ComEd 2006 Annual Report Download - page 187

Exelon Corporation and Subsidiary Companies
Exelon Generation Company, LLC and Subsidiary Companies
Commonwealth Edison Company and Subsidiary Companies
PECO Energy Company and Subsidiary Companies
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
PECO’s financial statements. The following table shows the amounts recorded as debt to financing
trusts within the Consolidated Balance Sheets:
As of the Year Ended December 31, Exelon ComEd PECO
2006 ................................................. $3.6 billion $1.0 billion $2.6 billion
2005 ................................................. 4.5billion 1.3 billion 3.2 billion
This change in presentation related to the financing trusts had no effect on Exelon’s, ComEd’s or
PECO’s net income. In accordance with FIN 46-R, prior periods were not restated. The maximum
exposure to loss as a result of ComEd’s and PECO’s involvement with the financing trusts was $34
million and $64 million respectively, at December 31, 2006 and $46 million and $73 million,
respectively, at December 31, 2005.
Revenues (Exelon, Generation, ComEd and PECO)
Operating Revenues. Operating revenues are recorded as service is rendered or energy is
delivered to customers. At the end of each month, the Registrants accrue an estimate for the unbilled
amount of energy delivered or services provided to customers (see Note 5—Accounts Receivable).
Option Contracts, Swaps, and Commodity Derivatives. Premiums received and paid on option
contracts and swap arrangements considered “normal” derivatives pursuant to SFAS No. 133,
“Accounting for Derivatives and Hedging Activities” (SFAS No. 133) are amortized to revenue and
expense over the lives of the contracts. Certain option contracts and swap arrangements which meet
the definition of derivative instruments are recorded at fair value with subsequent changes in fair value
recognized as revenues and expenses, unless hedge accounting is applied. If the derivatives meet
hedging criteria, changes in fair value are recorded in OCI. Commodity derivatives used for trading
purposes are accounted for using the mark-to-market method with unrealized gains and losses
recognized in operating revenues.
Trading Activities. Exelon and Generation account for their trading activities under the provisions
of Emerging Issues Task Force (EITF) Issue No. 02-3, “Accounting for Contracts Involved in Energy
Trading and Risk Management Activities” (EITF 02-3), which requires revenues and energy costs
related to energy trading contracts to be presented on a net basis in the income statement.
Physically Settled Derivative Contracts. Exelon and Generation account for realized gains and
losses on physically settled derivative contracts not “held for trading purposes” in accordance with
EITF Issue No. 03-11, “Reporting Realized Gains and Losses on Derivative Instruments That Are
Subject to FASB Statement No. 133, ‘Accounting for Derivative Instruments and Hedging Activities,’
and Not ‘Held for Trading Purposes’ as Defined in EITF Issue No. 02-3, ‘Issues Involved in Accounting
for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk
Management Activities’” (EITF 03-11).
EITF 03-11 states that determining whether realized gains and losses on physically settled
derivative contracts not “held for trading purposes” should be reported in the income statement on a
gross or net basis is a matter of judgment that depends on the relevant facts and circumstances.
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