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Fair Value of Financial Assets and Liabilities (Exelon, Generation, ComEd, PECO and BGE)

3 Months Ended

Mar. 31, 2014

Fair Value of Financial Assets and Liabilities [Line items]

6. Fair Value of Financial Assets and Liabilities (Exelon, Generation, ComEd, PECO and BGE)

Fair Value of Financial Liabilities Recorded at the Carrying Amount

The following tables present the carrying amounts and fair values of the Registrants' short-term liabilities, long-term debt, SNF obligation, and trust preferred securities (long-term debt to financing trusts or junior subordinated debentures) as of March 31, 2014 and December 31, 2013:

Exelon

	March 31, 2014
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Short-term liabilities	$	983	$	3	$	980	$	0	$	983
Long-term debt (including amounts due within one year)		18,920		0		18,976		1,066		20,042
Long-term debt to financing trusts		648		0		0		648		648
SNF obligation		1,021		0		840		0		840

	December 31, 2013
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Short-term liabilities	$	344	$	3	$	341	$	0	$	344
Long-term debt (including amounts due within one year)		19,132		0		18,672		1,079		19,751
Long-term debt to financing trusts		648		0		0		631		631
SNF obligation		1,021		0		790		0		790

Generation

	March 31, 2014
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Short-term liabilities	$	377	$	0	$	377	$	0	$	377
Long-term debt (including amounts due within one year)		7,490		0		6,684		1,066		7,750
SNF obligation		1,021		0		840		0		840

	December 31, 2013
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Short-term liabilities	$	22	$	0	$	22	$	0	$	22
Long-term debt (including amounts due within one year)		7,729	$	0		6,586		1,062		7,648
SNF obligation		1,021		0		790		0		790

ComEd

	March 31, 2014
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Short-term liabilities	$	534	$	0	$	534	$	0	$	534
Long-term debt (including amounts due within one year)		5,707		0		6,347		0		6,347
Long-term debt to financing trust		206		0		0		202		202

	December 31, 2013
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Short-term liabilities	$	184	$	0	$	184	$	0	$	184
Long-term debt (including amounts due within one year)		5,675		0		6,238		17		6,255
Long-term debt to financing trust		206		0		0		202		202

PECO

	March 31, 2014
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Long-term debt (including amounts due within one year)	$	2,197	$	0	$	2,392	$	0	$	2,392
Long-term debt to financing trusts		184		0		0		190		190

	December 31, 2013
	Carrying		Fair Value
	Amount		Level 1		Level 2		Level 3		Total
Long-term debt (including amounts due within one year)		2,197		0		2,358		0		2,358
Long-term debt to financing trusts		184		0		0		180		180

BGE

	March 31, 2014
	Carrying		Fair Value
	Amount		Level 1			Level 2	Level 3		Total
Short-term liabilities	$	72	$	3	$	69	$	0	$	72
Long-term debt (including amounts due within one year)		2,011		0		2,183		0		2,183
Long-term debt to financing trusts		258		0		0		256		256

	December 31, 2013
	Carrying		Fair Value
	Amount		Level 1			Level 2	Level 3		Total
Short-term liabilities	$	138	$	3	$	135	$	0	$	138
Long-term debt (including amounts due within one year)		2,011		0		2,148		0		2,148
Long-term debt to financing trusts		258		0		0		249		249

Short-Term Liabilities. The short-term liabilities included in the tables above are comprised of short-term borrowings (Level 2) and dividends payable (included in other current liabilities) (Level 1). The Registrants' carrying amounts of the short-term liabilities are representative of fair value because of the short-term nature of these instruments.

Long-Term Debt. The fair value amounts of Exelon's taxable debt securities (Level 2) are determined by a valuation model that is based on a conventional discounted cash flow methodology and utilizes assumptions of current market pricing curves. In order to incorporate the credit risk of the Registrants into the discount rates, Exelon obtains pricing (i.e., U.S. Treasury rate plus credit spread) based on trades of existing Exelon debt securities as well as debt securities of other issuers in the electric utility sector with similar credit ratings in both the primary and secondary market, across the Registrants' debt maturity spectrum. The credit spreads of various tenors obtained from this information are added to the appropriate benchmark U.S. Treasury rates in order to determine the current market yields for the various tenors. The yields are then converted into discount rates of various tenors that are used for discounting the respective cash flows of the same tenor for each bond or note.

The fair value of Generation's non-government-backed fixed rate project financing debt (Level 3) is based on market and quoted prices for its own and other project financing debt with similar risk profiles. Given the low trading volume in the project financing debt market, the price quotes used to determine fair value will reflect certain qualitative factors, such as market conditions, investor demand, new developments that might significantly impact the project cash flows or off-taker credit, and other circumstances related to the project (e.g., political and regulatory environment). The fair value of Generation's government-back fixed rate project financing debt (Level 3) is largely based on a discounted cash flow methodology that is similar to the taxable debt securities methodology described above. Due to the lack of market trading data on similar debt, the discount rates are derived based on the original loan interest rate spread to the applicable Treasury rate as well as a current market curve derived from government-backed securities. Variable rate project financing debt resets on a quarterly basis and the carrying value approximates fair value.

The Registrants also have tax-exempt debt (Level 3). Due to low trading volume in this market, qualitative factors, such as market conditions, investor demand, and circumstances related to the issuer (i.e., political and regulatory environment), may be incorporated into the credit spreads that are used to obtain the fair value as described above.

SNF Obligation. The carrying amount of Generation's SNF obligation (Level 2) is derived from a contract with the DOE to provide for disposal of SNF from Generation's nuclear generating stations. When determining the fair value of the obligation, the future carrying amount of the SNF obligation estimated to be settled in 2025 is calculated by compounding the current book value of the SNF obligation at the 13-week Treasury rate. The compounded obligation amount is discounted back to present value using Generation's discount rate, which is calculated using the same methodology as described above for the taxable debt securities, and an estimated maturity date of 2025.

Long-Term Debt to Financing Trusts. Exelon's long-term debt to financing trusts is valued based on publicly traded securities issued by the financing trusts. Due to low trading volume of these securities, qualitative factors, such as market conditions, investor demand, and circumstances related to each issue, this debt is classified as Level 3.

Recurring Fair Value Measurements

Exelon records the fair value of assets and liabilities in accordance with the hierarchy established by the authoritative guidance for fair value measurements. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities that the Registrants have the ability to access as of the reporting date. Financial assets and liabilities utilizing Level 1 inputs include active exchange-traded equity securities and funds, certain exchange-based derivatives, and money market funds.
Level 2 — inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities, derivatives, commingled and mutual investment funds priced at NAV per fund share and fair value hedges.
Level 3 — unobservable inputs, such as internally developed pricing models or third-party valuations for the asset or liability due to little or no market activity for the asset or liability. Financial assets and liabilities utilizing Level 3 inputs include infrequently traded securities and derivatives, and investments priced using an alternative pricing mechanism or third party valuation.

Transfers in and out of levels are recognized as of the end of the reporting period the transfer occurred. Given derivatives categorized within Level 1 are valued using exchange-based quoted prices within observable periods, transfers between Level 2 and Level 1 were not material. Transfers into Level 2 from Level 3 generally occur when the contract tenure becomes more observable. Transfers into Level 3 from Level 2 generally occur due to changes in market liquidity or assumptions for certain commodity contracts. There were no transfers between Level 1 and Level 2 during the three months ended March 31, 2014 for cash equivalents, nuclear decommissioning trust fund investments, pledged assets for Zion Station decommissioning, Rabbi trust investments, and deferred compensation obligations.

Exelon

The following tables present assets and liabilities measured and recorded at fair value on Exelon's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2014 and December 31, 2013:

As of March 31, 2014	Level 1		Level 2		Level 3			Total
Assets
Cash equivalents^(a)	$	518	$	0	$	0		$	518
Nuclear decommissioning trust fund investments
Cash equivalents		304		0		0			304
Equity
Individually held		1,813		0		0			1,813
Exchange traded funds		113		0		0			113
Commingled funds		0		2,053		0			2,053
Equity funds subtotal		1,926		2,053		0			3,979
Fixed income
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies		903		0		0			903
Debt securities issued by states of the United States
and political subdivisions of the states		0		295		0			295
Debt securities issued by foreign governments		0		87		0			87
Corporate debt securities		0		1,795		126			1,921
Federal agency mortgage-backed securities		0		9		0			9
Commercial mortgage-backed securities (non-agency)		0		40		0			40
Residential mortgage-backed securities (non-agency)		0		7		0			7
Mutual funds		0		278		0			278
Fixed income subtotal		903		2,511		126			3,540
Middle market lending		0		0		356			356
Private Equity		0		0		4			4
Other debt obligations		0		15		0			15
Nuclear decommissioning trust fund investments subtotal^(b)		3,133		4,579		486			8,198

Pledged assets for Zion Station decommissioning
Cash equivalents		0		35		0			35
Equity
Individually held		4		1		0			5
Equity funds subtotal		4		1		0			5
Fixed income
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies		36		4		0			40
Debt securities issued by states of the United States
and political subdivisions of the states		0		18		0			18
Corporate debt securities		0		180		0			180
Fixed income subtotal		36		202		0			238
Middle market lending		0		0		137			137
Pledged assets for Zion Station decommissioning subtotal^(c)		40		238		137			415

Rabbi trust investments
Cash equivalents		2		0		0			2
Mutual funds^(d)(e)		42		0		0			42
Rabbi trust investments subtotal		44		0		0			44

Commodity derivative assets
Economic hedges		592		2,778		1,271			4,641
Proprietary trading		354		808		179			1,341
Effect of netting and allocation of collateral^(f)		(826)		(2,957)		(911)			(4,694)
Commodity derivative assets subtotal		120		629		539			1,288

Interest rate and foreign currency derivative assets		24		37		0			61
Effect of netting and allocation of collateral		(18)		(4)		0			(22)
Interest rate and foreign currency derivative assets subtotal		6		33		0			39

Other investments		13		0		10			23

Total assets		3,874		5,479		1,172			10,525

Liabilities
Commodity derivative liabilities
Economic hedges		(586)		(2,624)		(1,253)			(4,463)
Proprietary trading		(357)		(765)		(196)			(1,318)
Effect of netting and allocation of collateral^(f)		943		3,289		1,029			5,261
Commodity derivative liabilities subtotal		0		(100)		(420)			(520)

Interest rate and foreign currency derivative liabilities		(25)		(21)		0	0		(46)
Effect of netting and allocation of collateral		25		3		0			28
Interest rate and foreign currency derivative liabilities subtotal		0		(18)		0			(18)

Deferred compensation obligation		0		(107)		0			(107)

Total liabilities		0		(225)		(420)			(645)

Total net assets	$	3,874	$	5,254	$	752		$	9,880

As of December 31, 2013	Level 1		Level 2		Level 3			Total
Assets
Cash equivalents^(a)	$	1,230	$	0	$	0		$	1,230
Nuclear decommissioning trust fund investments
Cash equivalents		459		0		0			459
Equity
Individually held		1,776		0		0			1,776
Exchange traded funds		115		0		0			115
Commingled funds		0		2,271		0			2,271
Equity funds subtotal		1,891		2,271		0			4,162
Fixed income
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies		882		0		0			882
Debt securities issued by states of the United States
and political subdivisions of the states		0		294		0			294
Debt securities issued by foreign governments		0		87		0			87
Corporate debt securities		0		1,753		31			1,784
Federal agency mortgage-backed securities		0		10		0			10
Commercial mortgage-backed securities (non-agency)		0		40		0			40
Residential mortgage-backed securities (non-agency)		0		7		0			7
Mutual funds		0		18		0			18
Fixed income subtotal		882		2,209		31			3,122
Middle market lending		0		0		314			314
Private Equity		0		0		5			5
Other debt obligations		0		14		0			14
Nuclear decommissioning trust fund investments subtotal^(b)		3,232		4,494		350			8,076

Pledged assets for Zion decommissioning
Cash equivalents		0		26		0			26
Equity
Individually held		16		0		0			16
Equity funds subtotal		16		0		0			16
Fixed income
Debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies		45		4		0			49
Debt securities issued by states of the United States
and political subdivisions of the states		0		20		0			20
Corporate debt securities		0		227		0			227
Fixed income subtotal		45		251		0			296
Middle market lending		0		0		112			112
Other debt obligations		0		1		0			1
Pledged assets for Zion Station decommissioning subtotal^(c)		61		278		112			451

Rabbi trust investments
Cash equivalents		2		0		0			2
Mutual funds^(d)(e)		54		0		0			54
Rabbi trust investments subtotal		56		0		0			56

Commodity derivative assets
Economic hedges		493		2,582		885			3,960
Proprietary trading		324		1,315		122			1,761
Effect of netting and allocation of collateral^(f)		(863)		(3,131)		(430)			(4,424)
Commodity derivative assets subtotal^(g)		(46)		766		577			1,297

Interest rate and foreign currency derivative assets		30		39		0			69
Effect of netting and allocation of collateral		(30)		(2)		0			(32)
Interest rate and foreign currency derivative assets subtotal		0		37		0			37

Other Investments		0		0		15			15
Total assets		4,533		5,575		1,054			11,162

Liabilities
Commodity derivative liabilities
Economic hedges		(540)		(1,890)		(590)			(3,020)
Proprietary trading		(328)		(1,256)		(119)			(1,703)
Effect of netting and allocation of collateral^(f)		869		3,007		404			4,280
Commodity derivative liabilities subtotal		1		(139)		(305)			(443)

Interest rate and foreign currency derivative liabilities		(31)		(17)		0			(48)
Effect of netting and allocation of collateral		31		1		0			32
Interest rate and foreign currency derivative liabilities subtotal		0		(16)		0			(16)

Deferred compensation obligation		0		(114)		0			(114)

Total liabilities		1		(269)		(305)			(573)

Total net assets	$	4,534	$	5,306	$	749		$	10,589

(a) Excludes certain cash equivalents considered to be held-to-maturity and not reported at fair value.

(b) Excludes net assets (liabilities) of $17 million and $(5) million at March 31, 2014 and December 31, 2013, respectively. These items consist of receivables related to pending securities sales, interest and dividend receivables, and payables related to pending securities purchases.

(c) Excludes net assets of $14 million and $7 million at March 31, 2014 and December 31, 2013, respectively. These items consist of receivables related to pending securities sales, interest and dividend receivables, and payables related to pending securities purchases.

(d) The mutual funds held by the Rabbi trusts include $41 million related to deferred compensation and $1 million related to Supplemental Executive Retirement Plan at March 31, 2014, and $53 million related to deferred compensation and $1 million related to Supplemental Executive Retirement Plan at December 31, 2013.

(e) Excludes $33 million and $32 million of the cash surrender value of life insurance investments at March 31, 2014 and December 31, 2013, respectively.

(f) Includes collateral postings (received) from counterparties. Collateral posted (received) from counterparties, net of collateral paid to counterparties, totaled $117 million, $332 million and $118 million allocated to Level 1, Level 2 and Level 3 mark-to-market derivatives, respectively, as of March 31, 2014. Collateral posted (received) from counterparties, net of collateral paid to counterparties, totaled $6 million, $(124) million and $(26) million allocated to Level 1, Level 2 and Level 3 mark-to-market derivatives, respectively, as of December 31, 2013.

The following table presents the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis during the three months ended March 31, 2014 and 2013:

Three Months Ended March 31, 2014		Nuclear Decommissioning Trust Fund Investments		Pledged Assets for Zion Station Decommissioning		Mark-to-Market Derivatives			Other Investments		Total
Balance as of December 31, 2013		$	350	$	112	$	272		$	15	$	749
Total realized / unrealized gains (losses)
	Included in net income		1		0		(312)	^(a)		0		(311)
	Included in regulatory assets		3		0		25			0		28
	Included in payable for Zion Station decommissioning		0		(1)		0			0		(1)
Change in collateral			0		0		144			0		144
Purchases, sales, issuances and settlements
	Purchases		139		30		10			2		181
	Sales		(1)		(4)		(2)			0		(7)
	Settlements		(6)		0		0			0		(6)
Transfers into Level 3			0		0		(26)			0		(26)
Transfers out of Level 3			0		0		8			(7)		1

Balance as of March 31, 2014		$	486	$	137	$	119		$	10	$	752
The amount of total losses included in income
	attributed to the change in unrealized gains (losses) related to assets and liabilities held for the three months ended March 31, 2014	$	0	$	0	$	(446)		$	0	$	(446)

(a) Includes an increase for the reclassification of $134 million of realized losses due to the settlement of derivative contracts recorded in results of operations for the three months ended March 31, 2014.

Three Months Ended March 31, 2013		Nuclear Decommissioning Trust Fund Investments		Pledged Assets for Zion Station Decommissioning		Mark-to-Market Derivatives				Other Investments	Total
Balance as of December 31, 2012		$	183	$	89	$	367		$	17	$	656
Total realized / unrealized gains (losses)
	Included in net income		1		0		(127)	^(a)		0		(126)
	Included in regulatory assets		1		0		(8)	^(b)		0		(7)
Change in collateral			0		0		33			0		33
Purchases, sales, issuances and settlements
	Purchases		32		22		(5)	^(c)		0		49
	Sales		(7)		(7)		(4)			(8)		(26)
Transfers into Level 3			0		0		4			0		4

Balance as of March 31, 2013		$	210	$	104	$	260		$	9	$	583
The amount of total gains included in income
	attributed to the change in unrealized gains related to assets and liabilities held for the three months ended March 31, 2013	$	1	$	0	$	(79)		$	0	$	(78)

(a) Includes the reclassification of $48 million of realized losses due to the settlement of derivative contracts recorded in results of operations for the three months ended March 31, 2013.

(b) Excludes increases in fair value of $8 million and realized losses reclassified due to settlements of $133 million associated with Generation's financial swap contract with ComEd for the three months ended March 31, 2013.

The following tables present the income statement classification of the total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis during the three months ended March 31, 2014 and 2013:

		Operating Revenues		Purchased Power and Fuel		Other, net (a)
Total losses included in net income for the three months ended
	March 31, 2014	$	(268)	$	(44)	$	1
Change in the unrealized losses relating to assets and liabilities
	held for the three months ended March 31, 2014	$	(425)	$	(21)	$	0

		Operating Revenues		Purchased Power and Fuel		Other, net (a)
Total gains (losses) included in net income for the three months ended
	March 31, 2013	$	(159)	$	32	$	1
Change in the unrealized gains (losses) relating to assets and liabilities
	held for the three months ended March 31, 2013	$	(117)	$	38	$	1

(a) Other, net activity consists of realized and unrealized gains (losses) included in income for the NDT funds held by Generation.

Generation

The following tables present assets and liabilities measured and recorded at fair value on Generation's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2014 and December 31, 2013:

(a) Excludes certain cash equivalents considered to be held-to-maturity and not reported at fair value.

(d) Excludes $10 million of the cash surrender value of life insurance investments at both March 31, 2014 and December 31, 2013.

(e) Includes collateral postings (received) from counterparties. Collateral posted (received) from counterparties, net of collateral paid to counterparties, totaled $117 million, $332 million and $118 million allocated to Level 1, Level 2 and Level 3 mark-to-market derivatives, respectively, as of March 31, 2014. Collateral posted (received) from counterparties, net of collateral paid to counterparties, totaled $6 million, $(124) million and $(26) million allocated to Level 1, Level 2 and Level 3 mark-to-market derivatives, respectively, as of December 31, 2013.

The following tables present the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis during the three months ended March 31, 2014 and 2013:

Three Months Ended March 31, 2014		Nuclear Decommissioning Trust Fund Investments		Pledged Assets for Zion Station Decommissioning		Mark-to-Market Derivatives			Other Investments		Total
Balance as of December 31, 2013		$	350	$	112	$	465		$	15	$	942
Total realized / unrealized losses
	Included in net income		1		0		(312)	^(a)		0		(311)
	Included in noncurrent payables to affiliates		3		0		0			0		3
	Included in payable for Zion Station decommissioning		0		(1)		0			0		(1)
Change in collateral			0		0		144			0		144
Purchases, sales, issuances and settlements
	Purchases		139		30		10			2		181
	Sales		(1)		(4)		(2)			0		(7)
	Settlements		(6)		0		0			0		(6)
Transfers into Level 3			0		0		(26)			0		(26)
Transfers out of Level 3			0		0		8			(7)		1

Balance as of March 31, 2014		$	486	$	137	$	287		$	10	$	920
The amount of total losses included in income
	attributed to the change in unrealized gains (losses) related to assets and liabilities held for the three months ended March 31, 2014	$	0	$	0	$	(446)		$	0	$	(446)

(a) Includes an increase for the reclassification of $134 million of realized losses due to the settlement of derivative contracts recorded in results of operations.

Three Months Ended March 31, 2013		Nuclear Decommissioning Trust Fund Investments		Pledged Assets for Zion Station Decommissioning		Mark-to-Market Derivatives			Other Investments		Total
Balance as of December 31, 2012		$	183	$	89	$	660		$	17	$	949
Total realized / unrealized losses
	Included in net income		1		0		(144)	^(a)(b)		0		(143)
	Included in other comprehensive income		0		0		(124)	^(b)		0		(124)
	Included in noncurrent payables to affiliates		1		0		0			0		1
Change in collateral			0		0		33			0		33
Purchases, sales, issuances and settlements
	Purchases		32		22		(5)	^(c)		0		49
	Sales		(7)		(7)		(4)			(8)		(26)
Transfers into Level 3			0		0		4			0		4

Balance as of March 31, 2013		$	210	$	104	$	420		$	9	$	743
The amount of total losses included in income
	attributed to the change in unrealized losses related to assets and liabilities held for the three months ended March 31, 2013
		$	1	$	0	$	(86)		$	0	$	(85)

(a) Includes the reclassification of $58 million of realized losses due to the settlement of derivative contracts recorded in results of operations.

(b) Includes $8 million of increases in fair value and $133 million of realized losses due to settlements during 2013 of Generation's financial swap contract with ComEd, which eliminates upon consolidation in Exelon's Consolidated Financial Statements.

		Operating Revenues		Purchased Power and Fuel			Other, net^(a)
Total losses included in net income for the three
	months ended March 31, 2014	$	(268)	$	(44)	$	1
Change in the unrealized losses relating to assets and
	liabilities held for the three months ended March 31, 2014	$	(425)	$	(21)	$	0

		Operating Revenues		Purchased Power and Fuel			Other, net^(a)
Total gains (losses) included in net income for the three months
	ended March 31, 2013	$	(176)	$	32	$	1
Change in the unrealized gains (losses) relating to assets and
	liabilities held for the three months ended March 31, 2013	$	(124)	$	38	$	1

(a) Other, net activity consists of realized and unrealized gains (losses) included in income for the NDT funds held by Generation.

ComEd

The following tables present assets and liabilities measured and recorded at fair value on ComEd's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2014 and December 31, 2013:

As of March 31, 2014		Level 1		Level 2		Level 3		Total
Assets
Rabbi trust investments
Mutual funds		$	2	$	0	$	0	$	2
	Rabbi trust investments subtotal		2		0		0		2

Total assets			2		0		0		2

Liabilities
Deferred compensation obligation			0		(8)		0		(8)
Mark-to-market derivative liabilities^(a)			0		0		(168)		(168)

Total liabilities			0		(8)		(168)		(176)

Total net assets (liabilities)		$	2	$	(8)	$	(168)	$	(174)

As of December 31, 2013		Level 1		Level 2		Level 3		Total
Assets
Rabbi trust investments
Mutual funds		$	5	$	0	$	0	$	5
	Rabbi trust investments subtotal		5		0		0		5

Total assets			5		0		0		5

Liabilities
Deferred compensation obligation			0		(8)		0		(8)
Mark-to-market derivative liabilities^(a)			0		0		(193)		(193)

Total liabilities			0		(8)		(193)		(201)

Total net assets (liabilities)		$	5	$	(8)	$	(193)	$	(196)

(a) The Level 3 balance includes the current and noncurrent liability of $13 million and $155 million at March 31, 2014, respectively, and $17 million and $176 million at December 31, 2013, respectively, related to floating-to-fixed energy swap contracts with unaffiliated suppliers.

The following tables present the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis during the three months ended March 31, 2014 and 2013:

Three Months Ended March 31, 2014	Mark-to-Market Derivatives
Balance as of December 31, 2013	$	(193)
Total realized / unrealized gains included in regulatory assets^(a)		25
Balance as of March 31, 2014	$	(168)

(a) Includes $30 million of decrease in the fair value partially offset by realized gains due to settlements of $5 million recorded in purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the three months ended March 31, 2014.

Three Months Ended March 31, 2013	Mark-to-Market Derivatives
Balance as of December 31, 2012	$	(293)
Total unrealized / realized gains included in regulatory assets^(a)(b)		133
Balance as of March 31, 2013	$	(160)

Includes $8 million of decreases in fair value and $133 million of realized gains due to settlements associated with ComEd's financial swap with Generation. All items eliminate upon consolidation in Exelon's Consolidated Financial Statements.
Includes $11 million of increases in fair value and realized losses due to settlements of $3 million recorded in purchased power expense associated with floating-to-fixed energy swap contracts with unaffiliated suppliers for the three ended March 31, 2013.

PECO

The following tables present assets and liabilities measured and recorded at fair value on PECO's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2014 and December 31, 2013:

As of March 31, 2014	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	32	$	0	$	0	$	32
Rabbi trust investments
Mutual funds^(a)		9		0		0		9
Rabbi trust investments subtotal		9		0		0		9

Total assets		41		0		0		41

Liabilities
Deferred compensation obligation		0		(17)		0		(17)

Total liabilities		0		(17)		0		(17)

Total net assets (liabilities)	$	41	$	(17)	$	0	$	24

As of December 31, 2013	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	175	$	0	$	0	$	175
Rabbi trust investments
Mutual funds^(a)		9		0		0		9
Rabbi trust investments subtotal		9		0		0		9

Total assets		184		0		0		184

Liabilities
Deferred compensation obligation		0		(17)		0		(17)

Total liabilities		0		(17)		0		(17)

Total net assets (liabilities)	$	184	$	(17)	$	0	$	167

(a) Excludes $14 million of the cash surrender value of life insurance investments at both March 31, 2014 and December 31, 2013.

PECO had no Level 3 assets or liabilities measured at fair value on a recurring basis during the three months ended March 31, 2014 and 2013.

BGE

The following tables present assets and liabilities measured and recorded at fair value on BGE's Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2014 and December 31, 2013:

As of March 31, 2014	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	30	$	0	$	0	$	30
Rabbi trust investments
Mutual funds		4		0		0		4
Rabbi trust investments subtotal		4		0		0		4

Total assets		34		0		0		34

Liabilities
Deferred compensation obligation		0		(4)		0		(4)

Total liabilities		0		(4)		0		(4)

Total net assets (liabilities)	$	34	$	(4)	$	0	$	30

As of December 31, 2013	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	31	$	0	$	0	$	31
Rabbi trust investments
Mutual funds		6		0		0		6
Rabbi trust investments subtotal		6		0		0		6

Total assets		37		0		0		37

Liabilities
Deferred compensation obligation		0		(6)		0		(6)

Total liabilities		0		(6)		0		(6)

Total net assets (liabilities)	$	37	$	(6)	$	0	$	31

BGE had no Level 3 assets or liabilities measured at fair value on a recurring basis during the three months ended March 31, 2014 and 2013.

Valuation Techniques Used to Determine Fair Value

The following describes the valuation techniques used to measure the fair value of the assets and liabilities shown in the tables above.

Cash Equivalents (Exelon, Generation, ComEd, PECO and BGE). The Registrants' cash equivalents include investments with maturities of three months or less when purchased. The cash equivalents shown in the fair value tables are comprised of investments in mutual and money market funds. The fair values of the shares of these funds are based on observable market prices and, therefore, have been categorized in Level 1 in the fair value hierarchy.

Nuclear Decommissioning Trust Fund Investments and Pledged Assets for Zion Station Decommissioning (Exelon and Generation). The trust fund investments have been established to satisfy Generation's nuclear decommissioning obligations as required by the NRC. The NDT funds hold debt and equity securities directly and indirectly through commingled funds. Generation's investment policies place limitations on the types and investment grade ratings of the securities that may be held by the trusts. These policies limit the trust funds' exposures to investments in highly illiquid markets and other alternative investments. Investments with maturities of three months or less when purchased, including certain short-term fixed income securities are considered cash equivalents and included in the recurring fair value measurements hierarchy as Level 1 or Level 2.

With respect to individually held equity securities, the trustees obtain prices from pricing services, whose prices are obtained from direct feeds from market exchanges, which Generation is able to independently corroborate. The fair values of equity securities held directly by the trust funds are based on quoted prices in active markets and are categorized in Level 1. Equity securities held individually are primarily traded on the New York Stock Exchange and NASDAQ-Global Select Market, which contain only actively traded securities due to the volume trading requirements imposed by these exchanges.

For fixed income securities, multiple prices from pricing services are obtained whenever possible, which enables cross-provider validations in addition to checks for unusual daily movements. A primary price source is identified based on asset type, class or issue for each security. The trustees monitor prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the portfolio managers challenge an assigned price and the trustees determine that another price source is considered to be preferable. Generation has obtained an understanding of how these prices are derived, including the nature and observability of the inputs used in deriving such prices. Additionally, Generation selectively corroborates the fair values of securities by comparison to other market-based price sources. U.S. Treasury securities are categorized as Level 1 because they trade in a highly liquid and transparent market. The fair values of fixed income securities, excluding U.S. Treasury securities, are based on evaluated prices that reflect observable market information, such as actual trade information or similar securities, adjusted for observable differences and are categorized in Level 2. The fair values of private placement fixed income securities are determined using a third party valuation that contains significant unobservable inputs and are categorized in Level 3.

Equity and fixed income commingled funds and fixed income mutual funds are maintained by investment companies and hold certain investments in accordance with a stated set of fund objectives. The fair values of fixed income commingled and mutual funds held within the trust funds, which generally hold short-term fixed income securities and are not subject to restrictions regarding the purchase or sale of shares, are derived from observable prices. The objectives of the remaining equity commingled funds in which Exelon and Generation invest primarily seek to track the performance of certain equity indices by purchasing equity securities to replicate the capitalization and characteristics of the indices. Comingled and mutual funds are categorized in Level 2 because the fair value of the funds are based on NAVs per fund share (the unit of account), primarily derived from the quoted prices in active markets on the underlying equity securities. See Note 10 — Nuclear Decommissioning for further discussion on the NDT fund investments.

Middle market lending are investments in loans or managed funds which invest in private companies. Generation elected the fair value option for its investments in certain limited partnerships that invest in middle market lending managed funds. The fair value of these loans is determined using a combination of valuation models including cost models, market models, and income models. Investments in middle market lending are categorized as Level 3 because the fair value of these securities is based largely on inputs that are unobservable and utilize complex valuation models. Investments in middle market lending typically cannot be redeemed until maturity of the term loan.

As of March 31, 2014, Generation has outstanding commitments to invest in middle market lending, corporate debt securities, private equity investments, and real estate investments of approximately $469 million. These commitments will be funded by Generation's existing nuclear decommissioning trust funds.

Rabbi Trust Investments (Exelon, Generation, ComEd, PECO and BGE). The Rabbi trusts were established to hold assets related to deferred compensation plans existing for certain active and retired members of Exelon's executive management and directors. The investments in the Rabbi trusts are included in investments in the Registrants' Consolidated Balance Sheets and consist primarily of mutual funds. These funds are maintained by investment companies and hold certain investments in accordance with a stated set of fund objectives, which are consistent with Exelon's overall investment strategy. Mutual funds are publicly quoted and have been categorized as Level 1 given the clear observability of the prices.

Mark-to-Market Derivatives (Exelon, Generation, and ComEd). Derivative contracts are traded in both exchange-based and non-exchange-based markets. Exchange-based derivatives that are valued using unadjusted quoted prices in active markets are categorized in Level 1 in the fair value hierarchy. Certain derivatives' pricing is verified using indicative price quotations available through brokers or over-the-counter, on-line exchanges and are categorized in Level 2. These price quotations reflect the average of the bid-ask, mid-point prices and are obtained from sources that the Registrants believe provide the most liquid market for the commodity. The price quotations are reviewed and corroborated to ensure the prices are observable and representative of an orderly transaction between market participants. This includes consideration of actual transaction volumes, market delivery points, bid-ask spreads and contract duration. The remainder of derivative contracts are valued using the Black model, an industry standard option valuation model. The Black model takes into account inputs such as contract terms, including maturity, and market parameters, including assumptions of the future prices of energy, interest rates, volatility, credit worthiness and credit spread. For derivatives that trade in liquid markets, such as generic forwards, swaps and options, model inputs are generally observable. Such instruments are categorized in Level 2. The Registrants' derivatives are predominately at liquid trading points. For derivatives that trade in less liquid markets with limited pricing information model inputs generally would include both observable and unobservable inputs. These valuations may include an estimated basis adjustment from an illiquid trading point to a liquid trading point for which active price quotations are available. Such instruments are categorized in Level 3.

Exelon may utilize fixed-to-floating interest rate swaps, which are typically designated as fair value hedges, as a means to achieve its targeted level of variable-rate debt as a percent of total debt. In addition, the Registrants may utilize interest rate derivatives to lock in interest rate levels in anticipation of future financings. These interest rate derivatives are typically designated as cash flow hedges. Exelon determines the current fair value by calculating the net present value of expected payments and receipts under the swap agreement, based on and discounted by the market's expectation of future interest rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk and other market parameters. As these inputs are based on observable data and valuations of similar instruments, the interest rate swaps are categorized in Level 2 in the fair value hierarchy. See Note 7 — Derivative Financial Instruments for further discussion on mark-to-market derivatives.

Deferred Compensation Obligations (Exelon, Generation, ComEd, PECO and BGE). The Registrants' deferred compensation plans allow participants to defer certain cash compensation into a notional investment account. The Registrants include such plans in other current and noncurrent liabilities in their Consolidated Balance Sheets. The value of the Registrants' deferred compensation obligations is based on the market value of the participants' notional investment accounts. The notional investments are comprised primarily of mutual funds, which are based on observable market prices. However, since the deferred compensation obligations themselves are not exchanged in an active market, they are categorized as Level 2 in the fair value hierarchy.

Additional Information Regarding Level 3 Fair Value Measurements (Exelon, Generation, ComEd)

Mark-to-Market Derivatives (Exelon, Generation, ComEd). For valuations that include both observable and unobservable inputs, if the unobservable input is determined to be significant to the overall inputs, the entire valuation is categorized in Level 3. This includes derivatives valued using indicative price quotations whose contract tenure extends into unobservable periods. In instances where observable data is unavailable, consideration is given to the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks such as liquidity, volatility and contract duration. Such instruments are categorized in Level 3 as the model inputs generally are not observable. Exelon's RMC approves risk management policies and objectives for risk assessment, control and valuation, counterparty credit approval, and the monitoring and reporting of risk exposures. The RMC is chaired by the chief risk officer and includes the chief financial officer, corporate controller, general counsel, treasurer, vice president of strategy, vice president of audit services and officers representing Exelon's business units. The RMC reports to the Exelon Board of Directors on the scope of the risk management activities and is responsible for approving all valuation procedures at Exelon. Forward price curves for the power market utilized by the front office to manage the portfolio, are reviewed and verified by the middle office, and used for financial reporting by the back office. The Registrants consider credit and nonperformance risk in the valuation of derivative contracts categorized in Level 2 and 3, including both historical and current market data in its assessment of credit and nonperformance risk by counterparty. Due to master netting agreements and collateral posting requirements, the impacts of credit and nonperformance risk were not material to the financial statements.

Disclosed below is detail surrounding the Registrants' significant Level 3 valuations. The calculated fair value includes marketability discounts for margining provisions and other attributes. Generation's Level 3 balance generally consists of forward sales and purchases of power and natural gas, coal purchases, certain transmission congestion contracts, and project financing debt. Generation utilizes various inputs and factors including market data and assumptions that market participants would use in pricing assets or liabilities as well as assumptions about the risks inherent in the inputs to the valuation technique. The inputs and factors include forward commodity prices, commodity price volatility, contractual volumes, delivery location, interest rates, credit quality of counterparties and credit enhancements.

For commodity derivatives, the primary input to the valuation models is the forward commodity price curve for each instrument. Forward commodity price curves are derived by risk management for liquid locations and by the traders and portfolio managers for illiquid locations. All locations are reviewed and verified by risk management considering published exchange transaction prices, executed bilateral transactions, broker quotes, and other observable or public data sources. The relevant forward commodity curve used to value each of the derivatives depends on a number of factors, including commodity type, delivery location, and delivery period. Price volatility varies by commodity and location. When appropriate, Generation discounts future cash flows using risk free interest rates with adjustments to reflect the credit quality of each counterparty for assets and Generation's own credit quality for liabilities. The level of observability of a forward commodity price is generally due to the delivery location and delivery period. Certain delivery locations including PJM West Hub (for power) and Henry Hub (for natural gas) are more liquid and prices are observable for up to three years in the future. The observability period of volatility is generally shorter than the underlying power curve used in option valuations. The forward curve for a less liquid location is estimated by using the forward curve from the liquid location and applying a spread to represent the cost to transport the commodity to the delivery location. This spread does not typically represent a majority of the instrument's market price. As a result, the change in fair value is closely tied to liquid market movements and not a change in the applied spread. The change in fair value associated with a change in the spread is generally immaterial. An average spread calculated across all Level 3 power and gas delivery locations is approximately $3.83 and $0.37 for power and natural gas, respectively. Many of the commodity derivatives are short term in nature and thus a majority of the fair value may be based on observable inputs even though the contract as a whole must be classified as Level 3. See Item 3. – Quantitative and Qualitative Disclosures About Market Risk for information regarding the maturity by year of the Registrant's mark-to-market derivative assets and liabilities.

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. See Note 7 – Derivative Financial Instruments for more information. The fair value of these swaps has been designated as a Level 3 valuation due to the long tenure of the positions and internal modeling assumptions. The modeling assumptions include using natural gas heat rates to project long term forward power curves adjusted by a renewable factor that incorporates time of day and seasonality factors to reflect accurate renewable energy pricing. In addition, marketability reserves are applied to the positions based on the tenor and supplier risk. The table below discloses the significant inputs to the forward curve used to value these positions.

Type of trade	Fair Value at March 31, 2014 (c)		Valuation Technique	Unobservable Input	Range
Mark-to-market derivatives – Economic Hedges (Generation) (a)	$	186	Discounted Cash Flow	Forward power price	$	19		-	$	155	(d)
			Discounted Cash Flow	Forward gas price	$	2.18		-	$	17.65	(d)
			Option Model	Volatility percentage		14	%	-		207	%

Mark-to-market derivatives – Proprietary trading (Generation) (a)	$	(17)	Discounted Cash Flow	Forward power price	$	26		-	$	152	(d)
			Option Model	Volatility percentage		12	%	-		59	%

Mark-to-market derivatives (ComEd)	$	(168)	Discounted Cash Flow	Forward heat rate (b)		8	x	-		9	x
				Marketability reserve		3.5	%	-		8	%
				Renewable factor		87	%	-		127	%

The valuation techniques, unobservable inputs and ranges are the same for the asset and liability positions.
Quoted forward natural gas rates are utilized to project the forward power curve for the delivery of energy at specified future dates. The natural gas curve is extrapolated beyond its observable period to the end of the contract's delivery.
The fair values do not include cash collateral held on level three positions of $118 million as of March 31, 2014.
The upper ends of the ranges are driven by the winter power and gas prices in the New England region. Without the New England region, the upper ends of the ranges for power and gas would be approximately $114 and $10.62, respectively.

Type of trade	Fair Value at December 31, 2013^(c)		Valuation Technique	Unobservable Input	Range
Mark-to-market derivatives – Economic Hedges (Generation) ^(a)	$	488	Discounted Cash Flow	Forward power price	$	8		-	$	176	^(d)
			Discounted Cash Flow	Forward gas price	$	2.98		-	$	16.63	^(d)
			Option Model	Volatility percentage		15	%	-		142	%

Mark-to-market derivatives – Proprietary trading (Generation)^(a)	$	3	Discounted Cash Flow	Forward power price	$	10		-	$	176	^(d)
			Option Model	Volatility percentage		14	%	-		19	%

Mark-to-market derivatives (ComEd)	$	(193)	Discounted Cash Flow	Forward heat rate ^(b)		8	x	-		9	x
				Marketability reserve		3.5	%	-		8	%
				Renewable factor		84	%	-		128	%

The valuation techniques, unobservable inputs and ranges are the same for the asset and liability positions.
Quoted forward natural gas rates are utilized to project the forward power curve for the delivery of energy at specified future dates. The natural gas curve is extrapolated beyond its observable period to the end of the contract's delivery.
The fair values do not include cash collateral held on level three positions of $26 million as of December 31, 2013
The upper ends of the ranges are driven by the winter power and gas prices in the New England region. Without the New England region, the upper ends of the ranges for power and gas would be approximately $100 and $5.70, respectively.

The inputs listed above would have a direct impact on the fair values of the above instruments if they were adjusted. The significant unobservable inputs used in the fair value measurement of Generation's commodity derivatives are forward commodity prices and for options is price volatility. Increases (decreases) in the forward commodity price in isolation would result in significantly higher (lower) fair values for long positions (contracts that give Generation the obligation or option to purchase a commodity), with offsetting impacts to short positions (contracts that give Generation the obligation or right to sell a commodity). Increases (decreases) in volatility would increase (decrease) the value for the holder of the option (writer of the option). Generally, a change in the estimate of forward commodity prices is unrelated to a change in the estimate of volatility of prices. An increase to the reserves listed above would decrease the fair value of the positions. An increase to the heat rate or renewable factors would increase the fair value accordingly. Generally, interrelationships exist between market prices of natural gas and power. As such, an increase in natural gas pricing would potentially have a similar impact on forward power markets.

Nuclear Decommissioning Trust Fund Investments and Pledged Assets for Zion Station Decommissioning (Exelon and Generation). For middle market lending, certain corporate debt securities, and private equity investments the fair value is determined using a combination of valuation models including cost models, market models and income models. The valuation estimates are based on valuations of comparable companies, discounting the forecasted cash flows of the portfolio company, estimating the liquidation or collateral value of the portfolio company or its assets, considering offers from third parties to buy the portfolio company, its historical and projected financial results, as well as other factors that may impact value. Significant judgment is required in the application of discounts or premiums applied to the prices of comparable companies for factors such as size, marketability, credit risk and relative performance.

Because Generation relies on third-party fund managers to develop the quantitative unobservable inputs without adjustment for the valuations of its' Level 3 investments, quantitative information about significant unobservable inputs used in valuing these investments is not reasonably available to Generation. This includes information regarding the sensitivity of the fair values to changes in the unobservable inputs. Generation gains an understanding of the fund managers' inputs and assumptions used in preparing the valuations. Generation performed procedures to assess the reasonableness of the valuations. For a sample of its' Level 3 investments, Generation reviewed independent valuations and reviewed the assumptions in the detailed pricing models used by the fund managers.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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