~~Table~~UNITED ofSTATES ~~Contents~~SECURITIES AND EXCHANGE COMMISSION

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

(Mark one)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2012
For the Quarterly Period Ended June 30, 2013
	or
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________

Commission File Number 333-59348

_______________________

MIDWEST GENERATION, LLC



Commission File Number	Exact name of registrants as specified in their charters, addresses of principal executive offices, telephone numbers and states of incorporation	I.R.S. Employer Identification No.
333-68630	EDISON MISSION ENERGY	95-4031807
	3 MacArthur Place, Suite 100 Santa Ana, California 92707 714-513-8000 State of Incorporation: Delaware
333-59348	MIDWEST GENERATION, LLC	33-0868558
	235 Remington Boulevard, Suite A Bolingbrook, Illinois 60440 630-771-7800 State of Incorporation: Delaware

(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of incorporationor organization)	33-0868558(I.R.S. Employer Identification No.)
235 Remington Boulevard, Suite ABolingbrook, Illinois(Address of principal executive offices)	60440(Zip Code)

Registrant's telephone number, including area code: (630) 771-7800

_______________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~YES ý NO o~~

~~Indicate~~Edison byMission ~~check~~Energy ~~mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule~~YES ~~405~~x ~~of Regulation~~NO ~~S-T~~o Midwest ~~(§232.405~~Generation, ofLLC ~~this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).~~ YES ý x NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Edison Mission Energy YES x NO o Midwest Generation, LLC YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Edison Mission Energy Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller reporting company o ~~(Do~~Midwest ~~not~~Generation, ~~check~~LLC ifLarge aaccelerated ~~smaller~~filer o Accelerated filer o Non-accelerated filer x Smaller reporting company) o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~YES o NO ý~~

~~Number~~Edison ofMission ~~units~~Energy ~~outstanding~~YES o ofNO x Midwest ~~the~~Generation, ~~registrant's~~LLC ~~Membership Interests as of November~~YES 1,o ~~2012: 100 units (all units held by an affiliate of the registrant).~~NO x

~~Table~~Number of ~~Contents~~shares outstanding of Edison Mission Energy's Common Stock as of July 30, 2013: 100 shares (all shares held by an affiliate of Edison Mission Energy).

~~Table~~This ofcombined ~~Contents~~Form 10-Q is filed separately by two registrants: Edison Mission Energy and Midwest Generation, LLC. Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrant.

TABLE OF CONTENTS

	GLOSSARY	~~iii~~v
PART I - FINANCIAL INFORMATION		1
	EXPLANATORY NOTE	1
	ITEM 1. FINANCIAL STATEMENTS	1
PART I		3
	CONSOLIDATED STATEMENTS OF OPERATIONS	1
	ITEM 1. FINANCIAL STATEMENTS	3
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)	2
	Edison Mission Energy
	CONSOLIDATED BALANCE SHEETS	3
	CONSOLIDATED STATEMENTS OF OPERATIONS	3
	CONSOLIDATED STATEMENTS OF CASH FLOWS	4
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)	4
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	5
	CONSOLIDATED BALANCE SHEETS	5
	Note 1. Summary of Significant Accounting Policies	5
	CONSOLIDATED STATEMENTS OF CASH FLOWS	6
	Note 2. Fair Value Measurements	6
	Midwest Generation, LLC
	Note 3. Derivative Instruments and Hedging Activities	8
	CONSOLIDATED STATEMENTS OF OPERATIONS	7
	Note 4. Income Taxes	10
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)	8
	Note 5. Compensation and Benefit Plans	11
	CONSOLIDATED BALANCE SHEETS	9
	Note 6. Commitments and Contingencies	11
	CONSOLIDATED STATEMENTS OF CASH FLOWS	10
	Note 7. Environmental Developments	14
	COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	11
	Note 8. Accumulated Other Comprehensive Loss	15
	Note 1. Summary of Significant Accounting Policies	11
	Note 9. Supplemental Cash Flows Information	15
	Note 2. Consolidated Statements of Changes in Equity (EME)	14
	Note 10. Severance Charges	15
	Note 3. Variable Interest Entities (EME)	14
	ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16
	Note 4. Fair Value Measurements	15
	MANAGEMENT'S OVERVIEW	17
	Note 5. Debt and Credit Agreements (EME)	20
	Midwest Generation Liquidity	17
	Note 6. Derivative Instruments and Hedging Activities	22
	EME Liquidity and Restructuring Activities	17
	Note 7. Income Taxes	27
	Midwest Generation's Dependence on EME as a Going Concern	18
	Note 8. Compensation and Benefit Plans	29
	Environmental Compliance Plans and Costs	18
	Note 9. Commitments and Contingencies	30
	Environmental Regulation Developments	18
	Note 10. Environmental Developments	34
	RESULTS OF OPERATIONS	19
	Note 11. Accumulated Other Comprehensive Loss	36
	Summary	19
	Note 12. Supplemental Cash Flows Information	37
	Reconciliation of Non-GAAP Disclosures and Statistical Definitions	19
	Note 13. Discontinued Operations (EME)	38
	Average Realized Energy Price	19
	Note 14. Restructuring Activities	38
	Average Realized Fuel Costs	20
	Note 15. Condensed Combined Debtors' Financial Information (EME)	40
	Statistical Definitions	20
	ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	42
	Seasonality	20
	EDISON MISSION ENERGY OVERVIEW	43
	Operating Income (Loss)	20
	Highlights of Operating Results	45
	Other Income (Expense)	21
	Midwest Generation Environmental Compliance Plans and Costs	47
	Income Taxes	21
	MIDWEST GENERATION, LLC	48
	New Accounting Guidance	21
	Results of Operations	48
	LIQUIDITY AND CAPITAL RESOURCES	22
	Operating Income (Loss)	49
	Available Liquidity	22
	Reconciliation of Non-GAAP Disclosures and Statistical Definitions	50
	Capital Investment Plan	22
	Average Realized Energy Price	50
	Consolidated Cash Flow	22
	Average Realized Fuel Costs	51
	Statistical Definitions	51

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	Other Income (Expense)	51
	Income Taxes	52
	EDISON MISSION ENERGY	53
	Results of Operations	53
	Midwest Generation Plants	53
	Renewable Energy Projects	53
	Interest Income (Expense)	54
	Income Taxes	54
	Results of Discontinued Operations	55
	Seasonality	55
	LIQUIDITY AND CAPITAL RESOURCES	56
	Available Liquidity	56
	Capital Investment Plan	56
	Historical Consolidated Cash Flow (EME)	57
	Cash Flows From Operating Activities	57
	Cash Flows From Financing Activities	58
	Cash Flows From Investing Activities	58
	Historical Consolidated Cash Flow (Midwest Generation)	58
	Cash Flows From Operating Activities	59
	Cash Flows From Financing Activities	59
	Cash Flows From Investing Activities	59
	Margin, Collateral Deposits and Other Credit Support for Energy Contracts	59
	EME's Intercompany Tax-Allocation Agreement	59
	Dividend Restrictions in Major Financings	60
	Contractual Obligations, Commercial Commitments and Contingencies	60
	Contractual Obligations	60
	Commercial Commitments	60
	Contingencies	60
	Off-Balance Sheet Transactions	60
	Environmental Matters and Regulations	60
	MARKET RISK EXPOSURES	62
	Derivative Instruments	62
	Unrealized Gains and Losses	62
	Fair Value Disclosures	62
	Commodity Price Risk	62
	Energy Price Risk	62
	Capacity Price Risk	64
	Coal Price Risk	64
	Basis Risk	64
	Credit Risk	65
	Interest Rate Risk	65
	CRITICAL ACCOUNTING ESTIMATES AND POLICIES	66
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	66

	Credit Ratings	23
	Credit Rating of EMMT	23
	Dividend Restrictions	23
	Powerton-Joliet Lease Payments	23
	Contractual Obligations and Contingencies	23
	Contractual Obligations	23
	Contingencies	23
	Off-Balance Sheet Transactions	24
	Environmental Matters and Regulations	24
	MARKET RISK EXPOSURES	25
	Derivative Instruments	25
	Unrealized Gains and Losses	25
	Fair Value Disclosures	25
	Commodity Price Risk	25
	Energy Price Risk	25
	Capacity Price Risk	27
	Basis Risk	27
	Coal Price Risk	27
	Credit Risk	28
	Interest Rate Risk	28
	CRITICAL ACCOUNTING ESTIMATES AND POLICIES	28
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28
	ITEM 4. CONTROLS AND PROCEDURES	28
	Disclosure Controls and Procedures	28
	Internal Control over Financial Reporting	28
PART II - OTHER INFORMATION		29
	ITEM 1. LEGAL PROCEEDINGS	29
	ITEM 1A. RISK FACTORS	29
	ITEM 6. EXHIBITS	29
	SIGNATURES	30



	ITEM 4. CONTROLS AND PROCEDURES	66
PART II - OTHER INFORMATION		67
	ITEM 1. LEGAL PROCEEDINGS	67
	ITEM 1A. RISK FACTORS	67
	ITEM 4. MINE SAFETY DISCLOSURES	67
	ITEM 6. EXHIBITS	67
	SIGNATURES	68

iii

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GLOSSARY

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.

ACI	activated carbon injection
2010 Tax Relief Act	Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
Adjusted EBITDA	adjusted earnings before interest, taxes, depreciation and amortization
Ambit	American Bituminous Power Partners, L.P. or its waste coal facility
AOCI	accumulated other comprehensive income (loss)
ARO(s)	asset retirement obligation(s)
BART	best available retrofit technology
BACT	best available control technology
Bankruptcy Code	Chapter 11 of the United States Bankruptcy Code
Bankruptcy Court	United States Bankruptcy Court for the Northern District of Illinois, Eastern Division
bcf	billion cubic feet
Big 4 Projects	Kern River, Midway-Sunset, Sycamore and Watson natural gas power projects
Btu	British thermal units
CAA	Clean Air Act
CAIR	Clean Air Interstate Rule
CAMR	Clean Air Mercury Rule
Certificate Holders	certain of the holders of the pass-through certificates of Midwest Generation's lessor debt
Chapter 11 Cases	Initial Debtors' chapter 11 cases and the Homer City Debtors chapter 11 cases, collectively
CO2	carbon dioxide
Commonwealth Edison	Commonwealth Edison Company
CPS	Combined Pollutant Standard
CPUC	California Public Utilities Commission
CSAPR	Cross-State Air Pollution Rule
EIA	Energy Information Administration
Debtor Entities	collectively 19 debtors composed of the Initial Debtors and the Homer City Debtors
EIX	Edison International
EME	Edison Mission Energy
EMMT	Edison Mission Marketing & Trading, Inc.
ERCOT	Electric Reliability Council of Texas
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FPA	Federal Power Act
GAAP	United States generally accepted accounting principles
GECC	General Electric Capital Corporation
GHG	greenhouse gas
GWh	gigawatt-hours
Illinois EPA	Illinois Environmental Protection Agency
Homer City	EME Homer City Generation L.P.
Homer City Debtors	three additional EME subsidiaries that filed during the second quarter 2013
Initial Debtors	EME and 16 of its wholly owned subsidiaries, including Midwest Generation
ISO(s)	independent system operator(s)
kV	kilovolt
Lehman	Lehman Brothers Commodity Services, Inc. and Lehman Brothers Holdings, Inc.
LIBOR	London Interbank Offered Rate
MATS	Mercury and Air Toxics Standards
Midwest Generation	Midwest Generation, LLC
MISO	Midwest Independent Transmission System Operator
MMBtu	million British thermal units
Moody's	Moody's Investors Service, Inc.
MW	megawatts
MWh	megawatt-hours
NAAQS	National Ambient Air Quality Standard(s)
NERC	North American Electric Reliability Corporation
NOX	nitrogen oxide
NSR	New Source Review
PJM	PJM Interconnection, LLC
PRB	Powder River Basin
PSD	Prevention of Significant Deterioration
RPM	Reliability Pricing Model
RTO(s)	regional transmission organization(s)
S&P	Standard & Poor's Ratings Services

~~iii~~ v

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Lehman Brothers	Lehman Brothers Commodity Services, Inc. and Lehman Brothers Holdings, Inc.
LIBOR	London Interbank Offered Rate
LSTC	liabilities subject to compromise
MATS	Mercury and Air Toxics Standards
Midwest Generation	Midwest Generation, LLC
MISO	Midwest Independent Transmission System Operator
MMBtu	million British thermal units
Moody's	Moody's Investors Service, Inc.
MW	megawatts
MWh	megawatt-hours
NAAQS	National Ambient Air Quality Standard(s)
NERC	North American Electric Reliability Corporation
NOX	nitrogen oxide
NSR	New Source Review
NYISO	New York Independent System Operator
OCI	other comprehensive income (loss)
PJM	PJM Interconnection, LLC
Powerton and Joliet Sale Leaseback	a sale leaseback transaction for the Powerton Station and Units 7 and 8 of the Joliet Station with third-party lessors in August 2000
PRB	Powder River Basin
PSD	Prevention of Significant Deterioration
RPM	Reliability Pricing Model
RTO(s)	regional transmission organization(s)
S&P	Standard & Poor's Ratings Services
SCE	Southern California Edison Company
SIP(s)	state implementation plan(s)
SNCR	selective non-catalytic reduction
SO2	sulfur dioxide
Support Agreement	Transaction Support Agreement dated as of December 16, 2012 by and among EME, Edison International, and certain holders of EME's senior unsecured notes
US EPA	United States Environmental Protection Agency
US Treasury Grant(s)	Cash grants, under the American Recovery and Reinvestment Act of 2009
VIE(s)	variable interest entity(ies)

iv vi

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EXPLANATORY NOTE

This quarterly report combines the quarterly reports on Form 10-Q for the three- and six-month periods ended June 30, 2013 of Edison Mission Energy (EME) and Midwest Generation, LLC (Midwest Generation).

EME, an indirect wholly owned subsidiary of Edison International (EIX), is a holding company whose subsidiaries and affiliates are engaged in the business of owning, leasing, operating and selling energy and capacity from independent power production facilities. Midwest Generation, an indirect wholly owned subsidiary of EME, operates and sells energy and capacity at four coal-fired generating stations and two oil-fired generating peakers in Illinois.

As of the date of this filing, EME and 19 of its wholly owned subsidiaries, including Midwest Generation, have filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the Bankruptcy Court). EME and Midwest Generation remain in possession of their property and continue their business operations uninterrupted as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Information on the cases, including each item filed on the docket, is available at www.edisonmissionrestructuring.com. The information set forth on this web site shall not be deemed to be a part of, or incorporated by reference into, EME's and Midwest Generation's quarterly report on Form 10-Q.

The consolidated financial statements of EME reflect the accounts of EME and its subsidiaries, including Midwest Generation, and are labeled debtor-in-possession to reflect EME's status. Midwest Generation's consolidated financial statements include the accounts of Midwest Generation and its subsidiaries and are labeled debtor-in-possession to reflect Midwest Generation's status. All significant intercompany balances and transactions have been eliminated for each reporting entity. The discussion in this quarterly report and in the notes to the consolidated financial statements generally applies to both EME and Midwest Generation unless otherwise specified as indicated parenthetically next to each corresponding disclosure.

This quarterly report also includes separate sections under Part I, Item 4. Controls and Procedures and separate Exhibit 31 and Exhibit 32 certifications for EME and Midwest Generation.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EDISON MISSION ENERGY AND SUBSIDIARIES

(Debtor-in-Possession)

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Operating Revenues	$	315		$	324		$	622		$	667
Operating Expenses
Fuel	141			148			282			270
Plant operations	109			147			207			285
Plant operating leases	19			18			37			37
Depreciation and amortization	71			67			138			135
Loss on disposal and asset retirements	—			1			—			4
Administrative and general	38			43			68			84
Total operating expenses	378			424			732			815
Operating loss	(63		)	(100		)	(110		)	(148		)
Other Income (Expense)
Equity in income from unconsolidated affiliates	4			18			12			17
Dividend income	—			11			—			11
Interest income	1			—			1			—
Interest expense	(22		)	(85		)	(39		)	(170		)
Total other expense	(17		)	(56		)	(26		)	(142		)
Loss from continuing operations before reorganization items and income taxes	(80		)	(156		)	(136		)	(290		)
Reorganization items, net	47			—			75			—
Benefit for income taxes	(25		)	(81		)	(28		)	(157		)
Loss From Continuing Operations	(102		)	(75		)	(183		)	(133		)
Income (Loss) from Operations of Discontinued Subsidiaries, net of tax (Note 13)	18			(29		)	17			(53		)
Net Loss	(84		)	(104		)	(166		)	(186		)
Net Income Attributable to Noncontrolling Interests (Note 3)	(7		)	(5		)	(14		)	(7		)
Net Loss Attributable to Edison Mission Energy Common Shareholder	$	(91	)	$	(109	)	$	(180	)	$	(193	)
Amounts Attributable to Edison Mission Energy Common Shareholder
Loss from continuing operations, net of tax	$	(109	)	$	(80	)	$	(197	)	$	(140	)
Income (loss) from discontinued operations, net of tax	18			(29		)	17			(53		)
Net Loss Attributable to Edison Mission Energy Common Shareholder	$	(91	)	$	(109	)	$	(180	)	$	(193	)

The accompanying notes are an integral part of these consolidated financial statements.

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EDISON MISSION ENERGY AND SUBSIDIARIES

(Debtor-in-Possession)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions, unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Net Loss	$	(84	)	$	(104	)	$	(166	)	$	(186	)
Other comprehensive income (loss), net of tax
Valuation allowance on deferred tax asset	2			—			—			—
Pension and postretirement benefits other than pensions:
Unamortized prior service cost on terminated plan, net of tax	(2		)	—			(2		)	—
Net gain adjustment, net of tax	1			—			—			1
Amortization of net loss and prior service adjustment included in expense, net of tax	1			—			2			1
Unrealized gains (losses) on derivatives qualified as cash flow hedges
Unrealized holding gains (losses) arising during the period, net of income tax expense (benefit) of $13 and $(19) for the three months and $14 and $(2) for the six months ended June 30, 2013 and 2012, respectively	25			(28		)	27			(3		)
Reclassification adjustments included in net loss, net of income tax expense (benefit) of $(2) and $6 for the three months and $(1) and $13 for the six months ended June 30, 2013 and 2012, respectively	4			(9		)	2			(20		)
Other comprehensive income (loss), net of tax	31			(37		)	29			(21		)
Comprehensive Loss	(53		)	(141		)	(137		)	(207		)
Comprehensive Income Attributable to Noncontrolling Interests	(7		)	(5		)	(14		)	(7		)
Comprehensive Loss Attributable to Edison Mission Energy Common Shareholder	$	(60	)	$	(146	)	$	(151	)	$	(214	)

The accompanying notes are an integral part of these consolidated financial statements.

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EDISON MISSION ENERGY AND SUBSIDIARIES

(Debtor-in-Possession)

CONSOLIDATED BALANCE SHEETS

(in millions, unaudited)



	June 30, 2013		December 31, 2012
Assets
Current Assets
Cash and cash equivalents	$	1,056	$	888
Accounts receivable—trade	92		73
Receivables from affiliates	6		8
Inventory	121		175
Derivative assets	41		53
Restricted cash and cash equivalents	14		11
Margin and collateral deposits	89		61
Prepaid expenses and other	48		54
Total current assets	1,467		1,323
Investments in Unconsolidated Affiliates	522		534
Property, Plant and Equipment, less accumulated depreciation of $1,566 and $1,431 at respective dates	4,465		4,516
Other Assets
Deferred financing costs	34		44
Long-term derivative assets	22		37
Restricted deposits	113		102
Rent payments in excess of levelized rent expense under plant operating leases	806		836
Other long-term assets	96		128
Total other assets	1,071		1,147
Total Assets	$	7,525	$	7,520

EDISON MISSION ENERGY AND SUBSIDIARIES

(Debtor-in-Possession)

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share amounts, unaudited)



	June 30, 2013			December 31, 2012
Liabilities and Shareholder's Equity
Current Liabilities
Accounts payable	$	20		$	29
Payables to affiliates	32			34
Accrued liabilities and other	115			67
Interest payable	2			1
Current portion of long-term debt	118			307
Short-term debt	—			382
Total current liabilities	287			820
Liabilities subject to compromise	3,981			3,959
Long-term debt net of current portion	1,404			749
Deferred taxes and tax credits, net (Note 7)	82			81
Deferred revenues	519			533
Long-term derivative liabilities	68			118
Other long-term liabilities	505			528
Total Liabilities	6,846			6,788
Commitments and Contingencies (Notes 5, 6, 9 and 10)
Equity
Common stock, par value $0.01 per share (10,000 shares authorized; 100 shares issued and outstanding at each date)	64			64
Additional paid-in capital	1,104			1,095
Retained deficit	(770		)	(577		)
Accumulated other comprehensive loss	(109		)	(138		)
Total Edison Mission Energy common shareholder's equity	289			444
Noncontrolling Interests	390			288
Total Equity	679			732
Total Liabilities and Equity	$	7,525		$	7,520

The accompanying notes are an integral part of these consolidated financial statements.

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EDISON MISSION ENERGY AND SUBSIDIARIES

(Debtor-in-Possession)

CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions, unaudited)



	Six Months Ended June 30,
	2013			2012
Cash Flows From Operating Activities
Net loss	$	(166	)	$	(186	)
Adjustments to reconcile loss to net cash provided by (used in) operating activities:
Non-cash reorganization items	48			—
Equity in income from unconsolidated affiliates	(12		)	(17		)
Distributions from unconsolidated affiliates	13			6
Mark to market on interest rate swaps	(5		)	—
Depreciation and amortization	151			148
Deferred taxes and tax credits	(15		)	(112		)
Loss on disposal and asset impairments	—			26
Changes in operating assets and liabilities:
Increase in margin and collateral deposits	(28		)	(18		)
(Increase) decrease in receivables	(17		)	3
Decrease (increase) in inventory	54			(2		)
Decrease in prepaid expenses and other	2			3
Increase in restricted cash and cash equivalents	(2		)	(4		)
Decrease (increase) in rent payments in excess of levelized rent expense	30			(38		)
Increase (decrease) in payables, other current liabilities and liabilities subject to compromise	50			(100		)
Decrease (increase) in derivative assets and liabilities, net	22			(15		)
Decrease (increase) in other operating—assets	1			(4		)
Decrease in other operating—liabilities	(41		)	(30		)
Operating cash flows from continuing operations	85			(340		)
Operating cash flows from discontinued operations, net	(2		)	(14		)
Net cash provided by (used in) operating activities	83			(354		)
Cash Flows From Financing Activities
Cash contributions from noncontrolling interests	94			242
Payments on debt	(69		)	(25		)
Borrowings under short-term debt	—			9
Borrowings under long-term debt	149			99
Cash contribution from EIX related to the tax-allocation agreements	6			—
Cash dividends to noncontrolling interests	(6		)	(7		)
Payments to affiliates related to stock-based awards	(13		)	(12		)
Excess tax benefits related to stock-based exercises	2			1
Financing costs	(1		)	(7		)
Net cash provided by financing activities from continuing operations	162			300
Cash Flows From Investing Activities
Capital expenditures	(85		)	(153		)
Proceeds from sale of assets	8			1
Proceeds from return of capital and loan repayments from unconsolidated affiliates	6			4
Proceeds from settlement of insurance claims	2			2
Cash settlement with turbine manufacturer	5			—
Investments in and loans to unconsolidated affiliates	(3		)	—
Increase in restricted deposits and restricted cash and cash equivalents	(12		)	(69		)
Investments in other assets	—			(9		)
Investing cash flows from continuing operations	(79		)	(224		)
Investing cash flows from discontinued operations, net	—			(13		)
Net cash used in investing activities	(79		)	(237		)
Net increase (decrease) in cash and cash equivalents from continuing operations	168			(264		)
Cash and cash equivalents at beginning of period from continuing operations	888			1,221
Cash and cash equivalents at end of period from continuing operations	1,056			957
Net decrease in cash and cash equivalents from discontinued operations	(2		)	(27		)
Cash and cash equivalents at beginning of period from discontinued operations	2			79
Cash and cash equivalents at end of period from discontinued operations	$	—		$	52

The accompanying notes are an integral part of these consolidated financial statements.

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MIDWEST GENERATION, LLC AND SUBSIDIARIES

(Debtor-in-Possession)

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, unaudited)

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	Three Months EndedJune 30,						Six Months EndedJune 30,
	2012			2011			2012			2011
	2013			2012			2013			2012
Operating Revenues from Marketing Affiliate	$	~~253~~203		$	~~366~~213		$	~~699~~382		$	~~997~~446
Operating Expenses
Fuel	~~183~~133			~~157~~143			~~443~~267			~~390~~260
Plant operations	7374			86120			~~302~~141			~~368~~229
Depreciation and amortization	3230			3932			9663			~~118~~64
Loss on disposal and asset retirements	1—			1			5—			124
Administrative and general	36			75			1311			1810
Total operating expenses	~~292~~243			~~290~~301			~~859~~482			~~906~~567
Operating income (loss)	(39		)	76			(160		)	91
Operating loss	(40		)	(88		)	(100		)	(121		)
Other Income (Expense)
Interest and other income	28—			27			83—			8555
Interest expense	(87		)	(8		)	(2513		)	(3017		)
Total other income	20			19			58			55
Total other income (expense)	(7		)	19			(13		)	38
Income (loss) before income taxes	(19		)	95			(102		)	146
Loss before reorganization items and income taxes	(47		)	(69		)	(113		)	(83		)
Provision (benefit) for income taxes	(7		)	38			(39		)	59
Reorganization items, net	26			—			34			—
Net Income (Loss)	$	(12	)	$	57		$	(63	)	$	87
Provision (benefit) for income taxes	1			(27		)	1			(32		)
Net Loss	$	(74	)	$	(42	)	$	(148	)	$	(51	)

The accompanying notes are an integral part of these consolidated financial statements.

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MIDWEST GENERATION, LLC AND SUBSIDIARIES

(Debtor-in-Possession)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions, unaudited)

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	Three Months EndedJune 30,						Six Months EndedJune 30,
	2012			2011			2012			2011
	2013			2012			2013			2012
Net Income (Loss)	$	(12	)	$	57		$	(63	)	$	87
Net Loss	$	(74	)	$	(42	)	$	(148	)	$	(51	)
Other comprehensive income (loss), net of tax
Valuation allowance on deferred tax asset	4			—			—			—
Pension and postretirement benefits other than pensions
Valuation allowance on deferred tax asset	(11		)	—			(11		)	—
Amortization of net loss and prior service adjustment included in expense, net of tax	—			—			1			1
Amortization of net loss and prior service adjustment included in expense, net of tax	1			—			2			1
Unrealized gains (losses) on derivatives qualified as cash flow hedges
Unrealized holding gains (losses) arising during the periods, net of income tax expense (benefit) of $(5) and $2 for the three months and $3 and $(3) for the nine months ended September 30, 2012 and 2011, respectively.	(10		)	3			2			(5		)
Unrealized holding gains (losses) arising during the period, net of income tax expense (benefit) of $2 and $(4) for the three months and $(1) and $8 for the six months ended June 30, 2013 and 2012, respectively	3			(6		)	(2		)	12
Reclassification adjustments included in net income (loss), net of income tax expense (benefit) of $(1) and $1 for the three months and $(13) and $(6) for the nine months ended September 30, 2012 and 2011, respectively.	—			2			(19		)	(10		)
Reclassification adjustments included in net loss, net of income tax expense (benefit) of $(1) and $6 for the three months and $0 and $12 for the six months ended June 30, 2013 and 2012, respectively	3			(9		)	1			(19		)
Other comprehensive income (loss), net of tax	~~(20~~10		)	5(15		)	~~(26~~—		)	(146		)
Comprehensive Income (Loss)	$	(32	)	$	62		$	(89	)	$	73
Comprehensive Loss	$	(64	)	$	(57	)	$	(148	)	$	(57	)

The accompanying notes are an integral part of these consolidated financial statements.

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MIDWEST GENERATION, LLC AND SUBSIDIARIES

(Debtor-in-Possession)

CONSOLIDATED BALANCE SHEETS

(in millions, except unit amounts, unaudited)

	September 30, 2012			December 31, 2011
	June 30,2013			December 31, 2012
Assets
Current Assets
Cash and cash equivalents	$	~~142~~117		$	~~213~~95
Due from affiliates	55			109
Due from affiliates, net (Note 1)	46			40
Inventory	~~161~~104			~~159~~165
Interest receivable from affiliate	27			55
Interest receivable from affiliate, net (Note 1)	—			—
Derivative assets	151			432
Deferred taxes (Note 4)	—			14
Other current assets	22			20
Other current assets	22			17
Total current assets	290			322
Total current assets	422			610
Property, Plant and Equipment, less accumulated depreciation of $1,322 and $1,260 at respective dates	2,034			2,078
Property, plant and equipment, less accumulated depreciation of $1,247 and $1,152 at respective dates	2,110			2,185
Notes receivable from affiliate, net (Note 1)	—			—
Notes receivable from affiliate	1,311			1,323
Other long-term assets	10			28
Long-term derivative assets	1			1
Total Assets	$	2,334		$	2,428
Deferred taxes (Note 4)	—			42
Other long-term assets	28			29
Total Assets	$	3,872		$	4,190
Liabilities and Member's Equity
Current Liabilities
Accounts payable	$	3010		$	3510
Accrued liabilities	4042			4918
Due to affiliates	611			183
Interest payable	712			191
Derivative liabilities	75			23
Current portion of lease financing	126			116
Current portion of lease financings	—			6
Total current liabilities	~~216~~80			~~239~~41
Lease financing, net of current portion	317			439
Liabilities subject to compromise	545			529
Benefit plans and other long-term liabilities	241			243
Lease financings, net of current portion	—			2
Total Liabilities	774			921
Deferred taxes, net (Note 7)	—			—
Commitments and Contingencies (Notes 3, 6 and 7)
Benefit plans and other long-term liabilities	191			190
Total Liabilities	816			762
Commitments and Contingencies (Notes 6, 9 and 10)
Member's Equity
Membership interests, no par value (100 units authorized, issued and outstanding at each date)	—			—
Additional paid-in capital (Note 4)	3,429			3,511
Additional paid-in capital	3,405			3,405
Accumulated deficit	(~~288~~1,837		)	(~~225~~1,689		)
Accumulated other comprehensive loss (Notes 4 and 8)	(43		)	(17		)
Accumulated other comprehensive loss	(50		)	(50		)
Total Member's Equity	31,~~098~~518			31,~~269~~666
Total Liabilities and Member's Equity	$	32,~~872~~334		$	42,~~190~~428

The accompanying notes are an integral part of these consolidated financial statements.

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MIDWEST GENERATION, LLC AND SUBSIDIARIES

(Debtor-in-Possession)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions, unaudited)

	Nine Months EndedSeptember 30,
	Six Months Ended June 30,
	2012			2011
	2013			2012
Cash Flows From Operating Activities
Net (loss) income	$	(63	)	$	87
Net loss	$	(148	)	$	(51	)
Adjustments to reconcile (loss) income to net cash provided by operating activities:
Adjustments to reconcile loss to net cash provided by operating activities:
Depreciation and amortization	96			120
Non-cash reorganization items	28			—
Deferred taxes	(29		)	32
Depreciation and amortization	63			64
Loss on disposal and asset retirements	5			12
Deferred taxes and tax credits	—			(25		)
Decrease in due from affiliates	42			56
Loss on disposal and asset impairments	—			4
Increase in inventory	(2		)	(16		)
Changes in operating assets and liabilities:
Decrease in interest receivable from affiliate	28			29
Decrease in due to/from affiliates, net	2			35
(Increase) decrease in other assets	(5		)	14
Decrease (increase) in inventory	61			(4		)
Decrease in emission allowances	—			2
(Increase) decrease in other current assets	(5		)	9
Decrease in accounts payable and other current liabilities	(9		)	(18		)
Increase (decrease) in accounts payable, other current liabilities and liabilities subject to compromise	22			(2		)
Decrease in interest payable	(12		)	(13		)
Increase (decrease) in interest payable	11			(3		)
Decrease in net derivative assets	5			7
Decrease in derivative assets and liabilities, net	1			1
Increase in other liabilities	1			7
Increase in other operating - liabilities	4			—
Net cash provided by operating activities	5739			~~319~~28
Cash Flows From Financing Activities
Cash distributions to parent	—			(85		)
Repayments of lease financing	(6		)	(58		)
Repayments of lease financing	(116		)	(109		)
Net cash used in financing activities	(6		)	(58		)
Net cash used in financing activities	(116		)	(194		)
Cash Flows From Investing Activities
Capital expenditures	(2412		)	(7816		)
Investment in other assets	—			(18		)
Proceeds from settlement of insurance claims	—			2
Increase in restricted deposits	(2		)	—
Decrease in restricted deposits and restricted cash and cash equivalents	1			2
Proceeds from settlement of insurance claims	2			—
Repayment of loan from affiliate	—			6
Repayment of loan from affiliate	12			9
Net cash used in investing activities	(11		)	(6		)
Net cash used in investing activities	(12		)	(87		)
Net increase (decrease) in cash and cash equivalents	22			(36		)
Net (decrease) increase in cash and cash equivalents	(71		)	38
Cash and cash equivalents at beginning of period	95			213
Cash and cash equivalents at beginning of period	213			295
Cash and cash equivalents at end of period	$	117		$	177
Cash and cash equivalents at end of period	$	142		$	333

The accompanying notes are an integral part of these consolidated financial statements.

410

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EDISON MISSION ENERGY AND SUBSIDIARIES

MIDWEST GENERATION, LLC AND SUBSIDIARIES

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~Note 1. 30Summary of Significant Accounting Policies (EME and Midwest Generation, ~~2012~~except as noted)

~~(Unaudited)~~Chapter 11 Cases

~~Note~~EME and Midwest Generation continue to experience operating losses due to low realized energy and capacity prices, high fuel costs, and low generation at the Midwest Generation plants. These operating losses are a continuation of trends initially experienced in the fourth quarter of 2011. These adverse trends coupled with pending interest payments and the need to retrofit the Midwest Generation plants to comply with governmental regulations were expected to exhaust EME's and Midwest Generation's liquidity. Consequently, on December 117, 2012, EME and 16 of its wholly owned subsidiaries, Camino Energy Company, Chestnut Ridge Energy Company, Edison Mission Energy Fuel Services, LLC, Edison Mission Fuel Resources, Inc., ~~Summary~~Edison Mission Fuel Transportation, Inc., Edison Mission Holdings Co., Edison Mission Midwest Holdings Co., Midwest Finance Corp., Midwest Generation EME, LLC, Midwest Generation, Midwest Generation Procurement Services, LLC, Midwest Peaker Holdings, Inc., Mission Energy Westside, Inc., San Joaquin Energy Company, Southern Sierra Energy Company, and Western Sierra Energy Company (the Initial Debtors) filed voluntary petitions for relief under Chapter 11 of ~~Significant~~the ~~Accounting~~Bankruptcy ~~Policies~~Code. On May 2, 2013, 3 additional EME subsidiaries, EME Homer City Generation L.P. (Homer City), Homer City Property Holdings Inc., and Edison Mission Finance Company (collectively, the Homer City Debtors) filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code. The Initial Debtors' chapter 11 cases and the Homer City Debtors' chapter 11 cases (collectively, the Chapter 11 Cases) are being jointly administered under case No. 12-49219 (JPC). The Initial Debtors and the Homer City Debtors are collectively referred to as the Debtor Entities.

~~Liquidity~~The Debtor Entities remain in possession of their property and ~~Capital~~continue ~~Needs~~their business operations uninterrupted as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Other than the Debtor Entities, none of EME's other direct or indirect subsidiaries is a debtor in the Chapter 11 Cases. The filing of the Chapter 11 Cases automatically stayed most actions against the Debtor Entities, including actions to enforce the payment of EME's $3.7 billion of unsecured senior notes and Midwest Generation's obligations related to leases of the Powerton Station and Units 7 and 8 of the Joliet Station (the Powerton and Joliet Sale Leaseback). Absent an order from the Bankruptcy Court, substantially all of the Debtor Entities' pre-petition liabilities are subject to settlement under a reorganization plan.

AtThe ~~September 30,~~Bankruptcy ~~2012,~~Court ~~Midwest~~established ~~Generation,~~June ~~LLC~~17, ~~(Midwest~~2013 ~~Generation)~~as ~~had~~the ~~cash~~bar ~~and~~date ~~cash~~for ~~equivalents~~filing proofs of ~~$142 million.~~claim ~~Midwest~~against ~~Generation~~the ~~continues~~Initial toDebtors ~~experience~~estates. ~~operating~~The ~~losses~~bar ~~due~~date tofor ~~low~~the ~~realized~~Homer ~~energy~~City ~~and~~Debtors ~~capacity~~has ~~prices,~~not ~~high~~yet ~~fuel~~been ~~costs and low generation at the Midwest Generation plants~~established. ~~Forward~~The ~~market~~differences ~~prices~~between ~~indicate~~amounts ~~that~~recorded ~~these~~by ~~trends~~the ~~are~~Debtor ~~expected~~Entities toand ~~continue~~the ~~for~~proofs ~~a number~~ of ~~years.~~claims Asfiled aby ~~result,~~creditors ~~Midwest~~are ~~Generation~~investigated ~~expects that it will incur an operating cash flow deficit~~ and ~~operating~~resolved ~~losses~~through inthe ~~2012~~claims ~~and~~resolution ~~subsequent years~~process. InThis ~~order~~process tomay ~~retrofit~~take ~~its~~considerable ~~coal-fired~~time ~~plants, Midwest Generation will need~~ to ~~receive~~complete. ~~additional~~The ~~contributions~~resolution orof ~~repayment~~such ofclaims ~~notes~~could ~~receivable~~result ~~from~~in ~~Edison~~material ~~Mission~~adjustments ~~Energy~~to (EME) or ~~other sources.~~ Midwest Generation's ~~plans~~financial tostatements. ~~fund~~For ~~operating~~further ~~cash flow deficits through a combination of cash on hand~~discussion, ~~management~~see ofNote 14—Restructuring ~~fuel inventories, deferral of operations and maintenance expenses, receipt of interest and principal repayment on notes receivable from EME, and equity contributions from EME~~Activities—Claims. ~~EME is under no obligation to make such contributions and may be unable to do so.~~

The filing of the Chapter 11 Cases constitutes an event of default under the Powerton and Joliet Sale Leaseback and under instruments governing the Senior Lease Obligation Bonds issued to finance these leases. EME, Midwest Generation, the owner-lessors, and certain of the holders of the pass-through certificates of Midwest Generation's ~~Dependence~~lessor ondebt (the Certificate Holders) have been engaged in ongoing discussions regarding the ultimate disposition of the leases. In June 2013, EME asand Midwest Generation agreed, among other things, to make monthly rental payments of $3.75 million beginning in July 2013 and to pay certain professional fees for the owner-lessors and Certificate Holders in exchange for an extension of the deadline to assume or reject the Powerton and Joliet leases and the agreement of the Certificate Holders to forbear and to direct the lease indenture trustee and pass-through trustee to forbear from seeking payment of any administrative claim for rent under the Powerton and Joliet leases (except the monthly partial rental payments of $3.75 million under the agreement) before the earlier of the effective date of a ~~Going~~chapter 11 ~~Concern~~plan for Midwest Generation or a sale of substantially all of the assets of Midwest Generation. The parties filed a motion detailing the terms of this agreement and the Bankruptcy Court approved the extension of the statutory deadline by which the Debtor Entities must assume or reject the Powerton and Joliet leases until September 30, 2013.

~~Midwest~~The Generation is largely dependent on EME to fund cash flow deficits and environmental retrofits. As indicated above, EME has no obligation to make capital contributions to Midwest Generation and may be unable to do so. Furthermore, Midwest Generation had $1.323Chapter ~~billion~~11 ofCases ~~notes~~could ~~receivable~~also ~~from~~potentially ~~EME~~give atrise ~~September 30, 2012 with payments used~~ to ~~meet~~counterparty ~~its~~rights ~~rent obligations under the Powerton~~ and ~~Joliet~~remedies ~~sale-leaseback agreements. If EME is unable to make payments on its notes, Midwest Generation may in turn be unable to make rent payments~~ under ~~the~~other ~~Powerton-Joliet leases~~documents. ~~Failure~~For tofurther ~~pay rent would be an event of default under the Powerton-Joliet leases that could result in termination of the leases~~discussion, ~~loss~~see ofNote 5—Debt ~~control over the use of the Powerton~~ and ~~Joliet~~Credit ~~Stations~~Agreements and a claim for termination value under the lease agreements. Also, if it became probable that a loss would be incurred on the notes receivable, Midwest Generation would record a material impairment charge. Accordingly, if Midwest Generation is unable to obtain financial support from EME or other sources, Midwest Generation may need to file for protection under ChapterNote 119—Commitments ofand ~~the~~Contingencies—Lease ~~U.S.~~Commitments—Powerton ~~Bankruptcy~~and ~~Code. A bankruptcy of either EME or Midwest Generation would also be an event of default under the Powerton-~~Joliet ~~leases.~~Sale Leaseback.

The accompanying consolidated financial statements have been prepared assuming that EME and Midwest Generation will continue as a going ~~concern~~concerns. Financial statements prepared on this basis assume the realization of assets and the satisfaction of liabilities in the normal course of business for the 12-month period following the date of these financial statements. There is no assurance that Midwest Generation will be able to continue as a going concern.

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liabilities in the normal course of business for the 12-month period following the date of the financial statements. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary if EME and Midwest Generation were unable to continue as going concerns. EME and Midwest Generation are currently developing a plan for their restructuring, but there is no assurance such a plan will be successfully implemented. EME's and Midwest Generation's ability to continue as going concerns is dependent on many factors, including the successful development of a confirmed plan of reorganization and an emergence from bankruptcy. Uncertainty as to the outcome of these factors raises substantial doubt about EME's and Midwest Generation's ability to continue as going concerns.

Basis of Presentation

There are no material updates to EME's and Midwest Generation's significant accounting policies ~~were~~since ~~described~~the infiling ~~"Note 1—Summary~~ of ~~Significant~~EME's ~~Accounting~~and ~~Policies" on page 44 of~~ Midwest Generation's combined annual report on Form 10-K for the year ended December 31, ~~2011. Midwest Generation follows the same accounting policies for interim reporting purposes~~2012, with the exception of new accounting principles adopted as ~~of January 1, 2012, as~~ discussed below in "—New Accounting Guidance." This quarterly report should be read in conjunction with ~~such~~the financial statements and notes included in EME's and Midwest Generation's combined annual report on Form 10-K for the year ended December 31, 2012.

In the opinion of management, all adjustments, consisting of recurring accruals, have been made that are necessary to fairly state the consolidated financial position and results of operations and cash flows in accordance with accounting principles generally accepted in the United States of America (GAAP) for the periods covered by this quarterly report on Form 10-Q. The results of operations for the three- and ~~nine~~six-month periods ended ~~September~~June 30, ~~2012~~2013 are not necessarily indicative of the operating results for the full year. Except as indicated, amounts reflected in the notes to the consolidated financial statements relate to continuing operations of EME and Midwest Generation. Certain prior period amounts have been reclassified to conform to the current year financial statement presentation pertaining to discontinued operations.

The December 31, 2011 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

Cash Equivalents

Cash equivalents included money market funds totaling $~~125~~856 million and $~~195~~615 million for EME and $99 million and $75 million for Midwest Generation at ~~September~~June 30, ~~2012~~2013 and December 31, ~~2011~~2012, respectively. The carrying value of cash equivalents equals the fair value as all investments have original maturities of less than three months.

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Related Party

Interest income from affiliates, included in interest and other income on Midwest Generation's consolidated statements of operations, was $28 million and $27 million during the three months ended September 30, 2012 and 2011, respectively, and $83 million during both the nine months ended September 30, 2012 and 2011.

Inventory

Inventory ~~is stated at the lower of weighted-average cost or market. Inventory is recorded at actual cost when purchased and then expensed at weighted-average cost as used. Inventory~~ consisted of the following:

(in millions)	September 30, 2012		December 31, 2011
	EME				Midwest Generation
Coal, fuel oil and other raw materials	$	116	$	117
(in millions)	June 30, 2013		December 31, 2012		June 30, 2013		December 31, 2012
Spare parts, materials and supplies	45		42
Coal, fuel oil and other raw materials	$	62	$	123	$	59	$	119
Total inventory	$	161	$	159
Spare parts, materials and supplies	59		52		45		46
Total inventory	$	121	$	175	$	104	$	165

Notes Receivable from EME (Midwest Generation only)

Notes receivable from EME on Midwest Generation's consolidated balance sheets consisted of the following:



	June 30, 2013							December 31, 2012
(in millions)	Carrying Value		Valuation Allowance			Net		Carrying Value		Valuation Allowance			Net
Current portion of notes receivable from affiliate	$	19	$	(19	)	$	—	$	12	$	(12	)	$	—
Interest receivable from affiliate	55		(55		)	—		55		(55		)	—
Notes receivable from affiliate	1,304		(1,304		)	—		1,311		(1,311		)	—
Total	$	1,378	$	(1,378	)	$	—	$	1,378	$	(1,378	)	$	—

As a result of the Chapter 11 Cases, EME did not make the scheduled principal and interest payment of $61 million due to Midwest Generation on January 2, 2013 and Midwest Generation recorded a full valuation allowance against its intercompany loan with EME during the fourth quarter of 2012. At December 31, 2012, Midwest Generation ceased accruing

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interest income associated with the intercompany loan as future payments, if any, made by EME under the loan will be dependent upon the overall resolution of the Chapter 11 Cases. Interest income from affiliates, included in interest and other income on Midwest Generation's consolidated statements of operations, was none and $27 million during the three months ended June 30, 2013 and 2012, respectively, and none and $55 million during the six months ended June 30, 2013 and 2012, respectively.

New Accounting Guidance

Accounting Guidance Adopted in ~~2012~~2013

Fair Value Measurement

In May 2011, the Financial Accounting Standards Board (FASB) issued an accounting standards update modifying the fair value measurement and disclosure guidance. This guidance prohibits grouping of financial instruments for purposes of fair value measurement and requires the value be based on the individual security. This amendment also results in new disclosures primarily related to Level 3 measurements including quantitative disclosure about unobservable inputs and assumptions, a description of the valuation processes and a narrative description of the sensitivity of the fair value to changes in unobservable inputs. Midwest Generation adopted this guidance effective January 1, 2012. For further information, see Note 2—Fair Value Measurements.

Presentation of Comprehensive Income

In June 2011 and December 2011, the FASB issued accounting standards updates on the presentation of comprehensive income. An entity can elect to present items of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate but consecutive statements. Midwest Generation adopted this guidance effective January 1, 2012 and elected to present two separate but consecutive statements. The adoption of these accounting standards updates did not change the items that constitute net income and other comprehensive income.

Accounting Guidance Not Yet Adopted

Offsetting Assets and Liabilities

In December 2011 and December 2012, the Financial Accounting Standards Board (FASB) issued an accounting standards ~~update~~updates modifying the disclosure requirements about the nature of an entity's rights of offsetting assets and liabilities in the ~~statement~~consolidated ofbalance ~~financial~~sheet ~~position~~ under master netting agreements and related arrangements associated with financial and derivative instruments. The guidance requires increased disclosure of the gross and net recognized assets and liabilities, collateral positions, and narrative descriptions of setoff rights. EME and Midwest Generation ~~will~~adopted ~~adopt~~ this guidance effective January 1, 2013.

~~Note 2.~~Presentation ~~Fair~~of ~~Value~~Items ~~Measurements~~Reclassified out of Accumulated Other Comprehensive Income

~~Recurring~~In ~~Fair~~February ~~Value~~2013, ~~Measurements~~the FASB issued an accounting standards update which requires disclosure related to items reclassified out of accumulated other comprehensive income (AOCI). The guidance requires entities to present separately, for each component of other comprehensive income (OCI), current period reclassifications and the remainder of the current-period OCI. In addition, for certain current period reclassifications, an entity is required to disclose the effect of the item reclassified out of AOCI on the respective line item of net income. EME adopted this guidance effective January 1, 2013.

~~Fair~~Accounting ~~value~~Guidance isNot ~~defined~~Yet as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an "exit price"). Fair value of an asset or liability considers assumptions that market participants would use in pricing the asset or liability, including assumptions about nonperformance risk, which was not material as of September 30, 2012 and December 31, 2011.Adopted

~~Assets~~Joint and ~~liabilities~~Several are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).Liabilities

6In February 2013, the FASB issued an accounting standard update which modifies the requirements for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. The guidance requires companies to measure these obligations as the sum of the amount the company has agreed with co-obligors to pay and any additional amount it expects to pay on behalf of one or more co-obligors. This guidance is effective for fiscal years beginning after December 31, 2013. EME and Midwest Generation do not expect this guidance to have a material impact on results of operations.

Presentation of Unrecognized Tax Benefits

In July 2013, the FASB issued an accounting standard update which clarifies that a liability for an unrecognized tax benefit should be presented as a reduction of a deferred tax asset when settlement of the liability with the taxing authority results in the reduction of a net operating loss or tax credit carryforward. The requirement to record a non-cash settlement in a net manner does not affect EME and Midwest Generation's analysis of the realization of deferred tax assets. This guidance is effective for fiscal years beginning after December 31, 2013. EME and Midwest Generation do not expect this guidance to have a material impact on results of operations.

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~~The~~Note 2. ~~following~~Consolidated ~~table~~Statements ~~sets~~of ~~forth~~Changes ~~assets~~in ~~and~~Equity ~~liabilities~~(EME ~~that were accounted for at fair value by level within the fair value hierarchy:~~ only)

	September 30, 2012
(in millions)	Level 1		Level 2		Level 3		Netting1			Total
Assets at Fair Value
Money market funds2	$	125	$	—	$	—	$	—		$	125
Derivative contracts
Electricity	$	—	$	14	$	—	$	2		$	16
Fuel oil	2		—		—		(2		)	—
Total derivative contracts	$	2	$	14	$	—	$	—		$	16
Total assets	$	127	$	14	$	—	$	—		$	141
Liabilities at Fair Value
Derivative contracts
Electricity	$	—	$	7	$	—	$	—		$	7
Total liabilities	$	—	$	7	$	—	$	—		$	7
	December 31, 2011
(in millions)	Level 1		Level 2		Level 3		Netting1			Total
Assets at Fair Value
Money market funds2	$	195	$	—	$	—	$	—		$	195
Derivative contracts
Electricity	$	—	$	40	$	—	$	4		$	44
Fuel oil	4		—		—		(4		)	—
Total derivative contracts	$	4	$	40	$	—	$	—		$	44
Total assets	$	199	$	40	$	—	$	—		$	239
Liabilities at Fair Value
Derivative contracts
Electricity	$	—	$	2	$	—	$	—		$	2
Total liabilities	$	—	$	2	$	—	$	—		$	2

EME's changes in equity for the six months ended June 30, 2013 consisted of the following:

1 Represents the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.



	Edison Mission Energy Shareholder's Equity
(in millions)	Common Stock		Additional Paid-in Capital		Retained Deficit			AOCI			Non- controlling Interests			Total Equity
Balance at December 31, 2012	$	64	$	1,095	$	(577	)	$	(138	)	$	288		$	732
Net income (loss)	—		—		(180		)	—			14			(166		)
OCI, net of tax	—		—		—			29			—			29
Payments to EIX for stock purchases related to stock-based compensation	—		—		(13		)	—			—			(13		)
Cash contribution from EIX¹	—		6		—			—			—			6
Excess tax benefits related to stock option exercises	—		2		—			—			—			2
Other stock transactions, net	—		1		—			—			—			1
Contributions from noncontrolling interests²	—		—		—			—			94			94
Distributions to noncontrolling interests	—		—		—			—			(6		)	(6		)
Balance at June 30, 2013	$	64	$	1,104	$	(770	)	$	(109	)	$	390		$	679

21 ~~Money~~During ~~market~~the ~~funds~~first ~~are~~quarter ~~included~~of in2013, ~~cash~~EME ~~and~~received a cash ~~equivalents~~contribution onfrom ~~Midwest~~EIX ~~Generation's~~related ~~consolidated~~to ~~balance~~the ~~sheets~~tax-allocation agreements. For further information, see Note 7—Income Taxes—EME—Effective Tax Rate.

~~The~~2 ~~fair~~Funds ~~value~~contributed ofby ~~transfers~~third-party ininvestors ~~and~~to ~~out~~Capistrano ofWind ~~each level is determined at the end of each reporting period~~Partners. ~~There~~For ~~were~~further noinformation, ~~transfers~~see ~~between~~Note ~~Levels 1~~3—Variable ~~and~~Interest 2Entities—Projects ~~during~~or ~~the~~Entities ~~three~~that ~~and~~are ~~nine~~Consolidated—Capistrano ~~months~~Wind ~~ended September 30, 2012 and 2011~~Partners.

~~Valuation~~EME's ~~Techniques~~changes ~~used~~in toequity ~~Determine~~for ~~Fair~~the ~~Value~~six months ended June 30, 2012 consisted of the following:



	Edison Mission Energy Shareholder's Equity
(in millions)	Common Stock		Additional Paid-in Capital			Retained Earnings			AOCI			Non- controlling Interests			Total Equity
Balance at December 31, 2011	$	64	$	1,327		$	365		$	(94	)	$	2		$	1,664
Net income (loss)	—		—			(193		)	—			7			(186		)
OCI, net of tax	—		—			—			(21		)	—			(21		)
Payments to EIX for stock purchases related to stock-based compensation	—		—			(12		)	—			—			(12		)
Excess tax benefits related to stock option exercises	—		1			—			—			—			1
Other stock transactions, net	—		2			—			—			—			2
Contributions from noncontrolling interests¹	—		—			—			—			242			242
Distributions to noncontrolling interests	—		—			—			—			(7		)	(7		)
Transfers of assets to Capistrano Wind Partners²	—		(21		)	—			—			—			(21		)
Balance at June 30, 2012	$	64	$	1,309		$	160		$	(115	)	$	244		$	1,662


¹	Funds contributed by third-party investors to Capistrano Wind Partners. For further information, see Note 3—Variable Interest Entities—Projects or Entities that are Consolidated—Capistrano Wind Partners.


²	Additional paid in capital was reduced by $21 million due to a new tax basis in the assets transferred to Capistrano Wind Partners.

Note 3. Variable Interest Entities (EME only)

Projects or Entities that are Consolidated

At June 30, 2013 and December 31, 2012, EME consolidated 16 and 15 projects, respectively, that have noncontrolling interests held by others. These projects have a total generating capacity of 958 megawatts (MW) and 878 MW, respectively. Projects consolidated at June 30, 2013 increased from December 31, 2012 due to the sale of Edison Mission Wind Inc.'s (Edison Mission Wind) indirect equity interest in the Broken Bow I wind project (80 MW in Nebraska) to Capistrano Wind Partners for $112 million. Edison Mission Wind is a wholly owned subsidiary of EME. Outside investors provided

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$94 million of the funding. In determining that EME was the primary beneficiary of the projects that are consolidated, key factors considered were EME's ability to direct commercial and operating activities and EME's obligation to absorb losses of the variable interest entities.

EME's summarized financial information for consolidated projects consisted of the following:



(in millions)	June 30, 2013		December 31, 2012
Current assets	$	91	$	74
Net property, plant and equipment	1,225		1,117
Other long-term assets	99		90
Total assets	$	1,415	$	1,281
Current liabilities	$	38	$	50
Long-term debt net of current portion	229		186
Deferred revenues	154		156
Long-term derivative liabilities	15		23
Other long-term liabilities	46		40
Total liabilities	$	482	$	455
Noncontrolling interests	$	390	$	288

Assets serving as collateral for the debt obligations had a carrying value of $636 million and $497 million at June 30, 2013 and December 31, 2012, respectively, and primarily consist of property, plant and equipment. The debt obligations are nonrecourse to EME. For further discussion, see Note 5—Debt and Credit Agreements.

Capistrano Wind Partners

In addition to the Broken Bow I transaction discussed above, in February 2012, Edison Mission Wind sold its indirect equity interests in the Cedro Hill wind project (150 MW in Texas), the Mountain Wind Power I wind project (61 MW in Wyoming), and the Mountain Wind Power II wind project (80 MW in Wyoming) to Capistrano Wind Partners for $346 million. Outside investors provided $238 million of the funding and Mission Energy Holding Company (MEHC) made a $4 million preferred investment. In December 2012, Edison Mission Wind sold its indirect equity interest in the Crofton Bluffs wind project (40 MW in Nebraska) to Capistrano Wind Partners for $58 million. Outside investors provided $46 million of the funding.

Through their ownership of Capistrano Wind Holdings, an indirect subsidiary of EME, Edison Mission Wind and EME's parent company, MEHC, own 100% of the Class A equity interests in Capistrano Wind Partners, and the Class B preferred equity interests are held by outside investors. Under the terms of the formation documents, preferred equity interests receive 100% of the cash available for distribution up to a scheduled amount to target a certain return and thereafter cash distributions are shared. Cash available for distribution includes 90% of the tax benefits realized by MEHC and contributed to Capistrano Wind Partners.

Edison Mission Wind retains indirect beneficial ownership of the common equity in the projects, net of MEHC's preferred investment, and retains responsibilities for managing the operations of Capistrano Wind Holdings and its projects. Accordingly, EME will continue to consolidate these projects. The $378 million contributed by the third-party investors and the $4 million preferred investment made by MEHC are reflected in noncontrolling interests on EME's consolidated balance sheet at June 30, 2013. The transactions between Edison Mission Wind and Capistrano Wind Partners were accounted for as a transfer among entities under common control and, therefore, resulted in no change in the book basis of the transferred assets. However, the transaction did trigger a taxable gain and new tax basis in the assets with a corresponding adjustment to deferred taxes and a reduction to equity.

Note 4. Fair Value Measurements (EME, Midwest Generation)

Recurring Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an "exit price"). Fair value of an asset or liability considers assumptions that market participants would use in pricing the asset or liability, including assumptions about

nonperformance risk, which was not material as of June 30, 2013 and December 31, 2012 for both EME and Midwest Generation.

Valuation Techniques Used to Determine Fair Value

Assets and liabilities are categorized into a three-level fair value hierarchy based on valuation inputs used to determine fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The fair value of transfers in and out of each level is determined at the end of each reporting period.

Level 1

The fair value of Level 1 assets and liabilities is determined using unadjusted quoted prices in active markets that are available at the measurement date for identical assets and liabilities. This level includes exchange-traded derivatives and money market funds.

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Level 2

The fair value of Level 2 assets and liabilities is determined using the income approach by obtaining quoted prices for similar assets and liabilities in active markets and inputs that are observable, either directly or indirectly, for substantially the full term of the instrument. This level includes over-the-counter derivatives and interest rate swaps.

Over-the-counter derivative contracts are valued using standard pricing models to determine the net present value of estimated future cash flows. Inputs to the pricing models include forward published or posted clearing prices from exchanges (New York Mercantile Exchange and Intercontinental Exchange) for similar instruments and discount rates. A primary price source that best represents trade activity for each market is used to develop observable forward market prices in determining the fair value of these positions. Broker quotes, prices from exchanges, or comparison to executed trades are used to validate and corroborate the primary price source. These price quotations reflect mid-market prices (average of bid and ask) and are obtained from sources believed to provide the most liquid market for the commodity.

Level 3

The fair value of Level 3 assets and liabilities is determined using the income approach through various models and techniques that require significant unobservable inputs. This level includes over-the-counter options and derivative contracts that trade infrequently, such as congestion revenue rights and long-term power agreements.

Assumptions are made in order to value derivative contracts in which observable inputs are not available. Changes in fair value are based on changes to forward market prices, including extrapolation of short-term observable inputs into forecasted prices for illiquid forward periods. In circumstances where fair value cannot be verified with observable market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. Modeling methodologies, inputs, and techniques are reviewed and assessed as markets continue to develop and more pricing information becomes available. ~~and~~The ~~the~~ fair value is adjusted when it is concluded that a change in inputs or techniques would result in a new valuation that better reflects the fair value of those derivative contracts.

~~Fair Value of Note Receivable from Affiliate~~16

The carrying amount of Midwest Generation's note receivable from affiliate was $1.323 billion at September 30, 2012 and $1.334 billion at December 31, 2011. It is not practicable to estimate the fair value of this financial instrument due to the indemnities and guarantees provided by EME ~~under the provisions of the sale-leaseback agreements for the Powerton and Joliet Stations.~~

~~Note 3.~~The ~~Derivative~~following ~~Instruments~~table sets forth EME's assets and ~~Hedging~~liabilities ~~Activities~~that were accounted for at fair value by level within the fair value hierarchy:

Midwest Generation uses derivative instruments to reduce its exposure to market risks that arise from price fluctuations of electricity, capacity, fuel and transmission rights. The derivative financial instruments vary in duration, ranging from a few days to several years, depending upon the instrument. To the extent that Midwest Generation does not use derivative instruments to hedge these market risks, the unhedged portions will be subject to the risks and benefits of spot market price movements.



	June 30, 2013
(in millions)	Level 1		Level 2		Level 3		Netting and Collateral¹			Total
Assets at Fair Value
Money market funds²	$	856	$	—	$	—	$	—		$	856
Derivative contracts
Electricity	—		41		32		(10		)	63
Natural gas	1		—		—		(1		)	—
Total assets	$	857	$	41	$	32	$	(11	)	$	919
Liabilities at Fair Value
Derivative contracts
Electricity	$	—	$	5	$	6	$	(11	)	$	—
Interest rate	—		68		—		—			68
Total liabilities	$	—	$	73	$	6	$	(11	)	$	68

Risk management positions may be designated as cash flow hedges or economic hedges, which are derivatives that are not designated as cash flow hedges. Economic hedges are accounted for at fair value on Midwest Generation's consolidated balance sheets as derivative assets or liabilities with offsetting changes recorded on the consolidated statements of operations. For derivative instruments that qualify for hedge accounting treatment, the fair value is recognized on Midwest Generation's consolidated balance sheets as derivative assets or liabilities with offsetting changes in fair value, to the extent effective, recognized in accumulated other comprehensive loss until reclassified into earnings when the related forecasted transaction occurs. The portion of a cash flow hedge that does not offset the change in the fair value of the transaction being hedged, which is commonly referred to as the ineffective portion, is immediately recognized in earnings. The results of derivative activities are recorded in cash flows from operating activities on the consolidated statements of cash flows.



	December 31, 2012
(in millions)	Level 1		Level 2		Level 3		Netting and Collateral¹			Total
Assets at Fair Value
Money market funds²	$	615	$	—	$	—	$	—		$	615
Derivative contracts
Electricity	—		41		52		(3		)	90
Total assets	$	615	$	41	$	52	$	(3	)	$	705
Liabilities at Fair Value
Derivative contracts
Electricity	$	—	$	6	$	1	$	(7	)	$	—
Natural gas	3		—		—		(3		)	—
Interest rate	—		118		—		—			118
Total liabilities	$	3	$	124	$	1	$	(10	)	$	118

~~Where~~1 ~~Midwest~~Represents ~~Generation's~~cash ~~derivative~~collateral ~~instruments~~and ~~are~~the ~~subject~~impact toof ~~a master~~ netting ~~agreement~~across ~~and~~ the ~~criteria~~levels of ~~authoritative~~the ~~guidance~~fair ~~are~~value ~~met,~~hierarchy. ~~Midwest~~Netting ~~Generation~~among ~~presents~~positions ~~its~~classified ~~derivative~~within ~~assets~~the ~~and~~same ~~liabilities~~level onis aincluded ~~net~~in ~~basis~~that ~~on its consolidated balance sheets~~level.

82 Money market funds are included in cash and cash equivalents on EME's consolidated balance sheets.

Level 3 Valuation Process

The process of determining fair value of commodity derivative contracts is the responsibility of the risk department, which reports to the chief financial officer. This department obtains observable and unobservable inputs through broker quotes, exchanges, and internal valuation techniques and uses both standard and proprietary models to determine fair value. Each reporting period, the risk and key finance departments collaborate to determine the appropriate fair value methodologies and classifications for each derivative. Inputs are validated for reasonableness by comparison against prior prices, other broker quotes, and volatility fluctuation thresholds. Inputs used and valuations are reviewed period-over-period and compared with market conditions to determine reasonableness. The following table sets forth the valuation techniques and significant unobservable inputs used to determine fair value for EME's Level 3 assets and liabilities:



	June 30, 2013
	Fair Value (in millions)						Valuation Techniques	Significant Unobservable Input	Range	Weighted Average
	Assets			Liabilities			Valuation Techniques	Significant Unobservable Input	Range	Weighted Average
Electricity
Congestion contracts	$	50		$	18		Latest auction pricing	Congestion prices	$(8.94) - $13.88	$0.11
Power contracts	14			20			Discounted cash flows	Power prices	$34.24 - $73.00	$41.79
Netting	(32		)	(32		)
Total	$	32		$	6



	December 31, 2012
	Fair Value (in millions)						Valuation Techniques	Significant Unobservable Input	Range	Weighted Average
	Assets			Liabilities			Valuation Techniques	Significant Unobservable Input	Range	Weighted Average
Electricity
Congestion contracts	$	71		$	20		Latest auction pricing	Congestion prices	$(8.93) - $18.03	$0.19
Power contracts	2			2			Discounted cash flows	Power prices	$22.54 - $48.85	$39.62
Netting	(21		)	(21		)
Total	$	52		$	1

Level 3 Fair Value Sensitivity

For congestion contracts, generally, an increase (decrease) in congestion prices in the last auction relative to the contract price will increase (decrease) fair value. For power contracts, generally, an increase (decrease) in long-term forward power prices at illiquid locations relative to the contract price will increase (decrease) fair value.

The following table sets forth a summary of changes in the fair value of EME's Level 3 net derivative assets and liabilities:



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2013			2012			2013			2012
Fair value of net assets at beginning of period	$	41		$	24		$	51		$	83
Total realized/unrealized gains (losses)
Included in earnings¹	(25		)	23			(19		)	8
Included in AOCI²	—			—			—			2
Purchases	10			13			19			19
Settlements	—			(19		)	(25		)	(20		)
Transfers out of Level 3	—			—			—			(51		)
Fair value of net assets at end of period	$	26		$	41		$	26		$	41
Change during the period in unrealized gains (losses) related to assets and liabilities held at end of period¹	$	(11	)	$	14		$	(17	)	$	8


¹	Reported in operating revenues on EME's consolidated statements of operations.


²	Included in reclassification adjustments in EME's consolidated statement of OCI.

There were no transfers between levels during the six months ended June 30, 2013 and no transfers between Level 1 and Level 2 during the six months ended June 30, 2012. Significant transfers out of Level 3 into Level 2 occurred in the first quarter of 2012 due to significant observable inputs becoming available as the transactions neared maturity.

Fair Value of Long-term Debt

The carrying amounts and fair values of EME's long-term debt were as follows:



	June 30, 2013				December 31, 2012
(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	1,522	$	1,517	$	1,056	$	1,057

In assessing the fair value of EME's long-term debt, EME primarily uses quoted market prices, except for floating-rate debt for which the carrying amounts were considered a reasonable estimate of fair value. The fair value of EME's long-term debt is classified as Level 2.

The carrying amount of short-term debt at December 31, 2012 approximates fair value.

Midwest Generation

The following table sets forth Midwest Generation's assets and liabilities that were accounted for at fair value by level within the fair value hierarchy:



	June 30, 2013
(in millions)	Level 1		Level 2		Netting¹		Total
Assets at Fair Value
Money market funds²	$	99	$	—	$	—	$	99
Derivative contracts
Electricity	—		1		—		1
Total assets	$	99	$	1	$	—	$	100
Liabilities at Fair Value
Derivative contracts
Electricity	$	—	$	5	$	—	$	5
Total liabilities	$	—	$	5	$	—	$	5
	December 31, 2012
(in millions)	Level 1		Level 2		Netting¹		Total
Assets at Fair Value
Money market funds²	$	75	$	—	$	—	$	75
Derivative contracts
Electricity	—		2		—		2
Total assets	$	75	$	2	$	—	$	77
Liabilities at Fair Value
Derivative contracts
Electricity	$	—	$	3	$	—	$	3
Total liabilities	$	—	$	3	$	—	$	3


¹	Represents the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.


²	Money market funds are included in cash and cash equivalents on Midwest Generation's consolidated balance sheets.

Midwest Generation does not have any Level 3 assets and liabilities. There were no transfers between levels during the six months ended June 30, 2013 and 2012.

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Note 5. Debt and Credit Agreements (EME only)

Debt

Debt with recourse to EME totaled $3.7 billion and is classified as part of liabilities subject to compromise (LSTC) as of June 30, 2013 and December 31, 2012. Nonrecourse debt, as summarized below, is debt whereby lenders rely on specific project assets to repay such obligations. The following table summarizes long-term debt (rates and terms as of June 30, 2013), excluding LSTC:



(in millions)	Current Rate¹	Effective Interest Rate²	Maturity Date	June 30, 2013		December 31, 2012
Walnut Creek Energy Term Loan	2.53% LIBOR+2.25%	5.47%	May 2023	$	442	$	330
WCEP Holdings, LLC Term Loan	4.32% LIBOR+4.0%	7.63%	May 2023	53		52
Big Sky Wind, LLC Vendor financing loan	3.94% LIBOR+3.5%	3.94%	October 2014	226		222
High Lonesome Mesa, LLC Bonds	6.85% Fixed	6.85%	November 2017	66		69
American Bituminous Power Partners, L.P.³Bonds	0.14% Fixed	0.14%	October 2017	46		46
Viento Funding II, Inc. Term Loan	3.18% LIBOR+2.75%	5.82%	December 2020	179		191
Tapestry Wind, LLC Term Loan	2.79% LIBOR+2.5%	4.52%	December 2021	205		210
Cedro Hill Wind, LLC Term Loan	3.29% LIBOR+3.0%	6.89%	December 2025	120		125
Laredo Ridge Term Loan	3.03% LIBOR+2.75%	5.90%	March 2026	70		71
Crofton Bluffs Wind, LLC Term Loan⁴	3.16% LIBOR+2.88%	3.61%	December 2027	26		27
Broken Bow Wind, LLC Term Loan⁴	3.15% LIBOR+2.88%	3.65%	December 2027	51		52
Others	Various	Various	Various	38		43
Total debt				$	1,522	$	1,438
Less: Short-term debt				—		382
Total long-term debt				1,522		1,056
Less: Current maturities of long-term debt				118		307
Long-term debt, net of current portion				$	1,404	$	749


¹	London Interbank Offered Rate (LIBOR).


²	The effective rate at which interest expense is reflected in the financial statements after the consideration of the current rate of debt and any amounts subject to interest rate swaps. For further discussion, see Note 6—Derivative Instruments and Hedging Activities—Interest Rate Risk Management.


³	Principal payments are due annually through October 1, 2017. Interest rates are reset weekly based on current bond yields for similar securities. At June 30, 2013, the outstanding balance is supported by a letter of credit.


⁴	The interest rate swaps for this obligation will expire in December 2013 and forward starting rate swaps will become effective. For additional information, see Note 6—Derivative Instruments and Hedging Activities.

Chapter 11 Cases

The filing of the Chapter 11 Cases constitutes an event of default under various financing documents. In addition to the instruments discussed below, the Chapter 11 Cases could also potentially give rise to counterparty rights and remedies under other documents.

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Senior Notes

The filing of the Chapter 11 Cases may constitute an event of default under EME's senior notes and, as a result, the principal and interest due under these debt instruments are immediately due and payable. The creditors are stayed from taking any action as a result of the default under Section 362 of the Bankruptcy Code and the obligations related to the senior notes are recorded as part of LSTC. For additional information, see Note 14—Restructuring Activities.

Viento II Financing

In July 2013, EME completed, through its subsidiary, Viento Funding II, Inc., an amendment of its Viento II Financing, a nonrecourse financing of its interests in the Wildorado, San Juan Mesa and Elkhorn Ridge wind projects. The amendment increased the financing amount to $238 million, which included a $202 million 10-year partially amortizing term loan, a $27 million 7-year letter of credit facility, and a $9 million 7-year working capital facility. Interest under the term loan accrues at LIBOR plus 2.75% initially with the rate increasing 0.25% on every fourth anniversary. EME reaffirmed the pledge of its interest in Viento Funding II, Inc. in connection with the amendment but is not a borrower or a guarantor. The amendment cured any possible event of default, and therefore the Viento Funding II debt was classified as a long-term liability on the consolidated balance sheets.

Viento Funding II terminated $78 million amortizing notional amount 3.415% interest rate swap agreements and entered into $96 million amortizing notional amount 3.03% new interest rate swap agreements to hedge the majority of the variable interest rate under the term loan. Viento Funding II also entered into $65 million forward starting interest rate swap agreements at 4.985% to hedge the majority of the final maturity payment of the term loan.

High Lonesome Financing

The filing of the Chapter 11 Cases may have constituted an event of default under the documents governing the issuance of the Series 2010A and 2010B Bonds (the Bonds). In July 2013, the applicable bondholders granted a permanent waiver of default, subject to EME assuming the state production tax credit agreement in the Chapter 11 Cases. On July 15, 2013, EME filed a notice of assumption of the production tax agreement in the Bankruptcy Court. Pursuant to expedited assumption and rejection procedures previously approved by the Bankruptcy Court, EME assumed the agreement effective as of July 15, 2013. Accordingly, the Bonds are classified as long-term at June 30, 2013. As of June 30, 2013, there were $41 million and $25 million outstanding under the Series 2010A and Series 2010B Bonds, respectively, and $11 million of outstanding letters of credit.

Credit Facilities and Letters of Credit

At June 30, 2013, letters of credit under EME's and its subsidiaries' credit facilities aggregated $244 million and were scheduled to expire as follows: $51 million in 2013, $123 million in 2014, $20 million in 2017, $19 million in 2018, $18 million in 2021, and $13 million in 2022. Standby letters of credit include $30 million issued in connection with the power purchase agreement with Southern California Edison Company (SCE), an affiliate of EME, under the Walnut Creek credit facility. At June 30, 2013, EME had $45 million of cash collateral supporting its standby letters of credit, including cash collateral under Edison Mission Wind's $75 million letter of credit facility which was completed in April 2013 and expires on April 30, 2016. Certain letters of credit are subject to automatic annual renewal provisions.

On February 20, 2013, the Bankruptcy Court approved an agreement between EME and DNB Bank, the lender pursuant to EME's secured letter of credit facility. Pursuant to this agreement, DNB Bank has agreed to forbear from sending notices of non-renewal to beneficiaries of outstanding letters of credit and to allow existing letters of credit to renew automatically in accordance with their terms. In exchange, EME consented to lift the automatic stay to permit DNB Bank to setoff any obligations due and owing under the applicable documents against EME's cash collateral.

Big Sky Turbine Financing

In October 2009, EME's subsidiary, Big Sky Wind, LLC (Big Sky), entered into turbine financing arrangements with the turbine manufacturer Suzlon Wind Energy Corporation (Suzlon) for wind turbine purchase obligations related to the 240 MW Big Sky wind project. The loan associated with the financing arrangements has a five-year final maturity. However, the satisfaction of certain criteria, including project performance and absence of serial defects, may trigger earlier repayment. In September 2012, Suzlon sued Big Sky in New York federal court seeking a declaratory judgment that the early repayment provisions had been satisfied and that Big Sky should be required to repay the loan in full in February 2013. Big Sky answered Suzlon's complaint, denied the allegations and counterclaimed. The counterclaim alleged that certain serial defects existing in the turbine equipment supplied by Suzlon precluded application of the early repayment provisions. The litigation is pending in New York federal court. The Big Sky loan is secured by a leasehold mortgage on the project's real property

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assets, a pledge of all other collateral of the Big Sky wind project, as well as a cash reserve account into which one-third of distributable cash flow, if any, of the Big Sky wind project is to be deposited on a monthly basis. The loan is also secured by pledges of Big Sky's direct and indirect ownership interests in the project, but is nonrecourse to EME. For further details regarding consolidated assets pledged as security for debt obligations, see Note 3—Variable Interest Entities.

As of June 30, 2013, $226 million was outstanding under the vendor financing loan at an effective interest rate of 3.94%. EME has been in discussions with Suzlon regarding a potential sale of EME's interest in the Big Sky wind project in exchange for forgiveness of debt and other consideration. These discussions are ongoing and EME has not made any decisions with respect to a potential sale. As a result, Big Sky's long-lived assets, consisting of property, plant and equipment and deferred revenue, were evaluated for impairment under the Held for Use model of Accounting Standards Codification 360 Property, Plant, and Equipment (ASC 360). The probability weighted future undiscounted cash flows associated with this asset group exceeded its carrying value at June 30, 2013 and consequently no impairment has been recognized. If EME and Suzlon do agree upon a sale transaction under terms similar to those currently under discussion, EME would record a material loss. If EME and Suzlon do not agree upon a sale transaction, Big Sky will need to arrange alternative financing, if available, to repay the loan at maturity or reach agreement with the lender to extend the maturity date of the loan. EME does not intend to make an investment in the project and is under no obligation to do so. If a restructuring of the loan or a sale effort is unsuccessful, Suzlon may foreclose on the project resulting in a write-off of the entire investment in the project. At June 30, 2013, EME's investment in the Big Sky wind project consisted of assets of $459 million and liabilities of $370 million.

Walnut Creek

Walnut Creek, a 490 MW gas-fired peaker plant, achieved commercial operation during the second quarter 2013, and accordingly, EME completed, through two wholly owned subsidiaries, Walnut Creek Energy and WCEP Holdings, LLC, the conversion of its nonrecourse financings from construction loans to 10-year amortizing term loans. Walnut Creek started earning revenues under its long-term purchase power agreement in June 2013.

Note 6. Derivative Instruments and Hedging Activities (EME, Midwest Generation)

EME and Midwest Generation use derivative instruments to reduce their exposure to market risks that arise from price fluctuations of electricity, capacity, fuel, emission allowances, transmission rights, and interest rates. The derivative financial instruments vary in duration, ranging from a few days to several years, depending upon the instrument. To the extent that EME and Midwest Generation do not use derivative instruments to hedge these market risks, the unhedged portions will be subject to the risks and benefits of spot market price movements.

Risk management positions may be designated as cash flow hedges or economic hedges, which are derivatives that are not designated as cash flow hedges. Economic hedges are accounted for at fair value on EME's and Midwest Generation's consolidated balance sheets as derivative assets or liabilities with offsetting changes recorded on the consolidated statements of operations. For derivative instruments that qualify for hedge accounting treatment, the fair value is recognized on EME's and Midwest Generation's consolidated balance sheets as derivative assets or liabilities with offsetting changes in fair value, to the extent effective, recognized in AOCI until reclassified into earnings when the related forecasted transaction occurs. The portion of a cash flow hedge that does not offset the change in the fair value of the transaction being hedged, which is commonly referred to as the ineffective portion, is immediately recognized in earnings. The results of derivative activities are recorded in cash flows from operating activities on the consolidated statements of cash flows.

Derivative instruments that are utilized by EME for trading purposes are measured at fair value and included on the consolidated balance sheets as derivative assets or liabilities, with offsetting changes recognized in operating revenues on the consolidated statements of operations.

Where EME's and Midwest Generation's derivative instruments are subject to a master netting agreement or contain collateral deposit requirements and the criteria of authoritative guidance are met, EME presents its derivative assets and liabilities on a net basis on its consolidated balance sheets. EME's and Midwest Generation's master netting agreements allow for the right of offset for contracts with physical settlement. They do not allow for cross commodity settlement unless all positions are liquidated.

Since EME's and Midwest Generation's credit ratings are below investment grade, EME and its subsidiaries have provided collateral in the form of cash and letters of credit for the benefit of derivative counterparties and brokers. The amount of margin and collateral deposits generally varies based on changes in fair value of the related positions. Future changes in power prices could expose EME and Midwest Generation to additional collateral postings.

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EME's and Midwest Generation's approach to trading and risk management depends, in part, on the ability to use clearing brokers to enter into market transactions. As a result of their financial position, EME and Midwest Generation have limited access to enter into such transactions and have been subject to increased initial collateral and margin requirements. There is no assurance that EME and Midwest Generation will continue to be able to utilize clearing brokers. If EME and Midwest Generation become unable to utilize clearing brokers, they may seek to execute bilateral transactions with third parties which could be unavailable on commercially reasonable terms or at all.

Notional Volumes of Derivative Instruments

The following table summarizes ~~the~~ notional volumes of derivatives used for hedging and trading activities:

September 30, 2012
				June 30, 2013
Commodity	Instrument	Classification	Unit of Measure	Cash FlowHedges		EconomicHedges
				Cash Flow Hedges				Economic Hedges				Trading Activities
Electricity	Forwards/Futures	Sales, net	GWh	5,644		—
Commodity	Instrument	Classification	Unit ofMeasure	Midwest Generation	Other EME Sub- sidiaries	EME		Midwest Generation	Other EME Sub- sidiaries	EME		Other EME Sub- sidiaries
Electricity	Forwards/ Futures	~~Purchases~~Sales, net	~~GWh~~GWh1	—1,816	—	21,816		19	29	48	2	—
Fuel oil	Forwards/Futures	Purchases	barrels	—		120,000
Electricity	Forwards/ Futures	Purchases, net	GWh	—	—	—		—	—	—		334
December 31, 2011
Electricity	Congestion	Purchases, net	GWh	—	—	—		—	151	151	4	296,064	4
Electricity	Forwards/Futures	Sales, net	GWh	7,978		227	2
Fuel oil	Forwards/Futures	Sales, net	barrels	—	—	—		—	—	—		45,000
Electricity	Capacity	Sales	GW-Day	61	1	—
Weather	Forwards/ Futures	Purchases, net	CDD1	—	—	—		—	—	—		20,000
Electricity	Congestion	Purchases	GWh	—		608	3
Fuel oil	Forwards/Futures	Purchases	barrels	—		240,000

1 Midwest Generation's hedge transactions for capacity result from bilateral trades. Capacity sold in the PJM Interconnection, LLC Reliability Pricing Model (PJM RPM) auction is not accounted for as a derivative.



				December 31, 2012
				Cash Flow Hedges			Economic Hedges				Trading Activities
Commodity	Instrument	Classification	Unit of Measure	Midwest Generation	Other EME Sub- sidiaries	EME	Midwest Generation	Other EME Sub- sidiaries	EME		Other EME Sub- sidiaries
Electricity	Forwards/Futures	Sales, net	GWh	3,615	—	3,615	1	47	48	²	—
Electricity	Forwards/Futures	Purchases, net	GWh	—	—	—	—	—	—		492
Electricity	Capacity	Purchases, net	GW-Day¹	—	—	—	—	—	—		60	³
Electricity	Congestion	Purchases, net	GWh	—	—	—	—	263	263	⁴	268,529	⁴
Natural gas	Forwards/Futures	Sales, net	bcf¹	—	—	—	—	—	—		9.9

21 ~~These~~gigawatt-hours ~~positions~~(GWh); ~~adjust financial and physical positions, or day~~gigawatts-~~ahead~~day ~~and real~~(GW-~~time~~Day); ~~positions,~~billion tocubic ~~reduce~~feet ~~costs~~(bcf); orcooling ~~increase~~degree ~~gross~~day ~~margin~~(CDD). ~~The net sales positions of these categories are primarily related to hedge transactions that are not designated as cash flow hedges.~~

32 ~~Congestion~~These ~~contracts~~positions ~~include~~adjust financial ~~transmission~~and ~~rights~~physical positions, ~~transmission congestion contracts~~ or ~~congestion~~day-ahead ~~revenue~~and ~~rights.~~real-time ~~These~~ positions ~~are~~to ~~similar~~reduce tocosts aor ~~swap,~~increase ~~where~~gross ~~the~~margin. ~~buyer~~The isnet ~~entitled~~sales topositions ~~receive~~of athese ~~stream~~categories ofare ~~revenues~~primarily ~~(or~~related ~~charges)~~to ~~based~~hedge ontransactions ~~the~~that ~~hourly~~are ~~day-ahead~~not ~~price~~designated ~~differences~~as ~~between~~cash ~~two~~flow ~~locations~~hedges.

~~Fair~~3 ~~Value~~Hedge oftransactions ~~Derivative~~for ~~Instruments~~capacity result from bilateral trades. Capacity sold in the PJM Interconnection, LLC Reliability Pricing Model (PJM RPM) auction is not accounted for as a derivative.

~~The~~4 ~~following~~Congestion ~~table~~contracts ~~summarizes~~include financial transmission rights, transmission congestion contracts, or congestion revenue rights. These positions are similar to a swap, where the ~~fair~~buyer ~~value~~is entitled to receive a stream of ~~commodity~~revenues ~~derivative~~(or ~~instruments~~charges) ~~reflected~~based on ~~Midwest~~the ~~Generation's~~hourly ~~consolidated~~day-ahead ~~balance~~price ~~sheets:~~differences between two locations.

September 30, 2012
	Derivative Assets									Derivative Liabilities
(in millions)	Short-term			Long-term			Subtotal			Short-term			Long-term			Subtotal			Net Assets
Cash flow hedges	$	14		$	1		$	15		$	9		$	—		$	9		$	6
Economic hedges	25			1			26			22			1			23			3
	39			2			41			31			1			32			9
Netting1	(24		)	(1		)	(25		)	(24		)	(1		)	(25		)	—
Total	$	15		$	1		$	16		$	7		$	—		$	7		$	9
December 31, 2011
Cash flow hedges	$	39		$	1		$	40		$	2		$	—		$	2		$	38
Economic hedges	24			—			24			20			—			20			4
	63			1			64			22			—			22			42
Netting1	(20		)	—			(20		)	(20		)	—			(20		)	—
Total	$	43		$	1		$	44		$	2		$	—		$	2		$	42

EME

1Interest ~~Netting~~Rate ofRisk ~~derivative receivables and derivative payables is permitted when a legally enforceable master netting agreement exists with a derivative counterparty.~~Management

9EME mitigates the risk of interest rate fluctuations for a number of its project financings by arranging for fixed rate financing or variable rate financing with interest rate swaps, interest rate options, or other hedging mechanisms.

Through June 30, 2013, as a result of the Chapter 11 Cases and the short-term forbearance agreements that had been executed with the lenders and the EME subsidiary borrowers, EME could no longer conclude it was probable that the future interest payments associated with the Viento II Financing would occur. Accordingly, the cash flow hedges associated with these interest rate swaps were prospectively discontinued. EME recorded unrealized gains of $4 million and $5 million during the three and six months ended June 30, 2013, respectively, in interest expense on the consolidated statements of operations representing changes in the fair value of discontinued interest rate swaps. In July 2013, the Viento II Financing was amended to remove the uncertainty around future interest payments. For additional information, see Note 5—Debt and Credit Agreements.

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The following table summarizes EME's interest rate swaps:



				Notional Value (in millions)
	Effective Date	Expiration Date	Fixed Swap Rate Paid	June 30, 2013		December 31, 2012
Project Financing
Viento Funding II	June 2009	June 2016	3.18%	$	55	$	65
Viento Funding II	March 2011	December 2020	3.42%	108		108
Cedro Hill	December 2010	December 2025	4.29%	108		112
Laredo Ridge	March 2011	March 2026	3.46%	63		64
Tapestry	December 2011	December 2021	2.21%	184		189
Broken Bow	December 2012	December 2013	0.83%	46		47
Crofton Bluffs	December 2012	December 2013	0.78%	24		24
Walnut Creek Energy¹	November 2011	May 2013	0.81%	—		181
Walnut Creek Energy¹	June 2013	May 2023	3.54%	398		—
WCEP Holdings¹	July 2011	May 2013	0.79%	—		26
WCEP Holdings¹	June 2013	May 2023	4.00%	48		—
Forward Starting Swaps
Broken Bow	December 2013	December 2027	2.96%	45		45
Crofton Bluffs	December 2013	December 2027	2.75%	23		23
Tapestry	December 2021	December 2029	3.57%	60		60


¹	During the second quarter of 2013, the existing interest rate swaps for the Walnut Creek Project expired and, in conjunction with the conversion to term loans, the forward starting swaps became effective.

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Summary of Derivative Instruments

The following table summarizes EME's derivative instruments, including amounts offset by collateral and under master netting agreements:



	June 30, 2013
	Short Term							Long Term
(in millions)	Gross		Netting and Collateral			Subtotal		Gross		Netting and Collateral			Subtotal		Net
Assets
Electricity contracts	$	135	$	(94	)	$	41	$	43	$	(21	)	$	22	$	63
Natural gas contracts	27		(27		)	—		3		(3		)	—		—
Coal contracts	1		(1		)	—		—		—			—		—
Total assets	$	163	$	(122	)	$	41	$	46	$	(24	)	$	22	$	63
Liabilities
Electricity contracts	$	96	$	(96	)	$	—	$	20	$	(20	)	$	—	$	—
Natural gas contracts	25		(25		)	—		3		(3		)	—		—
Coal contracts	1		(1		)	—		—		—			—		—
Total derivatives subject to a master netting agreement	$	122	$	(122	)	$	—	$	23	$	(23	)	$	—	$	—
Total derivatives not subject to a master netting agreement¹	—		—			—		68		—			68		68
Total liabilities	$	122	$	(122	)	$	—	$	91	$	(23	)	$	68	$	68

¹EME's interest rate swaps are not subject to master netting agreements and do not require EME to post collateral.



	December 31, 2012
	Short Term							Long Term
(in millions)	Gross		Netting and Collateral			Subtotal		Gross		Netting and Collateral			Subtotal		Net
Assets
Electricity contracts	$	120	$	(67	)	$	53	$	52	$	(15	)	$	37	$	90
Natural gas contracts	33		(33		)	—		1		(1		)	—		—
Coal contracts	2		(2		)	—		—		—			—		—
Total assets	$	155	$	(102	)	$	53	$	53	$	(16	)	$	37	$	90
Liabilities
Electricity contracts	$	71	$	(71	)	$	—	$	15	$	(15	)	$	—	$	—
Natural gas contracts	36		(36		)	—		1		(1		)	—		—
Coal contracts	2		(2		)	—		—		—			—		—
Total derivatives subject to a master netting agreement	$	109	$	(109	)	$	—	$	16	$	(16	)	$	—	$	—
Total derivatives not subject to a master netting agreement¹	—		—			—		118		—			118		118
Total liabilities	$	109	$	(109	)	$	—	$	134	$	(16	)	$	118	$	118


¹	EME's interest rate swaps are not subject to master netting agreements and do not require EME to post collateral.

EME's subsidiaries have posted $89 million and $61 million cash margin in the aggregate with various counterparties at June 30, 2013 and December 31, 2012, respectively, to support hedging and trading activities. The cash margin posted is required by counterparties as an initial collateral deposit and cannot be offset against the fair value of open contracts except in the event of default. EME's exposure is composed of $65 million and $44 million of net accounts receivable at June 30, 2013 and December 31, 2012, respectively. For positions subject to a master netting agreement, EME is in a net asset position, and

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in the event of default, cash collateral would be returned to EME. EME did not have any collateral received from counterparties as of June 30, 2013 and December 31, 2012.

Income Statement Impact of Derivative Instruments

The following table provides the cash flow hedge activity as part of ~~accumulated~~EME's ~~other comprehensive loss~~AOCI:

	Cash Flow Hedge Activity1Nine Months Ended September 30,						Income Statement Location
	Six Months Ended June 30,
(in millions)	2012			2011
	2013						2012
Beginning of period derivative gains	$	34		$	37
(in millions)	Commodity Contracts			Interest Rate Contracts			Commodity Contracts			Interest Rate Contracts
Effective portion of changes in fair value	5			(8		)
Beginning of period derivative gains (losses)	$	(1	)	$	(118	)	$	35		$	(90	)
Reclassification to earnings	(32		)	(16		)	Operating revenues
Effective portion of changes in fair value	(3		)	44			19			(24		)
End of period derivative gains	$	7		$	13
Reclassification to operating revenues	1			—			(33		)	—
Reclassification to interest expense	—			2			—			—
End of period derivative gains (losses)1	$	(3	)	$	(72	)	$	21		$	(114	)

1 Unrealized derivative gains (losses) are before income taxes. ~~The~~Amounts ~~after-tax amounts~~ recorded in ~~accumulated~~AOCI ~~other~~include ~~comprehensive~~commodity ~~loss~~and atinterest ~~September~~rate ~~30,~~contracts. ~~2012~~For ~~and~~additional ~~2011~~information, ~~were~~see $4Note ~~million~~11—Accumulated ~~and~~Other $8Comprehensive ~~million, respectively~~Loss.

~~For~~EME ~~additional~~recorded ~~information~~net gains (losses) of $(1) million and none during the second quarter of 2013 and 2012, ~~see~~respectively, ~~Note~~and ~~8—Accumulated~~$(1) million ~~Other~~and ~~Comprehensive~~$1 million ~~Loss~~during the six months ended June 30, 2013 and 2012, respectively, in operating revenues on the consolidated statements of operations representing the amount of cash flow hedge ineffectiveness. EME also reclassified $2 million of unrealized losses in AOCI to interest expense on the consolidated statements of operations in the six months ended June 30, 2013 due to the discontinuation of the Viento II interest rate swaps.

~~Midwest~~The ~~Generation~~effect ~~recorded net gains (losses)~~ of ~~$(2) million~~realized and ~~$2 million~~unrealized ~~during the three months ended September 30, 2012 and 2011, respectively, and~~ gains offrom ~~none~~derivative ~~and~~instruments ~~$1 million~~used ~~during~~for ~~the~~economic ~~nine~~hedging ~~months ended September 30, 2012~~ and ~~2011,~~trading ~~respectively,~~purposes ~~in operating revenues~~ on the consolidated statements of operations ~~representing~~is ~~the~~presented ~~amount of cash flow hedge ineffectiveness.~~below:

The effect of realized and unrealized gains (losses) from derivative instruments on the consolidated statements of operations is presented below:



		Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	Income Statement Location	2013			2012			2013			2012
Economic hedges	Operating revenues	$	(2	)	$	6		$	(2	)	$	17
	Fuel	—			(6		)	—			(1		)
Trading activities	Operating revenues	13			30			42			50

	Income Statement Location	Three Months Ended September 30,					Nine Months Ended September 30,
(in millions)		2012		2011			2012		2011
Economic hedges	Operating revenues	$	8	$	(4	)	$	24	$	3
	Fuel	3		(3		)	2		1

Midwest Generation

~~Collateral~~Summary of Derivative Instruments

~~Certain~~The ~~derivative~~following ~~instruments~~table ~~contain~~summarizes ~~collateral deposit requirements.~~ Midwest Generation's ~~sells~~commodity ~~merchant~~short-term ~~energy~~derivative ~~and~~instruments ~~capacity~~for ~~through~~non-trading ~~Edison Mission Marketing & Trading~~purposes, ~~Inc.~~including ~~(EMMT),~~amounts ~~which~~offset ~~has a below investment grade credit rating. Midwest Generation has cash on hand to provide credit support as needed for hedging contracts entered into~~ by ~~EMMT~~collateral ~~related~~and tounder ~~the~~master ~~Midwest~~netting ~~Generation plants. Future increases in power prices could expose Midwest Generation to collateral postings.~~agreements:

EMMT’s ability to enter into hedge contracts depends, in part, on the ability to use clearing brokers to enter into market transactions. As a result of EME's financial position, EMMT has limited access to enter into such transactions and has been subject to increased initial collateral and margin requirements. There is no assurance that EMMT will continue to be able to utilize clearing brokers. If EMMT becomes unable to utilize clearing brokers, it may seek to execute bilateral transactions with third parties which could be unavailable on commercially reasonable terms or at all.



	June 30, 2013							December 31, 2012
(in millions)	Gross		Netting and Collateral			Net		Gross		Netting and Collateral			Net
Assets
Electricity contracts	$	10	$	(9	)	$	1	$	12	$	(10	)	$	2
Liabilities
Electricity contracts	$	14	$	(9	)	$	5	$	13	$	(10	)	$	3

~~Note~~Midwest Generation does not have any long-term derivative assets and liabilities at June 4.30, ~~Income~~2013 ~~Taxes~~and December 31, 2012.

Midwest Generation's effective income tax rate was 38% and 41% for the nine months ended September 30, 2012 and 2011, respectively, which varied from the federal statutory rate of 35% primarily due to state income taxes.26

Midwest Generation is included in the consolidated federal and state income tax returns of Edison International and is party to a tax-allocation agreement with its parent, Edison Mission Midwest Holdings. Midwest Generation's tax allocation method is to allocate current tax liabilities or benefits on a separate return basis, except for the use of state tax apportionment factors of the Edison International group for purposes of determining state income taxes.

Midwest Generation generated taxable losses for the nine months ended September 30, 2012. In a hypothetical tax return prepared on a separate company basis, Midwest Generation would be able to carryback net operating losses to prior periods and receive tax benefits. During 2012, Midwest Generation recognized $82 million of tax benefits associated with net

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~~operating~~Income ~~losses~~Statement ~~carrybacks~~Impact ~~calculated on a hypothetical tax return under the separate return method. However, Midwest Generation's tax-allocation agreement only permits the use~~ of ~~net~~Derivative operating losses to offset future taxable income. Under generally accepted accounting principles applicable to the separate return method, benefits recognized on a hypothetical separate company tax return that are not paid under an intercompany tax-allocation agreement are treated as a non-cash distribution to the parent company. If Midwest Generation offsets net operating loss carryforwards against taxable income in the future, such tax benefit will be accounted for as non-cash contributions at the time of use.Instruments

~~Midwest~~The ~~Generation's~~following ~~deferred~~table ~~tax~~provides ~~position~~the atcash ~~September~~flow ~~30,~~hedge ~~2012~~activity ~~was~~as apart ~~net deferred tax asset~~ of ~~$11 million, mainly arising due to unrecognized losses and prior service adjustments associated with~~ Midwest Generation's pension plans, which is reflected in accumulated other comprehensive loss. As a result of the recently recognized losses and the indications of expected future losses, Midwest Generation recorded a valuation allowance of $11 million in other comprehensive loss.AOCI:

Note 5. Compensation and Benefit Plans



	Six Months Ended June 30,
(in millions)	2013			2012
Beginning of period derivative gains (losses)	$	(2	)	$	34
Effective portion of changes in fair value	(3		)	20
Reclassification to operating revenues	1			(31		)
End of period derivative gains (losses)¹	$	(4	)	$	23

~~Pension~~1 ~~Plans~~Unrealized ~~and~~derivative ~~Postretirement~~gains ~~Benefits~~(losses) are before income taxes. Amounts recorded in AOCI include commodity contracts. For additional information, see Note 11—Accumulated Other ~~Than~~Comprehensive ~~Pensions~~Loss.

Midwest Generation recorded net gains (losses) of $(1) million and $1 million during the second quarter of 2013 and 2012, respectively, and $(1) million and $2 million during the six months ended June 30, 2013 and 2012, respectively, in operating revenues on the consolidated statements of operations representing the amount of cash flow hedge ineffectiveness.

The effect of realized and unrealized gains from derivative instruments used for non-trading purposes on the consolidated statements of operations is presented below:



(in millions)	Income Statement Location	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	Income Statement Location	2013			2012			2013			2012
Economic hedges	Operating revenues	$	(2	)	$	5		$	(2	)	$	16
	Fuel	—			(6		)	—			(1		)

Note 7. Income Taxes (EME, Midwest Generation)

EME

Effective Tax Rate

The table below provides a reconciliation of income tax benefit computed at the federal statutory income tax rate to the income tax benefit:



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2013			2012			2013			2012
Loss from continuing operations before income taxes	$	(127	)	$	(156	)	$	(211	)	$	(290	)
Benefit for income taxes at federal statutory rate of 35%	$	(45	)	$	(54	)	$	(74	)	$	(101	)
Increase (decrease) in income tax from
State tax - net of federal benefit	(8		)	(5		)	(15		)	(18		)
Change in valuation allowance	48			—			105			—
Production tax credits, net	(21		)	(17		)	(42		)	(36		)
Taxes on income allocated to noncontrolling interests	(3		)	(5		)	(6		)	(4		)
Other	4			—			4			2
Total benefit for income taxes from continuing operations	$	(25	)	$	(81	)	$	(28	)	$	(157	)
Effective tax rate	20		%	52		%	13		%	54		%

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Estimated state income tax benefits allocated from EIX for the three and six months ended June 30, 2013 and 2012 were none and $1 million, respectively, and $2 million and $5 million, respectively.

EME's right to receive payments under the tax-allocation agreements and the timing and amount of those payments are dependent on the inclusion of EME in the consolidated income tax returns of EIX and other factors, including the amount of consolidated taxable income and net operating loss carryforwards of EIX, and other tax items of EME and other subsidiaries of EIX. During the first six months of 2013, EME received a net tax-allocation payment from EIX of approximately $6 million under the tax-allocation agreements. This cash receipt was treated as an equity contribution as it was a partial payment for tax benefits previously recorded as non-cash distributions. At December 31, 2012, $222 million of tax benefits generated by EME that had been utilized in the EIX consolidated tax return on a statutory basis and for which, under the tax-allocation agreements as applied, EME had not yet, and may never be, entitled to be paid were accounted for as non-cash distributions to EME's parent.

Without objectively verifiable evidence supporting the taxable income forecast of the EIX consolidated tax group during 2013, EME is not currently able to determine whether it is more likely than not that future tax-sharing payments will occur. Accordingly, EME's deferred tax asset valuation allowance increased to $549 million at June 30, 2013 from $444 million at December 31, 2012.

Tax Dispute

The Internal Revenue Service examination phase of tax years 2003 through 2006, which included a proposed adjustment related to EME, was completed in the fourth quarter of 2010. The proposed adjustment increases the taxable gain on the 2004 sale of EME's international assets, which if sustained, would result in a federal tax payment of approximately $203 million, including interest and penalties through June 30, 2013 (the Internal Revenue Service has asserted a 40% penalty for understatement of tax liability related to this matter). EME disagrees with the proposed adjustment and filed a protest with the Internal Revenue Service in the first quarter of 2011. The appeals process to date has not resulted in a change in the proposed adjustment by the Internal Revenue Service. EME continues to seek resolution through the appeals process and has requested technical advice from the Internal Revenue Service National Office.

Midwest Generation

Effective Tax Rate

The table below provides a reconciliation of income tax benefit computed at the federal statutory income tax rate to the income tax benefit:



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2013			2012			2013			2012
Loss before income taxes	$	(73	)	$	(69	)	$	(147	)	$	(83	)
Benefit for income taxes at federal statutory rate of 35%	$	(25	)	$	(24	)	$	(51	)	$	(29	)
Increase (decrease) in income tax from
State tax, net of federal benefit	(4		)	(3		)	(8		)	(4		)
Change in valuation allowance	30			—			60			—
Other	—			—			—			1
Total provision (benefit) for income taxes	$	1		$	(27	)	$	1		$	(32	)
Effective tax rate	*			39		%	*			39		%


*	Not meaningful.

As a result of the recently recognized losses and the indications of expected future losses, Midwest Generation increased its deferred tax valuation allowance to $593 million at June 30, 2013 from $533 million at December 31, 2012. At December 31, 2012, $106 million of tax benefits that would have been collected by Midwest Generation in a hypothetical tax return prepared on a separate return basis but was not collectible under Midwest Generation's tax-allocation agreement were accounted for as non-cash distributions to Midwest Generation's parent. Midwest Generation's tax-allocation agreement only permits the use of net operating losses to offset future taxable income and does not include the right to receive payments.

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Note 8. Compensation and Benefit Plans (EME and Midwest Generation, except as noted)

Pension Plans and Postretirement Benefits Other than Pensions

Pension Plans

During the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013, EME and Midwest Generation made contributions of $117 million and $3 million, respectively, and during the remainder of ~~2012~~2013, ~~expects~~expect to make $48 million and $5 million of additional contributions., respectively.

The following were components of pension expense:

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended June 30,
(in millions)	2012			2011			2012			2011
	2013									2012
Service cost	$	3.8		$	3.3		$	10.5		$	9.7
(in millions)	Midwest Generation			Other EME Sub- sidiaries1			EME			Midwest Generation			Other EME Sub- sidiaries1		EME
Interest cost	2.2			2.1			6.4			6.3
Service cost	$	2		$	—		$	2		$	3		$	1	$	4
Expected return on plan assets	(2.4		)	(2.1		)	(7.1		)	(6.3		)
Interest cost	2			1			3			2			1		3
Net amortization	0.7			—			1.8			0.2
Expected return on plan assets	(2		)	(1		)	(3		)	(3		)	—		(3		)
Total expense	$	4.3		$	3.3		$	11.6		$	9.9
Net amortization	—			2			2			1			1		2
Total expense	$	2		$	2		$	4		$	3		$	3	$	6


¹	Excludes Homer City.



	Six Months Ended June 30,
	2013									2012
(in millions)	Midwest Generation			Other EME Sub- sidiaries¹			EME			Midwest Generation			Other EME Sub- sidiaries¹			EME
Service cost	$	6		$	1		$	7		$	7		$	1		$	8
Interest cost	4			2			6			4			2			6
Expected return on plan assets	(5		)	(1		)	(6		)	(5		)	(1		)	(6		)
Net amortization	1			2			3			1			2			3
Total expense	$	6		$	4		$	10		$	7		$	4		$	11


¹	Excludes Homer City.

Postretirement Benefits Other Than Pensions

During the ~~nine~~six months ended ~~September~~June 30, ~~2012~~2013, EME and Midwest Generation made no contributions ofand ~~$0.8 million~~during ~~and~~the ~~expects~~remainder toof ~~make~~2013 noexpect ~~additional~~to ~~contributions~~make ~~during~~$2 million ~~the~~and ~~remainder~~$1 million of ~~2012~~additional contributions, respectively.

The following were components of postretirement benefits expense:

	Three Months Ended September 30,					Nine Months Ended September 30,
	Three Months Ended June 30,
(in millions)	2012		2011			2012		2011
	2013							2012
Service cost	$	0.3	$	0.4		$	1.1	$	1.2
(in millions)	Midwest Generation		Other EME Sub- sidiaries1			EME		Midwest Generation		Other EME Sub- sidiaries1			EME
Interest cost	0.7		0.7			2.1		2.2
Service cost	$	0.3	$	0.3		$	0.6	$	0.4	$	0.2		$	0.6
Net amortization	0.5		0.2			1.3		0.6
Interest cost	0.6		0.4			1.0		0.7		0.4			1.1
Total expense	$	1.5	$	1.3		$	4.5	$	4.0
Net amortization	0.4		(0.1		)	0.3		0.4		(0.1		)	0.3
Total expense	$	1.3	$	0.6		$	1.9	$	1.5	$	0.5		$	2.0

~~Note 6.~~1 ~~Commitments~~Excludes ~~and~~Homer ~~Contingencies~~City.

~~Coal Transportation Agreements~~29

At September 30, 2012, Midwest Generation had contractual agreements for the transportation of coal. The commitments under these contracts are based on either actual coal purchases derived from committed coal volumes set forth in fuel supply contracts or minimum quantities as set forth in the transportation agreements as adjusted for provisions that mitigate the financial exposure of Midwest Generation related to a plant closure under certain circumstances as specified in the agreements. Estimated contractual obligations for coal transportation agreements are estimated to aggregate $2.3 billion, which consists of: $118 million for the remainder of 2012, $292 million for 2013, $286 million for 2014, $260 million for

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2015, $260 million for 2016, and $1.1 billion thereafter. Years subsequent to 2012 reflect a reduction in minimum volumes for the shutdown of the Fisk and Crawford Stations.



	Six Months Ended June 30,
	2013							2012
(in millions)	Midwest Generation		Other EME Sub- sidiaries¹			EME		Midwest Generation		Other EME Sub- sidiaries¹			EME
Service cost	$	0.6	$	0.6		$	1.2	$	0.8	$	0.4		$	1.2
Interest cost	1.2		0.8			2.0		1.4		0.8			2.2
Net amortization	0.8		(0.2		)	0.6		0.8		(0.1		)	0.7
Total expense	$	2.6	$	1.2		$	3.8	$	3.0	$	1.1		$	4.1


¹	Excludes Homer City.

Effective May 1, 2013, Homer City terminated further access and company subsidy of postretirement medical, dental, vision and life insurance coverage. For further discussion, see Note 13—Discontinued Operations.

Transfer of Certain Postretirement Benefits to EIX (EME only)

During 2012, EME transferred the executive deferred compensation and executive postretirement benefit liabilities related to active employees to EIX. EME agreed to fund changes to the projected benefit obligation of the executive postretirement benefits and the employer portion of the executive deferred compensation plan through EME's emergence from bankruptcy. During the six months ended June 30, 2013, EME funded $3 million in connection with this agreement.

Note 9. Commitments and Contingencies (EME and Midwest Generation, except as noted)

Lease Commitments

Powerton and Joliet Sale Leaseback

Covenants in the Powerton and Joliet Sale Leaseback documents include restrictions on the ability of EME and Midwest Generation to, among other things, incur debt, create liens on their property, merge or consolidate, sell assets, make investments, engage in transactions with affiliates, make distributions, make capital expenditures, enter into agreements restricting their ability to make distributions, engage in other lines of business, enter into swap agreements, or engage in transactions for any speculative purpose.

The filing of the Chapter 11 Cases constitutes an event of default under the Powerton and Joliet Sale Leaseback and under instruments governing the Senior Lease Obligation Bonds issued to finance these leases. Prior to the filing of the Chapter 11 Cases, EME and Midwest Generation had entered into a forbearance agreement with the owner-lessors, the owner-lessors' equity owners, and the Certificate Holders. Under the terms of the forbearance agreement, Midwest Generation did not make the scheduled lease payment of $76 million on January 2, 2013, but on February 15, 2013, did pay the ratable portion of the rent due under the leases attributable to the period between December 17, 2012 and January 2, 2013 of $7 million. This forbearance agreement has expired. In June 2013, EME and Midwest Generation agreed, among other things, to make monthly rental payments of $3.75 million beginning in July 2013, in lieu of the scheduled $76 million lease payment due on July 2, 2013. In addition, the Bankruptcy Court approved the extension of the statutory deadline by which the Debtor Entities must assume or reject the Powerton and Joliet leases until September 30, 2013.

Each lease sets forth a termination value payable upon certain circumstances, which generally declines over time. A default under the terms of the Powerton and Joliet leases could result in foreclosure and a loss by Midwest Generation of its lease interest in the plant. In addition, under certain circumstances, a default would trigger obligations under EME's guarantee of such leases. These events could have an adverse effect on EME's and Midwest Generation's results of operations and financial position.

Operating Lease Commitments

At June 30, 2013, Midwest Generation had future minimum operating lease payments totaling approximately $4 million, which consists of $2 million for the remainder of 2013, $1 million for 2014, and $1 million for 2015. Future minimum operating lease commitments decreased from December 31, 2012 primarily due to amended contracts and the rejection of executory contracts in connection with the Chapter 11 Cases.

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Other Commitments

Fuel Supply Contracts

At June 30, 2013, Midwest Generation had commitments to purchase coal from third-party suppliers at fixed prices, subject to adjustment clauses. These commitments under existing agreements are estimated to aggregate $312 million, which consists of: $162 million for the remainder of 2013 and $150 million for 2014. Midwest Generation has the right to reject these fuel supply contracts in connection with the Chapter 11 Cases. In July 2013, Midwest Generation entered into additional contractual agreements for the purchase of coal. These commitments are estimated to be $35 million for the remainder of 2013.

Capital Commitments

At ~~September~~ June 30, ~~2012~~2013, Midwest Generation had firm commitments to spend approximately $134 million during the remainder of ~~2012, $22 million for~~ 2013, ~~and $17 million~~ for ~~2015 for~~ capital expenditures. ~~Midwest Generation intends to fund these expenditures with cash on hand, subject to availability.~~

Other Contractual Obligations

At June 30, 2013, Midwest Generation had contractual commitments for the purchase of materials used in the operation of environmental controls equipment. These commitments are estimated to aggregate $25 million, which consists of $8 million for the remainder of 2013 and $17 million for 2014.

Guarantees and Indemnities

EME and certain of its subsidiaries have various financial and performance guarantees and indemnity agreements which are issued in the normal course of business. The contracts discussed below include performance guarantees.

Environmental Indemnities Related to the Midwest Generation Plants

In connection with the acquisition of the Midwest Generation plants, EME and Midwest Generation agreed to indemnify Commonwealth Edison Company (Commonwealth Edison) with respect to specified environmental liabilities before and after December 15, 1999, the date of sale. The indemnification obligations are reduced by any insurance proceeds and tax benefits related to such indemnified claims and are subject to a requirement that Commonwealth Edison takes all reasonable steps to mitigate losses related to any such indemnification claim. Also, in connection with the ~~sale-leaseback transaction related to the~~ Powerton and Joliet ~~Stations~~Sale ~~in Illinois~~Leaseback, EME agreed to indemnify the owner-lessors for specified environmental liabilities. These indemnities are not limited in term or amount. Due to the nature of the obligations under these indemnities, a maximum potential liability cannot be determined. Commonwealth Edison has advised ~~Midwest~~EME ~~Generation~~ that Commonwealth Edison believes it is entitled to indemnification for all liabilities, costs, and expenses that it may be required to bear as a result of the litigation discussed below under "—Contingencies—Midwest Generation New Source Review and Other Litigation," and one of the Powerton-Joliet owner-lessors has made a similar request for indemnification. Commonwealth Edison has also advised Midwest Generation that it believes it is entitled to indemnification for costs and expenses incurred in connection with the information requests discussed below under "—Contingencies—Environmental Remediation." Except as discussed below, EME and Midwest Generation ~~has~~have not recorded a liability related to these environmental indemnities.

Midwest Generation entered into a supplemental agreement with Commonwealth Edison and Exelon Generation Company LLC on February 20, 2003 to resolve a dispute regarding interpretation of Midwest Generation's reimbursement obligation for asbestos claims under the environmental indemnities set forth in the Asset Sale Agreement. Under this supplemental agreement, Midwest Generation agreed to reimburse Commonwealth Edison and Exelon Generation for 50% of specific asbestos claims pending as of February 2003 and related expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos-related claims as specified in the agreement. The obligations under this agreement are not subject to a maximum liability. The supplemental agreement had an initial five-year term with an automatic renewal provision for subsequent one-year terms (subject to the right of either party to terminate); pursuant to the automatic renewal provision, the supplemental agreement has been extended until February ~~2013~~2014. There were approximately ~~230~~260 cases for which Midwest Generation was potentially liable that had not been settled and dismissed at ~~September~~June 30, ~~2012~~2013. Midwest Generation had ~~recorded a liability of~~ $53 million recorded in LSTC at ~~September~~June 30, ~~2012~~2013 related to this contractual indemnity,. ~~included~~For indiscussion ~~benefit~~of ~~plans~~LSTC, ~~and~~see ~~other~~Note 14—Restructuring ~~long-term liabilities on its consolidated balance sheets~~Activities.

Indemnities ~~Provided~~Related ~~under~~to ~~Sale-Leaseback~~the ~~Agreements~~Homer City Plant (EME only)

In connection with the ~~sale-leaseback~~1999 ~~transactions~~acquisition ~~related~~of to the ~~Powerton~~Homer ~~and~~City ~~Joliet~~plant ~~Stations~~from ~~and,~~New ~~previously,~~York ~~the~~State ~~Collins~~Electric ~~Station,~~& ~~EME,~~Gas ~~Midwest~~Corporation ~~Generation~~(NYSEG) and ~~another~~Pennsylvania ~~wholly~~Electric ~~owned~~Company ~~subsidiary~~(Penelec) of(the ~~EME entered into tax indemnity agreements. Under certain of these tax indemnity agreements~~sellers), ~~Midwest~~Homer ~~Generation,~~City ~~as the lessee in the sale-leaseback transactions~~ agreed to indemnify the ~~respective~~sellers ~~lessors~~with ~~for~~respect to specified ~~adverse~~environmental ~~tax~~liabilities ~~consequences~~before ~~that~~and ~~could~~after ~~result~~the ~~from~~date ~~certain~~of ~~situations~~sale. ~~set~~EME ~~forth~~guaranteed inthis ~~each tax~~ indemnity ~~agreement,~~obligation ~~including~~of ~~specified~~Homer ~~defaults under the respective leases~~City. ~~Although~~In ~~the~~connection ~~Collins~~with ~~Station~~Homer ~~lease terminated in April 2004, Midwest Generation~~City's ~~indemnities~~divestiture ~~in favor~~ of ~~its~~assets ~~former~~to ~~lease~~an ~~equity~~affiliate ~~investors~~of ~~are~~General ~~still~~Electric inCapital ~~effect.~~Corporation ~~EME~~(GECC) ~~provided~~on ~~similar~~December 14, ~~indemnities~~2012, inEME ~~the sale~~re-~~leaseback~~affirmed ~~transactions~~its ~~related~~guaranty to ~~the~~NYSEG ~~Powerton~~ and ~~Joliet~~Penelec. ~~Stations~~Also in ~~Illinois.~~connection ~~The~~with ~~potential indemnity obligations under these tax indemnity agreements could be significant. Due to~~ the ~~nature~~recent ofasset ~~these~~transfer potential obligations, Midwest Generation cannot determine a range of estimated obligations which would be triggered by a valid claim from the lessors. Midwest Generation has not recorded a liability for these matters.

~~Other Indemnities~~31

Midwest Generation provides other indemnifications through contracts entered into in the normal course of business. Midwest Generation's obligations under these agreements may or may not be limited in terms of time and/or amount, and in some instances Midwest Generation may have recourse against third parties. Midwest Generation cannot determine a range of estimates and has not recorded a liability related to these indemnities.

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to the GECC affiliate, all operative documents with respect to Homer City's sale leaseback (including all EME indemnities in favor of the former owner-lessors) were terminated. In connection with the transfer, the GECC affiliate did not assume (and Homer City retained) liabilities for monetary fines and penalties for violations of environmental laws or environmental permits prior to the closing date. EME has not recorded a liability related to this indemnity. For discussion of the New Source Review lawsuit filed against Homer City, see "—Contingencies—Homer City New Source Review and Other Litigation."

Indemnities Provided under Asset Sale and Sale Leaseback Agreements

The asset sale agreements for the sale of EME's international assets contain indemnities from EME to the purchasers, including indemnification for taxes imposed with respect to operations of the assets prior to the sale and for pre-closing environmental liabilities. Not all indemnities under the asset sale agreements have specific expiration dates. At June 30, 2013, EME had $19 million recorded in LSTC related to these matters. For discussion of LSTC, see Note 14—Restructuring Activities.

In connection with the Powerton and Joliet Sale Leaseback and, previously, a sale leaseback transaction related to the Collins Station in Illinois, EME, Midwest Generation, and another wholly owned subsidiary of EME entered into tax indemnity agreements. Under certain of these tax indemnity agreements, Midwest Generation, as the lessee in the Powerton and Joliet Sale Leaseback, agreed to indemnify the respective owner-lessors for specified adverse tax consequences that could result from certain situations set forth in each tax indemnity agreement, including specified defaults under the respective leases. Although the Collins Station lease terminated in April 2004, Midwest Generation's indemnities in favor of its former lease equity investors are still in effect. EME provided similar indemnities in the Powerton and Joliet Sale Leaseback. The potential indemnity obligations under these tax indemnity agreements could be significant. Due to the nature of these potential obligations, EME and Midwest Generation cannot determine a range of estimated obligations which would be triggered by a valid claim from the owner-lessors. EME and Midwest Generation have not recorded a liability for these matters.

Other Indemnities

EME and Midwest Generation provide other indemnifications through contracts entered into in the normal course of business. These include, among other things, indemnities for specified environmental liabilities and for income taxes with respect to assets sold. EME's and Midwest Generation's obligations under these agreements may or may not be limited in terms of time and/or amount, and in some instances, EME and Midwest Generation may have recourse against third parties. EME and Midwest Generation cannot determine a range of estimates and have not recorded a liability related to these indemnities.

Contingencies

In addition to the matters disclosed in these notes, EME and Midwest Generation isare involved in other legal, tax, and regulatory proceedings before various courts and governmental agencies regarding matters arising in the ordinary course of business. EME and Midwest Generation ~~believes~~believe the outcome of these other proceedings ~~will not~~, individually orand in the aggregate, will not materially affect ~~its~~their results of operations or liquidity.

Midwest Generation New Source Review and Other Litigation

In August 2009, the United States Environmental Protection Agency (US EPA) and the State of Illinois filed a complaint in the United States District Court for the Northern District of Illinois alleging that Midwest Generation or Commonwealth Edison performed repair or replacement projects at six Illinois coal-fired electric generating stations in violation of the Prevention of Significant Deterioration (PSD) requirements and of the New Source Performance Standards of the Clean Air Act (CAA), including alleged requirements to obtain a construction permit and to install controls sufficient to meet best available control technology (BACT) emission rates. The US EPA also alleged that Midwest Generation and Commonwealth Edison violated certain operating permit requirements under Title V of the CAA. Finally, the US EPA alleged violations of certain opacity and particulate matter standards at the Midwest Generation plants. In addition to seeking penalties ranging from $25,000 to $37,500 per violation, per day, the complaint called for an injunction ordering Midwest Generation to install controls sufficient to meet BACT emission rates at all units subject to the complaint and other remedies. The remedies sought by the plaintiffs in the lawsuit could go well beyond the requirements of the Combined Pollutant Standard (CPS). Several Chicago-based environmental action groups intervened in the case.

Nine of the ten PSD claims raised in the complaint have been dismissed, along with claims related to alleged violations of Title V of the CAA, to the extent based on the dismissed PSD claims, and all claims asserted against Commonwealth Edison and EME. The dismissals were affirmed by the Seventh Circuit Court of Appeals in July 2013. The court denied a motion to dismiss a claim by the Chicago-based environmental action groups for civil penalties in the remaining PSD claim, but noted that the plaintiffs will be required to convince the court that the statute of limitations should be equitably tolled. The court did not address other counts in the complaint that allege violations of opacity and particulate matter limitations under the Illinois State Implementation Plan and Title V of the CAA. The dismissals have been certified as "partial final judgments" capable of appeal, and an appeal is pending before the Seventh Circuit Court of Appeals. The remaining claims have been stayed pending the appeal. In February 2012, certain of the environmental action groups that had intervened in the case entered into an agreement with Midwest Generation to dismiss without prejudice all of their opacity claims as to all defendants. The agreed upon motion to dismiss was approved by the court on March 26, 2012.

In January 2012, two complaints were filed against Midwest Generation in Illinois state court by residents living near the Crawford and Fisk Stations on behalf of themselves and all others similarly situated, each asserting claims of nuisance, negligence, trespass, and strict liability. The plaintiffs seek to have their suits certified as a class action and request injunctive relief, as well as compensatory and punitive damages. The complaints are similar to two complaints previously filed in the Northern District of Illinois, which were dismissed in October 2011 for lack of federal jurisdiction. Midwest Generation's motions to dismiss the cases were denied in August 2012, following which the plaintiffs filed amended complaints alleging substantially similar claims and requesting similar relief.32

InTable October 2012, Midwest Generation and the Illinois Environmental Protection Agency entered into Compliance Commitment Agreements outlining specified environmental remediation measures and groundwater monitoring activities to be undertaken at its Powerton, Joliet, Crawford, Will County and Waukegan generating stations. Also in October 2012, several environmental groups filed a complaint before the Illinois Pollution Control Board against Midwest Generation, alleging violations of the Illinois groundwater standards through the operation of coal ash disposal ponds at its Powerton, Joliet, Waukegan and Will County generating stations. The complaint requests the imposition of civil penalties, injunctive relief and remediation. Contents

~~Adverse~~not ~~decisions~~address other counts in ~~these~~the ~~cases~~complaint ~~could~~that ~~involve~~allege ~~penalties,~~violations ~~remedial~~of ~~actions~~opacity and ~~damages~~particulate ~~that~~matter ~~could~~limitations ~~have~~under athe ~~material~~Illinois ~~impact~~State onImplementation ~~the~~Plan ~~financial condition~~ and ~~results~~Title V of ~~operations~~the ~~of Midwest Generation~~CAA. ~~Midwest~~In ~~Generation~~February ~~cannot~~2012, ~~predict~~certain of the ~~outcome~~environmental ofaction ~~these~~groups ~~matters~~that orhad ~~estimate~~intervened in the ~~impact~~case onentered ~~the~~into an agreement with Midwest Generation ~~plants,~~to ordismiss ~~its~~without ~~results~~prejudice all of ~~operations,~~their ~~financial~~opacity ~~position~~claims oras ~~cash~~to ~~flows~~all defendants. ~~Midwest~~The ~~Generation~~agreed ~~has~~upon ~~not~~motion ~~recorded~~to adismiss ~~liability~~was ~~for~~approved ~~these~~by ~~matters~~the court on March 26, 2012.

In January 2012, two complaints were filed against Midwest Generation in Illinois state court by residents living near the Crawford and Fisk Stations on behalf of themselves and all others similarly situated, each asserting claims of nuisance, negligence, trespass, and strict liability. The plaintiffs seek to have their suits certified as a class action and request injunctive relief, as well as compensatory and punitive damages. The complaints are similar to two complaints previously filed in the United States District Court for the Northern District of Illinois, which were dismissed in October 2011 for lack of federal jurisdiction. Midwest Generation's motions to dismiss the cases were denied in August 2012, following which the plaintiffs filed amended complaints alleging substantially similar claims and requesting similar relief. Midwest Generation has filed motions to dismiss the amended complaints, and these complaints are stayed as a result of the Chapter 11 Cases.

In October 2012, Midwest Generation and the Illinois Environmental Protection Agency entered into Compliance Commitment Agreements outlining specified environmental remediation measures and groundwater monitoring activities to be undertaken at its Powerton, Joliet, Crawford, Will County, and Waukegan generating stations. Also in October 2012, several environmental groups filed a complaint before the Illinois Pollution Control Board against Midwest Generation, alleging violations of the Illinois groundwater standards through the operation of coal ash disposal ponds at its Powerton, Joliet, Waukegan, and Will County generating stations. The complaint requests the imposition of civil penalties, injunctive relief, and remediation. The matter is currently stayed as a result of the Chapter 11 Cases, although that stay was lifted in part in April 2013 so that the proceedings may continue for the sole purpose of adjudicating Midwest Generation's motion to dismiss the complaint.

In December 2012, the Sierra Club filed a complaint before the Illinois Pollution Control Board against Midwest Generation, alleging violations of sulfur dioxide (SO₂) emissions standards at its Powerton, Joliet, Waukegan, and Will County generating stations. The complaint is based on alleged violations of the US EPA National Ambient Air Quality Standards (NAAQS) regulations for 1-hour SO₂, which have not yet been incorporated into any specific state implementation plan in Illinois. The complaint requests the imposition of civil penalties, injunctive relief, and the imposition of further reductions on SO₂emissions to offset past emissions. The complaint is now stayed as a result of the Chapter 11 Cases.

Adverse decisions in these cases could involve penalties, remedial actions, and damages that could have a material impact on the financial condition and results of operations of Midwest Generation and EME. EME cannot predict the outcome of these matters or estimate the impact on the Midwest Generation plants, or EME's and Midwest Generation's results of operations, financial position, or cash flows. EME and Midwest Generation have not recorded a liability for these matters.

Homer City New Source Review and Other Litigation (EME only)

In January 2011, the US EPA filed a complaint in the United States District Court for the Western District of Pennsylvania against Homer City, the sale leaseback owner participants of the Homer City plant, and two prior owners of the Homer City plant. The complaint alleged violations of the PSD and Title V provisions of the CAA as a result of projects in the 1990s performed by prior owners without PSD permits and the subsequent failure to incorporate emissions limitations that meet BACT into the station's Title V operating permit. In addition to seeking penalties ranging from $32,500 to $37,500 per violation per day, the complaint called for an injunction ordering Homer City to install controls sufficient to meet BACT emission rates at all units subject to the complaint and for other remedies. The PADEP, the State of New York, and the State of New Jersey intervened in the lawsuit. In October 2011, all of the claims in the US EPA's lawsuit were dismissed with prejudice. An appeal of the dismissal is pending before the United States Court of Appeals for the Third Circuit.

Also in January 2011, two residents filed a complaint in the United States District Court for the Western District of Pennsylvania, on behalf of themselves and all others similarly situated, against Homer City, the sale leaseback owner participants of the Homer City plant, two prior owners of the Homer City plant, EME, and EIX, claiming that emissions from the Homer City plant had adversely affected their health and property values. The plaintiffs sought to have their suit certified as a class action and requested injunctive relief, the funding of a health assessment study and medical monitoring, as well as compensatory and punitive damages. In October 2011, the claims in the purported class action lawsuit that were based on the federal CAA were dismissed with prejudice, while state law statutory and common law claims were dismissed without prejudice to re-file in state court should the plaintiffs choose to do so. EME does not know whether the plaintiffs will file a complaint in state court.

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Adverse decisions in these cases could involve penalties, remedial actions, and damages. EME cannot predict the outcome of these matters or estimate the impact on its results of operations, financial position, or cash flows. EME has not recorded a liability for these matters.

Environmental Remediation

Legislative and regulatory activities by federal, state, and local authorities in the United States relating to energy and the environment impose numerous restrictions and requirements with respect to the operation of EME's existing facilities, including the Midwest Generation plants, and affect the timing, cost, ~~and~~location, design, construction, ofand ~~capital~~operation ~~improvements~~of tonew ~~the~~facilities ~~Midwest~~by ~~Generation~~EME's ~~plants~~subsidiaries, as well as the cost of mitigating the environmental impacts of past operations.

13With respect to potential liabilities arising under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) or similar laws for the investigation and remediation of contaminated property, EME and Midwest Generation accrue a liability to the extent the costs are probable and can be reasonably estimated. Midwest Generation had accrued a probable amount of approximately $8 million at June 30, 2013 for estimated environmental investigation and remediation costs for two stations at the Midwest Generation plants. This estimate is based upon the number of sites, the scope of work, and the estimated costs for investigation and/or remediation where such expenditures could be reasonably estimated. EME and Midwest Generation also have identified sites for which a reasonable estimate cannot be made. Future estimated costs may vary based on changes in regulations or requirements of federal, state or local governmental agencies, changes in technology, and actual costs of disposal. In addition, future remediation costs will be affected by the nature and extent of contamination discovered at the sites that require remediation. Given the prior history of the operations at its facilities, EME and Midwest Generation cannot be certain that the existence or extent of all contamination at its sites has been fully identified.

Chevron Adversary Proceeding (EME only)

In December 2012, Chevron Kern River Company and Chevron Sycamore Cogeneration Company filed a complaint against Southern Sierra Energy Company and Western Sierra Energy in the Chapter 11 Cases. The plaintiffs and defendants are partners in the Kern River and Sycamore projects. The complaint alleged that the filing of the Chapter 11 Cases constituted a default under the partnership agreements related to those projects, entitling the defendants to expel the plaintiffs from the partnerships and pay for their interests at a price based on the net book value of the partnerships, and sought a declaratory judgment, injunctive relief, and relief from the automatic stay in support of those alleged remedies. In January 2013, the Bankruptcy Court denied the plaintiffs' request for relief from the automatic stay and a preliminary injunction. The plaintiffs have filed a notice of appeal, and the defendants have moved to stay proceedings until the plaintiffs' appeal is decided. The Bankruptcy Court has twice continued the proceedings, and the next hearing is scheduled for August 21, 2013.

Note 10. Environmental Developments (EME, Midwest Generation)

Midwest Generation Environmental Compliance Plans and Costs

On April 4, 2013, Midwest Generation was granted a variance, subject to various conditions, by the Illinois Pollution Control Board from the CPS system-wide annual SO₂ emission rate in 2015 and 2016 and an extension of Waukegan Unit 8's unit specific retrofit requirements from December 31, 2014 until May 31, 2015. Among the conditions of the variance, the Illinois Pollution Control Board accelerated the unit specific retrofit requirements of Powerton Unit 6 to December 31, 2014 and required the retrofitting of Waukegan Unit 7 by December 31, 2014. Midwest Generation has accepted the variance. As a result of the variance, it is more likely that Midwest Generation will install environmental controls at Waukegan Unit 7, which had been impaired from an accounting perspective during the fourth quarter of 2011. If Midwest Generation ultimately decides to install environmental controls at Waukegan Unit 7, less of Midwest Generation's available liquidity will be available to install environmental controls at other units. The likelihood of installation of environmental controls at each station is a key judgment used in developing probability weighted undiscounted cash flows for the purposes of impairment testing under ASC 360. Decreases in the expected likelihood of installing environmental controls or other decreases in expected future cash flows at Midwest Generation's plants could result in additional impairment charges.

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~~With~~The ~~respect~~following totable ~~potential~~summarizes liabilities arising under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, commonly referred to as CERCLA, or similar laws for the investigation and remediation of contaminated property, Midwest Generation's ~~accrues~~carrying avalue ~~liability to the extent the costs are probable and can be reasonably estimated. Midwest Generation had accrued a probable amount of approximately $9 million at September 30, 2012~~ for ~~estimated environmental investigation and remediation costs for four stations at~~ the Midwest Generation plants. This estimate is based upon the number of sites, the scope of work and the estimated costs for investigation and/or remediation where such expenditures could be reasonably estimated. Midwest Generation also has identified stations for which a reasonable estimate cannot be made. Future estimated costs may vary based on changes in regulations or requirements of federal, state or local governmental agencies, changes in technology, and actual costs of disposal. In addition, future remediation costs will be affected by the nature and extent of contamination discovered at ~~the~~June ~~sites that require remediation. Given the prior history of the operations at its facilities~~30, ~~Midwest Generation cannot be certain that the existence or extent of all contamination at its sites has been fully identified.~~2013:

In September 2012, Midwest Generation received a request for information under Section 104(e) of CERCLA regarding environmental sampling and investigation performed at its Fisk and Crawford sites. In October 2012, Midwest Generation responded to the request.



(in millions)	June 30, 2013
Joliet Station¹	$	687
Powerton Station	810
Will County Station²	471
Fleet assets	66
Property, Plant and Equipment, net	$	2,034

~~Note 7.~~1 ~~Environmental~~The ~~Developments~~Joliet Station is composed of Units 6, 7, and 8.

~~Cross-State~~2 ~~Air~~The ~~Pollution~~Will ~~Rule~~County Station is composed of Units 3 and 4. Midwest Generation permanently shut down Will County Station Units 1 and 2, totaling 299 MW of capacity, on December 29, 2010 in accordance with the CPS.

In August 2012, the U.S. Court of Appeals for the District of Columbia Circuit vacated the US EPA's Cross-State Air Pollution Rule (CSAPR) and directed the US EPA to continue administering the Clean Air Interstate Rule (CAIR) pending the promulgation of a valid replacement. In October 2012, the US EPA filed a petition seeking to have the decision reviewed by the full District of Columbia Circuit.

Hazardous Air Pollutant Regulations

In December 2011, the US EPA announced the Mercury and Air Toxics Standards (MATS) rule, limiting emissions of hazardous air pollutants from coal- and oil-fired electrical generating units. The rule was published in the Federal Register on February 16, 2012, and became effective on April 16, 2012. A number of parties have filed notices of appeal challenging the rule.

Greenhouse Gas Regulation

InOn ~~March~~June 25, ~~2012~~2013, President Obama signed a memorandum directing the US EPA ~~announced~~to issue a new proposed ~~carbon~~regulation ~~dioxide~~governing ~~emissions~~greenhouse ~~limits~~gas ~~for~~(GHG) emissions from new ~~power~~electric ~~plants~~generating stations by September 20, 2013. The ~~status~~memorandum ofalso directed the US EPA's ~~efforts~~ to ~~develop~~issue ~~greenhouse~~proposed ~~gas~~GHG ~~emissions~~emission ~~performance~~standards, regulations or guidelines, as appropriate, for reconstructed and existing electric generating stations by June 1, 2014 and to finalize such standards, regulations or guidelines by June 1, 2015. The memorandum further directed the US EPA to include in the guidelines for existing plants isa ~~unknown~~requirement that states submit their implementation plans responding to such guidelines to the US EPA by June 30, 2016.

In June 2012, the U.S. Court of Appeals for the D.C. Circuit dismissed the challenge by industry groups and some states to the Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, known as the "GHG tailoring rule." In August 2012, states and industry groups challenging the rule filed a petition seeking to have the decision reviewed by the full District of Columbia Circuit.

In July 2012, the US EPA published a final rule maintaining the CO2 equivalent emissions thresholds (for purposes of PSD and Title V permitting) originally established in the GHG tailoring rule.

Greenhouse Gas Litigation

In ~~March~~April ~~2012~~2013, the ~~federal~~United ~~district~~States ~~court~~Court inof ~~Mississippi~~Appeals ~~dismissed,~~for ~~in its entirety,~~ the ~~purported~~Fifth ~~class~~Circuit ~~action~~dismissed, ~~complaint~~as ~~filed~~to byEME ~~private~~and ~~citizens~~three inwholly ~~May~~owned ~~2011~~EME subsidiaries, ~~naming~~the aplaintiffs' ~~large~~appeal ~~number~~ of ~~defendants,~~the ~~including~~Mississippi ~~Midwest~~federal ~~Generation~~district court's ~~parent~~dismissal ~~company,~~of ~~EME,~~a ~~for~~lawsuit ~~damages~~filed ~~allegedly~~in ~~arising~~March ~~from~~2012 ~~Hurricane~~against ~~Katrina.~~a Inlarge ~~April~~number ~~2012,~~of ~~the~~defendants ~~plaintiffs~~(including ~~filed~~EME anand ~~appeal with~~ the ~~Fifth~~three ~~Circuit~~subsidiaries). ~~Court~~The ofplaintiffs ~~Appeals.~~had ~~Plaintiffs~~alleged ~~allege~~ that ~~the~~ defendants' activities resulted in emissions of substantial quantities of ~~greenhouse~~GHG ~~gases~~ that have contributed to climate change and sea level rise, which in turn ~~are~~were alleged to have increased the destructive force of Hurricane Katrina. The lawsuit alleges causes of action for negligence, public and private nuisance, and trespass, and seeks unspecified compensatory and punitive damages. The claims in this lawsuit are nearly identical to a subset of the claims that were raised against many of the same defendants in a previous lawsuit that was filed in, and dismissed by, the same federal district court where the current case has been filed.

In ~~September~~May ~~2012~~2013, athe ~~three-judge~~United ~~panel~~States ofSupreme Court declined to review the ~~U.S~~dismissal by the United States Court of Appeals for the Ninth Circuit ~~affirmed the dismissal~~ of a case brought against EME's parent company, ~~Edison International~~EIX, and other defendants, by the Alaskan Native Village of Kivalina. ~~In October 2012, the plaintiffs requested a rehearing by a larger panel of Ninth Circuit judges.~~

14Cross-State Air Pollution Rule

The U.S. Supreme Court has agreed to review the United States Court of Appeals for the District of Columbia Circuit's August 2012 decision, which vacated the US EPA's Cross-State Air Pollution Rule and directed the US EPA to continue administering the Clean Air Interstate Rule pending the promulgation of a valid replacement.

Water Quality

Regulations under the Clean Water Act that would affect cooling water intake structures at generating facilities, previously expected to be finalized by June 2013, are now expected in November 2013.

In June 2013, the US EPA proposed changes to the Steam Electric Guideline Regulation which sets discharge limits for various operations which discharge to waters of the United States. EME is reviewing the proposed rule and intends to provide comments. The rule is scheduled for issuance by May 2014.

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Note 811. Accumulated Other Comprehensive Loss (EME, Midwest Generation)

~~Accumulated other comprehensive loss consisted of the following:~~EME

(in millions)	UnrealizedGains (Losses) on Cash FlowHedges, Net			UnrecognizedLosses andPrior ServiceAdjustments, Net1			AccumulatedOtherComprehensiveLoss
Balance at December 31, 2011	$	21		$	(38	)	$	(17	)
Current period change	(17		)	(9		)	(26		)
Balance at September 30, 2012	$	4		$	(47	)	$	(43	)

EME's AOCI, net of tax and including discontinued operations, consisted of:

1 For further detail, see Note 5—Compensation and Benefit Plans.



(in millions)	Unrealized Gains and (Losses) on Cash Flow Hedges			Unrecognized Loss and Prior Service Adjustments, Net¹			Valuation Allowance on Deferred Tax Asset			AOCI
Balance at December 31, 2012	$	(76	)	$	(56	)	$	(6	)	$	(138	)
OCI before reclassifications	27			(2		)	—			25
Amount reclassified from AOCI	2			2			—			4
Balance at June 30, 2013²	$	(47	)	$	(56

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