UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

¨	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: 333-63240

GenOn Americas Generation, LLC

(Exact Name of Registrant as Specified in Its Charter)

51-0390520

(I.R.S. Employer Identification No.)

Commission File Number: 333-61668

GenOn Mid-Atlantic, LLC

(Exact Name of Registrant as Specified in Its Charter)


Delaware		58-2574140
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1000 Main Street,
Houston, Texas		77002
(Address of Principal Executive Offices)		(Zip Code)

(832) 357-3000

(Registrant’s Telephone Number, Including Area Code)

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. (As a voluntary filer not subject to filing requirements, the registrant nevertheless filed all reports which would have been required to be filed by Section 15(d) of the Exchange Act during the preceding 12 months had the registrant been required to file reports pursuant to Section 15(d) of the Securities Exchange Act of 1934 solely as a result of having registered debt securities under the Securities Act of 1933.)


GenOn Americas Generation, LLC		¨ Yes ¨ No
GenOn Mid-Atlantic, LLC		¨ Yes ¨ No

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


GenOn Americas Generation, LLC		þ Yes ¨ No
GenOn Mid-Atlantic, LLC		þ Yes ¨ No

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.


	Large accelerated filer	Accelerated filer	Non-accelerated filer	Smaller reporting company
GenOn Americas Generation, LLC	¨	¨	þ	¨
GenOn Mid-Atlantic, LLC	¨	¨	þ	¨

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


GenOn Americas Generation, LLC		¨ Yes þ No
GenOn Mid-Atlantic, LLC		¨ Yes þ No

All of the registrant’s outstanding membership interests are held by its parent and there are no membership interest held by nonaffiliates.


Registrant		Parent
GenOn Americas Generation, LLC		GenOn Americas, Inc.
GenOn Mid-Atlantic, LLC		GenOn North America, LLC

This combined Form 10-Q is separately filed by GenOn Americas Generation, LLC and GenOn Mid-Atlantic, LLC. Information contained in this combined Form 10-Q relating to GenOn Americas Generation, LLC and GenOn Mid-Atlantic, LLC is filed by such registrant on its own behalf and each registrant makes no representation as to information relating to registrants other than itself.

NOTE: WHEREAS GENON AMERICAS GENERATION, LLC AND GENON MID-ATLANTIC, LLC MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q, THIS COMBINED FORM 10-Q IS BEING FILED WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION H(2).

TABLE OF CONTENTS


Glossary of Certain Defined Terms		iv
Cautionary Statement Regarding Forward-Looking Information		vii

PART I
FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	1
	GenOn Americas Generation, LLC:
	Condensed Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended September 30, 2011 and 2010	1
	Condensed Consolidated Balance Sheets (Unaudited) September 30, 2011 and December 31, 2010	2
	Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2011 and 2010	3
	GenOn Mid-Atlantic, LLC:
	Condensed Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended September 30, 2011 and 2010	4
	Condensed Consolidated Balance Sheets (Unaudited) September 30, 2011 and December 31, 2010	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2011 and 2010	6
	Combined Notes to Condensed Consolidated Financial Statements (Unaudited)	7

ITEM 2.	MANAGEMENT’S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION	42
	GenOn Americas Generation, LLC:
	Overview	42
	Merger of Mirant and RRI Energy	42
	Hedging Activities	42
	Capital Expenditures and Capital Resources	44
	Environmental Matters	44
	Potrero Shutdown	47
	Potomac River Retirement	47
	Commodity Prices	48
	Results of Operations	48
	Financial Condition	54
	Historical Cash Flows	57
	Recently Adopted Accounting Guidance	59
	GenOn Mid-Atlantic, LLC:
	Overview	60
	Merger of Mirant and RRI Energy	60
	Hedging Activities	60
	Capital Expenditures and Capital Resources	62
	Environmental Matters	62
	Potomac River Retirement	62
	Commodity Prices	62
	Results of Operations	63
	Financial Condition	66
	Historical Cash Flows	68
	Recently Adopted Accounting Guidance	68


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS	69

ITEM 4.	CONTROLS AND PROCEDURES	69
	Effectiveness of Disclosure Controls and Procedures	69
	Changesin Internal Control Over Financial Reporting	69

PART II

ITEM 1.	LEGAL PROCEEDINGS	70

ITEM 6.	EXHIBITS
	GenOn Americas Generation, LLC	70
	GenOn Mid-Atlantic, LLC	71

iii

Glossary of Certain Defined Terms


AB 32		California’s Global Warming Solutions Act.

ancillary services		Services that ensure reliability and support the transmission of electricity from generation sites to customer loads. Such services include regulation service, spinning and non-spinning reserves and voltage support.

Administrative Services Agreement		Management, personnel and services agreement with GenOn Energy Services, effective January 3, 2006.

Bankruptcy Court		United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division.

baseload generating units		Units designed to satisfy minimum baseload requirements of the system and produce electricity at an essentially constant rate and run continuously.

CAIR		Clean Air Interstate Rule.

CAISO		California Independent System Operator.

capacity		Energy that could have been generated at continuous full-power operation during the period.

CARB		California Air Resources Board.

CFTC		Commodity Futures Trading Commission.

Clean Air Act		Federal Clean Air Act.

CO₂		Carbon dioxide.

CSAPR		Cross-State Air Pollution Rule.

dark spread		The difference between power prices and coal fuel costs.

D.C. Circuit		The United States Court of Appeals for the District of Columbia Circuit.

Dodd-Frank Act		The Dodd-Frank Wall Street Reform and Consumer Protection Act.

EPA		United States Environmental Protection Agency.

EPC		Engineering, procurement and construction.

Exchange Act		Securities Exchange Act of 1934, as amended.

FASB		Financial Accounting Standards Board.

FERC		Federal Energy Regulatory Commission.

GAAP		United States generally accepted accounting principles.

GenOn		GenOn Energy, Inc. (formerly known as RRI Energy, Inc.) and, except where the context indicates otherwise, its subsidiaries, after giving effect to the Merger.

GenOn Americas		GenOn Americas, Inc. (formerly known as Mirant Americas, Inc.).

GenOn Americas Generation		GenOn Americas Generation, LLC (formerly known as Mirant Americas Generation, LLC).

GenOn California North		GenOn California North, LLC (formerly known as Mirant California, LLC).

GenOn Chalk Point		GenOn Chalk Point, LLC (formerly known as Mirant Chalk Point, LLC).

GenOn credit facilities		Senior secured term loan and revolving credit facility of GenOn and certain of its subsidiaries.


GenOn Energy Holdings		GenOn Energy Holdings, Inc. (formerly known as Mirant Corporation) and, except where the context indicates otherwise, its subsidiaries.

GenOn Energy Management		GenOn Energy Management, LLC (formerly known as Mirant Energy Trading, LLC).

GenOn Energy Services		GenOn Energy Services, LLC (formerly known as Mirant Services, LLC).

GenOn Kendall		GenOn Kendall, LLC (formerly known as Mirant Kendall, LLC).

GenOn Marsh Landing		GenOn Marsh Landing, LLC (formerly known as Mirant Marsh Landing, LLC).

GenOn Mid-Atlantic		GenOn Mid-Atlantic, LLC (formerly known as Mirant Mid-Atlantic, LLC) and, except where the context indicates otherwise, its subsidiaries.

GenOn North America		GenOn North America, LLC (formerly known as Mirant North America, LLC).

GenOn Potomac River		GenOn Potomac River, LLC (formerly known as Mirant Potomac River, LLC).

HAPs		Hazardous Air Pollutants.

Hudson Valley Gas		Hudson Valley Gas Corporation.

intermediate generating units		Units designed to satisfy system requirements that are greater than baseload and less than peaking.

ISO		Independent system operator.

ISO-NE		Independent System Operator-New England.

LIBOR		London InterBank Offered Rate.

MDE		Maryland Department of the Environment.

Merger		The merger completed on December 3, 2010 pursuant to the Merger Agreement.

Merger Agreement		The agreement by and among Mirant Corporation, RRI Energy, Inc. and RRI Energy Holdings, Inc. dated as of April 11, 2010.

Mirant		GenOn Energy Holdings, Inc. (formerly known as Mirant Corporation) and, except where the context indicates otherwise, its subsidiaries.

MW		Megawatt.

MWh		Megawatt hour.

NAAQS		National Ambient Air Quality Standards.

net generating capacity		Net summer capacity.

NOV		Notice of violation.

NO_x		Nitrogen oxides.

NPDES		National pollutant discharge elimination system.

NYISO		New York Independent System Operator.

NYMEX		New York Mercantile Exchange.

OTC		Over-the-counter.

peaking generating units		Units designed to satisfy demand requirements during the periods of greatest or peak load on the system.

PEPCO		Potomac Electric Power Company.


PG&E		Pacific Gas & Electric Company.

PJM		PJM Interconnection, LLC.

Plan		The plan of reorganization that was approved in conjunction with Mirant Corporation’s, GenOn Americas Generation, LLC’s and GenOn Mid-Atlantic, LLC’s emergence from bankruptcy protection on January 3, 2006.

Power Sale, Fuel Supply and Services Agreement		Power sale, fuel supply and services agreement with Mirant Americas Energy Marketing, LP. effective January 3, 2006. As of February 1, 2006, the agreement was transferred to GenOn Energy Management.

PPA		Power purchase agreement.

RGGI		Regional Greenhouse Gas Initiative.

RMR		Reliability-must-run.

RRI Energy		RRI Energy, Inc., which changed its name to GenOn Energy, Inc. in connection with the Merger.

RTO		Regional Transmission Organization.

SCR		Selective catalytic reduction emissions controls.

scrubbers		Flue gas desulfurization emissions controls.

SEC		United States Securities and Exchange Commission.

Securities Act		Securities Act of 1933, as amended.

SO₂		Sulfur dioxide.

spark spread		The difference between power prices and natural gas fuel costs.

Stone & Webster		Stone & Webster, Inc.

swaption		An option that grants the holder the right, but not the obligation, to enter into the underlying swap.

WCI		Western Climate Initiative.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

In addition to historical information, the information presented in this combined Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements involve known and unknown risks and uncertainties and relate to our revenues, income, capital structure and other financial items, future events, our future financial performance or our projected business results and our view of economic and market conditions. In some cases, one can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “expect,” “intend,” “seek,” “plan,” “think,” “anticipate,” “estimate,” “predict,” “target,” “potential” or “continue” or the negative of these terms or other comparable terminology.

Forward-looking statements are only predictions. Actual events or results may differ materially from any forward-looking statement as a result of various factors, which include:

•

our ability to integrate successfully the businesses following the Merger or realize cost savings and any other synergies as a result of the Merger;

•

our ability to enter into intermediate and long-term contracts to sell power or to hedge economically our expected future generation of power, and to obtain adequate supply and delivery of fuel for our generating facilities, at our required specifications and on terms and prices acceptable to us;

•

failure to obtain adequate fuel supply, including from curtailments of the transportation of fuel;

•

changes in market conditions, including developments in the supply, demand, volume and pricing of electricity and other commodities such as coal and natural gas in the energy markets, including efforts to reduce demand for electricity and to encourage the development of renewable sources of electricity, and the extent and timing of the entry of additional competition in our markets;

•

deterioration in the financial condition of our counterparties, including financial counterparties and affiliates, and the failure of such parties to pay amounts owed to us beyond collateral posted or to perform obligations or services due to us;

•

the failure of our generating facilities to perform as expected, including outages for unscheduled maintenance or repair;

•

hazards customary to the power generation industry and the possibility that we may not have adequate insurance to cover losses resulting from such hazards or the inability of our insurers to provide agreed upon coverage;

•

our failure to utilize new, or advancements in, power generation technologies;

•

strikes, union activity or labor unrest;

•

our ability to develop or recruit capable leaders and our ability to retain or replace the services of key employees;

•

weather and other natural phenomena, including hurricanes and earthquakes;

•

the cost and availability of emissions allowances;

•

the curtailment of operations and reduced prices for electricity resulting from transmission constraints;

•

the ability of GenOn Americas Generation to execute its business plan in northern California, including entering into new arrangements for sales of capacity, energy and other products from its existing generating facilities;

vii

•

our relative lack of geographic diversification of revenue sources resulting in concentrated exposure to the PJM market;

•

war, terrorist activities, cyberterrorism and inadequate cybersecurity, or the occurrence of a catastrophic loss;

•

our failure to provide a safe working environment for our employees and visitors thereby increasing our exposure to additional liability, loss of productive time, other costs and a damaged reputation;

•

poor economic and financial market conditions, including impacts on financial institutions and other current and potential counterparties, and negative impacts on liquidity in the power and fuel markets in which we hedge economically and transact;

•

increased credit standards, margin requirements, market volatility or other market conditions that could increase our obligations to post collateral beyond amounts that are expected, including additional collateral costs associated with OTC hedging activities as a result of new or proposed laws, rules and regulations governing derivative financial instruments (such as the Dodd-Frank Act and related pending rulemaking proceedings);

•

our inability to access effectively the OTC and exchange-based commodity markets or changes in commodity market conditions and liquidity, including as a result of new or proposed laws, rules and regulations governing derivative financial instruments (such as the Dodd-Frank Act and related pending rulemaking proceedings), which may affect our ability to engage in asset management and, for GenOn Americas Generation, proprietary trading and fuel oil management activities as expected, or may result in material losses from open positions;

•

volatility in our gross margin as a result of changes in the fair value of our derivative financial instruments used in our asset management and GenOn Americas Generation’s proprietary trading and fuel oil management activities and volatility in our cash flow from operations resulting from working capital requirements, including collateral, to support our asset management and GenOn Americas Generation’s proprietary trading and fuel oil management activities;

•

legislative and regulatory initiatives regarding deregulation, regulation or restructuring of the industry of generating, transmitting and distributing electricity (the electricity industry); changes in state, federal and other regulations affecting the electricity industry (including rate and other regulations); changes in tax laws and regulations to which we and our subsidiaries are subject; and changes in, or changes in the application of, environmental and other laws and regulations to which we and our subsidiaries and affiliates are or could become subject;

•

more stringent environmental laws and regulations (including the cumulative effect of many such regulations) that restrict our ability or render it uneconomic to operate our assets, including regulations related to air emissions;

•

increased regulation that limits our access to adequate water supplies and landfill options needed to support power generation or that increases the costs of cooling water and handling, transporting and disposing of ash and other byproducts;

•

price mitigation strategies employed by ISOs or RTOs that reduce our revenue and may result in a failure to compensate our generating units adequately for all of their costs;

•

legal and political challenges to or changes in the rules used to calculate payments for capacity, energy and ancillary services or the establishment of bifurcated markets, incentives or other market design changes that give preferential treatment to new generating facilities over existing generating facilities;

•

the disposition of pending or threatened litigation, including environmental litigation;

viii

•

the inability of GenOn Americas Generation’s operating subsidiaries to generate sufficient cash to support their operations;

•

the ability of lenders under GenOn’s revolving credit facility to perform their obligations;

•

GenOn Americas Generation’s consolidated indebtedness and the possibility that GenOn Americas Generation or its subsidiaries may incur additional indebtedness in the future;

•

restrictions on the ability of GenOn Americas Generation’s subsidiaries to pay dividends, make distributions or otherwise transfer funds to GenOn Americas Generation, including restrictions on GenOn Mid-Atlantic contained in its operating lease documents, which may affect GenOn Americas Generation’s ability to access the cash flows of those subsidiaries to make debt service and other payments;

•

failure to comply with provisions of GenOn Mid-Atlantic’s operating leases, GenOn Americas Generation’s debt and affiliates’ loan agreements and debt may lead to a breach and, if not remedied, result in an event of default thereunder, which could result in such lessors, lenders and debt holders exercising remedies, limit access to needed liquidity and damage our reputation and relationships with financial institutions;

•

covenants contained in our affiliates’ credit facilities, debt and leases that restrict our current and future operations, particularly our ability to respond to changes or take certain actions that may be in our long-term best interests; and

•

our and our affiliates’ ability to borrow additional funds and access capital markets.

Many of these risks, uncertainties and assumptions are beyond our ability to control or predict. All forward-looking statements contained herein are expressly qualified in their entirety by cautionary statements contained throughout this report. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made.

We undertake no obligation to update publicly or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report. Our filings and other important information are also available on our investor relations page at www.genon.com/investors.aspx.

In addition to the discussion of certain risks in “Management’s Narrative of the Results of Operations and Financial Condition” and the accompanying combined notes to GenOn Americas Generation, LLC’s and GenOn Mid-Atlantic, LLC’s interim financial statements, other factors that could affect our future performance are set forth in our 2010 Annual Report on Form 10-K.

Certain Terms

As used in this report, unless the context requires otherwise, “we,” “us,” “our” and “GenOn Americas Generation” refer to GenOn Americas Generation, LLC and its consolidated subsidiaries and “GenOn Mid-Atlantic” refer to GenOn Mid-Atlantic, LLC and its consolidated subsidiaries.

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GENON AMERICAS GENERATION, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		September 30,			September 30,			September 30,			September 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(in millions)

Operating revenues (including unrealized gains (losses) of $37 million, $154 million, $(70) million and $286 million, respectively)	$	929		$	775		$	2,182		$	1,899
Operating revenues—affiliate (including unrealized gains (losses) of $(27) million, $0, $(19) million and $0, respectively)		(16	)		—			(3	)		—

Total operating revenues		913			775			2,179			1,899

Cost of fuel, electricity and other products (including unrealized (gains) losses of $11 million, $(13) million, $(18) million and $107 million, respectively)		210			245			513			720
Cost of fuel, electricity and other products—affiliate (including unrealized (gains) losses of $(1) million, $0, $(1) million and $0, respectively)		494			2			994			6

Total cost of fuel, electricity and other products		704			247			1,507			726

Gross Margin (excluding depreciation and amortization)		209			528			672			1,173

Operating Expenses:
Operations and maintenance		73			88			270			270
Operations and maintenance—affiliate		53			74			172			216
Depreciation and amortization		42			52			124			151
Impairment losses		128			—			128			—
Gain on sales of assets, net		(6	)		(1	)		(5	)		(4	)
Loss on sales of assets, net—affiliate		2			—			2			—

Total operating expenses		292			213			691			633

Operating Income (Loss)		(83	)		315			(19	)		540

Other Income (Expense), net:
Interest expense		(19	)		(51	)		(70	)		(150	)
Interest expense—affiliate		(4	)		—			(4	)		—
Other, net		—			1			(23	)		(1	)

Total other expense, net		(23	)		(50	)		(97	)		(151	)

Income (Loss) Before Income Taxes		(106	)		265			(116	)		389
Benefit for income taxes		—			(1	)		—			(1	)

Net Income (Loss)	$	(106	)	$	266		$	(116	)	$	390

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

GENON AMERICAS GENERATION, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

		September 30,			September 30,
	September 30, 2011			December 31, 2010
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	200		$	514
Funds on deposit		301			949
Receivables		230			363
Receivables—affiliate		29			4
Notes receivable—affiliate		164			—
Derivative contract assets		658			1,288
Derivative contract assets—affiliate		24			5
Inventories		256			295
Prepaid expenses and other current assets		105			124

Total current assets		1,967			3,542

Property, plant and equipment, gross		3,878			3,946
Accumulated depreciation and amortization		(920	)		(869	)

Property, Plant and Equipment, net		2,958			3,077

Noncurrent Assets:
Intangible assets, net		26			101
Derivative contract assets		546			689
Derivative contract assets—affiliate		13			3
Prepaid rent		374			348
Debt issuance costs, net		6			12
Other		43			41

Total noncurrent assets		1,008			1,194

Total Assets	$	5,933		$	7,813

LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Current portion of long-term debt	$	4		$	1,389
Accounts payable and accrued liabilities		324			527
Payables—affiliate		141			54
Notes payable—affiliate		32			—
Derivative contract liabilities		516			1,130
Derivative contract liabilities—affiliate		16			3
Other		17			8

Total current liabilities		1,050			3,111

Noncurrent Liabilities:
Long-term debt, net of current portion		863			866
Derivative contract liabilities		65			173
Derivative contract liabilities—affiliate		32			—
Other		90			90

Total noncurrent liabilities		1,050			1,129

Commitments and Contingencies
Member’s Equity:
Member’s interest		3,833			3,573

Total member’s equity		3,833			3,573

Total Liabilities and Member’s Equity	$	5,933		$	7,813

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

GENON AMERICAS GENERATION, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		September 30,			September 30,
	Nine Months Ended September 30,
	2011			2010
	(in millions)
Cash Flows from Operating Activities:
Net income (loss)	$	(116	)	$	390

Adjustments to reconcile net income (loss) and changes in other operating assets and liabilities to net cash provided by operating activities:
Depreciation and amortization		122			158
Impairment losses		128			—
Gain on sales of assets, net		(3	)		(4	)
Net changes in derivative contracts		70			(179	)
Lower of cost or market inventory adjustments		1			22
Loss on early extinguishment of debt		23			—
Funds on deposit		(54	)		(25	)
Changes in other operating assets and liabilities		96			59

Total adjustments		383			31

Net cash provided by operating activities		267			421

Cash Flows from Investing Activities:
Capital expenditures		(130	)		(207	)
Proceeds from the sales of assets		9			4
Restricted funds on deposit, net		700			—
Issuance of notes receivable—affiliate		(164	)		—

Net cash provided by (used in) investing activities		415			(203	)

Cash Flows from Financing Activities:
Redemption of preferred stock		—			95
Repayment of long-term debt		(1,404	)		(71	)
Issuance of notes payable—affiliate		34			—
Distributions to member		(100	)		(109	)
Capital contributions		474			—

Net cash used in financing activities		(996	)		(85	)

Net Increase (Decrease) in Cash and Cash Equivalents		(314	)		133
Cash and Cash Equivalents, beginning of period		514			404

Cash and Cash Equivalents, end of period	$	200		$	537

Supplemental Disclosures:
Cash paid for interest, net of amounts capitalized	$	59		$	94
Cash refunds received for income taxes	$	1		$	—
Supplemental Disclosure for Non-Cash Financing Activities:
Conversion to equity of notes payable to affiliate	$	2		$	—

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

GENON MID-ATLANTIC, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		September 30,			September 30,			September 30,			September 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(in millions)

Operating revenues (including unrealized gains (losses) of $(3) million, $124 million, $(42) million and $227 million, respectively)	$	41		$	165		$	85		$	384
Operating revenues—affiliate (including unrealized gains (losses) of $0, $32 million, $(39) million and $62 million, respectively)		287			488			821			1,178

Total operating revenues		328			653			906			1,562

Cost of fuel, electricity and other products (including unrealized (gains) losses of $0, $0, $0 and $0, respectively)		4			4			13			13
Cost of fuel, electricity and other products—affiliate (including unrealized (gains) losses of $9 million, $(23) million, $(18) million and $81 million, respectively)		170			178			410			574

Total cost of fuel, electricity and other products		174			182			423			587

Gross Margin (excluding depreciation and amortization)		154			471			483			975

Operating Expenses:
Operations and maintenance		53			65			216			200
Operations and maintenance—affiliate		43			51			125			146
Depreciation and amortization		30			36			89			105
Impairment losses		94			—			94			—
Gain on sales of assets, net—affiliate		—			—			—			(3	)

Total operating expenses		220			152			524			448

Operating Income (Loss)		(66	)		319			(41	)		527

Other Income (Expense), net:
Interest expense		—			(1	)		(1	)		(2	)
Interest expense—affiliate		(3	)		—			(3	)		—
Other, net		—			—			—			(1	)

Total other expense, net		(3	)		(1	)		(4	)		(3	)

Income (Loss) Before Income Taxes		(69	)		318			(45	)		524
Benefit for income taxes		—			(1	)		—			(1	)

Net Income (Loss)	$	(69	)	$	319		$	(45	)	$	525

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

GENON MID-ATLANTIC, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

		September 30,			September 30,
	September 30, 2011			December 31, 2010
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	84		$	202
Funds on deposit		166			2
Receivables		19			21
Receivables—affiliate		28			169
Derivative contract assets		170			162
Derivative contract assets—affiliate		113			245
Inventories		157			122
Prepaid rent		96			96
Other		6			11

Total current assets		839			1,030

Property, plant and equipment, gross		3,041			3,046
Accumulated depreciation and amortization		(577	)		(513	)

Property, Plant and Equipment, net		2,464			2,533

Noncurrent Assets:
Intangible assets, net		14			71
Derivative contract assets		452			516
Derivative contract assets—affiliate		38			97
Prepaid rent		374			348
Other		32			31

Total noncurrent assets		910			1,063

Total Assets	$	4,213		$	4,626

LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Current portion of long-term debt	$	4		$	4
Accounts payable and accrued liabilities		82			63
Payables—affiliate		37			114
Derivative contract liabilities		4			18
Derivative contract liabilities—affiliate		123			231
Contract retention liability		65			132
Other		23			8

Total current liabilities		338			570

Noncurrent Liabilities:
Long-term debt, net of current portion		15			18
Derivative contract liabilities—affiliate		33			94
Other		50			52

Total noncurrent liabilities		98			164

Commitments and Contingencies
Member’s Equity:
Member’s interest		3,777			3,892

Total member’s equity		3,777			3,892

Total Liabilities and Member’s Equity	$	4,213		$	4,626

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

GENON MID-ATLANTIC, LLC AND SUBSIDIARIES

(Wholly-Owned Indirect Subsidiary of GenOn Energy, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		September 30,			September 30,
	Nine Months Ended September 30,
	2011			2010
	(in millions)

Cash Flows from Operating Activities:
Net income (loss)	$	(45	)	$	525

Adjustments to reconcile net income (loss) and changes in other operating assets and liabilities to net cash provided by operating activities:
Depreciation and amortization		89			105
Impairment losses		94			—
Gain on sales of assets, net—affiliate		—			(3	)
Net changes in derivative contracts		63			(208	)
Lower of cost or market inventory adjustments		1			13
Changes in other operating assets and liabilities		44			14

Total adjustments		291			(79	)

Net cash provided by operating activities		246			446

Cash Flows from Investing Activities:
Capital expenditures		(126	)		(194	)
Proceeds from the sales of assets		1			4
Restricted funds on deposit, net		(166	)		—

Net cash used in investing activities		(291	)		(190	)

Cash Flows from Financing Activities:
Redemption of preferred stock		—			95
Repayment of long-term debt		(3	)		(3	)
Distributions to member		(100	)		(200	)
Capital contributions		30			—

Net cash used in financing activities		(73	)		(108	)

Net Increase (Decrease) in Cash and Cash Equivalents		(118	)		148
Cash and Cash Equivalents, beginning of period		202			125

Cash and Cash Equivalents, end of period	$	84		$	273


Supplemental Disclosures:
Cash paid for interest	$	—		$	1
Cash refunds received for income taxes	$	1		$	—

The accompanying combined notes are an integral part of these unaudited condensed consolidated financial statements

GENON AMERICAS GENERATION, LLC AND SUBSIDIARIES

GENON MID-ATLANTIC, LLC AND SUBSIDIARIES

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Description of Business and Accounting and Reporting Policies

Background

GenOn Americas Generation provides energy, capacity, ancillary and other energy services to wholesale customers in competitive energy markets in the United States through ownership and operation of, and contracting for, power generation capacity. GenOn Americas Generation is a wholesale generator with approximately 9,724 MW of net electric generating capacity in the Eastern PJM and Northeast regions and northern California. GenOn Americas Generation also operates integrated asset management and energy marketing organizations, including proprietary trading operations.

GenOn Mid-Atlantic operates and owns or leases 5,204 MW of net electric generating capacity in the Washington, D.C. area. GenOn Mid-Atlantic’s electric generating capacity is part of the 9,724 MW of net electric generating capacity of GenOn Americas Generation. GenOn Mid-Atlantic’s generating facilities serve the Eastern PJM markets. The PJM ISO operates the largest centrally dispatched control area in the United States.

We are Delaware limited liability companies and indirect wholly-owned subsidiaries of GenOn. GenOn Mid-Atlantic is a wholly-owned subsidiary of GenOn North America and an indirect wholly-owned subsidiary of GenOn Americas Generation. The chart below is a summary representation of our organizational structure and reportable segments and is not a complete organizational chart of GenOn.

LOGO

(1)	GenOn Power Generation, LLC’s subsidiaries include former RRI Energy generating facilities acquired as a result of the Merger.

We have a number of service agreements for labor and administrative services with GenOn Energy Services. GenOn Energy Management provides services to certain operating subsidiaries of GenOn Americas, outside of GenOn Americas Generation, which include the bidding and dispatch of the generating units, fuel procurement and the execution of contracts, including economic hedges, to reduce price risk. See note 6 for further discussion of arrangements with these related parties.

Merger of Mirant and RRI Energy

On December 3, 2010, Mirant and RRI Energy completed the Merger. See note 1 to our consolidated financial statements in our 2010 Annual Report on Form 10-K for additional information on the Merger.

Basis of Presentation

The consolidated interim financial statements and notes (interim financial statements) are unaudited, omit certain disclosures and should be read in conjunction with our audited consolidated financial statements and notes in our 2010 Annual Report on Form 10-K. These interim financial statements have been prepared in accordance with GAAP from records maintained by us. All significant intercompany accounts and transactions have been eliminated in consolidation. The interim financial statements reflect all normal recurring adjustments necessary, in management’s opinion, to present fairly our financial position and results of operations for the reported periods. Amounts reported for interim periods may not be indicative of a full year period because of seasonal fluctuations in demand for electricity and energy services, changes in commodity prices, and changes in regulations, timing of maintenance and other expenditures, dispositions, changes in interest expense and other factors.

At September 30, 2011, substantially all of our subsidiaries are wholly-owned and located in the United States. We do not consolidate two power generating facilities which are under operating leases.

The preparation of interim financial statements in conformity with GAAP requires management to make various estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the interim financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Our significant estimates include:

•

estimating the fair value of certain derivative contracts;

•

estimating the useful lives of long-lived assets;

•

estimating future costs and the valuation of asset retirement obligations;

•

estimating future cash flows in determining impairments of long-lived assets and definite-lived intangible assets; and

•

estimating losses to be recorded for contingent liabilities.

We evaluate events that occur after the balance sheet date but before the financial statements are issued for potential recognition or disclosure. Based on the evaluation, we determined that there were no material subsequent events for recognition or disclosure other than those disclosed herein.

Funds on Deposit

Funds on deposit are included in current and noncurrent assets in the consolidated balance sheets. Funds on deposit include the following:

GenOn Americas Generation

		September 30,		September 30,
	September 30, 2011		December 31, 2010
	(in millions)

Cash collateral posted – energy trading and marketing	$	135	$	80
Cash collateral posted – other operating activities⁽¹⁾		39		40
GenOn Mid-Atlantic restricted cash⁽²⁾		166		—
Funds deposited with the trustee to discharge the GenOn North America senior notes, due 2013⁽³⁾		—		866

Total current and noncurrent funds on deposit		340		986
Less: Current funds on deposit		301		949

Total noncurrent funds on deposit	$	39	$	37

(1)	Includes $32 million related to the Potomac River Settlement (see note 10 to our consolidated financial statements in our 2010 Annual Report on Form 10-K and note 2).

(2)	Represents cash reserved in respect of interlocutory liens related to the scrubber contract litigation. See note 9.

(3)	See note 4 for discussion of the related debt.

GenOn Mid-Atlantic

		September 30,		September 30,
	September 30, 2011		December 31, 2010
	(in millions)

GenOn Mid-Atlantic restricted cash⁽¹⁾	$	166	$	—
Cash collateral posted⁽²⁾		32		32

Total current and noncurrent funds on deposit		198		32
Less: Current funds on deposit		166		2

Total noncurrent funds on deposit	$	32	$	30

(1)	Represents cash reserved in respect of interlocutory liens related to the scrubber contract litigation. See note 9.

(2)	Represents amount related to the Potomac River Settlement (see note 10 to our consolidated financial statements in our 2010 Annual Report on Form 10-K.)

Inventories

Inventories were comprised of the following:

GenOn Americas Generation

		September 30,		September 30,
	September 30, 2011		December 31, 2010
	(in millions)
Fuel inventory:
Coal	$	84	$	52
Fuel oil		72		136
Other		3		1
Materials and supplies		74		72
Purchased emissions allowances		23		34

Total inventories	$	256	$	295

GenOn Mid-Atlantic

		September 30,		September 30,
	September 30, 2011		December 31, 2010
	(in millions)
Fuel inventory:
Coal	$	84	$	52
Fuel oil		19		20
Other		2		1
Materials and supplies		52		49

Total inventories	$	157	$	122

During the three months ended September 30, 2011 and 2010, GenOn Americas Generation recorded $0 and $2 million, respectively, and during the nine months ended September 30, 2011 and 2010, GenOn Americas Generation recorded $1 million and $22 million, respectively, for lower of average cost or market valuation adjustments in cost of fuel, electricity and other products.

During the three months ended September 30, 2011 and 2010, GenOn Mid-Atlantic recorded $0 and $1 million, respectively, and during the nine months ended September 30, 2011 and 2010, GenOn Mid-Atlantic recorded $1 million and $13 million, respectively, for lower of average cost or market valuation adjustments in cost of fuel, electricity and other products.

Capitalization of Interest Cost (GenOn Americas Generation)

GenOn Americas Generation incurred the following interest costs:

		September 30,			September 30,			September 30,			September 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(in millions)

Total interest costs	$	20		$	52		$	72		$	154
Capitalized and included in property, plant and equipment, net		(1	)		(1	)		(2	)		(4	)

Interest expense	$	19		$	51		$	70		$	150

The amounts of capitalized interest above include interest accrued. During the three months ended September 30, 2011 and 2010, cash paid for interest was $0 and $2 million, respectively, and we did not capitalize any interest in either period. During the nine months ended September 30, 2011 and 2010, cash paid for interest was $60 million and $97 million, respectively, of which $1 million and $3 million, respectively, were capitalized.

Recently Adopted Accounting Guidance

We adopted FASB accounting guidance for the quarter ended March 31, 2011 that requires a reconciliation for Level 3 fair value measurements, including presenting separately the amounts of purchases, issuances and settlements on a gross basis. See note 3 for additional information on fair value measurements.

New Accounting Guidance Not Yet Adopted at September 30, 2011

Fair Value Measurement and Disclosure. In May 2011, the FASB issued new fair value measurement and disclosure guidance. The new standard does not extend the use of fair value but rather provides guidance about how fair value should be determined and requires additional disclosures. The guidance is not expected to have a material effect on our fair value measurements, but will require disclosure of the following:

•

quantitative information about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy;

•

for those fair value measurements categorized within Level 3 of the fair value hierarchy, both the valuation processes used and the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs, if any; and

•

the categorization by level of the fair value hierarchy for items that are not measured at fair value in the statement of financial position but for which the fair value is required to be disclosed.

We will present the additional disclosures as required in our Form 10-Q for the quarter ended March 31, 2012.

2. Impairment of Long-Lived Assets and Emissions Allowances

We evaluate long-lived assets, such as property, plant and equipment and purchased intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Such evaluations are performed in accordance with the accounting guidance related to evaluating long-lived assets for impairment. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds its fair value.

Granted Emissions Credits

In August 2011, the EPA finalized the regulations to replace the CAIR with the CSAPR starting in 2012. The CSAPR addresses interstate transport of emissions of NO_x and SO₂. The CSAPR establishes limitations on NO_x and/or SO₂ emissions from electric generating units that are (i) greater than 25 megawatts and (ii) located in 27 states (in the eastern half of the United States) that the EPA determined contribute significantly to nonattainment in other states, or to interfere with maintenance in other states, of one or more of three NAAQS: (a) the annual NAAQS for fine particulate matter (PM_2.5) promulgated in 1997; (b) the “24-hour” NAAQS for PM_2.5 promulgated in 2006 and (c) the ozone NAAQS promulgated in 1997. The CSAPR creates “emission budgets” for each of the covered states and allocates emissions allowances (denominated in tons of emissions) to each of the 27 states regulated under the CSAPR. Under the EPA federal implementation plan, for 2012, GenOn Americas Generation was allocated 9,642, 4,311, and 19,285 allowances under the CSAPR for annual NO_x, ozone-season NO_x, and SO₂, respectively. For 2012, GenOn Mid-Atlantic was allocated 9,476, 4,194, and 18,925 allowances under the CSAPR for annual NO_x, ozone-season NO_x, and SO₂, respectively. The federal implementation plan has also outlined EPA-determined allocations in the same amounts for 2013, although the CSAPR contemplates that states after 2012 may allocate allowances in a different manner than allocated initially under the CSAPR. In October 2011, the EPA proposed revisions to the final CSAPR that, if finalized, would provide GenOn Americas Generation with a small allowance increase in each compliance year. As a result, the expected CSAPR allowances for GenOn Americas Generation would be 9,683, 4,345 and 19,339 in 2012 and 2013, for annual NO_x, ozone-season NO_x and SO₂, respectively. The CSAPR limits each electric generating unit’s NO_x and SO₂ emissions to amounts covered by the number of allowances held by that source in allowance accounts under the program (which may be purchased or otherwise acquired from other sources, subject to certain limitations in the rule). The NO_x allowances from the CAIR program will not be used in the CSAPR program and accordingly will have no value after 2011. The SO₂ allowances used for compliance in the CAIR program are the acid rain program allowances, which will have negligible value after 2011. As a result of the CSAPR, GenOn Americas Generation recorded impairment losses of $128 million for (a) the write-off of excess NO_x and SO₂ emissions allowances included in intangible assets ($70 million) and (b) the write-off of excess NO_x and SO₂emissions allowances previously included in property, plant and equipment ($58 million) during the three months ended September 30, 2011. As a result of the CSAPR, GenOn Mid-Atlantic recorded impairment losses of $94 million for (a) the write-off of excess NO_x and SO₂ emissions allowances included in intangible assets ($56 million) and (b) the write-off of excess NO_x and SO₂emissions allowances previously included in property, plant and equipment ($38 million) during the three months ended September 30, 2011. The emissions allowances within property, plant and equipment and intangible assets had previously been included with a generating facility asset group for purposes of impairment testing. As (a) there will be no future use of the NO_x emissions allowances and (b) the SO₂ emission allowances will have negligible value after 2011 under the CSAPR and their price has fallen sharply, we evaluated, in conjunction with preparing these interim financial statements, these emissions allowances for impairment separately from the generating facility asset group and determined that impairments existed.

At GenOn Americas Generation, CAIR NO_xemissions allowances of $43 million will have no value after 2011, and were therefore fully impaired. The excess acid rain program SO₂ emissions allowances of $86 million will have negligible value after 2011 and were impaired to their estimated fair value of $1 million based on their current market prices obtained from brokers. The excess acid rain program SO₂ emissions allowances were categorized in Level 3 in the fair value hierarchy.

At GenOn Mid-Atlantic, CAIR NO_xemissions allowances of $43 million will have no value after 2011, and were therefore fully impaired. The excess acid rain program SO₂ emissions allowances of $52 million will have negligible value after 2011 and were impaired to their estimated fair value of $1 million based on their current market prices obtained from brokers. The excess acid rain program SO₂ emissions allowances were categorized in Level 3 in the fair value hierarchy.

Potomac River Retirement

In the fourth quarter of 2010, GenOn Mid-Atlantic recorded impairment losses of $42 million to reduce the carrying value of the Potomac River generating facility to its estimated fair value of approximately $1 million. In addition, as a result of the impairment of the Potomac River generating facility, GenOn Mid-Atlantic recorded $32 million in operations and maintenance expense and corresponding liabilities associated with our commitment to reduce particulate emissions as part of the agreement with the City of Alexandria, Virginia. This $32 million is held in an escrow account. The planned capital investment would not be recovered in future periods based on the current projected cash flows of the Potomac River generating facility. See note 3(d) to our consolidated financial statements in our 2010 Annual Report on Form 10-K for further discussion.

In August 2011, GenOn Mid-Atlantic entered into an agreement with the City of Alexandria, Virginia to remove permanently from service its Potomac River generating facility. The agreement, which amends GenOn Mid-Atlantic’s Project Schedule and Agreement, dated July 17, 2008 with the City of Alexandria, provides for the retirement of the Potomac River generating facility on October 1, 2012, subject to the receipt of all necessary consents and approvals. PJM has determined that the retirement of the facility will not affect reliability. GenOn Mid-Atlantic must now receive consent from PEPCO. GenOn Mid-Atlantic will reverse the previously recorded obligation upon the receipt of consent from PEPCO and will recognize a reduction in operations and maintenance expense. If the PEPCO consent has not been received by July 3, 2012, the Potomac River generating facility will be retired within 90 days after the receipt thereof. Upon retirement of the Potomac River generating facility, all funds in the escrow account ($32 million) established under the July 17, 2008 agreement shall be distributed to GenOn Mid-Atlantic, provided, that, if the retirement of the facility is after January 1, 2014, $750,000 of such funds shall be paid to the City of Alexandria.

3. Financial Instruments

Derivatives and Hedging Activities

In connection with the business of generating electricity, we are exposed to energy commodity price risk associated with the acquisition of fuel and emissions allowances needed to generate electricity, the price of electricity produced and sold, and the fair value of fuel inventories. Through our asset management activities, we enter into a variety of exchange-traded and OTC energy and energy-related derivative financial instruments, such as forward contracts, futures contracts, option contracts and financial swap agreements to manage exposure to commodity price risks. These contracts have varying terms and durations, which range from a few days to years, depending on the instrument. GenOn Americas Generation’s proprietary trading activities also utilize similar derivative contracts in markets where it has a physical presence to attempt to generate incremental gross margin. GenOn Americas Generation’s fuel oil management activities use derivative financial instruments to hedge economically the fair value of physical fuel oil inventories, optimize the approximately three million barrels of storage capacity that it owns or leases, and attempt to profit from market opportunities related to timing and/or differences in the pricing of various products. The open positions in GenOn Americas Generation’s trading activities comprising proprietary trading and fuel oil management activities expose it to risks associated with changes in energy commodity prices.

Derivative financial instruments are recorded in the consolidated balance sheets at fair value, except for derivative contracts that qualify for and for which we have elected the normal purchase or normal sale exceptions, which are not reflected in the consolidated balance sheet or results of operations prior to accrual of the settlement. We present our derivative contract assets and liabilities on a gross basis (regardless of master netting arrangements with the same counterparty). Cash collateral amounts are also presented on a gross basis.

For our derivative financial instruments, changes in such instruments’ fair values are recognized currently in earnings. Our derivative financial instruments are categorized based on the business objective the instrument is expected to achieve: asset management or trading, which includes GenOn Americas Generation’s proprietary trading and fuel oil management. For asset management activities, changes in fair value and settlement of derivative financial instruments used to hedge electricity economically are reflected in operating revenue and changes in fair value and settlement of derivative financial instruments used to hedge fuel economically are reflected in cost of fuel, electricity and other products in the consolidated statements of operations. Changes in the fair value and settlements of derivative financial instruments for GenOn Americas Generation’s proprietary trading and fuel oil management activities are recorded on a net basis as operating revenue in the consolidated statements of operations.

We also consider risks associated with interest rates, counterparty credit and our own non-performance risk when valuing derivative financial instruments. The nominal value of the derivative contract assets and liabilities is discounted to account for time value using a LIBOR forward interest rate curve based on the tenor of the transactions being valued.

GenOn Americas Generation

The following table presents the fair value of GenOn Americas Generation’s derivative financial instruments:

		September 30,		September 30,		September 30,			September 30,			September 30,
	Derivative Contract Assets				Derivative Contract Liabilities						Net Derivative Contract
	Current		Long-Term		Current			Long- Term			Assets (Liabilities)
	(in millions)

September 30, 2011
Commodity Contracts:
Asset management	$	338	$	540	$	(184	)	$	(80	)	$	614
Trading activities		344		19		(348	)		(17	)		(2	)

Total derivatives	$	682	$	559	$	(532	)	$	(97	)	$	612


December 31, 2010
Commodity Contracts:
Asset management	$	442	$	623	$	(279	)	$	(102	)	$	684
Trading activities		851		69		(854	)		(71	)		(5	)

Total derivatives	$	1,293	$	692	$	(1,133	)	$	(173	)	$	679

The following table presents the net gains (losses) for derivative financial instruments recognized in income in the unaudited condensed consolidated statements of operations:

		September 30,			September 30,			September 30,			September 30,
	Three Months Ended September 30,
	2011						2010
Derivatives Not Designated as Hedging Instruments	Operating Revenues			Cost of Fuel, Electricity and Other Products			Operating Revenues			Cost of Fuel, Electricity and Other Products
	(in millions)

Asset Management Commodity Contracts:
Unrealized	$	(1	)	$	(10	)	$	164		$	13
Realized⁽¹⁾⁽²⁾		57			(15	)		54			(69	)

Total asset management	$	56		$	(25	)	$	218		$	(56	)


Trading Commodity Contracts:
Unrealized	$	11		$	—		$	(10	)	$	—
Realized⁽¹⁾⁽²⁾		(13	)		—			—			—

Total trading	$	(2	)	$	—		$	(10	)	$	—


Total derivatives	$	54		$	(25	)	$	208		$	(56	)

(1)	Represents the total cash settlements of derivative financial instruments during each quarterly reporting period that existed at the beginning of each respective period.

(2)	Effective January 1, 2011, excludes settlement value of fuel contracts classified as inventory.

		September 30,			September 30,			September 30,			September 30,
	Nine Months Ended September 30,
	2011						2010
Derivatives Not Designated as Hedging Instruments	Operating Revenues			Cost of Fuel, Electricity and Other Products			Operating Revenues			Cost of Fuel, Electricity and Other Products
	(in millions)

Asset Management Commodity Contracts:
Unrealized	$	(88	)	$	19		$	299		$	(107	)
Realized⁽¹⁾⁽²⁾		188			(39	)		230			(95	)

Total asset management	$	100		$	(20	)	$	529		$	(202	)


Trading Commodity Contracts:
Unrealized	$	(1	)	$	—		$	(13	)	$	—
Realized⁽¹⁾⁽²⁾		(8	)		—			(2	)		—

Total trading	$	(9	)	$	—		$	(15	)	$	—


Total derivatives	$	91		$	(20	)	$	514		$	(202	)

(1)	Represents the total cash settlements of derivative financial instruments during each reporting period (composed of the sum of the quarterly settlements) that existed at the beginning of each respective period.

(2)	Effective January 1, 2011, excludes settlement value of fuel contracts classified as inventory.

The following tables present the notional quantity on long (short) positions for derivative financial instruments:

		September 30,			September 30,		September 30,
	Notional Volumes at September 30, 2011
Derivative Instruments	Derivative Contract Assets			Derivative Contract Liabilities		Net Derivative Contracts
	(in millions)
Commodity Contracts (in equivalent MWh):
Power⁽¹⁾		(56	)		21		(35	)
Natural gas		(18	)		19		1
Fuel oil		(1	)		1		—
Coal		4			9		13

		September 30,			September 30,			September 30,
	Notional Volumes at December 31, 2010
Derivative Instruments	Derivative Contract Assets			Derivative Contract Liabilities			Net Derivative Contracts
	(in millions)
Commodity Contracts (in equivalent MWh):
Power⁽¹⁾		(23	)		(15	)		(38	)
Natural gas		(28	)		29			1
Fuel oil		2			(3	)		(1	)
Coal		9			7			16

(1)	Includes MWh equivalent of natural gas transactions used to hedge power economically.

GenOn Mid-Atlantic

The following table presents the fair value of GenOn Mid-Atlantic’s derivative financial instruments:

		September 30,		September 30,		September 30,			September 30,			September 30,
	Derivative Contract Assets				Derivative Contract Liabilities						Net Derivative Contract Assets
	Current		Long-Term		Current			Long-Term			(Liabilities)
	(in millions)
September 30, 2011
Commodity Contracts:
Asset management	$	170	$	452	$	(4	)	$	—		$	618
Asset management – affiliate		113		38		(123	)		(33	)		(5	)

Total derivatives	$	283	$	490	$	(127	)	$	(33	)	$	613

December 31, 2010
Commodity Contracts:
Asset management	$	162	$	516	$	(18	)	$	—		$	660
Asset management – affiliate		245		97		(231	)		(94	)		17

Total derivatives	$	407	$	613	$	(249	)	$	(94	)	$	677

The following table presents the net gains (losses) for derivative financial instruments recognized in income in the unaudited condensed consolidated statements of operations:

		September 30,			September 30,			September 30,		September 30,
	Three Months Ended September 30,
	2011						2010
Derivatives Not Designated as Hedging Instruments	Operating Revenues			Cost of Fuel, Electricity and Other Products			Operating Revenues		Cost of Fuel, Electricity and Other Products
	(in millions)
Asset Management Commodity Contracts:
Unrealized	$	(3	)	$	(9	)	$	156	$	23
Realized⁽¹⁾⁽²⁾		54			—			54		(58	)

Total asset management	$	51		$	(9	)	$	210	$	(35	)

(1)	Represents the total cash settlements of derivative financial instruments during each quarterly reporting period that existed at the beginning of each respective period.

(2)	Effective January 1, 2011, excludes settlement value of fuel contracts classified as inventory.

		September 30,			September 30,		September 30,		September 30,
	Nine Months Ended September 30,
	2011					2010
Derivatives Not Designated as Hedging Instruments	Operating Revenues			Cost of Fuel, Electricity and Other Products		Operating Revenues		Cost of Fuel, Electricity and Other Products
	(in millions)
Asset Management Commodity Contracts:
Unrealized	$	(81	)	$	18	$	289	$	(81	)
Realized⁽¹⁾⁽²⁾		176			—		215		(62	)

Total asset management	$	95		$	18	$	504	$	(143	)

(1)	Represents the total cash settlements of derivative financial instruments during each reporting period (composed of the sum of the quarterly settlements) that existed at the beginning of each respective period.

(2)	Effective January 1, 2011, excludes settlement value of fuel contracts classified as inventory.

The following tables present the notional quantity on long (short) positions for derivative financial instruments:

		September 30,			September 30,		September 30,
	Notional Volumes at September 30, 2011
Derivative Instruments	Derivative Contract Assets			Derivative Contract Liabilities		Net Derivative Contracts
	(in millions)
Commodity Contracts (in equivalent MWh):
Power⁽¹⁾		(40	)		6		(34	)
Coal		4			9		13

		September 30,			September 30,		September 30,
	Notional Volumes at December 31, 2010
Derivative Instruments	Derivative Contract Assets			Derivative Contract Liabilities		Net Derivative Contracts
	(in millions)
Commodity Contracts (in equivalent MWh):
Power⁽¹⁾		(40	)		4		(36	)
Coal		6			10		16

(1)	Includes MWh equivalent of natural gas transactions used to hedge power economically.

Fair Value Measurements

Fair Value Hierarchy and Valuation Techniques. We apply recurring fair value measurements to our financial assets and liabilities. In estimating fair value, we generally use a market approach and incorporate assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation techniques. The fair value measurement inputs we use vary from readily observable prices for exchange-traded instruments to price curves that cannot be validated through external pricing sources. Based on the observability of the inputs used in the valuation techniques, the financial assets and liabilities carried at fair value in the financial statements are classified as follows:

Level 1:

Represents unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. This category primarily includes natural gas and crude oil futures traded on the NYMEX and swaps cleared against NYMEX prices. The interest bearing funds are also valued using Level 1 inputs.

Level 2:

Represents quoted market prices for similar assets or liabilities in active markets, quoted market prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data. This category primarily includes non-exchange-traded derivatives such as OTC forwards, swaps and options, and certain energy derivative instruments that are cleared and settled through exchanges.

Level 3:

This category includes the commodity derivative instruments whose fair value is estimated based on internally developed models and methodologies utilizing significant inputs that are generally less readily observable from market sources (such as implied volatilities and correlations). The OTC, complex or structured derivative instruments that are transacted in less liquid markets with limited pricing information are included in Level 3. Examples are coal contracts, power transmission congestion products, power and natural gas contracts, and options valued using internally developed inputs.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls must be determined based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability.

Most of the fair value of our derivative contract assets and liabilities is based on observable quoted prices from exchanges and indicative quoted prices from independent brokers in active markets that regularly facilitate our transactions. An active market is considered to have transactions with sufficient frequency and volume to provide pricing information on an ongoing basis. We think that these prices represent the best available information for valuation purposes. In determining the fair value of derivative contract assets and liabilities, we use third-party market pricing where available. For transactions classified in Level 1 of the fair value hierarchy, we use the unadjusted published settled prices on the valuation date. For transactions classified in Level 2 of the fair value hierarchy, we value these transactions using indicative quoted prices from independent brokers or other widely-accepted valuation methodologies. Transactions are classified in Level 2 if substantially all (greater than 90%) of the fair value can be corroborated using observable market inputs such as transactable broker quotes. In accordance with the exit price objective under the fair value measurements accounting guidance, the fair value of our derivative contract assets and liabilities is determined based on the net underlying position of the recorded derivative contract assets and liabilities using bid prices for assets and ask prices for liabilities. The quotes that we obtain from brokers are non-binding in nature, but are from brokers that typically transact in the market being quoted and are based on their knowledge of market transactions on the valuation date. We typically obtain multiple broker quotes as of the valuation date that extend for the tenor of the underlying contracts for each delivery location. The number of quotes that we can obtain depends on the relative liquidity of the delivery location on the valuation date. If multiple broker quotes are received for a contract, we use an average of the quoted bid or ask prices. If only one broker quote is received for a delivery location and it cannot be validated through other external sources, we will assign the quote to a lower level within the fair value hierarchy. In some instances, we may combine broker quotes for a liquid delivery hub with broker quotes for the price spread between the liquid delivery hub and the delivery location under the contract. We also may apply interpolation techniques to value monthly strips if broker quotes are only available on a seasonal or annual basis. We perform validation procedures on the broker quotes at least monthly. The validation procedures include reviewing the quotes for accuracy and comparing them to our internal price curves. In certain instances, we may exclude from consideration a broker quote if it is a clear outlier and other quotes are obtained. At September 30, 2011, we obtained broker quotes for 100% of our delivery locations classified in Level 2 of the fair value hierarchy.

Inactive markets are considered to be those markets with few transactions, noncurrent pricing or prices that vary over time or among market makers. Our transactions in Level 3 of the fair value hierarchy may involve transactions whereby observable market data, such as broker quotes, are not available for substantially all of the tenor of the contract or we are only able to obtain indicative broker quotes that cannot be corroborated by observable market data. In such cases, we may apply valuation techniques such as extrapolation and other quantitative methods to determine fair value. Proprietary models may also be used to estimate the fair value of derivative contract assets and liabilities that may be structured or otherwise tailored. Our techniques for fair value estimation include assumptions for market prices, correlation and volatility. The degree of estimation increases for longer duration contracts, contracts with multiple pricing features, option contracts and off-hub delivery points. At September 30, 2011, GenOn Americas Generation’s assets and liabilities classified as Level 3 in the fair value hierarchy represented approximately 3% of its total derivative contract assets and 13% of its total derivative contract liabilities. At September 30, 2011, GenOn Mid-Atlantic’s assets and liabilities classified as Level 3 in the fair value hierarchy represented approximately 2% of its total derivative contract assets and 42% of its total derivative contract liabilities.

The fair value of our derivative contract assets and liabilities is also affected by assumptions as to time value, credit risk and non-performance risk. The nominal value of derivatives is discounted to account for time value using a LIBOR forward interest rate curve based on the tenor of the transaction. Derivative contract assets are reduced to reflect the estimated default risk of counterparties on their contractual obligations to us. The counterparty default risk for our overall net position is measured based on published spreads on credit default swaps for counterparties, where available, or proxies based upon published spreads, applied to our current exposure and potential loss exposure from the financial commitments in our risk management portfolio. The fair value of derivative contract liabilities is reduced to reflect the estimated risk of default on contractual obligations to counterparties and is measured based on published default rates of our debt, where available, or proxies based upon published spreads. Credit risk and non-performance risk are calculated with consideration of our master netting agreements with counterparties and our exposure is reduced by cash collateral posted to us against these obligations.

GenOn Americas Generation

Fair Value of Derivative Instruments and Certain Other Assets. The fair value measurements of GenOn Americas Generation’s financial assets and liabilities by class are as follows:

		September 30,		September 30,		September 30,		September 30,
	September 30, 2011
	Level 1⁽¹⁾		Level 2^(1) (2)		Level 3		Total Fair Value
	(in millions)
Derivative contract assets:
Commodity Contracts
Asset Management:
Power	$	31	$	810	$	8	$	849
Fuel		4		3		22		29

Total Asset Management		35		813		30		878
Trading Activities		202		148		13		363

Total derivative contract assets	$	237	$	961	$	43	$	1,241


Derivative contract liabilities:
Commodity Contracts
Asset Management:
Power	$	44	$	124	$	7	$	175
Fuel		19		2		68		89

Total Asset Management		63		126		75		264
Trading Activities		213		145		7		365

Total derivative contract liabilities	$	276	$	271	$	82	$	629


Interest-bearing funds⁽³⁾	$	391	$	—	$	—	$	391

(1)	Transfers between Level 1 and Level 2 are recognized as of the end of the reporting period. There were no significant transfers during the nine months ended September 30, 2011.

(2)	Option contracts comprised less than 1% of GenOn Americas Generation’s net derivative contract assets.

(3)

Represents investments in money market funds and is included in cash and cash equivalents, funds on deposit and other noncurrent assets in the consolidated balance sheet. GenOn Americas Generation had $187 million of interest-bearing funds included in cash and cash equivalents, $166 million included in funds on deposit and $38 million included in other noncurrent assets.

		September 30,		September 30,		September 30,		September 30,
	December 31, 2010
	Level 1⁽¹⁾		Level 2^(1) (2)		Level 3		Total Fair Value
	(in millions)
Derivative contract assets:
Commodity Contracts
Asset Management:
Power	$	1	$	1,022	$	2	$	1,025
Fuel		4		3		33		40

Total Asset Management		5		1,025		35		1,065
Trading Activities		530		385		5		920

Total derivative contract assets	$	535	$	1,410	$	40	$	1,985


Derivative contract liabilities:
Commodity Contracts
Asset Management:
Power	$	12	$	248	$	4	$	264
Fuel		18		—		99		117

Total Asset Management		30		248		103		381
Trading Activities		533		389		3		925

Total derivative contract liabilities	$	563	$	637	$	106	$	1,306


Interest-bearing funds⁽³⁾	$	547	$	—	$	—	$	547

(1)	Transfers between Level 1 and Level 2 are recognized as of the end of the reporting period. There were no significant transfers during 2010.

(2)	Option contracts comprised approximately 1% of GenOn Americas Generation’s net derivative contract assets.

(3)

Represents investments in money market funds and is included in cash and cash equivalents, funds on deposit and other noncurrent assets in the consolidated balance sheet. GenOn Americas Generation had $508 million of interest-bearing funds included in cash and cash equivalents, $2 million included in funds on deposit and $37 million included in other noncurrent assets.

The following is a reconciliation of changes (composed of the sum of the quarterly changes) in fair value of net commodity derivative contract assets and liabilities classified as Level 3 during the nine months ended September 30, 2011 and 2010, respectively:

		September 30,			September 30,			September 30,
	Net Derivatives Contracts (Level 3)
	Asset Management			Trading Activities			Total
	(in millions)

Balance, January 1, 2011 (net asset (liability))	$	(68	)	$	2		$	(66	)
Total gains (losses) realized/unrealized:
Included in earnings⁽¹⁾		—			9			9
Purchases⁽²⁾		—			—			—
Issuances⁽²⁾		—			—			—
Settlements⁽³⁾		11			(5	)		6
Transfers into Level 3⁽⁴⁾		—			—			—
Transfers out of Level 3⁽⁴⁾		12			—			12

Balance, September 30, 2011 (net asset (liability))	$	(45	)	$	6		$	(39	)


Balance, January 1, 2010 (net asset (liability))	$	19		$	13		$	32
Total gains (losses) realized/unrealized:
Included in earnings⁽¹⁾		(45	)		(22	)		(67	)
Purchases⁽²⁾		—			—			—
Issuances⁽²⁾		—			—			—
Settlements⁽⁵⁾		(80	)		28			(52	)
Transfers in and out of Level 3⁽⁴⁾		38			(1	)		37

Balance, September 30, 2010 (net asset (liability))	$	(68	)	$	18		$	(50	)

(1)

Represents the fair value, as of the end of each reporting period, of Level 3 contracts entered into during each reporting period and the gains and losses attributable to Level 3 contracts that existed as of the beginning of each reporting period and were still held at the end of each reporting period.

(2)	Contracts entered into during each reporting period are reported with other changes in fair value.

(3)	Effective January 1, 2011, represents the reversal of previously recognized unrealized gains and losses from settlement of contracts during each reporting period.

(4)

Denotes the total contracts that existed at the beginning of each reporting period and were still held at the end of each reporting period that were either previously categorized as a higher level for which the inputs to the model became unobservable or assets and liabilities that were previously classified as Level 3 for which the lowest significant input became observable during each reporting period. Amounts reflect fair value as of the end of each reporting period.

(5)	Represents the total cash settlements of contracts during each reporting period that existed at the beginning of each reporting period.

The following table presents the amounts included in income related to derivative contract assets and liabilities classified as Level 3:

		September 30,			September 30,			September 30,			September 30,			September 30,		September 30,
	Three Months Ended September 30,
	2011									2010
	Operating Revenues			Cost of Fuel, Electricity and Other Products			Total			Operating Revenues			Cost of Fuel, Electricity and Other Products		Total
	(in millions)

Gains (losses) included in income	$	(3	)	$	(7	)	$	(10	)	$	(1	)	$	24	$	23
Gains (losses) included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30	$	(2	)	$	(6	)	$	(8	)	$	(1	)	$	24	$	23

		September 30,		September 30,		September 30,		September 30,		September 30,			September 30,
	Nine Months Ended September 30,
	2011						2010
	Operating Revenues		Cost of Fuel, Electricity and Other Products		Total		Operating Revenues		Cost of Fuel, Electricity and Other Products			Total
	(in millions)

Gains (losses) included in income	$	7	$	20	$	27	$	1	$	(83	)	$	(82	)
Gains (losses) included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30	$	8	$	22	$	30	$	6	$	(83	)	$	(77	)

GenOn Mid-Atlantic

Fair Value of Derivative Instruments and Certain Other Assets. The fair value measurements of GenOn Mid-Atlantic’s financial assets and liabilities by class are as follows:

		September 30,		September 30,		September 30,		September 30,
	September 30, 2011
	Level 1⁽¹⁾		Level 2^(1) (2)		Level 3		Total Fair Value
	(in millions)
Derivative contract assets:
Commodity Contracts
Asset Management:
Power	$	6	$	748	$	—	$	754
Fuel		—		1		18		19

Total derivative contract assets	$	6	$	749	$	18	$	773


Derivative contract liabilities:
Commodity Contracts
Asset Management:
Power	$	18	$	73	$	1	$	92
Fuel		2		—		66		68

Total derivative contract liabilities	$	20	$	73	$	67	$	160


Interest-bearing funds⁽³⁾	$	277	$	—	$	—	$	277

(1)	Transfers between Level 1 and Level 2 are recognized as of the end of the reporting period. There were no significant transfers during the nine months ended September 30, 2011.

(2)	Option contracts comprised less than 1% of GenOn Mid-Atlantic’s net derivative contract assets.

(3)

Represents investments in money market funds and are included in cash and cash equivalents, funds on deposit and other noncurrent assets in the consolidated balance sheet. GenOn Mid-Atlantic had $79 million of interest-bearing funds included in cash and cash equivalents, $166 million included in funds on deposit and $32 million included in other noncurrent assets.

		September 30,		September 30,		September 30,		September 30,
	December 31, 2010
	Level 1⁽¹⁾		Level 2^(1) (2)		Level 3		Total Fair Value
	(in millions)
Derivative contract assets:
Commodity Contracts
Asset Management:
Power	$	1	$	986	$	—	$	987
Fuel		—		2		31		33

Total derivative contract assets	$	1	$	988	$	31	$	1,020


Derivative contract liabilities:
Commodity Contracts
Asset Management:
Power	$	12	$	231	$	1	$	244
Fuel		—		—		99		99

Total derivative contract liabilities	$	12	$	231	$	100	$	343


Interest-bearing funds⁽³⁾	$	234	$	—	$	—	$	234

(1)	Transfers between Level 1 and Level 2 are recognized as of the end of the reporting period. There were no significant transfers during 2010.

(2)	Option contracts comprised less than 1% of GenOn Mid-Atlantic’s net derivative contract assets.

(3)

Represents investments in money market funds and are included in cash and cash equivalents, funds on deposit and other noncurrent assets in the consolidated balance sheet. GenOn Mid-Atlantic had $202 million of interest-bearing funds included in cash and cash equivalents, $2 million included in funds on deposit and $30 million included in other noncurrent assets.

		September 30,
	Asset Management
	(in millions)

Balance, January 1, 2011 (net asset (liability))	$	(69	)
Total gains (losses) realized/unrealized:
Included in earnings⁽¹⁾		(5	)
Purchases⁽²⁾		—
Issuances⁽²⁾		—
Settlements⁽³⁾		13
Transfers into Level 3⁽⁴⁾		—
Transfers out of Level 3⁽⁴⁾		12

Balance, September 30, 2011 (net asset (liability))	$	(49	)


Balance, January 1, 2010 (net asset (liability))	$	13
Total gains (losses) realized/unrealized:
Included in earnings⁽¹⁾		(64	)
Purchases⁽²⁾		—
Issuances⁽²⁾		—
Settlements⁽⁵⁾		(63	)
Transfers in and out of Level 3⁽⁴⁾		38

Balance, September 30, 2010 (net asset (liability))	$	(76	)

(1)

(2)	Contracts entered into during each reporting period are reported with other changes in fair value.

(3)	Effective January 1, 2011, represents the reversal of previously recognized unrealized gains and losses from settlement of contracts during each reporting period.

(4)

(5)	Represents the total cash settlements of contracts during each reporting period that existed at the beginning of each reporting period.

The following table presents the amounts included in income related to derivative contract assets and liabilities classified as Level 3:

		September 30,			September 30,			September 30,			September 30,			September 30,		September 30,
	Three Months Ended September 30,
	2011									2010
	Operating Revenues			Cost of Fuel, Electricity and Other Products			Total			Operating Revenues			Cost of Fuel, Electricity and Other Products		Total
	(in millions)

Gains (losses) included in income	$	(5	)	$	(7	)	$	(12	)	$	(1	)	$	24	$	23
Gains (losses) included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30	$	(7	)	$	(7	)	$	(14	)	$	(1	)	$	24	$	23

		September 30,			September 30,		September 30,		September 30,		September 30,		September 30,
	Nine Months Ended September 30,
	2011							2010
	Operating Revenues			Cost of Fuel, Electricity and Other Products		Total		Operating Revenues		Cost of Fuel, Electricity and Other Products		Total
	(in millions)

Gains (losses) included in income	$	—		$	20	$	20	$	2	$	2	$	4
Gains (losses) included in income (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at September 30	$	(2	)	$	21	$	19	$	2	$	2	$	4

Counterparty Credit Concentration Risk

We are exposed to the default risk of the counterparties with which we transact. We manage our credit risk by entering into master netting agreements and requiring counterparties to post cash collateral or other credit enhancements based on the net exposure and the credit standing of the counterparty. We also have non-collateralized power hedges entered into by GenOn Mid-Atlantic. These transactions are senior unsecured obligations of GenOn Mid-Atlantic and the counterparties and do not require either party to post cash collateral for initial margin or for securing exposure as a result of changes in power or natural gas prices. GenOn Americas Generation and GenOn Mid-Atlantic credit valuation adjustments on derivative contract assets were $50 million and $19 million at September 30, 2011 and December 31, 2010, respectively.

At September 30, 2011 and December 31, 2010, $3 million of cash collateral posted to GenOn Americas Generation by counterparties under master netting agreements was included in accounts payable and accrued liabilities on GenOn Americas Generation’s consolidated balance sheets.

We also monitor counterparty credit concentration risk on both an individual basis and a group counterparty basis. The following tables highlight the credit quality and the balance sheet settlement exposures related to these activities:

GenOn Americas Generation

		September 30,		September 30,		September 30,		September 30,		September 30,
	September 30, 2011
Credit Rating Equivalent	Gross Exposure Before Collateral⁽¹⁾		Net Exposure Before Collateral⁽²⁾		Collateral⁽³⁾		Exposure Net of Collateral		% of Net Exposure
	(dollars in millions)

Clearing and Exchange	$	448	$	42	$	42	$	—
Investment Grade:
Financial institutions		730		690		—		690		79	%
Energy companies		212		126		2		124		14	%
Non-investment Grade:
Energy companies		8		8		—		8		1	%
No External Ratings:
Internally-rated investment grade		36		36		1		35		4	%
Internally-rated non-investment grade		21		21		—		21		2	%

Total	$	1,455	$	923	$	45	$	878		100	%

		September 30,		September 30,		September 30,		September 30,		September 30,
	December 31, 2010
Credit Rating Equivalent	Gross Exposure Before Collateral⁽¹⁾		Net Exposure Before Collateral⁽²⁾		Collateral⁽³⁾		Exposure Net of Collateral		% of Net Exposure
	(dollars in millions)

Clearing and Exchange	$	987	$	39	$	39	$	—
Investment Grade:
Financial institutions		806		707		—		707		78	%
Energy companies		337		130		2		128		14	%
Non-investment Grade:
Energy companies		15		15		—		15		2	%
No External Ratings:
Internally-rated investment grade		34		27		—		27		3	%
Internally-rated non-investment grade		26		26		—		26		3	%

Total	$	2,205	$	944	$	41	$	903		100	%

(1)

Gross exposure before collateral represents credit exposure, including both realized and unrealized transactions, before (a) applying the terms of master netting agreements with counterparties and (b) netting of transactions with clearing brokers and exchanges. The table excludes amounts related to contracts classified as normal purchases/normal sales and non-derivative contractual commitments that are not recorded at fair value in the consolidated balance sheets, except for any related accounts receivable. Such contractual commitments contain credit and economic risk if a counterparty does not perform. Non-performance could have a material adverse effect on the future results of operations, financial condition and cash flows.

(2)	Net exposure before collateral represents the credit exposure, including both realized and unrealized transactions, after applying the terms of master netting agreements with counterparties and netting of transactions with clearing brokers and exchanges.

(3)	Collateral includes cash and letters of credit received from counterparties.

GenOn Mid-Atlantic

		September 30,		September 30,		September 30,		September 30,		September 30,
	September 30, 2011
Credit Rating Equivalent	Gross Exposure Before Collateral^(1),(4)		Net Exposure Before Collateral⁽²⁾		Collateral⁽³⁾		Exposure Net of Collateral		% of Net Exposure
	(dollars in millions)
Investment Grade:
Financial institutions	$	687	$	678	$	—	$	678		96	%
Non-investment Grade:
Energy companies		7		7		—		7		1	%
No External Ratings:
Internally-rated non-investment grade		21		21		—		21		3	%

Total	$	715	$	706	$	—	$	706		100	%

		September 30,		September 30,		September 30,		September 30,		September 30,
	December 31, 2010
Credit Rating Equivalent	Gross Exposure Before Collateral^(1),(4)		Net Exposure Before Collateral⁽²⁾		Collateral⁽³⁾		Exposure Net of Collateral		% of Net Exposure
	(dollars in millions)
Investment Grade:
Financial institutions	$	714	$	695	$	—	$	695		95	%
Non-investment Grade:
Energy companies		13		13		—		13		2	%
No External Ratings:
Internally-rated non-investment grade		25		25		—		25		3	%

Total	$	752	$	733	$	—	$	733		100	%

(1)

(2)	Net exposure before collateral represents the credit exposure, including both realized and unrealized transactions, after applying the terms of master netting agreements with counterparties and netting of transactions with clearing brokers and exchanges.

(3)	Collateral includes cash and letters of credit received from counterparties.

(4)	Amounts do not include exposures with affiliates or exposures incurred by GenOn Mid-Atlantic in connection with transactions entered into with external counterparties by affiliates on its behalf, with the exception of coal purchases.

GenOn Americas Generation had credit exposure to two investment grade counterparties at September 30, 2011 and December 31, 2010, respectively, each representing an exposure of more than 10% of total credit exposure, net of collateral and totaling $586 million and $568 million at September 30, 2011 and December 31, 2010, respectively.

GenOn Mid-Atlantic had credit exposure to two investment grade counterparties at September 30, 2011 and three investment grade counterparties at December 31, 2010, respectively, each representing an exposure of more than 10% of total credit exposure, net of collateral and totaling $586 million and $653 million at September 30, 2011 and December 31, 2010, respectively.

GenOn Americas Generation and GenOn Mid-Atlantic Credit Risk

Our standard industry contracts contain credit-risk-related contingent features such as ratings-related thresholds whereby we would be required to post additional cash collateral or letters of credit as a result of a credit event, including a downgrade. Additionally, some of our contracts contain language, which is generally subjective in nature that could require us to post additional cash collateral or letters of credit as a result of a credit event, including a downgrade. However, as a result of our current credit rating, we are typically required to post collateral in the normal course of business to offset either substantially or completely the net liability positions, after applying the terms of master netting agreements. At September 30, 2011, the fair value of GenOn Americas Generation’s financial instruments with credit-risk-related contingent features in a net liability position was $11 million for which GenOn Americas Generation had posted collateral of $9 million, including cash and letters of credit. At September 30, 2011, GenOn Mid-Atlantic did not have any financial instruments with credit-risk-related contingent features in a net liability position.

At September 30, 2011 and December 31, 2010, GenOn Americas Generation had $54 million and $1 million, respectively, of cash collateral posted with counterparties under master netting agreements that was included in funds on deposit on the consolidated balance sheets.

Fair Values of Other Financial Instruments (GenOn Americas Generation)

The fair values of certain funds on deposit, accounts receivable, notes and other receivables and accounts payable and accrued liabilities approximate their carrying amounts.

The carrying amounts and fair values of GenOn Americas Generation’s financial instruments are as follows:

September 30,

September 30, 2011

December 31, 2010

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

(in millions)

Liabilities:

Long and short-term debt⁽¹⁾

867

748

2,255

2,273

(1)	The fair value of GenOn Americas Generation’s long- and short-term debt is estimated using reported market prices, when available.

4. Long-Term Debt

Outstanding debt was as follows:

		September 30,			September 30,			September 30,		September 30,			September 30,			September 30,
	September 30, 2011								December 31, 2010
	Stated Interest Rate ⁽¹⁾			Long-term			Current		Stated Interest Rate⁽¹⁾			Long-term			Current
	(in millions, except interest rates)
Bonds and Notes:
GenOn Americas Generation:
Senior unsecured notes, due 2011⁽²⁾		—		$	—		$	—		8.30	%	$	—		$	535
Senior unsecured notes, due 2021		8.50	%		450			—		8.50			450			—
Senior unsecured notes, due 2031		9.125			400			—		9.125			400			—
Unamortized debt discounts, net		—			(2	)		—		—			(2	)		—
GenOn North America:
Senior notes, due 2013⁽³⁾		—			—			—		7.375			—			850
GenOn Mid-Atlantic:								—
GenOn Chalk Point capital lease, due 2011 to 2015		8.19	%		15			4		8.19			18			4

Total				$	863		$	4				$	866		$	1,389

(1)	The stated interest rates are at September 30, 2011 and December 31, 2010.

(2)	These notes were repaid on May 2, 2011.

(3)	These notes were discharged at the closing of the Merger on December 3, 2010 and were redeemed on January 3, 2011 at a call price of 101.844% of the principal amount.

GenOn North America Senior Notes Due 2013

Upon the closing of the Merger, the senior notes due 2013 of GenOn North America (issued in 2005) were discharged following the deposit with the trustee of funds sufficient to pay the redemption price thereof, plus accrued interest to the date of redemption. The amount of funds on deposit with the trustee was $866 million at December 31, 2010 and was recorded as restricted cash included in funds on deposit on the consolidated balance sheet.

On January 3, 2011, the senior notes were redeemed at the call price of 101.844% of the principal amount plus accrued and unpaid interest through the date of redemption. The total payment on the date of redemption was $866 million and a $23 million loss on early extinguishment of debt (in other, net on the consolidated statement of operations) was recognized during the three months ended March 31, 2011, which includes a $16 million premium and $7 million of unamortized debt issuance costs.

GenOn Americas Generation Senior Notes

On May 2, 2011, GenOn Americas Generation repaid the $535 million of senior notes that came due.

5. Guarantees and Letters of Credit

GenOn generally conducts its business through various intermediate holding companies, including GenOn Americas Generation, and various operating subsidiaries, which enter into contracts as part of their business activities. In certain instances, the contractual obligations of such subsidiaries are guaranteed by, or otherwise supported by, GenOn or another of its subsidiaries, including by letters of credit issued under the GenOn credit facilities.

In addition, GenOn Americas Generation and its subsidiaries enter into various contracts that include indemnification and guarantee provisions. Examples of these contracts include financing and lease arrangements, purchase and sale agreements (including for commodities), construction agreements and agreements with vendors. Although the primary obligation under such contracts is to pay money or render performance, such contracts may include obligations to indemnify the counterparty for damages arising from the breach thereof and, in certain instances, other existing or potential liabilities. In many cases GenOn Americas Generation’s maximum potential liability cannot be estimated because some of the underlying agreements contain no limits on potential liability.

Upon issuance or modification of a guarantee, GenOn Americas Generation determines if the obligation is subject to initial recognition and measurement of a liability and/or disclosure of the nature and terms of the guarantee. Generally, guarantees of the performance of a third party are subject to the recognition and measurement, and the disclosure provisions, of the accounting guidance related to guarantees. Such guarantees must initially be recorded at fair value, as determined in accordance with the accounting guidance.

Following is a summary of letters of credit issued and surety bonds provided:

		September 30,		September 30,
	September 30, 2011		December 31, 2010
	(in millions)
Letters of credit—rent reserves⁽¹⁾	$	75	$	101
Letters of credit—energy trading and marketing activities⁽¹⁾		30		63
Letters of credit—other operating activities⁽¹⁾		33		31
Surety bonds		2		7

Total	$	140	$	202

(1)	Represents letters of credit posted by GenOn for the benefit of GenOn Americas Generation and GenOn Mid-Atlantic.

This note should be read in conjunction with note 7 to our consolidated financial statements in our 2010 Annual Report on Form 10-K.

6. Related Party Arrangements and Transactions

Administrative Services Agreement with GenOn Energy Services

GenOn Energy Services provides us with various management, personnel and other services as set forth in the Administrative Services Agreement. We reimburse GenOn Energy Services for amounts equal to GenOn Energy Services’ costs of providing such services.

The total costs incurred under the Administrative Services Agreement with GenOn Energy Services have been included in our unaudited condensed consolidated statements of operations as follows:

GenOn Americas Generation

		September 30,		September 30,		September 30,		September 30,
	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(in millions)
Cost of fuel, electricity and other products—affiliate	$	2	$	2	$	7	$	6
Operations and maintenance expense—affiliate		31		41		98		121

Total	$	33	$	43	$	105	$	127

GenOn Mid-Atlantic

		September 30,		September 30,		September 30,		September 30,
	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(in millions)
Cost of fuel, electricity and other products—affiliate	$	2	$	2	$	7	$	6
Operations and maintenance expense—affiliate		19		25		57		70

Total	$	21	$	27	$	64	$	76

Services Provided by GenOn Energy Management

GenOn Americas Generation

As a result of the Merger, GenOn Energy Management provides services to certain of GenOn’s indirect operating subsidiaries through Power, Fuel Supply and Services Agreements. The services include the bidding and dispatch of the generating units, fuel procurement and the execution of contracts, including economic hedges, to reduce price risk. These transactions are recorded as operating revenues—affiliate and cost of fuel, electricity and other products—affiliate, as appropriate, in the unaudited condensed consolidated statements of operations. Amounts due from and to GenOn’s indirect operating subsidiaries are recorded as accounts receivable—affiliate or net payable—affiliate, as appropriate. Substantially all energy marketing overhead expenses are allocated to GenOn’s operating subsidiaries. During the three and nine months ended September 30, 2011, GenOn Americas Generation recorded a reduction to operations and maintenance expense—affiliate of $7 million and $20 million, respectively, related to the allocations of energy marketing overhead expenses to affiliates that are not included in the GenOn Americas Generation unaudited condensed consolidated statements of operations.

GenOn Mid-Atlantic

GenOn Mid-Atlantic receives services from GenOn Energy Management which include the bidding and dispatch of the generating units, procurement of fuel and other products and the execution of contracts, including economic hedges, to reduce price risk. These transactions are recorded as operating revenues—affiliate, cost of fuel, electricity and other products—affiliate and operations and maintenance expense—affiliate, as appropriate, in the unaudited condensed consolidated statements of operations. Amounts due to and from GenOn Energy Management under the Power Sale, Fuel Supply and Services Agreement are recorded as a net payable—affiliate or accounts receivable—affiliate, as appropriate. Substantially all energy marketing overhead expenses are allocated to GenOn’s operating subsidiaries. During the three months ended September 30, 2011 and 2010, GenOn Mid-Atlantic incurred $1 million and $3 million, respectively, of energy marketing overhead expenses. During the nine months ended September 30, 2011 and 2010, GenOn Mid-Atlantic incurred $3 million and $10 million, respectively, of energy marketing overhead expenses. These costs are included in operations and maintenance expense—affiliate in GenOn Mid-Atlantic’s unaudited condensed consolidated statements of operations.

Power Sales and Fuel Supply Arrangement with GenOn Energy Management (GenOn Mid-Atlantic)

GenOn Mid-Atlantic operates under a Power Sale, Fuel Supply and Services Agreement with GenOn Energy Management. Amounts due to GenOn Energy Management for fuel purchases and due from GenOn Energy Management for power and capacity sales are recorded as a payable—affiliate or accounts receivable—affiliate in GenOn Mid-Atlantic’s unaudited condensed consolidated balance sheets.

Under the Power Sale, Fuel Supply and Services Agreement, GenOn Energy Management resells GenOn Mid-Atlantic’s energy products in the PJM spot and forward markets and to other third parties. GenOn Mid-Atlantic is paid the amount received by GenOn Energy Management for such capacity and energy. GenOn Mid-Atlantic has counterparty credit risk in the event that GenOn Energy Management is unable to collect amounts owed from third parties for the resale of GenOn Mid-Atlantic’s energy products.

Services Agreement with GenOn Marsh Landing (GenOn Americas Generation)

During 2010, GenOn Energy Management entered into a services agreement with GenOn Marsh Landing that includes the bidding and dispatch of the Marsh Landing generating units, fuel procurement and the execution of contracts to reduce price risk, except to the extent that GenOn Marsh Landing contracts directly with third-parties, including the PPA with PG&E. As reimbursement for such services, GenOn Marsh Landing has agreed to pay GenOn Energy Management the allocated cost to GenOn Energy Management of providing such services.

Administration Arrangements with GenOn Energy Services

Prior to the completion of the Merger, substantially all of GenOn’s corporate overhead costs were allocated to its operating subsidiaries based on an average of each operating subsidiaries’ gross margin, labor costs and net property, plant and equipment relative to all operating subsidiaries. For periods subsequent to the completion of the Merger, GenOn’s corporate overhead costs are allocated based on each operating subsidiaries’ planned operating expenses relative to all operating subsidiaries. Management has concluded that this method of allocating overhead costs is reasonable. During the three and nine months ended September 30, 2011 and 2010, we incurred the following in costs under these arrangements, which are included in operations and maintenance expense—affiliate in our unaudited condensed consolidated statements of operations:

		September 30,		September 30,		September 30,		September 30,
	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(in millions)
GenOn Americas Generation	$	29	$	33	$	94	$	95
GenOn Mid-Atlantic	$	19	$	22	$	61	$	61

These allocations and charges are not necessarily indicative of what would have been incurred had we been an unaffiliated entity.

Notes Receivable from Affiliate and Notes Payable to Affiliate (GenOn Americas Generation)

In January 2011, GenOn Americas Generation and certain of its subsidiaries began participating in separate intercompany cash management programs whereby cash balances at GenOn Americas Generation and the respective participating subsidiaries were transferred to central concentration accounts to fund working capital and other needs of the respective participants. The balances under this program are reflected as notes receivable from affiliate and notes payable to affiliate. The notes are due on demand and accrue interest, which is payable quarterly, at the yield of a short term Treasury security fund. At September 30, 2011 GenOn Americas Generation had current notes receivable from GenOn Energy Holdings of $161 million related to its intercompany cash management program. During the three and nine months ended September 30, 2011, GenOn Americas Generation earned an insignificant amount of interest income related to the notes receivable. At September 30, 2011 GenOn Americas Generation had current notes payable to GenOn Energy Holdings of $31 million related to its intercompany cash management program. During the three and nine months ended September 30, 2011, GenOn Americas Generation incurred an insignificant amount of interest expense related to the notes payable.

Purchased Emissions Allowances (GenOn Mid-Atlantic)

In the first quarter of 2009, GenOn Energy Management began maintaining on behalf of GenOn Mid-Atlantic an inventory of certain purchased emissions allowances. The emissions allowances are sold by GenOn Energy Management to GenOn Mid-Atlantic as they are needed for operations. GenOn Mid-Atlantic purchases emissions allowances from GenOn Energy Management at GenOn Energy Management’s original cost to purchase the allowances. For allowances that have been purchased by GenOn Energy Management from a GenOn affiliate, the price paid by GenOn Energy Management is determined by market indices.

Emissions allowances purchased from GenOn Energy Management that were utilized in the three months ended September 30, 2011 and 2010, were $7 million and $9 million, respectively, and in the nine months ended September 30, 2011 and 2010, were $21 million and $25 million, respectively, and are recorded in cost of fuel, electricity and other products—affiliate in GenOn Mid-Atlantic’s unaudited condensed consolidated statements of operations.

Immaterial Misstatement of Post-Employment Benefits in Prior Periods

During the second quarter of 2011, we identified an under accrual of post-employment benefits relating to over ten years up to and through 2010. In those years, we did not recognize a liability for future expected costs of benefits for inactive employees who were unable to perform services because of a disability. For GenOn Americas Generation, for 2010, 2009, 2008, 2007 and 2006, its operations and maintenance expense was understated by $0, $1 million, $1 million, $1 million and $2 million, respectively, and its net income/loss for these years was misstated by the same amounts. For GenOn Mid-Atlantic, for 2010, 2009, 2008, 2007 and 2006, its operations and maintenance expense was understated by $0, $0, $1 million, $1 million and $1 million, respectively, and its net income/loss for these years was misstated by the same amounts. The misstatements had no effect on cash flows for any of the periods.

To correct the misstatements, we recorded the following immaterial adjustments to the prior period financial statements presented in this Form 10-Q for GenOn Americas Generation: (a) cumulative decrease to member’s interest of $12 million in the consolidated balance sheet at December 31, 2010 and (b) cumulative increase to payables to affiliate and total current liabilities of $12 million in the consolidated balance sheet at December 31, 2010. To correct the misstatements, we recorded the following immaterial adjustments to the prior period financial statements presented in this Form 10-Q for GenOn Mid-Atlantic: (a) cumulative decrease to member’s interest of $8 million in the consolidated balance sheet at December 31, 2010 and (b) cumulative increase to payables to affiliate and total current liabilities of $8 million in the consolidated balance sheet at December 31, 2010.

7. Income Taxes

Income Tax Disclosures

GenOn Americas Generation

GenOn Americas Generation and most of its subsidiaries are limited liability companies that are treated as branches of GenOn Americas for income tax purposes. As a result, GenOn Americas and GenOn have direct liability for the majority of the United States federal and state income taxes relating to GenOn Americas Generation’s operations. Some of GenOn Americas Generation’s subsidiaries, Hudson Valley Gas and GenOn Special Procurement, Inc., exist as regarded corporate entities for income tax purposes. GenOn Kendall, which had previously existed as a regarded entity for income tax purposes, has been converted to a disregarded entity. For a subsidiary that continues to exist as a corporate regarded entity, GenOn Americas Generation allocates current and deferred income taxes to each corporate regarded entity as if such entity were a single taxpayer utilizing the asset and liability method to account for income taxes. To the extent GenOn Americas Generation provides tax expense or benefit, any related tax payable or receivable to GenOn is reclassified to equity in the same period because GenOn Americas Generation does not have a tax sharing agreement with GenOn.

If GenOn Americas Generation were to be allocated income taxes attributable to its operations, the pro forma income tax provision (benefit) attributable to income before taxes would be $(11) million and $67 million during the three months ended September 30, 2011 and 2010, respectively, and $(1) million and $68 million during the nine months ended September 30, 2011 and 2010, respectively. The balance of GenOn Americas Generation’s pro forma deferred income taxes is $0 at September 30, 2011.

GenOn Mid-Atlantic

GenOn Mid-Atlantic and its subsidiaries are limited liability companies and are not subject to United States federal or state income taxes. As such, GenOn Mid-Atlantic is treated as though it were a branch or division of GenOn Americas Generation’s parent, GenOn Americas, for income tax purposes, and not as a separate taxpayer. GenOn Americas and GenOn are directly responsible for income taxes related to GenOn Mid-Atlantic’s operations. If GenOn Mid-Atlantic were to be allocated income taxes attributable to its operations, the pro forma income tax provision (benefit) attributable to income before taxes would be $(33) million and $127 million during the three months ended September 30, 2011 and 2010, respectively, and $(23) million and $209 million during the nine months ended September 30, 2011 and 2010, respectively. The balance of GenOn Mid-Atlantic’s pro forma deferred income taxes would be a net deferred tax liability of $189 million at September 30, 2011.

8. Segment Reporting (GenOn Americas Generation)

In conjunction with the Merger, GenOn Americas Generation began reporting in five segments in the fourth quarter of 2010: Eastern PJM, Northeast, California, Energy Marketing and Other Operations. Prior to the Merger, GenOn Americas Generation had four reportable segments: Mid-Atlantic, Northeast, California and Other Operations. Amounts for 2010 were reclassified to conform to the current segment presentation. The segments were determined based on how the business is managed and align with the information provided to the chief operating decision maker for purposes of assessing performance and allocating resources. Generally, GenOn Americas Generation’s segments are engaged in the sale of electricity, capacity, ancillary and other energy services from their generating facilities in hour-ahead, day-ahead and forward markets in bilateral and ISO markets. GenOn Americas Generation also engages in proprietary trading and fuel oil management. Operating revenues consist of (a) power generation revenues, (b) contracted and capacity revenues, (c) fuel sales and proprietary trading revenues and (d) power hedging revenues.

The Eastern PJM segment consists of four generating facilities located in Maryland and Virginia with total net generating capacity of 5,204 MW. The Northeast segment consists of four generating facilities located in Massachusetts and New York with total net generating capacity of 2,535 MW. The California segment consists of two generating facilities located in or near the City of San Francisco, with total net generating capacity of 1,985 MW. The total net generating capacity for California excludes the Potrero generating facility of 362 MW, which was shut down on February 28, 2011. The Energy Marketing segment consists of proprietary trading and fuel oil management activities. Other Operations includes parent company adjustments for affiliate transactions of GenOn Americas Generation. All revenues are generated and long-lived assets are located within the United States.

GenOn Americas Generation’s measure of profit or loss for the reportable segments is operating income/loss. This measure represents the lowest level of information that is provided to the chief operating decision maker for GenOn Americas Generation’s reportable segments. In the following tables, eliminations are primarily related to intercompany revenues and intercompany cost of fuel.

GenOn Americas Generation Operating Segments

		September 30,			September 30,			September 30,			September 30,			September 30,			September 30,			September 30,
	Eastern PJM			Northeast			California			Energy Marketing			Other Operations			Eliminations			Total
	(in millions)
Three Months Ended September 30, 2011:

Operating revenues⁽¹⁾	$	41		$	2		$	22		$	864		$	—		$	—		$	929
Operating revenues—affiliate⁽²⁾		287			52			—			42			—			(397	)		(16	)

Total operating revenues		328			54			22			906			—			(397	)		913
Cost of fuel, electricity and other products⁽³⁾		4			1			—			72			133			—			210
Cost of fuel, electricity and other products—affiliate⁽⁴⁾		170			35			—			819			(133	)		(397	)		494

Total cost of fuel, electricity and other products		174			36			—			891			—			(397	)		704

Gross margin (excluding depreciation and amortization)		154			18			22			15			—			—			209

Operating Expenses:
Operations and maintenance		53			11			4			1			4			—			73
Operations and maintenance—affiliate		43			9			6			(1	)		(4	)		—			53
Depreciation and amortization		30			7			4			—			1			—			42
Impairment losses⁽⁵⁾		94			20			14			—			—			—			128
Gain on sales of assets, net		—			(1	)		(5	)		—			—			—			(6	)
Gain on sales of assets, net—affiliate		—			1			1			—			—			—			2

Total operating expenses		220		$	47		$	24		$	—		$	1		$	—		$	292

Operating income (loss)	$	(66	)	$	(29	)	$	(2	)	$	15		$	(1	)	$	—		$	(83	)

(1)	Includes unrealized gains (losses) of $(3) million and $40 million for Eastern PJM and Energy Marketing, respectively.

(2)	Includes unrealized losses of $(2) million and $(25) million for Northeast and Energy Marketing, respectively.

(3)	Includes unrealized losses of $11 million for Energy Marketing.

(4)	Includes unrealized (gains) losses of $9 million, $1 million and $(11) million for Eastern PJM, Northeast and Energy Marketing, respectively.

(5)	Represents impairment losses for the write off of excess NO_x and SO₂ emissions allowances as a result of the CSAPR. See note 2.

		September 30,			September 30,			September 30,			September 30,		September 30,			September 30,			September 30,
	Eastern PJM			Northeast			California			Energy Marketing		Other Operations			Eliminations			Total
	(in millions)
Nine Months Ended September 30, 2011:

Operating revenues⁽¹⁾	$	85		$	11		$	72		$	2,014	$	—		$	—		$	2,182
Operating revenues—affiliate⁽²⁾		821			136			—			171		—			(1,131	)		(3	)

Total operating revenues		906			147			72			2,185		—			(1,131	)		2,179
Cost of fuel, electricity and other products⁽³⁾		13			4			—			119		377			—			513
Cost of fuel, electricity and other products—affiliate⁽⁴⁾		410			87			(2	)		2,006		(376	)		(1,131	)		994

Total cost of fuel, electricity and other products		423			91			(2	)		2,125		1			(1,131	)		1,507

Gross margin (excluding depreciation and amortization)		483			56			74			60		(1	)		—			672

Operating Expenses:
Operations and maintenance		216			32			16			2		4			—			270
Operations and maintenance—affiliate		125			28			23			—		(4	)		—			172
Depreciation and amortization		89			19			11			1		4			—			124
Impairment losses⁽⁵⁾		94			20			14			—		—			—			128
Gain on sales of assets, net		—			—			(5	)		—		—			—			(5	)
Gain on sales of assets, net—affiliate		—			1			1			—		—			—			2

Total operating expenses		524			100			60			3		4			—			691

Operating income (loss)	$	(41	)	$	(44	)	$	14		$	57	$	(5	)	$	—		$	(19	)

Total assets at September 30, 2011	$	4,213		$	435		$	129		$	1,389	$	177		$	(410	)	$	5,933

(1)	Includes unrealized losses of $(42) million and $(28) million for Eastern PJM and Energy Marketing, respectively.

(2)	Includes unrealized gains (losses) of $(39) million, $(12) million and $32 million for Eastern PJM, Northeast and Energy Marketing, respectively.

(3)	Includes unrealized gains of $(18) million for Energy Marketing.

(4)	Includes unrealized (gains) losses of $(18) million, $(1) million and $18 million for Eastern PJM, Northeast and Energy Marketing, respectively.

(5)	Represents impairment losses for the write off of excess NO_x and SO₂ emissions allowances as a result of the CSAPR. See note 2.

		September 30,		September 30,			September 30,		September 30,			September 30,			September 30,			September 30,
	Eastern PJM		Northeast			California		Energy Marketing			Other Operations			Eliminations			Total
	(in millions)
Three Months Ended September 30, 2010:

Operating revenues⁽¹⁾	$	165	$	2		$	28	$	580		$	—		$	—		$	775
Operating revenues—affiliate⁽²⁾		488		86			13		53			—			(640	)		—

Total operating revenues		653		88			41		633			—			(640	)		775
Cost of fuel, electricity and other products⁽³⁾		4		—			—		78			163			—			245
Cost of fuel, electricity and other products—affiliate⁽⁴⁾		178		59			9		559			(163	)		(640	)		2

Total cost of fuel, electricity and other products		182		59			9		637			—			(640	)		247

Gross margin (excluding depreciation and amortization)		471		29			32		(4	)		—			—			528

Operating Expenses:
Operations and maintenance		65		14			6		2			1			—			88
Operations and maintenance—affiliate		51		14			9		1			(1	)		—			74
Depreciation and amortization		36		5			8		1			2			—			52
Gain on sales of assets, net		—		(1	)		—		—			—			—

GENON MID-ATLANTIC, LLC 10-Q