Stock-Based Compensation Plans (All Registrants)

Stock-Based Compensation Plans

Exelon grants stock-based awards through its LTIP, which primarily includes stock options, restricted stock units and performance share awards. At December 31, 2018, there were approximately 11 million shares authorized for issuance under the LTIP. For the years ended December 31, 2018, 2017 and 2016, exercised and distributed stock-based awards were primarily issued from authorized but unissued common stock shares.

ComEd, PECO, BGE and PHI grant cash awards. The following tables do not include expense related to these plans as they are not considered stock-based compensation plans under the applicable authoritative guidance.

In connection with the acquisition of PHI in March 2016, PHI’s unvested time-based restricted stock units and performance-based restricted stock units issued prior to April 29, 2014 were immediately vested and paid in cash upon the close of the merger. PHI’s remaining unvested time-based restricted stock units as of the close of the merger were cancelled. There were no remaining unvested performance-based restricted stock units as of the close of the merger.

For the years ended December 31, 2018, 2017 and 2016, there were no significant modifications to the granted stock based awards.

The following tables present the stock-based compensation expense included in Exelon's and PHI’s Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2018, 2017 and 2016 and PHI's predecessor period January 1, 2016 to March 23, 2016:



Exelon	Year Ended December 31,
Components of Stock-Based Compensation Expense	2018			2017			2016^(a)
Performance share awards	$	143		$	107		$	93
Restricted stock units	57			77			75
Stock options	—			—			—
Other stock-based awards	8			7			7
Total stock-based compensation expense included in operating and maintenance expense	208			191			175
Income tax benefit	(54		)	(74		)	(68		)
Total after-tax stock-based compensation expense	$	154		$	117		$	107

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(a)	2016 amounts include expense related to stock-based compensation granted to eligible PHI employees since the merger date of March 23, 2016.

PHI



	Predecessor
	January 1 to March 23,
Components of Stock-Based Compensation Expense	2016
Time-based restricted stock units	$	2
Performance-based restricted stock units	1
Time-based restricted stock awards	—
Total stock-based compensation expense included in operating and maintenance expense	3
Income tax benefit	(1		)
Total after-tax stock-based compensation expense	$	2

The following tables present the Registrants' stock-based compensation expense (pre-tax) for the years ended December 31, 2018, 2017 and 2016, as well as for the PHI predecessor period January 1, 2016 to March 23, 2016:



	Year Ended December 31,
Subsidiaries	2018		2017		2016
Exelon	$	208	$	191	$	175
Generation	77		88		78
ComEd	8		7		8
PECO	5		3		3
BGE	3		1		1
BSC^(a)	111		88		81
PHI Successor^(b)(c)	4		4		4



	Predecessor
	January 1 to March 23,
	2016
PHI	$	3

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(a)	These amounts primarily represent amounts billed to Exelon’s subsidiaries through intercompany allocations. These amounts are not included in the Generation, ComEd, PECO, BGE or PHI amounts above.


(b)	Pepco's, DPL's and ACE's stock-based compensation expense for the years ended December 31, 2018 and 2017 was not material.


(c)	These amounts primarily represent amounts billed to PHI’s subsidiaries through PHISCO intercompany allocations.

There were no significant stock-based compensation costs capitalized during the years ended December 31, 2018, 2017 and 2016 for Exelon or PHI, or for PHI during the predecessor period January 1, 2016 to March 23, 2016.

Exelon receives a tax deduction based on the intrinsic value of the award on the exercise date for stock options and the distribution date for performance share awards and restricted stock units. For each award, throughout the requisite service period, Exelon recognizes the tax benefit related to compensation costs. The following tables present information regarding Exelon’s tax benefits for the years ended December 31, 2018, 2017 and 2016.



Exelon	Year Ended December 31,
	2018	2017	2016
Realized tax benefit when exercised/distributed:
Restricted stock units	28	35	27
Performance share awards	16	29	18

Stock Options

Non-qualified stock options to purchase shares of Exelon’s common stock were granted under the LTIP through 2012. Due to changes in the LTIP, there were no stock options granted in 2018, 2017 and 2016. For all stock options granted through 2012, the exercise price of the stock options is equal to the fair market value of the underlying stock on the date of option grant. The vesting period of stock options is generally four years and all stock options will expire no later than ten years from the date of grant.

The value of stock options at the date of grant is expensed over the requisite service period using the straight-line method. The requisite service period for stock options is generally four years. However, certain stock options become fully vested upon the employee reaching retirement-eligibility. The value of the stock options granted to retirement-eligible employees is either recognized immediately upon the date of grant or through the date at which the employee reaches retirement eligibility.

The following table presents information with respect to stock option activity for the year ended December 31, 2018:



	Shares		Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Balance of shares outstanding at December 31, 2017	6,723,611		$	47.69	2.65	$	7
Options exercised	(1,522,952	)	36.54
Options forfeited	—		—
Options expired	(1,173,007	)	74.99
Balance of shares outstanding at December 31, 2018	4,027,652		$	43.95	2.90	$	14
Exercisable at December 31, 2018 ^(a)	4,027,652		$	43.95	2.90	$	14

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(a)	Includes stock options issued to retirement eligible employees.

The following table summarizes additional information regarding stock options exercised for the years ended December 31, 2018, 2017 and 2016:



	Year Ended December 31,
	2018		2017		2016
Intrinsic value^(a)	$	12	$	15	$	11
Cash received for exercise price	56		107		19

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(a)	The difference between the market value on the date of exercise and the option exercise price.

At December 31, 2016, all stock options were vested and at December 31, 2018 there were no unrecognized compensation costs related to nonvested stock options.

Restricted Stock Units

Restricted stock units are granted under the LTIP with the majority being settled in a specific number of shares of common stock after the service condition has been met. The corresponding cost of services is measured based on the grant date fair value of the restricted stock unit issued.

The value of the restricted stock units is expensed over the requisite service period using the straight-line method. The requisite service period for restricted stock units is generally three to five years. However, certain restricted stock unit awards become fully vested upon the employee reaching retirement-eligibility. The value of the restricted stock units granted to retirement-eligible employees is either recognized immediately upon the date of grant or through the date at which the employee reaches retirement eligibility. Exelon processes forfeitures as they occur for employees who do not complete the requisite service period.

The following table summarizes Exelon’s nonvested restricted stock unit activity for the year ended December 31, 2018:

Exelon



	Shares		Weighted Average Grant Date Fair Value (per share)
Nonvested at December 31, 2017^(a)	3,389,503		$	32.24
Granted	1,321,988		38.60
Vested	(1,845,300	)	32.03
Forfeited	(65,046	)	32.96
Undistributed vested awards^(b)	(507,804	)	36.76
Nonvested at December 31, 2018^(a)	2,293,341		$	35.06

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(a)	Excludes 1,131,487 and 1,488,383 of restricted stock units issued to retirement-eligible employees as of December 31, 2018 and 2017, respectively, as they are fully vested.


(b)	Represents restricted stock units that vested but were not distributed to retirement-eligible employees during 2018.

For Exelon, the weighted average grant date fair value (per share) of restricted stock units granted for the years ended December 31, 2018, 2017 and 2016 was $38.60, $34.98 and $28.14, respectively. At December 31, 2018 and 2017, Exelon had obligations related to outstanding restricted stock units not yet settled of $83 million and $108 million, respectively, which are included in common stock in Exelon’s Consolidated Balance Sheets. For the years ended December 31, 2018, 2017 and 2016, Exelon settled restricted stock units with fair value totaling $106 million, $88 million and $68 million, respectively. At December 31, 2018, $38 million of total unrecognized compensation costs related to nonvested restricted stock units are expected to be recognized over the remaining weighted-average period of 2.5 years.

Performance Share Awards

Performance share awards are granted under the LTIP. The performance share awards are settled 50% in common stock and 50% in cash at the end of the three-year performance period, except for awards granted to vice presidents and higher officers that are settled 100% in cash if certain ownership requirements are satisfied.

The common stock portion of the performance share awards is considered an equity award and is valued based on Exelon's stock price on the grant date. The cash portion of the performance share awards is considered a liability award which is remeasured each reporting period based on Exelon’s current stock price. As the value of the common stock and cash portions of the awards are based on Exelon’s stock price during the performance period, coupled with changes in the total shareholder return modifier and expected payout of the award, the compensation costs are subject to volatility until payout is established.

Effective January 2017 for nonretirement-eligible employees, stock-based compensation costs are recognized over the vesting period of three years using the straight-line method. For performance share awards granted to retirement-eligible employees, the value of the performance shares is recognized ratably over the vesting period, which is the year of grant.

In 2016 and prior, for nonretirement-eligible employees, stock-based compensation costs are recognized over the vesting period of three years using the graded-vesting method. For performance share awards granted to retirement-eligible employees, the value of the performance shares is recognized ratably over the vesting period, which is the year of grant.

Exelon processes forfeitures as they occur for employees who do not complete the requisite service period.

The following table summarizes Exelon’s nonvested performance share awards activity for the year ended December 31, 2018:

Exelon



	Shares		Weighted Average Grant Date Fair Value (per share)
Nonvested at December 31, 2017^(a)	2,956,966		$	32.65
Granted	1,637,542		38.15
Change in performance	1,348,029		30.66
Vested	(848,574	)	36.26
Forfeited	(50,467	)	36.24
Undistributed vested awards ^(b)	(1,640,268	)	33.38
Nonvested at December 31, 2018^(a)	3,403,228		$	33.13

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(a)	Excludes 3,586,259 and 2,723,440 of performance share awards issued to retirement-eligible employees as of December 31, 2018 and 2017, respectively, as they are fully vested.


(b)	Represents performance share awards that vested but were not distributed to retirement-eligible employees during 2018.

The following table summarizes the weighted average grant date fair value and the fair value of performance share awards granted and settled for the years ended December 31, 2018, 2017 and 2016:



	Year Ended December 31,
	2018^(a)		2017		2016
Weighted average grant date fair value (per share)	$	38.15	$	35.00	$	28.85
Fair value of performance shares settled	61		72		45
Fair value of performance shares settled in cash	49		56		28

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(a)	As of December 31, 2018, $33 million of total unrecognized compensation costs related to nonvested performance shares are expected to be recognized over the remaining weighted-average period of 1.7 years.

For PHI, the weighted average grant date fair value (per share) of performance-based restricted stock awards was $26.10 for the year ended December 31, 2016. There were no time-based restricted stock awards granted for the year ended December 31, 2016. There were no time-based share settlements or performance-based share settlements for the year-ended December 31, 2016 or the predecessor period January 1, 2016 to March 23, 2016.

The following table presents the balance sheet classification of obligations related to outstanding performance share awards not yet settled:



	December 31,
	2018		2017
Current liabilities^(a)	$	135	$	57
Deferred credits and other liabilities^(b)	109		100
Common stock	26		26
Total	$	270	$	183

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(a)	Represents the current liability related to performance share awards expected to be settled in cash.


(b)	Represents the long-term liability related to performance share awards expected to be settled in cash.