Variable Interest Entities (All Registrants)

A VIE is a legal entity that possesses any of the following characteristics: an insufficient amount of equity at risk to finance its activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest) or equity owners who do not have the obligation to absorb expected losses or the right to receive the expected residual returns of the entity. Companies are required to consolidate a VIE if they are its primary beneficiary, which is the enterprise that has the power to direct the activities that most significantly affect the entity’s economic performance.

At March 31, 2019 and December 31, 2018, Exelon, Generation, PHI and ACE collectively consolidated five VIEs or VIE groups for which the applicable Registrant was the primary beneficiary (see Consolidated Variable Interest Entities below). As of March 31, 2019 and December 31, 2018, Exelon and Generation collectively had significant interests in seven other VIEs for which the applicable Registrant does not have the power to direct the entities’ activities and, accordingly, was not the primary beneficiary (see Unconsolidated Variable Interest Entities below).

Consolidated Variable Interest Entities

As of March 31, 2019 and December 31, 2018, Exelon's and Generation's consolidated VIEs consist of:


•	energy related companies involved in distributed generation, backup generation and energy development


•	renewable energy project companies formed by Generation to build, own and operate renewable power facilities


•	certain retail power and gas companies for which Generation is the sole supplier of energy, and


•	CENG.

As of March 31, 2019 and December 31, 2018, Exelon's, PHI's and ACE's consolidated VIE consist of:


•	ATF, a special purpose entity formed by ACE for the purpose of securitizing authorized portions of ACE’s recoverable stranded costs through the issuance and sale of transition bonds.

As of March 31, 2019 and December 31, 2018, ComEd, PECO, BGE, Pepco and DPL did not have any material consolidated VIEs.

As of March 31, 2019 and December 31, 2018, Exelon and Generation provided the following support to their respective consolidated VIEs:


•	Generation provides operating and capital funding to the renewable energy project companies and there is limited recourse to Generation related to certain renewable energy project companies.


•	Generation provides approximately $32 million in credit support for the retail power and gas companies for which Generation is the sole supplier of energy.


•	Exelon and Generation, where indicated, provide the following support to CENG:

•

under PPAs with CENG, Generation purchased or will purchase 50.01% of the available output generated by the CENG nuclear plants not subject to other contractual agreements from January 2015 through the end of the operating life of each respective plant. However, pursuant to amendments dated March 31, 2015, the energy obligations under the Ginna Nuclear Power Plant (Ginna) PPAs were suspended during the term of the RSSA, through the end of March 31, 2017. With the expiration of the RSSA, the PPA was reinstated beginning April 1, 2017,


•	Generation provided a $400 million loan to CENG. The loan balance was fully repaid by CENG in January 2019.

•

Generation executed an Indemnity Agreement pursuant to which Generation agreed to indemnify EDF against third-party claims that may arise from any future nuclear incident (as defined in the Price-Anderson Act) in connection with the CENG nuclear plants or their operations. Exelon guarantees Generation’s obligations under this Indemnity Agreement. (See Note 16 — Commitments and Contingencies for additional information),


•	Generation and EDF share in the $688 million of contingent payment obligations for the payment of contingent retrospective premium adjustments for the nuclear liability insurance, and


•	Exelon has executed an agreement to provide up to $245 million to support the operations of CENG as well as a $165 million guarantee of CENG’s cash pooling agreement with its subsidiaries.

As of March 31, 2019 and December 31, 2018, Exelon, PHI and ACE provided the following support to their respective consolidated VIE:

•

In the case of ATF, proceeds from the sale of each series of transition bonds by ATF were transferred to ACE in exchange for the transfer by ACE to ATF of the right to collect a non-bypassable Transition Bond Charge from ACE customers pursuant to bondable stranded costs rate orders issued by the NJBPU in an amount sufficient to fund the principal and interest payments on transition bonds and related taxes, expenses and fees. During the three months ended March 31, 2019, ACE transferred $4 million to ATF. During the three months ended March 31, 2018, ACE transferred $8 million to ATF.

For each of the consolidated VIEs, except as otherwise noted:


•	the assets of the VIEs are restricted and can only be used to settle obligations of the respective VIE;


•	Exelon, Generation, PHI and ACE did not provide any additional material financial support to the VIEs;


•	Exelon, Generation, PHI and ACE did not have any material contractual commitments or obligations to provide financial support to the VIEs; and


•	the creditors of the VIEs did not have recourse to Exelon’s, Generation’s, PHI's or ACE's general credit.

The carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in the Registrants' consolidated financial statements at March 31, 2019 and December 31, 2018 are as follows:



	March 31, 2019								December 31, 2018
	Exelon^(a)		Generation		PHI^(a)		ACE		Exelon^(a)		Generation		PHI^(a)		ACE
Current assets	$	645	$	639	$	6	$	3	$	938	$	931	$	7	$	4
Noncurrent assets	9,235		9,210		25		19		9,071		9,045		26		19
Total assets	$	9,880	$	9,849	$	31	$	22	$	10,009	$	9,976	$	33	$	23
Current liabilities	$	748	$	725	$	23	$	19	$	274	$	252	$	22	$	19
Noncurrent liabilities	2,831		2,790		41		35		3,280		3,233		47		40
Total liabilities	$	3,579	$	3,515	$	64	$	54	$	3,554	$	3,485	$	69	$	59

_________


(a)	Includes certain purchase accounting adjustments not pushed down to the ACE standalone entity.

Assets and Liabilities of Consolidated VIEs

Included within the balances above are assets and liabilities of certain consolidated VIEs for which the assets can only be used to settle obligations of those VIEs, and liabilities that creditors or beneficiaries do not have recourse to the general credit of the Registrants. As of March 31, 2019 and December 31, 2018, these assets and liabilities primarily consisted of the following:



	March 31, 2019								December 31, 2018
	Exelon^(a)		Generation		PHI^(a)		ACE		Exelon^(a)		Generation		PHI^(a)		ACE
Cash and cash equivalents	$	125	$	125	$	—	$	—	$	414	$	414	$	—	$	—
Restricted cash and cash equivalents	58		55		3		3		66		62		4		4
Accounts receivable, net
Customer	152		152		—		—		146		146		—		—
Other	23		23		—		—		23		23		—		—
Inventory, net
Materials and supplies	213		213		—		—		212		212		—		—
Other current assets	51		48		3		—		52		49		3		—
Total current assets	622		616		6		3		913		906		7		4
Property, plant and equipment, net	6,147		6,147		—		—		6,145		6,145		—		—
NDT funds	2,520		2,520		—		—		2,351		2,351		—		—
Other noncurrent assets	257		232		25		19		258		232		26		19
Total noncurrent assets	8,924		8,899		25		19		8,754		8,728		26		19
Total assets	$	9,546	$	9,515	$	31	$	22	$	9,667	$	9,634	$	33	$	23
Long-term debt due within one year	$	567	$	545	$	22	$	19	$	87	$	66	$	21	$	18
Accounts payable	120		120		—		—		96		96		—		—
Accrued expenses	42		41		1		—		72		72		1		1
Unamortized energy contract liabilities	13		13		—		—		15		15		—		—
Other current liabilities	6		6		—		—		3		3		—		—
Total current liabilities	748		725		23		19		273		252		22		19
Long-term debt	565		524		41		35		1,072		1,025		47		40
Asset retirement obligations	2,190		2,190		—		—		2,160		2,160		—		—
Unamortized energy contract liabilities	—		—		—		—		1		1		—		—
Other noncurrent liabilities	69		69		—		—		42		42		—		—
Total noncurrent liabilities	2,824		2,783		41		35		3,275		3,228		47		40
Total liabilities	$	3,572	$	3,508	$	64	$	54	$	3,548	$	3,480	$	69	$	59

_________


(a)	Includes certain purchase accounting adjustments not pushed down to the ACE standalone entity.

Unconsolidated Variable Interest Entities

Exelon’s and Generation’s variable interests in unconsolidated VIEs generally include equity investments and energy purchase and sale contracts. For the equity investments, the carrying amount of the investments is reflected in Exelon’s and Generation’s Consolidated Balance Sheets in Investments. For the energy purchase and sale contracts (commercial agreements), the carrying amount of assets and liabilities in Exelon’s and Generation’s Consolidated Balance Sheets that relate to their involvement with the VIEs are predominately related to working capital accounts and generally represent the amounts owed by, or owed to, Exelon and Generation for the deliveries associated with the current billing cycles under the commercial agreements. Further, Exelon and Generation have not provided material debt or equity support, liquidity arrangements or performance guarantees associated with these commercial agreements.

As of March 31, 2019 and December 31, 2018, Exelon's and Generation's unconsolidated VIEs consist of:


•	Energy purchase and sale agreements with VIEs for which Generation has concluded that consolidation is not required.


•	Asset sale agreement with ZionSolutions, LLC and EnergySolutions, Inc. in which Generation has a variable interest but has concluded that consolidation is not required.


•	Equity investments in distributed energy companies for which Generation has concluded that consolidation is not required.

As of March 31, 2019 and December 31, 2018, the Utility Registrants did not have any material unconsolidated VIEs.

As of March 31, 2019 and December 31, 2018, Exelon and Generation had significant unconsolidated variable interests in seven VIEs for which Exelon or Generation, as applicable, was not the primary beneficiary; including certain equity investments and certain commercial agreements. Exelon and Generation only include unconsolidated VIEs that are individually material in the tables below. However, Exelon and Generation have several individually immaterial VIEs that in aggregate represent a total investment of $16 million and $12 million, respectively, as of March 31, 2019. These immaterial VIEs are equity and debt securities in energy development companies. As of March 31, 2019, the maximum exposure to loss related to these securities included in Investments in Exelon’s and Generation’s Consolidated Balance Sheets is limited to $16 million and $12 million, respectively. The risk of a loss was assessed to be remote and, accordingly, Exelon and Generation have not recognized a liability associated with any portion of the maximum exposure to loss.

The following tables present summary information about Exelon's and Generation’s significant unconsolidated VIE entities:



March 31, 2019	Commercial Agreement VIEs		Equity Investment VIEs		Total
Total assets^(a)	$	601	$	463	$	1,064
Total liabilities^(a)	42		223		265
Exelon's ownership interest in VIE^(a)	—		214		214
Other ownership interests in VIE^(a)	559		26		585
Registrants’ maximum exposure to loss:
Carrying amount of equity method investments	—		214		214
Contract intangible asset	7		—		7



December 31, 2018	Commercial Agreement VIEs		Equity Investment VIEs		Total
Total assets^(a)	$	597	$	472	$	1,069
Total liabilities^(a)	37		222		259
Exelon's ownership interest in VIE^(a)	—		223		223
Other ownership interests in VIE^(a)	560		27		587
Registrants’ maximum exposure to loss:
Carrying amount of equity method investments	—		223		223
Contract intangible asset	7		—		7

_________


(a)	These items represent amounts in the unconsolidated VIE balance sheets, not in Exelon’s or Generation’s Consolidated Balance Sheets. These items are included to provide information regarding the relative size of the unconsolidated VIEs.

For each of the unconsolidated VIEs, Exelon and Generation have assessed the risk of a loss equal to their maximum exposure to be remote and, accordingly, Exelon and Generation have not recognized a liability associated with any portion of the maximum exposure to loss. In addition, there are no material agreements with, or commitments by, third parties that would affect the fair value or risk of their variable interests in these VIEs.