation for a fair market value price determined by agreement of the parties, or absent agreement, a third-party arbitration process. The appraisers determining fair market value of EDF's 49.99% interest in CENG under the Put Option Agreement are instructed to take into account all rights and obligations under the CENG Operating Agreement, including Generation's rights with respect to any unpaid aggregate preferred distributions and the related return, and the value of Generation's rights to other distributions. The beginning of the exercise period will be accelerated if Exelon's affiliates cease to own a majority of CENG and exercise a related right to terminate the Nuclear Operating Services Agreement. In addition, under limited circumstances, the period for exercise of the put option may be extended for 18 months.

Also at closing, Generation will execute an Indemnity Agreement pursuant to which Generation will indemnify EDF and its affiliates against third-party claims that may arise from any future nuclear incident (as defined in the Price Anderson Act) in connection with the CENG nuclear plants or their operations. Exelon will guarantee Generation's obligations under this indemnity.

Currently, Exelon and Generation account for their investment in CENG under the equity method of accounting. The transfer of the operating licenses and corresponding operational control to Exelon and Generation will result in Exelon and Generation being required to consolidate the financial position and results of operations of CENG. When that accounting change occurs, Exelon and Generation will derecognize their equity method investment in CENG and will record all assets, liabilities and the non-controlling interest in CENG at fair value on Exelon and Generation's balance sheets. Any difference between the former carrying value and newly recorded fair value at that date will be recognized as a gain or loss upon consolidation, which could be material to Exelon's and Generation's results of operations.

Exelon Generation Co L L C [Member]

Equity Method Investments and Joint Ventures [Line Items]

Investment in Constellation Energy Nuclear Group, LLC (Exelon and Generation)

5. Investment in Constellation Energy Nuclear Group, LLC (Exelon and Generation)

As a result of the Constellation merger, Generation owns a 50.01% interest in CENG, a nuclear generation business. Generation's total equity in earnings (losses) ontheinvestment in CENG is as follows:

	Year Ended			Period March 12,
	Ended December 31,			through December 31,
	2013		2012
Equity investment income	$	123	$	73
Amortization of basis difference in CENG		(114)		(172)
Total equity in earnings (losses) - CENG	$	9	$	(99)

As of March 12, 2012, Generation had an initial basis difference of approximately $204 million between the initial carrying value of its investment in CENG and its underlying equity in CENG.  This basis difference resulted from the requirement to record the investment in CENG at fair value under purchase accounting while the underlying assets and liabilities within CENG continue to be accounted for on a historical cost basis.Generationis amortizing this basis difference over the respective useful lives of the assets and liabilities of CENG or as those assets and liabilities affect the earnings of CENG.

Based on tax sharing provisions contained in the operating agreement for CENG, Generation may be eligible for distributions from its investment in CENG in excess of its 50.01% ownership interest. Through purchase accounting, Generation has recorded the fair value of expected future distributions. When these distributions are realized, Generation will record a reduction in its investment in CENG. Any distributions in excess of Generation's investment in CENG would be recorded in earnings.

Generation has various agreements with CENG to purchase power and to provide certain services. For further information regarding these agreements see Note 25 – Related Party Transactions.

On July 29, 2013, Exelon, Generation and subsidiaries of Generation entered into a Master Agreement with EDF, EDF Inc. (EDFI) (a subsidiary of EDF) and CENG. The Master Agreement contemplates that the parties will execute a series of additional agreements at a closing that will occur following the receipt of regulatory approvals and the satisfaction of other customary closing conditions. Exelon currently expects that the closing will occur early in the second quarter of 2014.

The Master Agreement requires CENG to make two pre-closing cash distributions to EDF and Generation, if CENG has cash in excess of reserves and the amount of an outstanding credit facility are available, through one of its wholly owned subsidiaries, as owners of the joint venture. Generation received the first distribution of $115 million in December 2013 and recorded it as a reduction to the Investment in CENG on Exelon's and Generation's Consolidated Balance Sheets. A second distribution will occur prior to the closing provided that CENG has sufficient available cash.

At the closing, Generation, CENG and subsidiaries of CENG will execute a Nuclear Operating Services Agreement (NOSA) pursuant to which Generation will operate the CENG nuclear generation fleet owned by CENG subsidiaries and provide corporate and administrative services for the remaining life of the CENG nuclear plants as if they were a part of the Generation nuclear fleet, subject to EDFI's rights as a member of CENG. CENG will reimburse Generation for its direct and allocated costs for such services. The NOSA will replace the SSA. At the closing, Nine Mile Point Nuclear Station, a subsidiary of CENG, will also assign to Generation its obligations as Operator of Nine Mile Point Unit 2 under an operating agreement with the co-owner. In addition, at the closing the PSAA will be amended and extended until the permanent cessation of power generation by the CENG generation plants.

In addition, at closing, Generation will make a $400 million loan to CENG, bearing interest at 5.25% per annum and payable out of specified available cash flows of CENG and in any event, payable upon the settlement of the Put Option Agreement discussed below, if the put option is exercised, or payable upon the maturity date of the note(which will be 20 years from the closing), whichever occurs first. Immediately following receipt of the proceeds of such loan, CENG will make a $400 million special distribution to EDFI. The parties will also execute a Fourth Amended and Restated Operating Agreement for CENG, pursuant to which, among other things, CENG will commit to make preferred distributions to Generation (after repayment of the $400 million loan) quarterly out of specified available cash flows, until Generation has received aggregate distributions of $400 million plus a return of 8.5% per annum from the date of the special distribution to EDFI.

Generation and EDFI will also enter into a Put Option Agreement at closing pursuant to which EDFI will have the option, exercisable beginning on January 1, 2016 and thereafter until June 30, 2022, to sell its 49.99% interest in CENG to Generation for a fair market value price determined by agreement of the parties, or absent agreement, a third-party arbitration process. The appraisers determining fair market value of EDF's 49.99% interest in CENG under the Put Option Agreement are instructed to take into account all rights and obligations under the CENG Operating Agreement, including Generation's rights with respect to any unpaid aggregate preferred distributions and the related return, and the value of Generation's rights to other distributions. The beginning of the exercise period will be accelerated if Exelon's affiliates cease to own a majority of CENG and exercise a related right to terminate the Nuclear Operating Services Agreement. In addition, under limited circumstances, the period for exercise of the put option may be extended for 18 months.

Also at closing, Generation will execute an Indemnity Agreement pursuant to which Generation will indemnify EDF and its affiliates against third-party claims that may arise from any future nuclear incident (as defined in the Price Anderson Act) in connection with the CENG nuclear plants or their operations. Exelon will guarantee Generation's obligations under this indemnity.

Currently, Exelon and Generation account for their investment in CENG under the equity method of accounting. The transfer of the operating licenses and corresponding operational control to Exelon and Generation will result in Exelon and Generation being required to consolidate the financial position and results of operations of CENG. When that accounting change occurs, Exelon and Generation will derecognize their equity method investment in CENG and will record all assets, liabilities and the non-controlling interest in CENG at fair value on Exelon and Generation's balance sheets. Any difference between the former carrying value and newly recorded fair value at that date will be recognized as a gain or loss upon consolidation, which could be material to Exelon's and Generation's results of operations.