filings.toolsItem 1. FINANCIAL STATEMENTS
185K characters. Original on sec.gov ·
Item 1. FINANCIAL STATEMENTS
Constellation Energy Corporation and Subsidiary Companies
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| Three Months Ended March 31, | |||||||||||||||||||||||
| (In millions, except per share data) | 2024 | 2023 | |||||||||||||||||||||
| Operating revenues | $ | 6,161 | $ | 7,565 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Purchased power and fuel | 3,417 | 5,729 | |||||||||||||||||||||
| Operating and maintenance | 1,486 | 1,432 | |||||||||||||||||||||
| Depreciation and amortization | 306 | 267 | |||||||||||||||||||||
| Taxes other than income taxes | 139 | 132 | |||||||||||||||||||||
| Total operating expenses | 5,348 | 7,560 | |||||||||||||||||||||
| Gain (loss) on sales of assets and businesses | — | 26 | |||||||||||||||||||||
| Operating income (loss) | 813 | 31 | |||||||||||||||||||||
| Other income and (deductions) | |||||||||||||||||||||||
| Interest expense, net | (127) | (107) | |||||||||||||||||||||
| Other, net | 362 | 314 | |||||||||||||||||||||
| Total other income and (deductions) | 235 | 207 | |||||||||||||||||||||
| Income (loss) before income taxes | 1,048 | 238 | |||||||||||||||||||||
| Income tax (benefit) expense | 165 | 131 | |||||||||||||||||||||
| Equity in income (losses) of unconsolidated affiliates | — | (5) | |||||||||||||||||||||
| Net income (loss) | 883 | 102 | |||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests | — | 6 | |||||||||||||||||||||
| Net income (loss) attributable to common shareholders | $ | 883 | $ | 96 | |||||||||||||||||||
| Comprehensive income (loss), net of income taxes | |||||||||||||||||||||||
| Net income (loss) | $ | 883 | $ | 102 | |||||||||||||||||||
| Other comprehensive income (loss), net of income taxes | |||||||||||||||||||||||
| Pension and non-pension postretirement benefit plans: | |||||||||||||||||||||||
| Prior service benefit reclassified to periodic benefit cost | (1) | (1) | |||||||||||||||||||||
| Actuarial loss reclassified to periodic cost | 18 | 6 | |||||||||||||||||||||
| Pension and non-pension postretirement benefit plan valuation adjustment | (3) | (53) | |||||||||||||||||||||
| Unrealized gain (loss) on foreign currency translation | (3) | — | |||||||||||||||||||||
| Other comprehensive income (loss), net of income taxes | 11 | (48) | |||||||||||||||||||||
| Comprehensive income (loss) | 894 | 54 | |||||||||||||||||||||
| Comprehensive income (loss) attributable to noncontrolling interests | — | 6 | |||||||||||||||||||||
| Comprehensive income (loss) attributable to common shareholders | $ | 894 | $ | 48 | |||||||||||||||||||
| Average shares of common stock outstanding: | |||||||||||||||||||||||
| Basic | 317 | 328 | |||||||||||||||||||||
| Assumed exercise and/or distributions of stock-based awards | 1 | — | |||||||||||||||||||||
| Diluted | 318 | 328 | |||||||||||||||||||||
| Earnings per average common share | |||||||||||||||||||||||
| Basic | $ | 2.79 | $ | 0.29 | |||||||||||||||||||
| Diluted | $ | 2.78 | $ | 0.29 |
See the Combined Notes to Consolidated Financial Statements
Constellation Energy Corporation and Subsidiary Companies
Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Cash flows from operating activities | |||||||||||
| Net income (loss) | $ | 883 | $ | 102 | |||||||
| Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities | |||||||||||
| Depreciation, amortization, and accretion, including nuclear fuel and energy contract amortization | 694 | 605 | |||||||||
| Deferred income taxes and amortization of ITCs | 9 | (33) | |||||||||
| Net fair value changes related to derivatives | (186) | 273 | |||||||||
| Net realized and unrealized (gains) losses on NDT funds | (192) | (187) | |||||||||
| Net realized and unrealized (gains) losses on equity investments | (47) | 5 | |||||||||
| Other non-cash operating activities | (41) | 28 | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | 464 | 513 | |||||||||
| Inventories | 114 | 168 | |||||||||
| Accounts payable and accrued expenses | (382) | (1,516) | |||||||||
| Option premiums received (paid), net | 74 | (23) | |||||||||
| Collateral received (posted), net | 297 | (261) | |||||||||
| Income taxes | 159 | 163 | |||||||||
| Pension and non-pension postretirement benefit contributions | (177) | (10) | |||||||||
| Other assets and liabilities | (2,392) | (761) | |||||||||
| Net cash flows provided by (used in) operating activities | (723) | (934) | |||||||||
| Cash flows from investing activities | |||||||||||
| Capital expenditures | (738) | (660) | |||||||||
| Proceeds from NDT fund sales | 1,779 | 1,977 | |||||||||
| Investment in NDT funds | (1,847) | (2,030) | |||||||||
| Collection of DPP, net | 1,644 | 926 | |||||||||
| Proceeds from sales of assets and businesses | 7 | 24 | |||||||||
| Acquisitions of assets and businesses | (14) | (17) | |||||||||
| Other investing activities | (1) | (1) | |||||||||
| Net cash flows provided by (used in) investing activities | 830 | 219 | |||||||||
| Cash flows from financing activities | |||||||||||
| Change in short-term borrowings | 165 | (754) | |||||||||
| Proceeds from short-term borrowings with maturities greater than 90 days | 200 | 500 | |||||||||
| Repayments of short-term borrowings with maturities greater than 90 days | (500) | (200) | |||||||||
| Issuance of long-term debt | 900 | 1,353 | |||||||||
| Retirement of long-term debt | (32) | (30) | |||||||||
| Dividends paid on common stock | (112) | (93) | |||||||||
| Repurchases of common stock | (499) | (231) | |||||||||
| Other financing activities | (38) | (22) | |||||||||
| Net cash flows provided by (used in) financing activities | 84 | 523 | |||||||||
| Increase (decrease) in cash, restricted cash, and cash equivalents | 191 | (192) | |||||||||
| Cash, restricted cash, and cash equivalents at beginning of period | 454 | 528 | |||||||||
| Cash, restricted cash, and cash equivalents at end of period | $ | 645 | $ | 336 | |||||||
| Supplemental cash flow information | |||||||||||
| Increase (decrease) in capital expenditures not paid | $ | 110 | $ | 11 | |||||||
| Increase (decrease) in DPP | 1,812 | 794 | |||||||||
See the Combined Notes to Consolidated Financial Statements
Constellation Energy Corporation and Subsidiary Companies
Consolidated Balance Sheets
(Unaudited)
| (In millions) | March 31, 2024 | December 31, 2023 | |||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 562 | $ | 368 | |||||||
| Restricted cash and cash equivalents | 83 | 86 | |||||||||
| Accounts receivable | |||||||||||
| Customer accounts receivable (net of allowance for credit losses of $57 and $56 as of March 31, 2024 and December 31, 2023, respectively) | 1,855 | 1,934 | |||||||||
| Other accounts receivable (net of allowance for credit losses of $5 as of March 31, 2024 and December 31, 2023) | 472 | 917 | |||||||||
| Mark-to-market derivative assets | 1,232 | 1,179 | |||||||||
| Inventories, net | |||||||||||
| Natural gas, oil, and emission allowances | 179 | 284 | |||||||||
| Materials and supplies | 1,206 | 1,216 | |||||||||
| Renewable energy credits | 805 | 660 | |||||||||
| Other | 2,066 | 1,655 | |||||||||
| Total current assets | 8,460 | 8,299 | |||||||||
| Property, plant, and equipment (net of accumulated depreciation and amortization of $17,476 and $17,423 as of March 31, 2024 and December 31, 2023, respectively) | 22,446 | 22,116 | |||||||||
| Deferred debits and other assets | |||||||||||
| Nuclear decommissioning trust funds | 16,916 | 16,398 | |||||||||
| Investments | 623 | 563 | |||||||||
| Goodwill | 425 | 425 | |||||||||
| Mark-to-market derivative assets | 774 | 995 | |||||||||
| Deferred income taxes | 38 | 52 | |||||||||
| Other | 2,332 | 1,910 | |||||||||
| Total deferred debits and other assets | 21,108 | 20,343 | |||||||||
| Total assets**(a)** | $ | 52,014 | $ | 50,758 |
See the Combined Notes to Consolidated Financial Statements
Constellation Energy Corporation and Subsidiary Companies
Consolidated Balance Sheets
(Unaudited)
| (In millions) | March 31, 2024 | December 31, 2023 | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Short-term borrowings | $ | 1,509 | $ | 1,644 | |||||||
| Long-term debt due within one year | 122 | 121 | |||||||||
| Accounts payable and accrued expenses | 2,417 | 2,612 | |||||||||
| Mark-to-market derivative liabilities | 667 | 632 | |||||||||
| Renewable energy credit obligation | 895 | 972 | |||||||||
| Other | 312 | 338 | |||||||||
| Total current liabilities | 5,922 | 6,319 | |||||||||
| Long-term debt | 8,352 | 7,496 | |||||||||
| Deferred credits and other liabilities | |||||||||||
| Deferred income taxes and unamortized ITCs | 3,208 | 3,209 | |||||||||
| Asset retirement obligations | 14,278 | 14,118 | |||||||||
| Pension obligations | 888 | 1,070 | |||||||||
| Non-pension postretirement benefit obligations | 746 | 732 | |||||||||
| Spent nuclear fuel obligation | 1,313 | 1,296 | |||||||||
| Payables related to Regulatory Agreement Units | 3,874 | 3,688 | |||||||||
| Mark-to-market derivative liabilities | 480 | 419 | |||||||||
| Other | 1,393 | 1,125 | |||||||||
| Total deferred credits and other liabilities | 26,180 | 25,657 | |||||||||
| Total liabilities(a) | 40,454 | 39,472 | |||||||||
| Commitments and contingencies (Note 13) | |||||||||||
| Shareholders' equity | |||||||||||
| Common stock (No par value, 1,000 shares authorized, 315 shares and 317 shares outstanding as of March 31, 2024 and December 31, 2023, respectively) | 11,847 | 12,355 | |||||||||
| Retained earnings (deficit) | 1,532 | 761 | |||||||||
| Accumulated other comprehensive income (loss), net | (2,180) | (2,191) | |||||||||
| Total shareholders' equity | 11,199 | 10,925 | |||||||||
| Noncontrolling interests | 361 | 361 | |||||||||
| Total equity | 11,560 | 11,286 | |||||||||
| Total liabilities and shareholders' equity | $ | 52,014 | $ | 50,758 |
(a)Our consolidated assets include $3,514 million and $3,355 million at March 31, 2024 and December 31, 2023, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Our consolidated liabilities include $975 million and $990 million at March 31, 2024 and December 31, 2023, respectively, of certain VIEs for which the VIE creditors do not have recourse to us. See Note 15 — Variable Interest Entities for additional information.
See the Combined Notes to Consolidated Financial Statements
Constellation Energy Corporation and Subsidiary Companies
Consolidated Statements of Changes in Equity
(Unaudited)
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
| Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||
| (In millions, shares in thousands) | Issued Shares | Common Stock | Retained Earnings (Deficit) | Accumulated Other Comprehensive Income (Loss), net | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | 317,472 | $ | 12,355 | $ | 761 | $ | (2,191) | $ | 361 | $ | 11,286 | ||||||||||||||||||||||||||||||
| Net Income (loss) | — | — | 883 | — | — | 883 | |||||||||||||||||||||||||||||||||||
| Employee incentive plans | 661 | (4) | — | — | — | (4) | |||||||||||||||||||||||||||||||||||
| Common stock dividends ($0.3525/common share) | — | — | (112) | — | — | (112) | |||||||||||||||||||||||||||||||||||
| Common stock repurchased | (2,900) | (504) | — | — | — | (504) | |||||||||||||||||||||||||||||||||||
| Other comprehensive loss, net of income taxes | — | — | — | 11 | — | 11 | |||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | 315,233 | $ | 11,847 | $ | 1,532 | $ | (2,180) | $ | 361 | $ | 11,560 | ||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||
| Shareholders' Equity | |||||||||||||||||||||||||||||||||||
| (In millions, shares in thousands) | Issued Shares | Common Stock | Retained Earnings (Deficit) | Accumulated Other Comprehensive Income (Loss), net | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||
| Balance, December 31, 2022 | 327,130 | $ | 13,274 | $ | (496) | $ | (1,760) | $ | 354 | $ | 11,372 | ||||||||||||||||||||||||
| Net Income (loss) | — | — | 96 | — | 6 | 102 | |||||||||||||||||||||||||||||
| Employee incentive plans | 528 | 6 | — | — | — | 6 | |||||||||||||||||||||||||||||
| Changes in equity of noncontrolling interests | — | — | — | — | (2) | (2) | |||||||||||||||||||||||||||||
| Common stock dividends ($0.2820/common share) | — | — | (93) | — | — | (93) | |||||||||||||||||||||||||||||
| Common stock repurchased | (3,239) | (251) | — | — | — | (251) | |||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of income taxes | — | — | — | (48) | — | (48) | |||||||||||||||||||||||||||||
| Balance, March 31, 2023 | 324,419 | $ | 13,029 | $ | (493) | $ | (1,808) | $ | 358 | $ | 11,086 | ||||||||||||||||||||||||
See the Combined Notes to Consolidated Financial Statements
Constellation Energy Generation, LLC and Subsidiary Companies
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| Three Months Ended March 31, | |||||||||||||||||||||||
| (In millions) | 2024 | 2023 | |||||||||||||||||||||
| Operating revenues | $ | 6,161 | $ | 7,565 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Purchased power and fuel | 3,417 | 5,729 | |||||||||||||||||||||
| Operating and maintenance | 1,486 | 1,432 | |||||||||||||||||||||
| Depreciation and amortization | 306 | 267 | |||||||||||||||||||||
| Taxes other than income taxes | 139 | 132 | |||||||||||||||||||||
| Total operating expenses | 5,348 | 7,560 | |||||||||||||||||||||
| Gain (loss) on sales of assets and businesses | — | 26 | |||||||||||||||||||||
| Operating income (loss) | 813 | 31 | |||||||||||||||||||||
| Other income and (deductions) | |||||||||||||||||||||||
| Interest expense, net | (127) | (107) | |||||||||||||||||||||
| Other, net | 362 | 314 | |||||||||||||||||||||
| Total other income and (deductions) | 235 | 207 | |||||||||||||||||||||
| Income (loss) before income taxes | 1,048 | 238 | |||||||||||||||||||||
| Income tax (benefit) expense | 165 | 131 | |||||||||||||||||||||
| Equity in income (losses) of unconsolidated affiliates | — | (5) | |||||||||||||||||||||
| Net income (loss) | 883 | 102 | |||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests | — | 6 | |||||||||||||||||||||
| Net income (loss) attributable to membership interest | $ | 883 | $ | 96 | |||||||||||||||||||
| Comprehensive income (loss), net of income taxes | |||||||||||||||||||||||
| Net income (loss) | $ | 883 | $ | 102 | |||||||||||||||||||
| Other comprehensive income (loss), net of income taxes | |||||||||||||||||||||||
| Pension and non-pension postretirement benefit plans: | |||||||||||||||||||||||
| Prior service benefit reclassified to periodic benefit cost | (1) | (1) | |||||||||||||||||||||
| Actuarial loss reclassified to periodic cost | 18 | 6 | |||||||||||||||||||||
| Pension and non-pension postretirement benefit plan valuation adjustment | (3) | (53) | |||||||||||||||||||||
| Unrealized gain (loss) on foreign currency translation | (3) | — | |||||||||||||||||||||
| Other comprehensive income (loss), net of income taxes | 11 | (48) | |||||||||||||||||||||
| Comprehensive income (loss) | 894 | 54 | |||||||||||||||||||||
| Comprehensive income (loss) attributable to noncontrolling interests | — | 6 | |||||||||||||||||||||
| Comprehensive income (loss) attributable to membership interest | $ | 894 | $ | 48 |
See the Combined Notes to Consolidated Financial Statements
Constellation Energy Generation, LLC and Subsidiary Companies
Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Cash flows from operating activities | |||||||||||
| Net income (loss) | $ | 883 | $ | 102 | |||||||
| Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities | |||||||||||
| Depreciation, amortization, and accretion, including nuclear fuel and energy contract amortization | 694 | 605 | |||||||||
| Deferred income taxes and amortization of ITCs | 9 | (33) | |||||||||
| Net fair value changes related to derivatives | (186) | 273 | |||||||||
| Net realized and unrealized (gains) losses on NDT funds | (192) | (187) | |||||||||
| Net realized and unrealized (gains) losses on equity investments | (47) | 5 | |||||||||
| Other non-cash operating activities | (62) | 14 | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | 465 | 513 | |||||||||
| Receivables from and payables to affiliates, net | (32) | (78) | |||||||||
| Inventories | 114 | 168 | |||||||||
| Accounts payable and accrued expenses | (380) | (1,514) | |||||||||
| Option premiums received (paid), net | 74 | (23) | |||||||||
| Collateral received (posted), net | 297 | (261) | |||||||||
| Income taxes | 159 | 163 | |||||||||
| Pension and non-pension postretirement benefit contributions | (177) | (10) | |||||||||
| Other assets and liabilities | (2,378) | (737) | |||||||||
| Net cash flows provided by (used in) operating activities | (759) | (1,000) | |||||||||
| Cash flows from investing activities | |||||||||||
| Capital expenditures | (738) | (660) | |||||||||
| Proceeds from NDT fund sales | 1,779 | 1,977 | |||||||||
| Investment in NDT funds | (1,847) | (2,030) | |||||||||
| Collection of DPP, net | 1,644 | 926 | |||||||||
| Proceeds from sales of assets and businesses | 7 | 24 | |||||||||
| Acquisitions of assets and businesses | (14) | (17) | |||||||||
| Other investing activities | (1) | (1) | |||||||||
| Net cash flows provided by (used in) investing activities | 830 | 219 | |||||||||
| Cash flows from financing activities | |||||||||||
| Change in short-term borrowings | 165 | (754) | |||||||||
| Proceeds from short-term borrowings with maturities greater than 90 days | 200 | 500 | |||||||||
| Repayments of short-term borrowings with maturities greater than 90 days | (500) | (200) | |||||||||
| Issuance of long-term debt | 900 | 1,353 | |||||||||
| Retirement of long-term debt | (32) | (30) | |||||||||
| Distributions to member | (610) | (249) | |||||||||
| Other financing activities | (10) | (13) | |||||||||
| Net cash flows provided by (used in) financing activities | 113 | 607 | |||||||||
| Increase (decrease) in cash, restricted cash, and cash equivalents | 184 | (174) | |||||||||
| Cash, restricted cash, and cash equivalents at beginning of period | 440 | 501 | |||||||||
| Cash, restricted cash, and cash equivalents at end of period | $ | 624 | $ | 327 | |||||||
| Supplemental cash flow information | |||||||||||
| Increase (decrease) in capital expenditures not paid | $ | 110 | $ | 11 | |||||||
| Increase (decrease) in DPP | 1,812 | 794 | |||||||||
See the Combined Notes to Consolidated Financial Statements
Constellation Energy Generation, LLC and Subsidiary Companies
Consolidated Balance Sheets
(Unaudited)
| (In millions) | March 31, 2024 | December 31, 2023 | |||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 557 | $ | 366 | |||||||
| Restricted cash and cash equivalents | 67 | 74 | |||||||||
| Accounts receivable | |||||||||||
| Customer accounts receivable (net of allowance for credit losses of $57 and $56 as of March 31, 2024 and December 31, 2023, respectively) | 1,855 | 1,934 | |||||||||
| Other accounts receivable (net of allowance for credit losses of $5 as of March 31, 2024 and December 31, 2023) | 465 | 911 | |||||||||
| Mark-to-market derivative assets | 1,232 | 1,179 | |||||||||
| Inventories, net | |||||||||||
| Natural gas, oil, and emission allowances | 179 | 284 | |||||||||
| Materials and supplies | 1,206 | 1,216 | |||||||||
| Renewable energy credits | 805 | 660 | |||||||||
| Other | 2,066 | 1,655 | |||||||||
| Total current assets | 8,432 | 8,279 | |||||||||
| Property, plant, and equipment (net of accumulated depreciation and amortization of $17,476 and $17,423 as of March 31, 2024 and December 31, 2023, respectively) | 22,446 | 22,116 | |||||||||
| Deferred debits and other assets | |||||||||||
| Nuclear decommissioning trust funds | 16,916 | 16,398 | |||||||||
| Investments | 623 | 563 | |||||||||
| Goodwill | 425 | 425 | |||||||||
| Mark-to-market derivative assets | 774 | 995 | |||||||||
| Deferred income taxes | 38 | 52 | |||||||||
| Other | 2,332 | 1,910 | |||||||||
| Total deferred debits and other assets | 21,108 | 20,343 | |||||||||
| Total assets**(a)** | $ | 51,986 | $ | 50,738 |
See the Combined Notes to Consolidated Financial Statements
Constellation Energy Generation, LLC and Subsidiary Companies
Consolidated Balance Sheets
(Unaudited)
| (In millions) | March 31, 2024 | December 31, 2023 | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Short-term borrowings | $ | 1,509 | $ | 1,644 | |||||||
| Long-term debt due within one year | 122 | 121 | |||||||||
| Accounts payable and accrued expenses | 2,270 | 2,486 | |||||||||
| Payables to affiliates | 86 | 118 | |||||||||
| Mark-to-market derivative liabilities | 667 | 632 | |||||||||
| Renewable energy credit obligation | 895 | 972 | |||||||||
| Other | 310 | 338 | |||||||||
| Total current liabilities | 5,859 | 6,311 | |||||||||
| Long-term debt | 8,352 | 7,496 | |||||||||
| Deferred credits and other liabilities | |||||||||||
| Deferred income taxes and unamortized ITCs | 3,208 | 3,209 | |||||||||
| Asset retirement obligations | 14,278 | 14,118 | |||||||||
| Pension obligations | 888 | 1,070 | |||||||||
| Non-pension postretirement benefit obligations | 746 | 732 | |||||||||
| Spent nuclear fuel obligation | 1,313 | 1,296 | |||||||||
| Payables related to Regulatory Agreement Units | 3,874 | 3,688 | |||||||||
| Mark-to-market derivative liabilities | 480 | 419 | |||||||||
| Other | 1,330 | 1,025 | |||||||||
| Total deferred credits and other liabilities | 26,117 | 25,557 | |||||||||
| Total liabilities(a) | 40,328 | 39,364 | |||||||||
| Commitments and contingencies (Note 13) | |||||||||||
| Equity | |||||||||||
| Member’s equity | |||||||||||
| Membership interest | 11,038 | 11,537 | |||||||||
| Undistributed earnings | 2,439 | 1,667 | |||||||||
| Accumulated other comprehensive income (loss), net | (2,180) | (2,191) | |||||||||
| Total member’s equity | 11,297 | 11,013 | |||||||||
| Noncontrolling interests | 361 | 361 | |||||||||
| Total equity | 11,658 | 11,374 | |||||||||
| Total liabilities and equity | $ | 51,986 | $ | 50,738 |
(a)Our consolidated assets include $3,514 million and $3,355 million as of March 31, 2024 and December 31, 2023, respectively, of certain VIEs that can only be used to settle the liabilities of the VIE. Our consolidated liabilities include $975 million and $990 million as of March 31, 2024 and December 31, 2023, respectively, of certain VIEs for which the VIE creditors do not have recourse to us. See Note 15 — Variable Interest Entities for additional information.
See the Combined Notes to Consolidated Financial Statements
Constellation Energy Generation, LLC and Subsidiary Companies
Consolidated Statements of Changes in Equity (Unaudited)
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||
| Member's Equity | |||||||||||||||||||||||||||||
| (In millions) | Membership Interest | Undistributed Earnings | Accumulated Other Comprehensive Income (Loss), net | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | 11,537 | $ | 1,667 | $ | (2,191) | $ | 361 | $ | 11,374 | |||||||||||||||||||
| Net Income (loss) | — | 883 | — | — | 883 | ||||||||||||||||||||||||
| Distributions to member | (499) | (111) | — | — | (610) | ||||||||||||||||||||||||
| Other comprehensive income (loss), net of income taxes | — | — | 11 | — | 11 | ||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | 11,038 | $ | 2,439 | $ | (2,180) | $ | 361 | $ | 11,658 | |||||||||||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||
| Member's Equity | |||||||||||||||||||||||||||||
| (In millions) | Membership Interest | Undistributed Earnings | Accumulated Other Comprehensive Income (Loss), net | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | 12,408 | $ | 412 | $ | (1,760) | $ | 354 | $ | 11,414 | |||||||||||||||||||
| Net Income (loss) | — | 96 | — | 6 | 102 | ||||||||||||||||||||||||
| Changes in equity of noncontrolling interests | — | — | — | (2) | (2) | ||||||||||||||||||||||||
| Distributions to member | (152) | (97) | — | — | (249) | ||||||||||||||||||||||||
| Other comprehensive income (loss), net of income taxes | — | — | (48) | — | (48) | ||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | 12,256 | $ | 411 | $ | (1,808) | $ | 358 | $ | 11,217 | |||||||||||||||||||
See the Combined Notes to Consolidated Financial Statements
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
1. Basis of Presentation
Description of Business
We are a producer of carbon-free energy and a supplier of energy products and services. Our generating capacity includes primarily nuclear, wind, solar, natural gas and hydroelectric assets. Through our integrated business operations, we sell electricity, natural gas, and other energy-related products and sustainable solutions to various types of customers, including distribution utilities, municipalities, cooperatives, and commercial, industrial, governmental, and residential customers in markets across multiple geographic regions. We have five reportable segments: Mid-Atlantic, Midwest, New York, ERCOT and Other Power Regions.
Basis of Presentation
The accompanying Consolidated Financial Statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 are unaudited but, in our opinion include all adjustments that are considered necessary for a fair statement of the financial statements in accordance with GAAP. All adjustments are of a normal, recurring nature, unless otherwise disclosed. The Consolidated Financial Statements include the accounts of our subsidiaries and all intercompany transactions have been eliminated. Constellation's December 31, 2023 Consolidated Balance Sheet was derived from audited financial statements. The interim financial statements are to be read in conjunction with prior annual financial statements and notes. Financial results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year ending December 31, 2024. These Combined Notes to Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Amounts disclosed relate to CEG Parent and Constellation unless specifically noted as relating to CEG Parent only. Unless otherwise indicated or the context otherwise requires, references herein to the terms “we,” “us,” and “our” refer collectively to CEG Parent and Constellation.
Summary of Significant Accounting Policies
See Note 1 — Basis of Presentation of our 2023 Form 10-K for additional information on significant accounting policies.
2. Mergers, Acquisitions, and Dispositions
Acquisition of Joint Ownership in South Texas Project
On November 1, 2023, we completed the acquisition of NRG South Texas LP (renamed and converted as Constellation South Texas, LLC), which owns a 44% undivided ownership interest in the jointly owned STP, a 2,645 MW, dual-unit nuclear plant located in Bay City, Texas. The net cash paid was $1.65 billion, after certain purchase price adjustments. Other owners include City Public Service Board of San Antonio (CPS, 40%) and the City of Austin, Texas (Austin Energy, 16%). See Note 2 — Mergers, Acquisitions, and Dispositions of our 2023 Form 10-K for additional information.
On July 28, 2023 NRG accepted service of a lawsuit filed by the City of San Antonio, Texas, acting by and through CPS, in the 130th District Court of Matagorda County, Texas against NRG and certain of its subsidiaries, claiming the existence of a right of first refusal that applies to the transaction contemplated between us and NRG. On July 31, 2023 we intervened in the lawsuit and Austin Energy also intervened in the lawsuit claiming a similar right of first refusal. Per the terms of our Equity Purchase Agreement, NRG made representations that no right of first refusal applied to the transaction contemplated between us.
Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 2 — Mergers, Acquisitions, and Dispositions
Separately, on July 31, 2023, San Antonio and Austin filed motions to dismiss and (in the alternative) immediately stay proceedings and petitions to intervene on the license transfer application that was filed with the NRC. Notwithstanding this, the NRC issued approval of the license transfer application on October 30, 2023. However, the NRC staff’s approval of the license transfer is subject to the Commission’s authority to rescind, modify, or condition the approved transfer based on the outcome of any post-effectiveness hearing or motions on the license transfer application.
On May 2, 2024 we executed a settlement agreement with all parties (CPS/City of San Antonio, Austin, and NRG), resolving all litigation involving our purchase of the ownership interest in STP. The terms of the settlement include us selling a 2% ownership interest in STP to CPS at the same price and terms that we paid NRG for our 44% interest, subject to regulatory approvals from the NRC and the Public Utility Commission of Texas. Pursuant to the Settlement, CPS and Austin filed Notices of Dismissal with Prejudice with the Court, which ends the litigation, and likewise withdrew their pending objections to the sale with the NRC. We anticipate closing on the sale will occur in the second half of 2024. Upon closing of the sale, we and CPS will each own a 42% interest in STP, and Austin’s interest will remain at 16%. The terms of settlement are not expected to have a material impact on our consolidated financial statements.
3. Revenue from Contracts with Customers
We recognize revenue from contracts with customers to depict the transfer of goods or services to customers at an amount that we expect to be entitled to in exchange for those goods or services. Our primary sources of revenue include competitive sales of power, natural gas, and other energy-related products and sustainable solutions.
See Note 4 — Revenue from Contracts with Customers of our 2023 Form 10-K for additional information regarding the primary sources of revenue.
Contract Balances
Contract Assets
We record contract assets for the revenue recognized on the construction and installation of energy efficiency assets and new power generating facilities before we have an unconditional right to bill for and receive the consideration from the customer. These contract assets are subsequently reclassified to receivables when the right to payment becomes unconditional. We record contract assets and contract receivables in Other current assets and Customer accounts receivable, net, respectively, in the Consolidated Balance Sheets.
The following table provides a rollforward of the contract assets reflected in the Consolidated Balance Sheets for the three months ended March 31, 2024 and 2023.
| 2024 | 2023 | ||||||||||
| Beginning balance as of January 1 | $ | 82 | $ | 130 | |||||||
| Amounts reclassified to receivables | (15) | (11) | |||||||||
| Revenues recognized | 14 | 31 | |||||||||
| Ending balance as of March 31 | $ | 81 | $ | 150 | |||||||
Contract Liabilities
We record contract liabilities when consideration is received or due prior to the satisfaction of the performance obligations. We record contract liabilities in Other current liabilities and Other deferred credits and other liabilities in the Consolidated Balance Sheets. These contract liabilities primarily relate to upfront consideration received or due for equipment service plans, the Mystic COS, and the Illinois ZEC program. The Mystic COS includes upfront consideration received or due that differs from the recognized earnings over the cost of the service period. The Illinois ZEC program introduces an annual cap on the total consideration to be received by us for each delivery period. The ZEC price is established on a per MWh of production basis with a maximum annual cap for total compensation to be received for each planning year, while requiring delivery of all ZECs produced by our participating facilities during each delivery period. ZECs delivered to Illinois utilities in excess of the annual cost cap may be paid in subsequent years if the payments do not exceed the prescribed annual cost cap for that
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 3 — Revenue from Contracts with Customers
year. There were no outstanding contract liabilities for the Illinois ZEC program as of March 31, 2024 and December 31, 2023.
The following table provides a rollforward of the contract liabilities reflected in the Consolidated Balance Sheets for the three months ended March 31, 2024 and 2023.
| 2024 | 2023 | ||||||||||
| Beginning balance as of January 1 | $ | 40 | $ | 47 | |||||||
| Consideration received or due | 49 | 131 | |||||||||
| Revenues recognized | (55) | (115) | |||||||||
| Ending balance as of March 31 | $ | 34 | $ | 63 | |||||||
Transaction Price Allocated to Remaining Performance Obligations
The following table shows the amounts of future revenues expected to be recorded in each year for performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2024. This disclosure only includes contracts for which the total consideration is fixed and determinable at contract inception. The average contract term varies by customer type and commodity but ranges from one month to several years. This disclosure excludes mark-to-market derivatives and certain power and gas sales contracts which contain variable volumes and/or variable pricing.
| 2024 | 2025 | 2026 | 2027 | 2028 and thereafter | Total | |||||||||||||||||||||||||||||||||
| Remaining performance obligations | $ | 105 | $ | 58 | $ | 30 | $ | 18 | $ | 130 | $ | 341 |
Revenue Disaggregation
We disaggregate the revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. See Note 4 — Segment Information for the presentation of revenue disaggregation.
4. Segment Information
Operating segments are determined based on information used by the CODM in deciding how to evaluate performance and allocate resources. We have five reportable segments consisting of the Mid-Atlantic, Midwest, New York, ERCOT, and all other power regions referred to collectively as “Other Power Regions.”
The basis for our reportable segments is the integrated management of our electricity business that is located in different geographic regions, and largely representative of the footprints of ISO/RTO and/or NERC regions, which utilize multiple supply sources to provide electricity through various distribution channels (wholesale and retail). Our hedging strategies and risk metrics are also aligned to these same geographic regions. Descriptions of each of our five reportable segments are as follows:
-
Mid-Atlantic** represents operations in the eastern half of PJM, which includes New Jersey, Maryland, Virginia, West Virginia, Delaware, the District of Columbia, and parts of Pennsylvania and North Carolina.
-
Midwest** represents operations in the western half of PJM and the United States footprint of MISO, excluding MISO’s Southern Region.
-
New York** represents operations within NYISO.
-
ERCOT** represents operations within Electric Reliability Council of Texas that covers a majority of the state of Texas.
-
Other Power Regions:**
-
New England represents operations within ISO-NE.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 4 — Segment Information
-
South** represents operations in FRCC, MISO’s Southern Region, and the remaining portions of SERC not included within MISO or PJM.
-
West** represents operations in WECC, which includes CAISO.
-
Canada** represents operations across the entire country of Canada and includes AESO, OIESO, and the Canadian portion of MISO.
The CODM evaluates the performance of our electric business activities and allocates resources based on Operating revenues net of Purchased power and fuel expense (RNF). We believe this is a useful measurement of operational performance, although it is not a presentation defined under GAAP and may not be comparable to other companies’ presentations or deemed more useful than the GAAP information provided elsewhere in this report. Our operating revenues include all sales to third parties as well as government assistance. Purchased power costs include all costs associated with the procurement and supply of electricity including capacity, energy, and ancillary services. Fuel expense includes the fuel costs for our owned generation and fuel costs associated with tolling agreements. The results of our other business activities are not regularly reviewed by the CODM and are therefore not classified as operating segments or included in the regional reportable segment amounts. These activities include wholesale and retail sales of natural gas, energy-related sales in the United Kingdom, as well as sales of other energy-related products and sustainable solutions that are not significant to our overall results of operations. Further, our unrealized mark-to-market gains and losses on economic hedging activities and our amortization of certain intangible assets and liabilities relating to commodity contracts recorded at fair value from mergers and acquisitions are also excluded from the regional reportable segment amounts. The CODM does not use a measure of total assets in making decisions regarding allocating resources to or assessing the performance of these reportable segments.
The following tables disaggregate the revenue recognized from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The disaggregation of revenues reflects our two primary products of power sales and natural gas sales, with further disaggregation of power sales provided by geographic region.
The following tables also show the reconciliation of reportable segment revenues and RNF to our total revenues and RNF for the three months ended March 31, 2024 and 2023.
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||
| Revenues from external customers | |||||||||||||||||||||||||||||
| Contracts with customers | Other**(a)** | Total | Intersegment Revenues | Total Revenues | |||||||||||||||||||||||||
| Mid-Atlantic | $ | 1,356 | $ | (112) | $ | 1,244 | $ | (2) | $ | 1,242 | |||||||||||||||||||
| Midwest | 1,000 | 93 | 1,093 | 1 | 1,094 | ||||||||||||||||||||||||
| New York | 492 | 6 | 498 | 15 | 513 | ||||||||||||||||||||||||
| ERCOT | 237 | 83 | 320 | 1 | 321 | ||||||||||||||||||||||||
| Other Power Regions | 1,437 | 202 | 1,639 | (15) | 1,624 | ||||||||||||||||||||||||
| Total Reportable Segment Power Revenues | 4,522 | 272 | 4,794 | — | 4,794 | ||||||||||||||||||||||||
| Total Natural Gas Revenues | 608 | 554 | 1,162 | — | 1,162 | ||||||||||||||||||||||||
| Total Other Revenues(b) | 130 | 75 | 205 | — | 205 | ||||||||||||||||||||||||
| Total Consolidated Operating Revenues | $ | 5,260 | $ | 901 | $ | 6,161 | $ | — | $ | 6,161 |
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 4 — Segment Information
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||
| Revenues from external customers | |||||||||||||||||||||||||||||
| Contracts with customers | Other**(a)** | Total | Intersegment Revenues | Total Revenues | |||||||||||||||||||||||||
| Mid-Atlantic | $ | 1,413 | $ | (137) | $ | 1,276 | $ | (31) | $ | 1,245 | |||||||||||||||||||
| Midwest | 1,195 | (165) | 1,030 | 2 | 1,032 | ||||||||||||||||||||||||
| New York | 464 | 37 | 501 | 34 | 535 | ||||||||||||||||||||||||
| ERCOT | 200 | (32) | 168 | 1 | 169 | ||||||||||||||||||||||||
| Other Power Regions | 1,518 | 279 | 1,797 | (6) | 1,791 | ||||||||||||||||||||||||
| Total Reportable Segment Power Revenues | 4,790 | (18) | 4,772 | — | 4,772 | ||||||||||||||||||||||||
| Total Natural Gas Revenues | 895 | 590 | 1,485 | — | 1,485 | ||||||||||||||||||||||||
| Total Other Revenues(b) | 148 | 1,160 | 1,308 | — | 1,308 | ||||||||||||||||||||||||
| Total Consolidated Operating Revenues | $ | 5,833 | $ | 1,732 | $ | 7,565 | $ | — | $ | 7,565 |
(a)Includes revenues from nuclear PTCs beginning in 2024 as well as derivatives and leases in all periods presented.
(b)Represents activities not allocated to a region. See text above for a description of included activities. Includes unrealized mark-to-market gains of $64 million and $929 million for the three months ended March 31, 2024 and 2023, respectively.
| Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | ||||||||||||||||||||||||||||||||||
| RNF from external customers | Intersegment RNF | Total RNF | RNF from external customers | Intersegment RNF | Total RNF | ||||||||||||||||||||||||||||||
| Mid-Atlantic | $ | 675 | $ | (1) | $ | 674 | $ | 722 | $ | (31) | $ | 691 | |||||||||||||||||||||||
| Midwest | 700 | 3 | 703 | 690 | (1) | 689 | |||||||||||||||||||||||||||||
| New York | 329 | 15 | 344 | 225 | 36 | 261 | |||||||||||||||||||||||||||||
| ERCOT | 220 | (11) | 209 | 53 | (1) | 52 | |||||||||||||||||||||||||||||
| Other Power Regions | 392 | (24) | 368 | 256 | (8) | 248 | |||||||||||||||||||||||||||||
| Total RNF for Reportable Segments | 2,316 | (18) | 2,298 | 1,946 | (5) | 1,941 | |||||||||||||||||||||||||||||
| Other(a) | 428 | 18 | 446 | (110) | 5 | (105) | |||||||||||||||||||||||||||||
| Total RNF | $ | 2,744 | $ | — | $ | 2,744 | $ | 1,836 | $ | — | $ | 1,836 |
(a)Other represents activities not allocated to a region. See text above for a description of included activities.
5. Government Assistance
As a result of the enactment of the IRA, we qualify for certain federal government incentives through eligible activities. These incentives include both refundable and transferable tax credits. The current GAAP framework does not address the receipt of government assistance by for-profit entities. We account for this government assistance by analogy to International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance, and recognize the benefits when there is reasonable assurance that we will comply with the required conditions and that the benefits will be received. We believe the reasonable assurance term as used in IAS 20 is analogous to the term probable as defined in Accounting Standards Codification 450-20 of GAAP.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 5 — Government Assistance
Beginning in 2024, our nuclear units are eligible for a PTC extending through 2032. The nuclear PTC provides a transferable credit up to $15 per MWh (a base credit of $3 per MWh with a five times multiplier provided certain prevailing wage requirements are met) and is subject to phase-out when annual gross receipts are between $25.00 per MWh and $43.75 per MWh. We have determined that we will meet the annual prevailing wage requirements at all our nuclear units and are eligible for the five times multiplier. Both the amount of the PTC and the gross receipts thresholds adjust for inflation after 2024 through the duration of the program based on the GDP price deflator for the preceding calendar year. The benefits of the PTC may be realized through a credit against our federal income taxes or transferred via sale to an unrelated party. For the three months ended March 31, 2024, our Consolidated Statements of Operations and Comprehensive Income includes an estimate of $304 million in Operating revenues for nuclear PTCs earned based on qualifying production volumes during the period. Nuclear PTCs are recorded within Other deferred debits and other assets within the Consolidated Balance Sheets and reclassified as a reduction to Accounts payable and accrued expenses when used to reduce our federal income tax payable. As of March 31, 2024, our Consolidated Balance Sheets reflect an estimated nuclear PTC receivable of $238 million within Other deferred debits and other assets and a reduction to Accounts payable and accrued expenses of $66 million for estimated nuclear PTCs that we have utilized as a credit against our current federal income taxes payable. There were no transfers of estimated nuclear PTCs to third parties during the period. Our estimate required the exercise of judgment in determining the amount of nuclear PTC expected for each of our nuclear units. Since the amount of nuclear PTC is a function of annual gross receipts, the actual amount of PTC earned cannot be determined until after the end of the calendar year and may be different from this initial estimate. Further, the nuclear PTC continues to be the subject of additional guidance expected to be issued from the U.S. Treasury and IRS that may materially impact the total amount of benefits we receive.
Many of the state sponsored programs providing compensation for the emissions-free attributes of generation from certain of our nuclear units include contractual or other provisions that require us to refund that compensation up to the amount of the nuclear PTC received or pass through the entirety of the nuclear PTC received. As of March 31, 2024, we have recognized $174 million of estimated payables within Other deferred credits and other liabilities on our Consolidated Balance Sheets and recognized net operating revenue of $69 million (pre-tax) associated with programs requiring refunds or pass through of the nuclear PTC in our Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 2024. As with the actual amount of the PTC earned, which cannot be determined until after the end of the calendar year, the actual amount of refunds due under state sponsored programs may be different from our initial estimate.
6. Accounts Receivable
Unbilled Customer Revenue
We recorded $286 million and $372 million of unbilled customer revenues in Customer accounts receivables, net in the Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023, respectively.
Sales of Customer Accounts Receivable
In 2020, NER, a bankruptcy remote, special purpose entity, which is wholly owned by us, entered into a revolving accounts receivable financing arrangement with a number of financial institutions and a commercial paper conduit (Purchasers) to sell certain customer accounts receivable (Facility). The maximum funding limit of the Facility is $1.1 billion through August 15, 2025. Under the Facility, NER may sell eligible short-term customer accounts receivable to the Purchasers in exchange for cash and subordinated interest. The transfers are reported as sales of receivables in the consolidated financial statements. The subordinated interest in collections upon the receivables sold to the Purchasers is referred to as the DPP, which is reflected in Other current assets in the Consolidated Balance Sheets.
The Facility requires the balance of eligible receivables to be maintained at or above the balance of cash proceeds received from the Purchasers. To the extent the eligible receivables decrease below such balance, we are required to repay cash to the Purchasers. When eligible receivables exceed cash proceeds, we have the ability to increase the cash received up to the maximum funding limit. These cash inflows and outflows impact the DPP.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 6 — Accounts Receivable
The following tables summarize the impact of the sale of certain receivables:
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||
| Derecognized receivables transferred at fair value | $ | 1,525 | $ | 1,516 | |||||||
| Less: Cash proceeds received | 150 | 300 | |||||||||
| DPP | $ | 1,375 | $ | 1,216 |
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Loss on sale of receivables(a) | $ | 14 | $ | 20 |
(a)Reflected in Operating and maintenance expense in the Consolidated Statements of Operations and Comprehensive Income. This represents the amount by which the accounts receivable sold into the Facility are discounted, limited to credit losses.
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Proceeds from new transfers(a) | $ | 1,116 | $ | 1,957 | |||||||
| Cash collections received on DPP(b) | 1,794 | 926 | |||||||||
| Cash collections reinvested in the Facility | $ | 2,910 | $ | 2,883 |
(a)Customer accounts receivable sold into the Facility were $2,927 million and $2,750 million for the three months ended March 31, 2024 and 2023, respectively.
(b)Does not include the $150 million net cash payments to the Purchasers in 2024.
Our risk of loss following the transfer of accounts receivable is limited to the DPP outstanding. Payment of DPP is not subject to significant risks other than delinquencies and credit losses on accounts receivable transferred.
We recognize the cash proceeds received upon sale in Cash flows from operating activities in the Consolidated Statements of Cash Flows. The collection and reinvestment of DPP is recognized in Cash flows from investing activities in the Consolidated Statements of Cash Flows.
See Note 12 — Fair Value of Financial Assets and Liabilities and Note 15 — Variable Interest Entities for additional information.
Other Sales of Customer Accounts Receivables
We are required, under supplier tariffs, to sell customer receivables to utility companies. The following table presents the total receivables sold:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Total receivables sold | $ | 158 | $ | 184 | |||||||
7. Nuclear Decommissioning
Nuclear Decommissioning Asset Retirement Obligations
We have a legal obligation to decommission our nuclear power plants following the permanent cessation of operations. See Note 10 — Asset Retirement Obligations of our 2023 Form 10-K for additional information regarding AROs and the financial statement impact of changes in estimate.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 7 — Nuclear Decommissioning
The following table provides a rollforward of the nuclear decommissioning AROs reflected in the Consolidated Balance Sheets from December 31, 2023 to March 31, 2024:
| Balance as of December 31, 2023(a) | $ | 13,891 | |||
| Accretion expense | 164 | ||||
| Costs incurred related to decommissioning plants | (8) | ||||
| Balance as of March 31, 2024(a) | $ | 14,047 |
(a)Includes $28 million and $30 million as the current portion of the ARO as of March 31, 2024 and December 31, 2023, respectively, which is included in Other current liabilities in the Consolidated Balance Sheets.
NDT Funds
We had NDT funds totaling $17,005 million and $16,398 million as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, $89 million of the NDT funds were current and included in Other current assets in the Consolidated Balance Sheets. As of December 31, 2023, none of the NDT funds were reflected in Other current assets. See Note 16 — Supplemental Financial Information for additional information on activities of the NDT funds.
Accounting Implications of the Regulatory Agreement Units
See Note 1 — Basis of Presentation and Note 10 — Asset Retirement Obligations of our 2023 Form 10-K for additional information on the Regulatory Agreement Units.
The following table presents our noncurrent payables to ComEd, PECO, CenterPoint, and AEP Texas reflected as Payables related to Regulatory Agreement Units in the Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023:
| March 31, 2024 | December 31, 2023 | ||||||||||
| ComEd | $ | 3,078 | $ | 2,955 | |||||||
| PECO | 304 | 278 | |||||||||
| CenterPoint | 365 | 338 | |||||||||
| AEP Texas | 127 | 117 | |||||||||
| Payables related to Regulatory Agreement Units | $ | 3,874 | $ | 3,688 |
NRC Minimum Funding Requirements
NRC regulations require that licensees of nuclear generating facilities demonstrate reasonable assurance that funds will be available in specified minimum amounts for radiological decommissioning of the facility at the end of its life.
On March 22, 2024, we filed our annual decommissioning funding status report with the NRC for our shutdown units, including Zion Station which was transferred back to us on November 16, 2023. The status report demonstrated adequate decommissioning funding assurance as of December 31, 2023 for all our shutdown units except for Peach Bottom Unit 1. Financial assurance for decommissioning Peach Bottom Unit 1 is provided by the collections from PECO customers. Additionally, on March 28, 2024, STPNOC filed the decommissioning funding status report for STP. The status report demonstrated adequate funding assurance as of December 31, 2023. See Note 10 — Asset Retirement Obligations of our 2023 Form 10-K for additional information.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 8 — Income Taxes
8. Income Taxes
Rate Reconciliation
The effective income tax rate from continuing operations varies from the U.S. federal statutory rate principally due to the following:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| (Decrease) increase due to: | |||||||||||
| State income taxes, net of federal income tax benefit | (6.2) | 3.3 | |||||||||
| Qualified NDT fund income and losses | 8.9 | 33.7 | |||||||||
| Amortization of investment tax credit, including deferred taxes on basis differences | (0.3) | (0.7) | |||||||||
| Production tax credits and other credits | (6.7) | (0.8) | |||||||||
| Other | (1.0) | (1.5) | |||||||||
| Effective income tax rate(a) | 15.7 | % | 55.0 | % |
(a)The change in effective tax rate in 2024 is primarily due to the increase in pre-tax book income inclusive of the nuclear PTC, which is not taxable, and a state tax benefit due to a change in forecasted apportionment. See Note 5 — Government Assistance for additional information.
Other Tax Matters
Tax Matters Agreement
In connection with the separation, we entered into a TMA with Exelon. The TMA governs the respective rights, responsibilities, and obligations between us and Exelon after the separation with respect to tax liabilities and benefits, tax attributes, tax returns, tax contests and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns.
Responsibility and Indemnification for Taxes. As a former subsidiary of Exelon, we have joint and several liability with Exelon to the IRS and certain state jurisdictions relating to the taxable periods that we were included in federal and state filings. However, the TMA specifies the portion of this tax liability for which we will bear contractual responsibility, and we and Exelon agreed to indemnify each other against any amounts for which such indemnified party is not responsible. Specifically, we will be liable for taxes due and payable in connection with tax returns that we are required to file. We will also be liable for our share of certain taxes required to be paid by Exelon with respect to taxable years or periods (or portions thereof) ending on or prior to the separation to the extent that we would have been responsible for such taxes under the Exelon tax sharing agreement then existing. As of March 31, 2024 and December 31, 2023, our Consolidated Balance Sheets reflect a payable of $37 million and $26 million, respectively, for tax liabilities where we maintain contractual responsibility to Exelon. There were none and $11 million recorded in Other accounts receivable as of March 31, 2024 and December 31, 2023, respectively, and $37 million for both periods in Noncurrent other liabilities.
Tax Refunds and Attributes. The TMA provides for the allocation of certain pre-closing tax attributes between us and Exelon. Tax attributes will be allocated in accordance with the principles set forth in the existing Exelon tax sharing agreement, unless otherwise required by law. Under the TMA, we will be entitled to refunds for taxes for which we are responsible. In addition, it is expected that Exelon will have tax attributes that may be used to offset Exelon’s future tax liabilities. A significant portion of such attributes were generated by our business. In February 2024, we executed an amendment to the TMA that modified the timing of Exelon's payment of amounts due to us. As of March 31, 2024, our Consolidated Balance Sheets reflects receivables of $188 million and $331 million in Other accounts receivable and Other deferred debits and other assets, respectively. As of December 31, 2023, our Consolidated Balance Sheets reflected receivables of $336 million and $178 million in Other accounts receivable and Other deferred debits, respectively.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 9 — Retirement Benefits
9. Retirement Benefits
Components of Net Periodic Benefit (Credits) Costs
See Note 1 — Basis of Presentation of our 2023 10-K for additional information on where we report the service cost and other non-service cost (credit) components for all plans.
The following tables present the components of our net periodic benefit (credits) costs, prior to capitalization and co-owner allocations, for the three months ended March 31, 2024 and 2023:
| Pension Benefits | OPEB | Total Pension Benefits and OPEB | |||||||||||||||||||||||||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||
| Components of net periodic benefit (credit) cost: | |||||||||||||||||||||||||||||||||||
| Service cost | $ | 22 | $ | 22 | $ | 4 | $ | 4 | $ | 26 | $ | 26 | |||||||||||||||||||||||
| Non-service components of pension benefits & OPEB (credit) cost: | |||||||||||||||||||||||||||||||||||
| Interest cost | 95 | 99 | 18 | 18 | 113 | 117 | |||||||||||||||||||||||||||||
| Expected return on assets | (124) | (127) | (11) | (11) | (135) | (138) | |||||||||||||||||||||||||||||
| Amortization of: | |||||||||||||||||||||||||||||||||||
| Prior service (credit) cost | — | — | (2) | (2) | (2) | (2) | |||||||||||||||||||||||||||||
| Actuarial (gain) loss | 25 | 12 | (2) | (3) | 23 | 9 | |||||||||||||||||||||||||||||
| Settlement charges | 3 | — | — | — | 3 | — | |||||||||||||||||||||||||||||
| Non-service components of pension benefits & OPEB (credit) cost | (1) | (16) | 3 | 2 | 2 | (14) | |||||||||||||||||||||||||||||
| Net periodic benefit (credit) cost**(a)** | $ | 21 | $ | 6 | $ | 7 | $ | 6 | $ | 28 | $ | 12 |
(a)The pension benefit and OPEB service costs reflected in the Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2024 and 2023 totaled $24 million in both periods.
10. Derivative Financial Instruments
We use derivative instruments to manage commodity price risk, interest rate risk, and foreign exchange risk related to ongoing business operations.
Authoritative guidance requires that derivative instruments be recognized as either assets or liabilities at fair value, with changes in fair value of the derivative recognized in earnings immediately. Other accounting treatments are available through special election and designation, provided they meet specific, restrictive criteria both at the time of designation and on an ongoing basis. These alternative permissible accounting treatments include NPNS, cash flow hedges, and fair value hedges. All derivative instruments, excluding NPNS and cash flow hedges, are recorded at fair value through earnings. For all NPNS derivative instruments, accounts receivable or accounts payable are recorded when derivatives settle, and revenue or expense is recognized in earnings as the underlying physical commodity is sold or delivered.
Authoritative guidance about offsetting assets and liabilities requires the fair value of derivative instruments to be shown in the Combined Notes to Consolidated Financial Statements on a gross basis, even when the derivative instruments are subject to legally enforceable master netting agreements and qualify for net presentation in the Consolidated Balance Sheets. A master netting agreement is an agreement between two counterparties that may have derivative and non-derivative contracts with each other providing for the net settlement of all referenced contracts via one payment stream, which takes place as the contracts deliver, when collateral is requested or in the event of default. In the tables below, which present fair value balances, our energy-related economic hedges and proprietary trading derivatives are shown gross. The impact of the netting of fair value balances with the same counterparty that are subject to legally enforceable master netting agreements, as well as netting of cash collateral, including margin on exchange positions, is aggregated in the collateral and netting columns.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 10 — Derivative Financial Instruments
Our use of cash collateral is generally unrestricted unless we were downgraded below investment grade. As our senior unsecured debt rating is currently rated at BBB+ and Baa1 by S&P and Moody's, respectively, it would take a three notch downgrade by S&P or Moody's for us to go below investment grade.
Commodity Price Risk
We employ established policies and procedures to manage our risks associated with market fluctuations in commodity prices by entering into physical and financial derivative contracts, including swaps, futures, forwards, options, and short-term and long-term commitments to purchase and sell energy and energy-related products. We believe these instruments, which are either determined to be non-derivative or classified as economic hedges, mitigate exposure to fluctuations in commodity prices.
To the extent the amount of energy we produce or procure differs from the amount of energy we have contracted to sell and in connection with portfolio optimization, we are exposed to market fluctuations in the prices of electricity, natural gas, and other commodities. We use a variety of derivative and non-derivative instruments to manage the commodity price risk of our electric generation facilities, including power and gas sales, fuel and power purchases, natural gas transportation and pipeline capacity agreements, and other energy-related products marketed and purchased. To manage these risks, we may enter into fixed-price derivative or non-derivative contracts to hedge the variability in future cash flows from expected sales of power and gas and purchases of power and fuel. The objectives for executing such hedges include fixing the price for a portion of anticipated future electricity sales at a level that provides an acceptable return. We are also exposed to differences between the locational settlement prices of certain economic hedges and the hedged generating units. This price difference is actively managed through other instruments which include derivative congestion products, whose changes in fair value are recognized in earnings each period, and auction revenue rights, which are accounted for on an accrual basis.
Additionally, we are exposed to certain market risks through our proprietary trading activities. The proprietary trading activities are a complement to our energy marketing portfolio but represent a small portion of our overall energy marketing activities and are subject to limits established by the Executive Committee. Proprietary trading includes all contracts executed with the intent of benefiting from shifts or changes in market prices as opposed to those executed with the intent of hedging or managing risk. Gains and losses associated with proprietary trading are reported as Operating revenues in the Consolidated Statements of Operations and Comprehensive Income and are included in the Net fair value changes related to derivatives line in the Consolidated Statements of Cash Flows. For the three months ended March 31, 2024 and 2023, net pre-tax commodity mark-to-market gains and losses associated with proprietary trading activities were not material.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 10 — Derivative Financial Instruments
The following tables provide a summary of the derivative fair value balances recorded as of March 31, 2024 and December 31, 2023:
| March 31, 2024 | Economic Hedges | Proprietary Trading | Collateral (a)(b) | Netting**(a)** | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative assets (current) | $ | 7,301 | $ | 1 | $ | 637 | $ | (6,723) | $ | 1,216 | ||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative assets (noncurrent) | 3,615 | — | 318 | (3,160) | 773 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mark-to-market derivative assets | 10,916 | 1 | 955 | (9,883) | 1,989 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative liabilities (current) | (8,140) | — | 750 | 6,723 | (667) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative liabilities (noncurrent) | (4,037) | — | 397 | 3,160 | (480) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mark-to-market derivative liabilities | (12,177) | — | 1,147 | 9,883 | (1,147) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mark-to-market derivative net assets (liabilities) | $ | (1,261) | $ | 1 | $ | 2,102 | $ | — | $ | 842 | ||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative assets (current) | $ | 7,927 | $ | 2 | $ | 703 | $ | (7,472) | $ | 1,160 | ||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative assets (noncurrent) | 3,345 | — | 330 | (2,682) | 993 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mark-to-market derivative assets | 11,272 | 2 | 1,033 | (10,154) | 2,153 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative liabilities (current) | (9,019) | (2) | 922 | 7,472 | (627) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative liabilities (noncurrent) | (3,545) | — | 445 | 2,682 | (418) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mark-to-market derivative liabilities | (12,564) | (2) | 1,367 | 10,154 | (1,045) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mark-to-market derivative net assets (liabilities) | $ | (1,292) | $ | — | $ | 2,400 | $ | — | $ | 1,108 |
(a)We net all available amounts allowed in our Consolidated Balance Sheets in accordance with authoritative guidance for derivatives. These amounts include unrealized derivative transactions with the same counterparty under legally enforceable master netting agreements and cash collateral.
(b)Includes $1,331 million and $1,712 million of variation margin posted on the exchanges as of March 31, 2024 and December 31, 2023, respectively.
Economic Hedges (Commodity Price Risk)
For the three months ended March 31, 2024 and 2023, we recognized the following net pre-tax commodity mark-to-market gains (losses), which are also located in the Net fair value changes related to derivatives line in the Consolidated Statements of Cash Flows.
| Three Months Ended March 31, | |||||||||||||||||||||||
| Income Statement Location | 2024 | 2023 | |||||||||||||||||||||
| Operating revenues | $ | 63 | $ | 930 | |||||||||||||||||||
| Purchased power and fuel | 125 | (1,193) | |||||||||||||||||||||
| Total | $ | 188 | $ | (263) |
In general, increases and decreases in forward market prices have a positive and negative impact, respectively, on owned and contracted generation positions that have not been hedged. Beginning in 2024, our nuclear fleet is eligible for the nuclear PTC provided by the IRA, an important tool in managing commodity price risk for each nuclear unit not already receiving state support. The nuclear PTC provides increasing levels of support as unit revenues decline below levels established in the IRA and is further adjusted for inflation after 2024 through the duration of the program based on the GDP price deflator for the preceding calendar year. See Note 5 — Government Assistance for additional information on the nuclear PTC.
In locations and periods where our load serving activities do not naturally offset existing generation portfolio risk, remaining commodity price exposure is managed through portfolio hedging activities. Portfolio hedging activities are generally concentrated in the prompt three years, when customer demand and market liquidity enable effective price risk mitigation. During this prompt three-year period, we seek to mitigate the price risk associated with our load serving contracts, non-nuclear generation, and any residual price risk for our nuclear generation that the nuclear PTC and state programs may not fully mitigate. We also enter transactions that further optimize the economic benefits of our overall portfolio.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 10 — Derivative Financial Instruments
Interest Rate and Foreign Exchange Risk
We utilize interest rate swaps to manage our interest rate exposure and foreign currency derivatives to manage foreign exchange rate exposure associated with international commodity purchases in currencies other than U.S. dollars, both of which are treated as economic hedges. The notional amounts were $427 million and $562 million as of March 31, 2024 and December 31, 2023, respectively.
The mark-to-market derivative assets and liabilities as of March 31, 2024 and December 31, 2023 and the mark-to-market gains and losses associated with management of interest rate and foreign currency risk for the three months ended March 31, 2024 and 2023 were not material. The mark-to-market gains and losses associated with management of interest rate and foreign currency exchange rate risk are also included in the Net fair value changes related to derivatives line in the Consolidated Statements of Cash Flows.
Credit Risk
We would be exposed to credit-related losses in the event of non-performance by counterparties on executed derivative instruments. The credit exposure of derivative contracts, before collateral, is represented by the fair value of contracts as of the reporting date.
For commodity derivatives, we enter into enabling agreements that allow for payment netting with our counterparties, which reduces our exposure to counterparty risk by providing for the offset of amounts payable to the counterparty against amounts receivable from the counterparty. Typically, each enabling agreement is for a specific commodity and, with respect to each individual counterparty, netting is limited to transactions involving that specific commodity product, except where master netting agreements exist with a counterparty that allows for cross product netting. In addition to payment netting language in the enabling agreement, our credit department establishes credit limits, margining thresholds and collateral requirements for each counterparty, which are defined in the derivative contracts. Counterparty credit limits are based on an internal credit review process that considers a variety of factors, including the results of a scoring model, leverage, liquidity, profitability, credit ratings by credit rating agencies, and other risk management criteria. To the extent that a counterparty’s margining thresholds are exceeded, the counterparty is required to post collateral with us, as specified in each enabling agreement. Our credit department monitors current and forward credit exposure to counterparties and their affiliates, both on an individual and an aggregate basis.
The following tables provide information on the credit exposure for all derivative instruments, NPNS and payables and receivables, net of collateral and instruments that are subject to master netting agreements, as of March 31, 2024. The tables further delineate that exposure by credit rating of the counterparties and provide guidance on the concentration of credit risk to individual counterparties. The amounts in the tables below exclude credit risk exposure from individual retail counterparties and exposure through RTOs, ISOs, NYMEX, ICE, NASDAQ, NGX, and Nodal commodity exchanges.
| Rating as of March 31, 2024 | Total Exposure Before Credit Collateral | Credit Collateral**(a)** | Net Exposure | Number of Counterparties Greater than 10% of Net Exposure | Net Exposure of Counterparties Greater than 10% of Net Exposure | ||||||||||||||||||||||||
| Investment grade | $ | 1,030 | $ | 25 | $ | 1,005 | 1 | $ | 242 | ||||||||||||||||||||
| Non-investment grade | 24 | 15 | 9 | — | — | ||||||||||||||||||||||||
| No external ratings | |||||||||||||||||||||||||||||
| Internally rated — investment grade | 73 | — | 73 | — | — | ||||||||||||||||||||||||
| Internally rated — non-investment grade | 236 | 50 | 186 | — | — | ||||||||||||||||||||||||
| Total | $ | 1,363 | $ | 90 | $ | 1,273 | 1 | $ | 242 |
(a)As of March 31, 2024, credit collateral held from counterparties where we had credit exposure included $6 million of cash and $84 million of letters of credit. The credit collateral does not include non-liquid collateral.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 10 — Derivative Financial Instruments
| Net Credit Exposure by Type of Counterparty | As of March 31, 2024 | ||||
| Investor-owned utilities, marketers, power producers | $ | 1,053 | |||
| Energy cooperatives and municipalities | 75 | ||||
| Financial Institutions | 36 | ||||
| Other | 109 | ||||
| Total | $ | 1,273 |
Credit-Risk-Related Contingent Features
As part of the normal course of business, we routinely enter into physically or financially settled contracts for the purchase and sale of capacity, electricity, fuels, emissions allowances, and other energy-related products. Certain of our derivative instruments contain provisions that require us to post collateral. We also enter into commodity transactions on exchanges where the exchanges act as the counterparty to each trade. Transactions on the exchanges must adhere to comprehensive collateral and margining requirements. This collateral may be posted in the form of cash or credit support with thresholds contingent upon our credit ratings from S&P and Moody's. The collateral and credit support requirements vary by contract and by counterparty. These credit-risk-related contingent features stipulate that if we were to be downgraded or lose our investment grade credit ratings (based on our senior unsecured debt rating), we would be required to provide additional collateral. This incremental collateral requirement allows for the offsetting of derivative instruments that are assets with the same counterparty, where the contractual right of offset exists under applicable master netting agreements. In the absence of expressly agreed-to provisions that specify the collateral that must be provided, collateral requested will be a function of the facts and circumstances of the situation at the time of the demand. In this case, we believe an amount of several months of future payments (e.g., capacity payments) rather than a calculation of fair value is the best estimate for the contingent collateral obligation, which has been factored into the disclosure below.
The aggregate fair value of all derivative instruments with credit-risk-related contingent features in a liability position that are not fully collateralized (excluding transactions on the exchanges that are fully collateralized) is detailed in the table below:
| Credit-Risk-Related Contingent Features | March 31, 2024 | December 31, 2023 | |||||||||
| Gross fair value of derivative contracts containing this feature | $ | (1,873) | $ | (1,894) | |||||||
| Offsetting fair value of in-the-money contracts under master netting arrangements | 806 | 925 | |||||||||
| Net fair value of derivative contracts containing this feature | $ | (1,067) | $ | (969) |
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 10 — Derivative Financial Instruments
As of March 31, 2024 and December 31, 2023, we posted or held the following amounts of cash collateral and letters of credit on derivative contracts with external counterparties, after giving consideration to offsetting derivative and non-derivative positions under master netting agreements.
| March 31, 2024 | December 31, 2023 | ||||||||||
| Cash collateral posted(a) | $ | 2,119 | $ | 2,449 | |||||||
| Letters of credit posted(a) | 893 | 777 | |||||||||
| Cash collateral held(a) | 28 | 64 | |||||||||
| Letters of credit held(a) | 108 | 61 | |||||||||
| Additional collateral required in the event of a credit downgrade below investment grade (at BB+/Ba1)(b)(c)(d) | 1,949 | 1,914 |
(a)The cash collateral and letters of credit amounts are inclusive of NPNS contracts.
(b)Certain of our contracts contain provisions that allow a counterparty to request additional collateral when there has been a subjective determination that our credit quality has deteriorated, generally termed “adequate assurance”. Due to the subjective nature of these provisions, we estimate the amount of collateral that we may ultimately be required to post in relation to the maximum exposure with the counterparty.
(c)The downgrade collateral is inclusive of all contracts in a liability position regardless of accounting treatment and excludes any contracts with individual retail counterparties.
(d)A loss of investment grade credit rating would require a three notch downgrade from their current levels of BBB+ and Baa1 at S&P and Moody's, respectively.
We entered into supply forward contracts with certain utilities with one-sided collateral postings only from us. If market prices fall below the benchmark price levels in these contracts, the utilities are not required to post collateral. However, when market prices rise above the benchmark price levels, we are required to post collateral once certain unsecured credit limits are exceeded.
11. Debt and Credit Agreements
Short-Term Borrowings
We meet our short-term liquidity requirements primarily through the issuance of commercial paper. We may use our credit facility for general corporate purposes, including meeting short-term funding requirements and the issuance of letters of credit.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 11 — Debt and Credit Agreements
Credit Agreements
As of March 31, 2024 and December 31, 2023, we had the following aggregate bank commitments, credit facility borrowings and available capacity under our respective credit facilities:
| Facility Type | Aggregate Bank Commitment | Facility Draws | Outstanding Letters of Credit | Outstanding Commercial Paper(a) | Available Capacity as of March 31, 2024 | ||||||||||||||||||||||||||||||
| Syndicated Revolver | $ | 3,500 | $ | — | $ | 107 | $ | 1,271 | $ | 2,122 | |||||||||||||||||||||||||
| Bilaterals(b) | 1,700 | — | 833 | — | 867 | ||||||||||||||||||||||||||||||
| Liquidity Facility | 971 | — | 877 | — | 23 | (c) | |||||||||||||||||||||||||||||
| Project Finance | 137 | — | 115 | — | 22 | ||||||||||||||||||||||||||||||
| Total | $ | 6,308 | $ | — | $ | 1,932 | $ | 1,271 | $ | 3,034 |
| Facility Type | Aggregate Bank Commitment | Facility Draws | Outstanding Letters of Credit | Outstanding Commercial Paper(a) | Available Capacity as of December 31, 2023 | ||||||||||||||||||||||||||||||
| Syndicated Revolver | $ | 3,500 | $ | — | $ | 60 | $ | 1,107 | $ | 2,333 | |||||||||||||||||||||||||
| Bilaterals | 1,500 | — | 878 | — | 622 | ||||||||||||||||||||||||||||||
| Liquidity Facility | 971 | — | 720 | — | 191 | (c) | |||||||||||||||||||||||||||||
| Project Finance | 137 | — | 117 | — | 20 | ||||||||||||||||||||||||||||||
| Total | $ | 6,108 | $ | — | $ | 1,775 | $ | 1,107 | $ | 3,166 |
(a)Our commercial paper program is supported by the revolving credit agreement. In order to maintain our commercial paper program in the amounts indicated above, we must have a credit facility in place, at least equal to the amount of our commercial paper program. As of both March 31, 2024 and December 31, 2023, the maximum program size of our commercial paper program was $3.5 billion. We do not issue commercial paper in an aggregate amount exceeding the then available capacity under our credit facility. The weighted average interest rate on commercial paper borrowings was 5.56% and 5.66% as of March 31, 2024 and December 31, 2023, respectively.
(b)In March 2024, we initiated a new bilateral credit agreement for $200 million, with no maturity date.
(c)The maximum amount of the bank commitment is not to exceed $971 million. The aggregate available capacity of the facility is subject to market fluctuations based on the value of U.S. Treasury Securities which determines the amount of collateral held in the trust. We may post additional collateral to borrow up to the maximum bank commitment. As of March 31, 2024 and December 31, 2023, without posting additional collateral, the actual availability of facility, prior to outstanding letters of credit was $900 million and $911 million, respectively.
Short-Term Loan Agreements
As of March 31, 2024 and December 31, 2023, we had the following short-term loan agreements:
| Month Initiated | Interest Rate | Maturity | Outstanding Amount as of March 31, 2024 | Outstanding Amount as of December 31, 2023 | ||||||||||||||||||||||
| January 2023 | 1 month SOFR + 0.80% | January 2024 | $ | — | $ | 100 | ||||||||||||||||||||
| February 2023 | 1 month SOFR + 1.05% | February 2024 | — | 400 | ||||||||||||||||||||||
| February 2024 | 1 month SOFR + 0.90% | February 2025 | 200 | — |
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 11 — Debt and Credit Agreements
Long-Term Debt
Debt Issuances and Redemptions
During the three months ended March 31, 2024, the following long-term debt was issued (redeemed):
| Type | Interest Rate | Maturity | Amount | |||||||||||||||||||||||
| Green Senior Notes(a) | 5.75 | % | March 2054 | $ | 900 | |||||||||||||||||||||
| Energy Efficiency Project Financing(b) | 2.20% - 4.96% | September 2024 - October 2024 | 1 | |||||||||||||||||||||||
| Continental Wind Nonrecourse Debt | 6.00 | % | February 2033 | (15) | ||||||||||||||||||||||
| West Medway II Nonrecourse Debt | 1 month SOFR + 3.225% | March 2026 | (8) | |||||||||||||||||||||||
| Antelope Valley DOE Nonrecourse Debt | 2.29% - 3.56% | January 2037 | (6) | |||||||||||||||||||||||
| RPG Nonrecourse Debt | 4.11 | % | March 2035 | (3) | ||||||||||||||||||||||
| Total long-term debt issued (redeemed) | $ | 869 |
(a)The Green Senior Notes were issued to finance or refinance, in whole or in part, one or more new or existing Eligible Projects. Eligible Projects are defined as investments and expenditures made by us in the 24 months prior to or after the issuance of the notes within the following eligible green categories: clean generation fleet, clean hydrogen, energy storage, and clean commercial offerings.
(b)Energy Efficiency Project Financing represents funding to install energy conservation measures. The maturity dates represent the expected date of project completion, upon which the respective customer assumes the outstanding debt.
Debt Covenants
As of March 31, 2024, we are in compliance with all debt covenants.
12. Fair Value of Financial Assets and Liabilities
We measure and classify fair value measurements in accordance with the hierarchy as defined by GAAP. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
-
Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to liquidate as of the reporting date.
-
Level 2 — inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
-
Level 3 — unobservable inputs, such as internally developed pricing models or third-party valuations for the asset or liability due to little or no market activity for the asset or liability.
Fair Value of Financial Liabilities Recorded at Amortized Cost
The following table presents the carrying amounts and fair values of our long-term debt and the SNF obligation as of March 31, 2024 and December 31, 2023. We have no financial liabilities classified as Level 1.
The carrying amounts of the short-term liabilities as presented in the Consolidated Balance Sheets are representative of their fair value (Level 2) because of the short-term nature of these instruments.
| March 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||
| Level 2 | Level 3 | Total | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Long-Term Debt, including amounts due within one year | $ | 8,474 | $ | 7,966 | $ | 742 | $ | 8,708 | $ | 7,617 | $ | 7,140 | $ | 774 | $ | 7,914 | ||||||||||||||||||||||||||||||||||
| SNF Obligation | 1,313 | 1,256 | — | 1,256 | 1,296 | 1,222 | — | 1,222 |
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 12 — Fair Value of Financial Assets and Liabilities
Valuation Techniques Used to Determine Fair Value
Our valuation techniques used to measure the fair value of the assets and liabilities are in accordance with the policies discussed in Note 18 — Fair Value of Financial Assets and Liabilities of our 2023 Form 10-K.
Valuation Techniques Used to Determine Net Asset Value
Certain NDT Fund Investments are not classified within the fair value hierarchy and are included under the heading “Not subject to leveling” in the table below. These investments are measured at fair value using NAV per share as a practical expedient and include commingled funds, mutual funds which are not publicly quoted, managed private credit funds, private equity and real estate funds.
For commingled funds and mutual funds, which are not publicly quoted, the fair value is primarily derived from the quoted prices in active markets on the underlying securities and can typically be redeemed monthly with 30 or less days of notice and without further restrictions. For managed private credit funds, the fair value is determined using a combination of valuation models including cost models, market models, and income models and typically cannot be redeemed until maturity of the term loan. Private equity and real estate investments include those in limited partnerships that invest in operating companies and real estate holding companies that are not publicly traded on a stock exchange, such as, leveraged buyouts, growth capital, venture capital, distressed investments, investments in natural resources, and direct investments in pools of real estate properties. These investments typically cannot be redeemed and are generally liquidated over a period of 8 to 10 years from the initial investment date, which is based on our understanding of the investment funds. Private equity and real estate valuations are reported by the fund manager and are based on the valuation of the underlying investments, which include inputs such as cost, operating results, discounted future cash flows, market based comparable data, and independent appraisals from sources with professional qualifications. These valuation inputs are unobservable.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 12 — Fair Value of Financial Assets and Liabilities
Recurring Fair Value Measurements
The following table present assets and liabilities measured and recorded at fair value in the Consolidated Balance Sheets on a recurring basis and their level within the fair value hierarchy as of March 31, 2024 and December 31, 2023:
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash equivalents(a) | $ | 39 | $ | — | $ | — | $ | 39 | $ | 42 | $ | — | $ | — | $ | 42 | |||||||||||||||||||||||||||||||
| NDT fund investments | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash equivalents(b) | 248 | 107 | — | 355 | 356 | 87 | — | 443 | |||||||||||||||||||||||||||||||||||||||
| Equities | 4,944 | 1,948 | 1 | 6,893 | 4,574 | 1,990 | 1 | 6,565 | |||||||||||||||||||||||||||||||||||||||
| Fixed income | 2,050 | 1,594 | 316 | 3,960 | 2,043 | 1,523 | 277 | 3,843 | |||||||||||||||||||||||||||||||||||||||
| Private credit | — | — | 143 | 143 | — | — | 151 | 151 | |||||||||||||||||||||||||||||||||||||||
| Assets measured at NAV | — | — | — | 5,654 | — | — | — | 5,396 | |||||||||||||||||||||||||||||||||||||||
| NDT fund investments subtotal(c) | 7,242 | 3,649 | 460 | 17,005 | 6,973 | 3,600 | 429 | 16,398 | |||||||||||||||||||||||||||||||||||||||
| Rabbi trust investments | 50 | 35 | 1 | 86 | 48 | 33 | 1 | 82 | |||||||||||||||||||||||||||||||||||||||
| Investments in equities | 419 | — | — | 419 | 372 | — | — | 372 | |||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Economic hedges | 2,073 | 5,526 | 3,335 | 10,934 | 2,330 | 5,821 | 3,143 | 11,294 | |||||||||||||||||||||||||||||||||||||||
| Proprietary trading | — | — | 1 | 1 | — | — | 2 | 2 | |||||||||||||||||||||||||||||||||||||||
| Effect of netting and allocation of collateral(d) | (1,776) | (4,852) | (2,301) | (8,929) | (1,996) | (5,195) | (1,931) | (9,122) | |||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative assets subtotal | 297 | 674 | 1,035 | 2,006 | 334 | 626 | 1,214 | 2,174 | |||||||||||||||||||||||||||||||||||||||
| DPP consideration | — | 1,375 | — | 1,375 | — | 1,216 | — | 1,216 | |||||||||||||||||||||||||||||||||||||||
| Total assets measured at fair value | 8,047 | 5,733 | 1,496 | 20,930 | 7,769 | 5,475 | 1,644 | 20,284 | |||||||||||||||||||||||||||||||||||||||
| Total assets | 8,047 | 5,733 | 1,496 | 20,930 | 7,769 | 5,475 | 1,644 | 20,284 | |||||||||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Economic hedges | (2,335) | (6,531) | (3,312) | (12,178) | (2,681) | (7,154) | (2,736) | (12,571) | |||||||||||||||||||||||||||||||||||||||
| Proprietary trading | — | — | — | — | — | — | (2) | (2) | |||||||||||||||||||||||||||||||||||||||
| Effect of netting and allocation of collateral(d) | 2,260 | 5,976 | 2,795 | 11,031 | 2,587 | 6,542 | 2,393 | 11,522 | |||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivative liabilities subtotal | (75) | (555) | (517) | (1,147) | (94) | (612) | (345) | (1,051) | |||||||||||||||||||||||||||||||||||||||
| Deferred compensation obligation | — | (83) | — | (83) | — | (69) | — | (69) | |||||||||||||||||||||||||||||||||||||||
| Total liabilities | (75) | (638) | (517) | (1,230) | (94) | (681) | (345) | (1,120) | |||||||||||||||||||||||||||||||||||||||
| Total net assets | $ | 7,972 | $ | 5,095 | $ | 979 | $ | 19,700 | $ | 7,675 | $ | 4,794 | $ | 1,299 | $ | 19,164 |
(a)CEG Parent has $55 million and $54 million of Level 1 cash equivalents as of March 31, 2024 and December 31, 2023, respectively. We exclude cash of $539 million and $349 million as of March 31, 2024 and December 31, 2023, respectively, and restricted cash of $46 million and $49 million as of March 31, 2024 and December 31, 2023, respectively. CEG Parent has excluded an additional $5 million and $2 million of cash as of March 31, 2024 and December 31, 2023, respectively.
(b)Includes net liabilities of $351 million and $115 million as of March 31, 2024 and December 31, 2023, respectively, which include certain derivative assets that have notional amounts of $126 million and $64 million as of March 31, 2024 and December 31, 2023, respectively. These items consist of receivables related to pending securities sales, interest and dividend receivables, repurchase agreement obligations, and payables related to pending securities purchases. The repurchase agreements are generally short-term in nature with durations generally of 30 days or less.
(c)Includes derivative assets and liabilities that are not material, which have total notional amounts of $882 million and $884 million as of March 31, 2024 and December 31, 2023, respectively. The notional principal amounts provide one measure of the transaction volume outstanding as of the periods ended and do not represent the amount of our exposure to credit or market loss.
(d)Includes $1,331 million and $1,712 million of variation margin posted on the exchanges as of March 31, 2024 and December 31, 2023, respectively.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 12 — Fair Value of Financial Assets and Liabilities
As of March 31, 2024, our NDTs have outstanding commitments to invest in private credit, private equity, and real estate investments of $372 million, $86 million, and $366 million, respectively. These commitments will be funded by our existing NDT funds.
Equity Security Investments without Readily Determinable Fair Values. We hold investments without readily determinable fair values with carrying amounts of $113 million and $103 million as of March 31, 2024 and December 31, 2023, respectively. Changes in fair value, cumulative adjustments, and impairments were not material for the three months ended March 31, 2024 and the year ended December 31, 2023.
Reconciliation of Level 3 Assets and Liabilities
The following tables present the fair value reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis during the three months ended March 31, 2024 and 2023:
| For the Three Months Ended March 31, 2024 | |||||||||||||||||||||||
| NDT Fund Investments | Mark-to-Market Derivatives | Life Insurance Contracts | Total | ||||||||||||||||||||
| Balance as of January 1, 2024 | $ | 429 | $ | 869 | $ | 1 | $ | 1,299 | |||||||||||||||
| Total realized / unrealized gains (losses) | |||||||||||||||||||||||
| Included in net income (loss) | — | (306) | (a) | — | (306) | ||||||||||||||||||
| Included in Payable related to Regulatory Agreement Units | 3 | — | — | 3 | |||||||||||||||||||
| Change in collateral | — | 33 | — | 33 | |||||||||||||||||||
| Purchases, sales, issuances and settlements | |||||||||||||||||||||||
| Purchases | 33 | 4 | — | 37 | |||||||||||||||||||
| Sales | — | (44) | — | (44) | |||||||||||||||||||
| Settlements | (5) | (2) | — | (7) | |||||||||||||||||||
| Transfers into Level 3 | — | 9 | (b) | — | 9 | ||||||||||||||||||
| Transfers out of Level 3 | — | (45) | (b) | — | (45) | ||||||||||||||||||
| Balance as of March 31, 2024 | $ | 460 | $ | 518 | $ | 1 | $ | 979 | |||||||||||||||
| The amount of total gains (losses) included in income attributed to the change in unrealized gains (losses) related to assets and liabilities as of March 31, 2024 | $ | — | $ | 29 | $ | — | $ | 29 |
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 12 — Fair Value of Financial Assets and Liabilities
| For the Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| NDT Fund Investments | Mark-to-Market Derivatives | Life Insurance Contracts | Total | ||||||||||||||||||||
| Balance as of January 1, 2023 | $ | 423 | $ | 219 | $ | 1 | $ | 643 | |||||||||||||||
| Total realized / unrealized gains (losses) | |||||||||||||||||||||||
| Included in net income (loss) | — | 506 | (a) | — | 506 | ||||||||||||||||||
| Change in collateral | — | 35 | — | 35 | |||||||||||||||||||
| Purchases, sales, issuances and settlements | |||||||||||||||||||||||
| Purchases | — | 66 | — | 66 | |||||||||||||||||||
| Sales | — | (4) | — | (4) | |||||||||||||||||||
| Settlements | (2) | — | — | (2) | |||||||||||||||||||
| Transfers into Level 3 | — | (8) | (b) | — | (8) | ||||||||||||||||||
| Transfers out of Level 3 | — | (67) | (b) | — | (67) | ||||||||||||||||||
| Balance as of March 31, 2023 | $ | 421 | $ | 747 | $ | 1 | $ | 1,169 | |||||||||||||||
| The amount of total gains (losses) included in income attributed to the change in unrealized gains (losses) related to assets and liabilities as of March 31, 2023 | $ | — | $ | 712 | $ | — | $ | 712 |
(a)Includes a reduction of ($337) million and ($206) million for realized gains due to the settlement of derivative contracts for the three months ended March 31, 2024 and 2023, respectively.
(b)Transfers into and out of Level 3 generally occur when the contract tenor becomes less and more observable, respectively, primarily due to changes in market liquidity or assumptions for certain commodity contracts.
The following tables present the income statement classification of the total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis during the three months ended March 31, 2024 and 2023:
| For the Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| Operating Revenues | Purchased Power and Fuel | Other, net | |||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||
| Total gains (losses) included in net income | $ | (172) | $ | 547 | $ | (136) | $ | (41) | $ | — | $ | — | |||||||||||||||||||||||
| Total unrealized gains (losses) | 148 | 839 | (119) | (127) | — | — |
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 12 — Fair Value of Financial Assets and Liabilities
Mark-to-Market Derivatives
The following table presents the significant inputs to the forward curve used to value these positions:
| Type of trade | Fair Value as of March 31, 2024 | Fair Value as of December 31, 2023 | Valuation Technique | Unobservable Input | 2024 Range & Arithmetic Average | 2023 Range & Arithmetic Average | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Mark-to-market derivatives—Economic hedges(a)(b) | $ | 23 | $ | 407 | Discounted Cash Flow | Forward power price | $7.99 | - | $185 | $48 | $9.64 | - | $216 | $48 | ||||||||||||||||||||||||||||||||||||||||||
| Forward gas price | $0.28 | - | $12 | $3.23 | $1.20 | - | $14 | $3.09 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Option Model | Volatility percentage | 21% | - | 75% | 48% | 23% | - | 200% | 87% |
(a)The valuation techniques, unobservable inputs, ranges, and arithmetic averages are the same for the asset and liability positions.
(b)The fair values do not include cash collateral posted on Level 3 positions of $494 million and $462 million as of March 31, 2024 and December 31, 2023, respectively.
The inputs listed above, which are as of the balance sheet date, would have a direct impact on the fair values of the above instruments if they were adjusted. The significant unobservable inputs used in the fair value measurement of our commodity derivatives are forward commodity prices and for options is price volatility. Increases (decreases) in the forward commodity price in isolation would result in significantly higher (lower) fair values for long positions (contracts that give us the obligation or option to purchase a commodity), with offsetting impacts to short positions (contracts that give us the obligation or right to sell a commodity). Increases (decreases) in volatility would increase (decrease) the value for the holder of the option (writer of the option). Generally, a change in the estimate of forward commodity prices is unrelated to a change in the estimate of volatility of prices. An increase to the heat rate or renewable factors would increase the fair value accordingly. Generally, interrelationships exist between market prices of natural gas and power. As such, an increase in natural gas pricing would potentially have a similar impact on forward power markets.
13. Commitments and Contingencies
Commitments
Commercial Commitments. Commercial commitments as of March 31, 2024, representing commitments potentially triggered by future events, were as follows:
| Expiration within | |||||||||||||||||||||||||||||||||||||||||
| Total | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 and beyond | |||||||||||||||||||||||||||||||||||
| Letters of credit | $ | 1,932 | $ | 1,608 | $ | 204 | $ | 1 | $ | 4 | $ | 115 | $ | — | |||||||||||||||||||||||||||
| Surety bonds(a) | 816 | 674 | 142 | — | — | — | — | ||||||||||||||||||||||||||||||||||
| Total commercial commitments | $ | 2,748 | $ | 2,282 | $ | 346 | $ | 1 | $ | 4 | $ | 115 | $ | — |
(a)Surety bonds—Guarantees issued related to contract and commercial agreements, excluding bid bonds.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 13 — Commitments and Contingencies
Environmental Remediation Matters
General. Our operations have in the past, and may in the future, require substantial expenditures to comply with environmental laws. Additionally, under Federal and state environmental laws, we are generally liable for the costs of remediating environmental contamination of property now or formerly owned by us and of property contaminated by hazardous substances generated by us. We own or lease several real estate parcels, including parcels on which our operations or the operations of others may have resulted in contamination by substances that are considered hazardous under environmental laws. In addition, we are currently involved in proceedings relating to sites where hazardous substances have been deposited and may be subject to additional proceedings in the future. Unless otherwise disclosed, we cannot reasonably estimate whether we will incur significant liabilities for additional investigation and remediation costs at these or additional sites identified by us, environmental agencies, or others. Additional costs could have a material, unfavorable impact on our consolidated financial statements.
As of March 31, 2024 and December 31, 2023, we had accrued undiscounted amounts for environmental liabilities of $145 million and $149 million, respectively, in Accounts payable and accrued expenses and Other deferred credits and other liabilities in the Consolidated Balance Sheets. See Note 19 — Commitments and Contingencies of our 2023 Form 10-K for additional information on environmental remediation matters. As of March 31, 2024, and through the date of filing, there have been no significant developments to the matters discussed in our 2023 Form 10-K.
Litigation
General. We are involved in various other litigation matters that are being defended and handled in the ordinary course of business. The assessment of whether a loss is probable or reasonably possible, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. We maintain accruals for such losses that are probable of being incurred and subject to reasonable estimation. Management is sometimes unable to estimate an amount or range of reasonably possible loss, particularly where (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss.
See Note 19 — Commitments and Contingencies of our 2023 Form 10-K for additional information on litigation matters. As of March 31, 2024, and through the date of filing, there have been no significant developments to the matters discussed in our 2023 Form 10-K.
Asbestos Personal Injury Claims. We maintain a reserve for claims associated with asbestos-related personal injury actions at certain facilities that are currently owned by us or were previously owned by ComEd, PECO, or BGE. The estimated liabilities are recorded on an undiscounted basis and exclude the estimated legal costs associated with handling these matters, which could be material.
At both March 31, 2024 and December 31, 2023, we recorded estimated liabilities of approximately $131 million in total for asbestos-related bodily injury claims. As of March 31, 2024, approximately $18 million of this amount related to 219 open claims presented to us, while the remaining $113 million is for estimated future asbestos-related bodily injury claims anticipated to arise through 2055, based on actuarial assumptions and analyses, which are updated on an annual basis. On a quarterly basis, we monitor actual experience against the number of forecasted claims to be received and expected claim payments and evaluate whether adjustments to the estimated liabilities are necessary.
14. Shareholders' Equity
Share Repurchase Program (CEG Parent)
During 2023, our Board of Directors authorized the repurchase of up to $2 billion of the Company's outstanding common stock. On April 30, 2024, our Board of Directors approved a $1 billion increase to the program, authorizing up to $3 billion in total repurchases. As of the date of filing, there was approximately $1.5 billion of remaining authority to repurchase shares of the Company's outstanding common stock. No other repurchase plans or programs have been authorized. See Note 20 - Shareholders' Equity of our 2023 Form 10-K for additional information on our share repurchase program.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 14 — Shareholders' Equity
During the three months ended March 31, 2024 and 2023, we repurchased from the open market 1.2 million and 3.2 million shares, respectively, of our common stock for a total cost, inclusive of taxes and transaction costs, of $150 million and $251 million, respectively.
In March 2024, we entered into an ASR agreement with a financial institution to initiate share repurchases of our common stock for $354 million, inclusive of taxes and other transaction costs. Under the ASR agreement, we received an initial share delivery of approximately 1.7 million shares of our common stock, which resulted in an immediate reduction in the number of our shares outstanding. The remaining shares will be delivered upon completion of the transaction in May 2024 and will be based on the average of the daily-volume weighted average prices of our common stock during the term, less a discount.
Changes in Accumulated Other Comprehensive Loss (All Registrants)
The following tables present changes in AOCI, net of tax, by component:
| Three Months Ended March 31, 2024 | Gains (losses) on Cash Flow Hedges | Pension and Non-Pension Postretirement Benefit Plan Items(a) | Foreign Currency Items | Total | |||||||||||||||||||
| Beginning balance | $ | (10) | $ | (2,157) | $ | (24) | $ | (2,191) | |||||||||||||||
| OCI before reclassifications | — | (3) | (3) | (6) | |||||||||||||||||||
| Amounts reclassified from AOCI | — | 17 | — | 17 | |||||||||||||||||||
| Net current-period OCI | — | 14 | (3) | 11 | |||||||||||||||||||
| Ending balance | $ | (10) | $ | (2,143) | $ | (27) | $ | (2,180) |
| Three Months Ended March 31, 2023 | Gains (losses) on Cash Flow Hedges | Pension and Non-Pension Postretirement Benefit Plan Items(a) | Foreign Currency Items | Total | |||||||||||||||||||
| Beginning balance | $ | (9) | $ | (1,725) | $ | (26) | $ | (1,760) | |||||||||||||||
| OCI before reclassifications | — | (53) | — | (53) | |||||||||||||||||||
| Amounts reclassified from AOCI | — | 5 | — | 5 | |||||||||||||||||||
| Net current-period OCI | — | (48) | — | (48) | |||||||||||||||||||
| Ending balance | $ | (9) | $ | (1,773) | $ | (26) | $ | (1,808) |
(a)AOCI amounts are included in the computation of net periodic pension and OPEB cost. See Note 9 — Retirement Benefits for additional information. See our Statements of Operations and Comprehensive Income for individual components of AOCI.
The following table presents income tax (expense) benefit allocated to each component of our other comprehensive income (loss):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Pension and non-pension postretirement benefit plans: | |||||||||||||||||||||||
| Actuarial loss reclassified to periodic benefit cost | $ | (6) | $ | (2) | |||||||||||||||||||
| Pension and non-pension postretirement benefit plans valuation adjustment | 2 | 18 |
15. Variable Interest Entities
At March 31, 2024 and December 31, 2023, we consolidated several VIEs or VIE groups for which we are the primary beneficiary (see Consolidated VIEs below) and had significant interests in several other VIEs for which we do not have the power to direct the entities’ activities and, accordingly, we were not the primary beneficiary
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 15 — Variable Interest Entities
(see Unconsolidated VIEs below). Consolidated and unconsolidated VIEs are aggregated to the extent that the entities have similar risk profiles.
Consolidated VIEs
The table below shows the carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in the consolidated financial statements as of March 31, 2024 and December 31, 2023. The assets, except as noted in the footnotes to the table below, can only be used to settle obligations of the VIEs. The liabilities, except as noted in the footnotes to the table below, are such that creditors, or beneficiaries, do not have recourse to our general credit.
| March 31, 2024 | December 31, 2023 | ||||||||||
| Cash and cash equivalents | $ | 73 | $ | 48 | |||||||
| Restricted cash and cash equivalents | 37 | 47 | |||||||||
| Accounts receivable | |||||||||||
| Customer accounts receivable | 24 | 19 | |||||||||
| Other accounts receivable | 9 | 10 | |||||||||
| Inventories, net | |||||||||||
| Materials and supplies | 14 | 14 | |||||||||
| Other current assets | 1,407 | 1,249 | |||||||||
| Total current assets | 1,564 | 1,387 | |||||||||
| Property, plant, and equipment, net | 1,961 | 1,979 | |||||||||
| Other noncurrent assets | 161 | 166 | |||||||||
| Total noncurrent assets | 2,122 | 2,145 | |||||||||
| Total assets(a) | $ | 3,686 | $ | 3,532 | |||||||
| Long-term debt due within one year | $ | 64 | $ | 63 | |||||||
| Accounts payable | 16 | 11 | |||||||||
| Accrued expenses | 20 | 20 | |||||||||
| Other current liabilities | 2 | — | |||||||||
| Total current liabilities | 102 | 94 | |||||||||
| Long-term debt | 679 | 704 | |||||||||
| Asset retirement obligations | 192 | 190 | |||||||||
| Other noncurrent liabilities | 2 | 2 | |||||||||
| Total noncurrent liabilities | 873 | 896 | |||||||||
| Total liabilities | $ | 975 | $ | 990 |
(a)Our balances include unrestricted assets for current unamortized energy contract assets of $22 million and $22 million, disclosed within other current assets in the table above and noncurrent unamortized energy contract assets of $150 million and $155 million, disclosed within other noncurrent assets in the table above as of March 31, 2024 and December 31, 2023, respectively.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 15 — Variable Interest Entities
As of March 31, 2024 and December 31, 2023, our consolidated VIEs included the following:
| Consolidated VIE or VIE groups: | Reason entity is a VIE: | Reason we are the primary beneficiary: | ||||||||||||
| CRP - A collection of wind and solar project entities. We have a 51% equity ownership in CRP. See additional discussion below. | Similar structure to a limited partnership and the limited partners do not have kick out rights with respect to the general partner. | We conduct the operational activities. | ||||||||||||
| Bluestem Wind Energy Holdings, LLC - A Tax Equity structure which is consolidated by CRP. | Similar structure to a limited partnership and the limited partners do not have kick out rights with respect to the general partner. | We conduct the operational activities. | ||||||||||||
| Antelope Valley - A solar generating facility, which is 100% owned by us. Antelope Valley sells all of its output to PG&E through a PPA. | The PPA contract absorbs variability through a performance guarantee. | We conduct all activities. | ||||||||||||
| NER - A bankruptcy remote, special purpose entity which is 100% owned by us, which purchases certain of our customer accounts receivable arising from the sale of retail electricity. NER’s assets will be available first and foremost to satisfy the claims of the creditors of NER. Refer to Note 6 —Accounts Receivable for additional information on the sale of receivables. | Equity capitalization is insufficient to support its operations. | We conduct all activities. |
Unconsolidated VIEs
Our 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 the Consolidated Balance Sheets in Investments. For the energy purchase and sale contracts (commercial agreements), the carrying amount of assets and liabilities in the Consolidated Balance Sheets that relate to our involvement with the VIEs are predominantly related to working capital accounts and generally represent the amounts owed by, or owed to, us for the deliveries associated with the current billing cycles under the commercial agreements.
As of March 31, 2024 and December 31, 2023, we had significant unconsolidated variable interests in several VIEs for which we were not the primary beneficiary. These interests include certain equity method investments and certain commercial agreements.
The following table presents summary information about our significant unconsolidated VIE entities:
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||
| Commercial Agreement VIEs | Equity Investment VIEs | Total | Commercial Agreement VIEs | Equity Investment VIEs | Total | ||||||||||||||||||||||||||||||
| Total assets(a) | $ | 672 | $ | — | $ | 672 | $ | 704 | $ | — | $ | 704 | |||||||||||||||||||||||
| Total liabilities(a) | 64 | — | 64 | 77 | — | 77 | |||||||||||||||||||||||||||||
| Our ownership interest in VIE(a) | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Other ownership interests in VIE(a) | 608 | — | 608 | 627 | — | 627 | |||||||||||||||||||||||||||||
(a)These items represent amounts on the unconsolidated VIE balance sheets, not in the Consolidated Balance Sheets. These items are included to provide information regarding the relative size of the unconsolidated VIEs. We do not have any exposure to loss as we do not have a carrying amount in the equity investment VIEs as of March 31, 2024 and December 31, 2023.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 15 — Variable Interest Entities
As of March 31, 2024 and December 31, 2023 the unconsolidated VIEs consist of:
| Unconsolidated VIE groups: | Reason entity is a VIE: | Reason we are not the primary beneficiary: | ||||||||||||
| Equity investments in distributed energy companies. We sold this investment in the fourth quarter of 2022 resulting in it no longer being classified as an unconsolidated VIE. | Similar structures to a limited partnership and the limited partners do not have kick-out rights with respect to the general partner. | We do not conduct the operational activities. | ||||||||||||
| Energy Purchase and Sale agreements - We have several energy purchase and sale agreements with generating facilities. | PPA contracts that absorb variability through fixed pricing. | We do not conduct the operational activities. |
16. Supplemental Financial Information
Supplemental Statement of Operations Information
The following tables provide additional information about items recorded in the Consolidated Statements of Operations and Comprehensive Income.
| Operating revenues | |||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Operating lease income | $ | 4 | $ | 4 | |||||||||||||||||||
| Variable lease income | 52 | 58 |
| Taxes other than income taxes | |||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Gross receipts(a) | $ | 33 | $ | 33 | |||||||||||||||||||
| Property | 66 | 56 | |||||||||||||||||||||
| Payroll | 38 | 34 |
(a)Represent gross receipts taxes related to our retail operations. The offsetting collection of gross receipts taxes from customers is recorded in Operating revenues in the Consolidated Statements of Operations and Comprehensive Income.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 16 — Supplemental Financial Information
| Other, net | |||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Decommissioning-related activities: | |||||||||||||||||||||||
| Net realized income on NDT funds(a) | |||||||||||||||||||||||
| Regulatory Agreement Units | $ | 166 | $ | 314 | |||||||||||||||||||
| Non-Regulatory Agreement Units | 83 | 194 | |||||||||||||||||||||
| Net unrealized losses on NDT funds | |||||||||||||||||||||||
| Regulatory Agreement Units | 225 | 29 | |||||||||||||||||||||
| Non-Regulatory Agreement Units | 134 | 18 | |||||||||||||||||||||
| Regulatory offset to NDT fund-related activities(b) | (312) | (275) | |||||||||||||||||||||
| Total decommissioning-related activities | 296 | 280 | |||||||||||||||||||||
| Non-service net periodic benefit credit(c) | (2) | 14 | |||||||||||||||||||||
| Net realized and unrealized gains (losses) from equity investments | 47 | (5) | |||||||||||||||||||||
| Other(d) | 21 | 25 | |||||||||||||||||||||
| Total Other, net | $ | 362 | $ | 314 |
(a)Realized income includes interest, dividends and realized gains and losses on sales of NDT fund investments.
(b)Includes the elimination of decommissioning-related activities and the elimination of income taxes related to all NDT fund activity for the Regulatory Agreement Units.
(c)The non-service credit (cost) components are included in Other, net, in accordance with single employer plan accounting. See Note 9 — Retirement Benefits for additional information.
(d)Includes amounts we billed Exelon for services pursuant to the TSA.
Supplemental Cash Flow Information
The following tables provide additional information about items recorded within our Consolidated Statements of Cash Flows.
| Depreciation, amortization, and accretion | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Property, plant, and equipment(a) | $ | 300 | $ | 262 | |||||||
| Amortization of intangible assets, net(a) | 6 | 5 | |||||||||
| Amortization of energy contract assets and liabilities(b) | 5 | 9 | |||||||||
| Nuclear fuel(c) | 216 | 186 | |||||||||
| ARO accretion(d) | 167 | 143 | |||||||||
| Total depreciation, amortization, and accretion | $ | 694 | $ | 605 |
(a)Included in Depreciation and amortization expense in the Consolidated Statements of Operations and Comprehensive Income.
(b)Included in Operating revenues or Purchased power and fuel expense in the Consolidated Statements of Operations and Comprehensive Income.
(c)Included in Purchased power and fuel expense in the Consolidated Statements of Operations and Comprehensive Income.
(d)Included in Operating and maintenance expense in the Consolidated Statements of Operations and Comprehensive Income.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 16 — Supplemental Financial Information
| Other non-cash operating activities | |||||||||||||||||||||||
| CEG Parent | Constellation | ||||||||||||||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Other decommissioning-related activity(a) | $ | (161) | $ | (136) | $ | (161) | $ | (136) | |||||||||||||||
| Energy-related options(b) | 27 | 93 | 27 | 93 | |||||||||||||||||||
| (Gain) loss on sale of receivables | 14 | 20 | 14 | 20 | |||||||||||||||||||
| Amortization of operating ROU asset | 8 | 8 | 8 | 8 | |||||||||||||||||||
| Long-term incentive plan | 20 | 12 | — | — | |||||||||||||||||||
| Pension and non-pension postretirement benefit costs | 28 | 12 | 28 | 12 | |||||||||||||||||||
(a)Includes the elimination of decommissioning-related activities for the Regulatory Agreement Units, including the elimination of operating revenues, ARO accretion, ARC amortization, investment income, and income taxes related to all NDT fund activity for these units.
(b)Includes option premiums reclassified to realized at the settlement of the underlying contracts and recorded to results of operations.
The following table provides a reconciliation of cash, restricted cash, and cash equivalents reported within our Consolidated Balance Sheets that sum to the total of the same amounts in the Consolidated Statements of Cash Flows.
| CEG Parent | Constellation | ||||||||||
| March 31, 2024 | |||||||||||
| Cash and cash equivalents | $ | 562 | $ | 557 | |||||||
| Restricted cash and cash equivalents | 83 | 67 | |||||||||
| Total cash, restricted cash, and cash equivalents | $ | 645 | $ | 624 | |||||||
| December 31, 2023 | |||||||||||
| Cash and cash equivalents | $ | 368 | $ | 366 | |||||||
| Restricted cash and cash equivalents | 86 | 74 | |||||||||
| Total cash, restricted cash, and cash equivalents | $ | 454 | $ | 440 | |||||||
| March 31, 2023 | |||||||||||
| Cash and cash equivalents | $ | 237 | $ | 236 | |||||||
| Restricted cash and cash equivalents | 99 | 91 | |||||||||
| Total cash, restricted cash, and cash equivalents | $ | 336 | $ | 327 | |||||||
For additional information on restricted cash, see Note 1 — Basis of Presentation of our 2023 Form 10-K.
Combined Notes to Consolidated Financial Statements
(Dollars in millions, unless otherwise noted)
Note 16 — Supplemental Financial Information
Supplemental Balance Sheet Information
The following table provides additional information about items recorded within our Consolidated Balance Sheets.
| Accounts payable and accrued expenses | |||||||||||
| March 31, 2024 | CEG Parent | Constellation | |||||||||
| Accounts payable | $ | 1,309 | $ | 1,296 | |||||||
| Compensation-related accruals(a) | 358 | 237 | |||||||||
| Taxes accrued(b) | 370 | 356 | |||||||||
| December 31, 2023 | |||||||||||
| Accounts payable | $ | 1,302 | $ | 1,289 | |||||||
| Compensation-related accruals(a) | 680 | 576 | |||||||||
| Taxes accrued | 399 | 390 | |||||||||
(a)Primarily includes accrued payroll, bonuses and other incentives, vacation, and benefits.
(b)Includes $66 million related to nuclear PTC that was used to offset the current tax liability. See Note 5 — Government Assistance for additional information on the nuclear PTC.
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