Severance (All Registrants)

The Registrants have an ongoing severance plan under which, in general, the longer an employee worked prior to termination the greater the amount of severance benefits. The Registrants record a liability and expense or regulatory asset for severance once terminations are probable of occurrence and the related severance benefits can be reasonably estimated. For severance benefits that are incremental to its ongoing severance plan (“one-time termination benefits”), the Registrants measure the obligation and record the expense at fair value at the communication date if there are no future service requirements, or, if future service is required to receive the termination benefit, ratably over the required service period.

Ongoing Severance Plans

The Registrants provide severance and health and welfare benefits under Exelon’s ongoing severance benefit plans to terminated employees in the normal course of business. These benefits are accrued for when the benefits are considered probable and can be reasonably estimated.

For the three and six months ended June 30, 2017 and 2016, Exelon, Generation, ComEd, PHI, Pepco, DPL, and ACE recorded the following severance costs associated with these ongoing severance benefits within Operating and maintenance expense in their Consolidated Statements of Operations and Comprehensive Income.



							Successor
	Exelon		Generation^(a)		ComEd^(a)		PHI		Pepco^(a)		DPL^(a)		ACE^(a)
Three Months Ended
June 30, 2017	$	5	$	1	$	1	$	3	$	1	$	1	$	1
June 30, 2016	2		1		1		—		—		—		—

Six Months Ended
June 30, 2017	$	9	$	4	$	2	$	3	$	1	$	1	$	1
June 30, 2016	4		3		1		—		—		—		—

_______

(a)

The amounts above for Generation include less than $1 million and $1 million for amounts billed by BSC through intercompany allocations for the three and six months ended June 30, 2017, respectively, and $1 million and $2 million for the three and six months ended June 30, 2016, respectively. The amounts above for ComEd include less than $1 million and $1 million for amounts billed by BSC through intercompany allocations for the three and six months ended June 30, 2017, respectively, and less than $1 million and $1 million for the three and six months ended June 30, 2016, respectively. Amounts billed by PHISCO to Pepco, DPL and ACE were $1 million, each, for both three and six months ended June 30, 2017. Pepco, DPL and ACE did not have any ongoing severance plans for the three and six months ended June 30, 2016.

Cost Management Program-Related Severance

In August 2015, Exelon announced a cost management program focused on cost savings at BSC and Generation, including the elimination of approximately 500 positions. These actions are in response to the continuing economic challenges confronting all parts of Exelon’s business and industry, necessitating continued focus on cost management through enhanced efficiency and productivity. Exelon expects that approximately 250 corporate support positions in BSC and approximately 250 positions located throughout Generation will be eliminated.

For the three months ended June 30, 2017 and 2016, the amounts for severance costs related to the cost management program were immaterial. For the six months ended June 30, 2017 and 2016, the Registrants recorded the following severance costs related to the cost management program within Operating and maintenance expense in their Consolidated Statements of Operations and Comprehensive Income, pursuant to the authoritative guidance for ongoing severance plans:



	Exelon			Generation			ComEd		PECO		BGE
Six Months Ended
June 30, 2017^(a)	$	(1	)	$	(1	)	$	—	$	—	$	—
June 30, 2016^(b)	$	17		$	12		$	3	$	1	$	1

_______


(a)	Amounts billed by BSC through intercompany allocations for the six months ended June 30, 2017 were immaterial.


(b)	The amounts above for Generation, ComEd, PECO and BGE include $7 million, $3 million, $1 million and $1 million, respectively, for amounts billed by BSC through intercompany allocations for the six months ended June 30, 2016.

Early Plant Retirement-Related Severance (Exelon and Generation)

As a result of the Three Mile Island plant retirement decision, Exelon and Generation will incur certain employee-related costs, including severance benefit costs. Severance costs will be provided to management employees that are eligible under Exelon’s severance policy, to the extent that those employees are not redeployed to other locations. In June 2017, Exelon and Generation recognized severance costs of $17 million related to expected management employee severances resulting from the plant retirements within Operating and maintenance expense in their Consolidated Statements of Operation and Comprehensive Income. Approximately half of the employees at this location fall under a collective bargaining union agreement and are not eligible for severance benefits under an existing plan. The union and Exelon will negotiate terms of any severance benefits. If severance benefits are successfully negotiated, the amounts will be accrued as a one-time employee termination benefit once the established plan is communicated to employees. The final amount of the severance cost will ultimately depend on the specific employees severed. See Note - 7 Early Nuclear Plant Retirements for additional information regarding the announced early retirement of TMI.

Severance Costs Related to the PHI Merger

Upon closing the PHI Merger, Exelon recorded a severance accrual for the anticipated employee position reductions as a result of the post-merger integration. Cash payments under the plan began in May 2016 and will continue through 2020.

Pepco and DPL maintain regulatory assets for merger related integration costs which include a portion of the severance costs related to the PHI merger that is either currently being recovered in rates or is deemed probable of recovery if not currently being recovered in rates. As of June 30, 2017 and 2016, Pepco and DPL have regulatory assets of $12 million and $13 million, respectively, and $9 million and $3 million, respectively.

For the three and six months ended June 30, 2017, the PHI merger severance costs were immaterial. For the three and six months ended June 30, 2016, the Registrants recorded the following severance costs associated with the identified job reductions within Operating and maintenance expense in their Consolidated Statements of Operations and Comprehensive Income, pursuant to the authoritative guidance for ongoing severance plans:



													Successor
	Exelon		Generation			ComEd			PECO		BGE		PHI		Pepco		DPL		ACE
Three Months Ended June 30, 2016
Severance costs (benefits)^(a)	$	2	$	(1	)	$	(1	)	$	—	$	—	$	4	$	2	$	1	$	1

Six Months Ended June 30, 2016
Severance costs^(a)	$	55	$	9		$	2		$	1	$	1	$	42	$	20	$	12	$	10

______________

(a)

The amounts above for Generation, ComEd, PECO, BGE, Pepco, DPL and ACE include $(1) million, $(1) million, less than $1 million, less than $1 million, $2 million, $1 million and $1 million, respectively, for amounts billed by BSC and/or PHISCO through intercompany allocations for the three months ended June 30, 2016, and $8 million, $2 million, $1 million, $1 million, $19 million, $11 million and $10 million for the six months ended June 30, 2016.

Severance Liability

Amounts included in the table below represent the severance liability recorded for the severance plans above for employees of each Registrant and exclude amounts included at Exelon and billed through intercompany allocations:



														Successor
Severance Liability	Exelon			Generation			ComEd			PECO		BGE		PHI			Pepco		DPL		ACE
Balance at December 31, 2016	$	88		$	36		$	3		$	—	$	—	$	29		$	—	$	—	$	—
Severance charges^(a)	25			17			1			—		—		3			—		—		—
Payments	(18		)	(4		)	(1		)	—		—		(10		)	—		—		—
Balance at June 30, 2017	$	95		$	49		$	3		$	—	$	—	$	22		$	—	$	—	$	—

______________


(a)	Includes salary continuance and health and welfare severance benefits.