Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Description of Business (All Registrants)

Exelon is a utility services holding company engaged in the generation, delivery and marketing of energy through Generation and the energy distribution and transmission businesses through ComEd, PECO, BGE, Pepco, DPL and ACE. On March 23, 2016, Exelon completed the merger with PHI, which became a wholly owned subsidiary of Exelon. PHI is a utility services holding company engaged through its principal wholly owned subsidiaries, Pepco, DPL and ACE, in the energy distribution and transmission businesses. See Note 5 — Mergers, Acquisitions and Dispositions for additional information regarding the merger transaction.



Name of Registrant	Business	Service Territories
Exelon Generation Company, LLC	Generation, physical delivery and marketing of power across multiple geographical regions through its customer-facing business, Constellation, which sells electricity to both wholesale and retail customers. Generation also sells natural gas, renewable energy and other energy-related products and services.	Six reportable segments: Mid-Atlantic, Midwest, New England, New York, ERCOT and Other Power Regions

Commonwealth Edison Company	Purchase and regulated retail sale of electricity	Northern Illinois, including the City of Chicago
	Transmission and distribution of electricity to retail customers
PECO Energy Company	Purchase and regulated retail sale of electricity and natural gas	Southeastern Pennsylvania, including the City of Philadelphia (electricity)
	Transmission and distribution of electricity and distribution of natural gas to retail customers	Pennsylvania counties surrounding the City of Philadelphia (natural gas)
Baltimore Gas and Electric Company	Purchase and regulated retail sale of electricity and natural gas	Central Maryland, including the City of Baltimore (electricity and natural gas)
	Transmission and distribution of electricity and distribution of natural gas to retail customers
Pepco Holdings LLC	Utility services holding company engaged, through its reportable segments Pepco, DPL and ACE	Service Territories of Pepco, DPL and ACE

Potomac Electric Power Company	Purchase and regulated retail sale of electricity	District of Columbia, and major portions of Montgomery and Prince George’s Counties, Maryland.
	Transmission and distribution of electricity to retail customers
Delmarva Power & Light Company	Purchase and regulated retail sale of electricity and natural gas	Portions of Delaware and Maryland (electricity)
	Transmission and distribution of electricity and distribution of natural gas to retail customers	Portions of New Castle County, Delaware (natural gas)
Atlantic City Electric Company	Purchase and regulated retail sale of electricity	Portions of Southern New Jersey
	Transmission and distribution of electricity to retail customers

Basis of Presentation (All Registrants)

This is a combined annual report of all Registrants. The Notes to the Consolidated Financial Statements apply to the Registrants as indicated above in the Index to Combined Notes to Consolidated Financial Statements and parenthetically next to each corresponding disclosure. When appropriate, the Registrants are named specifically for their related activities and disclosures. Each of the Registrant’s Consolidated Financial Statements includes the accounts of its subsidiaries. All intercompany transactions have been eliminated.

As a result of the merger with PHI, Exelon’s financial reporting reflects PHI’s consolidated financial results subsequent to the March 23, 2016, acquisition date. Exelon has accounted for the merger transaction applying the acquisition method of accounting, which it has pushed-down to the consolidated financial statements of PHI such that the assets and liabilities of PHI are recorded at their respective fair values, and goodwill has been established as of the acquisition date. Accordingly, the consolidated financial statements of PHI for periods before and after the March 23, 2016, acquisition date reflect different bases of accounting, and the results of operations and the financial positions of the predecessor and successor periods are not comparable. The acquisition method of accounting has not been pushed down to PHI’s wholly owned subsidiary utility registrants, Pepco, DPL and ACE.

For financial statement purposes, beginning on March 24, 2016, disclosures related to Exelon also apply to PHI, Pepco, DPL and ACE, unless otherwise noted.

Through its business services subsidiary, BSC, Exelon provides its subsidiaries with a variety of support services at cost, including legal, human resources, financial, information technology and supply management services. PHI also has a business services subsidiary, PHISCO, which provides a variety of support services at cost, including legal, accounting, engineering, customer operations, distribution and transmission planning, asset management, system operations, and power procurement, to PHI operating companies. The costs of BSC and PHISCO are directly charged or allocated to the applicable subsidiaries. The results of Exelon’s corporate operations are presented as “Other” within the consolidated financial statements and include intercompany eliminations unless otherwise disclosed.

Exelon owns 100% of Generation, PECO, BGE and PHI and more than 99% of ComEd. PHI owns 100% of Pepco, DPL and ACE. Generation owns 100% of its significant consolidated subsidiaries, either directly or indirectly, except for certain consolidated VIEs, including CENG and EGRP, of which Generation holds a 50.01% and 51% interest, respectively. The remaining interests in these consolidated VIEs are included in noncontrolling interests on Exelon’s and Generation’s Consolidated Balance Sheets. See Note 2 — Variable Interest Entities for additional information of Exelon’s and Generation’s consolidated VIEs.

The Registrants consolidate the accounts of entities in which a Registrant has a controlling financial interest, after the elimination of intercompany transactions. Where the Registrants do not have a controlling financial interest in an entity, proportionate consolidation, equity method accounting or accounting for investments in equity securities without readily determinable fair value is applied. The Registrants apply proportionate consolidation when they have an undivided interest in an asset and are proportionately liable for their share of each liability associated with the asset. The Registrants proportionately consolidate their undivided ownership interests in jointly owned electric plants and transmission facilities. Under proportionate consolidation, the Registrants separately record their proportionate share of the assets, liabilities, revenues and expenses related to the undivided interest in the asset. The Registrants apply equity method accounting when they have significant influence over an investee through an ownership in common stock, which generally approximates a 20% to 50% voting interest. The Registrants apply equity method accounting to certain investments and joint ventures, including certain financing trusts of ComEd and PECO. Under equity method accounting, the Registrants report their interest in the entity as an investment and the Registrants’ percentage share of the earnings from the entity as single line items in their financial statements. The Registrants use accounting for investments in equity securities without readily determinable fair values if they lack significant influence, which generally results when they hold less than 20% of the common stock of an entity. Under accounting for investments in equity securities without readily determinable fair values, the Registrants report their investments at cost adjusted for changes from observable transactions for identical or similar investments of the same issuer, less impairment. Changes in measurement are reported in earnings.

The accompanying consolidated financial statements have been prepared in accordance with GAAP for annual financial statements and in accordance with the instructions to Form 10-K and Regulation S-X promulgated by the SEC.

Use Of Estimates (All Registrants)

Use of Estimates (All Registrants)

The preparation of financial statements of each of the Registrants in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Areas in which significant estimates have been made include, but are not limited to, the accounting for nuclear decommissioning costs and other AROs, pension and other postretirement benefits, the application of purchase accounting, inventory reserves, allowance for uncollectible accounts, goodwill and asset impairments, derivative instruments, unamortized energy contracts, fixed asset depreciation, environmental costs and other loss contingencies, taxes and unbilled energy revenues. Actual results could differ from those estimates.

Reclassifications (Exelon, ComEd, and BGE)

Prior Period Adjustments and Reclassifications (All Registrants)

Certain prior year amounts in the Registrants' Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of Cash Flows, Consolidated Balance Sheets and Consolidated Statements of Changes in Shareholders' Equity have been recasted to reflect new accounting standards issued by the FASB and adopted as of January 1, 2018. See New Accounting Standards below for additional information.

Accounting for the Effects of Regulation (Exelon, ComEd, PECO and BGE)

Accounting for the Effects of Regulation (Exelon and the Utility Registrants)

For their regulated electric and gas operations, Exelon and the Utility Registrants reflect the effects of cost-based rate regulation in their financial statements, which is required for entities with regulated operations that meet the following criteria: 1) rates are established or approved by a third-party regulator; (2) rates are designed to recover the entities’ cost of providing services or products; and (3) there is a reasonable expectation that rates designed to recover costs can be charged to and collected from customers. Exelon and the Utility Registrants account for their regulated operations in accordance with regulatory and legislative guidance from the regulatory authorities having jurisdiction, principally the ICC, PAPUC, MDPSC, DCPSC, DPSC and NJBPU, under state public utility laws and the FERC under various Federal laws. Regulatory assets and liabilities are amortized and the related expense or revenue is recognized in the Consolidated Statements of Operations consistent with the recovery or refund included in customer rates. Exelon's regulatory assets and liabilities as of the balance sheet date are probable of being recovered or settled in future rates. If a separable portion of the Registrants' business was no longer able to meet the criteria discussed above, the affected entities would be required to eliminate from their consolidated financial statements the effects of regulation for that portion, which could have a material impact on their financial statements. See Note 4 — Regulatory Matters for additional information.

With the exception of income tax-related regulatory assets and liabilities, Exelon and the Utility Registrants classify regulatory assets and liabilities with a recovery or settlement period greater than one year as both current and non-current in their Consolidated Balance Sheets, with the current portion representing the amount expected to be recovered from or settled to customers over the next twelve-month period as of the balance sheet date. Income tax-related regulatory assets and liabilities are classified entirely as non-current in Exelon's and the Utility Registrants’ Consolidated Balance Sheets to align with the classification of the related deferred income tax balances.

Exelon and the Utility Registrants treat the impacts of a final rate order received after the balance sheet date but prior to the issuance of the financial statements as a non-recognized subsequent event, as the receipt of a final rate order is a separate and distinct event that has future impacts on the parties affected by the order.

Revenues (All Registrants)

Operating Revenues. The Registrants’ operating revenues generally consist of revenues from contracts with customers involving the sale and delivery of energy commodities and related products and services, utility revenues from alternative revenue programs (ARP), and realized and unrealized revenues recognized under mark-to-market energy commodity derivative contracts. The Registrants recognize revenue from contracts with customers to depict the transfer of goods or services to customers in an amount that the entities expect to be entitled to in exchange for those goods or services. Generation’s primary sources of revenue include competitive sales of power, natural gas, and other energy-related products and services. The Utility Registrants’ primary sources of revenue include regulated electric and natural gas tariff sales, distribution and transmission services. At the end of each month, the Registrants accrue an estimate for the unbilled amount of energy delivered or services provided to customers.

ComEd records ARP revenue for its best estimate of the electric distribution, energy efficiency, and transmission revenue impacts resulting from future changes in rates that ComEd believes are probable of approval by the ICC and FERC in accordance with its formula rate mechanisms. BGE, Pepco and DPL record ARP revenue for their best estimate of the electric and natural gas distribution revenue impacts resulting from future changes in rates that they believe are probable of approval by the MDPSC and/or DCPSC in accordance with their revenue decoupling mechanisms. PECO, BGE, Pepco, DPL and ACE record ARP revenue for their best estimate of the transmission revenue impacts resulting from future changes in rates that they believe are probable of approval by FERC in accordance with their formula rate mechanisms. See Note 4 — Regulatory Matters and Note 23 — Supplemental Financial Information for additional information.

Option Contracts, Swaps and Commodity Derivatives. Certain option contracts and swap arrangements that meet the definition of derivative instruments are recorded at fair value with subsequent changes in fair value recognized as revenue or expense. The classification of revenue or expense is based on the intent of the transaction. To the extent a Utility Registrant receives full cost recovery for energy procurement and related costs from retail customers, it records the fair value of its energy swap contracts with unaffiliated suppliers as well as an offsetting regulatory asset or liability in its Consolidated Balance Sheets. See Note 4 — Regulatory Matters and Note 12 — Derivative Financial Instruments for additional information.

Revenue, Transaction Price Measurement, Tax Exclusion [Policy Text Block]

Taxes Directly Imposed on Revenue-Producing Transactions. The Registrants collect certain taxes from customers such as sales and gross receipts taxes, along with other taxes, surcharges and fees, that are levied by state or local governments on the sale or distribution of gas and electricity. Some of these taxes are imposed on the customer, but paid by the Registrants, while others are imposed on the Registrants. Where these taxes are imposed on the customer, such as sales taxes, they are reported on a net basis with no impact to the Consolidated Statements of Operations and Comprehensive Income. However, where these taxes are imposed on the Registrants, such as gross receipts taxes or other surcharges or fees, they are reported on a gross basis. Accordingly, revenues are recognized for the taxes collected from customers along with an offsetting expense. See Note 23 — Supplemental Financial Information for Generation’s, ComEd’s, PECO’s, BGE’s, Pepco's, DPL's and ACE's utility taxes that are presented on a gross basis.

Income Taxes (All Registrants)

Deferred Federal and state income taxes are recorded on significant temporary differences between the book and tax basis of assets and liabilities and for tax benefits carried forward. Investment tax credits have been deferred in the Registrants’ Consolidated Balance Sheets and are recognized in book income over the life of the related property. The Registrants account for uncertain income tax positions using a benefit recognition model with a two-step approach; a more-likely-than-not recognition criterion; and a measurement approach that measures the position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. If it is not more-likely-than-not that the benefit of the tax position will be sustained on its technical merits, no benefit is recorded. Uncertain tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. The Registrants recognize accrued interest related to unrecognized tax benefits in Interest expense or Other income and deductions (interest income) and recognize penalties related to unrecognized tax benefits in Other, net in their Consolidated Statements of Operations and Comprehensive Income.

Pursuant to the IRC and relevant state taxing authorities, Exelon and its subsidiaries file consolidated or combined income tax returns for Federal and certain state jurisdictions where allowed or required. See Note 14 — Income Taxes for additional information.

Cash and Cash Equivalents (All Registrants)

The Registrants consider investments purchased with an original maturity of three months or less to be cash equivalents.

Restricted Cash and Cash Equivalents (All Registrants)

Restricted cash and cash equivalents represent funds that are restricted to satisfy designated current liabilities. As of December 31, 2018 and 2017, the Registrants' restricted cash and cash equivalents primarily represented the following items:



Registrant	Description
Exelon	Payment of medical, dental, vision and long-term disability benefits, in addition to the items listed for Generation and the Utility Registrants.
Generation	Project-specific nonrecourse financing structures for debt service and financing of operations of the underlying entities.
ComEd	Collateral held from suppliers associated with energy and REC procurement contracts, any over-recovered RPS costs and alternative compliance payments received from RES pursuant to FEJA and costs for the remediation of an MGP site.
PECO	Proceeds from the sales of assets that were subject to PECO’s mortgage indenture.
BGE	Proceeds from the loan program for the completion of certain energy efficiency measures and collateral held from energy suppliers.
PHI	Payment of merger commitments, collateral held from its energy suppliers associated with procurement contracts and repayment of transition bonds.
Pepco	Payment of merger commitments and collateral held from energy suppliers.
DPL	Collateral held from energy suppliers.
ACE	Repayment of transition bonds and collateral held from energy suppliers.

Restricted cash and cash equivalents not available to satisfy current liabilities are classified as noncurrent assets. As of December 31, 2018 and 2017, the Registrants' noncurrent restricted cash and cash equivalents primarily represented ComEd’s over-recovered RPS costs and alternative compliance payments received from RES pursuant to FEJA and costs for the remediation of an MGP site, and ACE’s repayment of transition bonds.

Allowance for Uncollectible Accounts (All Registrants)

The allowance for uncollectible accounts reflects the Registrants’ best estimates of losses on the customers' accounts receivable balances. For Generation, the allowance is based on accounts receivable aging historical experience and other currently available information. Utility Registrants estimate the allowance by applying loss rates developed specifically for each company to the outstanding receivable balance by customer risk segment. Utility Registrants' customer accounts are written off consistent with approved regulatory requirements.

Variable Interest Entities (All Registrants)

Exelon accounts for its investments in and arrangements with VIEs based on the following specific requirements:


•	requires an entity to qualitatively assess whether it should consolidate a VIE based on whether the entity has a controlling financial interest,


•	requires an ongoing reconsideration of this assessment instead of only upon certain triggering events, and


•	requires the entity that consolidates a VIE (the primary beneficiary) to disclose (1) the assets of the consolidated VIE, if they can be used to only settle specific obligations of the consolidated VIE, and (2) the liabilities of a consolidated VIE for which creditors do not have recourse to the general credit of the primary beneficiary.

Inventories (All Registrants)

Inventory is recorded at the lower of weighted average cost or net realizable value. Provisions are recorded for excess and obsolete inventory. Fossil fuel, materials and supplies, and emissions allowances are generally included in inventory when purchased. Fossil fuel and emissions allowances are expensed to purchased power and fuel expense when used or sold. Materials and supplies generally includes transmission, distribution and generating plant materials and are expensed to operating and maintenance or capitalized to property, plant and equipment, as appropriate, when installed or used.

Marketable Securities (All Registrants)

Debt and Equity Security Investments (Exelon and Generation)

Debt Security Investments. Debt securities are reported at fair value and classified as available-for-sale securities. Unrealized gains and losses, net of tax, are reported in OCI.

Equity Security Investments without Readily Determinable Fair Values. Exelon has certain equity securities without readily determinable fair values. Exelon has elected to use the practicability exception to measure these investments, defined as cost adjusted for changes from observable transactions for identical or similar investments of the same issuer, less impairment. Changes in measurement are reported in earnings.

Equity Security Investments with Readily Determinable Fair Values. Equity securities held in the NDT funds are classified as equity securities with readily determinable fair values. Realized and unrealized gains and losses, net of tax, on Generation’s NDT funds associated with the Regulatory Agreement Units are included in regulatory liabilities at Exelon, ComEd and PECO and in Noncurrent payables to affiliates at Generation and in Noncurrent receivables from affiliates at ComEd and PECO. Realized and unrealized gains and losses, net of tax, on Generation’s NDT funds associated with the Non-Regulatory Agreement Units are included in earnings at Exelon and Generation. Exelon's and Generation's NDT funds are classified as current or noncurrent assets, depending on the timing of the decommissioning activities and income taxes on trust earnings.

Property Plant And Equipment (All Registrants)

Property, Plant and Equipment (All Registrants)

Property, plant and equipment is recorded at original cost. Original cost includes construction-related direct labor and material costs. The Utility Registrants also include indirect construction costs including labor and related costs of departments associated with supporting construction activities. When appropriate, original cost also includes capitalized interest for Generation, Exelon Corporate and PHI and AFUDC for regulated property at the Utility Registrants. The cost of repairs and maintenance, including planned major maintenance activities and minor replacements of property, is charged to Operating and maintenance expense as incurred.

Third parties reimburse the Utility Registrants for all or a portion of expenditures for certain capital projects. Such contributions in aid of construction costs (CIAC) are recorded as a reduction to Property, plant and equipment, net. DOE SGIG and other funds reimbursed to the Utility Registrants have been accounted for as CIAC.

For Generation, upon retirement, the cost of property is generally charged to accumulated depreciation in accordance with the composite and group methods of depreciation. Upon replacement of an asset, the costs to remove the asset, net of salvage, are capitalized to gross plant when incurred as part of the cost of the newly-installed asset and recorded to depreciation expense over the life of the new asset. Removal costs, net of salvage, incurred for property that will not be replaced is charged to Operating and maintenance expense as incurred.

For the Utility Registrants, upon retirement, the cost of property, net of salvage, is charged to accumulated depreciation consistent with the composite and group methods of depreciation. Depreciation expense at ComEd, BGE, Pepco, DPL and ACE includes the estimated cost of dismantling and removing plant from service upon retirement. Actual incurred removal costs are applied against a related regulatory liability or recorded to a regulatory asset if in excess of previously collected removal costs. PECO’s removal costs are capitalized to accumulated depreciation when incurred, and recorded to depreciation expense over the life of the new asset constructed consistent with PECO’s regulatory recovery method.

Capitalized Software. Certain costs, such as design, coding, and testing incurred during the application development stage of software projects that are internally developed or purchased for operational use are capitalized within Property, plant and equipment. Such capitalized amounts are amortized ratably over the expected lives of the projects when they become operational, generally not to exceed five years. Certain other capitalized software costs are being amortized over longer lives based on the expected life or pursuant to prescribed regulatory requirements.

Capitalized Interest and AFUDC. During construction, Exelon and Generation capitalize the costs of debt funds used to finance non-regulated construction projects. Capitalization of debt funds is recorded as a charge to construction work in progress and as a non-cash credit to interest expense.

AFUDC is the cost, during the period of construction, of debt and equity funds used to finance construction projects for regulated operations. AFUDC is recorded to construction work in progress and as a non-cash credit to an allowance that is included in interest expense for debt-related funds and other income and deductions for equity-related funds. The rates used for capitalizing AFUDC are computed under a method prescribed by regulatory authorities.

Nuclear Fuel (Exelon and Generation)

The cost of nuclear fuel is capitalized within Property, plant and equipment and charged to fuel expense using the unit-of-production method. Any potential future SNF disposal fees will be expensed through fuel expense. Additionally, certain on-site SNF storage costs are being reimbursed by the DOE since a DOE (or government-owned) long-term storage facility has not been completed.

Nuclear Outage Costs (Exelon and Generation)

Costs associated with nuclear outages, including planned major maintenance activities, are expensed to Operating and maintenance expense or capitalized to Property, plant and equipment (based on the nature of the activities) in the period incurred.

Depreciation, Depletion, and Amortization (All Registrants)

Depreciation and Amortization (All Registrants)

Except for the amortization of nuclear fuel, depreciation is generally recorded over the estimated service lives of property, plant and equipment on a straight-line basis using the group, composite or unitary methods of depreciation. The group approach is typically for groups of similar assets that have approximately the same useful lives and the composite approach is used for dissimilar assets that have different lives. Under both methods, a reporting entity depreciates the assets over the average life of the assets in the group. The Utility Registrants' depreciation expense includes the estimated cost of dismantling and removing plant from service upon retirement, which is consistent with each utility's regulatory recovery method. The estimated service lives for the Registrants are based on a combination of depreciation studies, historical retirements, site licenses and management estimates of operating costs and expected future energy market conditions. See Note 8 — Early Plant Retirements for additional information on the impacts of expected and potential early plant retirements.

See Note 6 — Property, Plant and Equipment for additional information regarding depreciation.

Amortization of regulatory assets and liabilities are recorded over the recovery or refund period specified in the related legislation or regulatory order or agreement. When the recovery or refund period is less than one year, amortization is recorded to the line item in which the deferred cost or income would have originally been recorded in the Utility Registrants’ Consolidated Statements of Operations and Comprehensive Income. Amortization of ComEd’s electric distribution and energy efficiency formula rate regulatory assets and the Utility Registrants' transmission formula rate regulatory assets is recorded to Operating revenues.

Amortization of income tax related regulatory assets and liabilities is generally recorded to Income tax expense. With the exception of the regulatory assets and liabilities discussed above, when the recovery period is more than one year, the amortization is generally recorded to Depreciation and amortization in the Registrants’ Consolidated Statements of Operations and Comprehensive Income.

Asset Retirement Obligations (All Registrants)

Generation estimates and recognizes a liability for its legal obligation to perform asset retirement activities even though the timing and/or methods of settlement may be conditional on future events. Generation generally updates its nuclear decommissioning ARO annually, unless circumstances warrant more frequent updates, based on its annual evaluation of cost escalation factors and probabilities assigned to the multiple outcome scenarios within its probability-weighted discounted cash flow models. Generation’s multiple outcome scenarios are generally based on decommissioning cost studies which are updated, on a rotational basis, for each of Generation’s nuclear units at least every five years, unless circumstances warrant more frequent updates. AROs are accreted throughout each year to reflect the time value of money for these present value obligations through a charge to Operating and maintenance expense in the Consolidated Statements of Operations and Comprehensive Income or, in the case of the Utility Registrants' accretion, through an increase to regulatory assets.

Guarantees (All Registrants)

The Registrants recognize, at the inception of a guarantee, a liability for the fair market value of the obligations they have undertaken by issuing the guarantee, including the ongoing obligation to perform over the term of the guarantee in the event that the specified triggering events or conditions occur.

The liability that is initially recognized at the inception of the guarantee is reduced as the Registrants are released from risk under the guarantee. Depending on the nature of the guarantee, the release from risk of the Registrant may be recognized only upon the expiration or settlement of the guarantee or by a systematic and rational amortization method over the term of the guarantee.

Long-lived Assets (All Registrants)

Long-Lived Assets (All Registrants). The Registrants evaluate the carrying value of their long-lived assets or asset groups, excluding goodwill, when circumstances indicate the carrying value of those assets may not be recoverable. Indicators of impairment may include a deteriorating business climate, including, but not limited to, declines in energy prices, condition of the asset, specific regulatory disallowance, or plans to dispose of a long-lived asset significantly before the end of its useful life. The Registrants determine if long-lived assets and asset groups are impaired by comparing the undiscounted expected future cash flows to the carrying value. When the undiscounted cash flow analysis indicates a long-lived asset or asset group is not recoverable, the amount of the impairment loss is determined by measuring the excess of the carrying amount of the long-lived asset or asset group over its fair value.

Goodwill (All Registrants)

Goodwill (Exelon, ComEd and PHI). Goodwill represents the excess of the purchase price paid over the estimated fair value of the net assets acquired and liabilities assumed in the acquisition of a business. Goodwill is not amortized, but is tested for impairment at least annually or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

Equity Method Investments (All Registrants)

Equity Method Investments (Exelon and Generation). Exelon and Generation regularly monitor and evaluate equity method investments to determine whether they are impaired. An impairment is recorded when the investment has experienced a decline in value that is other-than-temporary in nature. Additionally, if the entity in which Generation holds an investment recognizes an impairment loss, Exelon and Generation would record their proportionate share of that impairment loss and evaluate the investment for an other-than-temporary decline in value.

Derivatives Financial Instruments (All Registrants)

Derivative Financial Instruments (All Registrants)

All derivatives are recognized on the balance sheet at their fair value unless they qualify for certain exceptions, including the normal purchases and normal sales exception. For derivatives intended to serve as economic hedges, changes in fair value are recognized in earnings each period. Amounts classified in earnings are included in Operating revenue, Purchased power and fuel, Interest expense or Other, net in the Consolidated Statements of Operations and Comprehensive Income based on the activity the transaction is economically hedging. While the majority of the derivatives serve as economic hedges, there are also derivatives entered into for proprietary trading purposes, subject to Exelon’s Risk Management Policy, and changes in the fair value of those derivatives are recorded in revenue in the Consolidated Statements of Operations and Comprehensive Income. At the Utility Registrants, changes in fair value may be recorded as a regulatory asset or liability if there is an ability to recover or return the associated costs. Cash inflows and outflows related to derivative instruments are included as a component of operating, investing or financing cash flows in the Consolidated Statements of Cash Flows, depending on the nature of each transaction. On July 1, 2018, Exelon and Generation de-designated its fair value and cash flow hedges. See Note 4 — Regulatory Matters and Note 12 — Derivative Financial Instruments for additional information.

As part of Generation’s energy marketing business, Generation enters into contracts to buy and sell energy to meet the requirements of its customers. These contracts include short-term and long-term commitments to purchase and sell energy and energy-related products in the energy markets with the intent and ability to deliver or take delivery of the underlying physical commodity. Normal purchases and normal sales are contracts where physical delivery is probable, quantities are expected to be used or sold in the normal course of business over a reasonable period of time and will not be financially settled. Revenues and expenses on derivative contracts that qualify, and are designated, as normal purchases and normal sales are recognized when the underlying physical transaction is completed. While these contracts are considered derivative financial instruments, they are not required to be recorded at fair value, but rather are recorded on an accrual basis of accounting.

Retirement Benefits (All Registrants)

Exelon sponsors defined benefit pension plans and other postretirement benefit plans for essentially all employees.

The measurement of the plan obligations and costs of providing benefits under these plans involve various factors assumptions, and accounting elections. The impact of assumption changes or experience different from that assumed on pension and other postretirement benefit obligations is recognized over time rather than immediately recognized in the Consolidated Statements of Operations and Comprehensive Income. Gains or losses in excess of the greater of ten percent of the projected benefit obligation or the MRV of plan assets are amortized over the expected average remaining service period of plan participants.

Investment, Policy [Policy Text Block]

Debt Security Investments (Exelon and Generation). Declines in the fair value of debt security investments below the cost basis are reviewed to determine if such decline is other-than-temporary. If the decline is determined to be other-than-temporary, the amount of the impairment loss is included in earnings.

Equity Security Investments (Exelon and Generation). Equity investments with readily determinable fair values are measured and recorded at fair value with any changes in fair value recorded through earnings. Investments in equity securities without readily determinable fair values are qualitatively assessed for impairment each reporting period. If it is determined that the equity security is impaired on the basis of the qualitative assessment, an impairment loss will be recognized in earnings to the amount by which the security’s carrying amount exceeds its fair value.

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

Prior Period Adjustments and Reclassifications (All Registrants)

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Standards Adopted in 2018: In 2018, the Registrants adopted the following new authoritative accounting guidance issued by the FASB.

Defined Benefit Plan Disclosures (Issued August 2018). Eliminates existing disclosure requirements related to amounts in Accumulated other comprehensive income expected to be recognized in Net periodic benefit cost over the next year and the effects of a one-percentage-point change in the assumed health care cost trend rates. In addition, new disclosures were added such as the weighted-average interest crediting rates for cash balance plans and an explanation for the reasons for significant gains and losses related to changes in the benefit obligation. The standard is effective January 1, 2021, with early adoption permitted, and must be applied retrospectively. Exelon early adopted this standard in the fourth quarter of 2018. See Note 16 — Retirement Benefits for additional information.

Fair Value Measurement Disclosures (Issued August 2018). Updates the disclosure requirements for fair value measurements to improve the usefulness of information for financial statement users. The guidance removes the requirements to disclose (1) the amount of and reasons for transfers between Level 1 and Level 2, (2) the policy for timing of transfers between levels, and (3) the valuation processes for Level 3 fair value measurements and adds a requirement to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The standard is effective January 1, 2020, with early adoption permitted. The amendments to remove disclosures must be applied retrospectively and can be early adopted, while the amendments to add disclosures must be applied prospectively and adoption can be delayed until the effective date. The Registrants early adopted, in the fourth quarter of 2018, the amendments to remove disclosures and will adopt the amendments to add disclosures in the first quarter of 2020. The impact of the new disclosures is not expected to be material to the Registrants’ consolidated financial statements. See Note 11 — Fair Value of Financial Assets and Liabilities for additional information.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Issued February 2018). Provides an election for a reclassification from AOCI to Retained earnings to eliminate the stranded tax effects resulting from the TCJA. This standard is effective January 1, 2019, with early adoption permitted, and may be applied either in the period of adoption or retrospective to each period in which the effects of the TCJA were recognized. Exelon early adopted this standard and elected to apply the guidance retrospectively as of December 31, 2017, which resulted in an increase to Exelon’s Retained earnings and Accumulated other comprehensive loss of $539 million in its Consolidated Balance Sheet and Consolidated Statement of Changes in Shareholders' Equity related to deferred income taxes associated with Exelon’s pension and OPEB obligations. There was no impact for Generation or the Utility Registrants. Exelon's accounting policy is to release the stranded tax effects from AOCI related to its pension and OPEB plans under a portfolio (or aggregate) approach as an entire pension or OPEB plan is liquidated or terminated. See Note 21— Changes in Accumulated Other Comprehensive Income for additional information.

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Issued March 2017). Changes the accounting and presentation of pension and OPEB costs at the plan sponsor (i.e., Exelon) level. The guidance requires plan sponsors to report the service cost and other non-service cost components of net periodic pension cost and net periodic OPEB cost (together, net benefit cost) separately. Under the new guidance, service cost is presented as part of income from operations and the other non-service cost components are classified outside of income from operations in the Consolidated Statements of Operations and Comprehensive Income. Additionally, service cost is the only component eligible for capitalization on a prospective basis beginning on January 1, 2018. Under prior GAAP, the total amount of net benefit cost was recorded as part of income from operations and all components were eligible for capitalization. Exelon applied the presentation of the service component and the other non-service cost components of net benefit costs retrospectively and, accordingly, have recasted those amounts, which were not material, in its Consolidated Statement of Operations and Comprehensive Income in prior periods presented. Exelon elected the practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the comparative periods as the estimation basis for applying the retrospective presentation requirements. In Exelon’s consolidated financial statements, non-service cost components of pension and OPEB cost capitalizable under a regulatory framework were prospectively reported as regulatory assets (previously, they were capitalizable under pension and OPEB accounting guidance and reported as PP&E). These regulatory assets are amortized outside of operating income. See Note 16 — Retirement Benefits for additional information.

Generation, ComEd, PECO, BGE, BSC, PHI, Pepco, DPL, ACE and PHISCO participate in Exelon’s single employer pension and OPEB plans and apply multi-employer accounting. Multi-employer accounting was not impacted by this standard; therefore, Exelon's subsidiary financial statements did not change upon its adoption.

Statement of Cash Flows: Classification of Restricted Cash (Issued November 2016). The standard states that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows (instead of being presented as cash flow activities). The Registrants applied the new guidance using the full retrospective method and, accordingly, have recasted the presentation of restricted cash in their Consolidated Statements of Cash Flows in the prior periods presented. See Note 23 — Supplemental Financial Information for additional information.

Recognition and Measurement of Financial Assets and Financial Liabilities (Issued January 2016). Eliminates the available-for-sale and cost method classification for equity securities and requires that all equity investments (other than those accounted for using the equity method of accounting) be measured and recorded at fair value with any changes in fair value recorded through earnings and, for equity investments without a readily determinable fair value, provides a measurement alternative of cost less impairment plus or minus adjustments for observable price changes in identical or similar assets. In addition, equity investments without readily determinable fair values must be qualitatively assessed for impairment each reporting period and fair value determined if any significant impairment indicators exist. If fair value is less than carrying value, the impairment is recorded through net income immediately in the period in which it is identified. The guidance does not impact the classification or measurement of investments in debt securities. The guidance also amends several disclosure requirements, including requiring i) financial assets and financial liabilities to be presented separately in the balance sheet or note, grouped by measurement category and form, ii) disclosure of the methods and significant assumptions used to estimate fair value or a description of the changes in the methods and assumptions used to estimate fair value, and iii) for financial assets and liabilities measured at amortized cost, disclosure of the fair value of the amount that would be received to sell the asset or paid to transfer the liability. The guidance was applied using a modified retrospective transition approach with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of adoption. The Registrants recorded an insignificant adjustment to opening retained earnings as of January 1, 2018 related to unrealized gains/losses on available for sale equity securities. See Note 21— Changes in Accumulated Other Comprehensive Income for additional information.

Revenue from Contracts with Customers (Issued May 2014 and subsequently amended to address implementation questions). Changes the criteria for recognizing revenue from a contract with a customer. The new standard replaces existing guidance on revenue recognition, including most industry specific guidance, with a five-step model for recognizing and measuring revenue from contracts with customers. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance also requires a number of disclosures regarding the nature, amount, timing, and uncertainty of revenue and the related cash flows. The guidance can be applied retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of initial adoption (modified retrospective method). The Registrants applied the new guidance using the full retrospective method and, accordingly, have recasted certain amounts in their Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of Cash Flows, Consolidated Balance Sheets, Consolidated Statements of Changes in Shareholders' Equity and Combined Notes to Consolidated Financial Statements in the prior periods presented. The amounts recasted in the Registrants' 2017 and 2016 Consolidated Statements of Operations and Comprehensive Income are shown in the table below. The amounts recasted in the Registrants’ Consolidated Statements of Cash Flows, Consolidated Balance Sheets, Consolidated Statements of Changes in Shareholders' Equity and Combined Notes to Consolidated Financial Statements were not material. See Note 3 — Revenue from Contracts with Customers for additional information.



														Successor
For the year ended December 31, 2017	Exelon			Generation		ComEd			PECO		BGE			PHI			Pepco			DPL			ACE
Operating Revenues - As reported
Competitive business revenues	$	17,360		$	—	$	—		$	—	$	—		$	—		$	—		$	—		$	—
Rate-regulated utility revenues	16,171			—		—			—		—			—			—			—			—
Operating revenues	—			17,351		—			—		—			—			—			—			—
Electric operating revenues	—			—		5,521			2,369		2,484			4,468			2,152			1,131			1,184
Natural gas operating revenues	—			—		—			494		676			161			—			161			—
Operating revenues from affiliates	—			1,115		15			7		16			50			6			8			2
Total operating revenues	$	33,531		$	18,466	$	5,536		$	2,870	$	3,176		$	4,679		$	2,158		$	1,300		$	1,186

Operating Revenues - Adjustments
Competitive business revenues	$	34		$	—	$	—		$	—	$	—		$	—		$	—		$	—		$	—
Rate-regulated utility revenues	(207		)	—		—			—		—			—			—			—			—
Operating revenues	—			34		—			—		—			—			—			—			—
Electric operating revenues	—			—		(43		)	—		(100		)	(40		)	(26		)	(6		)	(8		)
Natural gas operating revenues	—			—		—			—		(24		)	—			—			—			—
Revenues from alternative revenue programs	207			—		43			—		124			40			26			6			8
Operating revenues from affiliates	—			—		—			—					—			—			—			—
Total operating revenues	$	34		$	34	$	—		$	—	$	—		$	—		$	—		$	—		$	—

Operating Revenues - Retrospective application
Competitive business revenues	$	17,394		$	—	$	—		$	—	$	—		$	—		$	—		$	—		$	—
Rate-regulated utility revenues	15,964			—		—			—		—			—			—			—			—
Operating revenues	—			17,385		—			—		—			—			—			—			—
Electric operating revenues	—			—		5,478			2,369		2,384			4,428			2,126			1,125			1,176
Natural gas operating revenues	—			—		—			494		652			161			—			161			—
Revenues from alternative revenue programs	207			—		43			—		124			40			26			6			8
Operating revenues from affiliates	—			1,115		15			7		16			50			6			8			2
Total operating revenues	$	33,565		$	18,500	$	5,536		$	2,870	$	3,176		$	4,679		$	2,158		$	1,300		$	1,186



																							Successor			Predecessor
																							March 24, 2016 to December 31, 2016			January 1, 2016 to March 23, 2016
For the year ended December 31, 2016	Exelon			Generation		ComEd			PECO		BGE			Pepco			DPL			ACE			PHI			PHI
Operating Revenues - As reported
Competitive business revenues	$	16,324		$	—	$	—		$	—	$	—		$	—		$	—		$	—		$	—		$	—
Rate-regulated utility revenues	15,036			—		—			—		—			—			—			—			—			—
Operating revenues	—			16,312		—			—		—			—			—			—			—			—
Electric operating revenues	—			—		5,239			2,524		2,603			2,181			1,122			1,254			3,506			1,096
Natural gas operating revenues	—			—		—			462		609			—			148			—			92			57
Operating revenues from affiliates	—			1,439		15			8		21			5			7			3			45			—
Total operating revenues	$	31,360		$	17,751	$	5,254		$	2,994	$	3,233		$	2,186		$	1,277		$	1,257		$	3,643		$	1,153

Operating Revenues - Adjustments
Competitive business revenues	$	6		$	—	$	—		$	—	$	—		$	—		$	—		$	—		$	—		$	—
Rate-regulated utility revenues	(48		)	—		—			—		—			—			—			—			—			—
Operating revenues	—			6		—			—		—			—			—			—			—			—
Electric operating revenues	—			—		24			—		(72		)	(14		)	6			(9		)	(43		)	26
Natural gas operating revenues	—			—		—			—		19			—			—			—			—			—
Revenues from alternative revenue programs	48			—		(24		)	—		53			14			(6		)	9			43			(26		)
Operating revenues from affiliates	—			—		—			—		—			—			—			—			—			—
Total operating revenues	$	6		$	6	$	—		$	—	$	—		$	—		$	—		$	—		$	—		$	—

Operating Revenues - Retrospective application
Competitive business revenues	$	16,330		$	—	$	—		$	—	$	—		$	—		$	—		$	—		$	—		$	—
Rate-regulated utility revenues	14,988			—		—			—		—			—			—			—			—			—
Operating revenues	—			16,318		—			—		—			—			—			—			—			—
Electric operating revenues	—			—		5,263			2,524		2,531			2,167			1,128			1,245			3,463			1,122
Natural gas operating revenues	—			—		—			462		628			—			148			—			92			57
Revenues from alternative revenue programs	48			—		(24		)	—		53			14			(6		)	9			43			(26		)
Operating revenues from affiliates	—			1,439		15			8		21			5			7			3			45			—
Total operating revenues	$	31,366		$	17,757	$	5,254		$	2,994	$	3,233		$	2,186		$	1,277		$	1,257		$	3,643		$	1,153

New Accounting Standards Adopted as of January 1, 2019: The following new authoritative accounting guidance issued by the FASB was adopted as of January 1, 2019 and will be reflected by the Registrants in their consolidated financial statements beginning in the first quarter of 2019.

Cloud Computing Arrangements (Issued August 2018). Aligns the requirements for capitalizing costs incurred to implement a cloud computing arrangement with the internal-use software guidance. As a result, certain implementation costs incurred in a cloud computing arrangement that are currently expensed as incurred will be deferred and amortized over the non-cancellable term of the arrangement plus any reasonably certain renewal periods. The standard is effective January 1, 2020, with early adoption permitted, and can be applied using either a prospective or retrospective transition approach. A retrospective approach requires a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Registrants early adopted this standard using a prospective approach as of January 1, 2019. The new guidance is not expected to have a material impact on the Registrants’ financial statements.

Leases (Issued February 2016). Increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Registrants adopted the standard on January 1, 2019.

The new standard requires lessees to recognize both the right-of-use assets and lease liabilities in the balance sheet for most leases, whereas under previous GAAP only finance lease liabilities (referred to as capital leases) were recognized in the balance sheet. In addition, the definition of a lease has been revised which may result in changes to the classification of an arrangement as a lease. Under the new standard, an arrangement that conveys the right to control the use of an identified asset by obtaining substantially all of its economic benefits and directing how it is used is a lease, whereas the previous definition focuses on the ability to control the use of the asset or to obtain its output. Quantitative and qualitative disclosures related to the amount, timing and judgments of an entity’s accounting for leases and the related cash flows are expanded. Disclosure requirements apply to both lessees and lessors, whereas previous disclosures related only to lessees. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. Lessor accounting is also largely unchanged.

The new standard provides a number of transition practical expedients, which the Registrants have elected, including:


•	a "package of three" expedients that must be taken together and allow entities to (1) not reassess whether existing contracts contain leases, (2) carryforward the existing lease classification, and (3) not reassess initial direct costs associated with existing leases,


•	an implementation expedient which allows the requirements of the standard in the period of adoption with no restatement of prior periods, and


•	a land easement expedient which allows entities to not evaluate land easements under the new standard at adoption if they were not previously accounted for as leases.

The Registrants have assessed the lease standard and executed a detailed implementation plan in preparation for adoption, which included the following key activities:


•	Developed a complete lease inventory and abstracted the required data attributes into a lease accounting system that supports the Registrants' lease portfolios and integrates with existing systems.


•	Evaluated the transition practical expedients available under the standard.


•	Identified, assessed and documented technical accounting issues, policy considerations and financial reporting implications.


•	Identified and implemented changes to processes and controls to ensure all impacts of the new standard are effectively addressed.

The adoption of the new standard is expected to result in right of use assets and lease obligations for operating leases recorded in the Registrants’ Consolidated Balance Sheets on January 1, 2019 of approximately:



	Exelon	Generation	ComEd	PECO	BGE	PHI	Pepco	DPL	ACE
ROU Assets	$1,400-$1,500	$1,000-$1,100	$5-$10	$1-$5	$100-$120	$250-$270	$60-$65	$70-$75	$20-$25
Lease Liabilities	$1,600-$1,700	$1,200-$1,300	$5-$10	$1-$5	$100-$120	$300-$320	$60-$65	$75-$80	$20-$25

The impact of adopting the new standard on retained earnings as of January 1, 2019 is expected to be immaterial.

New Accounting Standards Issued and Not Yet Adopted as of December 31, 2018: The following new authoritative accounting guidance issued by the FASB has not yet been adopted and reflected by the Registrants in their consolidated financial statements as of December 31, 2018. Unless otherwise indicated, the Registrants are currently assessing the impacts such guidance may have (which could be material) in their Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of Cash Flows and disclosures, as well as the potential to early adopt where applicable. The Registrants have assessed other FASB issuances of new standards which are not listed below given the current expectation that such standards will not significantly impact the Registrants' financial reporting.

Goodwill Impairment (Issued January 2017). Simplifies the accounting for goodwill impairment by removing Step 2 of the current test, which requires calculation of a hypothetical purchase price allocation. Under the revised guidance, goodwill impairment will be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill (currently Step 1 of the two-step impairment test). Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. Exelon, Generation, ComEd, PHI and DPL have goodwill as of December 31, 2018. This updated guidance is not currently expected to impact the Registrants’ financial reporting. The standard is effective January 1, 2020, with early adoption permitted, and must be applied on a prospective basis.

Impairment of Financial Instruments (Issued June 2016). Provides for a new Current Expected Credit Loss (CECL) impairment model for specified financial instruments including loans, trade receivables, debt securities classified as held-to-maturity investments and net investments in leases recognized by a lessor. Under the new guidance, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. The standard does not make changes to the existing impairment models for non-financial assets such as fixed assets, intangibles and goodwill. The standard will be effective January 1, 2020 (with early adoption as of January 1, 2019 permitted) and requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Registrants are currently assessing the impacts of this standard.