OREANDA-NEWS. Fitch Ratings has taken the following rating actions on Exelon Corp. (EXC) and its subsidiaries:

EXC
--'BBB+' Issuer Default Ratings (IDR) maintained on Rating Watch Negative;

Exelon Generation Co., LLC's (Exgen)
--IDR and senior unsecured debt ratings downgraded to 'BBB' from 'BBB+'; Rating Outlook revised to Stable from Negative;

Baltimore Gas and Electric Co.'s (BGE)
--IDR upgraded to 'BBB+' from 'BBB'; Outlook revised to Stable from Positive;

Commonwealth Edison Co.'s (Comed)
--IDR affirmed at 'BBB'' Outlook revised to Positive from Stable;

PECO Energy Co. (PECO)
--IDR affirmed at 'BBB+'; Outlook Stable.

A full list of the rating actions follows at the end of this release.

The Rating Watch Negative for EXC reflects the increased leverage that results from its pending acquisition of Pepco Holdings, Inc. (PHI, IDR rated 'BBB' by Fitch). The higher leverage reflects the acquisition financing plan and the consolidation of the more levered PHI. The rise in leverage is mitigated in part by an increase in regulated earnings.

The Exgen downgrade reflects Fitch's view that the previous ratings are inconsistent with the inherent cash flow volatility of the commodity sensitive competitive generation business. The ratings also reflect the on-going weakness in forward power and natural gas prices, soft power demand and aggressive competition in the retail supply business. Credit protection measures that are solidly within the investment grade category are also captured in the revised ratings.

The BGE upgrade reflects the improvement in the company's financial profile in recent years, which Fitch Ratings believes is sustainable, although on-going rate support will be required.

The Positive Ratings Outlook for Comed recognizes the uptrend in financial performance in recent years and the regulatory predictability in Illinois due to a formula rate plan (FRP) that provides for annual rate adjustments that reduce regulatory lag. On-going improvement is expected by Fitch in 2015.

KEY RATING DRIVERS FOR EXELON CORP.

Pending Merger: The proposed acquisition increases consolidated leverage compared to EXC's stand-alone financial position. The additional leverage reflects the financing plan that includes a significant debt component and the consolidation of the higher levered PHI. The financing plan for the \$7.2 billion acquisition includes \$3.5 billion of new EXC corporate debt, \$1 billion from Exgen asset sales (completed in 2014), \$1.7 billion of common equity and \$1.0 billion of mandatorily convertible debt (issued in 2014). Under Fitch criteria the convertible debt issued by EXC, in the form of equity units, receives no equity credit. In addition, EXC will assume approximately \$5.0 billion of PHI consolidated debt. The merger is expected to close in 2015 Q2 or Q3.

Utility Earnings Contribution: EXC's ratings benefit from the predictable and growing earnings and cash flow contributions of its three regulated utilities. The utilities accounted for approximately 53% of 2014 adjusted operating income growing to an estimated 60% (excluding the pending PHI acquisition) by 2019. The utilities have sound and/or improving credit profiles, limited commodity price risk and a relatively predictable earnings, balancing the more volatile earnings and cash flow of the commodity sensitive competitive generation business.
Competitive Generation Business: The operating environment for EXC's competitive generation business is expected to remain challenging with sluggish demand and low natural gas and power prices likely to persist for several years. Favorably, the business is well capitalized and the credit profile has stabilized during a low point in the commodity cycle. In addition, management employs a three-year hedging strategy that moderates earnings and cash flow volatility.

Sound Financial Position: Despite the reduced earnings contribution of its competitive generation business, EXC has maintained a solid credit profile. Fitch estimates EXC's adjusted ratio of Debt/EBITDAR and FFO adjusted leverage will average approximately 3.5x and 3.0x, respectively, over the next two years and FFO fixed charge coverage about 6x, all of which supports existing ratings. Proforma for the PHI acquisition, 2015 Debt/EBITDAR, FFO adjusted leverage and FFO fixed charge coverage are estimated to approximate 4.2x, 3.5x and 5x, respectively. The proforma adjustments do not reflect the customer credits related to the proposed merger, which will weaken the credit metrics of PHI and its subsidiaries in the near-term.

KEY RATING DRIVERS FOR EXELON GENERATION COMPANY, LLC

Operating Environment: Fitch expects gas and power prices to remain at or near currently low levels over the next several years, which will continue to pressure credit metrics. However, several proposed market reforms in PJM and in Illinois are constructive and, if enacted, will increase gross margin, strengthen credit quality measures and reduce the risk of nuclear plant closures.

Market Reforms: Market reforms instituted in New England and proposed in PJM, where the majority of Exgen's generating capacity is located should, if enacted, have a material beneficial impact on Exgen. The PJM pay for performance capacity product has the potential to meaningfully enhance EBITDA in the 2020/2021 delivery year and lesser amounts beginning this year.

The performance capacity product, which raises the cap on capacity prices, is intended to reward generators that are capable of sustained operations during peak load periods and extreme weather events. With their base load dispatch profile and high capacity factors, nuclear units are likely beneficiaries of the incentive payments. The proposed capacity plan is not without risk since there are substantial penalties for non-performance.

In addition, the state of Illinois is considering legislation that, if enacted, would support the on-going operation of in-state nuclear units that are at risk of closure. The pending legislation would require electric utilities in Illinois to purchase energy credits from low carbon sources, including nuclear, to match 70% of the electricity used on the delivery system. Utilities would collect a charge from customers for procuring the low carbon power, subject to a cap of 2.015% annually. If the Illinois legislation is not enacted, Exgen is likely to shut several nuclear plants in Illinois.

Also, Exgen entered into a Reliability Services Agreement (RSA) with Rochester Gas and Electric Co. (RGE) that, pending FERC final approval, assures the continued operation of the Ginna nuclear unit through September 2018. Exgen will receive fixed capacity payments of \$17.5 million per month (\$210 million annually) plus 15% of the unit's energy and capacity revenue. Exgen will offer the energy and capacity into the NYISO spot markets.

Competitive Position: Exgen's largely nuclear-fueled generating fleet is positioned low on the dispatch curve and likely to be dispatched under any price scenario. The emission free nuclear portfolio is also well positioned to benefit from any uplift in power prices from higher environmental costs or reduced supply from coal retirements and the proposed market reforms alluded to above.

Financial Position: Exgen's financial position has stabilized in recent years, and remains solidly within the investment grade category. Fitch estimates Exgen's adjusted ratio of Debt/EBITDAR to range between 2.75x and 3.0x over the next two years and FFO adjusted leverage between 2.0x and 2.25x over the same period. FFO fixed charge coverage is expected to range between 7.25x and 6.5x.

Hedging Strategy: To moderate cash flow volatility and commodity price risk, Exgen employs a three-year ratable hedging strategy. The strategy targets a financial hedge range of 90% - 98% in the prompt year, 70% - 90% in year two and 50% - 70% year three.

Strong Nuclear Operator: Exgen has a long record of strong nuclear performance. Over the past three years the nuclear capacity factor averaged approximately 94% and re-fueling outages have averaged about 30 days, in each case setting the industry standard.

KEY RATING DRIVERS FOR COMMONWEALTH EDISON COMPANY

Strong Credit Metrics: Higher rates effective Jan. 1, 2014 and a FRP that allows for annual rate adjustments should allow Commonwealth Edison Co. (Comed) to sustain its currently sound financial position over the next few years. Fitch estimates Debt/EBITDAR and FFO leverage will approximate 3.75 and FFO fixed charge coverage 5x over the next two years, which is strong within the current rating level.

Regulatory Predictability: The FRP implemented in October 2011 provides increased regulatory predictability in Illinois. The FRP, which is filed annually, recognizes forward looking capital additions and includes a true-up mechanism reducing, albeit not eliminating, rate lag. However, due to the formulaic ROE determination, Comed is substantially impacted by changes in long-term treasury rates, which have declined since the last ROE determination. The most recently filed FRP requests a \$50 million rate reduction. The FRP was enacted into law by the Illinois Energy Infrastructure Modernization Act (EIMA).

Constructive Rate Decision: In response to Comed's latest FRP filing, in December 2014, the Illinois Commerce Commission (ICC) approved a \$232 million increase in distribution rates or approximately 86% of the company's rate request. An additional \$23 million is recoverable through other rider mechanisms. Although the legislatively set ROE of 9.25% is below the industry average, Comed should have a reasonable opportunity to earn the allowed ROE.

Commodity Price Exposure: Ratings and credit quality benefit from the absence of commodity price exposure, which limits cash flow volatility and reduces business risk. Comed retains the provider of last resort obligation for customers that do not choose an alternative energy provider, but recovers its energy supply costs from customers through a monthly fuel adjustment mechanism.
Rising Capex: Capex is forecasted to rise to \$6.0 billion over the three-year period 2015 - 2017, a significant increase over the \$4.4 billion invested in the prior three years. The higher outlays are primarily driven by the EIMA, which requires investments in system reliability and smart grid deployment and provides for recovery through the FRP filings. The higher capex also reflects an increase in transmission expenditures, which are subject to credit supportive Federal Energy Regulatory Commission (FERC) regulatory policies.

Like-Kind-Exchange: Comed's exposure to the IRS's disallowance of the tax benefits associated with a like-kind-exchange continues to linger. As of Dec. 31, 2014, Comed's potential tax exposure, excluding penalties, is \$310 million, which although significant should be manageable within the current rating. EXC has indicated that it will hold Comed harmless for any after-tax interest.

KEY RATING DRIVERS FOR PECO ENERGY COMPANY

Strong Credit Profile: Fitch expects PECO's credit measures to remain strong relative to both Fitch's target ratios for the current rating level and the companies' peer group of 'BBB+' distribution utilities. Adjusted debt/EBITDAR is expected to increase to a still strong 3.3x in 2015 and then range between 2.8x and 3.0x over the following two years, reflecting the impact of a pending rate case. FFO adjusted leverage is expected to range between 3.8x and 4.0x over the next three years. The modest downtrend reflects the expiration of bonus depreciation and rising debt, which had been relatively flat over the past few years.

Rate Increase: A requested rate increase filed in March 2015 is expected by Fitch to allow PECO to maintain its strong credit profile in 2016 and beyond. The rate filing seeks a \$190.1 million (4.4%) revenue increase based on a 10.95% return on equity (ROE). A final decision on the rate filing is expected in December 2015. PECO's last rate increase was implemented in December 2010 based on an 11.75% ROE.

Manageable Capital Spending: Forecasted capex of approximately \$1.6 billion over the next three years is relatively unchanged from the prior three-year period. However, unlike the prior period, PECO no longer has a large cash balance to help fund the expenditures and will be more reliant on external funding.
Low business Risk: Ratings and credit quality benefit from the absence of commodity price exposure and the associated cash flow volatility. PECO retains the provider of last resort obligation for customers that do not choose an alternative energy provider, but recovers its' electric and gas supply costs from customers through monthly fuel adjustment mechanisms.

Alternative Regulatory Model: Fitch considers the regulatory legislation enacted in Pennsylvania in February 2012 (HB 1294) to be supportive of credit quality. The law allows the Pennsylvania Public Utility Commission (PUC) to establish a distribution system investment charge (DSIC) to provide timely recovery of capital costs incurred to enhance electric and gas distribution systems. The DSIC will be updated quarterly. The new legislation also allows traditional rate filings to include fully forecasted test years further reducing regulatory lag.

Demand Reduction: Pennsylvania Act 129 (Act 129) requires Pennsylvania utilities to reduce electric consumption with the companies absorbing the associated revenue loss. PECO met the initial consumption reduction targets of 1% by 2011 and 3% by May 31, 2013. Act 129 also requires the installation of smart meter technology and the implementation of time of use rates and real time price plans. Importantly, Act 129 provides a surcharge mechanism to recover the implementation costs (other than lost sales) on a timely basis.

KEY RATING DRIVERS FOR BALTIMORE GAS AND ELECTRIC COMPANY

Credit Metrics: BGE's financial position is strong and supportive of the revised rating. The strong credit profile is largely due to electric and gas base rate increases implemented in February and December 2013. Subsequent electric and gas tariff increases effective December 2014 should allow BG&E to sustain its sound credit profile. Fitch expects Debt/EBITDAR and FFO fixed charge coverage to approximate the 2014 levels of 2.9x and 5.8x, respectively, with FFO adjusted leverage increasing to a still strong range of 3.25x - 3.5x.

Regulatory Recovery Mechanisms: Rate adjustment mechanisms outside of base rate cases tend to stabilize BGE's cash flow. These include decoupling for both residential and commercial gas and electricity sales and purchased gas and purchased power recovery mechanisms. In 2014, Maryland regulators' approved a rider to recover gas infrastructure improvements and has approved two subsequent surcharges. Certain capex is also subject to tracking mechanisms, including energy efficiency and smart grid/automated meter initiatives.

Base Rate Decision: In December 2014, BGE implemented electric and gas rate increases aggregating \$60 million, the third in a 22-month period. Although the tariff increase was only about 33% of the amounts supported by BGE, the higher rates should support BGE's existing financial position. Importantly, the rate case was approved after a settlement agreement, which is highly unusual in Maryland, only five months after filing compared to the more typical seven month review period in fully litigated Maryland rate cases.

Ring-fencing: BGE's funding and Treasury practices result in moderate ring fencing of the utility from its parent Exelon Corp. (EXC) and affiliates. These include maintaining separate books and records and separate credit facilities and commercial paper programs and allocating parent expenses according to a Cost Allocation Manual. Also, BGE does not participate in the corporate money pool and BGE's financings do not contain any provisions that could result in cross defaults between BGE and EXC.

Dividend Restrictions Expired: Dividend restrictions imposed on BGE in 2012 as a condition for approving the merger between BGE's corporate parent EXC and Constellation Energy Group, Inc. expired Dec. 31, 2014, which will adversely affect future cash flow. Based on a mid-point of management's earnings guidance and a 70% payout ratio, 2015 dividends will be roughly \$150 million.
Rating Sensitivities for Exelon Corp.

Positive Rating Action: Positive rating action is not likely at the present rating level given the meaningful earnings and cash flow contribution of the company's competitive generation business. However, ratings could be maintained if post acquisition debt/EBITDAR remains below 3.6x and FFO adjusted leverage below 4.5x.

Negative Rating Action: Ratings could be downgraded if post acquisition debt EBITDAR exceeds 3.6x and FFO adjusted leverage exceeds 4.5x on a sustained basis.

Onerous regulatory concessions or a renewed emphasis on non-regulated investments could also have an adverse effect on ratings.

Ratings could also be downgraded if the ratings of EXC's merchant generation business, Exgen, fall below 'BBB'.

RATING SENSITIVITIES FOR EXELON GENERATION CO., LLC

Positive Rating Action: Positive rating action is not likely given the inherent cash flow volatility in the competitive generation business.

Negative Rating Action: Ratings could be downgraded if debt/ EBITDAR exceed 3.25x and FFO adjusted leverage exceeds 3.5x on a sustained basis.

Ratings could also be downgraded if management were to pursue a more aggressive growth strategy.

RATING SENSITIVITIES FOR COMMONWEALTH EDISON CO.

Positive Rating Action: Reducing debt/EBITDAR below 3.6x on a sustained basis, while maintaining FFO leverage below 4.5x and FFO fixed charge coverage above 4.7x could lead to higher ratings.

Negative Rating Action: While not expected, FFO adjusted leverage above 5.25x and/or and FFO fixed charge coverage below 4.5x on a sustained basis could lead to lower ratings.

A change in the FRP or other regulatory policies that inhibit Comed's ability to recover invested capital or commodity costs on a timely basis could also lead to lower ratings.

RATING SENSITIVITIES FOR PECO ENERGY CO.

Positive Rating Action: Positive rating action is not likely prior a decision in its pending rate filing.

Ratings could be upgraded with a constructive rate decision that
allows PECO to maintain debt/EBITDAR below 3.4x and FFO leverage below 4x on a sustained basis.

Negative Rating Action: A change in the regulatory policies that restrict PECO's ability to recover invested capital or commodity costs on a timely basis could also lead to lower ratings.

RATING SENSITIVITIES BALTIMORE GAS AND ELECTRIC CO.

Positive Rating Action: Reducing debt/EBITDAR below 3.4x on a sustained basis, while maintaining FFO leverage below 4x and FFO fixed charge coverage above 4.8x could lead to higher ratings.

Negative Rating Action: While not expected, FFO adjusted leverage above 4.75x and/or and FFO fixed charge coverage below 4.5x on a sustained basis could lead to lower ratings.

KEY ASSUMPTIONS

Commonwealth Edison Company
Electric load growth of about 0.5%
FRP updated annually

PECO Energy Company
Electric and gas load growth of about .5%
Electric distribution rate case effective Jan. 1, 2016
Targeted equity capital of 53% by 2015

Baltimore Gas and Electric Company
Electric customer growth of about 0.5%; flat growth for gas customers
BGE begins paying dividends in 2015
On-going rate support

Exelon Generation Co., LLC
Henry Hub Natural gas prices (as of Dec. 31, 2014)
Nihub and PJM forward power prices (as of Dec. 31, 2014)

Fitch maintains the Rating Watch Negative on the following:

Exelon Corp.
--IDR 'BBB+';
--Senior unsecured debt 'BBB+';
--Junior subordinated debt 'BBB-'.

Fitch has downgraded the following ratings:

Exelon Generation Co., LLC
--IDR to 'BBB' from 'BBB+';
--Senior unsecured debt to 'BBB' from 'BBB+';

The Rating Outlook is Stable.

Fitch has affirmed the following ratings::

Commonwealth Edison Company
--IDR at 'BBB';
--First mortgage bonds at 'A-';
--Senior unsecured debt at 'BBB+';
--Preferred stock at 'BBB-';
--Short-term IDR at 'F2';
--Commercial paper at 'F2'.

The Rating Outlook is Positive.

ComEd Financing Trust III
--Preferred stock at 'BBB-'.

Fitch has upgraded the following ratings:

Baltimore Gas and Electric Company
--IDR to 'BBB+' from 'BBB;
--First mortgage bonds to 'A' from 'A-';
--Senior unsecured debt to 'A-' from 'BBB+';
--Pollution Control Revenue Bonds to 'A-' from 'BBB+'
--Preferred stock to 'BBB' from 'BBB-';

The Rating Outlook is Stable.

Fitch has affirmed the following ratings:

PECO Energy Co.
--IDR at 'BBB+';
--First mortgage bonds at 'A';
--Senior unsecured debt at 'A-';
--Commercial paper at 'F2';
--Short-term IDR at 'F2'.

PECO Energy Capital Trust III
--Preferred stock at 'BBB'.

PECO Energy Capital Trust IV
--Preferred stock at 'BBB'.

The Rating Outlook is Stable.

Fitch has affirmed the following ratings:

Exelon Corp
--Commercial paper at 'F2';
--Short-term IDR at 'F2'.

Fitch has affirmed the following ratings:

Exelon Generation Co., LLC
--Commercial paper at 'F2';
--Short-term IDR at 'F2'.

Baltimore Gas and Electric Co.

--Short-term IDR at 'F2';
--Commercial paper at 'F2'.