~~Use~~UNITED ~~these links to rapidly review the document TABLE OF CONTENTS ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA PART IV~~ STATES

SECURITIES ~~Table~~AND ofEXCHANGE ~~Contents~~ COMMISSION

~~UNITED STATES SECURITIES AND EXCHANGE COMMISSION~~ Washington, D.C. 20549

_______________________

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) ~~OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010 Commission File Number 333-59348~~

~~Midwest~~OF ~~Generation, LLC (Exact~~THE ~~name~~SECURITIES ofEXCHANGE ~~registrant~~ACT ~~as specified in its charter)~~ OF 1934

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

For the fiscal year ended December 31, 2011

Commission File Number 333-59348

_______________________

Midwest Generation, LLC

(Exact name of registrant as specified in its charter)



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

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

Securities registered pursuant to Section 12(b) of the Act:

None		Not Applicable
(Title of Class)		(Name of each exchange on which registered)



None		Not Applicable
(Title of Class)		(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

_____________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO ý

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ý.

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). YES o NO o

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



Large accelerated filer o	Accelerated filer o	Non-accelerated filer ý	Smaller reporting company o

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

Aggregate market value of the registrant's Membership Interests held by non-affiliates of the registrant as of June 30, ~~2010~~2011: $0. Number of units outstanding of the registrant's Membership Interests as of February 2829, ~~2011~~2012: 100 units (all units held by an affiliate of the registrant).

The registrant meets the conditions set forth in General Instruction I.(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K under the reduced disclosure format.

DOCUMENTS INCORPORATED BY REFERENCE

None

Table of Contents

TABLE OF CONTENTS



	TABLE OF CONTENTS

	GLOSSARY	1
	FORWARD-LOOKING STATEMENTS	3
PART I		5
	ITEM 1. BUSINESS	5
	Overview	5
	Location and Available Information	5
	Electric Power Industry	5
	Wholesale Markets	6
	Competition	6
	Overview of Facilities	6
	The Crawford Station	6
	The Fisk Station	6
	The Joliet Station	6
	The Powerton Station	7
	The Waukegan Station	7
	The Will County Station	7
	On-Site Peaking Facilities	7
	Power Sales	7
	Fuel Supply	7
	Emission Allowances	7
	Significant Customers	8
	Insurance	8
	Seasonality	8
	Regulatory Matters	8
	General	8
	Federal Power Act	8
	Reliability Standards	8
	Transmission of Wholesale Power	9
	Environmental Matters and Regulations	9
	Air Quality	9
	Nitrogen Oxide and Sulfur Dioxide	9
	Clean Air Interstate and Cross-State Air Pollution Rules	9
	Revised NAAQS for SO	10
	Illinois	10
	Mercury/Hazardous Air Pollutants	10
	Mercury and Air Toxics Standards Rule	10
	Illinois	10
	Ozone	10
	National Ambient Air Quality Standards	11
	Regional Haze	11
	New Source Review Requirements	11
	Water Quality	11
	Clean Water Act	11
	Coal Combustion Wastes	11

FORWARD-LOOKING STATEMENTS					1
GLOSSARY					3
PART I					4
ITEM 1. BUSINESS					4
	Overview				4
		Location and Available Information			4
	Description of the Industry				5
		Electric Power Industry			5
		Wholesale Markets			5
		Competition			6
	Overview of Facilities				6
		The Crawford Station			6
		The Fisk Station			6
		The Joliet Station			6
		The Powerton Station			7
		The Waukegan Station			7
		The Will County Station			7
		On-Site Peaking Facilities			7
	Transmission				7
	Significant Customers				7
	Fuel Supply				8
		Emission Allowances			8
	Insurance				8
	Seasonality				9
	Regulatory Matters				9
		General			9
		Federal Power Act			9
		Reliability Standards			10
		Transmission of Wholesale Power			10
		Dodd-Frank Act			10
	Environmental Matters and Regulations				10
		Climate Change			11
			Federal Legislative/Regulatory Developments		11
			Regional Initiatives		12
			Litigation Developments		12
		Air Quality			12
			Nitrogen Oxide and Sulfur Dioxide		13
				Clean Air Interstate and Transport Rules	13
				Proposed NAAQS for SO2	14
				Illinois	14
			Mercury/Hazardous Air Pollutants		15
				Clean Air Mercury Rule/Hazardous Air Pollutant Regulations	15
				Illinois	15
			Ozone and Particulates		16

Table of Contents

				National Ambient Air Quality Standards	16
	Climate Change	12
				Illinois	16
	Federal Legislative/Regulatory Developments	12
			Regional Haze		16
	Litigation Developments	12
			New Source Review Requirements		17
	Employees	12
		Water Quality			17
	ITEM 1A. RISK FACTORS	12
			Clean Water Act		17
	Liquidity Risks	12
		Coal Combustion Wastes			17
	Regulatory and Environmental Risks	13
	Employees				18
	Market Risks	14
ITEM 1A. RISK FACTORS					18
	Operating Risks	15
	Regulatory and Environmental Risks				18
	ITEM 1B. UNRESOLVED STAFF COMMENTS	15
	Market Risks				20
	ITEM 2. PROPERTIES	16
	Liquidity Risks				21
	Description of Properties	16
	Operating Risks				22
	ITEM 3. LEGAL PROCEEDINGS	17
ITEM 1B. UNRESOLVED STAFF COMMENTS					23
PART II		17
ITEM 2. PROPERTIES					23
	ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	17
	Description of Properties				24
	ITEM 6. SELECTED FINANCIAL DATA	18
ITEM 3. LEGAL PROCEEDINGS					24
	ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19
ITEM 4. RESERVED					24
	MANAGEMENT'S OVERVIEW	19
PART II					25
	Highlights of Operating Results	19
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES					25
	Environmental Compliance Plans and Costs	19
ITEM 6. SELECTED FINANCIAL DATA					26
	Environmental Regulation Developments	20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS					27
	RESULTS OF OPERATIONS	20
	MANAGEMENT'S OVERVIEW				27
	Summary	20
	Highlights of Operating Results				27
	Reconciliation of Non-GAAP Disclosures and Statistical Definitions	21
	Environmental Developments				28
	Average Realized Energy Price	21
		Environmental Compliance Plans and Costs			28
	Average Realized Fuel Costs	21
		US EPA Developments			29
	Statistical Definitions	22
	Liquidity				29
	Operating Income (Loss)	22
	RESULTS OF OPERATIONS				30
	Other Income (Expense)	23
	Summary				30
	Income Taxes	23
		Statistical Definitions and Reconciliation of Non-GAAP Disclosures			30
	Related Party Transactions	23
	Operating Revenues				32
	New Accounting Guidance	23
	Operating Expenses				33
	LIQUIDITY AND CAPITAL RESOURCES	24
	Other Income (Expense)				34
	Available Liquidity	24
	Provision For Income Taxes				34
	Capital Investment Plan	24
	Related-Party Transactions				34
	Consolidated Cash Flow	24
	New Accounting Guidance				34
	Powerton-Joliet Lease Payments	25
	LIQUIDITY AND CAPITAL RESOURCES				35
	Credit Ratings	25
	Overview	25
	Credit Rating of EMMT and Credit Support for Energy Contracts	25
	Equity Distributions and Tax Payments	25

Table of Contents

	Available Liquidity		35
	Key Ratio Affecting Distributions	26
		Bonus Depreciation Impact	35
	Financing Restrictions on Distributions	26
	Consolidated Cash Flow		35
	Contractual Obligations, Commercial Commitments and Contingencies	26
	Capital Expenditures		36
	Contingencies	27
	Credit Facility and Other Covenants		36
	Off-Balance Sheet Transactions	27
	Equity Distributions and Tax Payments		37
	MARKET RISK EXPOSURES	28
	Powerton-Joliet Lease Payments		37
	Introduction	28
	Credit Ratings		38
	Derivative Instruments	28
		Overview	38
	Unrealized Gains and Losses	28
		Credit Rating of EMMT	38
	Fair Value Disclosures	28
	Contractual Obligations, Commercial Commitments and Contingencies		39
	Commodity Price Risk	28
		Contingencies	39
	Introduction	28
	Off-Balance Sheet Transactions		39
	Energy Price Risk	28
	MARKET RISK EXPOSURES		40
	Capacity Price Risk	29
	Introduction		40
	Basis Risk	30
	Derivative Instruments		40
	Coal and Transportation Price Risk	30
		Unrealized Gains and Losses	40
	Emission Allowances Price Risk	31
		Fair Value Disclosures	40
	Credit Risk	31
	Commodity Price Risk		41
	Interest Rate Risk	31
		Introduction	41
	CRITICAL ACCOUNTING ESTIMATES AND POLICIES	32
		Energy Price Risk	41
	Introduction	32
		Capacity Price Risk	42
	Impairment of Long-Lived Assets	32
		Basis Risk	43
	Derivatives	33
		Coal and Transportation Price Risk	44
	Income Taxes	34
		Emission Allowances Price Risk	44
	Accounting for Contingencies, Guarantees and Indemnities	34
	Credit Risk		45
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35
	Interest Rate Risk		45
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	36
	CRITICAL ACCOUNTING ESTIMATES AND POLICIES		46
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	36
	Introduction		46
	ITEM 9A. CONTROLS AND PROCEDURES	36
	Derivatives		46
	Disclosure Controls and Procedures	36
	Impairment of Long-Lived Assets		47
	Management's Report on Internal Control over Financial Reporting	36
		Application to Merchant Coal-Fired Power Plants	48
	Internal Control over Financial Reporting	36
	Accounting for Contingencies, Guarantees and Indemnities		49
	ITEM 9B. OTHER INFORMATION	36
	Income Taxes		49
	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	37
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			50
	CONSOLIDATED STATEMENTS OF OPERATIONS	38
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			51
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)	39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			51
	CONSOLIDATED BALANCE SHEETS	40
ITEM 9A. CONTROLS AND PROCEDURES			51
	CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY	41
	Disclosure Controls and Procedures		51
	CONSOLIDATED STATEMENTS OF CASH FLOWS	42
	Management's Report on Internal Control over Financial Reporting		51
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	43
	Note 1. Summary of Significant Accounting Policies	43
	Note 2. Property, Plant and Equipment	46

iii

Table of Contents

	Internal Control over Financial Reporting				51
	Note 3. Fair Value Measurements	47
ITEM 9B. OTHER INFORMATION					52
	Note 4. Long-Term Debt	50
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM					53
	Note 5. Derivative Instruments and Hedging Activities	50
CONSOLIDATED STATEMENTS OF INCOME					54
	Note 6. Income Taxes	53
CONSOLIDATED BALANCE SHEETS					55
	Note 7. Compensation and Benefit Plans	55
CONSOLIDATED STATEMENTS OF MEMBER'S EQUITY					56
	Note 8. Commitments and Contingencies	62
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME					57
	Note 9. Environmental Developments	65
CONSOLIDATED STATEMENTS OF CASH FLOWS					58
	Note 10. Accumulated Other Comprehensive Income (Loss)	68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS					59
	Note 11. Supplemental Cash Flows Information	68
	Note 1. Summary of Significant Accounting Policies				59
	Note 12. Asset Impairments and Other Charges	68
		Basis of Presentation			59
	Note 13. Related Party Transactions	69
		Cash Equivalents			59
	Note 14. Quarterly Financial Data (unaudited)	70
		Derivative Instruments and Hedging Activities			60
PART III		71
		Deferred Financing Costs			60
	ITEM 10. MANAGERS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	71
		Impairment of Long-Lived Assets			60
	ITEM 11. EXECUTIVE COMPENSATION	71
		Income Taxes and Tax-Allocation Agreements			60
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	71
		Intangible Assets			61
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	71
		Inventory			61
	ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	71
		New Accounting Guidance			61
PART IV		72
			Accounting Guidance Adopted in 2010		61
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES	72
				Fair Value Measurements and Disclosures	61
	SIGNATURES	76
			Accounting Guidance Not Yet Adopted		62
		Property, Plant and Equipment			62
		Restricted Deposits			63
		Revenue Recognition			63
	Note 2. Property, Plant and Equipment				63
		Asset Retirement Obligations			64
	Note 3. Fair Value Measurements				65
		Valuation Techniques used to Determine Fair Value			66
			Level 1		66
			Level 2		66
			Level 3		67
	Note 4. Long-Term Debt				67
		Credit Facility			67
		Other Covenants			68
	Note 5. Derivative Instruments and Hedging Activities				68
		Notional Volumes of Derivative Instruments			69
		Fair Value of Derivative Instruments			70
		Income Statement Impact of Derivative Instruments			70
		Contingent Features			71
		Collateral Deposits			72
		Commodity Price Risk Management			72
		Credit Risk			72
	Note 6. Income Taxes				74
		Current and Deferred Taxes			74
		Effective Tax Rate			75
		Accounting for Uncertainty in Income Taxes			75
			Unrecognized Tax Benefits		75

Table of Contents

		Accrued Interest and Penalties		76
Note 7. Compensation and Benefit Plans				76
	Employee Savings Plan			76
	Pension Plans and Postretirement Benefits Other Than Pensions			76
		Pension Plans		76
		Postretirement Benefits Other Than Pensions		79
	Discount Rate			82
	Plan Assets			82
		Description of Pension and Postretirement Benefits Other Than Pensions Investment Strategies		82
		Determination of the Expected Long-Term Rate of Return on Assets		83
		Capital Markets Return Forecasts		83
		Fair Value of Plan Assets		83
			Pension Plan	84
Note 8. Commitments and Contingencies				86
	Lease Commitments			86
		Powerton-Joliet Facilities Sale-Leaseback		87
	Other Commitments			87
		Fuel Supply Contracts		87
		Coal Transportation Agreements		88
		Capital Expenditures		88
		Other Contractual Obligations		88
	Interconnection Agreement			88
	Guarantees and Indemnities			88
		Tax Indemnity Agreements		88
		Environmental Indemnities Related to the Midwest Generation Plants		89
	Contingencies			90
		Environmental Remediation		90
		New Source Review Lawsuit		90
	Insurance			91
Note 9. Environmental Developments				91
	Environmental Compliance Plans and Costs			91
	Greenhouse Gas Regulation			92
	Transport Rule			93
	Hazardous Air Pollutant Regulations			93
	Water Quality			93
		Clean Water Act		93
	Coal Combustion Wastes			94
Note 10. Accumulated Other Comprehensive Income (Loss)				94
Note 11. Supplemental Cash Flows Information				95
Note 12. Related-Party Transactions				95
	EMMT Agreements			95
	Notes Receivable from EME			95
	Services Agreements with EME and Edison International			96
	Agreements with Midwest Generation EME, LLC			96
		Management and Administration Agreement		96
		Support Services Agreement		96
Note 13. Quarterly Financial Data (unaudited)				97

GLOSSARY

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



ACI	activated carbon injection
ARO(s)	asset retirement obligation(s)
BART	best available retrofit technology
bcf	billion cubic feet
Btu	British thermal units
CAA	Clean Air Act
CAIR	Clean Air Interstate Rule
CAMR	Clean Air Mercury Rule
CO₂	carbon dioxide
Commonwealth Edison	Commonwealth Edison Company
CPS	Combined Pollutant Standard
CSAPR	Cross-State Air Pollution Rule
EIA	Energy Information Administration
EME	Edison Mission Energy
EMMT	Edison Mission Marketing & Trading, Inc.
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
GAAP	United States generally accepted accounting principles
GHG	greenhouse gas
GWh	gigawatt-hours
HAP(s)	hazardous air pollutant(s)
Illinois EPA	Illinois Environmental Protection Agency
ISO(s)	independent system operator(s)
kV	kilovolt
Lehman	Lehman Brothers Commodity Services, Inc. and Lehman Brothers Holdings, Inc.
LIBOR	London Interbank Offered Rate
MATS	Mercury and Air Toxics Standards
Midwest Generation	Midwest Generation, LLC
MISO	Midwest Independent Transmission System Operator
MMBtu	million British thermal units
Moody's	Moody's Investors Service, Inc.
MW	megawatts
MWh	megawatt-hours
NAAQS	National Ambient Air Quality Standard(s)
NERC	North American Electric Reliability Corporation
NO_X	nitrogen oxide
NSR	New Source Review
PJM	PJM Interconnection, LLC
PRB	Powder River Basin
PSD	Prevention of Significant Deterioration
RPM	Reliability Pricing Model
RTO(s)	regional transmission organization(s)
S&P	Standard & Poor's Ratings Services

Table of Contents

PART III		98
SIP(s)	state implementation plan(s)
ITEM 10. MANAGERS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		98
SNCR	selective non-catalytic reduction
ITEM 11. EXECUTIVE COMPENSATION		98
SO2	sulfur dioxide
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		98
US EPA	United States Environmental Protection Agency
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		98
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES		98
PART IV		99
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		99
SIGNATURES		106

vi2

Table of Contents

FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect Midwest Generation's current expectations and projections about future events based on Midwest Generation's knowledge of present facts and circumstances and assumptions about future events and include any statement that does not directly relate to a historical or current fact. Other information distributed by Midwest Generation that is incorporated in this annual report, or that refers to or incorporates this annual report, may also contain forward-looking statements. In this annual report and elsewhere, the words "expects," "believes," "anticipates," "estimates," "projects," "intends," "plans," "probable," "may," "will," "could," "would," "should," and variations of such words and similar expressions, or discussions of strategy or plans, are intended to identify forward-looking statements. Such statements necessarily involve risks and uncertainties that could cause actual results to differ materially from those anticipated. Some of the risks, uncertainties and other important factors that could cause results to differ from those currently expected, or that otherwise could impact Midwest Generation, include but are not limited to:

1• supply and demand for electric capacity and energy, and the resulting prices and dispatch volumes, in the wholesale markets to which Midwest Generation's generating units have access;


•	volatility of market prices for energy and capacity;


•	the difficulty of predicting wholesale prices, transmission congestion energy demand, and other aspects of the complex and volatile markets in which Midwest Generation participates;


•	environmental laws and regulations, at both state and federal levels, or changes in the application of those laws, that could require additional expenditures or otherwise affect Midwest Generation's cost and manner of doing business, including compliance with the CPS and CAIR or CSAPR (as applicable) and the MATS rule;


•	Midwest Generation's significant cash requirements and its limited ability to borrow funds and access the capital markets on reasonable terms;


•	the cost and availability of fuel, sorbents, and other commodities used for power generation and emission controls, and of related transportation services;


•	the cost and availability of emission credits or allowances;


•	transmission congestion in and to each market area and the resulting differences in prices between delivery points;


•	the availability and creditworthiness of counterparties, and the resulting effects on liquidity in the power and fuel markets in which Midwest Generation operates and/or the ability of counterparties to pay amounts owed in excess of collateral provided in support of their obligations;


•	governmental, statutory, regulatory or administrative changes or initiatives affecting Midwest Generation or the electricity industry generally, including market structure rules and price mitigation strategies adopted by ISOs and RTOs;


•	market volatility and other market conditions that could increase Midwest Generation's obligations to post collateral beyond the amounts currently expected, and the potential effect of such conditions on the ability of Midwest Generation to provide sufficient collateral in support of its hedging activities and purchases of fuel;


•	completion of permitting and construction of Midwest Generation's capital projects;


•	weather conditions, natural disasters and other unforeseen events;

•

the extent of additional supplies of capacity, energy and ancillary services from current competitors or new market entrants, including the development of new generation facilities, and technologies that may be able to produce electricity at a lower cost than Midwest Generation's generating facilities and/or increased access by competitors to Midwest Generation's markets as a result of transmission upgrades;


•	competition in all aspects of Midwest Generation's business;


•	operating risks, including equipment failure, availability, heat rate, output, costs of repairs and retrofits, and availability and cost of spare parts;


•	creditworthiness of suppliers and their ability to deliver goods and services under their contractual obligations to Midwest Generation or to pay damages if they fail to fulfill those obligations;

Table of Contents

~~effect of~~• ~~such~~effects ~~conditions on the ability~~ of ~~Midwest~~legal ~~Generation~~proceedings, tochanges ~~provide~~in ~~sufficient~~or ~~collateral~~interpretations inof ~~support~~tax oflaws, ~~its~~rates ~~hedging~~or ~~activities~~policies, and ~~purchases~~changes ofin ~~fuel~~accounting standards; and


•	general political, economic and business conditions.

Certain of the risk factors listed above are discussed in more detail in "Item 1A. Risk Factors" and in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk Exposures." Additional information about the risk factors listed above and other risks and uncertainties is contained throughout this annual report. Readers are urged to read this entire annual report, including the information incorporated by reference, and carefully consider the risks, uncertainties and other factors that affect Midwest Generation's business. Forward-looking statements speak only as of the date they are made, and Midwest Generation is not obligated to publicly update or revise forward-looking statements. Readers should review future reports filed by Midwest Generation with the Securities and Exchange Commission.

Table of Contents

GLOSSARY

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

ARO(s)		asset retirement obligation(s)
BART		best available retrofit technology
bcf		billion cubic feet
Btu		British thermal units
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CAMR		Clean Air Mercury Rule
CO2		carbon dioxide
Commonwealth Edison		Commonwealth Edison Company
CPS		Combined Pollutant Standard
EME		Edison Mission Energy
EMMT		Edison Mission Marketing & Trading, Inc.
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
GAAP		United States generally accepted accounting principles
GHG		greenhouse gas
GWh		gigawatt-hours
HAP(s)		hazardous air pollutant(s)
Illinois EPA		Illinois Environmental Protection Agency
ISO(s)		independent system operator(s)
kV		kilovolt
Lehman Brothers		Lehman Brothers Commodity Services, Inc. (filed for bankruptcy on October 3, 2008) and Lehman Brothers Holdings, Inc. (filed for bankruptcy on September 15, 2008)
LIBOR		London Interbank Offered Rate
Midwest Generation		Midwest Generation, LLC
MMBtu		million British thermal units
MW		megawatts
MWh		megawatt-hours
NAAQS		National Ambient Air Quality Standard(s)
NERC		North American Electric Reliability Corporation
NOX		nitrogen oxide
NSR		New Source Review
PJM		PJM Interconnection, LLC
PRB		Powder River Basin
PSD		Prevention of Significant Deterioration
RPM		Reliability Pricing Model
RTO(s)		regional transmission organization(s)
SIP(s)		state implementation plan(s)
SNCR		selective non-catalytic reduction
SO2		sulfur dioxide
Transport Rule		Clean Air Transport Rule
US EPA		United States Environmental Protection Agency

Table of Contents

PART I

ITEM 1. BUSINESS

Overview

Midwest Generation was formed on July 12, 1999 as a Delaware limited liability company with Edison Mission Midwest Holdings Co. as the sole owner. Edison Mission Midwest Holdings is a wholly owned subsidiary of Midwest Generation EME, LLC, which is in turn a wholly owned subsidiary of EME. EME is an indirect wholly owned subsidiary of Edison International. Midwest Generation was formed for the purpose of owning or leasing, making improvements to, and operating and selling the capacity and energy of, the power generation assets it purchased from Commonwealth Edison, which are referred to as the Midwest Generation plants. Midwest Generation acquired the Midwest Generation plants on December 15, 1999.

As of December 31, ~~2010~~2011, Midwest Generation operated 5,477 MW of power plants, based on installed capacity acknowledged by PJM, consisting of:

~~Midwest Generation~~• issix acoal-fired ~~party~~generating toplants aconsisting ~~contract~~of ~~with EMMT~~5,172 ~~an EME subsidiary engaged in asset management and trading activities~~MW, ~~under~~ which ~~EMMT~~include ~~sells energy and capacity from~~ the ~~Midwest Generation plants into the wholesale market~~Powerton, ~~engages in hedging activities and provides scheduling and other services. Midwest Generation is also a party to a revolving credit agreement with EMMT under which it can make revolving loans to~~Joliet, orWill ~~have letters of credit issued on behalf of~~County, ~~EMMT in order to provide credit support for forward contracts. EMMT has the ability to enter into fuel hedging arrangements~~Waukegan, on ~~Midwest~~Crawford ~~Generation's~~and ~~behalf.~~Fisk Stations; and


•	the Fisk and Waukegan on-site, oil-fired generating peakers consisting of 305 MW.

Midwest Generation is a party to a contract with EMMT, an EME subsidiary engaged in asset management and trading activities, under which EMMT sells energy and capacity from the Midwest Generation plants into the wholesale market, engages in hedging activities and provides scheduling and other services. Midwest Generation is also a party to a revolving credit agreement with EMMT under which it can make revolving loans to, or have letters of credit issued on behalf of, EMMT in order to provide credit support for forward contracts for the benefit of Midwest Generation. EMMT has the ability to enter into fuel hedging arrangements, on Midwest Generation's behalf.

In August 2000, Midwest Generation completed a sale-leaseback transaction with respect to the Powerton and Joliet power facilities to third-party lessors for an aggregate purchase price of $1.367 billion. In connection with this transaction, Midwest Generation facilitated the issuance of lessor debt of $1.147 billion in Pass-Through Certificates which were registered with the Securities and Exchange Commission.

Location and Available Information

Midwest Generation's principal executive offices are located at 235 Remington Boulevard, Suite A, Bolingbrook, Illinois 60440, and its telephone number is (630) 771-7800.

Midwest Generation's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, are electronically filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and are available on the Securities and Exchange Commission's internet web site at http://www.sec.gov.

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EME files separately an Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. Such reports are available on the Securities and Exchange Commission's internet website at http://www.sec.gov.

Description of the Industry

Electric Power Industry

The United States electric industry, including companies engaged in providing generation, transmission, distribution and retail sales and service of electric power, has undergone significant deregulation over the last three decades, which has led to increased competition, especially in the generation sector. See further discussion of regulations under "Regulatory Matters."

In areas where ISOs and RTOs have been formed, market participants have open access to transmission service typically at a system-wide rate. ISOs and RTOs may also operate real-time and day-ahead energy and ancillary service markets, which are governed by FERC-approved tariffs and market rules. The development of such organized markets into which independent power producers are able to sell has reduced their dependence on bilateral contracts with electric utilities. In addition, capacity markets in various regional wholesale power markets compensate supply resources for the capability to supply electricity when needed, and demand resources for the electricity they avoid using.

Wholesale Markets

Energy and capacity from the Midwest Generation plants are sold under terms, including price, duration and quantity, arranged by EMMT with customers through a combination of bilateral agreements (resulting from negotiations or from auctions), forward energy sales and spot market sales. Thus, Midwest Generation is subject to market risks related to the price of energy and capacity from the Midwest Generation plants. Power generated at the Midwest Generation plants is primarily sold into PJM, an RTO which includes all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. Sales may also be made from PJM into the Midwest Independent Transmission System Operator (MISO) RTO, which includes all or parts of Illinois, Wisconsin, Indiana, Michigan, Ohio, and other states in the region.

PJM operates a wholesale spot energy market and determines the market-clearing price for each hour based on bids submitted by participating generators indicating the minimum prices at which a bidder is willing to dispatch energy at various incremental generation levels. PJM requires all load-serving entities and generators, such as Midwest Generation, to maintain prescribed levels of capacity, including a reserve margin, to ensure system reliability. PJM's capacity markets have a single market-clearing price for each capacity zone. In May of every year, PJM conducts an annual capacity auction (RPM) to commit generation, energy efficiency, and demand side resources three years forward, and to provide a long-term pricing signal for capacity resources.

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sales and service of electric power, has undergone significant deregulation over the last three decades, which has led to increased competition, especially in the generation sector. See further discussion of regulations under "Regulatory Matters."

Wholesale Markets

Power generated at the Midwest Generation plants is primarily sold into PJM, an RTO which includes all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. Sales may also be made from PJM into the MISO RTO, which includes all or parts of Illinois, Wisconsin, Indiana, Michigan, Ohio, and other states in the region.

PJM operates a wholesale spot energy market and determines the market-clearing price for each hour based on bids submitted by participating generators indicating the minimum prices at which a bidder is willing to dispatch energy at various incremental generation levels. PJM requires all load-serving entities and generators, such as Midwest Generation, to maintain prescribed levels of capacity, including a reserve margin, to ensure system reliability. PJM's capacity markets have a single market-clearing price for each capacity zone. In May of each year, PJM conducts an annual capacity auction (RPM) to commit generation, energy efficiency, and demand side resources three years forward, and to provide a long-term pricing signal for the construction of capacity resources.

Competition

Midwest Generation is subject to competition from energy marketers, public utilities, government-owned power agencies, industrial companies, financial institutions, and other independent power producers. These companies may have competitive advantages as a result of scale, the location of their generation facilities or other factors. Some of Midwest Generation's competitors have a lower cost of capital than ~~most~~Midwest ~~independent~~Generation ~~power producers~~ and, in the case of utilities, ~~are~~may ~~often~~be able to recover fixed costs through rate base mechanisms, allowing them to build, buy and upgrade generation without relying exclusively on market clearing prices to recover their investments.

State and local environmental regulations, particularly those that impose stringent state specific emission limits, could put the Midwest Generation plants at a disadvantage compared with competing power plants operating in nearby states and subject to less stringent state emission limits or to federal emission limits alone,. ~~and~~The ~~the~~ CPS ~~could~~puts ~~put~~ these plants at a disadvantage compared with competing plants not subject to similar regulations, and federal air quality regulations such as CSAPR and the MATS rule will put Midwest Generation's plants at a disadvantage compared to plants utilizing other fuels. Potential future climate change regulations could also put the Midwest Generation~~'s coal-fired~~ plants at a disadvantage compared to ~~both~~ power plants utilizing other fuels ~~and~~as well as utilities that may be able to recover climate change compliance costs through rate-base mechanisms. InThe ~~addition, the~~ ability of ~~these~~Midwest Generation plants to compete ~~may~~can also be affected by future environmental regulations, by governmental and regulatory activities designed to support the construction and operation of power generation facilities fueled by renewable energy sources., and by developments such as shale gas technology that lower the price of other fuels.

Overview of Facilities

The Crawford Station

The Crawford Station is a 532 MW coal-fired power plant located in Cook County, Illinois, and is within the city limits of Chicago. The Crawford Station occupies approximately 72 acres, inclusive of the switchyard. The operating units are referred to as Units 7 and 8 and began operations in 1958 and 1961, respectively. In February 2012, Midwest Generation decided to shut down the Crawford Station by the end of 2014.

The Fisk Station

The Fisk Station is a 326 MW coal-fired power plant located in Cook County, Illinois, and is within the city limits of Chicago. The Fisk Station is located on approximately 44 acres, inclusive of the switchyard. The operating unit comprising the Fisk Station is referred to as Unit 19 and began operations in 1959. In February 2012, Midwest Generation decided to shut down the Fisk Station by the end of 2012.

The Joliet Station

The Joliet Station is located in Joliet, Will County, Illinois, approximately 40 miles southwest of Chicago on an approximately 467-acre site. The operating units comprising the Joliet Station are referred to as Units 6, 7 and 8. Only Units 7 and 8 are subject to the sale-leaseback transaction described in this annual report. The operation of Units 6, 7 and 8 began in 1959, 1965 and 1966, respectively. Joliet Unit 6 is a 290 MW coal-fired unit located adjacent to, but across the Des Plaines River from, Joliet Units 7 and 8. Joliet Units 7 and 8 are coal-fired and have a combined capacity of 1,036 MW.

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The Powerton Station

The Powerton Station is a 1,538 MW coal-fired station located in Pekin, Tazwell County, Illinois on an approximately 568-acre site. The Powerton Station is subject to the sale-leaseback transaction described in this annual report. The site also includes an approximately 1,440-acre lake. The operating units comprising the Powerton Station are referred to as Units 5 and 6 and began operations in 1972 and 1975, respectively.

The Waukegan Station

The Waukegan Station is a 689 MW coal-fired power plant located in Waukegan, Lake County, Illinois, on Lake Michigan. The Waukegan Station occupies approximately 194 acres, inclusive of the switchyard. The operating units comprising the Waukegan Station are referred to as Units 7 and 8 and began operations in 1958 and 1962, respectively. Midwest Generation shut down permanently Unit 6, representing 100 MW of capacity, on December 21, 2007.

The Will County Station

The Will County Station is a 761 MW coal-fired power plant located in Romeoville, Will County, Illinois. The Will County Station is located on approximately 215 acres, inclusive of the switchyard. The operating units comprising the Will County Station are referred to as Units 3 and 4 and began operations between 1955 and 1963. Midwest Generation shut down permanently Units 1 and 2 representing 299 MW of capacity, on December 29, 2010.

On-Site Peaking Facilities

The on-site peaking units consist of 305 MW at Fisk and Waukegan, which were commissioned in 1968. The Fisk and Waukegan peaking units burn fuel oil. Natural gas is used by the Fisk peaking unit for ignition. Natural gas is purchased in the monthly and daily spot markets and is shipped at the seller's risk to Chicago. Peoples Gas provides delivery services, including balancing storage, to the site under tariffs approved by the Illinois Commerce Commission.

Power ~~Transmission~~ Sales

~~Station~~Energy ~~units~~and atcapacity ~~Will~~from ~~County,~~the ~~Crawford,~~Midwest ~~Waukegan,~~Generation ~~and~~plants ~~Joliet Unit 6~~ are ~~connected~~sold tounder ~~Commonwealth~~terms, ~~Edison's~~including ~~138 kV~~price, ~~transmission~~duration ~~systems. The~~and ~~Fisk~~quantity, ~~Station~~arranged isby ~~connected~~EMMT, ~~via~~an ~~various~~EME ~~circuit~~subsidiary ~~breakers~~engaged ~~and~~in ~~transformers~~power tomarketing ~~transmission~~and ~~substations.~~trading ~~The~~activities, ~~Joliet~~with ~~Units 7~~customers ~~and~~through 8,a ~~subject~~combination toof ~~the~~bilateral ~~sale-leaseback~~agreements ~~transaction described~~(resulting infrom ~~this~~negotiations ~~annual~~or ~~report~~from auctions), ~~and~~forward ~~the~~energy ~~two~~sales ~~Powerton~~and ~~units~~spot ~~deliver~~market ~~their~~sales. ~~power~~Power ~~into~~generated ~~Commonwealth Edison's~~at ~~345 kV~~the ~~transmission system. The~~ Midwest Generation plants ~~are~~is ~~generally~~primarily ~~dispatched~~sold into the PJM market~~, and sales may also be made from PJM into the MISO~~.

Significant Customers

For a discussion of significant customers, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 5. Derivative Instruments and Hedging Activities—Credit Risk."

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Fuel Supply

The Midwest Generation plants purchase coal from several suppliers located in the Southern PRB of Wyoming. The total volume of coal consumed annually is largely dependent on the amount of generation and ~~ranges~~has historically ranged between 17.5 million to 19.5 million tons. Coal consumption in the current low natural gas price environment may be lower than the historical range. Coal is transported under ~~long-term~~ transportation agreements with Union Pacific Railroad and various short-haul carriers. In late 2011, Midwest Generation's ~~long-term~~signed ~~rail~~new ~~transportation~~agreements, ~~contract~~effective ~~with~~January ~~Union~~1, ~~Pacific~~2012, ~~Railroad~~to ~~expires~~provide atsuch ~~the~~fuel ~~end~~transportation ofon ~~2011~~a long-term basis. For additional information, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk Exposures—Commodity Price Risk—Coal and Transportation Price Risk." As of December 31, ~~2010~~2011, Midwest Generation leased approximately 3,~~900~~400 railcars to transport the coal from the mines to the generating stations, ~~and~~under ~~the~~ leases ~~have~~with remaining terms that range from ~~less than~~ one year to ~~nine~~eight years, with options to extend the leases or purchase some railcars at the end of the lease terms.

Coal for the Fisk and Crawford Stations is typically shipped by rail to the Will County Station where it is transferred from the railcars, blended as necessary to meet station specifications, and loaded into river barges. These barges are towed to the stations by an independent contractor under a transportation agreement with Midwest Generation. Occasionally, third-party transloading facilities are utilized.

Emission Allowances

The federal Acid Rain Program requires electric generating stations to hold SO2 allowances sufficient to cover their annual emissions. Pursuant to Illinois' implementation of the CAIR, the Midwest Generation plants are required to hold seasonal and annual NOx allowances. AsThe ~~part~~CAIR ofremains the acquisition of the Midwest Generation plants, Midwest Generation obtained emission allowance rights that have been or are allocated to these facilities. Midwest Generation purchases (or sells) emission allowances based on the amounts required for actual generation in ~~excess~~effect ofuntil ~~(or~~a ~~less~~replacement ~~than)~~regulation ~~the~~becomes ~~amounts allocated under these programs~~effective. Future regulations, including the Transport Rule, may impact future emission allowance allocations and may require Midwest Generation to purchase additional allowances in amounts that could be significant.

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CSAPR, like the CAIR, is an allowance-based regulation that provides for emissions trading. Under CSAPR, the amount of actual SO₂ or NO_X emissions from plant operations will need to be matched by a sufficient amount of SO₂ or NO_Xallowances that are either allocated or purchased in the open market. SO₂ allowances under the federal Acid Rain Program cannot be used to satisfy the requirements under CSAPR. In December 2011, the United States Court of Appeals for the District of Columbia granted a stay of CSAPR pending completion of its review of the rule's validity. Midwest Generation believes its current environmental remediation plan developed to comply with the CPS, along with the allowances allocated to it under CSAPR, will be sufficient to comply with the requirements of CAIR or CSAPR (as applicable). For additional information, see "Environmental Matters and Regulations—Air Quality."

Significant Customers

Insurance

Midwest Generation maintains insurance policies consistent with those normally carried by companies engaged in similar business and owning similar properties. Midwest Generation's insurance program includes all-risk property insurance, including business interruption, covering real and personal property, including losses from boiler or machinery breakdowns, and the perils of earthquake and flood, subject to specific sublimits. Midwest Generation also carries general liability insurance covering liabilities to third parties for bodily injury or property damage resulting from operations, automobile liability insurance and excess liability insurance. Limits and deductibles in respect of these insurance policies are comparable to those carried by other electric generating facilities of similar size. No assurance can be given that Midwest Generation's insurance will be adequate to cover all losses.

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Seasonality

Due to fluctuations in electric demand resulting from warm weather during the summer months and cold weather during the winter months, electric revenues from the Midwest Generation plants normally vary substantially on a seasonal basis. In addition, maintenance outages generally are scheduled during periods of lower projected electric demand (spring and fall), further reducing generation and increasing major maintenance costs which are recorded as an expense when incurred. Accordingly, earnings from the Midwest Generation plants are seasonal and have significant variability from quarter to quarter. Seasonal fluctuations may also be affected by changes in market prices. For further discussion regarding market prices, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk Exposures—Commodity Price Risk—Energy Price Risk."

Regulatory Matters

General

Midwest Generation's operations are subject to extensive regulation. Midwest Generation is subject to energy, environmental and other governmental laws and regulations at the federal, state and local levels in connection with the ownership and operation of the Midwest Generation plants, and the use of electric energy, capacity and related products, including ancillary services, from those facilities. In addition, Midwest Generation is subject to the market rules, procedures, and protocols of the markets in which it participates.

Federal Power Act

The FERC has exclusive jurisdiction over the rates, terms and conditions of wholesale sales of electricity and transmission services in interstate commerce (other than transmission that is "bundled" with retail sales), including ongoing, as well as initial, rate jurisdiction. ~~Rates~~The ~~may~~FERC bealso ~~based~~has onjurisdiction aover ~~cost-of-service approach~~the sale or transfer of specified assets, inincluding ~~geographic~~wholesale power sales contracts and ~~product~~generation ~~markets~~facilities ~~determined~~and, byin ~~the~~some ~~FERC~~cases, tojurisdiction beover ~~workably~~the ~~competitive,~~issuance ~~may~~of besecurities ~~market~~or ~~based.~~the ~~Previously~~assumption ~~approved~~of ~~rates~~specified ~~may~~liabilities ~~also~~and besome ~~revoked~~interlocking ordirectorates. ~~modified~~Dispositions byof ~~the~~Midwest ~~FERC~~Generation's ~~after notice~~jurisdictional assets and ~~opportunity~~certain ~~for~~types ~~hearing.~~of financing arrangements may require FERC approval.

The FERC also has jurisdiction over the sale or transfer of specified assets, including wholesale power sales contracts and generation facilities and, in some cases, jurisdiction over the issuance of securities or the assumption of specified liabilities and some interlocking directorates. Dispositions of Midwest Generation's jurisdictional assets and certain types of financing arrangements may require FERC approval.

Midwest Generation, an exempt wholesale generator (EWG), is subject to the FERC's ratemaking jurisdiction under the Federal Power Act, but has been authorized to sell power at market-based rates to purchasers which are not affiliated electric utility companies as long as the absence of market power is shown. If Midwest Generation were to lose its EWG status, defaults under the covenants in Midwest Generation's agreements could be triggered.

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Reliability Standards

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NERC establishes and enforces reliability standards for the bulk power system. Midwest Generation believes it has taken appropriate steps to be compliant with current NERC reliability standards that apply to its operations.

Transmission of Wholesale Power

Midwest Generation utilizes power lines owned by others for the transmission of electricity. The prices and other terms and conditions of transmission contracts are regulated by the FERC when the entity providing the transmission service is subject to FERC jurisdiction.

Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") provides the Commodity Futures Trading Commission and the Securities and Exchange Commission with jurisdiction to regulate financial derivative products, including swaps, options and other derivative products, collectively referred to in this annual report as "swaps." These agencies are required to issue rules and regulations that implement regulation of swaps markets by July 2011.

The Dodd-Frank Act subjects swaps to new mandatory clearing and trading requirements, if no exemption applies. It may also impose capital requirements on non-exempt market participants. The clearing and trading requirements could result in increased margining requirements which may increase the costs of hedging activity. Midwest Generation, through EMMT, uses swaps to hedge commercial risks associated with the generation, purchase and sale of electricity and fuel to wholesale customers.

If new clearing, trading or other requirements are applicable to EMMT under the Dodd-Frank Act rules and regulations, the potential impact will depend on the content of those rules and regulations, which remains uncertain.

Environmental Matters and Regulations

Legislative and regulatory activities by federal, state, and local authorities in the United States relating to energy and the environment impose numerous restrictions and requirements with respect to the operation of the Midwest Generation plants and affect the timing, cost and construction of capital improvements to the Midwest Generation plants as well as the cost of mitigating the environmental impacts of past operations. In addition, as discussed in "Item 8. Midwest Generation, ~~continues~~LLC and Subsidiaries Notes to ~~monitor~~Consolidated ~~legislative~~Financial Statements—Note 8. Commitments and ~~regulatory~~Contingencies," ~~developments~~the US EPA and toothers ~~evaluate possible~~have ~~strategies~~from ~~for~~time ~~compliance~~to ~~with~~time ~~environmental~~involved ~~regulations~~Midwest Generation in litigation. Additional information about environmental matters affecting Midwest Generation, including projected environmental capital expenditures, is included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital ~~Expenditures~~ Investment Plan" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Policies—Impairment of Long-Lived Assets~~—Application to Merchant Coal-Fired Power Plants~~."

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Climate Change

There have been a number of federal and state legislative and regulatory initiatives to reduce GHG emissions. Any climate change regulation or other legal obligation that would require substantial reductions in emissions of GHGs or that would impose additional costs or charges for the emission of GHGs could significantly increase the cost of generating electricity from fossil fuels, and especially from coal-fired plants, which could adversely affect Midwest Generation.

Federal Legislative/Regulatory Developments

Efforts to pass comprehensive federal climate change legislation have not yet been successful. The timing, contents, and potential effects on Midwest Generation of federal legislation imposing limits on GHG emissions remain uncertain. However, the US EPA has begun to issue federal GHG regulations that are likely to impact Midwest Generation's operations.

In June 2010, the US EPA issued the Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, known as the "GHG tailoring rule." This regulation generally subjects newly constructed sources of GHG emissions and newly modified existing major sources to the PSD air permitting program beginning in January 2011 (and later, to the Title V permitting program under the CAA); however, the GHG tailoring rule significantly increases the emissions thresholds that apply before facilities are subjected to these programs. The emissions thresholds for CO2 equivalents in the final rule vary from 75,000 tons per year to 100,000 tons per year depending on the date and whether the sources are new or modified.

A challenge to the GHG tailoring rule (along with other GHG regulations and determinations issued by the US EPA) is pending before the U.S. Court of Appeals for the D.C. Circuit. Regulation of GHG emissions pursuant to the PSD program could affect efforts to modify the Midwest Generation plants in the future. If Midwest Generation is required to install controls in the future or otherwise modify its operations in order to reduce GHG emissions, the potential impact of the GHG tailoring rule will depend on the nature and timing of the controls or modifications, which remain uncertain.

In December 2010, the US EPA announced that it had entered into a settlement with various states and environmental groups to resolve a long-standing dispute over regulation of GHGs from electrical generating units pursuant to the New Source Performance Standards in the CAA. Under the pending settlement, the US EPA will propose performance standards for GHG emissions from new and modified power plants and emissions guidelines for existing power plants in July 2011, and will finalize such regulations by May 2012, with compliance dates for existing power plants expected to be in 2015 or 2016. The specific requirements will not be known until the regulations are finalized.

Since January 2010, the US EPA's Final Mandatory Greenhouse Gas Reporting Rule has required all sources within specified categories, including electric generation facilities, to monitor emissions and to submit annual reports to the US EPA by March 31 of each year, with the first report due on March 31, 2011. Midwest Generation's 2010 GHG emissions were approximately 34.1 million metric tons.

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Regional Initiatives

The Midwest Generation plants may be affected by the Midwestern Greenhouse Gas Reduction Accord, by which six Midwestern states, including Illinois, and the Canadian province of Manitoba agreed to develop regional GHG emission reduction goals using a multi-sector cap-and-trade program. In May 2010, the Midwestern Greenhouse Gas Reduction Accord Advisory Group finalized recommendations and a model rule for emissions reduction targets and the design of a regional cap-and-trade program to serve as a basis for individual state legislative or regulatory action. However, there is substantial uncertainty as to whether the parties to the Midwestern Greenhouse Gas Reduction Accord intend to continue their efforts to develop or implement such a program, especially in light of the failure to pass a federal cap-and-trade program in the 111th Congress.

Litigation Developments

In December 2010, the Supreme Court agreed to review a case in which an appellate panel had endorsed the availability of judicial remedies for nuisance allegedly caused by GHG emissions associated with climate change. Oral argument before the Supreme Court is scheduled for April 2011. Currently pending while the Supreme Court considers the matter before it is an appeal before the Ninth Circuit of a federal district order dismissing a case against Midwest Generation's ultimate parent company, Edison International, and other defendants brought by the Alaskan Native Village of Kivalina in which the plaintiffs seek damages of up to $400 million for the cost of relocating the village, which the plaintiffs claim is no longer protected from storms because the Arctic sea ice has melted as the result of climate change. Edison International and the other defendants in the lawsuit recently requested the Ninth Circuit to defer oral argument on the appeal pending the Supreme Court's decision on related issues.

Midwest Generation cannot predict whether the legal principles emerging from the U.S. Supreme Court or any of the cases in the appellate courts will result in the filing of new actions with similar claims or whether Congress, in considering climate legislation, will address directly the availability of courts for these sorts of claims.

Air Quality

The CAA, which regulates air pollutants from mobile and stationary sources, has a significant impact on the operation of the Midwest Generation plants. The CAA requires the US EPA to establish concentration levels in the ambient air for six criteria pollutants to protect public health and welfare. These concentration levels are known as National Ambient Air Quality Standards, or NAAQS. The six criteria pollutants are carbon monoxide, lead, nitrogen dioxide, ozone, particulate matter, and SO₂.

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Federal environmental regulations require states to adopt state implementation plans, known as SIPs, for certain pollutants, which detail how the state will attain the standards that are mandated by the relevant law or regulation. The SIPs must be equal to or more stringent than the federal requirements and must be submitted to the US EPA for approval. Each state identifies the areas within its boundaries that meet the NAAQS (attainment areas) and those that do not (non-attainment areas), and must develop a SIP both to bring non-attainment areas into compliance with the NAAQS and to maintain good air quality in attainment areas. If the attainment status of areas changes, states may be required to develop new SIPs that address the changes. Many of Midwest Generation's facilities are located in areas that have not attained NAAQS for ozone (affected by NO_x emissions from power plants) and fine particulate matter (affected by SO₂ and NO_x emissions from power plants).

As described further below, on December 11, 2006, Midwest Generation entered into an agreement with the Illinois EPA, which was subsequently embodied in an Illinois rule called Combined Pollutant Standard or CPS, to reduce mercury, NO_x and SO₂ emissions at the Midwest Generation plants. The CPS requires Midwest Generation to achieve air emission reductions for NO_x and SO₂, and those reductions should contribute to or effect compliance with various existing US EPA ambient air quality standards. It is possible that if lower ozone, particulate matter, NO_x or SO₂ NAAQS are finalized by US EPA in the future, Illinois may implement regulations that are more stringent than those required by the CPS.

Nitrogen Oxide and Sulfur Dioxide

Clean Air Interstate and ~~Transport~~Cross-State Air Pollution Rules

The CAIR, issued by the US EPA on March 10, 2005, mandated significant reductions in NOx and SO2 emission allowance caps under the CAA in 28 eastern states and the District of Columbia. In 2008, the U.S. Court of Appeals for the D.C. Circuit initially vacated the CAIR, but later remanded the CAIR to the US EPA for the issuance of a revised rule. The CAIR remains in effect until ~~the US EPA finalizes~~ a ~~revised~~replacement regulation. becomes effective.

In On July 6, ~~2010~~2011, the US EPA ~~issued~~adopted athe ~~Notice~~Cross-State ofAir ~~Proposed~~Pollution ~~Rulemaking~~Rule ~~for~~(CSAPR). aCSAPR ~~proposed~~establishes ~~rule,~~emissions ~~known~~reductions asfor ~~the~~annual ~~Transport~~sulfur ~~Rule,~~dioxide ~~which~~(SO2) ~~would~~emissions ~~require~~and 31annual ~~eastern~~and ~~states~~ozone ~~(including~~season ~~Illinois)~~nitrogen ~~and~~oxide ~~the~~(NOx) ~~District~~emissions ~~of Columbia~~in totwo ~~reduce~~phases: ~~power~~a ~~plant~~first ~~emissions~~phase oforiginally ~~NOx~~scheduled ~~and~~to ~~SO2~~be ~~substantially~~effective January 1, ~~starting~~2012 and, in ~~2012~~most states subject to the program (including Illinois), ~~with~~a ~~additional~~second ~~reductions~~phase ineffective January 1, 2014. ~~The~~that ~~Transport~~requires ~~Rule~~additional ~~would~~reductions ~~replace~~in ~~the~~annual ~~CAIR.~~SO2 emissions.

~~The US~~In ~~EPA~~December ~~has proposed allocating emission allowances based on historic and projected emissions data from power plants~~2011, ~~along~~the ~~with~~United ~~three~~States ~~possible~~Court ~~approaches~~of toAppeals ~~emission~~for ~~allowance~~the ~~trading.~~District ~~Under~~of ~~its preferred~~Columbia ~~approach,~~granted a ~~pollution~~stay ~~limit~~of ~~would~~CSAPR bepending ~~set~~completion ~~for each state, intrastate trading~~ of ~~allowances would be permitted among power plants, and limited interstate trading would also be permitted consistent with the requirement that each state meet~~ its ~~own~~review ~~pollution~~of ~~control obligations. Under~~ the ~~first~~rule's ~~alternative, a pollution limit would be set for each state, and only intrastate trading of allowances would be permitted~~validity. ~~Under~~Oral ~~the~~argument ~~second~~is ~~alternative,~~scheduled ~~a pollution limit would be set~~ for ~~each state~~April 13, ~~an emissions limit would be set for each power plant~~2012, and ~~limited~~a ~~emissions~~court ~~averaging~~decision ~~would be~~is ~~permitted~~expected among affected units. In January 2011, the US EPA proposed two other possible approaches to emission allowance allocation. Both approaches would allocate allowances among units within each state based on

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~~each unit's~~during ~~proportional share of~~ the ~~state's~~third ~~total~~quarter ~~historic~~of ~~heat~~2012. ~~input,~~The ~~and~~court directed the ~~second~~US EPA ~~approach~~to ~~would~~continue ~~add~~administering athe ~~constraint~~CAIR ~~based~~until onits areview ~~unit's~~is ~~reasonably foreseeable maximum emissions under the proposed Transport Rule trading programs~~completed.

~~The Transport~~CSAPR, ~~Rule~~like the CAIR, is ~~scheduled~~an toallowance-based beregulation ~~finalized~~that inprovides ~~2011~~for emissions trading. ~~The~~If ~~CAIR~~the stay is lifted and CSAPR becomes effective, the amount of actual SO2 or NOx emissions from plant operations will ~~remain~~need into ~~place~~be ~~until~~matched by a sufficient amount of SO2 or NOx allowances that ~~time.~~are ~~Depending~~either onallocated or purchased in the ~~approach~~open ~~adopted~~market. In connection with CSAPR, the ~~Transport~~US ~~Rule~~EPA ~~may~~has, ~~provide~~for each phase, established SO2 and NOx allowance allocations for ~~the Midwest~~each ~~Generation~~state ~~plants~~and ~~which~~each ~~are~~generating ~~adequate~~unit ~~for~~subject to the ~~plants'~~regulation, ~~needs~~and orat ~~may~~the ~~require~~close of the ~~Midwest~~annual ~~Generation~~or ~~plants~~seasonal tocompliance ~~procure~~period, ~~additional~~units will need to surrender allowances, ~~based~~for oneach ~~projected~~ton ~~emissions~~of ~~using~~SO2 ~~the~~and ~~Illinois~~NOx ~~CPS allowable~~emitted ~~emission~~or ~~rates~~face penalties.

Revised ~~Proposed~~ NAAQS for SO2

In June 2010, the US EPA finalized the primary NAAQS for SO2 by establishing a new one-hour standard at a level of 75 parts per billion. ~~The~~In ~~final standard~~June is2011, ~~being~~Illinois ~~taken~~submitted ~~into~~their ~~account~~initial inrecommended ~~Midwest~~attainment/nonattainment ~~Generation's~~designations ~~environmental~~in ~~compliance~~connection ~~strategy~~with the standard. ~~Revisions~~Illinois torecommended ~~SIPs~~designating toparts ~~achieve~~of ~~compliance~~Tazewell ~~with~~County (where the ~~new~~Powerton plant is located) and Will and Cook Counties as nonattainment with this standard. ~~are~~The ~~due~~recommended todesignation befor ~~submitted~~parts toof Will and Cook Counties included the USarea ~~EPA~~where ~~by February~~the ~~2014~~Will County plant is located, ~~with~~but anot ~~compliance~~the ~~deadline~~areas ofwhere ~~August~~Midwest ~~2017.~~Generation's other plants in those counties are located.

Illinois

On December 11, 2006, Midwest Generation entered into an agreement with the Illinois EPA to reduce mercury, NOx and SO2 emissions at the Midwest Generation plants. The agreement has been embodied in the CPS. All of Midwest Generation's Illinois coal-fired electric generating units are subject to the CPS. The CPS also specifies the control technologies that are to be installed on some units by specified dates. Midwest Generation must either install the required technology by the specified deadline or shut down the unit. The principal emission standards and control technology requirements for ~~NOx~~NOX and SO2 under the CPS are as described below:

NOx Emissions—Beginning in calendar year 2012 and continuing in each calendar year thereafter, Midwest Generation must comply with an annual and seasonal NOx emission rate of no more than 0.11 lbs/million Btu. ~~In addition to these standards,~~ Midwest Generation ~~must~~substantially ~~install~~completed ~~and~~installation ~~operate~~of SNCR equipment onin ~~Units 7~~2011 ~~and~~for 8compliance atwith the ~~Crawford~~ ~~Station~~emission bylimitations. ~~December 31,~~Capital ~~2015.~~expenditures relating to these controls were $105 million.

SO₂ Emissions—Midwest Generation must comply with an overall SO₂ annual emission rate beginning with 0.44 lbs/million Btu in 2013 and decreasing annually until it reaches 0.11 lbs/million Btu in 2019 and thereafter.

~~The CPS~~Testing ~~also~~of ~~specifies~~dry ~~the~~scrubbing ~~control~~using ~~technologies~~Trona ~~that~~on ~~are~~select toMidwest beGeneration ~~installed~~units onhas ~~some~~demonstrated ~~units~~significant byreductions ~~specified~~in ~~dates~~SO2 emissions. InUse ~~these~~of ~~cases,~~dry ~~Midwest~~sorbent ~~Generation~~injection ~~must~~technology ~~either~~in ~~install~~conjunction ~~the~~with ~~required~~low ~~technology~~sulfur bycoal ~~the specified~~is ~~deadline~~expected orto ~~shut~~require ~~down~~substantially less capital and time to construct than the ~~unit.~~use ~~The~~of ~~CPS~~spray ~~also~~dryer ~~required~~absorber ~~Midwest~~technology, ~~Generation~~but towould ~~shut~~likely ~~down~~result ~~Unit 6~~in athigher ~~the~~ongoing ~~Waukegan~~operating ~~Station~~costs byand ~~December 31~~may consequently result in lower dispatch rates and competitiveness of Midwest Generation's plants, ~~2007~~depending on competitors' costs. For additional discussion, ~~and~~see ~~Units~~"Item 17. Management's Discussion and 2Analysis atof ~~the~~Financial ~~Will County~~Condition ~~Station~~and byResults ~~December 31,~~of ~~2010,~~Operations—Management's ~~which~~Overview—Environmental itCompliance ~~has~~Plans ~~done.~~and Costs."

During 2009, Midwest Generation conducted tests of NOx removal technology based on SNCR that may be employed to meet CPS requirements. Based on this testing, Midwest Generation has concluded that installation of SNCR technology on multiple units will meet the NOx portion of the CPS. Capital expenditures for installation of SNCR equipment are expected to be approximately $109 million in 2011.

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Testing of dry scrubbing using Trona on select Midwest Generation units has demonstrated significant reductions in SO2 emissions. Use of this technology in conjunction with low sulfur coal is expected to require substantially less capital and time than the use of spray dryer absorber technology, but would likely result in higher ongoing operating costs and may consequently result in lower dispatch rates and competitiveness of Midwest Generation's plants, depending on competitors' costs. For additional discussion, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Management's Overview—Environmental Developments—Environmental Compliance Plans and Costs."

Mercury/Hazardous Air Pollutants

~~Clean Air~~ Mercury ~~Rule/Hazardous~~and Air ~~Pollutant~~Toxics ~~Regulations~~ Standards Rule

~~The CAMR~~In ~~was~~December ~~established~~2011, by the US EPA asannounced anthe ~~attempt~~Mercury toand ~~reduce~~Air ~~mercury~~Toxics Standards (MATS) rule, limiting emissions ~~from~~of ~~existing~~hazardous ~~coal-fired~~air ~~power~~pollutants ~~plants~~(HAPs) ~~using~~from ~~a cap~~coal- and oil-~~trade~~fired ~~program~~electrical generating units. InThe ~~February~~rule ~~2007,~~was published in the ~~U.S.~~Federal ~~Court~~Register ofon ~~Appeals~~February ~~for~~16, ~~the~~2012, ~~D.C.~~and ~~Circuit~~becomes ~~vacated~~effective ~~both~~on ~~the~~April ~~CAMR~~16, ~~and~~2012. ~~the~~Midwest ~~related~~Generation USdoes ~~EPA~~not ~~decision~~expect tothat ~~remove~~these ~~oil-~~standards ~~and coal-fired~~will ~~power~~require ~~plants~~Midwest ~~from~~Generation ~~the~~to ~~list~~make ofmaterial ~~sources~~changes to bethe ~~regulated~~approach ~~under~~to ~~the~~compliance ~~provision~~with ofstate ~~the~~and ~~CAA~~federal ~~governing~~environmental ~~emissions~~regulations ofthat ~~HAPs.~~it contemplates for CPS compliance.

In accordance with a consent decree entered in April 2010, the US EPA committed to proposing regulations by March 16, 2011 limiting emissions of HAPs from coal- and oil-fired electrical generating units that are major sources of HAPs, and to finalizing such regulations by November 2011. The emissions standards must be designed to achieve the maximum degree of emission reduction that the US EPA determines is achievable for the affected units, taking into account costs and non-air quality environmental and health benefits (also referred to as maximum achievable control technology, or MACT standard). Unlike the CAMR, the US EPA must regulate all of the HAPs emitted by these generating units. Compliance with the MACT standards will be required three years after the effective date of the final regulations. Until the US EPA's regulations are finalized, Midwest Generation cannot determine whether the actions it is taking to comply with other legal requirements (including the CPS) will be sufficient to address its obligations under the new regulations.

Illinois

~~Midwest Generation's compliance with the CPS supersedes the Illinois mercury regulations that would otherwise be applicable to the Midwest Generation plants.~~ The CPS requires that, beginning in calendar year 2015, and continuing thereafter on a rolling 12-month basis, Midwest Generation must either achieve an emission standard of 0.008 lbs mercury/GWh gross electrical output or a minimum 90% reduction in mercury for each unit (except Unit 3 at the Will County Station, which will be included in calendar year 2016). Midwest Generation will be required to install cold side electrostatic precipitator or baghouse equipment on Unit 7 at the Waukegan Station by December 31, 2013, and on Unit 3 at the Will County Station by December 31, 2015.

Midwest Generation installed required carbon injection equipment on all operating units in 2009 to achieve the necessary mercury reductions. Capital expenditures relating to these controls were $42 million. Midwest Generation will also be required to install cold side electrostatic precipitator or baghouse equipment on Unit 7 at the Waukegan Station by December 31, 2013, and on Unit 3 at the Will County Station by December 31, 2015. The Illinois EPA granted Midwest Generation a construction permit to install a cold-side electrostatic precipitator on Unit 7 at the Waukegan Station in November 2010. Ozone

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Ozone and Particulates

National Ambient Air Quality Standards

In January 2010, the US EPA proposed a revision to the primary and secondary NAAQS for 8-hour ozone that it had finalized in 2008. The 8-hour ozone standard established in 2008 was 0.075 parts per million. In January 2010, the US EPA proposed establishing a primary 8-hour ozone NAAQS between 0.060 and 0.070 parts per million and a distinct secondary standard to protect sensitive vegetation and ecosystems. ~~The~~In USSeptember ~~EPA~~2011, isPresident ~~expected~~Obama toannounced ~~finalize~~that the proposed revision towas ~~the~~being withdrawn. The ozone NAAQS byestablished ~~July~~in ~~2011.~~2008 Itremains isin ~~expected~~place, ~~that~~but ~~once~~the implementation process must be completed before the 0.075 parts-per-million standard can be enforced. The US EPA ~~finalizes~~has ~~the~~indicated ~~revised~~that ~~ozone~~it ~~NAAQS,~~intends ~~it will~~to ~~propose~~issue ainitial ~~second~~area ~~Transport~~designations ~~Rule~~of ~~that~~attainment, ~~may~~nonattainment, ~~further~~and ~~affect~~unclassifiable ~~electric~~areas ~~power~~across ~~generating~~the ~~units.~~nation ~~The~~in US2012. ~~EPA~~States iswill ~~also~~then ~~expected~~be required to ~~propose~~develop ~~revised~~and ~~fine~~submit ~~particulate~~SIPs ~~matter~~outlining how compliance with the 2008 NAAQS inwill ~~2011,~~be ~~which~~achieved. ~~could~~New ~~result in~~primary ~~further~~and ~~emission~~secondary ~~reduction~~ozone ~~requirements~~standards inare ~~future~~expected ~~years.~~in 2014.

In January 2012, the US EPA indicated that it intended to designate the counties in Illinois where Midwest Generation's coal-fired power plants are located as nonattainment with the 2008 NAAQS.

The Illinois SIP for compliance with the 1997 8-hour ozone standard was submitted to the US EPA in March 2009. The SIP for fine particulates was submitted to the US EPA in June 2010. As the fine particulate and ozone standards are finalized, as described above, Illinois may be required to implement additional emission control measures to address emissions of NOx, SO2 and volatile organic compounds.

Regional Haze

The regional haze rules under the CAA are designed to prevent impairment of visibility in certain federally designated areas. The goal of the rules is to restore visibility in mandatory federal Class I areas, such as national parks and wilderness areas, to natural background conditions by 2064. Sources such as power plants that are reasonably anticipated to contribute to visibility impairment in Class I areas may be required to install BART or implement other control strategies to meet regional haze control requirements. ~~The~~ US EPA issued a final rulemaking on regional haze in 2005, requiring emission controls that constitute BART for industrial facilities that emit air pollutants which reduce visibility by causing or contributing to regional haze. These amendments required states to develop implementation plans to comply with BART by December 2007, to identify the facilities that will have to reduce SO2, NOx and particulate matter emissions, and then to set BART emissions limits for those facilities. Failure to do so would result in the imposition of a Federal Implementation Plan.

~~Beginning on December 31, 2009,~~ Illinois ~~became subject to a two-year deadline after which a Federal Implementation Plan (which~~ has ~~not~~submitted ~~yet~~its ~~been~~ proposed) ~~will~~SIP ~~govern related emission issues. Illinois has prepared proposed~~ revisions to ~~its SIP and is expected to submit them to~~ the US EPA into ~~2011~~address regional haze. Illinois ~~proposes~~proposed that the emission reductions that the Midwest Generation plants will be required to make pursuant to the CPS, discussed above in "—Nitrogen Oxide and Sulfur Dioxide—Illinois," satisfy the BART requirement. Midwest Generation believes that the control measures being undertaken to comply with other environmental regulations will likely satisfy the requirements of these SIPs.

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New Source Review Requirements

The NSR regulations impose certain requirements on facilities, such as electric generating stations, if modifications are made to air emissions sources at the facility. Since 1999, the US EPA has pursued a coordinated compliance and enforcement strategy to address NSR compliance issues at the nation's coal-fired power plants. The ~~strategy~~ ~~has included both the filing of suits against a number of power plant owners, and the issuance of administrative Notice of Violations to a number of power plant owners alleging NSR violations. The~~ US EPA has filed enforcement actions against Midwest Generation alleging NSR violations. For further discussion, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 8. Commitments and Contingencies—Contingencies~~—New Source Review Lawsuit~~."

Water Quality

Clean Water Act

Regulations under the federal Clean Water Act govern critical operating parameters at generating facilities, such as the temperature of effluent discharges and the location, design, and construction of cooling water intake structures at generating facilities. ~~The~~In March 2011, the US EPA isproposed ~~rewriting~~standards ~~these~~under ~~regulations~~the ~~following~~federal aClean ~~2009~~Water ~~U.S.~~Act ~~Supreme~~that ~~Court~~would ~~decision that~~affect ~~held~~cooling ~~that~~water ~~the~~intake USstructures ~~EPA~~at ~~may~~generating ~~consider,~~facilities. ~~but~~The isstandards ~~not~~are ~~required~~intended to ~~use,~~protect aaquatic ~~cost-benefit~~organisms ~~analysis~~by ~~for~~reducing ~~this~~capture ~~purpose.~~in ~~The~~screens ~~Supreme~~attached ~~Court~~to ~~set~~cooling awater ~~deadline~~intake ofstructures ~~March~~(impingement) ~~2011~~and ~~for~~in ~~draft~~the water volume brought into the facilities (entrainment). The regulations, ~~which~~ are expected to be finalized by July ~~2011~~2012. ~~Because~~The ~~there~~required ~~are~~measures noto ~~defined~~comply ~~compliance~~with ~~targets~~the ~~absent~~proposed astandards ~~new~~regarding ~~rule,~~entrainment ~~Midwest~~are ~~Generation~~subject isto ~~reviewing~~the adiscretion ~~wide range~~ of ~~possible~~the ~~control~~permitting ~~technologies.~~authority, Aand ~~new~~Midwest ~~rule~~Generation ~~could have~~is aunable ~~material~~at ~~impact~~this ontime ~~Midwest~~to ~~Generation's~~assess ~~operations,~~potential ~~but~~costs ~~Midwest~~of ~~Generation~~compliance, ~~cannot~~which ~~determine~~could ~~the~~be ~~financial~~significant ~~impact~~for ~~until~~ the ~~final~~Midwest ~~compliance~~Generation ~~criteria have been published~~plants.

Midwest Generation is a party to an administrative proceeding before the Illinois Pollution Control Board to determine whether more stringent thermal and effluent water quality standards for the Chicago Area Waterway System and Lower Des Plaines River, which supply cooling water to the ~~Fisk, Crawford,~~ Will County, and Joliet Stations, will be implemented. The rule, if implemented, is expected to affect the manner in which those stations use water for station cooling. It is not possible to predict the timing for resolution of the proceeding, the final form of the rule, or how it would impact the operation of the affected stations; however, significant capital expenditures may be required.

Coal Combustion Wastes

US EPA regulations currently classify coal ash and other coal combustion residuals as solid wastes that are exempt from hazardous waste requirements. This classification enables beneficial uses of coal combustion residuals, such as for cement production and fill materials. Midwest Generation currently provides a portion of its coal combustion residuals for beneficial ~~uses. Midwest Generation is also examining the impact of current and proposed emission control technologies on ash quality for beneficial use.~~

~~In June 2010, the US EPA published proposed regulations relating to coal combustion residuals. Two different proposed approaches are under consideration. The first approach,~~ 11

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~~under which~~uses. ~~the~~In USJune ~~EPA would list these residuals as special wastes subject to regulation as hazardous wastes~~2010, ~~could require Midwest Generation to incur additional capital and operating costs. The second approach, under which~~ the US EPA ~~would~~published ~~regulate~~proposed ~~these~~regulations ~~residuals~~relating asto ~~nonhazardous wastes, would establish minimum technical standards for units that are used for the disposal of~~ coal combustion residuals, ~~but~~that ~~would~~could ~~allow~~result ~~procedural~~in ~~and~~their ~~enforcement~~reclassification. ~~mechanisms~~For ~~(such~~further asdiscussion ~~permit~~see ~~requirements)~~"Item ~~to be exclusively a matter of state law~~8. ~~Many~~Midwest ~~of the proposed technical standards are similar under both proposed options (for example~~Generation, ~~surface~~LLC ~~impoundments~~and ~~may~~Subsidiaries ~~need~~Notes to beConsolidated ~~retrofitted,~~Financial ~~depending~~Statements—Note on9. ~~which~~Environmental ~~standard is finally adopted), but the second approach would not require the retrofitting of landfills used for the disposal of coal combustion residuals~~Developments. "

Climate Change

There have been a number of federal and state legislative and regulatory initiatives to reduce greenhouse gas (GHG) emissions. Any climate change regulation or other legal obligation that would require substantial reductions in GHG emissions or that would impose additional costs or charges for the GHG emissions could significantly increase the cost of generating electricity from fossil fuels, and especially from coal-fired plants, which could adversely affect Midwest Generation's business.

Federal Legislative/Regulatory Developments

In June 2010, the US EPA issued the Prevention of Significant Deterioration (PSD) and Title V Greenhouse Gas Tailoring Rule, known as the "GHG tailoring rule." This regulation generally subjects newly constructed sources of GHG emissions and newly modified existing major sources to the PSD air permitting program beginning in January 2011 (and later, to the Title V permitting program under the CAA); however, the GHG tailoring rule significantly increases the emissions thresholds that apply before facilities are subjected to these programs. The emissions thresholds for CO₂ equivalents in the final rule vary from 75,000 tons per year to 100,000 tons per year depending on the date and whether the sources are new or modified.

Regulation of GHG emissions pursuant to the PSD program could affect efforts to modify the Midwest Generation plants in the future, and could subject new capital projects to additional permitting or emissions control requirements that could delay such projects. In December 2010, the US EPA announced that it had entered into a settlement with various states and environmental groups to resolve a long-standing dispute over regulation of GHGs from electrical generating units pursuant to the New Source Performance Standards in the CAA and would propose performance standards for emissions from new and modified power plants and emissions guidelines for existing power plants. The specific requirements will not be known until the regulations are finalized. Since January 2010, the US EPA's Final Mandatory Greenhouse Gas Reporting Rule has required all sources within specified categories, including electric generation facilities, to monitor emissions and to submit annual reports to the US EPA by March 31 of each year. Midwest Generation's 2011 GHG emissions were approximately 31 million metric tons.

Litigation Developments

Litigation alleging that GHG is a public and private nuisance may affect Midwest Generation whether or not it is named as a defendant. The law is unsettled on whether or not this litigation presents questions capable of judicial resolution or political questions that should be resolved by the legislative or executive branches. For further discussion, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 9. Environmental Developments."

Employees

At December 31, ~~2010~~2011, Midwest Generation employed ~~987~~962 employees, approximately ~~729~~702 of whom were covered by a collective bargaining agreement ~~with~~ ~~the International Brotherhood of Electrical Workers, Local 15, AFL-CIO (Local 15),~~ governing wages, certain benefits and working conditions. This collective bargaining agreement expires on December 31, ~~2011~~2013. Midwest Generation also has a separate collective bargaining agreement governing retirement, health care, disability and insurance benefits that expires on March 31, 2015.

ITEM 1A. RISK FACTORS

Liquidity Risks

Midwest Generation has significant cash requirements, limited sources of capital and expects to incur substantial losses in 2012 and subsequent years.

At December 31, 2011, Midwest Generation had cash and cash equivalents of $213 million and $497 million of available borrowing capacity under its $500 million credit facility maturing in June 2012. There can be no assurance that Midwest Generation will be eligible to draw on its credit facility prior to maturity. Any replacement of this credit line will likely be on less favorable terms and conditions, and there is no assurance that Midwest Generation will, or will be able to, replace this credit line or any portion of it.

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than those in the previous credit facility, depending on market conditions. In the case of a further downgrade, Midwest Generation expects that these negative effects would become more pronounced. If cash flow and other means for assuring liquidity are unavailable or insufficient, Midwest Generation may be unable to complete environmental improvements at its coal plants (which in turn could lead to unit shutdowns) or its ability to provide credit support for contracts for power and fuel related to merchant activities may be severely limited. The terms of debt instruments binding on EME and its subsidiaries, including Midwest Generation, may restrict Midwest Generation's ability to sell assets, seek additional capital, or restructure or refinance debt to satisfy liquidity needs. For further discussion, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

Midwest Generation has a substantial amount of long-term lease obligations and Midwest Generation's ability to meet these obligations is dependent on payment of interest and principal on its notes receivable from EME.

As of December 31, 2011, Midwest Generation had $555 million in lease financing obligations. During 2000, Midwest Generation loaned $1.367 billion to EME from the proceeds of the sale-leaseback of the Powerton and Joliet plants. Midwest Generation's ability to meet its obligations under the Powerton and Joliet leases is partially dependent on receiving payment from EME on the intercompany notes evidencing this loan. A default by EME in the payment of these intercompany notes would result in a shortfall of cash available to Midwest Generation to meet its lease and debt obligations. A default by Midwest Generation in meeting its lease obligations could give rise to various remedies, including the right to terminate the Powerton and Joliet leases, which would result in the loss of revenues from the Powerton and Joliet power plants and would have a material adverse effect on Midwest Generation's business, results of operations and financial condition.

The interests of EME as Midwest Generation's equity holder may conflict with the interests of Midwest Generation's lease obligations.

Midwest Generation is indirectly owned and controlled by EME. The directors appointed by EME are able to make decisions affecting Midwest Generation's capital structure. The interests of EME may not in all cases be aligned with the interests of the holders of Midwest Generation's lease obligations. If Midwest Generation encounters financial difficulties or becomes unable to pay its lease obligations as they mature, the interests of EME might conflict with the interests of the lease obligations. In addition, EME may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in its judgment, could enhance its equity investments, even though such transactions might involve risks to Midwest Generation's business or the holders of Midwest Generation's lease obligations.

Regulatory and Environmental Risks

Midwest Generation is subject to extensive environmental regulation and permitting requirements that may involve significant and increasing costs.

Midwest Generation's operations are subject to extensive and frequently changing environmental regulations with respect to, among other things, air quality, water quality and waste disposal which involve significant and increasing costs and substantial uncertainty. Midwest Generation is required to obtain, and comply with conditions established by, licenses, permits and other approvals in order to construct, operate or modify its facilities. Failure to comply with these requirements could subject Midwest Generation to civil or criminal liability, the imposition of liens or fines, or actions by regulatory agencies seeking to curtail Midwest Generation's operations. Midwest Generation may also be exposed to risks arising from past, current or future contamination at its former or existing facilities or with respect to off-site waste disposal sites that have been used in its operations.

Midwest Generation devotes significant resources to environmental monitoring, ~~pollution~~emissions control equipment and emission allowances to comply with environmental regulatory requirements. Midwest Generation believes that it is currently in substantial compliance with environmental regulatory requirements. However, the US EPA has filed an enforcement action against Midwest Generation alleging violations of the CAA and other regulations at the Midwest Generation plants. For more detail with respect to these matters, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 8. Commitments and Contingencies."

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The current trend is toward more stringent standards, stricter regulation, and more expansive application of environmental regulations. The adoption of laws and regulations to implement CO2 controls could adversely affect coal-fired power plants. Other environmental laws, particularly with respect to air emissions, disposal of ash, wastewater discharge and cooling water systems, are also generally becoming more stringent. The continued operation of the Midwest Generation plants is expected to require substantial capital expenditures for environmental controls. If Midwest Generation cannot comply with all applicable regulations, it could be required to retire or suspend operations at some of its facilities, or restrict or modify the operations of its facilities, and its business, results of operations and financial condition could be adversely affected.

Midwest Generation is required to surrender emission allowances equal to emissions of specific substances in connection with

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the operation of its facilities. This may require the purchase of allowances, which are subject to price volatility and which could be unavailable.

Typically, environmental laws require a lengthy and complex process for obtaining licenses, permits and approvals prior to construction, operation or modification of a project or generating facility. Midwest Generation cannot provide assurance that it will be able to obtain and comply with all necessary licenses, permits and approvals for the Midwest Generation plants. If there is a delay in obtaining required approvals or permits or if Midwest Generation fails to obtain and comply with such permits, the operation of the Midwest Generation plants may be interrupted or become subject to additional costs.

The controls imposed on the Midwest Generation plants as a result of environmental regulations, including the CPS, may require material expenditures or unit shutdowns.

~~All~~Capital expenditures relating to required environmental controls (including the CPS, to which all of Midwest Generation's ~~Illinois~~ coal-fired ~~electric~~ generating units are subject) are expected to ~~the~~be ~~CPS~~significant. ~~Capital~~In ~~expenditures~~February ~~relating~~2012, Midwest Generation decided to ~~controls~~ ~~contemplated~~shut down the Fisk Station by the ~~CPS~~end ~~are~~of ~~expected~~2012 toand bethe ~~significant~~Crawford Station by the end of 2014 and ~~could~~concluded ~~make~~it ~~some~~was ~~units~~less ~~uneconomic~~likely to ~~maintain~~install orenvironmental ~~operate~~controls at the Waukegan Station and Joliet Unit 6. Midwest Generation may ultimately decide to ~~comply~~shut ~~with~~down ~~CPS~~the ~~requirements~~Waukegan ~~by shutting~~Station ~~down~~and Joliet Unit 6, and possibly other units, rather than ~~making~~make improvements. Unit shutdowns could have an adverse effect on Midwest Generation's business, results of operation and financial condition. For more information about ~~the CPS requirements and~~ Midwest Generation's plans for environmental compliance, see "Item 1. Business—Environmental Matters and Regulations—Air Quality—Nitrogen Oxide and Sulfur Dioxide," "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—~~Illinois~~Management's Overview—Environmental Compliance Plans and Costs," "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Policies—Impairment of Long-Lived Assets" and "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 9. Environmental Developments."

Midwest Generation is subject to extensive energy industry regulation.

Midwest Generation's operations are subject to extensive regulation by governmental agencies. Federal laws and regulations govern, among other things, transactions by and with purchasers of power, including utility companies, the development and construction of generation facilities, the ownership and operation of generation facilities, and access to transmission. Generation facilities are also subject to federal, state and local laws and regulations that govern, among other things, the geographical location, zoning, land use and operation of a project. Midwest Generation in the course of its business must obtain and periodically renew licenses, permits and approvals for its facilities. The FERC may impose various forms of market mitigation measures, including price caps and operating restrictions, where it determines that potential market power might exist and that the public interest requires mitigation. RTOs and ISOs may impose bidding and scheduling rules, both to curb the potential exercise of market power and to facilitate market functions. Such actions may materially affect Midwest Generation's results of operations. The Midwest Generation plants are also subject to mandatory reliability standards promulgated by NERC, compliance with which can increase the facilities' operating costs or capital expenditures.

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are also subject to mandatory reliability standards promulgated by NERC, compliance with which can increase the facilities' operating costs or capital expenditures.

This extensive governmental regulation creates significant risks and uncertainties for Midwest Generation's business. Existing regulations may be revised or reinterpreted and new laws and regulations may be adopted or become applicable to Midwest Generation or its facilities or operations in a manner that may have a detrimental effect on its business or result in significant additional costs.

The generation and transmission of electricity are dangerous and involve inherent risks of injury to employees and the general public.

Electricity is dangerous for employees and the general public should they come in contact with power lines or electrical equipment. Injuries caused by such contact can subject Midwest Generation to liability, that despite the existence of insurance coverage, can be significant. Such liabilities could be significant but are very difficult to predict. The range of possible liabilities includes amounts that could adversely affect Midwest Generation's liquidity and results of operations.

Market Risks

Midwest Generation's operations are subject to market risks related to wholesale energy prices because it operates without long-term power purchase agreements. Wholesale energy prices have substantially declined in recent years.

The Midwest Generation plants do not have long-term power purchase agreements. Because the output of these power plants is not committed to be sold under long-term contracts, these projects are subject to market forces which determine the amount and price of energy, capacity and ancillary services sold from the power plants. Unlike most other commodities, electric power can only be stored on a very limited basis and generally must be produced when it is to be used. As a result, the wholesale power markets are subject to significant and unpredictable price fluctuations over relatively short periods of time. Due to the volume of sales into PJM from the Midwest Generation plants, Midwest Generation has concentrated exposure to market conditions and fluctuations in PJM. Prices for power have declined significantly in recent years as a result of increased use of demand response technology, changes in final demand for power during the economic slowdown, and technological developments that have permitted the exploitation of natural gas shale reserves in a way that has resulted in substantial declines in market prices for natural gas which supplies power plants that compete with the Midwest Generation plants.

Market prices of energy, capacity and ancillary services sold from these power plants are influenced by multiple factors beyond Midwest Generation's control, and thus there is considerable uncertainty whether or when current depressed prices will recover or whether Midwest Generation can effectively hedge the risks involved on economic terms. Midwest Generation's hedging activities may not cover the entire exposure of its assets or positions to market price volatility, and the level of coverage will vary over time. The effectiveness of Midwest Generation's hedging activities may depend on the amount of credit available to post collateral, either in support of performance guarantees or as cash margin, and liquidity requirements may be greater than Midwest Generation anticipates or will be able to meet. Midwest Generation cannot provide assurance that its hedging strategies will successfully mitigate market risks. For more detail with respect to these matters, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk Exposures—Commodity Price Risk." 14

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of sales into PJM from the Midwest Generation plants, Midwest Generation has concentrated exposure to market conditions and fluctuations in PJM. Prices for power and capacity have declined significantly due largely to lower natural gas prices and have been affected in recent years by increased use of demand response technology, changes in final demand for power during the economic slowdown, and technological developments that have increased access to natural gas shale reserves, resulting in substantial declines in market prices for natural gas which supplies power plants that compete with the Midwest Generation plants.

Market prices of energy, capacity and ancillary services sold from these power plants are influenced by multiple factors beyond Midwest Generation's control, and thus there is considerable uncertainty whether or when current depressed prices will recover. Midwest Generation's hedging activities may not cover the entire exposure of its assets or positions to market price volatility, and the level of coverage will vary over time. The effectiveness of Midwest Generation's hedging activities may depend on the amount of credit available to post collateral, either in support of performance guarantees or as cash margin, and liquidity requirements may be greater than Midwest Generation anticipates or will be able to meet. Midwest Generation cannot provide assurance that its hedging strategies will successfully mitigate market risks. For more detail with respect to these matters, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk Exposures—Commodity Price Risk."

Midwest Generation's financial results can be affected by changes in prices, transportation cost, and supply interruptions related to fuel, sorbents, and other commodities used for power generation and emission controls.

In addition to volatile power prices, Midwest Generation's business is subject to changes in the cost of fuel, sorbents, and other commodities used for power generation and emission controls, and in the cost of transportation. These costs can be volatile and are influenced by many factors outside Midwest Generation's control. Operations at Midwest Generation's coal plants are dependent upon the availability and affordability of coal which is available only from a limited number of suppliers and which is transported by rail under a multi-year long-term transportation contract ~~that will expire in 2011~~. All of these factors may have an adverse effect on Midwest Generation's financial condition and results of operations. For additional information, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Market Risk Exposures—Coal and Transportation Price Risk."

Competition could adversely affect Midwest Generation's business.

Midwest Generation has numerous competitors in all aspects of its business, some of whom may have greater liquidity, greater access to credit and other financial resources, lower cost structures, greater ability to withstand losses, larger staffs or more experience than Midwest Generation. Multiple participants in the wholesale markets, including many regulated utilities, have a lower cost of capital than most merchant generators and often are able to recover fixed costs through rate base mechanisms, allowing them to build, buy and upgrade generation assets without relying exclusively on market clearing prices to recover their investments. These factors could affect Midwest Generation's ability to compete effectively in the markets in which those entities operate. Newer plants owned by Midwest Generation's competitors are often more efficient than Midwest Generation's facilities and may also have lower costs of operation. Over time, the Midwest Generation plants may become obsolete in their markets, or be unable to compete with such plants.

Liquidity Risks

Midwest Generation has significant cash requirements and limited sources of capital.

At December 31, 2010, Midwest Generation had cash and cash equivalents of $295 million and $497 million of available borrowing capacity under its $500 million credit facility maturing in June 2012. Compliance with current and forthcoming environmental requirements will add to Midwest Generation's near-term liquidity needs. Midwest Generation's below-investment grade credit status may limit its ability to extend or replace credit facilities, including those maturing in 2012, should it choose to do so, and the terms and conditions of any refinancing could be substantially less favorable than those in the current credit facilities, depending on market conditions. In the case of a further downgrade, Midwest Generation expects that these negative effects would become more pronounced. If Midwest Generation's credit facilities are not extended or replaced, or if cash flow and other means for assuring liquidity are unavailable or insufficient, Midwest Generation may be unable to complete environmental improvements at its coal plants (which in turn could lead to unit shutdowns) or its ability to provide credit support for contracts for power and fuel related to merchant activities may be severely limited. The terms of debt instruments binding on EME and its subsidiaries, including Midwest Generation, may restrict Midwest Generation's ability to sell assets, seek additional capital, or restructure or refinance debt to satisfy liquidity needs. For further

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discussion, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

Midwest Generation has a substantial amount of indebtedness, including long-term lease obligations and Midwest Generation's ability to meet its obligations under its long-term leases is dependent on payment of interest and principal on its notes receivable from EME.

As of December 31, 2010, Midwest Generation had $665 million in lease financing obligations. During 2000, Midwest Generation loaned $1.367 billion to EME from the proceeds of the sale-leaseback of the Powerton and Joliet plants. Midwest Generation's ability to meet its obligations under the Powerton and Joliet leases is partially dependent on receiving payment from EME on the intercompany notes evidencing this loan. A default by EME in the payment of these intercompany notes would result in a shortfall of cash available to Midwest Generation to meet its lease and debt obligations. A default by Midwest Generation in meeting its lease obligations could give rise to various remedies, including the right to terminate the Powerton and Joliet leases, which would result in the loss of revenues from the Powerton and Joliet power plants and would have a material adverse effect on Midwest Generation's business, results of operations and financial condition.

The interests of EME as Midwest Generation's equity holder may conflict with the interests of holders of debt.

Midwest Generation is indirectly owned and controlled by EME. The directors appointed by EME are able to make decisions affecting Midwest Generation's capital structure. The interests of EME may not in all cases be aligned with the interests of the holders of Midwest Generation's debt. If Midwest Generation encounters financial difficulties or becomes unable to pay its debts as they mature, the interests of EME might conflict with the interests of holders of Midwest Generation's debt. In addition, EME may have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in its judgment, could enhance its equity investments, even though such transactions might involve risks to Midwest Generation's business or the holders of Midwest Generation's debt.

Operating Risks

Midwest Generation's capital projects may not be successful.

Midwest Generation's capital projects are subject to risks including, without limitation, risks related to financing, construction, permitting and governmental approvals. Midwest Generation may be required to spend significant amounts before it can determine whether a particular approach is feasible or economically attractive. The timing of such projects may be delayed beyond the date that equipment is ready for installation, in which case Midwest Generation may be required to incur material equipment and/or material costs with no deployment plan at delivery.

The Midwest Generation plants may be affected by general operating risks and hazards customary in the power generation industry. Midwest Generation may not have adequate insurance to cover all these hazards.

The operation of power generation facilities is a potentially dangerous activity that involves many operating risks, including transmission disruptions and constraints, equipment failures or shortages, and system limitations, degradation and interruption. Midwest Generation's operations are also subject to risks of human performance and workforce capabilities. There can be no assurance that Midwest Generation's insurance will be sufficient or effective under all circumstances or protect against all hazards to which Midwest Generation may be subject. Midwest Generation has a number of older facilities ~~with~~that ~~potentially~~are subject to higher risks of failure or outage ~~than an average plant~~.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

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Inapplicable.

ITEM 2. PROPERTIES

As of December 31, ~~2010~~2011, Midwest Generation owned a fee interest in the Midwest Generation plants, with the exception of the Powerton Station and the Joliet Units 7 and 8, as more particularly described below. In December 1999, Commonwealth Edison sold only a portion of its then owned properties related to the Midwest Generation plants to Midwest Generation and retained the remaining portions of the properties for its own uses. Midwest Generation and Commonwealth Edison have various reciprocal permanent and temporary easements over Midwest Generation's respective parcels for the location, use, maintenance and repair of those facilities and equipment that are used in connection with the operations of Midwest Generation and Commonwealth Edison.

In conjunction with the sale-leaseback of the Powerton Station and Joliet Units 7 and 8 in August 2000, Midwest Generation leased substantially all the property on which the generating units are located to the owner trusts under site leases, and the owner trusts in turn subleased their undivided ground interest in the property back to Midwest Generation under site subleases. The terms of the site subleases are 33.75 years for the Powerton property and 30 years for the Joliet property, with renewal options. Rent is paid on each January 2 and July 2.

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Description of Properties

Operating Plant or Site		Location	~~Location~~	Leased/Owned	~~Leased/ Owned~~	Fuel	~~Fuel~~	Megawatts
Electric Generating Facilities
Crawford Station	~~Crawford Station~~	Chicago, Illinois	~~Chicago, Illinois~~	owned	~~owned~~	coal	~~coal~~	532	~~532~~1
Fisk Station	~~Fisk Station~~	Chicago, Illinois	~~Chicago, Illinois~~	owned	~~owned~~	coal	~~coal~~	326	~~326~~1
Joliet Unit 6	~~Joliet Unit 6~~	Joliet, Illinois	~~Joliet, Illinois~~	owned	~~owned~~	coal	~~coal~~	290	~~290~~
Joliet Units 7 and 8	~~Joliet Units 7 and 8~~	Joliet, Illinois	~~Joliet, Illinois~~	leased	~~leased~~	coal	~~coal~~	1,036	~~1,036~~
Powerton Station	~~Powerton Station~~	Pekin, Illinois	~~Pekin, Illinois~~	leased	~~leased~~	coal	~~coal~~	1,538	~~1,538~~
Waukegan Station	~~Waukegan Station~~	Waukegan, Illinois	~~Waukegan, Illinois~~	owned	~~owned~~	coal	~~coal~~	689	~~689~~2	1
Will County Station	~~Will County Station~~	Romeoville, Illinois	~~Romeoville, Illinois~~	owned	~~owned~~	coal	~~coal~~	761	~~761~~3	2
Peaking Units
Fisk	~~Fisk~~	Chicago, Illinois	~~Chicago, Illinois~~	owned	~~owned~~	oil	~~oil~~	197	~~197~~
Waukegan	~~Waukegan~~	Waukegan, Illinois	~~Waukegan, Illinois~~	owned	~~owned~~	oil	~~oil~~	108	~~108~~
Total								5,477	~~5,477~~
Non-Operating Plant or Site
	Collins Station3		Grundy County, Illinois
	Crawford peaker4		Chicago, Illinois
	Joliet peaker5		Joliet, Illinois
	Calumet peaker5		Chicago, Illinois
	Electric Junction peaker5		Aurora, Illinois
	Lombard peaker5		Lombard, Illinois
	Sabrooke peaker5		Rockford, Illinois

1The Waukegan Station is comprised of Units 7 and 8. Midwest Generation shut down permanently Waukegan Station Unit 6 (100 MW) on December 21, 2007. 2The Will County Station is comprised of Units 3 and 4. Midwest Generation shut down permanently Will County Station Units 1 and 2, totaling 299 MW of capacity, on December 29, 2010 in accordance with the CPS. For further discussion, see "Item 1. Business—Environmental Matters and Regulations—Air Quality—Nitrogen Oxide and Sulfur Dioxide—Illinois." 3All Collins Station units ceased operations and were decommissioned on or before December 31, 2004. 4Peaking units ceased operations as of April 21, 2005. 5Peaking units ceased operations as of December 31, 2004.



Non-Operating Plant or Site⁴		Location
Collins Station		Grundy County, Illinois
Crawford peaker		Chicago, Illinois
Joliet peaker		Joliet, Illinois
Calumet peaker		Chicago, Illinois
Electric Junction peaker		Aurora, Illinois
Lombard peaker		Lombard, Illinois
Sabrooke peaker		Rockford, Illinois


¹	In February 2012, Midwest Generation decided to shut down the Fisk Station by the end of 2012 and the Crawford Station by the end of 2014.


²	The Waukegan Station is composed of Units 7 and 8. Midwest Generation shut down permanently Waukegan Station Unit 6 (100 MW) on December 21, 2007.


³	The Will County Station is composed of Units 3 and 4. Midwest Generation shut down permanently Will County Station Units 1 and 2, totaling 299 MW of capacity, on December 29, 2010 in accordance with the CPS. For further discussion, see "Item 1. Business—Environmental Matters and Regulations—Air Quality—Nitrogen Oxide and Sulfur Dioxide—Illinois."


⁴	Ceased operations before December 31, 2005.

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ITEM 3. LEGAL PROCEEDINGS

For a discussion of the material legal proceedings specifically affecting Midwest Generation, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 8. Commitments and Contingencies."

ITEM 4. RESERVED

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PART II


ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

All the outstanding membership interest of Midwest Generation is, as of the date hereof, owned by Edison Mission Midwest Holdings Co., which is an indirect wholly owned subsidiary of Edison International. There is no market for Midwest Generation's membership interest.

Distributions on the membership interest will be paid when declared by Midwest Generation's board of managers. Midwest Generation paid cash distributions to Edison Mission Midwest Holdings totaling $~~125~~225 million in ~~2010~~2011, $~~200~~125 million in ~~2009~~2010 and $~~206~~200 million in ~~2008~~2009. For information about distribution restrictions, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Equity Distributions and Tax Payments."

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ITEM 6. SELECTED FINANCIAL DATA

The selected financial data was derived from Midwest Generation's audited financial statements and is qualified in its entirety by the more detailed information and financial statements, including the notes to the financial statements, included in this annual report.

INCOME STATEMENT DATA (in millions)



INCOME STATEMENT DATA
(in millions)
	Years Ended December 31,
	2011			2010		2009		2008		2007
Operating revenues from marketing affiliate	$	1,286		$	1,479	$	1,487	$	1,778	$	1,579
Operating expenses ¹	1,802			1,191		1,117		1,068		971
Operating income (loss)	(516		)	288		370		710		608
Interest and other income (expense)	74			69		55		50		(122		)
Income (loss) before income taxes	(442		)	357		425		760		486
Provision (benefit) for income taxes	(172		)	142		166		283		183
Net income (loss)	$	(270	)	$	215	$	259	$	477	$	303

	Years Ended December 31,
	2010		2009		2008		2007			2006
Operating revenues from marketing affiliate	$	1,479	$	1,487	$	1,778	$	1,579		$	1,399
Operating expenses		1,191		1,117		1,068		971			910
Operating income		288		370		710		608			489
Interest and other income (expense)		69		55		50		(122	)		(83	)
Income before income taxes		357		425		760		486			406
Provision for income taxes		142		166		283		183			159
Net income	$	215	$	259	$	477	$	303		$	247


¹	Operating expenses in 2011 included asset impairment charges of $640 million. For addition information, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 12. Asset Impairments and Other Charges."

BALANCE SHEET DATA (in millions)



BALANCE SHEET DATA
(in millions)
	As of December 31,
	2011		2010		2009		2008		2007
Current assets	$	610	$	680	$	677	$	1,193	$	409
Total assets	4,190		4,942		5,063		5,711		4,912
Current liabilities	239		263		333		380		389
Long-term debt	—		—		—		475		—
Lease financing, net of current portion	439		556		665		785		912
Other long-term obligations	243		345		320		296		294
Member's equity	3,269		3,778		3,745		3,775		3,317

		As of December 31,
CASH FLOW DATA
		2010		2009			2008			2007			2006
(in millions)
Current assets		$	680	$	677		$	1,193		$	409		$	601
	Years Ended December 31,
Total assets			4,942		5,063			5,711			4,912			5,284
	2011			2010				2009				2008			2007
Current liabilities			263		333			380			389			363
Cash provided by operating activities	$	364		$	401			$	460			$	545		$	732
Long-term debt			—		—			475			—			1,326
Cash provided by (used in) financing activities	(334		)	(245		)		(801		)		150			(824		)
Lease financing, net of current portion			556		665			785			912			1,030
Cash used in investing activities	(112		)	(98		)		(72		)		(110		)	(14		)
Other long-term obligations			345		320			296			294			184
Member's equity			3,778		3,745			3,775			3,317			2,381

~~CASH FLOW DATA (in millions)~~ 18

	Years Ended December 31,
	2010			2009			2008			2007			2006
Cash provided by operating activities	$	401		$	460		$	545		$	732		$	874
Cash provided by (used in) financing activities		(245	)		(801	)		150			(824	)		(819	)
Cash used in investing activities		(98	)		(72	)		(110	)		(14	)		(8	)

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ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT'S OVERVIEW

Midwest Generation's iscompetitive apower ~~limited~~generation ~~liability~~business ~~company~~consists ~~engaged~~of in the ~~business~~generation ofand ~~operating~~sale ~~and~~into ~~selling~~the PJM market of energy and capacity from its 5,172 MW of coal-fired generating plants and 305 MW of oil-fired peaking plants. ~~The profitability of~~ Midwest Generation's isoperating ~~expected~~results towere ~~decline~~ significantly lower in 2011 ascompared ato ~~result~~2010 of due to lower realized energy and capacity prices ~~(largely~~and ~~driven~~generation. byPower prices fell in the ~~expiration~~fourth quarter of ~~hedge~~2011 ~~contracts)~~ and ~~higher~~have ~~fuel~~continued ~~costs.~~to Infall ~~addition~~in 2012, ~~the~~driven ~~profitability~~by an abundance of ~~the~~low-priced ~~Midwest~~natural ~~Generation~~gas, ~~plants~~weather isconditions ~~expected~~and toa beslow ~~adversely affected~~economic inrecovery. ~~2012~~Moreover, bythe aabundance ~~decline~~of low-priced natural gas has resulted in ~~capacity~~increased ~~prices~~competition ~~(projected~~from tonatural ~~begin~~gas-fired generating units in ~~June~~the ~~2012)~~markets in which Midwest Generation operates, and ~~higher~~generation ~~rail~~from ~~transportation~~Midwest ~~costs~~Generation's ~~(due~~plants tohas ~~the~~been ~~expiration~~correspondingly affected. Also at the end of 2011, of a favorable long-term rail contract). ~~For~~that ~~discussion~~supplied ofMidwest ~~energy~~Generation's fleet expired and was replaced by a higher priced contract. Midwest Generation expects that its average fuel ~~price~~cost ~~risks~~($/MWh) will increase by approximately one-third in 2012. Finally, ~~see~~as ~~"Market~~discussed ~~Risk~~below, ~~Exposures—Commodity~~Midwest ~~Price~~Generation ~~Risk"~~recorded ~~and~~significant ~~"Item 1A.~~impairment ~~Risk~~charges ~~Factors—Market~~during ~~Risks."~~the fourth quarter of 2011.

Unless energy and capacity prices increase, Midwest Generation expects that it will incur an operating cash flow deficit and operating losses in 2012 and subsequent years. A continuation of these adverse trends coupled with the need to retrofit its plants to comply with governmental regulations will strain Midwest Generation's liquidity. In order to retrofit its coal-fired plants, Midwest Generation will need to borrow additional funds or receive additional contributions from EME. Midwest Generation plans to fund operating cash flow deficits through a combination of cash on hand, management of fuel inventories, deferral of operations and maintenance expenses and acceleration of the timing of collections from affiliates, which management believes will provide sufficient liquidity in 2012. Midwest Generation's current business plans are focused on liquidity and operating effectively through the current commodity price cycle and on environmental compliance as described below. There is no assurance that sufficient liquidity will exist beyond 2012 without additional equity contributions from EME.

Highlights of Operating Results

Midwest Generation's had a net ~~income~~loss ~~decreased~~of $44270 million in ~~2010~~2011 as compared to ~~2009.~~net ~~Excluding~~income ~~the~~of $24215 million ~~write-off~~in ~~of capitalized~~2010. ~~costs~~Excluding ~~related to~~ the ~~Powerton~~impairment ~~Station~~charges ~~described~~recorded ~~below, the 2010 decrease~~ in ~~earnings~~2011 ~~was primarily attributable to unrealized losses in 2010 compared to unrealized gains in 2009 related to hedge contracts~~ and ~~an increase in plant maintenance costs~~2010, ~~partially~~as ~~offset~~described ~~by higher capacity revenues~~below, ~~a gain from~~ the ~~sale~~2011 ofdecrease ~~bankruptcy claims against Lehman Brothers, and lower average realized fuel costs. Plant maintenance and overhaul related expenses were higher~~ in ~~2010~~earnings ~~due~~was ~~to the deferral of plant outages in 2009. Average realized fuel costs per megawatt-hour were lower in 2010 as compared to 2009~~ primarily due to lower ~~emission~~average ~~allowance~~realized ~~costs~~energy ~~partially~~and ~~offset~~capacity ~~by higher costs for activated carbon, which is used to reduce mercury emissions. Results for 2010 included the benefit of power hedge contracts entered into during earlier periods at higher~~ prices ~~than~~and ~~current~~lower ~~energy prices~~generation. ~~For additional information about market conditions, see "Market Risk Exposures."~~

During the fourth quarter of ~~2010~~2011, Midwest Generation recorded a $24 386 million after-tax ($40 640 million pre-tax) ~~write-off~~charge ofresulting ~~capitalized~~from ~~engineering~~the ~~and other~~impairment ~~costs~~of ~~for air emissions control technology that is not currently being pursued for use at~~ the ~~Powerton~~long-lived ~~Station.~~assets ~~These~~of ~~activities were previously suspended as~~ Midwest Generation's ~~pursued testing and evaluation of the use of a dry sorbent injection system using Trona or similar sorbents~~Fisk, ~~which~~Crawford isand ~~expected~~Waukegan ~~to require lower capital costs~~Stations. ~~The~~For ~~Illinois~~further ~~EPA~~discussion, ~~recently~~see ~~issued~~"Critical ~~construction~~Accounting ~~permits~~Estimates toand ~~authorize~~Policies—Impairment ~~installation~~ of aLong-Lived ~~dry~~Assets" ~~sorbent~~and"Item ~~injection~~8. ~~system~~Midwest ~~using Trona or similar sorbents to meet emission reductions required under the CPS~~Generation, ~~which~~LLC ~~Midwest~~and ~~Generation~~Subsidiaries ~~currently~~Notes ~~expects~~ to ~~use~~Consolidated ifFinancial ~~this project is undertaken~~Statements—Note 12. ~~For~~Asset ~~further~~Impairments ~~discussion, see "—Environmental Developments—Environmental Compliance Plans~~ and ~~Costs,"~~Other ~~below~~Charges. "

Midwest Generation's 2010 net income decreased $~~218~~44 million ~~in 2009~~ as compared to ~~2008~~2009. ~~The~~In ~~2009~~2010, ~~decrease~~Midwest inGeneration ~~earnings~~recorded ~~was~~a ~~primarily~~$24 million ~~attributable~~after-tax ($40 million pre-tax) charge related to athe ~~21%~~write-off ~~decline~~of capitalized engineering and other costs related to a change in ~~average~~air ~~realized~~emissions ~~energy~~control ~~prices resulting~~technology ~~from~~selection ~~lower~~at ~~wholesale~~the ~~energy~~Powerton ~~prices~~Station. In addition, ~~higher~~2010 ~~fuel~~results ~~costs~~were tolower ~~comply~~than ~~with~~2009 ~~the~~due ~~CAIR~~to ~~annual~~unrealized ~~NOx~~losses ~~emission~~in ~~program~~2010 ~~that~~compared ~~began~~to unrealized gains in 2009, and ~~new~~higher ~~mercury~~plant ~~emission~~maintenance ~~controls~~costs in 2010, partially offset by higher capacity revenues, ~~unrealized~~a ~~gains~~$24 million gain from the sale of bankruptcy claims against Lehman and lower average realized fuel costs. Energy and fuel related unrealized losses in 2010 were $13 million compared to unrealized gains of $45 million in 2009. Results in 2010 included the benefit of power hedge contracts entered into during earlier periods at higher prices than current energy prices.

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contracts and lower plant operations expense due in part to the deferral of plant overhaul activities.

Environmental Developments

Environmental Compliance Plans and Costs

During ~~2010~~2011, Midwest Generation continued ~~its~~to ~~permitting~~advance ~~and~~necessary ~~planning~~ activities for NOx and SO2 controls to meet the requirements of the CPS. Midwest Generation ~~has~~does ~~received~~not ~~all~~anticipate ~~necessary~~a ~~permits~~material ~~from~~change ~~the Illinois EPA~~ to ~~allow~~its ~~the~~current ~~installation~~approach ofin ~~SNCR~~order ~~technology on multiple units~~ to ~~meet~~comply ~~the~~with ~~NOx portion of~~ the ~~CPS~~MATS rule. ~~In November 2010 and February 2011, the Illinois EPA issued construction permits authorizing~~ Midwest Generation expects to ~~install~~continue ato ~~dry~~develop ~~sorbent~~and ~~injection~~implement ~~system~~a ~~using~~compliance ~~Trona~~program orthat ~~its~~includes ~~equivalent at~~ the ~~Waukegan~~operations ~~generating~~of ~~station's~~ACI ~~Unit 7~~systems, ~~and~~upgrades ~~Units 5~~to ~~and~~particulate 6removal atsystems and the ~~Powerton~~use ~~Station.~~of ~~The~~dry ~~permit~~sorbent ~~for~~injection, ~~Unit 7~~combined atwith ~~the~~its ~~Waukegan~~use ~~Station~~of ~~also~~low ~~authorizes~~sulfur ~~Midwest~~PRB ~~Generation~~coal, to ~~convert~~meet ~~the existing~~emissions ~~electrostatic~~limits ~~precipitator~~for tocriteria apollutants, ~~cold-side~~such ~~design~~as ~~which~~NOx ~~will~~and ~~improve~~SO2 ~~removal~~as ~~efficiency~~well ofas ~~particulate~~for ~~matter~~HAPs, tosuch ~~satisfy~~as ~~the~~mercury, ~~particulate~~acid ~~control~~gas ~~requirements~~and ofnon-mercury ~~the CPS~~metals.

Based on work to date, Midwest Generation estimates the cost of retrofitting all units, using dry scrubbing with sodium-based sorbents to comply with CPS requirements for SO2 emissions, and the associated upgrading of existing particulate removal systems, would be approximately $1.2 billion in 2010 dollars. If these projects are undertaken, these expenditures would be incurred through 2018.

Decisions regarding whether or not to proceed with the above projects or other approaches to compliance remain subject to a number of factors, such as market conditions, regulatory and legislative developments, and forecasted commodity prices and capital and operating costs applicable at the time decisions are required or made. Midwest Generation could also elect to shut down units, instead of installing controls, to be in compliance with the CPS. Therefore, decisions about any particular combination of retrofits and shutdowns it may ultimately employ also remain subject to conditions applicable at the time decisions are required or made. Due to existing uncertainties about these factors, Midwest Generation intends to defer final decisions about particular units for the maximum time available. Accordingly, final decisions on whether to install controls, to install particular kinds of controls, and to actually expend capital that is budgeted may not occur until 2012 for some of the units and potentially later for others. Preconstruction engineering and initial construction work for a project may occur in 2011 in advance of a final decision to continue or complete the project.

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A significant USdecline ~~EPA~~in ~~Developments~~ power prices from September 30, 2011, combined with new environmental regulations and public policy pressure on coal generation have resulted in continuing uncertainties for merchant coal-fired power plants. Decisions regarding whether or not to proceed with retrofitting any particular remaining units to comply with CPS requirements for SO2 emissions, including those that have received permits, are subject to a number of factors, such as market conditions, regulatory and legislative developments, liquidity and forecasted commodity prices and capital and operating costs applicable at the time decisions are required or made. Midwest Generation may also elect to shut down units, instead of installing controls, to be in compliance with the CPS. Decisions about any particular combination of retrofits and shutdowns Midwest Generation may ultimately employ also remain subject to conditions applicable at the time decisions are required or made. Final decisions on whether to install controls, to install particular kinds of controls, and to actually expend capital or continue with the expenditure of capital will be made as required, subject to the requirements of the CPS and other applicable regulations. In February 2012, Midwest Generation decided to shut down the Fisk Station by the end of 2012 and the Crawford Station by the end of 2014 and concluded it was less likely to retrofit the Waukegan Station rather than the larger Powerton, Joliet and Will County Stations. As a result, Midwest Generation recorded an impairment charge of $640 million at December 31, 2011 related to the Crawford, Fisk and Waukegan Stations. For further discussion, see "Critical Accounting Estimates and Policies—Impairment of Long-Lived Assets" and “Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 12. Asset Impairments and Other Charges.” Units that are not retrofitted may continue to operate until required to shut down by applicable regulations or operate with reduced output.

~~For~~In ~~information~~connection ~~regarding~~with ~~recent~~its ~~developments~~decision to close the Fisk and Crawford Stations, Midwest Generation entered into a Memorandum of Understanding with the City of Chicago, acting through the Commissioner of Health, which acknowledges that the cessation of coal-fired electric generation at the Fisk and Crawford Stations will achieve the objectives of the proposed Chicago Clean Power Ordinance without a need to pass the proposed Clean Power Ordinance or similar ordinances (recognizing that such agreement cannot bind the Chicago City Council or its members). Midwest Generation and the City of Chicago have also agreed to collaborate with key stakeholders to consider potential future uses, ownership and sources of external funding to transition the sites for such uses. The closure of the Fisk and Crawford Stations will be subject to review for reliability by PJM Interconnection LLC, the regional transmission organization that controls the area where these plants are located. In total, Midwest Generation estimates 150 to 180 employees will be affected. The timing and amount of severance benefits, if any, will be determined after completion of review of personnel based on seniority and other factors and, in ~~environmental~~the ~~regulations~~case of the Crawford Station, ~~see~~the ~~"Item 1~~amount may be affected by the timing of the plant closure. ~~Business—Environmental~~Other ~~Matters~~obligations related to the Fisk and ~~Regulations~~ Crawford Stations could be affected by the plant closing, including sales of capacity, for which Midwest Generation is unable to reasonably estimate the impact, or range of impacts, that could be incurred." Midwest Generation does not expect to incur future capital expenditures to close these plants.

Based on ~~Liquidity~~ work to date, Midwest Generation estimates the cost of retrofitting the large stations (Powerton, Joliet Units 7 and 8 and Will County) using dry scrubbing with sodium-based sorbents to comply with CPS requirements for SO2 emissions, and the associated upgrading of existing particulate removal systems, would be up to approximately $628 million. In order to retrofit its coal-fired plants, Midwest Generation will need to borrow funds or receive additional contributions from EME. The cost of retrofitting Joliet Unit 6 is not included in the large unit amounts as it is less likely that Midwest Generation will make retrofits for this unit. The estimated cost of retrofitting Joliet Unit 6, if made, would be approximately $75 million, while the estimated cost of retrofitting the Waukegan Station, if made, would be approximately $160 million. For further discussion related to Midwest Generation's impairment policy on the unit of account, see "Critical Accounting Estimates and Policies—Impairment of Long-Lived Assets."

AtIn ~~December 31,~~February ~~2010~~2012, Midwest Generation ~~had~~received ~~cash~~an ~~and~~extension ~~cash equivalents~~ of ~~$295 million and a total of $497 million of available borrowing capacity under~~ its ~~$500 million~~permit ~~working~~to ~~capital~~install ~~facility.~~a ~~Midwest~~dry ~~Generation's~~sorbent ~~liquidity~~injection issystem ~~also~~at ~~comprised of cash flow generated from operations and payments by EME under~~ the ~~intercompany~~ ~~notes issued in connection with the~~ Powerton~~-Joliet~~ ~~facilities sale-leaseback~~Station.

~~Midwest Generation~~Environmental ~~has~~Regulation not yet committed to the completion of environmental compliance activities for all of its plants. Expenditures for NOx and SO2 controls through 2013 are estimated at $481 million based on an assumption that Midwest Generation would retrofit all units over the compliance period, which extends to 2018. Depending upon the facilities selected to be retrofitted, the cost of such retrofitting, and the timing of funding requirements beyond the near term, Midwest Generation may utilize operating cash flow, draw on its credit facility, when available, or seek debt financing to fund capital expenditures. Developments

29For additional discussion of environmental regulation developments, see "Item 1. Business—Environmental Matters and Regulations" and "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 9. Environmental Developments."

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RESULTS OF OPERATIONS

Summary

The table below summarizes total revenues as well as key performance measures related to coal-fired generation, which represents the majority of Midwest Generation's operations.

			Years Ended December 31
			2010		2009		2008
Operating Revenues (in millions)			$	1,479	$	1,487	$	1,778
Statistics
	Generation (in GWh)
		Energy contracts		29,798		28,977		26,010
		Load requirements services contracts		—		1,333		5,090
		Total		29,798		30,310		31,100
	Aggregate plant performance
		Equivalent availability		82.2%		85.3%		81.0%
		Capacity factor		62.3%		63.3%		64.8%
		Load factor		75.8%		74.2%		80.0%
		Forced outage rate		6.2%		5.8%		8.3%
	Average realized price/MWh
		Energy contracts	$	40.12	$	41.17	$	51.82
		Load requirements services contracts	$	—	$	62.52	$	62.64
	Capacity revenues only (in millions)		$	263	$	178	$	111
	Average realized fuel costs/MWh		$	17.17	$	18.54	$	15.49

Statistical Definitions and Reconciliation of Non-GAAP Disclosures

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	Years Ended December 31
	2011			2010			2009
Operating Revenues (in millions)	$	1,286		$	1,479		$	1,487
Statistics
Generation (in GWh)
Energy contracts	28,145			29,798			28,977
Load requirements services contract	—			—			1,333
Total	28,145			29,798			30,310
Aggregate plant performance
Equivalent availability	82.9		%	82.2		%	85.3		%
Capacity factor	62.2		%	62.3		%	63.3		%
Load factor	75.0		%	75.8		%	74.2		%
Forced outage rate	5.3		%	6.2		%	5.8		%
Average realized price/MWh
Energy contracts	$	36.83		$	40.12		$	41.17
Load requirements services contract	$	—		$	—		$	62.52
Capacity revenues only (in millions)	$	244		$	263		$	178
Average realized fuel costs/MWh	$	18.06		$	17.17		$	18.54

Reconciliation of Non-GAAP Disclosures and Statistical Definitions

Average Realized Energy Price

The average realized energy price reflects the average price at which energy is sold into the market including the effects of hedges, real-time and day-ahead sales and PJM fees and ancillary services. It is determined by dividing (i) operating revenues less unrealized gains (losses) and other non-energy related revenues by (ii) generation as shown in the table below. Revenues related to capacity sales are excluded from the calculation of average realized energy price.

	Years Ended December 31,		~~Years Ended December 31,~~
(in millions)	2011		~~2010~~		2010	~~2009~~			~~2008~~2009
Operating revenues	$	1,286	$	~~1,479~~	$	$1,479	~~1,487~~		$	1,~~778~~487
Less:
	Load requirements services contracts			—			(83	)		(319	)
Load requirements services contract	—				—				(83		)
Unrealized (gains) losses	~~Unrealized~~ (~~gains) losses~~3		)	6	6		~~(30~~	)	(30	6	)
Capacity and other1 revenues	~~Capacity and other1 revenues~~(247		)	~~(290~~	)(290		~~(181~~)	)	(181	~~(117~~	)
Realized revenues	$	1,036	$	~~1,195~~	$	$1,195	~~1,193~~		$	1,~~348~~193
Generation – energy contracts (in GWh)	28,145			~~29,798~~	29,798		~~28,977~~		28,977	~~26,010~~
Average realized energy price/MWh	$	36.83	$	~~40.12~~	$	$40.12	~~41.17~~		$	5141.8217

1 1A A gain from the sale of the bankruptcy claims against Lehman Brothers is included in 2010.

The average realized ~~fuel~~energy ~~costs~~price ~~reflect~~is presented as an aid in understanding the ~~average~~operating ~~cost~~results ~~per~~of ~~MWh~~the atMidwest ~~which~~Generation ~~fuel~~plants. Average realized energy price is ~~consumed~~a ~~for~~non-GAAP ~~generation~~performance ~~sold~~measure ~~into~~since such statistical measure excludes unrealized gains or losses recorded as operating revenues. Management believes that the ~~market,~~average ~~including~~realized ~~emission~~energy ~~allowance~~price ~~costs~~is ~~and~~meaningful for investors as this information reflects the impact of hedge contracts at the time of actual generation in period-over-period comparisons or as compared to real-time market prices.

31Average Realized Fuel Costs

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The average realized fuel costs reflect the average cost per MWh at which fuel is consumed for generation sold into the market, including emission allowance costs and the effects of hedges. It is determined by dividing (i) fuel costs adjusted for unrealized gains (losses) by (ii) generation as shown in the table below:

	Years Ended December 31,		~~Years Ended December 31,~~
(in millions)	2011		~~2010~~		2010	~~2009~~		~~2008~~2009
Fuel costs	$	512	$	~~519~~	$	$519	~~547~~	$	~~482~~547
Add back:
	Unrealized gains			(7	)		15		—
Unrealized gains (losses)	(4		)		(7		)	15
Realized fuel costs	$	508	$	~~512~~	$	$512	~~562~~	$	~~482~~562
Total generation (in GWh)				29,798			30,310		31,100
Generation (in GWh)	28,145				29,798			30,310
Average realized fuel costs/MWh	$	18.06	$	~~17.17~~	$	$17.17	~~18.54~~	$	1518.4954

The average ~~Operating~~realized ~~Revenues~~ fuel costs are presented as an aid in understanding the operating results of the Midwest Generation plants. Average realized fuel costs are a non-GAAP performance measure since such statistical measure excludes unrealized gains or losses recorded as fuel costs. Management believes that average realized fuel costs are meaningful for investors as this information reflects the impact of hedge contracts at the time of actual generation in period-over-period comparisons.

~~Operating~~Statistical revenues decreased $8 million in 2010 compared to 2009 and decreased $291 million in 2009 compared to 2008. The 2010 decrease was primarily attributable to the expiration of favorably priced hedges and the sale of energy at lower market prices, and unrealized losses in 2010 compared to unrealized gains in 2009 related to hedge contracts, partially offset by higher capacity revenues and a gain from the sale of bankruptcy claims against Lehman Brothers. The 2009 decrease in operating revenues was primarily due to lower energy revenues partially offset by higher capacity revenues and unrealized gains related to hedge contracts. The decrease in energy revenues was primarily attributable to lower average realized energy prices. Definitions

~~In 2010,~~• ~~Midwest~~Load ~~Generation~~requirements ~~sold~~services ~~its~~contract ~~bankruptcy~~generation ~~claims~~represents ~~against~~a ~~Lehman~~load ~~Brothers~~requirements ~~and~~services ~~recorded~~contract awith ~~gain~~Commonwealth ofEdison, ~~$24 million.~~awarded ~~The~~as ~~claims~~part ~~originated~~of ~~from~~an ~~power~~Illinois ~~contracts~~auction. ~~that~~The ~~were~~contract ~~terminated~~commenced inon ~~2008~~January ~~due~~1, ~~to the~~2007 ~~bankruptcy~~and ofexpired ~~Lehman~~in ~~Brothers,~~May ~~as discussed below~~2009.

~~Included in~~• ~~operating~~Equivalent ~~revenues~~availability ~~were~~reflects ~~unrealized~~the ~~gains~~impact ~~(losses)~~ of ~~$(6)~~the ~~million,~~unit's ~~$30 million~~inability ~~and~~to ~~$(6)~~achieve ~~million~~full ~~in 2010~~load, ~~2009~~referred ~~and 2008, respectively. Unrealized gains (losses) in 2010 and 2009 were primarily due~~ to ~~economic~~as ~~hedge contracts that are accounted for at fair value with offsetting changes recorded on the consolidated statements of income. In addition~~derating, ~~$10 million~~as ~~and $14 million~~well ~~were~~as ~~reversed~~outages ~~from~~which ~~accumulated~~result ~~other comprehensive income and recognized~~ in ~~2010 and 2009, respectively, related to the power contracts with Lehman Brothers. Unrealized losses in 2008 included~~ a ~~$24 million~~complete ~~write-down~~unit ~~of power contracts with Lehman Brothers for 2009 and 2010 forecasted generation~~shutdown. ~~These~~The ~~contracts~~coal ~~qualified~~plants asare ~~cash~~not ~~flow~~available ~~hedges~~during ~~until~~periods ~~Midwest Generation~~of ~~dedesignated~~planned ~~the contracts due to nonperformance risk~~ and ~~subsequently~~unplanned ~~terminated the contracts~~maintenance. The ~~change~~equivalent inavailability ~~fair~~factor ~~value~~is ~~was~~defined ~~recorded~~ as ~~an unrealized loss during 2008. In addition, unrealized gains (losses) included~~ the ~~ineffective~~number ~~portion~~ of ~~hedge~~MWh ~~contracts at~~ the ~~Midwest~~coal ~~Generation~~ plants ~~attributable~~are available to ~~changes~~generate inelectricity ~~the~~divided ~~difference~~by ~~between energy prices at~~ the ~~Northern~~product ~~Illinois Hub~~of (the ~~settlement~~capacity ~~point~~of ~~under forward contracts) and~~ the ~~energy~~coal ~~prices at the Midwest Generation~~ plants' ~~busbars~~ (~~the~~in ~~delivery~~MW) ~~point~~and ~~where power generated by~~ the ~~Midwest~~number ~~Generation~~of ~~plants~~hours ~~is delivered~~in ~~into~~ the ~~transmission system) resulting from marginal losses~~period.

32• The capacity factor indicates how much power a unit generated compared to the maximum amount of power that could be generated according to its rating. It is defined as the actual number of MWh generated by the coal plants divided by the product of the capacity of the coal plants (in MW) and the number of hours in the period.


•	The load factor indicates how much power a unit generated compared to the maximum amount of power that a unit was available to generate electricity. It is determined by dividing capacity factor by the equivalent availability factor.


•	The forced outage rate refers to forced outages and deratings excluding events outside of management's control as defined by NERC. Examples include floods, tornado damage and transmission outages.


•	The average realized price for a load requirements services contract reflects the contract price for sales to Commonwealth Edison under the load requirements services contract that includes energy, capacity and ancillary services. It is determined by dividing (i) operating revenues related to the contracts by (ii) generation.

Operating Income (Loss)

Operating loss from the Midwest Generation plants was $516 million in 2011 compared to operating income of $288 million in 2010. Operating income decreased $82 million in 2010 compared to 2009. The 2011 decrease in operating income, excluding the $640 million impairment charges previously discussed in "Management's Overview—Highlights of Operating Results," was primarily attributable to lower energy and capacity revenues. The decline in energy revenues was due to lower average realized energy prices and lower generation due to the permanent shutdown of Will County Units 1 and 2 at the end of 2010 in accordance with the CPS. The decline in capacity revenues was due to lower capacity prices from the RPM auction. In addition, the change in operating income was impacted by a $40 million pre-tax charge in 2010 related to the write-off of capitalized engineering and other costs related to a change in air emissions control technology at the Powerton Station and a $24 million gain from the sale of bankruptcy claims against Lehman. The claims originated from power contracts that were terminated in 2008 due to the bankruptcy of Lehman.

The 2010 decrease in operating income from 2009 was primarily attributable to unrealized losses in 2010 compared to

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unrealized gains ~~Operating~~in ~~Expenses~~ 2009 related to hedge contracts and an increase in plant maintenance costs, partially offset by higher capacity revenues and lower average realized fuel costs. Plant maintenance and overhaul related expenses were higher in 2010 due to the deferral of plant outages in 2009. Average realized fuel costs per megawatt-hour were lower in 2010 as compared to 2009 primarily due to lower emission allowance costs partially offset by higher costs for activated carbon, which is used to reduce mercury emissions. The write-off of capitalized costs at the Powerton Station and the gain from the sale of bankruptcy claims against Lehman also affected the comparison of results between these periods.

~~Operating~~Included ~~expenses~~in ~~increased~~operating revenues were unrealized gains (losses) of $743 million, $(6) million and $30 million in 2011, 2010 ~~from~~and 2009, ~~and~~respectively. ~~increased~~Unrealized gains (losses) were primarily attributable to economic hedge contracts that are accounted for at fair value with offsetting changes recorded on the consolidated statements of operations. In addition, $4910 million inand ~~2009~~$14 million was reversed from ~~2008.~~accumulated ~~Operating~~other ~~expenses~~comprehensive ~~consist~~income ~~of fuel~~and recognized in 2010 and 2009, ~~plant~~respectively, ~~operations~~related to power contracts with Lehman that were dedesignated as cash flow hedges, ~~asset~~subsequently ~~write-downs~~terminated and recorded as unrealized losses in 2008. Unrealized gains (~~gain~~losses) onalso ~~buyout~~included ofthe ~~contract,~~ineffective ~~depreciation~~portion ~~and~~of ~~amortization,~~hedge ~~and~~contracts ~~administrative~~at ~~and~~the ~~general.~~Midwest ~~The~~Generation ~~primary~~plants attributable to changes in the ~~components~~difference ofbetween ~~operating~~energy ~~expenses are~~prices ~~discussed~~at ~~below~~the Northern Illinois Hub (the settlement point under forward contracts) and the energy prices at the Midwest Generation plants' busbars (the delivery point where power generated by the Midwest Generation plants is delivered into the transmission system) resulting from marginal losses.

~~Fuel costs~~Included ~~decreased~~in ~~$28 million~~fuel incosts ~~2010~~were ~~from~~$3 ~~2009~~million, $13 million and ~~increased~~ $6563 million in ~~2009~~2011, ~~from 2008. The~~ 2010 ~~decrease~~and ~~was~~2009, ~~primarily~~respectively, ~~attributable~~related to ~~lower~~the ~~annual~~net ~~NOx~~cost of emission ~~allowance~~ ~~costs~~allowances. ~~and~~Also ~~lower~~included ~~generation,~~in ~~partially~~fuel ~~offset~~costs bywere ~~lower realized and~~ unrealized gains ~~from~~(losses) ~~oil~~of ~~futures~~$(4) million, ~~contracts~~ and ~~higher~~$(7) ~~costs~~million ~~for~~and ~~activated~~$15 million ~~carbon~~in 2011, ~~which~~2010 isand ~~used to reduce mercury emissions. The~~ 2009, ~~increase~~respectively, indue ~~fuel~~to ~~costs~~oil ~~was~~futures ~~primarily~~contracts ~~attributable~~that towere ~~annual~~accounted ~~NOx~~for ~~emission~~as ~~allowances~~economic ~~costs~~hedges. toThese ~~comply~~contracts ~~with~~were ~~the~~entered ~~CAIR~~into ~~program that began~~ in ~~2009~~2010 and ~~higher~~2009 ~~costs~~to ~~for activated~~hedge ~~carbon,~~variable ~~partially~~fuel ~~offset~~oil bycomponents ~~realized~~of ~~and~~rail ~~unrealized~~transportation ~~gains from oil futures contracts~~costs.

Included in fuel costs were annual NOx emission allowance costs of $13 million and $58 million in 2010 and 2009, respectively, and activated carbon costs used for the reduction of mercury emissions of $47 million, $31 million and $8 million in 2010, 2009 and 2008, respectively. Also included in fuel costs were realized and unrealized gains of $2 million and $18 million in 2010 and 2009, respectively, due to oil futures contracts which were accounted for as economic hedges. These contracts were entered into in 2010 and 2009 to hedge variable fuel oil components of rail transportation costs.

Plant operations expenses increased $51 million in 2010 from 2009 and decreased $37 million in 2009 from 2008. The 2010 increase was attributable to higher scheduled plant maintenance and overhaul related expenses in 2010 due to the deferral of plant outages in 2009. Cost containment efforts and the deferral of plant overhaul activities contributed to the decrease in 2009 costs.

Asset write-downs and (gain) on buyout of contract of $48 million in 2010 included $40 million for the write-off of capitalized engineering and other costs for air emissions control technology that is not currently being pursued for use at the Powerton Station and $8 million primarily related to the retirement of assets at the Powerton Station due to plant maintenance activities. 2008 included a $15 million gain related to the buyout of a fuel contract. For further discussion, see "Management's Overview—Highlights of Operating Results" and "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 8. Commitments and Contingencies—Fuel Supply Contracts."

Depreciation and amortization expense increased $5 million in 2010 from 2009 and $3 million in 2009 from 2008. The 2010 and 2009 increases were attributable to an increase in assets being placed in service.

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Other Income (Expense)

	Years Ended December 31,	~~Years Ended December 31,~~
(in millions)	2011	~~2010~~			~~2009~~2010			~~2008~~	2009
Interest and other income	$	$3	5		$	5		$	14$	5
Interest income from affiliates	111		~~112~~		112	~~112~~			~~113~~112
Interest expense	(40		~~(48~~)	)	(48	~~(62~~	)		(7762	)	)
Total other income	$	$74	69		$	5569		$	50$	55

Interest ~~and~~expense ~~other income~~ decreased $98 million in ~~2009~~2011 from ~~2008.~~2010 ~~The~~and ~~2009 decrease was attributable to~~ $214 million ~~lower~~in ~~interest~~2010 ~~income~~from ~~due~~2009. ~~to lower~~The ~~cash~~decreases ~~balances~~were indue ~~2009, $3 million recorded~~ to ~~other~~lower ~~income~~interest ~~in 2008 for settlement of a claim~~ related to ~~barge~~the ~~traffic~~Powerton-Joliet ~~closed~~lease infinancing ~~2005,~~during ~~and~~both ~~$3 million~~2011 ~~recorded~~and in2010 ~~other~~and ~~income~~lower ~~in 2009,~~borrowings ~~compared~~outstanding toduring ~~$6 million~~2010 inon ~~2008,~~Midwest ~~for~~Generation's ~~business~~working ~~interruption~~capital ~~coverage~~facility ~~related~~compared to ~~insurance claims from unplanned outages~~2009.

~~Interest expense~~Income decreased $14 million in 2010 from 2009 and $15 million in 2009 from 2008. The 2010 decrease was due to lower interest related to the Powerton-Joliet lease financing and lower borrowings outstanding during 2010 on Midwest Generation's working capital facility. The 2009 decrease was primarily due to lower interest expense related to the Powerton-Joliet lease financing and $6 million of interest costs in 2008 included as part of a resolution of a labor matter. Taxes

Midwest Generation's ~~Provision~~effective ~~For~~tax ~~Income~~rates ~~Taxes~~ were 39%, 40% and 39% in 2011, 2010 and 2009, respectively. Midwest Generation's effective tax rate varies from the federal statutory rate of 35% primarily due to state income taxes.

~~Midwest~~Related ~~Generation~~Party had an effective income tax provision rate of 40%, 39% and 37% in 2010, 2009 and 2008, respectively. Midwest Generation's effective income tax rate varies from the federal statutory rate of 35% primarily due to state income taxes and estimated benefits from a federal deduction related to qualified domestic production activities under Section 199 of the Internal Revenue Code. Transactions

For a ~~Related~~discussion of related party transactions, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Income Taxes and Tax-Allocation Agreements" and "—Note 13. Related Party Transactions ."

For a discussion of related-party transactions, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Income Taxes and Tax-Allocation Agreements and—Note 12. Related-Party Transactions."

New Accounting Guidance

For a discussion of new accounting guidance affecting Midwest Generation, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—New Accounting Guidance."

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LIQUIDITY AND CAPITAL RESOURCES

Available Liquidity

At December 31, ~~2010~~2011, Midwest Generation had cash and cash equivalents of $~~295~~213 million and a total of $497 million of available borrowing capacity under its $500 million working capital facility. Midwest Generation's liquidity is also ~~comprised~~composed of cash flow generated from operations and payments by EME under the intercompany notes issued in connection with the Powerton-Joliet facilities sale-leaseback.

Midwest Generation's working capital facility matures in June 2012. For further discussion, see "Management's Overview" and "Item 1A. Risk Factors—Liquidity Risks." The following table summarizes the status of Midwest Generation's working capital facility at December 31, ~~2010, which matures in June 2012~~2011:

(in millions)
Commitment	$	$500	~~500~~
Outstanding letters of credit			(3	)
Outstanding borrowings	—
Amount available		$	497
Outstanding letters of credit	3
Amount available	$	497

~~Midwest~~Capital ~~Generation~~Investment ~~may seek to extend or replace its credit facility or retire it by other means. The terms and conditions of any refinancing could be substantially different than those in the current credit facility.~~ Plan

~~For additional~~Forecasted ~~discussion~~capital ofexpenditures ~~liquidity,~~through ~~see~~2014 ~~"Management's~~by ~~Overview—Liquidity."~~Midwest Generation are as follows:

Bonus Depreciation Impact



(in millions)	2012		2013		2014
Environmental¹	$	35	$	102	$	311
Plant capital	21		46		16
Total	$	56	$	148	$	327

~~The~~1 ~~Small~~For ~~Business~~additional ~~Jobs Act of 2010 and the Tax Relief~~information, ~~Unemployment~~see Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) extended 50% bonus depreciation for qualifying property through 2012 and created a new 100% bonus depreciation for qualifying property placed in service between September 9, 2010 and December 31, 2011. Subject to updated Internal Revenue Service regulations clarifying the definitions of capital expenditures that qualify for 100% bonus depreciation, Midwest Generation"Management's ~~capital~~ ~~expenditures~~Overview—Environmental ~~are~~Compliance ~~expected~~Plans ~~to qualify, accelerating federal tax deductions in 2010~~ and ~~2011~~Costs. "

Midwest Generation plants' projected environmental expenditures would retrofit Powerton Units 5 and 6, Joliet Units 7 and 8 and Will County Units 3 and 4, using dry scrubbing with sodium-based sorbents and upgrading particulate removal systems to comply with CPS requirements for SO₂ emissions and the US EPA's regulation on HAP emissions. Decisions regarding whether or not to proceed with retrofitting any particular remaining units to comply with CPS requirements for SO₂emissions, including those that have received permits, remain subject to a number of factors, such as market conditions, regulatory and legislative developments, and forecasted commodity prices and capital and operating costs applicable at the time decisions are required or made. Final decisions on whether to install controls, to install particular kinds of controls, and to actually expend capital or continue with the expenditure of capital will be made as required, subject to the requirements of the CPS and other applicable regulations. Furthermore, the timing of commencing capital projects may vary from the amounts set forth in the above table. For additional discussion, see "Management's Overview—Environmental Compliance Plans and Costs."

Plant capital expenditures for Midwest Generation includes capital projects for boiler and turbine controls, major boiler components and electrical systems.

Consolidated Cash Flow

At December 31, ~~2010~~2011, Midwest Generation had cash and cash equivalents of $~~295~~213 million, compared to $~~237~~295 million at December 31, ~~2009~~2010. Net cash provided by operating activities totaled $~~401~~364 million, $~~460~~401 million and $~~545~~460 million in ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, respectively. The ~~2010~~2011 ~~and~~decrease ~~2009 decreases~~ in net cash provided by operating activities ~~were~~was ~~largely~~primarily attributable to lower revenues due to lower average realized energy prices and the timing of cash receipts and disbursements related to working capital items, partially offset by higher payments for settlements of derivative contracts in 2010. The 2010 decrease was primarily attributable to lower net income.

Net cash ~~provided by (~~used in) financing activities totaled $~~(245)~~334 million, $~~(801)~~245 million and $~~150~~801 million in ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, respectively. The ~~2010~~2011 ~~decrease~~increase ~~was~~in ~~due~~net tocash ~~no borrowings~~used orin ~~repayments~~financing onactivities ~~Midwest~~was ~~Generation's~~primarily ~~working~~due ~~capital~~to ~~facility in 2010 and~~ $75100 million ~~less~~of higher distributions by Midwest Generation to its parent in ~~2010~~2011 as compared to ~~2009~~2010. The 2010 decrease from 2009 ~~change~~ was ~~primarily~~ due to lower repayments on Midwest Generation's working capital facility of $475 million in 2010 and $75 million ofless ~~repayments~~distributions onby Midwest Generation to its

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~~Generation's working~~parent ~~capital facility~~ in ~~2009, as compared to net borrowings of $475 million in 2008~~2010.

Net cash used in investing activities totaled $98112 million, $7298 million and $~~110~~72 million in ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, respectively, and consisted primarily of capital expenditures. ~~The 2010 increase was due to higher capital expenditures. The 2009 decrease was due to lower capital expenditures.~~

Capital Expenditures

At December 31, 2010, forecasted capital expenditures through 2013 by Midwest Generation were as follows:

(in millions)	2011		2012		2013
Plant capital expenditures	$	34	$	23	$	29
Environmental expenditures		151		132		198
Total	$	185	$	155	$	227

Plant capital expenditures relate to non-environmental projects such as boiler components, generator stator rewinds, condenser re-tubing, and main power transformer replacement.

Environmental expenditures include $109 million for expenditures in 2011 related to SNCR equipment and $372 million for expenditures in 2011 to 2013 to begin to retrofit initial units using dry scrubbing with sodium-based sorbents to comply with CPS requirements for SO2 emissions. Midwest Generation could elect to shut down units instead of installing controls to be in compliance with the CPS, and, therefore, decisions about any particular combination of retrofits and shutdowns it may ultimately employ to comply remain subject to conditions applicable at the time decisions are required or made. Accordingly, the environmental expenditures for Midwest Generation in the preceding table represent current projects only and are subject to change based upon a number of considerations. Actual expenditures could be higher or lower. Preconstruction engineering and initial construction work for a project may occur in 2011 in advance of a final decision to continue or complete the project. For additional discussion, see "Management's Overview—Environmental Developments—Environmental Compliance Plans and Costs."

Credit Facility and Other Covenants

Midwest Generation maintains a $500 million working capital facility that matures in June 2012, with an option to extend for up to two years. The interest rate on borrowings outstanding under this credit facility is currently LIBOR plus 1.15%, unless average utilized commitments during a period exceed $250 million. As of December 31, 2010, Midwest Generation had no borrowings outstanding and $3 million of letters of credit had been utilized under this working capital facility.

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assets, make investments, engage in transactions with affiliates, make distributions, make capital expenditures, enter into agreements restricting its ability to make distributions, engage in other lines of business, enter into swap agreements, or engage in transactions for any speculative purpose. In order for Midwest Generation to make a distribution, it must be in compliance with the covenants specified under its credit agreement, including maintaining a historical debt to capitalization ratio of no greater than 0.60 to 1. At December 31, 2010, the debt to capitalization ratio was 0.15 to 1.

Midwest Generation is permitted to use its working capital facility and cash on hand to provide credit support for hedging transactions related to the Midwest Generation plants entered into by EMMT. Utilization of this credit facility in support of these hedging transactions provides additional liquidity support for implementation of Midwest Generation's contracting strategy for the Midwest Generation plants. In addition, Midwest Generation may grant liens on its property in support of hedging transactions associated with the Midwest Generation plants. For additional discussion, see "Market Risk Exposures—Credit Risk."

Equity Distributions and Tax Payments

The following table summarizes the payments by Midwest Generation as equity distributions through Edison Mission Midwest Holdings and payments made pursuant to tax-allocation agreements:

(in millions)	2010		2009		2008
Equity distributions	$	125	$	200	$	206
Tax payments under tax-allocation agreements		136		65		349
Total payments	$	261	$	265	$	555

For additional information on the tax-allocation agreements, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies—Income Taxes and Tax-Allocation Agreements."

Powerton-Joliet Lease Payments

As part of the sale-leaseback of the Powerton Station and Units 7 and 8 of the Joliet Station, Midwest Generation loaned the proceeds (in the original amount of $1.367 billion) to EME in exchange for promissory notes in the same aggregate amount. EME's obligations under the promissory notes payable to Midwest Generation are general corporate obligations of EME and are not contingent upon receiving distributions from its subsidiaries. There is no assurance that EME will have sufficient cash flow to meet these obligations. Furthermore, EME has guaranteed Midwest Generation's lease obligations under these leases. If EME fails to pay under its guarantee, including payments due under the Powerton-Joliet leases in the event that Midwest Generation could not make such payments, this would result in an event of default under the Powerton and Joliet leases. This event would have a material adverse effect on Midwest Generation.

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Credit Ratings

Overview

Credit ratings for Midwest Generation, EME and EMMT as of December 31, ~~2010~~2011 were as follows:

	Moody's Rating	~~Standard~~ S&P ~~Poor's~~ Rating	Fitch Rating
Midwest Generation1	~~Ba2~~Ba3	B+	BB-
EME2	B3Caa1	B-	B-CCC
EMMT	Not Rated	B-	Not Rated

1 ~~1First~~ First priority senior secured rating. ~~2Senior unsecured rating.~~


²	Senior unsecured rating.

All the above ratings are on negative outlook. Midwest Generation cannot provide assurance that its current credit ratings or the credit ratings of its subsidiaries will remain in effect for any given period of time or that one or more of these ratings will not be lowered. Midwest Generation notes that these credit ratings are not recommendations to buy, sell or hold its securities and may be revised at any time by a rating agency.

Midwest Generation's coal contracts include provisions that provide the right to request additional collateral to support payment obligations for delivered coal and may vary based on Midwest Generation's credit ratings.

Credit Rating of EMMT and Credit Support for Energy Contracts

Midwest Generation sells merchant energy and capacity through EMMT, which currently has a below investment grade credit rating. Midwest Generation ~~currently~~ ~~has~~is permitted to use its working capital facility, to the extent available, and cash on hand to provide credit support as needed for hedging contracts entered into by EMMT related to the Midwest Generation plants. In addition, Midwest Generation may grant liens on its property in support of hedging contracts associated with the Midwest Generation plants.

EMMT borrows under its revolving credit agreement with Midwest Generation to provide credit support for futures and forward contracts. Loans provided under this revolving credit agreement are repaid by EMMT upon the return of the funds under the terms of the related forward contracts. The amount repaid includes interest earned, if any, under margin agreements supporting such contracts. As of December 31, ~~2010~~2011, EMMT had no borrowings outstanding under this revolving credit agreement.

Midwest Generation anticipates that sales of its power through EMMT may require additional credit support, depending upon market conditions and the strategies adopted for the sale of this power. Changes in forward market prices and margin requirements and increases in merchant sales could further increase the need for credit support related to hedging activities. Midwest Generation is able to provide collateral to support bilateral contracts for power and fuel to the extent that any such transactions relate to its merchant energy operations. Depending on market conditions and the volume and duration of forward sales, there is no assurance that Midwest Generation will be able to provide sufficient credit support to EMMT.

38Equity Distributions and Tax Payments

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The following table summarizes the payments by Midwest Generation as equity distributions through Edison Mission Midwest Holdings and payments made pursuant to tax-allocation agreements:



(in millions)	2011		2010		2009
Equity distributions	$	225	$	125	$	200
Tax payments under tax-allocation agreements	8		136		65
Total payments	$	233	$	261	$	265

Key Ratio Affecting Distributions

Set forth below is the key ratio required under the covenants contained in Midwest Generation's credit agreement at December 31, 2011:



Financial Ratio	Covenant	Actual
Debt-to-capitalization ratio	Less than or equal to 0.60 to 1	0.15 to 1

Financing Restrictions on Distributions

Midwest Generation is bound by the covenants in its credit agreement and certain covenants under the Powerton-Joliet lease documents with respect to Midwest Generation making payments under the leases. These covenants include restrictions on the ability to, among other things, incur debt, create liens on its property, merge or consolidate, sell assets, make investments, engage in transactions with affiliates, make distributions, make capital expenditures, enter into agreements restricting its ability to make distributions, engage in other lines of business, enter into swap agreements, or engage in transactions for any speculative purpose. In order for Midwest Generation to make a distribution, it must be in compliance with the covenants specified under its credit agreement, including maintaining a debt to capitalization ratio of no greater than 0.60 to 1.

Contractual Obligations, Commercial Commitments and Contingencies

Midwest Generation has contractual obligations and other commercial commitments that represent prospective cash requirements. The following table summarizes Midwest Generation's significant consolidated contractual obligations as of December 31, ~~2010~~2011:

					Payments Due by Period	~~Payments Due by Period~~
(in millions)	Total		~~Total~~		Less than1 year	~~Less than 1 year~~		1 to ~~3 years~~3years		~~3 to 5 years~~	3 to 5years		~~More than 5 years~~		More than5 years
Lease financing1	$	787	$	~~938~~	$	$151	~~151~~	$	302	$	~~218~~$	93	$	~~267~~	$	241
Operating lease obligations2	67			79	15		16	27	32		1413			17	12
Purchase obligations:2
Fuel supply contracts	~~Fuel supply contracts~~518			~~329~~	223		~~195~~	295	~~134~~		—			—	—
	Coal transportation agreements			219			219		—		—			—
Coal transportation agreements3	3,023				386			659			630				1,348
Capital expenditures	~~Capital expenditures~~22			~~116~~	22		~~116~~	—	—		—			—	—
Other contractual obligations	~~Other contractual obligations~~79			~~118~~	54		50	25	68		—			—	—
Employee benefit plan contribution3				15			15		—		—			—
Employee benefit plan contribution4	84				14			34			36				—
Total Contractual Obligations4			$	1,814		$	762	$	536	$	232		$	284
Total Contractual Obligations5,6	$	4,580			$	865		$	1,342		$	772			$	1,601

1 ~~1Amount~~ Amount represents lease payments related to the Powerton-Joliet sale-leaseback transaction and includes interest payments over the life of the lease. For further discussion, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 8. ~~Commitments and Contingencies." 2For additional details, see "Item~~ 8. ~~Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 8.~~ Commitments and Contingencies." 3Amount includes estimated contribution for pension plans and postretirement benefits other than pensions. The estimated contributions beyond 2011 are not available. For more information, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 7. Compensation and Benefit Plans—Pension Plans and Postretirement Benefits Other than Pensions." 4The contractual obligations table does not include derivative obligations and AROs, which are discussed in "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 5. Derivative Instruments and Hedging Activities," and "—Note 2. Property, Plant and Equipment," respectively.


²	For additional details, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 8. Commitments and Contingencies."

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³	Years subsequent to 2012 represent contracts for minimum volumes without regard to payment of alternative liquidated damages or plant closures.


⁴	Amount includes estimated contribution for pension plans and postretirement benefits other than pensions. The estimated contributions beyond 2016 are not available. For more information, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 7. Compensation and Benefit Plans—Pension Plans and Postretirement Benefits Other than Pensions."


⁵	At December 31, 2011, Midwest Generation had a total net liability recorded for uncertain tax positions of $37 million, which is excluded from the table. For more information, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 6. Income Taxes."


⁶	The contractual obligations table does not include derivative obligations and AROs, which are discussed in "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 5. Derivative Instruments and Hedging Activities," and "—Note 2. Property, Plant and Equipment," respectively.

Contingencies

Midwest Generation's ~~significant~~has contingencies related to the NSR ~~lawsuit~~and other litigation and environmental remediation, which are discussed in "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 8. Commitments and Contingencies."

Off-Balance Sheet Transactions

Midwest Generation has off-balance sheet activities related to operating leases in place ~~for equipment,~~ primarily for leased railcars, with termination ~~option~~ dates in various years through 2019. For further discussion, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 8. Commitments and Contingencies—Lease Commitments."

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MARKET RISK EXPOSURES

Introduction

Midwest Generation's primary market risk exposures are associated with the sale of electricity and capacity from, and the procurement of fuel for, its merchant power plants. These market risks arise from price fluctuations of electricity, capacity, fuel, emission allowances, and transmission rights. Additionally, Midwest Generation's financial results can be affected by fluctuations in interest rates. Midwest Generation manages these risks in part by using derivative instruments in accordance with established policies and procedures.

Derivative Instruments

Midwest Generation uses derivative instruments to reduce its exposure to market risks that arise from price fluctuations of electricity, capacity, fuel, emission allowances, and transmission rights. For derivative instruments recorded at fair value, changes in fair value are recognized in earnings at the end of each accounting period unless the instrument qualifies for hedge accounting. For derivatives that qualify for cash flow hedge accounting, changes in their fair value are recognized in other comprehensive income until the hedged item settles and is recognized in earnings. However, the ineffective portion of a derivative that qualifies for cash flow hedge accounting is recognized currently in earnings.

Unrealized Gains and Losses

Midwest Generation classifies unrealized gains and losses from derivative instruments (other than the effective portion of derivatives that qualify for hedge accounting) as part of operating revenues or fuel costs. The ~~results of derivative activities are recorded as part of cash flows from operating activities on the consolidated statements of cash flows. The~~ following table summarizes unrealized gains (losses):

	Years Ended December 31,	~~Years Ended December 31,~~
(in millions)	2011	~~2010~~			~~2009~~2010			~~2008~~	2009
Non-qualifying hedges	$	$(2	~~(11~~)	)	$	40(11	)	$	~~(16~~$	)40
Ineffective portion of cash flow hedges	1		(2	)	(2	5	)		105
Total unrealized gains (losses)	$	$(1	~~(13~~)	)	$	45(13	)	$	(6$	)45

At December 31, ~~2010~~2011, cumulative unrealized gains of $97 million were recognized from non-qualifying hedge contracts or the ineffective portion of cash flow hedges related to ~~subsequent periods ($7 million for 2011 and $2 million for~~ 2012).

Fair Value Disclosures

In determining the fair value of Midwest Generation's derivative positions, Midwest Generation uses third-party market pricing where available. For further explanation of the fair value hierarchy and a discussion of Midwest Generation's derivative instruments, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 3. Fair Value Measurements" and "—Note 5. Derivative Instruments and Hedging Activities," respectively.

40The net fair value of Midwest Generation's commodity derivatives at December 31, 2011 was $42 million. A 10% change in the market price of the underlying commodity at December 31, 2011 would increase or decrease the net fair value of commodity derivatives by approximately $25 million.

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Value Measurements" and "—Note 5. Derivative Instruments and Hedging Activities," respectively.

The fair value of Midwest Generation's derivative instruments at December 31, 2010 was $45 million. A 10% change in the market price of the underlying commodity at December 31, 2010 would increase or decrease the fair value of outstanding commodity derivative instruments by approximately $41 million.

Commodity Price Risk

Introduction

Energy Price Risk

~~The following table depicts the average historical market prices for energy per megawatt-hour during the past three years:~~ 28

		24-Hour Average Historical Market Prices1
		2010			2009			2008
Northern Illinois Hub		$	33.08		$	28.86		$	49.01

1 Energy prices were calculated at the Northern Illinois Hub delivery point using historical hourly real-time prices as published by PJM or provided on the PJM web-site.

The following table sets forth the forward market prices for energy per megawatt-hour as quoted for sales into the Northern Illinois Hub at December 31, 2010:

		24-Hour Forward Energy Prices1 Northern Illinois Hub
2011 calendar "strip"2		$	30.68
2012 calendar "strip"2		$	32.37

1		Energy prices were determined by obtaining broker quotes and information from other public sources relating to the Northern Illinois Hub delivery point.
2		Market price for energy purchases for the entire calendar year.

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~~Forward~~The ~~market~~following ~~prices~~table atdepicts the ~~Northern~~average ~~Illinois~~historical ~~Hub fluctuate as a result of a number of factors, including natural gas prices, transmission congestion, changes in~~ market rules, electricity demand (which in turn is affected by weather, economic growth, and other factors), plant outages in the region, and the amount of existing and planned power plant capacity. The actual spot prices for ~~electricity~~energy ~~delivered~~per bymegawatt-hour ~~the~~during ~~Midwest Generation plants into these markets may vary materially from~~ the ~~forward~~past ~~market~~three ~~prices set forth in the preceding table.~~ years:

EMMT engages in hedging activities for the Midwest Generation plants to hedge the risk of future change in the price of electricity. The following table summarizes Midwest Generation's hedge positions for contracts entered into at both the Northern Illinois Hub and AEP/Dayton Hub (including forward contracts accounted for on the accrual basis) as of December 31, 2010 for electricity expected to be generated in 2011 and 2012:



	24-Hour Average Historical Market Prices¹
	2011		2010		2009
Northern Illinois Hub	$	33.21	$	33.12	$	28.68

		2011			2012
MWh (in thousands)			10,870			3,358
Average price/MWh1		$	37.75		$	38.11


¹	Energy prices were calculated at the Northern Illinois Hub delivery point using historical hourly day-ahead prices as published by PJM or provided on the PJM web-site.

The following table sets forth the forward market prices for energy per megawatt-hour as quoted for sales into the Northern Illinois Hub at December 31, 2011:



	24-Hour Forward Energy Prices¹
2012 calendar "strip"²	$	29.75
2013 calendar "strip"²	$	31.41


¹	Energy prices were determined by obtaining broker quotes and information from other public sources relating to the Northern Illinois Hub delivery point.


²	Market price for energy purchases for the entire calendar year.

Power prices at the Northern Illinois Hub fell in the fourth quarter of 2011 and continued to fall in 2012 due to an abundance of low-priced natural gas and the sales volume from the Midwest Generation plants has been correspondingly affected. Forward market prices at the Northern Illinois Hub fluctuate as a result of a number of factors, including natural gas prices, transmission congestion, changes in market rules, electricity demand (which in turn is affected by weather, economic growth and other factors), plant outages in the region, and the amount of existing and planned power plant capacity. The actual spot prices for electricity delivered by the Midwest Generation plants into these markets may vary materially from the forward market prices set forth in the preceding table.

EMMT engages in hedging activities for the Midwest Generation plants to hedge the risk of future change in the price of electricity. The following table summarizes Midwest Generation's hedge positions for transactions primarily entered into at the Northern Illinois Hub and to a lesser extent the AEP/Dayton Hub, both in PJM and the Indiana Hub in MISO (including forward contracts accounted for on the accrual basis) at December 31, 2011 for electricity expected to be generated in 2012 and 2013:



	2012		2013
MWh (in thousands)	7,185		1,020
Average price/MWh¹	$	38.76	$	40.43

The above hedge positions include forward contracts for the sale of power and futures contracts during different periods of the year and the day. Market prices tend to be higher during on-peak periods and during summer months, although there is significant variability of power prices during different periods of time. Accordingly, the above hedge positions are not directly comparable to the 24-hour Northern Illinois Hub prices set forth above.

In January 2012, EMMT entered into 14.7 billion cubic feet of natural gas futures contracts (equivalent to approximately 1,610 GWh of energy only contracts using a ratio of 9.12 MMBtu to 1 MWh) for the Midwest Generation plants to economically hedge energy price risks through December 2012 at an average price of $24.88/MWh.

Capacity Price Risk

Under the RPM, capacity commitments are made in advance to provide a long-term pricing signal for construction of capacity resources. The ~~RPM~~following istable ~~intended to~~summarizes ~~provide a mechanism for PJM to meet~~ the ~~region's~~status ~~need~~of ~~for generation~~ capacity, ~~while~~sales ~~allocating~~for ~~the~~Midwest ~~cost~~Generation toat ~~load-serving~~December 31, ~~entities through a locational reliability charge.~~ 2011:

~~The following table summarizes the status of capacity sales for Midwest Generation at December 31, 2010:~~ 29

												Other Capacity Sales, Net of Purchases2
								RPM Capacity Sold in Base Residual Auction
	Installed Capacity MW		Unsold Capacity1 MW			Capacity Sold MW								Average Price per MW-day		Aggregate Average Price per MW-day
								MW		Price per MW-day		MW
January 1, 2011 to May 31, 2011		5,477		(548	)		4,929		4,929	$	174.29		—		—	$	174.29
June 1, 2011 to May 31, 2012		5,477		(495	)		4,982		4,582		110.00		400	$	85.00		107.99
June 1, 2012 to May 31, 2013		5,477		(773	)		4,704		4,704		16.46		—		—		16.46
June 1, 2013 to May 31, 2014		5,477		(827	)		4,650		4,650		27.73		—		—		27.73

1Capacity not sold arises from: (i) capacity retained to meet forced outages under the RPM auction guidelines, and (ii) capacity that PJM does not purchase at the clearing price resulting from the RPM auction. 2Other capacity sales and purchases, net includes contracts executed in advance of the RPM base residual auction to hedge the price risk related to such auction, participation in RPM incremental auctions and other capacity transactions entered into to manage capacity risks.

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								Other Capacity Sales, Net of Purchases²
					RPM Capacity Sold in Base Residual Auction			Other Capacity Sales, Net of Purchases²			Aggregate Average Price per MW-day
	Installed Capacity MW	Unsold Capacity¹ MW		Capacity Sold MW	RPM Capacity Sold in Base Residual Auction				Average Price per MW-day
	Installed Capacity MW	Unsold Capacity¹ MW		Capacity Sold MW	MW	Price per MW-Day		MW	Average Price per MW-day
January 1, 2012 to May 31, 2012	5,477	(555	)	4,922	4,582	$	110.00	340	$	98.92	$	109.23
June 1, 2012 to May 31, 2013	5,477	(773	)	4,704	4,704	16.46		—	—		16.46
June 1, 2013 to May 31, 2014	5,477	(827	)	4,650	4,650	27.73		—	—		27.73
June 1, 2014 to May 31, 2015	5,477	(852	)	4,625	4,625	125.99		—	—		125.99


¹	Capacity not sold arises from: (i) capacity retained to meet forced outages under the RPM auction guidelines, and (ii) capacity that PJM does not purchase at the clearing price resulting from the RPM auction.


²	Other capacity sales and purchases, net includes contracts executed in advance of the RPM base residual auction to hedge the price risk related to such auction, participation in RPM incremental auctions and other capacity transactions entered into to manage capacity risks.

The RPM auction capacity prices for the delivery period of June 1, 2012 to May 31, 2013 and June 1, 2013 to May 31, 2014 varied between different areas of PJM. In the western portion of PJM, affecting Midwest Generation, the prices of $16.46 per MW-day and $27.73 per MW-day were substantially lower than other areas' capacity prices. The impact of lower capacity prices for these periods compared to previous years will have an adverse effect on Midwest Generation's revenues unless such lower capacity prices are offset by an unavailability of competing resources and increased energy prices.

Revenues from the sale of capacity from Midwest Generation beyond the periods set forth above will depend upon the amount of capacity available and future market prices either in PJM or nearby markets if Midwest Generation has an opportunity to capture a higher value associated with those markets. Under PJM's RPM system, the market price for capacity is generally determined by aggregate market-based supply conditions and an administratively set aggregate demand curve. Among the factors influencing the supply of capacity in any particular market are plant forced outage rates, plant closings, plant delistings (due to plants being removed as capacity resources and/or to export capacity to other markets), capacity imports from other markets, demand side management activities and the cost of new entry.

Basis Risk

Sales made from the Midwest Generation plants in the real-time or day-ahead market receive the actual ~~spot~~real-time ~~prices~~ or day-ahead prices, as the case may be, at the busbars (delivery points) of the individual plants. In order to mitigate price risk from changes in forward spot prices at the individual plant busbars, Midwest Generation may enter into cash settled futures contracts as well as forward contracts with counterparties for energy to be delivered in future periods. Currently, a liquid market for entering into these contracts at the individual plant busbars does not exist. A liquid market does exist for settlement points at the Northern Illinois Hub and the AEP/Dayton ~~Hub~~and Indiana Hubs. Midwest Generation's hedging activities use these settlement points (and, to a lesser extent, other similar trading hubs) to enter into hedging contracts. To the extent that, on the settlement date of a hedge contract, spot prices at the relevant busbar are lower than spot prices at the settlement point, the proceeds actually realized from the related hedge contract are effectively reduced by the difference. This is referred to as "basis risk." During ~~2010~~2011, ~~transmission~~day-ahead ~~congestion in PJM resulted in~~ prices at the individual busbars of the Midwest Generation plants ~~being~~were lower than ~~those at~~ the AEP/Dayton Hub, Cinergy Hub and Northern Illinois Hub by an average of 1314%, 4% and less than 1%, respectively, compared to 1413%, 6% and less than 1%, respectively, during ~~2009.~~2010, due to transmission congestion in PJM.

By entering into cash settled futures contracts and forward contracts using the Northern Illinois Hub and the AEP/Dayton Hub (or other similar trading hubs) as settlement points, Midwest Generation is exposed to basis risk as described above. In order to mitigate basis risk, Midwest Generation may purchase financial transmission rights and basis swaps in PJM ~~for Midwest Generation~~. A financial transmission right is a financial instrument that entitles the holder to receive the difference between actual ~~spot~~day-ahead prices for two delivery points in exchange for a fixed amount. ~~Accordingly, Midwest Generation's hedging activities include using financial transmission rights alone or in combination with forward contracts and basis swap contracts to manage basis risk.~~

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Coal and Transportation Price Risk

The Midwest Generation plants purchase coal primarily from the Southern PRB of Wyoming. Coal purchases are made under a variety of supply agreements. The following table summarizes the amount of coal under contract at December 31, ~~2010~~2011 for the following ~~two~~three years:


	2012		2013		2014
Amount of Coal Under Contract in Millions of Equivalent Tons1,2		15.9		9.8
Amount of Coal Under Contract in Millions of Equivalent Tons1	16.0		9.8		9.8

1		The amount of coal under contract in equivalent tons is calculated based on contracted tons and applying an 8,800 Btu equivalent.
2		In January 2011, Midwest Generation entered into additional contractual agreements for the purchase of 1.25 million tons for 2011.


¹	The amount of coal under contract in equivalent tons is calculated based on contracted tons and applying an 8,800 Btu equivalent.

Midwest Generation is subject to price risk for purchases of coal that are not under contract. ~~Prices~~Market prices of PRB coal ~~(with~~based on 8,800 Btu per pound heat content and 0.8 pounds of SO2 per MMBtu sulfur content) ~~purchased for the Midwest Generation plants increased during 2010 from 2009 year-end prices and declined during 2009 from 2008 year-end prices. The price of PRB coal~~ fluctuated between $912.8035 per ton and $15.3510 per ton during ~~2010~~2011, ~~with~~as areported ~~price~~by ~~of $13~~EIA.60 ~~per~~The ~~ton at~~ December ~~31,~~ ~~2010~~30, ~~compared~~2011 ~~to a~~ price of $912.2575 per ton atcompared ~~December 31, 2009, as reported by the Energy Information Administration (EIA). The 2010 increase in PRB coal prices was due~~ to ~~the~~a ~~draw~~price ~~down~~ of ~~inventory levels and flat to slight declines of PRB coal production~~$13.60

Midwest Generation has contracts for the transport of coal to its facilities. The primary contract is with Union Pacific Railroad (and various short-haul carriers), which extends through 2011. Midwest Generation is exposed to price risk related to transportation rates after the expiration of its existing transportation contracts. Current market transportation rates for PRB coal are higher than the existing rates under contract. Transportation costs are approximately half of the delivered cost of PRB coal to the Midwest Generation plants. 30

Based on Midwest Generation's anticipated coal requirements in 2011 in excess of the amount under contract, Midwest Generation expects that a 10% change in the price of coal at December 31, 2010 would increase or decrease pre-tax income in 2011 by approximately $4 million.

Emission Allowances Price Risk

In the event that actual emissions required are greater than allowances held, Midwest Generation is subject to price risk for purchases of emission allowances. The market price for emission allowances may vary significantly. The average purchase price of annual NOx

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~~allowances was~~per ton and $~~987~~9.25 per ton inat December 31, 2010 and $12009,~~431~~ ~~per~~respectively, ~~ton~~as inreported ~~2009~~by the EIA. ~~Based~~The on2011 ~~broker's~~fluctuations ~~quotes~~in ~~and~~PRB ~~information~~coal ~~from~~prices ~~public~~were ~~sources,~~in ~~the~~line ~~spot~~with ~~price~~normal ~~for~~market ~~SO2~~price ~~allowances~~volatility ~~and~~with ~~annual~~the ~~NOx allowances~~higher ~~was~~PRB $9prices ~~per~~reflecting ~~ton~~the ~~and~~impact ~~$320~~of ~~per~~the ~~ton,~~CSAPR ~~respectively,~~before atit ~~December 31,~~was ~~2010~~stayed.

~~Based on~~ Midwest Generation's ~~anticipated~~contracts ~~SO2~~with ~~requirements~~rail ~~and~~carriers ~~annual~~to ~~and~~transport ~~seasonal~~coal ~~NOx~~to ~~requirements~~its ~~for~~facilities. In anticipation of the expiration on December 31, 2011 ~~beyond~~of ~~those~~its ~~allowances~~existing ~~already~~rail ~~purchased~~transportation contracts, during the fourth quarter of 2011, Midwest Generation ~~expects~~ ~~that~~entered into new multi-year transportation contracts with Union Pacific Railroad and two short-haul carriers for a ~~10%~~specified ~~change~~minimum inand ~~the~~maximum ~~price~~amount of ~~SO2~~tons ~~emission~~effective ~~allowances~~January 1, ~~and~~2012. The estimated minimum annual ~~and~~costs ~~seasonal~~of ~~NOx~~transportation ~~emission~~of ~~allowances~~coal atunder ~~December 31~~these contracts, ~~2010~~based ~~would~~on ~~increase~~tonnage orcommitments, ~~decrease pre-tax~~are ~~income~~$386 million induring ~~2011~~2012, by$326 million ~~approximately~~in 2013, and $~~0.5~~333 million in 2014. However, all of the contracts have provisions that address the financial exposure of Midwest Generation related to a plant closure under certain circumstances as specified in the agreements. The contracts provide for quarterly and annual cost adjustments based on a number of factors that may increase the minimum payments.

Midwest Generation believes it is fully contracted in 2012 based on its anticipated coal requirements in 2012.

Emission Allowances Price Risk

If CSAPR becomes effective as issued, the amount of SO₂ that a plant emits in its operation will need to be matched by a sufficient amount of SO₂ allowances designated under this program (CSAPR SO₂ allowances) that are either allocated to the plant under the CSAPR program or purchased in the open market. SO₂ allowances under the federal Acid Rain Program cannot be used to satisfy the requirements under CSAPR. For additional information on CSAPR, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 9. Environmental Developments—Cross-State Air Pollution Rule."

Credit Risk

For further information related to credit risk and how Midwest Generation manages credit risk, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 5. Derivative Instruments and Hedging Activities."

Interest Rate Risk

Interest rate changes can affect earnings and the cost of capital for capital improvements. Midwest Generation has a $500 million working capital facility, maturing in June 2012, which exposes Midwest Generation to the risk of earnings loss resulting from changes in interest rates from any borrowings outstanding. At December 31, ~~2010~~2011, Midwest Generation had no borrowings outstanding.

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CRITICAL ACCOUNTING ESTIMATES AND POLICIES

Introduction

The accounting policies described below are considered critical to obtaining an understanding of Midwest Generation's consolidated financial statements because their application requires the use of significant estimates and judgments by management in preparing Midwest Generation's consolidated financial statements. Management estimates and judgments are inherently uncertain and may differ significantly from actual results achieved. Management considers an accounting estimate to be critical if the estimate requires significant assumptions and changes in the estimate or if different estimates that could have been selected had been used could have a material impact on Midwest Generation's results of operations or financial position. For more information on Midwest Generation's accounting policies, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 1. Summary of Significant Accounting Policies."

Impairment of Long-Lived Assets

Nature of Estimates Required. Long-lived assets, including intangible assets, are evaluated for impairment in accordance with applicable authoritative guidance. Authoritative guidance requires that if the undiscounted expected future cash flow from a company's assets or group of assets (without interest charges) is less than its carrying value, asset impairment must be recognized on the financial statements. The impairment charges, if applicable, are calculated as the excess of the asset's carrying value over its fair value, which represents the discounted expected future cash flows attributable to the asset or, in the case of assets expected to be sold, at fair value less costs to sell. Long-lived assets are evaluated for impairment whenever indicators exist or when there is a commitment to sell or dispose of the asset. These evaluations may result from significant decreases in the market price of an asset, a significant adverse change in the extent or manner in which an asset is being used in its physical condition, a significant adverse change in legal factors or in the business climate that could affect the value of an asset, as well as economic or operational analyses.

Key Assumptions and Approach Used. The assessment of impairment requires significant management judgment to determine: (1) if an indicator of impairment has occurred, (2) how assets should be grouped, (3) the forecast of undiscounted expected future cash flow over the asset's estimated useful life to determine if an impairment exists, and (4) if an impairment exists, the fair value of the asset or asset group. Factors that are considered important, which could trigger an impairment, include operating losses, projected future operating losses, the financial condition of counterparties, or significant negative industry or economic trends. The determination of fair value requires management to apply judgment in: (1) estimating future prices of energy and capacity in wholesale energy markets and fuel prices that are susceptible to significant change, (2) environmental and maintenance expenditures, and (3) the time period due to the length of the estimated remaining useful lives.

In preparing long-term cash forecasts, Midwest Generation includes assumptions about future prices for electricity, capacity, fuel and related products and services, as applicable, future operations and maintenance costs and future capital expenditure requirements under different scenarios. As appropriate, Midwest Generation uses a probability weighted approach when determining whether impairment indicators exist. Assumptions included in the long-term cash flow forecasts for merchant projects include:


•	Observable market prices for electricity, fuel and related products and services to the extent available and long-term prices developed based on a fundamental price model;


•	Long-term capacity prices based on the assumption that capacity markets would continue consistent with their current structure, with expected increases in revenues as a result of declines in reserve margins beyond the price of the latest auctions;


•	Trends for additions and retirements for generation resources; and


•	Plans for compliance with both existing and possible future environmental regulations.

Midwest Generation includes allocated acquired emission allowances as part of each power plant asset group. Midwest Generation's unit of account is at the plant level and, accordingly, the closure of a unit at a multi-unit site would not result in an impairment of property, plant and equipment unless such condition were to affect an impairment assessment on the entire plant.

Effect if Different Assumptions Used. The estimates and assumptions used to determine whether an impairment exists are subject to a high degree of uncertainty. The estimated fair value of an asset would change materially if different estimates and assumptions were used to determine the amounts or timing of future revenues, environmental compliance costs or operating expenditures.

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Effect on 2011 Results. A significant decline in power prices from September 30, 2011, combined with new environmental regulations and public policy pressure on coal generation have resulted in continuing uncertainties for merchant coal-fired power plants. In connection with the preparation of its year end financial statements, Midwest Generation concluded, based on the current energy price environment, it is less likely that Midwest Generation will install environmental controls required by the CPS at its Fisk, Crawford and Waukegan Stations; and such assessment was an indicator that these stations were impaired. Management updated the probability weighted future undiscounted cash flows expected to be received at these stations and concluded that such amounts did not recover the respective station's carrying amounts. As part of these alternative cash flow scenarios, management considered a shortened estimated useful life of each station if environmental improvements were not made and a forecasted reduction in generation from lower forward power prices. In February 2012, Midwest Generation decided to shut down the Fisk Station by the end of 2012 and the Crawford Station by the end of 2014.

To measure the amount of the impairment loss, the income approach was considered the most relevant, but market data obtained prior to the significant decline in power prices was used to corroborate the income approach. The discounted cash flow analysis assumptions that have the most significant impact on fair value are forecasted energy and capacity prices. The discounted cash flow analysis indicated a fair value of zero. Midwest Generation also concluded it was unlikely that a third party would consummate the purchase of the Fisk, Crawford or Waukegan Stations in the current economic and regulatory environment resulting in a determination that the fair value of each of these stations is zero. This resulted in an impairment charge of $115 million, $186 million and $339 million for Fisk, Crawford and Waukegan Stations, respectively. Environmental and other remediation or ongoing maintenance costs are expected to be offset by the salvage value of the asset groups.

The following table summarizes the net book value of Midwest Generation's asset groups at December 31, 2011:



(in millions)
Joliet Station	$	763
Powerton Station	827
Will County Station	523

Derivatives

Midwest Generation uses derivative instruments to manage exposure to changes in electricity, fuel oil and interest rates. Derivative instruments that do not meet the normal purchases and sales exception at fair value are recorded with changes in the derivative's fair value recognized currently in earnings unless specific hedge accounting criteria are met. For derivatives that qualify for cash flow hedge accounting treatment, the effective portion of the changes in the derivative's fair value is recognized in other comprehensive income until the hedged item is recognized in earnings.

Management's judgment is required to determine if a transaction meets the definition of a derivative and, if it does, whether the normal purchases and sales exception applies or whether individual transactions qualify for hedge accounting treatment. Management's judgment is also required to determine the fair value of derivative transactions.

Key Assumptions and Approach Used. Midwest Generation determines the fair value of derivative instruments based on forward market prices in active markets adjusted for nonperformance risk. If quoted market prices are not available, internally developed models are used to determine the fair value. When actual market prices, or relevant observable inputs are not available, it is appropriate to use unobservable inputs which reflect management assumptions, including extrapolating limited short-term observable data and developing correlations between liquid and non-liquid trading hubs. In assessing nonperformance risks, Midwest Generation reviews credit ratings of counterparties (and related default rates based on such credit ratings) and prices of credit default swaps. The market price (or premium) for credit default swaps represents the price that a counterparty would pay to transfer the risk of default, typically bankruptcy, to another party. A credit default swap is not directly comparable to the credit risks of derivative contracts, but provides market information of the related risk of nonperformance.

In addition, a fair value hierarchy is established that prioritizes the inputs to valuation techniques used to measure fair value. For further information, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 3. Fair Value Measurements."

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Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 3. Fair Value Measurements."

Effect if Different Assumptions Used. As described above, fair value is determined using a combination of market information or observable data and unobservable inputs which reflect management's assumptions. Changes in observable data and unobservable inputs would impact results.

For Midwest Generation's derivative instruments that are measured at fair value using quantitative pricing models, a significant change in estimate could affect Midwest Generation's results of operations. For further sensitivities in Midwest Generation's assumptions used to calculate fair value, see "Market Risk Exposures—Derivative Instruments—Fair Value Disclosures." For further information on derivative instruments, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 5. Derivative Instruments and Hedging Activities."

~~Impairment of Long-Lived Assets~~ 33

Nature of Estimates Required. Long-lived assets, including intangible assets, are evaluated for impairment in accordance with applicable authoritative guidance. Authoritative guidance requires that if the undiscounted expected future cash flow from a company's assets or group of assets (without interest charges) is less than its carrying value, asset impairment must be recognized on the financial statements. The impairment charges, if applicable, are calculated as the excess of the asset's carrying value over its fair value, which represents the discounted expected future cash flows attributable to the asset or, in the case of assets expected to be sold, at fair value less costs to sell. Long-lived assets for impairment are evaluated whenever indicators of impairment exist or when there is a commitment to sell or dispose of the asset. These evaluations may result from significant decreases in the market price of an asset, a significant adverse change in the extent or manner in which an asset is being used in its physical condition, a significant adverse change in legal factors or in the business climate that could affect the value of an asset, as well as economic or operational analyses.

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~~determine the~~assumptions ~~amounts~~used orto ~~timing~~calculate offair ~~future~~value, ~~revenues~~see "Market Risk Exposures—Derivative Instruments—Fair Value Disclosures." For further information on derivative instruments, ~~environmental~~see ~~compliance~~"Item 8. ~~costs~~Midwest orGeneration, LLC ~~operating~~and ~~expenditures~~Subsidiaries Notes to Consolidated Financial Statements—Note 5. Derivative Instruments and Hedging Activities."

Application to Merchant Coal-Fired Power Plants

Weak commodity prices combined with continuing, heightened public policy pressure on coal generation have resulted in continuing uncertainties for merchant coal-fired power plants, which may require significant capital and increased operating costs to meet environmental requirements. For a discussion of environmental requirements, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 9. Environmental Developments." Management has reviewed long-term cash flow forecasts that include assumptions about future electricity and fuel prices, future capacity payments under the PJM RPM, and future capital expenditure requirements under different scenarios. Assumptions included in the long-term cash flow forecasts include:

If electricity and capacity prices do not increase consistent with the fundamental forecast or if Midwest Generation decides not to install additional environmental control equipment and, instead, shuts down one or more coal-fired power plants, the forecasted cash flow would be less than expected and impairment may result.

The following table summarizes the net book value of Midwest Generation's asset groups at December 31, 2010:

(in millions)
Crawford Station	$	178
Fisk Station		124
Joliet Station		771
Powerton Station		856
Waukegan Station		365
Will County Station		537

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Accounting for Contingencies, Guarantees and Indemnities

Nature of Estimates Required. Midwest Generation records loss contingencies when it determines that the outcome of future events is probable of occurring and when the amount of the loss can be reasonably estimated. When a guarantee or indemnification subject to authoritative guidance is entered into, Midwest Generation records a liability for the estimated fair value of the underlying guarantee or indemnification. Gain contingencies are recognized in the financial statements when they are realized.

Key Assumptions and Approach Used. The determination of a reserve for a loss contingency is based on management judgment and estimates with respect to the likely outcome of the matter, including the analysis of different scenarios. Liabilities are recorded or adjusted when events or circumstances cause these judgments or estimates to change. In assessing whether a loss is a reasonable possibility, Midwest Generation may consider the following factors, among others: the nature of the litigation, claim or assessment, available information, opinions or views of legal counsel and other advisors, and the experience gained from similar cases. Midwest Generation provides disclosures for material contingencies when there is a reasonable possibility that a loss or an additional loss may be incurred. Some guarantees and indemnifications could have a significant financial impact under certain circumstances, and management also considers the probability of such circumstances occurring when estimating the fair value.

Midwest Generation agreed to reimburse Commonwealth Edison and Exelon Generation Company LLC for 50% of specific asbestos claims pending as of February 2003 and related expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos-related claims as specified in a supplemental agreement. The estimated liability is based on studies that estimate future losses based on claims experience and other available information. In calculating future losses, various assumptions were made, including, but not limited to, the settlement of future claims under the supplemental agreement, the distribution of exposure sites and that the filing date of asbestos claims will not be after 2044. At December 31, 2010, Midwest Generation had recorded a liability of $56 million related to this contract indemnity.

Effect if Different Assumptions Used. Actual amounts realized upon settlement of contingencies may be different than amounts recorded and disclosed and could have a significant impact on the liabilities, revenues and expenses recorded on the consolidated financial statements. In addition, for guarantees and indemnities actual results may differ from the amounts recorded and disclosed and could have a significant impact on Midwest Generation's consolidated financial statements. For a discussion of contingencies, guarantees and indemnities, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 8. Commitments and Contingencies—Guarantees and Indemnities," "—Contingencies" and "Item 1. Business—Environmental Matters and Regulations."

Income Taxes

Nature of Estimates Required. As part of the process of preparing its consolidated financial statements, Midwest Generation is required to estimate its income taxes for each jurisdiction in which it operates. This process involves estimating actual current period tax expense together with assessing temporary differences resulting from differing treatment of items, such as depreciation, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within Midwest Generation's consolidated balance sheets.

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in which it operates. This process involves estimating actual current period tax expense together with assessing temporary differences resulting from differing treatment of items, such as depreciation, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within Midwest Generation's consolidated balance sheet.

Midwest Generation takes certain tax positions it believes are applied in accordance with the applicable tax laws. However, these tax positions are subject to interpretation by the Internal Revenue Service, state tax authorities and the courts. Midwest Generation determines its uncertain tax positions in accordance with the authoritative guidance.

Key Assumptions and Approach Used. Accounting for tax obligations requires management judgment. Management uses judgment in determining whether the evidence indicates it is more likely than not, based solely on the technical merits, that a tax position will be sustained and to determine the amount of tax benefits to be recognized. Judgment is also used in determining the likelihood a tax position will be settled and possible settlement outcomes. In assessing its uncertain tax positions, Midwest Generation considers, among others, the following factors: the facts and circumstances of the position, regulations, rulings, and case law, opinions or views of legal counsel and other advisers, and the experience gained from similar tax positions. Management evaluates uncertain tax positions at the end of each reporting period and makes adjustments when warranted based on changes in fact or law.

Effect if Different Assumptions Used. Actual income taxes may differ from the estimated amounts which could have a significant impact on the liabilities, revenues and expenses recorded in the financial statements. Midwest Generation continues to be under audit or subject to audit for multiple years in various jurisdictions. Significant judgment is required to determine the tax treatment of particular tax positions that involve interpretations of complex tax laws. A tax liability has been recorded with respect to tax positions in which the outcome is uncertain and the effect is estimable. Such liabilities are based on judgment and a final determination could take many years from the time the liability is recorded and the related filing position is no longer subject to review. Furthermore, settlement of tax positions included in open tax years may be resolved by compromises of tax positions based on current factors and business considerations that may result in material adjustments to income taxes previously estimated. For further discussion, see "Item 8. Midwest Generation, LLC and Subsidiaries Notes to Consolidated Financial Statements—Note 6. Income Taxes."

Accounting for Contingencies, Guarantees and Indemnities

Midwest Generation agreed to reimburse Commonwealth Edison and Exelon Generation Company LLC for 50% of specific asbestos claims pending as of February 2003 and related expenses less recovery of insurance costs, and agreed to a sharing arrangement for liabilities and expenses associated with future asbestos-related claims as specified in a supplemental agreement. The estimated liability is based on studies that estimate future losses based on claims experience and other available information. In calculating future losses, various assumptions were made, including, but not limited to, the settlement of future claims under the supplemental agreement, the distribution of exposure sites and that the filing date of asbestos claims will not be after 2044. At December 31, 2011, Midwest Generation had recorded a liability of $54 million related to this contract

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indemnity.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information responding to Item 7A is filed with this report under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm	37	53
Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008		54
Consolidated Statements of Operations for the years ended December 31, 2011, 2010 and 2009	38
Consolidated Balance Sheets at December 31, 2010 and 2009		55
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2011, 2010 and 2009	39
Consolidated Statements of Member's Equity for the years ended December 31, 2010, 2009 and 2008		56
Consolidated Balance Sheets at December 31, 2011 and 2010	40
Consolidated Statements of Comprehensive Income for the years ended December 31, 2010, 2009 and 2008		57
Consolidated Statements of Member's Equity for the years ended December 31, 2011, 2010 and 2009	41
Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008		58
Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009	42
Notes to Consolidated Financial Statements	43	59

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Midwest Generation's management, under the supervision and with the participation of the company's President and Chief Financial Officer, has evaluated the effectiveness of Midwest Generation's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the period covered by this report. Based on that evaluation, the President and Chief Financial Officer concluded that, as of the end of the period, Midwest Generation's disclosure controls and procedures were effective.

Management's Report on Internal Control over Financial Reporting

Midwest Generation's management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), for Midwest Generation. Under the supervision and with the participation of its President and Chief Financial Officer, Midwest Generation's management conducted an evaluation of the effectiveness of Midwest Generation's internal control over financial reporting based on the framework set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under the COSO framework, Midwest Generation's management concluded that Midwest Generation's internal control over financial reporting was effective as of December 31, ~~2010~~2011.

Internal Control over Financial Reporting

There were no changes in Midwest Generation's internal control over financial reporting (as that term is defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the period to which this report relates that have materially affected, or are reasonably likely to materially affect, Midwest Generation's internal control over financial reporting.

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period to which this report relates that have materially affected, or are reasonably likely to materially affect, Midwest Generation's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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MIDWEST GENERATION, LLC AND SUBSIDIARIES ~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Member and Board of Managers of Midwest Generation, LLC:

In our opinion, the consolidated financial statements listed in the index appearing under Item 8 of the Form 10-K present fairly, in all material respects, the financial position of Midwest Generation, LLC and its subsidiaries at December 31, ~~2010~~2011 and ~~2009~~2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2010~~2011 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) ~~of the Form 10-K~~ presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~As discussed~~/s/ ~~in Note~~PricewaterhouseCoopers ~~1 to the consolidated financial statements, the Company changed the manner in which it accounts for fair value disclosure principles as of January 1, 2010.~~ LLP

~~/s/ PricewaterhouseCoopers LLP~~ Los Angeles, California ~~February 28, 2011~~

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MIDWEST GENERATION, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~INCOME (in millions)~~ OPERATIONS

(in millions)

	Years Ended December 31,			~~Years Ended December 31,~~
				2010			2009			2008
	2011				2010				2009
Operating Revenues from Marketing Affiliate	$	1,286		$	~~1,479~~$	1,479	$	~~1,487~~	$	$1,487	~~1,778~~
Operating Expenses
Fuel	~~Fuel~~512				519			~~547~~	547		~~482~~
Plant operations	~~Plant operations~~457				447			~~396~~	396		~~433~~
Depreciation and amortization	~~Depreciation and amortization~~158				155			~~150~~	150		~~147~~
	Asset write-downs and (gain) on buyout of contract (Notes 2 and 8)				48			3			(16	)
Asset impairments and other charges (Note 12)	653				48				3
Administrative and general	~~Administrative and general~~22				22			21	21		22
Total operating expenses	1,802	~~Total operating expenses~~			1,191			~~1,117~~	1,117		~~1,068~~
Operating income					288			370			710
Operating income (loss)	(516		)		288				370
Other Income (Expense)
Interest and other income	~~Interest and other income~~114				117			~~117~~	117		~~127~~
Interest expense	~~Interest expense~~(40		)		(48	)	)	~~(62~~	)(62		~~(77~~)	)
Total other income	74	~~Total other income~~			69			55	55		50
Income before income taxes					357			425			760
Income (loss) before income taxes	(442		)		357				425
Provision for income taxes					142			166			283
Provision (benefit) for income taxes	(172		)		142				166
Net Income				$	215		$	259		$	477
Net Income (Loss)	$	(270	)		$	215			$	259

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

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MIDWEST GENERATION, LLC AND SUBSIDIARIES

CONSOLIDATED ~~BALANCE~~STATEMENTS ~~SHEETS (in~~OF ~~millions,~~COMPREHENSIVE ~~except~~INCOME ~~unit amounts~~(LOSS)

			December 31,
			2010			2009
Assets
Current Assets
	Cash and cash equivalents		$	295		$	237
	Due from affiliates			124			137
	Fuel inventory			85			74
	Spare parts inventory			38			34
	Interest receivable from affiliate			56			55
	Derivative assets			47			98
	Intangible assets			2			11
	Other current assets			33			31
		Total current assets		680			677
Property, plant and equipment, net				2,905			3,002
Notes receivable from affiliate				1,343			1,348
Long-term derivative assets				3			24
Other assets				11			12
Total Assets			$	4,942		$	5,063
Liabilities and Member's Equity
Current Liabilities
	Accounts payable		$	43		$	39
	Accrued liabilities			60			66
	Due to affiliates			16			20
	Interest payable			22			26
	Derivative liabilities			3			19
	Deferred taxes			10			43
	Current portion of lease financing			109			120
		Total current liabilities		263			333
Lease financing, net of current portion				556			665
Deferred taxes				129			167
Long-term derivative liabilities				2			4
Benefit plans and other long-term liabilities				214			149
Total Liabilities				1,164			1,318
Commitments and Contingencies (Notes 5 and 8)
Member's Equity
	Membership interests, no par value; 100 units authorized, issued and outstanding			—			—
	Additional paid-in capital			3,511			3,511
	Accumulated earnings			270			180
	Accumulated other comprehensive income			(3	)		54
Total Member's Equity				3,778			3,745
Total Liabilities and Member's Equity			$	4,942		$	5,063

(in millions)



	Years Ended December 31,
	2011			2010			2009
Net Income (Loss)	$	(270	)	$	215		$	259
Other comprehensive income (loss), net of tax
Pension and postretirement benefits other than pensions:
Prior service adjustment, net of tax benefit of $4 for 2010	—			(6		)	—
Net gain (loss) adjustment, net of tax expense (benefit) of $(8), $(4) and $4 for 2011, 2010 and 2009, respectively	(13		)	(6		)	6
Amortization of net loss included in expense, net of tax	1			—			1
Unrealized gains (losses) on derivatives qualified as cash flow hedges:
Unrealized holding gains arising during period, net of income tax expense of $15, $29 and $27 for 2011, 2010 and 2009, respectively	23			45			39
Reclassification adjustments included in net income, net of income tax benefit of $16, $58 and $88 for 2011, 2010 and 2009, respectively	(25		)	(90		)	(135		)
Other comprehensive loss, net of tax	(14		)	(57		)	(89		)
Comprehensive Income (Loss)	$	(284	)	$	158		$	170

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

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MIDWEST GENERATION, LLC AND SUBSIDIARIES

CONSOLIDATED ~~STATEMENTS~~BALANCE ~~OF MEMBER'S EQUITY (in millions)~~ SHEETS

		Membership Interests		Additional Paid-in Capital			Accumulated Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Member's Equity
Balance at December 31, 2007		$	—	$	3,587		$	(226	)	$	(44	)	$	3,317
	Net income		—		—			477			—			477
	Other comprehensive income		—		—			—			187			187
	Cash distribution to parent		—		(76	)		(130	)		—			(206	)
Balance at December 31, 2008			—		3,511			121			143			3,775
	Net income		—		—			259			—			259
	Other comprehensive loss		—		—			—			(89	)		(89	)
	Cash distribution to parent		—		—			(200	)		—			(200	)
Balance at December 31, 2009			—		3,511			180			54			3,745
	Net income		—		—			215			—			215
	Other comprehensive loss		—		—			—			(57	)		(57	)
	Cash distribution to parent		—		—			(125	)		—			(125	)
Balance at December 31, 2010		$	—	$	3,511		$	270		$	(3	)	$	3,778

(in millions, except unit amounts)



	December 31,
	2011			2010
Assets
Current Assets
Cash and cash equivalents	$	213		$	295
Due from affiliates	109			124
Inventory	159			123
Interest receivable from affiliate	55			56
Derivative assets	43			47
Deferred taxes	14			—
Emission allowances	—			2
Other current assets	17			33
Total current assets	610			680
Property, Plant and Equipment, less accumulated depreciation of $1,152 and $1,541 at respective dates	2,185			2,905
Notes receivable from affiliate	1,323			1,343
Long-term derivative assets	1			3
Deferred taxes	42			—
Other long-term assets	29			11
Total Assets	$	4,190		$	4,942
Liabilities and Member's Equity
Current Liabilities
Accounts payable	$	35		$	43
Accrued liabilities	49			60
Due to affiliates	18			16
Interest payable	19			22
Derivative liabilities	2			3
Deferred taxes	—			10
Current portion of lease financing	116			109
Total current liabilities	239			263
Lease financing, net of current portion	439			556
Deferred taxes	—			129
Long-term derivative liabilities	—			2
Benefit plans and other long-term liabilities	243			214
Total Liabilities	921			1,164
Commitments and Contingencies (Notes 5, 8 and 9)
Member's Equity
Membership interests, no par value (100 units authorized, issued and outstanding at each date)	—			—
Additional paid-in capital	3,511			3,511
Accumulated earnings (deficit)	(225		)	270
Accumulated other comprehensive loss	(17		)	(3		)
Total Member's Equity	3,269			3,778
Total Liabilities and Member's Equity	$	4,190		$	4,942

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

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MIDWEST GENERATION, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE~~MEMBER'S ~~INCOME (in millions)~~ EQUITY

			Years Ended December 31,
			2010			2009			2008
Net Income			$	215		$	259		$	477
Other comprehensive income (loss), net of tax
	Pension and postretirement benefits other than pensions:
		Prior service adjustment, net of tax benefit of $(4) for 2010		(6	)		—			(1	)
		Net gain (loss) adjustment, net of tax expense (benefit) of $(4), $4 and $(13) for 2010, 2009 and 2008, respectively		(6	)		6			(21	)
		Amortization of net loss included in expense, net of tax		—			1			—
	Unrealized gains (losses) on derivatives qualified as cash flow hedges:
		Unrealized holding gains arising during period, net of income tax expense of $29, $27 and $93 for 2010, 2009 and 2008, respectively		45			39			146
		Reclassification adjustments included in net income, net of income tax expense (benefit) of $(58), $(88) and $40 for 2010, 2009 and 2008, respectively		(90	)		(135	)		63
Other comprehensive income (loss), net of tax				(57	)		(89	)		187
Comprehensive Income			$	158		$	170		$	664

(in millions)



	Membership Interests		Additional Paid-in Capital		Accumulated Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Member's Equity
Balance at December 31, 2008	$	—	$	3,511	$	121		$	143		$	3,775
Net income	—		—		259			—			259
Other comprehensive loss	—		—		—			(89		)	(89		)
Cash distribution to parent	—		—		(200		)	—			(200		)
Balance at December 31, 2009	—		3,511		180			54			3,745
Net income	—		—		215			—			215
Other comprehensive loss	—		—		—			(57		)	(57		)
Cash distribution to parent	—		—		(125		)	—			(125		)
Balance at December 31, 2010	—		3,511		270			(3		)	3,778
Net loss	—		—		(270		)	—			(270		)
Other comprehensive loss	—		—		—			(14		)	(14		)
Cash distribution to parent	—		—		(225		)	—			(225		)
Balance at December 31, 2011	$	—	$	3,511	$	(225	)	$	(17	)	$	3,269

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

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MIDWEST GENERATION, LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(in millions)~~

			Years Ended December 31,
			2010			2009			2008
Cash Flows From Operating Activities
	Net income		$	215		$	259		$	477
	Adjustments to reconcile income to net cash provided by operating activities:
		Depreciation and amortization		156			153			151
		Asset write-downs and (gain) on buyout of contract		48			3			(16	)
		Deferred taxes		(33	)		76			20
		Other non-cash items		(3	)		(1	)		(1	)
	Decrease (increase) in due to/from affiliates			9			37			(128	)
	Decrease (increase) in inventory			(15	)		2			(18	)
	Decrease in loans to affiliate for margin deposits			—			—			54
	Increase in other assets			(2	)		(9	)		(10	)
	Decrease (increase) in intangible assets			9			41			(30	)
	Decrease in accounts payable and other current liabilities			(3	)		(21	)		—
	Decrease in interest payable			(4	)		(5	)		(3	)
	Increase (decrease) in other liabilities			44			(5	)		(16	)
	Decrease (increase) in derivative assets and liabilities			(20	)		(70	)		65
		Net cash provided by operating activities		401			460			545
Cash Flows From Financing Activities
	Borrowings on long-term debt			—			—			700
	Repayments of long-term debt			—			(475	)		(225	)
	Cash distributions to parent			(125	)		(200	)		(206	)
	Repayment of capital lease obligation			(120	)		(126	)		(119	)
		Net cash provided by (used in) financing activities		(245	)		(801	)		150
Cash Flows From Investing Activities
	Capital expenditures			(107	)		(78	)		(116	)
	Proceeds from sale of assets			—			—			1
	Proceeds from sale of emission allowances			3			1			2
	Proceeds from settlement of claim			1			—			—
	Decrease (increase) in restricted deposits			—			1			(1	)
	Repayment of loan to affiliate			5			4			4
		Net cash used in investing activities		(98	)		(72	)		(110	)
Net increase (decrease) in cash and cash equivalents				58			(413	)		585
Cash and cash equivalents at beginning of period				237			650			65
Cash and cash equivalents at end of period			$	295		$	237		$	650

(in millions)



	Years Ended December 31,
	2011			2010			2009
Cash Flows From Operating Activities
Net income (loss)	$	(270	)	$	215		$	259
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization	160			156			153
Asset impairments and other charges	653			48			3
Deferred taxes	(145		)	(33		)	76
Other non-cash items	—			(3		)	(1		)
Decrease in due to/from affiliates	28			9			37
Decrease (increase) in inventory	(36		)	(15		)	2
Increase in other assets	(25		)	(2		)	(9		)
Decrease in emission allowances	2			9			41
Decrease in accounts payable and other current liabilities	(7		)	(3		)	(21		)
Decrease in interest payable	(4		)	(4		)	(5		)
Increase (decrease) in other liabilities	7			44			(5		)
Decrease (increase) in derivative assets and liabilities	1			(20		)	(70		)
Net cash provided by operating activities	364			401			460
Cash Flows From Financing Activities
Repayments of long-term debt	—			—			(475		)
Cash distributions to parent	(225		)	(125		)	(200		)
Repayments of lease financing	(109		)	(120		)	(126		)
Net cash used in financing activities	(334		)	(245		)	(801		)
Cash Flows From Investing Activities
Capital expenditures	(103		)	(107		)	(78		)
Investments in other assets	(18		)	—			—
Proceeds from sale of emission allowances	—			3			1
Proceeds from settlement of claim	—			1			—
Decrease in restricted deposits	—			—			1
Repayment of loan to affiliate	9			5			4
Net cash used in investing activities	(112		)	(98		)	(72		)
Net increase (decrease) in cash and cash equivalents	(82		)	58			(413		)
Cash and cash equivalents at beginning of period	295			237			650
Cash and cash equivalents at end of period	$	213		$	295		$	237

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

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MIDWEST GENERATION, LLC AND SUBSIDIARIES ~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Midwest Generation, LLC (Midwest Generation) is an indirect wholly owned subsidiary of Edison Mission Energy (EME). EME is an indirect wholly owned subsidiary of Edison International. Midwest Generation was formed for the purpose of acquiring, owning or leasing and operating multiple fossil-fuel electric generating units located within the state of Illinois, which are referred to as the Midwest Generation plants, for the purpose of producing electric energy.

As of December 31, ~~2010~~2011, Midwest Generation operated 5,477 MW of power plants, based on installed capacity acknowledged by PJM, consisting of:

~~Midwest Generation~~• ~~has~~six acoal-fired ~~contract~~generating ~~with~~plants ~~Edison~~consisting ~~Mission~~of ~~Marketing & Trading~~5, ~~Inc.~~172 ~~(EMMT)~~MW, awhich ~~marketing~~include ~~affiliate, to sell energy and capacity into~~ the ~~wholesale market~~Powerton, ~~to engage in hedging activities and to provide scheduling and other services. Midwest Generation has a revolving credit agreement with EMMT in order to make revolving loans to~~Joliet, orWill ~~have letters of credit issued on behalf of~~County, ~~EMMT~~Waukegan, inCrawford ~~order to provide credit support for forward contracts. EMMT also purchases natural gas~~ and ~~has~~Fisk ~~the~~Stations; ~~ability to enter into fuel hedging arrangements on Midwest Generation's behalf.~~ and


•	the Fisk and Waukegan on-site, oil-fired generating peakers consisting of 305 MW.

Midwest Generation has a contract with Edison Mission Marketing & Trading, Inc. (EMMT), a marketing affiliate, to sell energy and capacity into the wholesale market, to engage in hedging activities and to provide scheduling and other services. Midwest Generation has a revolving credit agreement with EMMT in order to make revolving loans to, or have letters of credit issued on behalf of, EMMT, in order to provide credit support for forward contracts for the benefit of Midwest Generation. EMMT also purchases natural gas and has the ability to enter into fuel hedging arrangements on Midwest Generation's behalf.

At December 31, 2011, Midwest Generation had cash and cash equivalents of $213 million and a total of $497 million of available borrowing capacity under its $500 million credit facility maturing in June 2012. There can be no assurance that Midwest Generation will be eligible to draw on its credit facility prior to maturity. Any replacement of this credit line will likely be on less favorable terms and conditions, and there is no assurance that Midwest Generation will, or will be able to, replace this credit line or any portion of it. Unless energy and capacity prices increase, Midwest Generation expects that it will incur an operating cash flow deficit and operating losses in 2012 and subsequent years. A continuation of these adverse trends coupled with the need to retrofit its plants to comply with governmental regulations will strain Midwest Generation's liquidity. In order to retrofit its coal-fired plants, Midwest Generation will need to borrow additional funds or receive additional contributions from EME. Midwest Generation plans to fund operating cash flow deficits through a combination of cash on hand, management of fuel inventories, deferral of operations and maintenance expenses and acceleration of the timing of collections from affiliates, which management believes will provide sufficient liquidity in 2012. Midwest Generation's current business plans are focused on liquidity and operating effectively through the current commodity price cycle and on environmental compliance. There is no assurance that sufficient liquidity will exist beyond 2012 without additional equity contributions from EME.

Basis of Presentation

The consolidated financial statements include the accounts of Midwest Generation and its subsidiaries. All significant intercompany transactions and balances have been eliminated in the consolidated financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires Midwest Generation to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The preparation of financial statements in conformity with United States generally accepted accounting principles requires Midwest Generation to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain prior year reclassifications have been made to conform to the current year financial statement presentation pertaining to immaterial items.

Cash Equivalents

Cash equivalents ~~include~~included money market funds totaling $~~270~~195 million and $~~237~~270 million at December 31, ~~2010~~2011 and ~~2009~~2010, respectively. The carrying value of cash equivalents equals the fair value as all investments have maturities of less than three months.

59Restricted Deposits

~~Table~~Restricted deposits of ~~Contents~~$3 million as of December 31, 2011 and 2010 were included in other long-term assets on Midwest Generation's consolidated balance sheet. These cash balances are restricted to provide collateral for fuel suppliers.

Derivative Instruments and Hedging Activities

Authoritative guidance on derivatives and hedging establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). Midwest Generation is required to record derivatives on its balance sheets as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as normal purchases and sales. All changes in the fair value of derivative instruments are recognized currently in earnings, unless specific hedge criteria are met, which requires that Midwest Generation formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

The accounting guidance for cash flow hedges provides that the effective portion of gains or losses on derivative instruments designated and qualifying as cash flow hedges be reported as a component of other comprehensive income and be reclassified into earnings in the same period during which the hedged forecasted transaction affects earnings. The remaining gains or losses on the derivative instruments, if any, must be recognized currently in earnings.

Where Midwest Generation's derivative instruments are subject to a master netting agreement and the criteria of authoritative guidance are met, Midwest Generation presents its derivative assets and liabilities on a net basis on its consolidated balance sheets. The results of derivative activities are recorded in cash flows from operating activities on the consolidated statements of cash flows. Derivative and hedging accounting policies are discussed further in Note 5—Derivative Instruments and Hedging Activities.

Deferred Financing Costs

Bank, legal and other direct costs incurred in connection with obtaining financing are deferred and amortized as interest expense using a method that approximates the effective interest rate method over the term of the related debt. Accumulated amortization of these costs at December 31, 2010 and 2009 amounted to $4 million and $3 million, respectively. Amortization of deferred financing costs charged to interest expense was $1 million in each of 2010, 2009 and 2008.

Impairment of Long-Lived Assets

Midwest Generation evaluates the impairment of its long-lived assets based on a review of estimated future cash flows expected to be generated whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amount of the asset exceeds the expected future cash flows, undiscounted and without interest charges, then an impairment loss is recognized.

Income Taxes and Tax-Allocation Agreements

Midwest Generation is included in the consolidated federal and state income tax returns of Edison International and is party to a tax-allocation agreement with its parent Edison Mission Midwest Holdings. As long as Edison International continues to own, directly or indirectly, at least 80% of the voting power of the stock of EME and its existing subsidiaries and at least 80% of the value of such stock, Midwest Generation will be included in the consolidated

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federal and state income tax returns of Edison International. In accordance with the agreement and the tax-allocation procedures that have been in effect since Midwest Generation's formation, its current tax liability or benefit is generally determined on a separate return basis, except for calculating consolidated state income taxes, for which Midwest Generation uses the state tax apportionment factors of the Edison International group. Also, while Midwest Generation is generally subject to separate return limitations for net losses, under the tax-allocation agreement it is permitted to transfer to Edison Mission Midwest Holdings, or its subsidiaries, net operating loss benefits which would not yet be realized in a separate return in exchange for a reduction in Midwest Generation's intercompany account balances (including subordinated loans). The amount on the balance sheet associated with this tax-allocation agreement totaled $9 million and $11 million at December 31, 2010 and 2009, respectively, included in due to affiliates.

Intangible Assets

Intangible assets consist of emission allowances purchased by Midwest Generation. These emission allowances are stated at weighted average cost. Emission allowances do not have a pre-determined contractual term or expiration date. Acquired intangible assets with indefinite lives are not amortized; rather they are tested at least annually for impairment or when events or changes in circumstances indicate that the asset might be impaired. Intangible assets are periodically reviewed when impairment indicators are present to assess recoverability from future operations using undiscounted future cash flows.

Inventory

Inventory ~~consists of spare parts, coal, fuel oil, and other raw materials and~~ is stated at the lower of weighted average cost or market. Inventory is recorded at actual cost when purchased and then expensed at weighted-average cost as used. ~~Generally,~~Cost ~~cost~~ is reduced to market value if the market value of inventory has declined ~~and it is probable that revenues earned from the generation of power will not cover the cost of the inventory in the ordinary course of business.~~

~~New Accounting Guidance~~ 43

Accounting Guidance Adopted in 2010

Fair Value Measurements and Disclosures

The Financial Accounting Standards Board (FASB) issued an accounting standards update that provides for new disclosure requirements related to fair value measurements. The requirements, which Midwest Generation adopted effective January 1, 2010, include separate disclosure of significant transfers in and out of Levels 1 and 2 and the reasons for the transfers. The update also clarified existing disclosure requirements for the level of

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~~disaggregation, inputs~~ and ~~valuation~~it ~~techniques.~~is ~~Since~~probable ~~this~~that ~~guidance~~revenues ~~impacts~~earned ~~disclosures~~from ~~only,~~ the ~~adoption~~generation ~~did~~of ~~not~~power ~~have~~will annot ~~impact~~cover onthe ~~Midwest~~cost ~~Generation's consolidated results~~ of ~~operations,~~the ~~financial position~~inventory orin ~~cash flows. In addition, effective January 1, 2011,~~ the ~~Level 3~~ordinary ~~reconciliation~~course of ~~fair~~business ~~value~~or ~~measurements~~if ~~using~~the ~~significant~~inventory ~~unobservable~~is ~~inputs~~determined ~~should~~to ~~include~~be ~~gross rather than net information about purchases, sales, issuances and settlements~~obsolete. ~~The~~Inventory ~~guidance~~consisted ~~impacts~~of ~~disclosures~~the ~~only. For further discussion, see Note 3—Fair Value Measurements.~~ following:

Accounting Guidance Not Yet Adopted



	December 31,
(in millions)	2011		2010
Coal, fuel oil and other raw materials	$	117	$	85
Spare parts, materials and supplies	42		38
Total inventory	$	159	$	123

~~Recently~~Purchased ~~issued~~Emission accounting standards updates by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants and the Securities and Exchange Commission that were effective after December 31, 2010 are not expected to have a material effect on Midwest Generation's consolidated results of operations or financial position. Allowances

Purchased emission allowances are stated at the lower of weighted-average cost or market. Purchased emission allowances are recorded at cost when purchased and then expensed at weighted-average cost as used. Cost is reduced to market value if the market value of emission allowances has declined and it is probable that revenues earned from the generation of power will not cover the amounts recorded in the ordinary course of business. Purchased emission allowances are classified as current or long-term assets based on the time the allowances are expected to be used.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. ~~Gains and losses from the sale of assets are recognized at the time of the transaction.~~ As part of the acquisition of the Midwest Generation plants, Midwest Generation acquired emission allowances under the United States Environmental Protection Agency's (US EPA's) Acid Rain Program. Midwest Generation uses these emission allowances in the normal course of its business to generate electricity and has classified them as part of property, plant and equipment.

Depreciation and amortization are computed using the straight-line method over the following estimated useful lives:



Power plant facilities		3 to 30 years
Emission allowances		25 to 33.75 years
Equipment, furniture and fixtures		3 to 7 years
Plant and equipment under lease financing		30 to 33.75 years

The remaining estimated useful life or lease term at December 31, ~~2010~~2011 for the Midwest Generation coal plants is as follows:

Crawford Station		14 years
Joliet Unit 6		18 years
Fisk Station		14 years
Joliet Units 7 and 81		19 years
Joliet Unit 6		19 years
Powerton Station1		22 years
Joliet Units 7 and 81		20 years
Will County Station		18 years
Powerton Station1		23 years
Waukegan Station		14 years
Will County Station		19 years


¹	Represents leased facilities. The leases may be renewed based on criteria outlined in their respective agreements.

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Estimated useful lives of individual facilities could be impacted by decisions related to the installation of environmental remediation equipment. If environmental compliance equipment is not installed, the useful life may be shortened.

Certain ~~major~~ ~~pieces~~ of Midwest Generation's power plant facilities and equipment require periodic ~~repairs~~major ~~and~~ maintenance. These costs, ~~including major maintenance costs,~~ are expensed as incurred.

Impairment of ~~Restricted~~Long-Lived ~~Deposits~~ Assets

~~Restricted~~Midwest ~~deposits~~Generation evaluates the impairment of ~~$3 million~~its aslong-lived assets based on a review of ~~December 31,~~estimated ~~2010~~future ~~and~~cash ~~2009~~flows ~~were~~expected ~~included~~to be generated whenever events or changes in ~~other~~circumstances indicate that the carrying amount of such assets onmay not be recoverable. Midwest Generation's ~~consolidated balance~~unit ~~sheet~~of account is at the plant level and, accordingly, the closure of a unit at a multi-unit site would not result in an impairment of property, plant and equipment unless such condition were to affect an impairment assessment on the entire plant. ~~These~~If the carrying amount of a long-lived asset exceeds the expected future cash ~~balances~~flows, ~~are~~undiscounted ~~restricted~~and towithout ~~provide~~interest ~~collateral~~charges, then an impairment loss is recognized for ~~fuel~~the ~~suppliers~~excess of the carrying amount over fair value. Fair value is determined via market, cost and income based valuation techniques, as appropriate. For further discussion, see Note 12—Asset Impairments and Other Charges.

Revenue Recognition

Generally, revenues and related costs are recognized when electricity is generated or services are provided unless the transaction is accounted for as a derivative and does not qualify for the normal purchases and sales exception. Midwest Generation enters into power and fuel hedging and optimization transactions under a contract with EMMT. These transactions are executed primarily through the use of physical forward commodity purchases and sales and financial commodity swaps and options. With respect to its physical forward contracts, Midwest Generation generally takes title to the commodities, and assumes the risks and rewards of ownership. Midwest Generation records the settlement of non-trading physical forward contracts on a gross basis. Midwest Generation nets the cost of purchased power against related third-party sales in markets that use locational marginal pricing, currently PJM. Financial swap and option transactions are settled net and, accordingly, Midwest Generation does not take title to the underlying commodity. Therefore, gains and losses from settlement of financial swaps and options are recorded net in operating revenues on the accompanying consolidated income statements. 44

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Derivative Instruments and Hedging Activities

The accounting guidance for cash flow hedges provides that the effective portion of gains or losses on derivative instruments designated and qualifying as cash flow hedges be reported as a component of other comprehensive loss and be reclassified into earnings in the same period during which the hedged forecasted transaction affects earnings. The remaining gains or losses on the derivative instruments, if any, must be recognized currently in earnings.

Income Taxes and Tax-Allocation Agreements

Midwest Generation is included in the consolidated federal and state income tax returns of Edison International and is party to a tax-allocation agreement with its parent Edison Mission Midwest Holdings. In accordance with the agreement and the tax-allocation procedures in effect, its current tax liability or benefit is generally determined on a separate return basis, except for calculating consolidated state income taxes, for which Midwest Generation uses the state tax apportionment factors of the Edison International group. Also, while Midwest Generation is generally subject to separate return limitations for net losses, under the tax-allocation agreement it is permitted to transfer to Edison Mission Midwest Holdings, or its subsidiaries, net operating loss benefits which would not yet be realized in a separate return in exchange for a reduction in Midwest Generation's intercompany account balances (including subordinated loans). The amount on the balance sheet associated with this tax-allocation agreement totaled $13 million and $9 million at December 31, 2011 and 2010, respectively, included in due to affiliates.

Midwest Generation accounts for deferred income taxes using the asset-and-liability method, wherein deferred tax assets and liabilities are recognized for future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities using enacted income tax rates. At December 31, 2011, Midwest Generation had net federal and state deferred tax assets of $56 million. Realization of Midwest Generation's deferred tax assets depends upon its ability to generate taxable income in the future. On a quarterly basis, management evaluates the recoverability of its deferred tax assets to ensure there is adequate support for the realization of the deferred tax assets. In the event management were to determine that Midwest Generation would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged as a reduction to income in the period such determination was made. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized.

Interest income, interest expense and penalties associated with income taxes are reflected in provision (benefit) for income taxes on Midwest Generation's consolidated statements of operations. For further information regarding income taxes, see Note 6—Income Taxes.

New Accounting Guidance

Accounting Guidance Adopted in 2011

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Fair Value Measurements and Disclosures

The Financial Accounting Standards Board (FASB) issued an accounting standards update modifying the disclosure requirements related to fair value measurements. Under these requirements, purchases and settlements for Level 3 fair value measurements are presented on a gross basis, rather than net. Midwest Generation adopted this guidance effective January 1, 2011.

Accounting Guidance Not Yet Adopted

Fair Value Measurement

In May 2011, the FASB issued an accounting standards update modifying the fair value measurement and disclosure guidance. This guidance prohibits grouping of financial instruments for purposes of fair value measurement and requires the value be based on the individual security. This amendment also results in new disclosures primarily related to Level 3 measurements including quantitative disclosure about unobservable inputs and assumptions, a description of the valuation processes and a narrative description of the sensitivity of the fair value to changes in unobservable inputs. Midwest Generation will adopt this guidance in the first quarter of 2012. The adoption of this standards update is not expected to have a material impact on Midwest Generation's consolidated financial position.

Presentation of Comprehensive Income

In June 2011, the FASB issued an accounting standards update on the presentation of comprehensive income. An entity can elect to present items of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate but consecutive statements. Midwest Generation will adopt this guidance in the first quarter of 2012. Midwest Generation currently presents the statement of comprehensive income immediately following the statement of income and expects to continue to do so. The adoption of this accounting standards update does not change the items that constitute net income and other comprehensive income.

Offsetting Assets and Liabilities

In December 2011, the FASB issued an accounting standards update modifying disclosure requirements about the nature of an entity's rights of offsetting assets and liabilities in the statement of financial position under master netting agreements and related arrangements associated with financial and derivative instruments. The guidance requires increased disclosure of the gross and net recognized assets and liabilities, collateral positions and narrative descriptions of setoff rights. Midwest Generation will adopt this guidance effective January 1, 2013. The guidance impacts disclosure only.

Note 2. Property, Plant and Equipment

Property, plant and equipment consisted of the following:

	December 31,	~~December 31,~~
(in millions)	2011	~~2010~~		~~2009~~2010
Land	$	$32	43	$	3343
Power plant facilities	1,309		~~2,101~~	2,101	~~2,035~~
Emission allowances	639		~~834~~	834	~~834~~
Construction in progress	8		~~111~~	111	~~128~~
Equipment, furniture and fixtures	15		18	18	16
Plant and equipment under lease financing	1,334		~~1,339~~	1,339	~~1,348~~
			4,446		4,394
	3,337			4,446
Less accumulated depreciation and amortization	1,152		~~1,541~~	1,541	~~1,392~~
Property, plant and equipment, net	$	$2,185	~~2,905~~	$	32,~~002~~905

63Property, plant and equipment includes assets which are capitalized under lease financing. Midwest Generation recorded amortization expense related to the leased facilities of $42 million for all three years ended December 31, 2011, 2010 and 2009. Accumulated amortization related to the leased facilities was $472 million and $433 million at December 31, 2011 and 2010, respectively.

Midwest Generation recorded a $640 million and $48 million write-off related to property, plant and equipment at the Midwest Generation plants in 2011 and 2010, respectively. For additional information, see Note 12—Asset Impairments and Other

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~~Property, plant and equipment includes assets which are capitalized under lease financing~~Charges. Midwest Generation recorded amortization expense related to the leased facilities of $42 million for all three years ended December 31, 2010, 2009 and 2008. Accumulated amortization related to the leased facilities was $433 million and $393 million at December 31, 2010 and 2009, respectively.

In 2010, Midwest Generation recorded a $40 million write-off reflected in "Asset-write-downs and (gain) on buyout of contract" of capitalized construction in progress costs for air emissions control technology that is not currently being pursued for use at the Powerton Station. In addition, Midwest Generation recorded a loss on disposal of assets of $8 million primarily related to the retirement of assets at the Powerton Station due to plant maintenance activities also reflected in "Asset write-downs and (gain) on buyout of contract" on Midwest Generation's consolidated statements of income.

Asset Retirement Obligations

Authoritative guidance on asset retirement obligations (AROs) requires entities to record the fair value of a liability for an ARO in the period in which it is incurred, including a liability for the fair value of a conditional ARO, if the fair value can be reasonably estimated even though uncertainty exists about the timing and/or method of settlement. When an ARO liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is increased for accretion expense to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Settlement of an ARO liability for an amount other than its recorded amount results in an increase or decrease in expense.

Midwest Generation has conditional AROs related to asbestos removal and disposal costs for owned buildings and power plant facilities. Midwest Generation has not recorded a liability related to these structures because it cannot reasonably estimate the obligation's fair value at this time. The range of time over which Midwest Generation may settle these obligations in the future (demolition or other method) is sufficiently large to not allow for the use of expected present value techniques.

Midwest Generation recorded a liability representing expected future costs associated with site reclamation, facilities dismantlement and removal of environmental hazards, which is included in benefit plans and other long-term liabilities on Midwest Generation's consolidated balance sheets. A reconciliation of the changes in the ARO liability is as follows:

	Years Ended December 31,	~~Years Ended December 31,~~
(in millions)	2011	~~2010~~		~~2009~~2010		~~2008~~	2009
Beginning balance	$	$2	2	$	2	$	1$	2
Revisions			—		—		—
Accretion expense	1			—			—
Liabilities added			—		—		1
Revisions	(1		)	—			—
Ending balance	$	$2	2	$	2	$	2$	2

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Note 3. Fair Value Measurements

~~Fair~~Recurring value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (referred to as an "exit price"). Fair ~~value~~Value of an asset or a liability should consider assumptions that market participants would use in pricing the asset or liability, including assumptions about nonperformance risk. The fair value of derivative assets' nonperformance risk was not material as of December 31, 2010 and 2009. Measurements

~~Midwest Generation~~Fair ~~categorizes~~value ~~financial~~is ~~assets~~defined ~~and~~as ~~liabilities~~the ~~into~~price athat ~~fair~~would ~~value~~be ~~hierarchy~~received ~~based~~to onsell ~~valuation~~an ~~inputs~~asset ~~used~~or paid to ~~derive~~transfer ~~fair~~a ~~value.~~liability ~~The~~in ~~hierarchy~~an ~~gives~~orderly transaction between market participants at the ~~highest~~measurement ~~priority~~date (referred to ~~unadjusted quoted~~as an "exit price"). Fair value of an asset or a liability should consider assumptions that market ~~prices~~participants would use in ~~active~~pricing ~~markets~~the ~~for~~asset ~~identical~~or ~~assets~~liability, ~~and~~including ~~liabilities~~assumptions ~~(Level 1~~about ~~measurements)~~nonperformance ~~and~~risk. ~~the~~The ~~lowest~~fair ~~priority~~value toof ~~unobservable~~derivative ~~inputs~~assets' ~~(Level~~nonperformance risk was not material as of December 331, ~~measurements).~~2011 and 2010.

Midwest Generation categorizes financial assets and liabilities into a fair value hierarchy based on valuation inputs used to derive fair value. The hierarchy, established by authoritative accounting guidance, gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

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

			As of December 31, 2010
(in millions)			Level 1		Level 2		Level 3		Netting and Collateral1			Total
Assets at Fair Value
	Money market funds2		$	270	$	—	$	—	$	—		$	270
	Derivatives
		Electricity	$	—	$	42	$	—	$	8		$	50
		Fuel oil		8		—		—		(8	)		—
	Total assets		$	8	$	42	$	—	$	—		$	50
Liabilities at Fair Value
	Derivatives
		Electricity	$	—	$	5	$	—	$	—		$	5
	Total liabilities		$	—	$	5	$	—	$	—		$	5
				As of December 31, 2009
Assets at Fair Value
	Money market funds2		$	237	$	—	$	—	$	—		$	237
	Derivatives
		Electricity	$	—	$	134	$	3	$	(33	)	$	104
		Natural gas		2		—		—		—			2
		Fuel oil		16		—		—					16
	Total assets		$	18	$	134	$	3	$	(33	)	$	122
Liabilities at Fair Value
	Derivatives
		Electricity	$	—	$	22	$	—	$	1		$	23
	Total liabilities		$	—	$	22	$	—	$	1		$	23

1		Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.
2		Included in cash and cash equivalents on Midwest Generation's consolidated balance sheets.

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The following table sets forth a summary of changes in the fair value of assets and liabilities, net categorized as Level 3:



	December 31, 2011
(in millions)	Level 1		Level 2		Level 3		Netting¹			Total
Assets at Fair Value
Money market funds²	$	195	$	—	$	—	$	—		$	195
Derivative contracts
Electricity	$	—	$	40	$	—	$	4		$	44
Fuel oil	4		—		—		(4		)	—
Total commodity contracts	$	4	$	40	$	—	$	—		$	44
Total assets	$	199	$	40	$	—	$	—		$	239
Liabilities at Fair Value
Derivative contracts
Electricity	$	—	$	2	$	—	$	—		$	2
Total liabilities	$	—	$	2	$	—	$	—		$	2
	December 31, 2010
Assets at Fair Value
Money market funds²	$	270	$	—	$	—	$	—		$	270
Derivative contracts
Electricity	$	—	$	42	$	—	$	8		$	50
Fuel oil	8		—		—		(8		)	—
Total commodity contracts	$	8	$	42	$	—	$	—		$	50
Total assets	$	278	$	42	$	—	$	—		$	320
Liabilities at Fair Value
Derivative contracts
Electricity	$	—	$	5	$	—	$	—		$	5
Total liabilities	$	—	$	5	$	—	$	—		$	5

(in millions)		2010			2009
Fair value, net asset at beginning of periods		$	3		$	1
Total realized/unrealized gains (losses):
	Included in earnings1		—			24
	Included in accumulated other comprehensive income		3			3
Purchases and settlements, net			(3	)		(24	)
Transfers in or out of Level 3			(3	)		(1	)
Fair value, net asset at end of periods		$	—		$	3
Change during the periods in unrealized gains related to assets and liabilities, net held at end of periods1		$	1		$	2


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

12 ~~Reported~~Money market funds are included in ~~operating~~cash ~~revenues~~and cash equivalents on Midwest Generation's consolidated ~~statements~~balance ~~of income~~sheets.

~~Midwest~~The ~~Generation~~following ~~determines~~table ~~the~~sets ~~fair~~forth ~~value~~a summary of ~~transfers~~changes in ~~and out of each level at~~ the ~~end~~fair value of ~~each~~derivative ~~reporting~~assets ~~period.~~and ~~There were no significant transfers between levels during 2010~~liabilities, ~~2009~~net ~~and~~categorized ~~2008.~~as Level 3:

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(in millions)	2011		2010
Fair value, net assets at beginning of period	$	—	$	3
Total realized/unrealized gains (losses):
Included in earnings¹	—		—
Included in accumulated other comprehensive income	—		3
Settlements	—		(3		)
Transfers in or out of Level 3	—		(3		)
Fair value, net assets at end of period	$	—	$	—
Change during the period in unrealized gains related to assets and liabilities, net held at end of period¹	$	—	$	1


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

Midwest Generation determines the fair value of transfers in and out of each level at the end of each reporting period. There were no significant transfers between levels during 2011, 2010 and 2009.

Valuation Techniques used to Determine Fair Value

Level 1

Level 1 includes financial assets and liabilities where unadjusted quoted prices in active markets are available at the measurement date for identical assets and liabilities. Financial assets and liabilities classified as Level 1 include exchange-traded derivatives and money market funds.

Level 2

Level 2 pricing inputs include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the derivative instrument. Financial assets and liabilities utilizing Level 2 inputs include over-the-counter derivatives.

Derivative contracts that are over-the-counter traded are valued using pricing models and are generally classified as Level 2. Inputs to the pricing models include forward published or posted clearing prices from exchanges (New York Mercantile Exchange and Intercontinental Exchange) for similar instruments and discount rates. Forward market prices are developed based on the source that best represents trade activity in each market. Broker quotes or prices from exchanges are used to validate and corroborate the primary source. These price quotations reflect mid-market prices (average of bid and ask) and are obtained from sources believed to provide the most liquid market for the commodity. Broker quotes are incorporated when corroborated with other information which may include a combination of prices from exchanges, other brokers, and comparison to executed trades.

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Level 3

Level 3 includes financial assets and liabilities where fair value is determined using techniques that require significant unobservable inputs. Over-the-counter options, bilateral contracts, capacity contracts, qualifying facilities contracts, derivative contracts that trade infrequently (such as financial transmission rights ~~and over-the-counter derivatives at illiquid locations~~), ~~long-term power agreements,~~ and derivative contracts with counterparties that have significant nonperformance risks are classified as Level 3. In circumstances where EMMT cannot verify fair value with observable market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. As markets continue to develop and more pricing information becomes available, EMMT continues to assess valuation methodologies used to determine fair value.

For derivative contracts that trade infrequently (illiquid financial transmission rights), changes in fair value are based on the hypothetical sale of illiquid positions. Objective criteria are reviewed, including system congestion and other underlying drivers and fair value is adjusted when it is concluded that a change in objective criteria would result in a new valuation that better reflects fair value. For illiquid long-term power agreements, fair value is based upon a discounting of future electricity and natural gas prices derived from a proprietary model using the risk free discount rate for a similar duration contract, adjusted for credit risk and market liquidity. Changes in fair value are based on changes to forward market prices, including forecasted prices for illiquid forward periods. The fair value of the majority of Midwest Generation's derivatives that are classified as Level 3 is determined using uncorroborated non-binding broker quotes and models that may require EMMT to extrapolate short-term observable inputs in order to calculate fair value. Broker quotes are obtained from several brokers and compared ~~against each other for reasonableness.~~

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against each other for reasonableness.

Non-Recurring Fair Value Measurements

For a discussion of non-recurring fair value measurements, see Note 12—Asset Impairments and Other Charges.

Note 4. Long-Term Debt

Credit Facility

Midwest Generation maintains a $500 million working capital facility that matures in June 2012~~, with an option to extend for up to two years~~. The interest rate on borrowings outstanding under this credit facility is currently London Interbank Offered Rate (LIBOR) plus 1.15%, ~~except~~unless if average utilized commitments during a period exceed $250 million, in which case the margin increases to 1.275%. Midwest Generation uses its secured working capital facility to provide credit support for its hedging activities and for general working capital purposes. Midwest Generation can also support its hedging activities by granting liens to eligible hedge counterparties. As of December 31, ~~2010~~2011 and ~~2009~~2010, Midwest Generation had no borrowings outstanding and $3 million of letters of credit had been utilized under its working capital facility. There can be no assurance that Midwest Generation will be eligible to draw on its credit facility prior to maturity. Any replacement of this credit line will likely be on less favorable terms and conditions, and there is no assurance that Midwest Generation will, or will be able to, replace this credit line or any portion of it.

In connection with Midwest Generation's working capital facility, Midwest Generation has given a first priority security interest in substantially all the coal-fired generating plants owned by Midwest Generation and the assets relating to those plants, the receivables of EMMT directly related to Midwest Generation's hedging activities, and the pledge of the intercompany notes from EME (approximately $1.3 billion at December 31, ~~2010~~2011). The net book value of assets pledged or mortgaged was approximately $2.83 billion at December 31, 2011. In addition to these assets, Midwest Generation's membership interests and the capital stock of Edison Mission Midwest Holdings were pledged.

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2010. In addition to these assets, Midwest Generation's membership interests and the capital stock of Edison Mission Midwest Holdings were pledged.

Other Covenants

Midwest Generation is bound by the covenants in its credit agreement and certain covenants under the Powerton-Joliet lease documents. These covenants include restrictions on the ability to, among other things, incur debt, create liens on its property, merge or consolidate, sell assets, make investments, engage in transactions with affiliates, make distributions, make capital expenditures, enter into agreements restricting its ability to make distributions, engage in other lines of business, enter into swap agreements, or engage in transactions for any speculative purpose. In order for Midwest Generation to make a distribution, it must be in compliance with the covenants specified under its credit agreement, including maintaining a debt to capitalization ratio of no greater than 0.60 to 1. At December 31, ~~2010~~2011, the debt to capitalization ratio was 0.15 to 1.

Note 5. Derivative Instruments and Hedging Activities

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

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

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Notional Volumes of Derivative Instruments

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

December 31, 2010
Commodity	Instrument	Classification	Unit of Measure	Cash Flow Hedges			Economic Hedges
Electricity	Forwards/Futures	Sales	GWh1		12,961	2		13,437	4
Electricity	Forwards/Futures	Purchases	GWh		408	2		14,066	4
Electricity	Capacity	Sales	MW-Day (in thousands)		146	3		—
Electricity	Congestion	Purchases	GWh		—			144	5
Fuel oil	Forwards/Futures	Sales	barrels		—			250,000
Fuel oil	Forwards/Futures	Purchases	barrels		—			490,000
December 31, 2009
Electricity	Forwards/Futures	Sales	GWh1		20,653	2		19,004	4
Electricity	Forwards/Futures	Purchases	GWh		106	2		18,406	4
Electricity	Capacity	Sales	MW-Day (in thousands)		254	3		—
Electricity	Capacity	Purchases	MW-Day (in thousands)		11	3		2	3
Natural gas	Forwards/Futures	Sales	bcf1		—			3.3
Fuel oil	Forwards/Futures	Sales	barrels		—			250,000
Fuel oil	Forwards/Futures	Purchases	barrels		—			625,000

1		The terms gigawatt-hours and billion cubic feet are referred to as GWh and bcf, respectively.
2		Includes forward and futures contracts that qualify for hedge accounting. This category excludes power contracts for the Midwest Generation plants which meet the normal purchases and sales exception and are accounted for on the accrual method.
3		Midwest Generation's hedge transactions for capacity result from bilateral trades. Capacity sold in the PJM Reliability Pricing Model (RPM) auction is not accounted for as a derivative.
4		Midwest Generation also entered into transactions that adjust financial and physical positions, or day-ahead and real-time positions to reduce costs or increase gross margin. These positions largely offset each other. The net sales positions of these categories are primarily related to hedge transactions that are not designated as cash flow hedges.
5		Congestion contracts include financial transmission rights, transmission congestion contracts or congestion revenue rights. These positions are similar to a swap, where the buyer is entitled to receive a stream of revenues (or charges) based on the hourly day-ahead price differences between two locations.

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December 31, 2011
Commodity	Instrument	Classification	Unit of Measure	Cash Flow Hedges		Economic Hedges
Electricity	Forwards/Futures	Sales, net	GWh	7,978	¹	227	³
Electricity	Capacity	Sales	MW-Day (in thousands)	61	²	—
Electricity	Congestion	Purchases	GWh	—		608	⁴
Fuel oil	Forwards/Futures	Purchases	barrels	—		240,000
December 31, 2010
Electricity	Forwards/Futures	Sales, net	GWh	12,553	¹	—
Electricity	Forwards/Futures	Purchases, net	GWh	—		629	³
Electricity	Capacity	Sales	MW-Day (in thousands)	146	²	—
Electricity	Congestion	Purchases	GWh	—		144	⁴
Fuel oil	Forwards/Futures	Purchases, net	barrels	—		240,000


¹	Midwest Generation's hedge products include forward and futures contracts that qualify for hedge accounting. This category excludes power contracts for the Midwest Generation plants which meet the normal purchases and sales exception and are accounted for on the accrual method.


²	Midwest Generation's hedge transactions for capacity result from bilateral trades. Capacity sold in the PJM Reliability Pricing Model (RPM) auction is not accounted for as a derivative.


³	These positions adjust financial and physical positions, or day-ahead and real-time positions, to reduce costs or increase gross margin. The net sales positions of these categories are primarily related to hedge transactions that are not designated as cash flow hedges.


⁴	Congestion contracts include financial transmission rights, transmission congestion contracts or congestion revenue rights. These positions are similar to a swap, where the buyer is entitled to receive a stream of revenues (or charges) based on the hourly day-ahead price differences between two locations.

Fair Value of Derivative Instruments

The following table summarizes the fair value of commodity derivative instruments for non-trading purposes reflected on Midwest Generation's consolidated balance sheets:

December 31, 2010
December 31, 2011
	Derivative Assets	~~Derivative Assets~~								~~Derivative Liabilities~~		Derivative Liabilities
																		Net Assets
(in millions)	Short-term				Long-term			Subtotal				Short-term			Long-term				Subtotal			Net Assets
(in millions)		Short-term			Long-term		Subtotal			Short-term			Long-term		Subtotal
Cash flow hedges	$	39			$	1		$	40			$	2		$	—			$	2		$	38
Cash flow hedges		$	41		$	2	$	43		$	3		$	2	$	5		$	38
Economic hedges	24				—			24				20			—				20			4
Economic hedges			26			1		27			20			—		20			7
	63				1			64				22			—				22			42
			67			3		70			23			2		25			45
Netting1	(20		)		—			(20		)		(20		)	—				(20		)	—
Netting and collateral received1			(20	)		—		(20	)		(20	)		—		(20	)		—
Total	$	43			$	1		$	44			$	2		$	—			$	2		$	42
Total		$	47		$	3	$	50		$	3		$	2	$	5		$	45
December 31, 2010
December 31, 2009
Cash flow hedges	$	41			$	2		$	43			$	3		$	2			$	5		$	38
Cash flow hedges		$	152		$	17	$	169		$	61		$	4	$	65		$	104
Economic hedges	26				1			27				20			—				20			7
Economic hedges			176			7		183			154			—		154			29
	67				3			70				23			2				25			45
			328			24		352			215			4		219			133
Netting1	(20		)		—			(20		)		(20		)	—				(20		)	—
Netting and collateral received1			(230	)		—		(230	)		(196	)		—		(196	)		(34	)
Total	$	47			$	3		$	50			$	3		$	2			$	5		$	45
Total		$	98		$	24	$	122		$	19		$	4	$	23		$	99

1 Netting of derivative receivables and derivative payables ~~and the related cash collateral received and paid~~ is permitted when a legally enforceable master netting agreement exists with a derivative counterparty.

~~Income Statement Impact of Derivative Instruments~~ 51

The following table provides the activity of accumulated other comprehensive income, containing information about the changes in the fair value of cash flow hedges, to the extent effective, and reclassification from accumulated other comprehensive income into results of operations:

	Cash Flow Hedge Activity1
							Income Statement Location
(in millions)	2010			2009
Accumulated other comprehensive income derivative gain at January 1	$	111		$	268
Effective portion of changes in fair value		74			66
Reclassification from accumulated other comprehensive income to net income		(148	)		(223	)	Operating revenues
Accumulated other comprehensive income derivative gain at December 31	$	37		$	111

1 Unrealized derivative gains are before income taxes. The after-tax amounts recorded in accumulated other comprehensive income at December 31, 2010 and 2009 were $23 million and $68 million, respectively.

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~~The~~Income ~~portion~~Statement ofImpact ~~a cash flow hedge that does not offset the change in the value~~ of ~~the~~Derivative ~~transaction being hedged, which is commonly referred to as the ineffective portion, is immediately recognized in earnings.~~ Instruments

~~Midwest Generation~~The ~~recorded~~following ~~net~~table ~~gains~~provides ~~of $7 million, $5 million and $1 million in 2010, 2009 and 2008, respectively, in operating revenues on~~ the ~~consolidated~~cash ~~statements~~flow ofhedge ~~income representing~~activity ~~the~~as ~~amount~~part of ~~cash~~accumulated ~~flow~~other ~~hedge~~comprehensive ~~ineffectiveness.~~ loss:

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



	Cash Flow Hedge Activity¹						Income Statement
(in millions)	2011			2010			Location
Beginning of period derivative gains	$	37		$	111
Effective portion of changes in fair value	38			74
Reclassification to earnings	(41		)	(148		)	Operating revenues
End of period derivative gains	$	34		$	37

		December 31,
	Income Statement Location
(in millions)		2010		2009
Economic hedges	Operating revenues	$	7	$	39
	Fuel costs		2		18


1	Unrealized derivative gains are before income taxes. The after-tax amounts recorded in accumulated other comprehensive loss at December 31, 2011 and 2010 were $21 million and $23 million, respectively.

For additional information, see Note 10—Accumulated Other Comprehensive Income (Loss).

Midwest Generation recorded net gains of $4 million, $7 million and $5 million in 2011, 2010 and 2009, respectively, in operating revenues on the consolidated statements of operations representing the amount of cash flow hedge ineffectiveness.

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



	Income Statement Location	Years Ended December 31,
(in millions)	Income Statement Location	2011		2010
Economic hedges	Operating revenues	$	2	$	7
	Fuel	3		2

Contingent Features

Certain derivative instruments contain collateral deposit requirements. Midwest Generation sells merchant energy and capacity through EMMT, which has a below investment grade credit rating. Midwest Generation has cash on hand and availability under its working capital facility to provide credit support as needed for hedging contracts entered into by EMMT related to the Midwest Generation plants. EMMT borrows under its revolving credit agreement with Midwest Generation to provide credit support for futures and forward contracts. Loans provided under this revolving credit agreement are repaid by EMMT upon the return of the funds under the terms of the related forward contracts. The amount repaid includes interest earned, if any, under margin agreements supporting such contracts. As of December 31, ~~2010~~2011, EMMT had no borrowings outstanding under this revolving credit agreement. Future increases in power prices could expose Midwest Generation to additional collateral postings.

Midwest Generation has entered into derivative contracts directly with third parties that do not require margin, but contain provisions that require Midwest Generation to comply with the terms and conditions of its credit facility. The credit facility contains financial covenants. Some hedge contracts include provisions related to a change in control or material adverse effect resulting from amendments or modifications to the related credit facility. Failure by Midwest Generation to comply with these provisions may result in a termination event under the hedge contracts, enabling the counterparties to terminate and liquidate all outstanding transactions and demand immediate payment of amounts owed to them. EMMT has hedge contracts that do not require margin, but provide that each party can request additional credit support in the form of adequate assurance of performance in the case of an adverse development affecting the other party. The aggregate fair value of all derivative instruments with credit-risk-related contingent features is in an asset position at December 31, 2010 and, accordingly, the contingent features described above do not currently have liquidity exposure. Future increases in power prices could expose Midwest Generation to termination payments or additional collateral postings under the contingent features described above.

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Collateral Deposits

Collateral deposits include cash collateral received from counterparties and brokers as credit support under derivative contracts. The amount of collateral deposits generally varies based on changes in fair value of the related positions. Midwest Generation nets counterparty receivables and payables where balances exist under master netting arrangements. Midwest Generation presents the portion of its cash collateral deposits netted with its derivative positions on its consolidated balance sheets. Cash collateral received from others that was offset against derivative assets totaled none and $34 million at December 31, 2010 and 2009, respectively.

Commodity Price Risk Management

Midwest Generation's operations ~~create~~are ~~exposure~~exposed to commodity price risk, which reflects the potential impact of a change in the market value of a particular commodity. Commodity price risks are actively monitored, with oversight provided by a risk management committee, to ensure compliance with Midwest Generation's risk management policies, through EMMT. EMMT uses estimates of the variability in gross margin to help identify, measure, monitor and control Midwest Generation's overall market risk exposure and earnings volatility with respect to hedge positions at the Midwest Generation plants. This measure allows management to aggregate overall commodity risk, compare risk on a consistent basis and identify changes in risk factors. Variability in gross margin measures the potential change in value of an asset or position, in each case over a given time interval, under normal market conditions, at a given confidence level. Given the inherent limitations of this measure and reliance on a single type of risk measurement tool, EMMT supplements this approach with the use of stress testing and worst-case scenario analysis for key risk factors, as well as stop-loss triggers and volumetric exposure limits. When appropriate, EMMT manages the spread between the electric prices and fuel prices, and uses forward contracts, swaps, futures, or options contracts to achieve those objectives.

Credit Risk

In conducting Midwest Generation's marketing activities, EMMT enters into transactions with utilities, energy companies, financial institutions, and other companies, collectively referred to as counterparties. In the event a counterparty were to default on its trade obligation, Midwest Generation would be exposed to the risk of possible loss associated with market price changes occurring since the original contract was executed if the nonperforming counterparty were unable to pay the resulting damages owed to Midwest Generation. Midwest Generation's agreement with EMMT transfers the risk of non-payment of accounts receivable from counterparties to EMMT. Notwithstanding the foregoing, Midwest Generation will not be in default under the credit agreement if it fails to enforce payment from EMMT in the case of nonpayment of an account receivable from a counterparty, so long as the counterparty is rated investment grade.

The obligations of Midwest Generation under the credit agreement are secured by, among other things, an account of EMMT in which EMMT will deposit funds received from third-party counterparties for sales of energy and capacity from the Midwest Generation plants. See Note 4—Long-term Debt and Note 12—Related-Party Transactions—EMMT Agreements. 52

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~~To manage~~on ~~credit~~its ~~risk~~trade obligation, ~~EMMT~~Midwest ~~evaluates~~Generation would be exposed to the risk of ~~potential~~possible ~~defaults~~loss byassociated ~~counterparties.~~with ~~Credit~~market ~~risk~~price ischanges ~~measured~~occurring assince the ~~loss~~original ~~that~~contract ~~EMMT~~was ~~would~~executed ~~expect~~if the nonperforming counterparty were unable to ~~incur~~pay ifthe aresulting ~~counterparty~~damages ~~failed~~owed to ~~perform~~Midwest ~~pursuant to~~Generation. Midwest Generation's agreement with EMMT transfers the ~~terms~~risk of ~~its~~non-payment ~~contractual~~of ~~obligations~~accounts receivable from counterparties to EMMT. ToNotwithstanding ~~mitigate~~the foregoing, Midwest Generation will not be in default under the credit ~~risk~~agreement if it fails to enforce payment from ~~counterparties,~~EMMT ~~master~~in ~~netting~~the ~~agreements~~case ~~are~~of ~~used~~nonpayment ~~whenever~~of ~~possible~~an ~~and~~account ~~counterparties~~receivable ~~may~~from bea ~~required~~counterparty, toso ~~pledge~~long ~~collateral when~~as ~~deemed~~the ~~necessary.~~counterparty is rated investment grade.

Credit risk is measured as the loss that EMMT would expect to incur if a counterparty failed to perform pursuant to the terms of its contractual obligations. To manage credit risk, EMMT evaluates the risk of potential defaults by counterparties. To mitigate credit risk from counterparties, master netting agreements are used whenever possible and counterparties may be required to pledge collateral when deemed necessary.

The majority of the coal for the Midwest Generation plants is purchased from suppliers under contracts which may be for multiple years. None of the coal suppliers to the Midwest Generation plants have investment grade credit ratings and, accordingly, Midwest Generation may have limited recourse to collect damages in the event of default by a supplier.

Midwest Generation derives a significant source of its operating revenues from electric power sold into the PJM market by EMMT. Sales into PJM accounted for approximately 7981%, 6279% and 5862% of Midwest Generation's consolidated operating revenues for the years ended December 31, ~~2010~~2011, ~~2009~~2010 and ~~2008~~2009, respectively. Moody's Investors Service, Inc. (Moody's) rates PJM's debt Aa3. PJM, an a regional transmission organization (RTO) with over 300 member companies, maintains its own credit risk policies and does not extend unsecured credit to non-investment grade companies. Losses resulting from a PJM member default are shared by all other members using a predetermined formula.

For the year ended December 31, 2008, Midwest Generation derived 18% of its consolidated operating revenues from the sale of energy, capacity and ancillary services generated at the Midwest Generation plants to Commonwealth Edison Company (Commonwealth Edison) under load requirements services contracts.

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Note 6. Income Taxes

Current and Deferred Taxes

~~Income~~The ~~tax~~ provision ~~includes~~(benefit) ~~the~~for ~~current tax provision from operating~~ income ~~and the change in deferred income~~ taxes ~~during~~is ~~the~~composed ~~year. The components~~ of ~~net~~the ~~accumulated deferred income tax liability were~~following:

				December 31,
	Years Ended December 31,
(in millions)	2011			~~2010~~	2010		~~2009~~		2009
Deferred tax assets
Current
	State taxes			$	9		$	7
Federal	$	2			$	112			$	75
	Deferred income				1			5
State	12				24				24
	Accrued charges and liabilities				6			—
Total current	14				136				99
		Total			16			12
Deferred
Deferred tax liabilities
Federal	$	(145	)		$	7			$	59
	Derivative instruments			$	1		$	48
State	(41		)		(1		)		8
	Lease financing				—			45
Total deferred	(186		)		6				67
	Property, plant and equipment—basis differences				154			120
Provision (benefit) for income taxes	$	(172	)		$	142			$	166
	Accrued charges and liabilities				—			9
		Total			155			222
Deferred tax liabilities, net				$	139		$	210
Classification of accumulated deferred income taxes
	Included in current liabilities			$	10		$	43
	Included in non-current liabilities			$	129		$	167

The ~~provision~~components ~~for~~of ~~income~~net ~~taxes~~accumulated isdeferred ~~comprised~~income oftax ~~the~~asset ~~following:~~(liability) were:

			Years Ended December 31,
(in millions)			2010			2009		2008
Current
	Federal		$	112		$	75	$	224
	State			24			24		39
		Total current		136			99		263
Deferred
	Federal		$	7		$	59	$	14
	State			(1	)		8		6
		Total deferred		6			67		20
Provision for income taxes			$	142		$	166	$	283

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	December 31,
(in millions)	2011		2010
Deferred tax assets
State taxes	$	3	$	9
Deferred income	1		1
Derivative instruments	9		—
Property, plant and equipment—basis differences	15		—
Net operating loss carryforwards	19		—
Accrued charges and liabilities	9		6
Total	56		16
Deferred tax liabilities
Derivative instruments	$	—	$	1
Lease financing	—		—
Property, plant and equipment—basis differences	—		154
Accrued charges and liabilities	—		—
Total	—		155
Deferred tax asset (liability), net	$	56	$	(139	)
Classification of accumulated deferred income taxes
Included in current assets	$	14	$	—
Included in deferred taxes	$	42	$	—
Included in current liabilities	$	—	$	10
Included in deferred taxes	$	—	$	129

As of December 31, 2011, Midwest Generation had $55 million of federal net operating loss carryforwards which expire in 2031 and $5 million of state net operating loss carryforwards which expire in 2025, if unused.

Effective Tax Rate

The table below ~~contains~~provides a reconciliation of income tax expense (benefit) computed at the federal statutory income tax rate to the income tax provision ~~from operations~~(benefit):

	Years Ended December 31,	~~Years Ended December 31,~~
(in millions)	2011	~~2010~~			~~2009~~2010			~~2008~~	2009
Provision for income taxes at federal statutory rate of 35%		$	125		$	149		$	266
Income (loss) before income taxes	$	(442	)		$	357			$	425
State tax, net of federal benefit			14			19			29
Provision (benefit) for income taxes at federal statutory rate of 35%	$	(155	)		$	125			$	149
Qualified production deduction			(7	)		(3	)		(12	)
State tax, net of federal benefit	(19		)		14				19
Deferred tax adjustments1			9			—			—
Qualified production deduction	—				(7		)		(3		)
Other			1			1			—
Deferred tax adjustments	—				9				—
Total provision for income taxes		$	142		$	166		$	283
Other	2				1				1
Effective tax rate			40%			39%			37%
Total provision (benefit) for income taxes	$	(172	)		$	142			$	166
Effective tax rate	39		%		40		%		39		%

1 Deferred tax adjustments in 2010 included $8 million of prior period expenses determined to be immaterial to overall results.

Accounting for Uncertainty in Income Taxes

Unrecognized Tax Benefits

The following table provides a reconciliation of unrecognized tax benefits:

(in millions)		2010		2009			2008
Balance at January 1		$	—	$	21		$	21
Tax positions taken during the current year
	Increases		—		—			—
	Decreases		—		—			—
Tax positions taken during a prior year
	Increases1		44		—			—
	Decreases		—		—			—
Decreases for settlements during the period			—		(21	)		—
Decreases resulting from a lapse in statute of limitations			—		—			—
Balance at December 31		$	44	$	—		$	21

1Unrecognized tax benefits relate to tax positions taken in prior years and result from a review of Midwest Generation's deferred tax assets and liabilities.

The total amount of unrecognized tax benefits as of December 31, 2010 that, if recognized, would affect the effective tax rate was $41 million.

Edison International's federal income tax returns and its California combined franchise tax returns are currently open for years subsequent to 2002. In addition, specific California refund claims made by Edison International for years 1991 through 2002 remain subject to audit.

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(in millions)	2011		2010		2009
Balance at January 1	$	44	$	—	$	21
Tax positions taken during the current year
Increases	—		—

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