9. Implications of Potential Early Plant Retirements (Exelon and Generation)

Exelon and Generation continue to evaluate the current and expected economic value of each of Generation’s nuclear plants. Factors that will continue to affect the economic value of Generation’s nuclear plants include, but are not limited to: market power prices, results of capacity auctions, potential legislative solutions in New York and Illinois such as the proposed Low Carbon Portfolio Standard (LCPS) legislation, the impact of final rules from the EPA requiring reduction of carbon and other emissions and the efforts of the states to implement those final rules, and the outcome of the Ginna RSSA hearing and settlement procedures and the resulting contractual terms and conditions. On September 10, 2015, after considering the results of the recent PJM capacity auctions, Exelon and Generation decided to defer decisions about the future operations of its Quad Cities and Byron nuclear plants and will offer both plants in the 2019/2020 auction in May 2016. As a result of clearing the other PJM capacity auction in September 2015 for the 2017/2018 transitional capacity auction, Exelon and Generation will continue to operate its Quad Cities nuclear power plant through at least May 2018. The Byron plant is already obligated to operate through May 2019. On October 29, 2015, Exelon and Generation announced the deferral of any decision about the future operations of its Clinton nuclear plant and plans to bid the plant into the MISO capacity auction for the 2016-2017 planning year in April 2016. This decision was driven by MISO’s acknowledgment of the need for market design changes to ensure long-term power system reliability in southern Illinois, the desire to provide Illinois policy makers with additional time to consider needed reforms as well as the potential long-term impact of EPA’s Clean Power Plan. Exelon and Generation previously committed to cease operation of the Oyster Creek nuclear plant by the end of 2019. Exelon and Generation have not made any decisions regarding potential nuclear plant closures at other sites at this time.

As a result of a decision to early retire one or more other nuclear plants, certain changes in accounting treatment would be triggered and Exelon’s and Generation’s results of operations and cash flows could be materially affected by a number of items including, among other items: accelerated depreciation expense, impairment charges related to inventory that cannot be used at other nuclear units and cancellation of in-flight capital projects, accelerated amortization of plant specific nuclear fuel costs, employee-related costs (i.e. severance, relocation, retention, etc.), accelerated asset retirement obligation expense related to future decommissioning activities, and additional funding of nuclear decommissioning trust funds. In addition, any early plant retirement would also result in reduced operating costs, lower fuel expense, and lower capital expenditures in the periods beyond shutdown. While there are a number of Generation’s nuclear plants that are at risk of early retirement, the following table provides the balance sheet amounts as of December 31, 2015 for significant assets and liabilities associated with the three nuclear plants currently considered by management to be at the greatest risk of early retirement due to their current economic valuations and other factors:



(in millions)	Quad Cities			Clinton				Ginna			Total
Asset Balances
Materials and supplies inventory	$	50		$	57			$	29		$	136
Nuclear fuel inventory, net	218			107				60			385
Completed plant, net	1,030			579				127			1,736
Construction work in progress	11			9				11			31

Liability Balances
Asset retirement obligation	(698		)	(401		)		(644		)	(1,743		)

NRC License Renewal Term	2032			2046			^(a)	2029

________


(a)	Assumes Clinton seeks and receives a 20-year operating license renewal extension.

In the event a decision is made to retire early one or more nuclear plants, the precise timing of the retirement date, and resulting financial statement impact, is uncertain and would be influenced by a number of factors such as the results of any transmission system reliability study assessments, the nature of any co-owner requirements and stipulations, and decommissioning trust fund requirements, among other factors. However, the earliest retirement date for any plant would usually be the first year in which the unit does not have capacity obligations and just prior to its next scheduled nuclear refueling outage date in that year.