Constellation Energy Corp

7. Early Plant Retirements

We continuously evaluate factors that affect the current and expected economic value of our plants, including, but not limited to: market power prices, results of capacity auctions, potential legislative and regulatory solutions to ensure plants are fairly compensated for benefits they provide through their carbon-free emissions, reliability or fuel security, and the impact of potential rules from the EPA requiring reduction of carbon and other emissions and the efforts of states to implement those final rules. We remain committed to continued operations for our nuclear plants receiving state-supported payments under the Illinois CMC (Byron, Dresden, and Braidwood), Illinois ZES (Clinton and Quad Cities), New Jersey ZEC program (Salem), and the New York CES (FitzPatrick, Ginna, and Nine Mile Point), assuming the continued effectiveness of each program. While the current ZEC

Note 7 — Early Plant Retirements

program in New York ends in 2029, the state has acknowledged our nuclear assets are vital to achieving its clean energy goals and we believe New York will continue to promote policies that support nuclear in the state beyond 2029. With the passage of the IRA, we expect that many of our nuclear assets will operate at least through the end of the nuclear PTC period, concluding at the end of 2032. To enable long term operations, we plan to file applications to extend the licenses of our nuclear fleet to 80 years for the units that receive continued support under federal or state policies or a combination of both. See Note 8 — Property, Plant, and Equipment for additional information on depreciable provisions of the stations, and Note 10 — Asset Retirement Obligations for additional information on ARO.

Nuclear Generation

On August 27, 2020, we announced our intention to permanently cease our operations at Byron in September 2021 and at Dresden in November 2021. On September 15, 2021, we announced that we had reversed our previous decision to retire Byron and Dresden given the opportunity for additional revenue under the Illinois Clean Energy Law. Our Byron, Dresden, and Braidwood nuclear plants were each awarded CMC contracts.

In 2021, we reversed $81 million of severance benefit costs and $13 million of other one-time charges initially recorded in Operating and maintenance expense in 2020 associated with the early retirements. In addition, we updated the expected economic useful life for both facilities to 2044 and 2046, for Byron Units 1 and 2, respectively, and to 2029 and 2031 for Dresden Units 2 and 3, respectively, the end of the respective NRC operating license for each unit. Depreciation was therefore adjusted beginning September 15, 2021, to reflect these extended useful life estimates. See Note 10 — Asset Retirement Obligations for additional detail on changes to the nuclear decommissioning ARO balances resulting from the initial decision and subsequent reversal of the decision to early retire Byron and Dresden.

The total impact for the year ended December 31, 2021 in the Consolidated Statements of Operations and Comprehensive Income resulting from the initial decision and subsequent reversal of the decision to early retire Byron and Dresden is summarized in the table below:

(a)Includes the accelerated depreciation of plant assets including any ARC.

(b)Reflects contractual offset for ARO accretion, ARC depreciation, ARO remeasurement, and excludes any changes in earnings in the NDT funds. Decommissioning-related impacts were not offset for the Byron units starting in the second quarter of 2021 due to the inability to recognize a regulatory asset at ComEd. With our September 15, 2021 reversal of the previous decision to retire Byron, we resumed contractual offset for Byron as of that date. Based on the regulatory agreement with the ICC, decommissioning-related activities are offset in the Consolidated Statements of Operations and Comprehensive Income as long as the net cumulative decommissioning-related activity result in a regulatory liability at ComEd. The offset resulted in an equal adjustment to the noncurrent payables to ComEd. See Note 10 - Asset Retirement Obligations for additional information.

Note 7 — Early Plant Retirements

Other Generation

In March 2018, we notified ISO-NE of our plans to early retire the Mystic Generating Station's units 8 and 9 ("Mystic 8 and 9") absent regulatory reforms to properly value reliability and regional fuel security. Thereafter, ISO-NE identified Mystic 8 and 9 as being needed to ensure fuel security for the region and entered into a cost of service agreement with these two units for the period between June 1, 2022 to May 31, 2024. The agreement was approved by FERC in December 2018. In August 2020, we announced we will permanently cease generation operations at Mystic 8 and 9 at the expiration of the cost of service commitment in May 2024. See Note 3 — Regulatory Matters for additional discussion of Mystic’s cost of service agreement. The annual financial impacts stemming from shortening the expected economic useful life of Mystic 8 and 9 were not material to the periods presented.