Letters of credit held

[Table of Contents](#i0fa971ac9e834218957059819155291f_10)Combined Notes to Consolidated Financial Statements(Dollars in millions, except per share data unless otherwise noted)  
Note 16 — Derivative Financial Instruments

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| Rating as of December 31, 2021 | TotalExposureBefore CreditCollateral |  | CreditCollateral(a) |  | NetExposure |  | Number ofCounterpartiesGreater than 10%of Net Exposure |  | Net Exposure ofCounterpartiesGreater than 10%of Net Exposure |
| Investment grade | $ | 715  |  |  | $ | 176  |  |  | $ | 539  |  |  | 1  |  |  | $ | 106  |  |
| Non-investment grade | 13  |  |  | —  |  |  | 13  |  |  | —  |  |  | —  |  |
| No external ratings |  |  |  |  |  |  |  |  |  |
| Internally rated — investment grade | 111  |  |  | —  |  |  | 111  |  |  | —  |  |  | —  |  |
| Internally rated — non-investment grade | 226  |  |  | 47  |  |  | 179  |  |  | —  |  |  | —  |  |
| Total | $ | 1,065  |  |  | $ | 223  |  |  | $ | 842  |  |  | 1  |  |  | $ | 106  |  |



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| --- | --- | --- | --- | --- | --- |
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| Net Credit Exposure by Type of Counterparty | As of December 31, 2021 |
| Financial institutions | $ | 32  |  |
| Investor-owned utilities, marketers, power producers | 711  |  |
| Energy cooperatives and municipalities | 62  |  |
| Other | 37  |  |
| Total | $ | 842  |  |

\_\_\_\_\_\_\_\_\_\_(a)As of December 31, 2021, credit collateral held from counterparties where Generation had credit exposure included $163 million of cash and $60 million of letters of credit. The credit collateral does not include non-liquid collateral.Utility Registrants. The Utility Registrants have contracts to procure electric and natural gas supply that provide suppliers with a certain amount of unsecured credit. If the exposure on the supply contract exceeds the amount of unsecured credit, the suppliers may be required to post collateral. The net credit exposure is mitigated primarily by the ability to recover procurement costs through customer rates. As of December 31, 2021, the amount of cash collateral held with external counterparties by ComEd and DPL was $41 million and $43 million, respectively, which is recorded in Other current liabilities in ComEd’s and DPL’s Consolidated Balance Sheets. The amounts for PECO, BGE, Pepco, and ACE as of December 31, 2021 and for the Utility Registrants as of December 31, 2020 are not material. Credit-Risk-Related Contingent Features (All Registrants)Generation. As part of the normal course of business, Generation routinely enters into physically or financially settled contracts for the purchase and sale of electric capacity, electricity, fuels, emissions allowances, and other energy-related products. Certain of Generation’s derivative instruments contain provisions that require Generation to post collateral. Generation also enters 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 Generation’s credit rating from each of the major credit rating agencies. The collateral and credit support requirements vary by contract and by counterparty. These credit-risk related contingent features stipulate that if Generation were to be downgraded or lose its investment grade credit rating (based on its senior unsecured debt rating), it 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, Generation believes an amount of several months of future payments (i.e., 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:280  
  
  

