Severance Costs

[Table of Contents](#i0fa971ac9e834218957059819155291f_10)Combined Notes to Consolidated Financial Statements(Dollars in millions, except per share data unless otherwise noted)  
Note 7 — Early Plant RetirementsARC), accelerated amortization of nuclear fuel, and changes in ARO accretion expense associated with the changes in decommissioning timing and cost assumptions to reflect an earlier retirement date. In the third quarter of 2021, Exelon reversed $81 million of severance benefit costs and $13 million of other one-time charges initially recorded in Operating and maintenance expense in the third and fourth quarters of 2020 associated with the early retirements. In addition, the expected economic useful life for both facilities was updated to 2044 and 2046 for Byron Units 1 and 2, respectively, and to 2029 and 2031 for Dresden Units 2 and 3, respectively, the end of the respective NRC operating license for each unit. Depreciation was therefore adjusted beginning September 15, 2021, to reflect these extended useful life estimates. See Note 10 — Asset Retirement Obligations for additional detail on changes to the nuclear decommissioning ARO balances resulting from the initial decision and subsequent reversal of the decision to early retire Byron and Dresden.In Pennsylvania, the TMI nuclear plant did not clear in the May 2017 PJM capacity auction for the 2020-2021 planning year, the third consecutive year that TMI failed to clear the PJM base residual capacity auction and on May 30, 2017, based on these capacity auction results, prolonged periods of low wholesale power prices, and the absence of federal or state policies, Generation announced that it would permanently cease generation operations at TMI. On September 20, 2019, TMI permanently ceased generation operations. The total impact for the years ended December 31, 2021, 2020, and 2019 in Exelon's Consolidated Statements of Operations and Comprehensive Income resulting from the initial decision and subsequent reversal of the decision to early retire Byron and Dresden, and decision to early retire TMI is summarized in the table below.

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Income statement expense (pre-tax) |  | 2021(a) |  | 2020(a) |  | 2019(b) |
| Depreciation and amortization |  |  |  |  |  |  |
|      Accelerated depreciation(c)  |  | $ | 1,805  |  |  | $ | 895  |  |  | $ | 216  |  |
|      Accelerated nuclear fuel amortization |  | 148  |  |  | 60  |  |  | 13  |  |
| Operating and maintenance |  |  |  |  |  |  |
|      One-time charges |  | (94) |  |  | 255  |  |  | —  |  |
|      Other charges(d) |  | 9  |  |  | 34  |  |  | (53) |  |
|      Contractual offset(e) |  | (451) |  |  | (364) |  |  | —  |  |
| Total |  | $ | 1,417  |  |  | $ | 880  |  |  | $ | 176  |  |
|  |  |  |  |  |  |  |

\_\_\_\_\_\_\_\_\_(a)Reflects expense for Byron and Dresden.(b)Reflects expense for TMI.(c)Includes the accelerated depreciation of plant assets including any ARC.(d)For 2020 and 2019, reflects the net impacts associated with the remeasurement of the ARO. See Note 10 – Asset Retirement Obligations for additional information.(e)Reflects contractual offset for ARO accretion, ARC depreciation, ARO remeasurement, and excludes any changes in earnings in the NDT funds. Decommissioning-related impacts were not offset for the Byron units starting in the second quarter of 2021 due to the inability to recognize a regulatory asset at ComEd. With the September 15, 2021 reversal of the previous decision to retire Byron, Generation resumed contractual offset for Byron as of that date. Based on the regulatory agreement with the ICC, decommissioning-related activities are offset in Exelon's Consolidated Statements of Operations and Comprehensive Income as long as the net cumulative decommissioning-related activities result in a regulatory liability at ComEd. The offset resulted in an equal adjustment to the regulatory liabilities at ComEd. See Note 10 — Asset Retirement Obligations for additional information.  
Other GenerationIn March 2018, Generation notified ISO-NE of its plans to early retire, among other assets, the Mystic Generating Station's units 8 and 9 (Mystic 8 and 9) absent regulatory reforms to properly value reliability and regional fuel security. Thereafter, ISO-NE identified Mystic 8 and 9 as being needed to ensure fuel security for the region and entered into a cost of service agreement with these two units for the period between June 1, 2022 - May 31, 2024. The agreement was approved by the FERC in December 2018.On June 10, 2020, Generation filed a complaint with FERC against ISO-NE stating that ISO-NE failed to follow its tariff with respect to its evaluation of Mystic 8 and 9 for transmission security for the 2024 to 2025 Capacity Commitment Period and that the modifications that ISO-NE made to its unfiled planning procedures to avoid 241  
  
  

