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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 endedDECEMBER 31, 20072010

MARYLAND

(States of incorporation)

750 E. PRATT2 CENTER PLAZA, 110 WEST FAYETTE STREET,             BALTIMORE, MARYLAND                21202
                                         (Address(Address of principal executive offices)                                                                                                   (Zip Code)

410-783-2800410-234-5000
(Registrants' telephone number, including area code)

MARYLAND
(States of incorporation of both registrants)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

Not Applicable

          Indicate by check mark if Constellation Energy Group, Inc. is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o.

          Indicate by check mark if Baltimore Gas and Electric Company is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý    No o.

          Indicate by check mark if Constellation Energy Group, Inc. 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 if Baltimore Gas and Electric Company 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 registrants (1) have 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, and (2) have 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 registrants' 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. o

          Indicate by check mark whether Constellation Energy Group, Inc. has submitted electronically and posted on its corporate Web-site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

          Indicate by check mark whether Baltimore Gas and Electric Company has submitted electronically and posted on its corporate Web-site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o

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

Large accelerated filerý        Accelerated filer o        Non-accelerated filero        Smaller reporting company o

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

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

          Indicate by check mark whether Constellation Energy Group, Inc. is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o    No ý

          Indicate by check mark whether Baltimore Gas and Electric Company is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o    No ý

          Aggregate market value of Constellation Energy Group, Inc. Common Stock, without par value, held by non-affiliates as of June 30, 20072010 was approximately $15,630,501,504$6,490,790,907 based upon New York Stock Exchange composite transaction closing price.

CONSTELLATION ENERGY GROUP, INC. COMMON STOCK, WITHOUT PAR VALUE
177,923,807199,850,572 SHARES OUTSTANDING ON JANUARY 31, 2008.2011.

DOCUMENTS INCORPORATED BY REFERENCE

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

TABLE OF CONTENTSTable of Contents

TABLE OF CONTENTS

Table of Contents

Forward Looking Statements

We make statements in this report that are considered forward looking statements within the meaning of the Securities Exchange Act of 1934. Sometimes these statements will contain words such as "believes," "anticipates," "expects," "intends," "plans," and other similar words. We also disclose non-historical information that represents management's expectations, which are based on numerous assumptions. These statements and projections are not guarantees of our future performance and are subject to risks, uncertainties, and other important factors that could cause our actual performance or achievements to be materially different from those we project. These risks, uncertainties, and factors include, but are not limited to:

•

the timing and extent of changes in commodity prices and volatilities for energy and energy relatedenergy-related products including coal, natural gas, oil, electricity, nuclear fuel, freight, and emission allowances, and the impact of such changes on our liquidity requirements,

•

the liquidity and competitiveness of wholesale and retail markets for energy commodities,

•

the effect of weather and general economic and business conditions on energy supply, demand, and prices,

•

the ability to attract and retain customers in our competitive supply activities and to adequately forecast their energy usage,

•

the timing and extent of deregulation of, and competition in, the energy markets, and the rules and regulations adopted in those markets,

•

uncertainties associated with estimating natural gas reserves, developing properties, and extracting natural gas,

•

regulatory or legislative developments federally, in Maryland, or in other states that affect deregulation, the price of energy, transmission or distribution rates and revenues, demand for energy, or increases in costs, including costs related to nuclear power plants, safety, or environmental compliance,

•

the ability of our regulated and nonregulated businesses to comply with complex and/or changing market rules and regulations,

•

the ability of Baltimore Gas and Electric Company (BGE) to recover all its costs associated with providing customers service,

•

the conditions of the capital markets, interest rates, foreign exchange rates, availability of credit facilities to support business requirements, liquidity, and general economic conditions, as well as Constellation Energy Group's (Constellation Energy) and BGE'sBaltimore Gas and Electric's (BGE) ability to maintain their current credit ratings,

•

the effectiveness of Constellation Energy's and BGE's risk management policies and procedures and the ability and willingness of our counterparties to satisfy their financial and performance commitments,

•

losses on the sale or write-down of assets due to impairment events or changes in management intent with regard to either holding or selling certain assets,

•

the ability to successfully identify, finance, and complete acquisitions and sales of businesses and assets, including generating facilities, and to successfully invest in new business initiatives and markets,

•

the effect of weather and general economic and business conditions on energy supply, demand, prices, and customers' and counterparties' ability to perform their obligations or make payments,

•

the ability to attract and retain customers in our NewEnergy business and to adequately forecast their energy usage,

•

the timing and extent of customer choice and competition in the energy markets and the rules and regulations adopted in those markets,

•

regulatory or legislative developments federally, in Maryland, or in other states that affect energy competition, the price of energy, transmission or distribution rates and revenues, demand for energy, or increases in costs, including costs related to safety, or environmental compliance,

•

the ability of our regulated and nonregulated businesses to comply with complex and/or changing market rules and regulations,

•

the ability of BGE to recover all its costs associated with providing customers service,

•

operational factors affecting commercial operations of our generating facilities, (including nuclear facilities) and BGE's transmission and distribution facilities, or our other commercial operations, including catastrophic weather-related damages, unscheduled outages or repairs, unanticipated changes in fuel costs or availability, unavailability of coal or gas transportation or electric transmission services, workforce issues, terrorism, liabilities associated withacts of war, catastrophic events, and other events beyond our control,

•

the impact of industry consolidation,

•

the impact of increased energy conservation and use of renewable energy,

•

the actual outcome of uncertainties associated with assumptions and estimates usingrequiring judgment when managing our business, applying critical accounting policies and preparing financial statements, including factors that are estimated in determining the fair value of energy contracts, such as the ability to obtain market prices and, in the absence of verifiable market prices, the appropriateness of models and model inputs (including, but not limited to, estimated contractual load obligations, unit availability, forward commodity prices, interest rates, correlation and volatility factors),

•

changes in accounting principles or practices,

•

losses on the sale or write down of assets due to impairment events or changes in management intent with regard to either holding or selling certain assets,

•

the ability to successfully identify and complete acquisitions and sales of businesses and assets, and

•

cost and other effects of legal and administrative proceedings and other events that may not be covered by insurance, including environmental liabilities.liabilities and liabilities associated with catastrophic events.

        Given these uncertainties, you should not place undue reliance on these forward looking statements. Please see the other sections of this report and our other periodic reports filed with the Securities and Exchange Commission (SEC) for more information on these factors. These forward looking statements represent our estimates and assumptions only as of the date of this report.

        Changes may occur after that date, and neither Constellation Energy nor BGE assumeassumes responsibility to update these forward looking statements.

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PART I

Item 1. Business

Item 1. BusinessOverview

Overview

Constellation Energy is an energy company that includes a merchant energygeneration business (Generation), a customer supply business (NewEnergy), and BGE, a regulated electric and gas public utility in central Maryland.

        Constellation Energy was incorporated in Maryland on September 25, 1995. On April 30, 1999, Constellation Energy became the holding company for BGE and its subsidiaries. References in this report to "we" and "our" are to Constellation Energy and its subsidiaries, collectively. References in this report to the "regulated business(es)" are to BGE.

        Our merchant energyGeneration business is a competitive provider of energy solutions for a variety of customers. It hasdevelops, owns, owns interests in, and operates electric generation assetsfacilities and a fuel processing facility located in various regions of the United StatesStates. This business also includes an operation that manages certain contractually controlled physical assets, including generating facilities and provides energy solutions to meet customers' needs.owns an interest in a joint venture that owns and operates nuclear generating facilities.

        Our merchant energyNewEnergy business is primarily a competitive provider of energy-related products and services for a variety of customers and focuses on serving the energyselling electricity, natural gas, and capacityother energy-related products to serve customers' requirements (load-serving) of,, and providing other energy products and risk management services for, various customers.services. This business also manages our upstream natural gas activities, designs, constructs, and operates renewable energy, heating, cooling, and cogeneration facilities and provides home improvements, sales of electric and gas appliances, and servicing of heating, air conditioning, plumbing, electrical, and indoor air quality systems.

        BGE is a regulated electric transmission and distribution utility company and a regulated gas distribution utility company with a service territory that covers the City of Baltimore and all or part of ten10 counties in central Maryland. BGE was incorporated in Maryland in 1906.

        Our other nonregulated businesses:

•

design, construct,        On October 26, 2010, we reached a comprehensive agreement with EDF Group and operate renewable energy, heating, cooling,affiliates (EDF) that restructured the relationship between our two companies, eliminated an outstanding asset put arrangement, and cogeneration facilities, and provide various energy-related services, including energy consulting, for commercial, industrial, and governmental customers throughout North America, and

•

provide home improvements, service heating, air conditioning, plumbing, electrical, and indoor air quality systems, and provide natural gastransferred to residential customers in central Maryland.

        Constellation Energy maintains a website at constellation.com where copiesEDF the full ownership of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments may be obtained free of charge. These reports are posted on our website the same day they are filed with the SEC. The SEC maintains a website (sec.gov), where copies of our filings may be obtained free of charge. The website address for BGE is bge.com. These website addresses are inactive textual references, and the contents of these websites are not part ofprior nuclear development joint venture, UniStar Nuclear Energy, LLC (UNE). We discuss this Form 10-K.comprehensive agreement in more detail inNote 4 to Consolidated Financial Statements.

        In addition, the website for Constellation Energy includes copies of our Corporate Governance Guidelines, Principles of Business Integrity, Corporate Compliance Program, Insider Trading Policy, Policy and Procedures with respect to Related Person Transactions, and Information Disclosure Policy, and the charters of the Audit, Compensation and Nominating and Corporate Governance Committees of the Board of Directors. Copies of each of these documents may be printed from our website or may be obtained from Constellation Energy upon written request to the Corporate Secretary.

        The Principles of Business Integrity is a code of ethics that applies to all of our directors, officers, and employees, including the chief executive officer, chief financial officer, and chief accounting officer. We will post any amendments to, or waivers from, the Principles of Business Integrity applicable to our chief executive officer, chief financial officer, or chief accounting officer on our website.

Operating Segments

The percentages of revenues, net (loss) income attributable to common stock, and assets attributable to our operating segments are shown in the tables below. We present information about our operating segments, including certain other items, inNote 3 to Consolidated Financial Statements.

		Unaffiliated Revenues
		Generation			NewEnergy			Regulated Electric			Regulated Gas			Holding Company and Other
2010			8	%		68	%		19	%		5	%		—	%
2009			4			73			18			5			—
2008			4			77			14			5			—

		Net (Loss) Income Attributable to Common Stock
		Generation			NewEnergy			Regulated Electric			Regulated Gas			Holding Company and Other
2010			(128	)%		14	%		10	%		4	%		—	%
2009			107			(9	)		1			1			—
2008			(27	)		(76	)		—			3			—

		Total Assets
		Generation			NewEnergy			Regulated Electric			Regulated Gas			Holding Company and Other			Eliminations
2010			49	%		19	%		26	%		7	%		4	%		(5	)%
2009			53			18			21			6			19			(17	)
2008			50			32			21			6			15			(24	)

(1)

Excludes income from discontinued operations in 2007, 2006Generation Business

We develop, own, operate, and 2005 and cumulative effects of changes in accounting principles in 2005 as discussed in more detail in Item 8. Financial Statements and Supplementary Data.

Merchant Energy Business

Introduction

Our merchant energy business integrates electric generation assets with the marketing and risk management of energy and energy-related products to wholesale and retail customers, allowing us to manage energy price risk over geographic regions and time.

        Our merchant energy business includes:

•

a power generation and development operation that owns, operates, and maintainsmaintain fossil and renewable generating facilities, and holdshold a 50.01% interest in a nuclear joint venture that owns nuclear generating facilities, hold interests in qualifying facilities, fuel processing facilities, and power projects in the United States

•

and Canada totaling 9,030 MW as of December 31, 2010 (excludes our January 2011 acquisition of Boston Generating assets), and manage approximately 1,100 MW associated with certain of our long-dated tolling agreements. These agreements provide us with the contractual rights to purchase power from third party generation plants over an extended period of time. The output of our owned and contractually controlled plants is managed by our NewEnergy business and is hedged through a nuclear generation operation that owns, operates and maintains nuclear generating facilities and oversees our new nuclear development activities,

•

a customer supply operation that primarily provides energy products and services relating to load-serving obligationscombination of power sales to wholesale and retail customers,market participants. We also provide operation and maintenance services, including distribution utilities, cooperatives, aggregators,testing and commercial, industrialstart-up, to owners of electric generating facilities. Our NewEnergy business meets the load-serving requirements under various contracts using the output from our generating fleet and governmental customers, and

•

a global commodities operation that manages contractually controlled physical assets, including generation facilities, natural gas properties, international coal and freight assets, provides risk management services, and trades energy and energy-related commodities.

        Our merchant energy business:

•

provided approximately 32,700 megawatts (MW) of peak loadfrom purchases in the aggregate to distribution utilities, municipalities, and commercial, industrial, and governmental customers during 2007,

•

provided approximately 410,000 million British Thermal Units (mmBTUs) of natural gas to commercial, industrial, and governmental customers during 2007,

•

delivered approximately 28 million tons of coal to international and domestic third-party customers and to our own fleet during 2007, and

•

managed approximately 8,730 MW of generation capacity as of December 31, 2007.

        For years 2007 and prior, we analyze the results of our merchant energy business as follows:

•

Mid-Atlantic Region—our fossil, nuclear, and hydroelectric generating facilities and load-serving activities in the Mid-Atlantic region of the PJM Interconnection (PJM). This also includes active portfolio management of generating assets and other physical and financial contractual arrangements, as well as other PJM competitive supply activities.

•

Plants with Power Purchase Agreements—our generating facilities outside the Mid-Atlantic Region with long-term power purchase agreements. As discussed inNote 2 to Consolidated Financial Statements, the sale of the High Desert facility in 2006 resulted in a reclassification of its results to discontinued operations.

•

Wholesale Competitive Supply—our marketing, risk management, and trading operation that provides energy products and services primarily to distribution utilities, power generators, and other wholesale customers. We also include in our wholesale competitive supply results our global coal sourcing and logistics services and upstream and downstream natural gas services.

•

Retail Competitive Supply—our operation that provides electric and natural gas energy products and services to commercial, industrial, and governmental customers.

•

Other—our investments in qualifying facilities and domestic power projects and our generation operations and maintenance services.

        Beginning in 2008, we will analyze our merchant energy business in terms of Generation, Customer Supply and Global Commodities activities.market.

•

Generation—will encompass all of our generating assets, including those currently included in the Mid-Atlantic Region, Plants with Power Purchase Agreements and Other.

•

Customer Supply—will encompass the current Retail Competitive Supply and the power load-serving portion of Wholesale Competitive Supply.

•

Global Commodities—will encompass the remaining Wholesale Competitive Supply businesses including our marketing, risk management, and trading operations, global coal sourcing and logistics services, and upstream and downstream natural gas services.

        We present details about our generating properties inItem 2. Properties.

Mid-Atlantic RegionInvestment in Nuclear Generating Facilities

We own 6,355 MWOn November 6, 2009, we completed the sale of fossil,a 49.99% membership interest in Constellation Energy Nuclear Group LLC and affiliates (CENG), our subsidiary that owns our nuclear and hydroelectric generation capacity in the Mid-Atlantic Region.generating facilities

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described below. The total output of these nuclear facilities over the past three years is presented in the following table:

        In connection with the closing of the transaction with EDF on November 6, 2009, we entered into a power purchase agreement (PPA) with CENG under which we will purchase 85 to 90% of the output that is not sold to third parties under pre-existing PPAs for an initial five year period. Additionally, pursuant to an amendment to the PPA entered into in 2010, beginning on January 1, 2015, and continuing to the end of the lives of the respective nuclear plants, is managed by our global commodities operationwe will purchase 50.01% and EDF will purchase 49.99% of the output of CENG's nuclear plants. We discuss this PPA in more detail inNote 16 to Consolidated Financial Statements.

Calvert Cliffs

CENG owns 100% of Calvert Cliffs Unit 1 and Unit 2. Unit 1 entered service in 1974 and is hedged through a combination of power saleslicensed to wholesaleoperate until 2034. Unit 2 entered service in 1976 and retail market participants. Our merchant energy business meets the load-serving requirements of various contracts using the output from the Mid-Atlantic Region and from purchases in the wholesale market.

        BGE transferred all of these facilitiesis licensed to our merchant energy generation subsidiaries on July 1, 2000 as a result of the implementation of electric customer choice and competition among suppliers in Maryland, except for the Handsome Lake facility that commenced operations in mid-2001. The assets transferred from BGE are subject to the lien of BGE's mortgage. We expect the assets to be released from this lien following payment in March 2008 of the last series of bonds outstanding under the mortgage and the subsequent discharge of the mortgage.

        Our merchant energy business supplies BGE with a portion of its market-based standard offer service obligation. For 2007, the peak load supplied to BGE was approximately 3,200 MW.operate until 2036.

Plants with Power Purchase Agreements

We own 2,134 MW of nuclear generation capacity with power purchase agreements for a significant portion of their output. Our facilities with power purchase agreements are the Nine Mile Point Nuclear Station (Nine Mile Point) and the R.E. Ginna Nuclear Plant (Ginna). Both Nine Mile Point and Ginna are located within the New York Independent System Operator (NYISO) region.

        We ownCENG owns 100% of Nine Mile Point Unit 1 (620 MW) and 82% of Unit 2 (933 MW).2. The remaining interest in Nine Mile Point Unit 2 is owned by the Long Island Power Authority (LIPA). Unit 1 entered service in 1969 and is licensed to operate until 2029. Unit 2 entered service in 1988 and is licensed to operate until 2046.

        We sellNine Mile Point Unit 2 sells 90% of our share of Nine Mile Point'sthe plant's output to the former owners of the plant at an average price of nearlyapproximately $35 per megawatt-hour (MWH)MWH under agreementsa PPA that terminate between 2009 andterminates in November 2011. The agreements arePPA is unit contingent (if the output is not available because the plant is not operating, there is no requirement to provide output from other sources). The remaining 10% of our sharethe output of Nine Mile Point's outputPoint Unit 2 is managed by our global commodities operationCENG and sold into the wholesale market.primarily to us and EDF.

        After termination of the power purchase agreements,Nine Mile Point Unit 2 PPA, a revenue sharing agreement with the former owners of the plant will begin and continue through November 2021. Under this agreement, which applies only to ourCENG's ownership percentage of Unit 2, a predetermined strike price is compared to the market price for electricity. If the market price exceeds the strike price, then 80% of this excess amount is shared with the former owners of the plant. The average strike price for the first year of the revenue sharing agreement is $40.75 per MWH. The strike price increases two percent annually beginning in the second year of the revenue sharing agreement. The revenue sharing agreement is unit contingent and is based on the operation of the unit.Unit 2.

        WeCENG exclusively operateoperates Unit 2 under an operating agreement with LIPA. LIPA is responsible for 18% of the operating costs (and(including decommissioning costs) and capital expenditures of Unit 2 and has representation on the Nine Mile Point Unit 2 management committee, which provides certain oversight and review functions.

        We ownGinna

CENG owns 100% of the Ginna nuclear facility. Ginna consists of a 581 MW reactor that entered service in 1970 and is licensed to operate until 2029. We sell up to 80%Ginna sells approximately 90% of the plant's output and capacity to the former ownersowner for 10 years ending in 2014 at an average price of $44.00 per MWH under a long term unit contingent power purchase agreement.long-term unit-contingent PPA. The remaining 10% of the output of Ginna is managed by our global commodities operationCENG and sold into the wholesale market.

Competitive SupplyNew Nuclear

In November 2010, as part of our comprehensive agreement with EDF to restructure the relationship between our two companies, we sold our 50% ownership interest in UNE to EDF. EDF is now the sole owner of UNE, and we will no longer have responsibility for developing or financing new nuclear projects through UNE. As discussed inNote 4 to Consolidated Financial Statements, we will cause CENG to transfer to UNE two potential new nuclear sites upon receipt of necessary approvals.

Qualifying Facilities and Power Projects

We hold up to a 50% voting interest in 15 operating energy projects, totaling approximately 758 MW, that consist of electric generation (primarily relying on alternative fuel sources), fuel processing, or fuel handling facilities. Thirteen of the electric generation projects are considered qualifying facilities under the Public Utility Regulatory Policies Act of 1978. Each electric generating plant sells its output to a local utility under long-term contracts.

Contracted Generation

We manage approximately 1,100 MWs under three agreements with third party generators in which we have long-dated contractual rights to purchase power from these third party generating plants. The economics of these transactions are similar to our owned generation.

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NewEnergy Business

We are a leading supplier of energy products and services to wholesale customers and retail commercial, industrial, and governmental customers. In 2007, our wholesale competitive supply operation provided approximately 16,500 peak MWs of wholesale full requirements load-serving products. During 2007, our retail competitive supply activities served approximately 16,200 MW of peak load and approximately 410,000 mmBTUs ofelectricity, natural gas.

Wholesale and Retail Load-Serving Activities

Our wholesale competitive supply operation structures transactions that serve the full energy and capacity requirements of various customers such as distribution utilities, municipalities, cooperatives, and retail aggregators that do not own sufficient generating capacity or in-house supply functions to meet their own load requirements.

        Our retail competitive supply operation structures transactions to supply full energy and capacity requirements and provide natural gas, transportation, and other energy products and services to wholesale and retail commercial, industrial,electric and governmentalnatural gas customers. Contracts with these customers generally extend from one to ten years, but some can be longer.

        To meet our customers' load-serving requirements, our merchant energyNewEnergy business obtains energy from various sources, including:

•

our generation assets,

•

our contractually controlled generation assets,

•

exchange-traded and bilateral power and natural gas purchase agreements, with third parties,

•

unit contingent power purchases from generation companies,

•

our generation assets,

•

regional power pools,

•

tolling contracts with generation companies, which provide us the right, but not the obligation, to purchase power at a price linked to the variable cost of production, including fuel, with terms that generally extend from several months up to severalfive years, but can be longer, and

•

regional power pools.

        During 2010, our NewEnergy business:

•

exchange tradedsupplied approximately 119 million megawatt hours (MWH) of aggregate electricity to distribution utilities, municipalities, and residential, commercial, industrial, and governmental customers,

•

provided approximately 334 million British Thermal Units (mmBTUs) of natural gas to residential, commercial, industrial, and governmental customers, and

•

delivered approximately 7.8 million tons of coal primarily to our own fleet.

        Our NewEnergy business also manages certain contractually controlled physical assets, including generation facilities (excluding long-dated tolling agreements managed by our Generation business), and natural gas contracts.
properties, provides risk management services, and trades energy and energy-related commodities. This business also provides the wholesale risk management function for our Generation business, as well as structured products and energy investment activities and includes our actual hedged positions with third parties.

        Our NewEnergy business also manages our upstream natural gas activities, designs, constructs, and operates renewable energy, heating, cooling, and cogeneration facilities and provides home improvements, sales of electric and gas appliances, and servicing of heating, air conditioning, plumbing, electrical, and indoor air quality systems.

Wholesale Customer Supply

In 2010, our wholesale NewEnergy customer supply operation served approximately 57 million MWHs of wholesale full requirements electricity and related load-serving products.

        Our wholesale NewEnergy customer supply operation structures transactions that serve the full energy and capacity requirements of various customers such as distribution utilities, municipalities, cooperatives and retail aggregators that do not own sufficient generating capacity or have in-house supply functions to meet their own load requirements.

Retail Customer Supply

During 2010, our retail NewEnergy customer supply operation served approximately 62 million MWHs of electricity load and approximately 334 million mmBTUs of natural gas.

        Our retail NewEnergy customer supply operation structures transactions to supply full energy and capacity requirements and provide natural gas, transportation, and other energy products and services to commercial, industrial, governmental, and residential customers. Contracts with these customers generally extend from one to ten years, but some can be longer.

        The retail NewEnergy customer supply operation combines a unified sales force with a customer-centric model that leverages technology to broaden the range of products and services we offer, which we believe promotes stronger customer relationships. This model focuses on efficiency and cost reduction, which we believe will provide a platform that is scalable and able to capitalize on opportunities for future growth.

Structured Products

Our NewEnergy business uses energy and energy-related commodities and contracts in order to manage our portfolio of energy purchases and sales to customers through structured transactions. Our NewEnergy business assists customers with customized risk management products in the power, gas, coal, and freight markets (e.g., generation tolls and gas transport and storage).

Energy Investments

Our NewEnergy business has investments in energy assets that primarily include natural gas activities. Our NewEnergy business includes upstream (exploration and production) and downstream (transportation and storage) natural gas operations. Our upstream natural gas activities include the development, exploration, and exploitation of natural gas properties, as well as an approximately 28.5% interest in Constellation Energy Partners LLC (CEP), a limited liability company that we formed. CEP is principally engaged in the acquisition, development, and exploitation of natural gas properties. We no longer have any active involvement in the day-to-day operations of CEP.

Portfolio Management and Trading

Our NewEnergy business transacts in energy and energy-related commodities in order to manage our portfolio of energy purchases and sales to customers through structured transactions. We continue to identify and pursue opportunitiesuse economic value

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at risk, which can generate additional returns throughmeasures the market risk in our total portfolio, management and trading activities within our business. These opportunities have increased due to the significant growth in scaleencompassing all aspects of our competitive supply operations.NewEnergy business, along with daily value at risk limits, stop loss limits, position limits, generation hedge ratios, and liquidity guidelines to restrict the level of risk in our portfolio.

        In managing our portfolio, we may terminate, restructure, or acquire contracts. Such transactions are within the normal course of managing our portfolio and may materially impact the timing of our recognition of revenues, fuel and purchased energy expenses, and cash flows.

        Our global commodities operation actively uses energy and energy-related commodities and contracts for those commodities in order to manage our portfolio of energy purchases and sales to customers through structured transactions. We use both derivative and nonderivative contracts in managing our portfolio of energy sales and purchase contracts. Generally, we expect to use both derivative and nonderivative contracts to hedge our portfolio in order to reduce volatility. Although a substantial portion of our portfolio is hedged, we are able to identify opportunities to deploy risk capital to increase the value of our accrual positions, which we characterize as portfolio management.

        We trade        Active portfolio management is intended to allow our NewEnergy business to:

•

manage and hedge its fixed-price energy purchase and energy-related contractssale commitments,

•

provide fixed-price energy commitments to customers and commoditiessuppliers,

•

reduce exposure to the volatility of market prices, and deploy risk capital in the management of

•

hedge fuel requirements at our portfolio in order to earn additional returns. These activities are managed through daily value at risk and stop loss limits and liquidity guidelines, and could have a material impact on our financial results.non-nuclear generation facilities.

        We discuss the impact of our trading activities and economic value at risk in more detail inItem 7. Management's Discussion and Analysis.

        TheseOur portfolio management and trading activities involve the use of physical commodity inventories and a variety of instruments, including:

•

forward contracts (which commit us to purchase or sell energy commodities in the future),

•

swap agreements (which require payments to or from counterparties based upon the difference between two prices for a predetermined contractual (notional) quantity),

•

option contracts (which convey the right to buy or sell a commodity, financial instrument, or index at a predetermined price), and

•

futures contracts (which are exchange traded standardized commitments to purchase or sell a commodity or financial instrument, or make a cash settlement, at a specified price and future date).

        ActiveBeginning in the fourth quarter of 2008 and continuing throughout 2010, we reduced the risk and scale of our portfolio management allowsand trading activities. Energy trading activities were scaled back and are being used primarily for hedging our merchant energy business to:

•

manageGeneration and hedge its fixed-price energy purchaseNewEnergy businesses, price discovery and sale commitments,

•

provide fixed-price energy commitments to customersverification, and suppliers,

•

reduce exposure to the volatility of market prices,for deploying limited risk capital. These efforts materially impacted our portfolio management and

•

hedge fuel requirements at our non-nuclear generation facilities.

Coal and International Services

Our global commodities operation participates in global coal sourcing activities by providing coal and coal-related logistical services for the variable or fixed supply needs of global customers. In late 2006, we formed a shipping joint venture that will own and operate six freight ships for the delivery of coal and other dry bulk freight products. We own a 50% interest in this joint venture. In 2007, we delivered approximately 28 million tons of coal to global customers and trading activities' contribution to our own generation fleet. Additionally, we entered into power, natural gas, freight, and emissions transactions outside of the United States. We also include in our coal services the results from our synthetic fuel processing facility in South Carolina. In 2008, these synthetic fuel processing facilities will be decommissioned.

        We will continue to evaluate new international opportunities, including expanding our coal sourcing, freight, power, natural gas and emissions activities outside of the United States.operating results.

Natural Gas Services

Our global commodities operation includes upstream (exploration and production) and downstream (transportation and storage) natural gas operations. Our upstream activities include the acquisition, development, and exploitation of natural gas properties. Our downstream activities include providing natural gas to various customers, including large utilities, commercial and industrial customers, power generators, wholesale marketers, and retail aggregators.

        In 2007, 2006 and 2005, we acquired working interests in gas producing fields. We discuss these acquisitions in more detail inNote 15 to Consolidated Financial Statements.

Fuel Sources

Our power plants use diverse fuel sources. Our plants' fuel mix based on capacity owned at December 31, 20072010 and our generation based on actual output by fuel type in 2007 wereduring 2010 was as follows:

        We discuss our risks associated with fuel in more detail inItem 7. Management's Discussion and Analysis—Market Risk.Risk Management.

Nuclear

The output ofCENG, our nuclear facilities overjoint venture with EDF, owns the past five years (including periods prior to our acquisition ofCalvert Cliffs, Nine Mile Point, and Ginna in June 2004) is presented in the following table:

*represents our proportionate ownership interestnuclear generating facilities.

        The supply of fuel for these nuclear generating stationsfacilities includes the:

•

purchase of uranium (concentrates and uranium hexafluoride),

•

conversion of uranium concentrates to uranium hexafluoride,

•

enrichment of uranium hexafluoride (enrichment services and enriched uranium hexafluoride), and

•

fabrication of nuclear fuel assemblies.

        CENG has commitments that provide for quantities of uranium, conversion, enrichment, and fabrication of fuel assemblies to substantially meet expected requirements for the next several years at these nuclear generating facilities.

        The nuclear fueluranium markets are competitive, and while prices can be volatile; however, we dovolatile, CENG does not anticipate any significant problems in meeting ourits future supply requirements.

Storage of Spent Nuclear Fuel—Federal FacilitiesFuel
One of the issues associated with the operation and decommissioning of nuclear generating facilities is disposal of spent nuclear fuel. There are no facilities for the reprocessing or permanent disposal of spent nuclear fuel currently in operation in the United States, and the NRC has not licensed any such facilities.

The Nuclear Waste Policy Act of 1982, (NWPA) requiredas amended, ("NWPA") requires the federal government, through the Department of Energy (DOE), to develop a repository for the disposal of spent nuclear fuel and high-level radioactive waste.

        As required by Although the NWPA we are a party to contracts with the DOE to provide for disposal of spent nuclear fuel from our nuclear generating plants. The NWPA and our contracts with the DOE require payments to the DOE of one tenth of one cent (one mill) per kilowatt hour on nuclear electricity generated and sold to pay for the cost of long-term nuclear fuel storage and disposal. We continue to pay those fees into the DOE's Nuclear Waste Fund for our nuclear generating facilities. The NWPA and ourCENG's contracts with the DOE required the DOE to begin taking possession of spent nuclear fuel generated by nuclear generating units no later than

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January 31, 1998.1998, the DOE has failed to meet its obligation. The DOE's delay in taking possession of spent fuel has required CENG to undertake additional actions and incur costs to provide on-site dry fuel storage at all three of its nuclear sites. CENG has installed additional capacity at its independent spent fuel storage installation ("ISFSI") at Calvert Cliffs, has constructed an ISFSI at Ginna, and is constructing an ISFSI to be placed in service at Nine Mile Point in 2012.

        ThePrior to 2010, the DOE hashad stated that it may not meet thatits obligation until 20172020 at the earliest. This delay has required that we undertake additional actionsDuring 2010, the DOE requested the withdrawal of its license application to provide on-site fuel storage at ouruse Yucca Mountain as a national repository for spent nuclear generating facilities, includingfuel. At this time, CENG is not able to determine whether the installationDOE will be able to commence meeting its obligation by 2020.

        Each of on-site dry fuel storage capacity as described in more detail below.

        In 2004,CENG's plant subsidiaries have filed complaints were filed against the federal government in the United StatesU.S. Court of Federal Claims seeking to recover damages caused by the DOE's failure to meet its contractual obligation to begin disposing of spent nuclear fuel by January 31, 1998. TheseThe cases are currently stayed, pending litigation in other related cases.

        In connection with our purchase of Ginna, all of the former owner's rights and obligations related to recovery of damages for DOE's failure to meet its contractual obligations were assigned to us. However, we have an obligation to reimburse the former owner for up to $10 million of any recovered damages for such claims.

Storage of Spent Nuclear Fuel—On-Site Facilities
Calvert Cliffs has a license Any funds received from the NRCDOE that represent the reimbursement of costs incurred prior to operate an on-site independent spent fuel storage installation that expiresNovember 6, 2009, the date we sold a 49.99% membership interest in 2012. We have storage capacity at Calvert Cliffs thatCENG to EDF, will accommodate spent fuel from operations through 2011. In addition, we can expand our temporary storage capacity at Calvert Cliffsbelong to meet future requirements until approximately 2025. Nine Mile Pointus, and Ginna are developing independent spent fuel storage installations at eachany funds representing the reimbursement of those facilities, which we expectcosts incurred after November 6, 2009 will belong to be completed in 2011 and 2010, respectively. Nine Mile Point and Ginna have sufficient storage capacity within the plant until the expected completion of the on-site independent spent fuel storage installations.CENG.

Cost for Decommissioning Nuclear Facilities
We are

When Constellation Energy sold a 49.99% membership interest in CENG on November 6, 2009, we deconsolidated CENG for financial reporting purposes and, as a result, the decommissioning trust funds were removed from our Consolidated Balance Sheets. CENG is obligated to decommission ourits nuclear power plants after these plants cease operation. Every two years,

        Decommissioning activities are currently projected to be staged through the NRC requires us to demonstrate reasonable assurance that funds will be available to decommission2080 decade. Any changes in the sites. When BGE transferred allcosts or timing of its nuclear generating assets to our merchant energy business, it also transferreddecommissioning activities, or changes in the fund earnings, could affect the adequacy of the funds accumulated to paycover the decommissioning of the plants, and if there were to be a shortfall, additional funding would have to be provided by CENG. CENG has the ability to request funding assistance from both Constellation Energy and EDF, as the owners of CENG.

Calvert Cliffs

In March 2008, Constellation Energy, BGE, and a Constellation Energy affiliate entered into a settlement agreement with the State of Maryland, the Public Service Commission of Maryland (Maryland PSC), and certain State of Maryland officials. The settlement agreement became effective on June 1, 2008. Pursuant to the terms of the settlement agreement, BGE customers were relieved of the potential future liability for decommissioning Calvert Cliffs. At December 31, 2007,Cliffs Unit 1 and Unit 2. BGE will continue to collect the external Calvert Cliffs trust fund assets were $457.4 million.

        Under the Maryland Public Service Commission's (Maryland PSC) order regarding the deregulation of$18.7 million annual nuclear decommissioning charge from all electric generation, BGE ratepayers must pay a total of $520 million, in 1993 dollars adjusted for inflation,customers through 2016 and continue to decommission Calvert Cliffs through fixed annual collections. BGE is collectingrebate this amount on behalf of Calvert Cliffs. Any costs to decommission Calvert Cliffs in excess of this $520 million, in 1993 dollars adjusted for inflation, must be paidresidential electric customers, as previously required by Calvert Cliffs. If BGE ratepayers have paid more than this amount at the time of decommissioning, Calvert Cliffs must refund the excess. If the cost to decommission Calvert Cliffs is less than the $520 million, in 1993 dollars adjusted for inflation, BGE's ratepayers are obligated to pay, Calvert Cliffs may keep the difference.

        In 2006, BGE received approval from the Maryland PSC to continue previously approved annual customer collections for decommissioning of approximately $18.7 million through December 31, 2016. BGE will be required to submit a filing to determine the level of customer contributions after December 31, 2016. Senate Bill 1 which was enacted in June 2006, requires BGE to provide credits to residential electric customers equal to the amount collected for decommissioning annually for 10 years beginning January 1, 2007. Under the provisions of Senate Bill 1, we are required to apply the collection of the nuclear decommissioning trust funds over the ten year period beginning January 1, 2007 toward the fulfillment of the decommissioning obligations of BGE ratepayers. As discussed inItem 7. Management's Discussion and Analysis—Business Environment—Regulation—Maryland—Senate Bills 1 and 400 section, we have notified the State of Maryland of our intent to file an action challenging the legality of this Senate Bill 1 requirement.

        The sellers of Nine Mile Point transferred a $441.7 million decommissioning trust fund to us at the time of sale. In return, we assumed all liability for the costs to decommission Unit 1 and 82% of the costs to decommission Unit 2. We believe that this amount is adequate to cover our responsibility for decommissioning Nine Mile Point to a greenfield status (restoration of the site so that it substantially matches the natural state of the surrounding properties and the site's intended use). At December 31, 2007, the Nine Mile Point trust fund assets were $610.2 million.

        The seller of Ginna transferred $200.8 million in decommissioning funds to us. In return, we assumed all liability for the costs to decommission the unit. We believe that this amount will be sufficient to cover our responsibility for decommissioning Ginna to a greenfield status. At December 31, 2007, the Ginna trust fund assets were $263.2 million.2006.

Coal

We purchase the majority of our coal for electric generation under supply contracts with miningmine operators, and we acquire the remainder in the spot or forward coal markets. The actual fuel quantities required can vary substantially from year to year depending upon the relationship between energy prices and fuel costs, weather conditions, and operating requirements. We believe that we will be able to renew supply contracts as they expire or enter into contracts with other coal suppliers. Our primary coal burningcoal-burning facilities have the following requirements:

        CoalWe receive coal deliveries to these facilities are made by rail and barge. Over the past few years, we expanded our coal sources through a variety of methods, including restructuring our rail and terminal contracts, increasing the range of coals we can consume, adding synthetic fuel as an alternate source, and finding potential other coal supply sources including limited shipments from various international sources. While we primarily use coal produced from mines located in central and northern Appalachia, we are capable of switchingusing sub-bituminous coal from the Western United States at C.P. Crane and have the ability to switch to using imported coalscoal at Brandon Shores and H.A. Wagner to manage our coal supply. Synthetic fuel will no longer be burned as an alternate source since tax credits for synthetic fuel expired on December 31, 2007. The timely delivery of coal together with the maintenance of appropriate levels of inventory is necessary to allow for continued, reliable generation from these facilities.

        As discussed in theEnvironmental Matters section, our Maryland coal-fired generating facilities must comply with the requirements of the Maryland Healthy Air Act (HAA), which requires reduction of sulfur dioxide (SO₂), nitrogen oxide (NO_x), and mercury emissions. To comply with the HAA requirements, we

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are planning to burn domestic and/or import compliance coals (1.2 lb/mmbtu SO₂ or less) at H.A. Wagner. The C.P. Crane station was converted to burn up to 100% sub-bituminous coal in June 2010. In March 2010, we completed installation of flue gas desulfurization (FGD) equipment on both Brandon Shores units. With the FGD installation, Brandon Shores now is able to burn higher sulfur coals (limit 6 lbs/mmbtu or approximately 3.5% sulfur) while simultaneously reducing station emissions. The blend of coals actually procured for Brandon Shores will be optimized to achieve the lowest delivered cost while complying with HAA limitations.

        We own an undivided interest in the Keystone and Conemaugh electric generating plants in Western Pennsylvania. Our ownership interests in these plants are 20.99% in Keystone and 10.56% in Conemaugh. All of the Conemaugh and Keystone plants' annual coal requirements are purchased by the plant operators from regional suppliers on the open market. FGD equipment was installed on both of the Keystone units in 2009 and has been installed on both Conemaugh units since the mid-1990s. The sulfurFGD SO₂ restrictions on coal are 6 lbs/mmbtu (or approximately 2.3%3.7% sulfur) for the Keystone plant and approximately 5.3%4.9 lbs/mmbtu (or 3% sulfur) for the Conemaugh plant. The blend of coal procured is optimized to ensure compliance with station emission limits at the lowest delivered cost.

        The annual coal requirements for the ACE, Jasmin, and Poso plants, which are located in California, are supplied under contracts with mining operators. These plants are restricted to coal with sulfur content less than 2.0%4.0%.

        The primary fuel source for Panther Creek and Colver generating facilities' primary fuel sourcefacilities is waste coal. These facilities meet their annual requirements through existing reserves of mined and processed waste coal and through supply agreements with various terms.

        All of our coal requirements reflect historicalexpected generating levels. The actual fuel quantities required can vary substantially from historical generating levels depending upon the relationship between energy prices and fuel costs, weather conditions, and operating requirements. However, we believe that we will be able to obtain adequate quantities of coal to meet our requirements.

Gas

We purchase natural gas, storage capacity, and transportation, as necessary, for electric generation at certain plants. Some of our gas-fired units can use residual fuel oil or distillates instead of gas. Gas is purchased under contracts with suppliers on the spot market and forward markets, including financial exchanges and under bilateral agreements. The actual fuel quantities required can vary substantially from year to year depending upon the relationship between energy prices and fuel costs, weather conditions, and operating requirements. However, we believe that we will be able to obtain adequate quantities of gas to meet our requirements.

Oil
Under normal burn practices,

From 2008 through 2010, our requirements for residual fuel oil (No. 6) amountamounted to approximately 1.0 million to 1.5less than 0.5 million barrels of low-sulfur oil per year. Deliveries of residual fuel oil are made from the suppliers' Baltimore Harbor and Philadelphia marine terminals for distribution to the various generating plant locations. Also, based on normal burn practices, we require approximately 8.0 million to 11.0 million gallons of distillates (No. 2 oil and kerosene) annually, but these requirements can vary substantially from year to year depending upon the relationship between energy prices and fuel costs, weather conditions, and operating requirements. Distillates are purchased from the suppliers' Baltimore truck terminals for distribution to the various generating plant locations. We have contracts with various suppliers to purchase oil at spot prices, and for future delivery, to meet our requirements.

Competition

We encounter competition from companies of various sizes, having varying levels of experience, financial and human resources, and differing strategies.

        We face competition in the market for energy, capacity, and ancillary services. In our merchant energyNewEnergy business, we compete with international, national, and regional full servicefull-service energy providers, merchants, and producers to obtain competitively priced supplies from a variety of sources and locations, and to utilize efficient transmission, transportation, or storage. We principally compete on the basis of price, customer service, reliability, and availability of our products.

        With respect to power generation,our Generation business, we compete in the operation of energy-producing projects, and our competitors in this business are both domestic and international organizations, including various utilities, industrial companies and independent power producers (including affiliates of utilities, financial investors, banks and investment banks), some of which have greater financial resources.

        StatesMany states are considering different types of regulatory initiatives concerning competition in the power and gas industry, which makes a general assessment of the state of competitive assessmentmarkets difficult. Increased competition that resulted from some of these initiatives in several states contributed in some instances to a reduction in electricity prices and put pressure on electric utilities to lower their costs, including the cost of purchased electricity. Many states continue to support or expand retail competition and industry restructuring. Other states that were considering deregulationrestructuring have slowed their plans or postponed consideration of deregulation.competitive markets. In addition, certain previouslystates that have restructured states are considering reregulation of their retail markets.energy markets routinely consider new market rules including return to monopoly service measures that could result in more limited opportunities for competitive energy suppliers like Constellation Energy. While there is significant activity in this area, we believe there is

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adequate growth potential in the current deregulated market and that further market changes could provide additional opportunities for our merchant energy business.competitive market.

        As theThe market for commercial, industrial, and governmental energy supply continues to grow and we have experiencedcontinue to experience increased competition from energy and non-energy market participants on a regional and national basis in our retail competitivecustomer supply activities. The increase inStrong retail competition and the impact of wholesale power prices compared to the rates charged by local utilities has, in certain circumstances, reducedaffects the margins thatcontract margin we realizereceive from our customers. However, we believe that ourRecent economic conditions have increased overall margins reflecting an appropriate return on capital to support the business. Our experience and expertise in assessing and managing risk and our strong focus on customer service willshould help us to remain competitive during volatile or otherwise adverse market circumstances.

Merchant EnergyGeneration and NewEnergy Operating Statistics

Our financial results may fluctuate on a seasonal and quarterly basis or as a result of severe weather.

Our business is affected by weather conditions. Our overall operating results may fluctuate substantially on a seasonal basis, and the pattern of this fluctuation may change depending on the nature and location of any facility we acquire and the terms of any contract to which we become a party. Weather conditions directly influence the demand for electricity and natural gas and affect the price of energy commodities.

        Generally, demand for electricity peaks in winter and summer and demand for gas peaks in the winter. Typically, when winters are warmer than expected and summers are cooler than expected, demand for energy is lower, resulting in less electric and gas consumption than forecasted. Depending on prevailing market prices for electricity and gas, these and other unexpected conditions may reduce our revenues and results of operations. First and third quarter financial results, in particular, are substantially dependent on weather conditions, and may make period comparisons less relevant.

        Severe weather can be destructive, causing outages and/or property damage. This could require us to incur additional costs. Catastrophic weather, such as hurricanes, could impact our or our customers' operating facilities, communication systems and technology. Unfavorable weather conditions may have a material adverse effect on our financial results.

A downgradeInvestment in our credit ratings could negativelynew business initiatives and markets may not be successful.

Our NewEnergy business has sought to invest in new business initiatives and actively participate in new markets. These include, but are not limited to, unconventional oil and gas exploration and production, residential retail power and gas sales, solar and wind generation, and managed load response. Such initiatives may involve significant risks and uncertainties, including distraction of management from current operations, inadequate return on capital, and unidentified issues not discovered in the diligence performed prior to launching an initiative or entering a market. Due to these risks, no assurance can be given that such initiatives will be successful and will not materially adversely affect our ability to access capital and/financial results. Additionally, as these markets mature, there may be new market entrants or operateexpansion by established competitors that increase competition for customers and resources, which could result in us not achieving our wholesaleplans and retail competitive supply businesses.

We rely on access to capital markets as a source of liquidity for capital requirements not satisfied by

operating cash flows. If any of our credit ratings were to be downgraded, especially below investment grade, our ability to raise capital on favorable terms, including the commercial paper markets, could be hindered, and our borrowing costs would increase. Additionally, the business prospects of our wholesale and retail competitive supply businesses, which in many cases rely on the creditworthiness of Constellation Energy, would be negatively impacted. Some of the factors that affect credit ratings are cash flows, liquidity, the amount of debt as a component of total capitalization, and political, legislative and regulatory events.

        In addition, the ability of BGE to recover its costs of providing service and timing of BGE's recovery could have a material adverse effect on the credit ratingsour financial results.

A failure in our operational systems or infrastructure, or those of BGE and us.

We, and BGE in particular, are subject to extensive local, state and federal regulation that couldthird parties, may adversely affect our operationsfinancial results.

Our businesses are dependent upon our operational systems to process a large amount of data and costs.

We are subject to regulation by federal and state governmental entities, including the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the Maryland PSC and the utility commissions of other states in which we have operations. In addition, changing governmental policies and regulatory actions can have a significant impact on us. Regulations can affect, for example, allowed rates of return, requirements for plant operations, recovery of costs, limitations on dividend payments and the regulation or re-regulation of wholesale and retail competition (including but not limited to retail choice and transmission costs).

        BGE's distribution rates are subject to regulation by the Maryland PSC, and such rates are effective until new rates are approved. In addition, limited categories of costs are recovered through adjustment charges that are periodically reset to reflect current and projected costs. Inability to recover material costs not included in rates or adjustment clauses, including increases in uncollectible customer accounts that may result from higher gas or electric costs, could have an adverse effect on our, or BGE's, cash flow and financial position.

        Energy legislation enacted in Maryland in June 2006 and April 2007 mandated that the Maryland PSC review Maryland's deregulated electricity market. In December 2007 and January 2008, the Maryland PSC issued interim reports that addressed the costs and benefits of options for re-regulation and reviewed the impact to customers resulting from Maryland's deregulation process. In addition, the Maryland PSC continues to review the relationship between Constellation Energy and BGE. Because reviews of the Maryland electric industry and market structure are ongoing, we cannot at this time predict the final outcome of these reviews and proposals or how such outcome may affect our, or BGE's, financial results, but it could be material.

        In addition, the June 2006 legislation required BGE to provide credits to residential electric customers totaling approximately $39 million annually. In January 2008, we notified the State of Marylandcomplex transactions. If any of our intent to file a federal action to enforcefinancial, accounting, or other data processing systems fail or have other significant shortcomings, our rights under the 1999 Maryland electric deregulation settlement and to challenge the constitutionality of the residential customer credits provided for under the June 2006 legislation. We may incur significant costs to litigate this action and we cannot provide any assurances that it will be resolved in our favor. If the action is resolved in a manner adverse to us, which may include a court determining that the legislation appropriately required the residential rate credits or overturning aspects of the 1999 electric deregulation settlement, the impact on our, or BGE's, financial results could be material.adversely affected. Our financial results could also be adversely affected if an employee causes our operational systems to fail, either as a result of inadvertent error or by deliberately tampering with or manipulating our operational systems. In addition, dependence upon automated systems may further increase the risk that operational system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect.

        The regulatory processWe may restrict our abilityalso be subject to grow earnings in certain partsdisruptions of our business, cause delays inoperational systems arising from events that are wholly or affect business planningpartially beyond our control (for example, natural disasters, acts of terrorism, epidemics, computer viruses and transactions and increase our,telecommunications outages). Third party systems on which we rely could also suffer operational system failure. Any of these occurrences could disrupt one or BGE's, costs.

Poor market performance will affect our benefit plan and nuclear decommissioning trust asset values, which may adversely affect our liquidity and financial results.

Our qualified pension obligations have exceeded the fair valuemore of our plan assets since 2001. At December 31, 2007, our qualified pension obligations were approximately $315 million greater than the fair value of our plan assets. The performance of the capital markets will affect the value of the assets that are heldbusinesses, result in trust to satisfy our future obligations under our qualified pension plans. A decline in the market value of those assets may increase our funding requirements for these obligations, which may adversely affect our liquidity and financial results.

        We are required to maintain funded trusts to satisfy our future obligations to decommission our nuclear power plants. A decline in the market value of those assets due to poor investment performancepotential liability or other factors may increase our funding requirements for these obligations, which mayreputational damage or otherwise have an adverse effectaffect on our liquidity and financial results.

Our ability to successfully identify, complete and integrate acquisitions is subject to significant risks, including the effect of increased competition.

We are likely to encounter significant competition for acquisition opportunities that may become available. In addition, we may be unable to identify attractive acquisition opportunities at favorable prices, to secure the financing necessary to undertake them, or to successfully and timely complete and integrate them. Specifically, we intend to continue to pursue the acquisition of new generating plants in regions where we have significant retail and wholesale customer supply operations. Acquired plants may not generate the projected rates of return or sufficiently match generation capacity with retail and wholesale customer supply operations volumes causing an increase in collateral requirements. If we cannot identify, complete and integrate acquisitions successfully, our business, results of operations and financial condition could be adversely affected.

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War, and threats of terrorism and catastrophic events that could result from terrorism may impact ourthe results of our operations in unpredictable ways.

We cannot predict the impact that any future act of war, terrorist attacks mayattack, or catastrophic event might have on the energy industry in general and on our business in particular. In addition, any retaliatory military strikes or sustained military campaign may affect our operations in unpredictable ways, such as changes in insurance markets and disruptions of fuel supplies and markets, particularly oil.

The possibility alone that infrastructure facilities, such as electric generation, electric and gas transmission and distribution facilities would be direct targets of, or indirect casualties of, an act of terror, war, or a catastrophic event may affect our operations. Furthermore, these catastrophic events could compromise the physical or cyber security of our facilities, which could adversely affect our ability to manage our business effectively.

        Such activity may have an adverse effect on the United States economy in general. A lower level of economic activity might result in a decline in energy consumption, which may adversely affect our financial results or restrict our future growth. Instability in the financial markets as a result of war, threats of terrorism, or warand catastrophic events may affect our stock price and our ability to raise capital.

        In addition, we maintain a level of insurance coverage consistent with industry practices against property and casualty losses subject to unforeseen occurrences or catastrophic events that may damage or destroy assets or interrupt operations. Furthermore, in the event of a severe disruption resulting from war, threats of terrorism, and catastrophic events, we have contingency plans and employ crisis management to respond and recover operations. Despite these measures, there may be events beyond our control that may severely impact operations and affect financial performance.

A downgrade in our credit ratings could negatively affect our ability to access capital and/or operate our wholesale and retail NewEnergy business.

We rely on access to capital markets as a source of liquidity for capital requirements not satisfied by operating cash flows. If any of our credit ratings were to be downgraded, especially below investment grade, our ability to raise capital on favorable terms, including in the commercial paper markets, if available, could be hindered, and our borrowing costs would increase. Additionally, the business prospects of our wholesale and retail NewEnergy business, which in many cases rely on the creditworthiness of Constellation Energy, would be negatively impacted. In this regard, we have certain agreements that contain provisions that would require us to post additional collateral upon a credit rating downgrade. Based on market conditions and contractual obligations at the time of a downgrade, we could be required to post collateral in an amount that exceeds our available liquidity. Some of the factors that affect credit ratings are cash flows, liquidity, the amount of debt as a component of total capitalization, and political, legislative, and regulatory events.

We are subject to employee workforce factors that could affect our businesses and financial results.

We are subject to employee workforce factors, including loss or retirement of key executives or other employees, availability of qualified personnel, collective bargaining agreements with union employees, and work stoppage that could affect our financial results. In particular, our competitive energy businesses are dependent, in part, on recruiting and retaining personnel with experience in sophisticated energy transactions and the functioning of complex wholesale markets.

Our ability to successfully identify, complete and integrate acquisitions is subject to significant risks, including the effect of increased competition.

We are likely to encounter significant competition for acquisition opportunities that may become available. In addition, we may be unable to identify attractive acquisition opportunities at favorable prices and to successfully and timely complete and integrate them.

Item 2. Properties

Constellation Energy occupies approximately 900,000856,000 square feet of leased and owned office space in North America, which includes its corporate offices in Baltimore, Maryland. We describe our electric generation properties on the next page. We also have leases for other offices and services located in the Baltimore metropolitan region, and for various real property and facilities relating to our generation projects.

        BGE owns its principal headquarters building located in downtown Baltimore. BGE also leases approximately 16,670 square feet of office space. In addition, BGE owns propane air and liquefied natural gas facilities as discussed inItem 1. Business—Gas Business section.

        BGE also has rights-of-way to maintain 26-inch natural gas mains across certain Baltimore City-owned property (principally parks) which expired in 2004. BGE is in the process of renewing the rights-of-way with Baltimore City for an additional 25 years. The expiration of the rights-of-way does not affect BGE's ability to use the rights-of-way during the renewal process.

        BGE has electric transmission and electric and gas distribution lines located:

•

in public streets and highways pursuant to franchises, and

•

on rights-of-way secured for the most part by grants from owners of the property.

        All of BGE's property is subject to the lien of BGE's mortgage securing its mortgage bonds. The generation facilities transferred to our subsidiaries by BGE on July 1, 2000, along with the stock we own in certain of our subsidiaries, are subject to the lien of BGE's mortgage. We expect the assets to be released from this lien following payment in March 2008 of the last series of bonds outstanding under the mortgage and the discharge of the mortgage.

We believe we have satisfactory title to our power project facilities in accordance with standards generally accepted in the energy industry, subject to exceptions, which in our opinion, would not have a material adverse effect on the use or value of the facilities.

        Our merchant energyNewEnergy business owns several natural gas producing properties. We also lease office space in the United Kingdom and Australia to support our merchant energy business.