EXCExelon

You disclose that if Generation’s state-supported nuclear plants in PJM or NYISO are subjected to the Minimum Offer Price Rule (MOPR) without compensation under an Fixed Resource Requirement (FRR) or similar program, it could have a material adverse impact on Exelon's and Generation's financial statements.

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In this regard, please tell us what consideration you gave to quantifying the expected impact of this known uncertainty on your future results of operations. Refer to Item 303(a)(3)(ii) of Regulation S-K.

On page 66 and again more fully in Note 3 - Regulatory Matters on pages 250 & 251 of Exelon’s 2019 Form 10-K filing we describe an uncertainty that we reasonably expect could have a material unfavorable impact on Exelon and Generation’s future results of operations in accordance with Item 303(a)(3)(ii) of Regulation S-K, however, given the significance of the unknown variables and potential for multiple outcomes, we cannot reasonably estimate the impact of FERC’s December 19, 2019 Order on the PJM MOPR for the following reasons:

•

On January 21, 2020, Exelon, PJM and a number of other

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entities individually submitted requests for rehearing of FERC’s December 19, 2019 Order given the lack of clarity regarding certain aspects of the MOPR, the outcomes of which remain uncertain.

As part of the December 19, 2019 Order, FERC directed PJM to submit a compliance filing in 90 days with details implementing the new rules, including an auction schedule proposal and proposed offer floors for new and existing resource types, which was filed on March 18, 2020. FERC has no deadline on which it must act on PJM’s compliance filing. PJM proposed to post a specific schedule for the next capacity auction by the later of June 15, 2020 or 14 days after a FERC order accepting the compliance filing.

We cannot currently predict what impact FERC’s Order will have on the bidding behavior of PJM market participants and the ultimate clearing prices that will result when PJM’s capacity auction for planning year 2022/2023, indefinitely postponed since May 2019, is ultimately conducted.

It remains uncertain whether or when Illinois or other states in PJM may pursue and implement FRR programs to avoid having state supported resources subjected to the MOPR and to what extent such programs may benefit our generating resources.

Additionally, at the time of our 2019 Form 10-K filing, FERC had not yet acted, nor did it have a deadline upon which it was required to act, in the NYISO proceeding.

Upon further consideration, in future Form 10-K and Form 10-Q filings, and when circumstances continue to warrant such disclosure, we will include an affirmative statement to make it clear to the reader when we believe we are unable to reasonably estimate the impact of an uncertainty. Using our 2019 Form 10-K as an example, the following is illustrative (added disclosure is underlined):

“If Generation’s state-supported nuclear plants in PJM or NYISO are subjected to the MOPR or equivalent without compensation under an FRR or similar program, it could have a material adverse impact on Exelon's and Generation's financial statements, which Exelon and Generation cannot reasonably estimate at this time.”

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We note from your disclosure on page 267 that you recorded significant charges to earnings associated with accelerated depreciation due to early nuclear plant retirements over the last three fiscal years. We also note your disclosure in footnote 6 regarding the economic challenges faced by your nuclear generating stations and the resulting potential for early retirement of the Dresden, Byron, and Braidwood nuclear

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plants in Illinois. We also note that you have recorded charges to earnings over the last three fiscal years associated with early nuclear plant retirements. Please tell us your consideration of providing additional disclosures in your critical accounting policies that allows for an assessment of the probability, magnitude and timing of future material charges associated with accelerated deprecation or early retirement or shutdown of the Dresden, Byron and Braidwood units, the net book value and revenues of the business units along with a description of the specific events and/or changes in circumstances that could reasonably be expected to result in accelerated deprecation or early retirement or shutdown. Lastly, please address how the early retirement of these units would necessitate any incremental charges associated with their asset retirement obligations. Refer to Section V of SEC Release 33-8350 and Item 303(a)(3)(ii), which requires a description of a known uncertainty that will have a material impact on income from continuing operations.

Accelerated Depreciation and Other Charges Resulting from Early Retirement

We added the disclosure for Dresden, Byron, and Braidwood in our 2018 Form 10-K (Note 8 - Early Plant Retirements on page 319) as an early warning disclosure to foreshadow for the reader the potential for those plants to experience an earlier than anticipated retirement given all of Dresden and portions of Byron and Braidwood did not clear in PJM’s capacity auction for the 2021-2022 planning year.

Specific to Section V of SEC Release 330-8350, we have provided the following disclosures that we believe provide

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sufficient qualitative information for investors as it relates to our assessment of the probability, magnitude and timing of future material charges associated with accelerated depreciation or early retirement or shutdown of the Dresden, Byron and Braidwood units.

Within our Critical Accounting Policies - Depreciable Lives of Property, Plant and Equipment disclosure on page 78, we disclose that “management considers expected future energy market conditions … in determining the estimated service lives of its generating facilities.” Further, on pages 266 and 267 of Exelon’s 2019 Form 10-K within Note 6 - Early Plant Retirements we include discussion of those factors, in addition to context surrounding the potential timing of an early retirement, as follows:

“Exelon and Generation continuously evaluate factors that affect the current and expected economic value of Generation’s plants, including, but not limited to: market power prices, results of capacity auctions, potential legislative and regulatory solutions to ensure plants are fairly compensated for benefits they provide through their carbon-free emissions, reliability, or fuel security, and the impact of potential rules from the EPA requiring reduction of carbon and other emissions and the efforts of states to implement those final rules.”

“The precise timing of an early retirement date for any plant, and the resulting financial statement impacts, may be affected by many factors, including the status of potential regulatory or legislative solutions, results of any transmission system reliability study assessments, the nature of any co-owner requirements and stipulations, and NDT fund requirements for nuclear plants, among other factors. However, the earliest retirement date for any plant would usually be the first year in which the unit does not have capacity or other obligations, and where applicable, just prior to its next scheduled nuclear refueling outage.”

Upon additional review of Section V of SEC Release 33-8350, we do however acknowledge that our Critical Accounting Policies disclosure for Depreciable Lives of Property, Plant and Equipment could be enhanced to better articulate how we approach the reassessment of the expected useful lives of our generating assets. In future Form 10-K filings starting with the 2020 Form 10-K, we will enhance this disclosure as follows (added disclosure is underlined):

“At Generation, along with depreciation study results, management considers expected future energy market conditions and generation plant operating costs and capital investment requirements in determining the estimated service lives of its generating facilities and reassesses the reasonableness of estimated useful lives whenever events or changes in circumstances warrant. When a determination has been made that an asset will be retired before the end of its current estimated useful life, depreciation provisions will be accelerated to reflect the shortened estimated useful life, which could have a material unfavorable impact on Exelon’s and Generation’s future results of operations. See Note 6 - Early Plant Retirements of the Combined Notes to the Consolidated Financial Statements for additional information.”

We do not believe however, given the uncertainties referenced in our response to comment #1 above, that additional quantitative information is reasonably available. When, based on further evolution of facts and circumstances, management contemplates more specific plans or contingencies that would lead to an early retirement, or a determination is made that one or more of these generating assets will be prematurely retired, we will provide the appropriate level of quantitative information, consistent with that previously disclosed for other nuclear plants, including Clinton, Quad Cities, Three Mile Island, Ginna, and Salem.

Asset Retirement Obligations

Consistent with our response as it relates to accelerated depreciation and other charges resulting from early retirement, specific to Section V of SEC Release 330-8350, we have provided the following qualitative disclosure that we believe provides material information for investors as it relates to our assessment of any incremental charges associated with asset retirement obligations that would result from the early retirement of the Dresden, Byron and Braidwood units. We do not believe, however, given the uncertainties referenced in our response to comment #1 above, that additional quantitative information is reasonably available.

Within our Critical Accounting Policies - Nuclear Decommissioning Asset Retirement Obligations disclosure on pages 74 through 76, we disclose several significant assumptions underlying the valuation of Generation’s nuclear asset retirement obligations, which include the following:

“Additionally, certain factors such as changes in regulatory requirements during plant operations or the profitability of a nuclear plant could impact the timing of plant retirements. These factors could result in material changes to Generation’s current estimates as more information becomes available and could change the timing of plant retirements and the probability assigned to the decommissioning outcome scenarios.”

“Generation’s probabilistic cash flow models include the assignment of probabilities to various scenarios for decommissioning cost levels, decommissioning approaches, and timing of plant shutdown on a unit-by-unit basis.”

“The assumed plant shutdown timing scenarios include the following four alternatives: … (4) the probability of early plant retirement for certain sites due to changing market conditions and regulatory environments. … As power market and regulatory environment developments occur, Generation evaluates and incorporates, as necessary, the impacts of such developments into its nuclear ARO assumptions and estimates.”

Further, within our footnote disclosure on page 272 of Exelon’s 2019 Form 10-K, Note 9 - Asset Retirement Obligations, we also highlight for the reader that the financial statement impact for changes in the ARO, on an individual unit basis, due to the changes in and timing of estimated cash flows generally result in a corresponding change in the unit’s ARC within Property, plant and equipment on Exelon’s and Generation’s Consolidated Balance Sheets, any acceleration or impairment of which would include the ARC.

In summary, we believe the combination of the disclosures referenced provides the reader of our financial statements with sufficient information around uncertainties that we expect might have a material unfavorable impact on income from continuing operations in accordance with Item 303(a)(3)(ii). We have also provided the reader with context around the end of the current capacity obligations for Dresden, Byron, and Braidwood on page 267 of our 2019 Form 10-K. As discussed in our response to the previous comment, there continues to be a significant degree of uncertainty given the number of unknown variables and potential for multiple outcomes such that a qualitative discussion remains appropriate. As the assumptions used in the determination of accelerated depreciation, changes in asset retirement obligations and other charges become available, we will provide more quantitative information.

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We note your presentation of the non-GAAP measure revenues net of purchased power and fuel expense. Please present a reconciliation for this non-GAAP measure in accordance with Item 10(e)(1)(i)(B) of Regulation S-K. In doing so, reconcile this measures to the most directly comparable GAAP measure of gross margin.

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If you do not believe gross margin that includes depreciation and amortization is the most directly comparable GAAP measure, please tell us why in your response.

We do not believe that gross margin that includes depreciation and amortization is the most directly comparable GAAP measure. Exelon does not present gross margin in our financial statements as gross margin is not a relevant metric for our industry. The primary product sold by Exelon’s businesses are largely commodities consumed on a real-time, as-needed basis, largely incapable of being stored and very different than a manufacturing company selling inventoriable finished goods where the cost of the manufacturing facility is an inventoriable cost component of that finished product.

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An entity’s direct costs to sell the electricity commodity in our industry includes the fuel used to generate that electricity or the purchase of that electricity from alternative sources, likewise for natural gas where supply is generally purchased in the wholesale markets for sales to retail customers.

We calculate the “Revenue Net of Purchased Power and Fuel Expense” or “RNF” financial metric (not defined under GAAP) as the GAAP measure of Operating revenues less the GAAP measure of Purchase power and fuel expense. Such calculation/reconciliation is shown in the summary income statement in the Results of Operations disclosures for each of our registrants within Management’s Discussion and Analysis of Financial Condition and Results of Operations. Further, on pages 261 - 262 of Exelon’s 2019 Form 10-K, Note 5 - Segment Information, we disclose Operating revenues and “RNF” for Generation’s reportable segments. We do not separately disclose Purchased power and fuel expense for Generation’s reportable segments as we believe the reader of our financial statements can compute it based on the disclosure of Operating revenues and “RNF”. In future Form 10-K and Form 10-Q filings, within Generation’s Results of Operations we will reference to the reconciliation in the Segment Information footnote.

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We note your disclosure that it is reasonably possible that additional exposure to estimated future asbestos-related bodily injury claims in excess of the amount accrued could have a material, unfavorable impact on Exelon’s and Generation’s financial statements.

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If it is at least reasonably possible that a loss exceeding amounts already recognized may have been incurred and the amount of that additional loss would be material, either disclose the estimated additional loss, or range of loss that is reasonably possible, or state that such an estimate cannot be made. Refer to ASC 450-20-50-4.

We cannot reasonably estimate a range of loss beyond the amounts we have recorded because of uncertainties around future events such as claim filing rates and the cost of defending and disposing claims, as well as uncertainties surrounding asbestos litigation in the United States over a significant period of time.

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In future Form 10-K and Form 10-Q filings, we will add that disclosure as shown below (added disclosure is underlined):

“It is reasonably possible that additional exposure to estimated future asbestos-related bodily injury claims in excess of the amount accrued could have a material, unfavorable impact on Exelon’s and Generation’s financial statements. However, management cannot reasonably estimate a range of loss beyond the amounts recorded.”

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We have read your response to comment 2. We note from your disclosure on page 272 that you increased your asset retirement obligation by $780 million in part due to changes in the assumed retirement timing probabilities of economically challenged nuclear plants. In this regard, it appears that you revised the planned asset retirement dates of the nuclear plants that are economically challenged.

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Your proposed disclosure indicates that when a determination has been made that an asset will be retired before the end of its current estimated useful life, depreciation provisions will be accelerated to reflect the shortened estimated useful life, which could have a material unfavorable impact on Exelon’s and Generation’s future results of operations. A company should address specifically why its accounting estimates or assumptions bear the risk of change. The reason may be that there is an uncertainty attached to the estimate or assumption, or it just may be difficult to measure or value. Equally important, companies should address the questions that arise once the critical accounting estimate or assumption has been identified, by analyzing, to the extent material, such factors as how they arrived at the estimate, how accurate the estimate/assumption has been in the past, how much the estimate/assumption has changed in the past, and whether the estimate/assumption is reasonably likely to change in the future. Since critical accounting estimates and assumptions are based on matters that are highly uncertain, a company should analyze their specific sensitivity to change, based on outcomes that are reasonably likely to occur and would have a material effect. Please note a Company is required to provide quantitative as well as qualitative disclosure when quantitative information is reasonably available and will provide material information for investors pursuant to Section V of SEC Release 33-8350. Please disclose the accounting estimates or assumptions used to determine the depreciable lives of your Dresden, Byron and Braidwood units at risk of early retirement, including their book values, based on the guidance in SEC Release 33-8350.

In future Form 10-K and Form 10-Q filings, starting with the first quarter 2020 Form 10-Q, we will add disclosure of assumptions used to determine the depreciable lives of Dresden, Byron and Braidwood and their book values as follows (added disclosure is underlined) in the Early Plant Retirements footnote:

“Generation’s Dresden, Byron and Braidwood nuclear plants in Illinois are also showing increased signs of economic distress, which could lead to an early retirement, in a market that does not currently compensate them for their unique contribution to grid resiliency and their ability to

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produce large amounts of energy without carbon and air pollution. The May 2018 PJM capacity auction for the 2021-2022 planning year resulted in the largest volume of nuclear capacity ever not selected in the auction, including all of Dresden, and portions of Byron and Braidwood. Exelon continues to work with stakeholders on state policy solutions, while also advocating for broader market reforms at the regional and federal level.

The following table provides the balance sheet amounts as of March 31, 2020 for Exelon’s and Generation’s significant assets and liabilities associated with these three nuclear plants. Depreciation provisions are based on the estimated useful lives of these nuclear generating stations, which reflect the first renewal of the operating licenses.

(in millions)

Dresden

Byron

Braidwood

Total

Asset Balances

Materials and supplies inventory

$

XX

Nuclear fuel inventory, net

Completed plant, net

Construction work in progress

Liability Balances

Asset retirement obligation

(XX)

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We have read your response to comment 3. It appears the Company’s chief operating decision maker (“CODM”) uses net income as the segment measure for the utility registrants. Please reconcile the non-GAAP measure revenues net of purchased power and fuel expense (“RNF”) to a GAAP gross margin that includes depreciation and amortization expense for the utility registrants.

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In this regard, a GAAP gross margin should be used as the starting point of the non-GAAP reconciliation of RNF and should be shown even if it is not otherwise presented in the utility registrants financial statements.

We acknowledge the Staff’s comment and have considered 1) the remarks made by Mr. Patrick Gilmore at the 2019 AICPA Conference on Current SEC and PCAOB Developments and 2) the clarification provided by the Staff during our conference call with the Staff on April 13, 2020. As noted in Mr. Gilmore’s remarks, companies that present a non-GAAP contribution margin must also provide a reconciliation of the respective non-GAAP contribution margin to gross margin calculated in accordance with GAAP, even if gross margin is not presented in the companies’ income statement.

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Based on our understanding of Mr. Gilmore’s remarks and our conference call discussion with the Staff, the Company will no longer present RNF for Exelon Utilities, beginning with the first quarter 2020 Form 10-Q.

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We note the adjustments to reconcile GAAP net income attributable to common shareholders to adjusted non-GAAP operating earnings are presented net of income taxes. Please revise your disclosure in future filings to show income taxes as a separate adjustment and clearly explain how the adjustment is determined.

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Please refer to Question 102.11 of the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please note that this comment is also applicable to earnings releases filed on Form 8-K. Item 8. Financial Statements and Supplementary Data Combined Notes to Consolidated Financial Statements 1.Significant Accounting Policies

On pages 89 and 90 of Exelon’s 2016 Form 10-K, the footnotes to the table reconciling GAAP net income attributable to common shareholders to adjusted non-GAAP operating earnings separately set forth the income tax amounts associated with each reconciling adjustment. We believe this disclosure approach is aligned with the guidance in Question 102.11 of the May 2016 Compliance and Disclosure Interpretations, whereby the income tax impacts are shown separately in a succinct and transparent manner, enabling the reader to determine the before and after income tax impacts of each reconciling

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adjustment. Upon further consideration, to more clearly link the income tax impact to the specific associated reconciling adjustment, going forward Exelon will disclose such income tax impact within the line item caption for each reconciling adjustment instead of in the related footnote explanation. As an example:

For the years ended December 31,

2016

2015

(All amounts after tax; in million, except per share amounts)

Earnings per Diluted Share

Mark-to-Market Impact of Economic Hedging Activities (net of taxes of $18 and $99, respectively)

$24

0.03

$(158)

(0.18)

Merger and Integration Costs (net of taxes of $50 and $38, respectively)

114

0.12

0.07

Exelon will also provide similar expanded income tax impact disclosures in the line item captions of the GAAP to non-GAAP reconciliation tables such as those included on pages 8 and 12-15 of its earnings release filed in its February 8, 2017, Form 8-K. (Please note that the GAAP to non-GAAP reconciliations on pages 8-11 and 16-23 of Exelon’s earnings release separately set forth reconciling adjustments for Exelon and each of its subsidiary registrants on a pre-tax basis, with the aggregate income tax impact of such pre-tax items shown as a separate reconciling adjustment.)

Additionally, consistent with its approach in its first quarter 2017 Form 10-Q and earnings releases filings, Exelon will add the following footnote disclosure to its GAAP to non-GAAP reconciliation tables in its Forms 10-Q and 10-K and earnings release filings to explain the bases for income tax impacts of reconciling adjustments:

“Unless otherwise noted, the income tax impact of each reconciling item between GAAP Net Income and Adjusted (non-GAAP) Operating Earnings is based on the marginal statutory federal and state income tax rates for each Registrant, taking into account whether the income or expense item is taxable or deductible, respectively, in whole or in part. For all items except the unrealized gains and losses related to NDT fund investments, the marginal statutory income tax rates ranged from 39% to 41%. Under IRS regulations, NDT fund investment returns are taxed at differing rates for investments in qualified vs. non-qualified funds. The tax rates applied to unrealized gains and losses related to NDT Fund investments were 76.2%, 48.7%, 49.1% and 56.3% for the three months and twelve months ended December 31, 2016 and 2015, respectively.”

Finally, as information, based on benchmarking of other public utility SEC filings, we have noted diversity in practice in disclosing the income tax impacts of non-GAAP reconciling adjustments, including certain SEC filers that disclosed the income tax impacts in footnotes to a table and others that disclosed such impacts in line item captions as we plan for future filings.

Item 8. Financial Statements and Supplementary Data

Combined Notes to Consolidated Financial Statements

1. Significant Accounting Policies

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We note your disclosure that the amount of the impairment loss for assets held and used is determined by measuring the excess of the carrying amount of the long-lived asset or asset group over its fair value less costs to sell. Please tell us how your measurements of impairment losses for long-lived assets held and used comply with ASC 360-10-35-17. 19. Mezzanine Equity (Exelon, Generation and PHI), page 509

Both the Significant Accounting Policies (page 320) and Critical Accounting Policies and Estimates (page 110) disclosures in Exelon’s 2016 Form 10-K erroneously stated that costs to sell are reflected in the measurement of impairment losses for long-lived assets held and used. In fact, as disclosed in Note 8-Impairment of Long-Lived Assets (pages 395 and 396), impairment losses for long-lived assets held and used are determined by measuring the excess of the carrying amount of the long-lived asset or asset group over its fair value, without any consideration of costs to sell.

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In future Form 10-K filings, Exelon will remove the “less costs to sell” reference from the Asset Impairments-Long Lived Assets section of Significant Accounting Policies and from the Impairment of Long-lived Assets disclosure in the Critical Accounting Policies and Estimates section of the Form 10-K.

As information, as disclosed in Note 8-Impairment of Long-Lived Assets (page 396), in accordance with ASC 360, the Registrants only reflect costs to sell in determining impairment losses for long-lived assets classified as held for sale.

19. Mezzanine Equity (Exelon, Generation and PHI), page 508

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Please tell how the release of the redeemable noncontrolling interests contingency during the year ended December 31, 2016 is reflected in the consolidated statements of changes in shareholders’ equity. Please refer to paragraph 16 of ASC 480-10-S99-3A.

The contingently redeemable noncontrolling interests relate to 2015 ESA Investco, LLC, which is a partially owned, consolidated subsidiary of Generation. As described in Note 19-Mezzanine Equity, the 2016 year-to-date amount of the contingency that was released was $157 million. In accordance with ASC 480-10-S99-3A, this amount was reclassified to permanent equity when the contingency was released. The reclassification for the year ended December 31, 2016 was included in the Sale of noncontrolling interests line within the consolidated statement of changes in equity.

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Through the third quarter of 2016, Exelon and Generation had presented the reclassification as a separate line item within the consolidated statement of changes in equity labeled Adjustment of contingently redeemable noncontrolling interests due to release of contingency.

Unrelated to 2015 ESA Investco, LLC, during the fourth quarter of 2016, Generation sold a portion of the equity interest in one of its wind projects to a tax equity investor for $243 million. (Additional details related to this transaction are included in Note 2-Variable Interest Entities within 2016 Form 10-K.) Within the Consolidated Statement of Changes in Equity in the 2016 Form 10-K, we combined the sale of the equity interest in the wind projects and the year-to-date contingency released by 2015 ESA Investco, LLC within the same line item Sale of noncontrolling interests for a total of $400 million.

Upon receiving this Comment Letter, we reviewed our decision to combine the two items into a single line item. Pursuant to our review, to provide additional transparency, we will revise our presentation on the Consolidated Statements of Changes in Equity for Exelon and Generation to reflect separately (1) the release of the redeemable noncontrolling interests contingency, and (2) the partial sale of the wind projects. We will make this change for all periods presented beginning with the 2017 Form 10-K. The table below depicts the changes that will be made:

Member’s Equity

Noncontrolling

Interests

Total

Equity

(In millions)

Membership

Interest

Undistributed

Earnings

Accumulated

Other

Comprehensive

Income (Loss)

Balance, December 31, 2015

$

8,997

2,701

(63

)

1,307

12,942

Net income

—

496

558

Sale of noncontrolling interests

(4

243

239

Adjustment of contingently redeemable noncontrolling interests due to release of contingency

157

Changes in equity of noncontrolling interests

Allocation of tax benefit from member

Contribution from member

170

Distribution to member

(922

Other comprehensive income, net of income taxes

Balance, December 31, 2016

9,261

2,275

(54

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We note you omitted the disclosure required by Item 308(c) of Regulation S-K. Please file an amendment containing the disclosure required by Item 308(c) of Regulation S-K.

Item 308(c) of Regulation S-K requires a registrant to "disclose any change in the registrant's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 that occurred during the registrant's last fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.” During the first quarter of 2017, there were no changes in the Registrants’ internal control

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over financial reporting that occurred that materially affected, or were reasonably likely to materially affect, any of the Registrants’ internal control over financial reporting. Therefore, we do not believe disclosure was required, the omission of disclosure misled users of the financial statements, or that amendment of the March 2017 Form 10-Q is warranted. Nevertheless, to provide further transparency and to be consistent with the practice of some other registrants, in future Form 10-K and Form 10-Q filings, we will explicitly disclose whether or not there have been any changes in internal control over financial reporting as set forth in Item 308(c) of Regulation S-K.

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Presenting full non-GAAP income statements when reconciling non-GAAP measures to the most directly comparable GAAP measures is inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. Please review this guidance when preparing your next earnings release.

We understand and share the SEC’s concerns of placing undo prominence on non-GAAP measures in disclosures, while also balancing the need to provide useful and relevant information to users of the financial statements. To address those concerns, we do not provide the full non-GAAP income statements in the actual Earnings Release document itself.

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Rather, full non-GAAP income statement reconciliations are not presented until page 8 of the Earnings Release Attachments (the equivalent of an appendix to the Earnings Release document), which is after the presentation of the complete GAAP income statements, balance sheets and cash flow statements on pages 1-7.

We believe the level of detail presented in the full income statement reconciliation provides transparency to our disclosures by providing useful information addressing questions we routinely receive from our securities analysts and investors, who seek detailed information as to specific line items to which reconciling adjustments are recorded to assist them in modeling their views of Exelon’s future financial performance. By providing this information in the Earnings Release Attachments, we are able to make such information equally and consistently available to all investors and analysts, consistent with the requirements of Regulation FD. Given the usefulness and relevance of this information, we plan to continue to present a full non-GAAP income statement in the Earnings Release Attachments, but will further emphasize the full GAAP income statement on those pages through other presentation style techniques such as larger font, bolding, or highlighting.

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We reviewed your response to comment 5. We still believe that such presentation is inconsistent with the updated Compliance and Disclosure Interpretations issued on May 17, 2016. In that regard, please confirm to us that you will discontinue the presentation of a full non-GAAP income statement when reconciling non-GAAP measures to the most directly comparable GAAP measures in your future earnings releases.

In acknowledgment of the updated Compliance and Disclosure Interpretations issued last year, we confirm that beginning with our second quarter 2017 earnings release, we will no longer provide a full non-GAAP income statement when reconciling the Adjusted (non-GAAP) Operating Earnings measure for each registrant to the corresponding most directly comparable GAAP Net Income measure.

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Instead, we will disclose the amounts that should be added to or subtracted from each GAAP income statement line item to reconcile to the total Adjusted (non-GAAP) Operating Earnings measure, in a format as set forth in the following example:

EXELON CORPORATION

GAAP Consolidated Statements of Operations and

Adjusted (non-GAAP) Operating Earnings Reconciling Adjustments

(unaudited)

(in millions, except per share data)

Three Months Ended June 30, 2017

Three Months Ended June 30, 2016

GAAP (a)

Non-GAAP Adjustments

Operating revenues

$

7,623

158

(b),(d)

6,910

626

(b),(d),(e)

Operating expenses

Purchased power and fuel

3,086

(48

)

2,454

300

(b),(d),(h)

Operating and maintenance

2,971

(524

(e),(f),(g),(h),(i)

2,505

(172

(e),(g),(h),(i)

Depreciation and amortization

915

(35

(h)

941

(114

Taxes other than income

420

394

Total operating expenses

7,392

6,294

Gain on sales of assets

Operating income

232

647

Other income and (deductions)

Interest expense, net

(436

(g),(j)

(376

Other, net

205

(66

(c),(j)

144

(89

(c),(h)

Total other income and (deductions)

(231

(232

Income before income taxes

415

Income taxes

(72

353

(b),(c),(d),(e),(f),(g),(h),(i),(j)

102

194

(b),(c),(d),(e),(f),(g),(h),(i)

Equity in losses of unconsolidated affiliates

(9

(7

Net income

306

Net income (loss) attributable to noncontrolling interests and preference stock dividends

(16

(20

(k)

(8

Net income attributable to common shareholders

267

Effective tax rate(l)

(7,200.0

)%

24.6

%

Earnings per average common share

Basic

0.09

0.29

Diluted

Average common shares outstanding

934

924

936

926

Effect of adjustments on earnings per average diluted common share recorded in accordance with GAAP:

Mark-to-market impact of economic hedging activities (b)

0.12

0.20

Unrealized gains related to NDT fund investments (c)

(0.05

(0.03

Amortization of commodity contract intangibles (d)

0.01

Merger and integration costs (e)

—

Merger commitments (f)

Long-lived asset impairments (g)

0.02

Plant retirements and divestitures (h)

0.07

0.14

Cost management program (i)

Like-kind exchange tax position (j)

CENG noncontrolling interest (k)

Total adjustments

0.45

0.36

(a)

Results reported in accordance with accounting principles generally accepted in the United States (GAAP).

(b)

Adjustment to exclude the mark-to-market impact of Exelon’s economic hedging activities, net of intercompany eliminations.

(c)

Adjustment to exclude the unrealized gains and losses on NDT fund investments to the extent not offset by contractual accounting as described in the notes to the consolidated financial statements.

(d)

Adjustment to exclude the non-cash amortization of intangible assets, net, primarily related to commodity contracts recorded at fair value related to the Integrys acquisition in 2016, and in 2017, the ConEdison Solutions and FitzPatrick acquisitions.

(e)

Adjustment to exclude certain costs associated with mergers and acquisitions, including, if and when applicable, professional fees, employee-related expenses and integration activities related to the PHI acquisition in 2016, partially offset in 2016 at BGE and PHI by the anticipated recovery of previously incurred PHI acquisition costs, and in 2017, the PHI and FitzPatrick acquisitions.

(f)

Adjustment to exclude costs incurred as part of the settlement orders approving the PHI acquisition.

(g)

Adjustment to exclude charges to earnings related to the impairment of certain wind projects at Generation in 2016, and in 2017, impairments as a result of the ExGen Texas Power, LLC assets held for sale.

Adjustment to exclude accelerated depreciation and amortization expenses, increases to materials and supplies inventory reserves, charges for severance reserves and construction work in progress impairments associated with Generation's previous decision to early retire the Clinton and Quad Cities nuclear facilities in 2016, and Generation's decision to early retire the Three Mile Island nuclear facility in 2017, partially offset in 2016 by a gain associated with Generation’s sale of the New Boston generating site.

(i)

Adjustment to exclude reorganization costs, and in 2016 severance costs, related to a cost management program.

(j)

Adjustment to excluded income tax, penalties and interest expenses in the second quarter of 2017 as a result of the finalization of the IRS tax computation related to Exelon’s like-kind exchange tax position.

Adjustment to eliminate from Generation’s results of the noncontrolling interest related to CENG exclusion items, primarily related to the impact of unrealized gains and losses on NDT fund investments and mark-to-market activity.

(l)

The effective tax rate related to Adjusted (non-GAAP) Operating Earnings is 36.8% and 31.6% for the three months ended June 30, 2017 and June 30, 2016, respectively. The effective tax rate for the three months ended June 30, 2017 is disproportionately impacted due to the decline in pre-tax GAAP earnings and changes in other reconciling items.

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