Exelon EXC

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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