WGL (WGL) 10-Q/A 2001 Q2 Quarterly report (amended)

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

FORM 10-Q/A

(Mark One)

[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended March 31, 2001

OR

[  ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	Exact name of registrant as		I.R.S.
Commission	specified in its charter and principal	States of	Employer
File Number	office address and telephone number	Incorporation	I.D. Number
1-16163	WGL Holdings, Inc.	Virginia	52-2210912
	1100 H Street, N.W.
	Washington, D.C. 20080
	(703) 750-2000
1-1483	Washington Gas Light Company	District of Columbia	53-0162882
	1100 H Street, N.W.	and Virginia
	Washington, D.C. 20080
	(703) 750-4440

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),

WGL Holdings, Inc.:	Yes X	No
Washington Gas Light Company:	Yes X	No

and (2) has been subject to such filing requirements for the past 90 days:

WGL Holdings, Inc.:	Yes X	No
Washington Gas Light Company:	Yes X	No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

		Shares Outstanding at
Registrant	Description of Common Stock	April 30, 2001
WGL Holdings, Inc.	Common Stock (Without Par Value)		46,505,977
Washington Gas Light Company	Common Stock ($1.00 Par Value)		46,479,536
	(All held by WGL Holdings, Inc.)

Explanatory Note

WGL Holdings, Inc. (“WGL”) and Washington Gas Light Company (“Washington Gas”), its utility subsidiary, as co-registrants (collectively the “Company”) are filing this Amendment to its Quarterly Report on Form 10-Q for the period ended March 31, 2001, originally filed with the Securities and Exchange Commission on May 15, 2001 in order to restate the Financial Statements, Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Additional Exhibits in that report.

In August 2001, the Company discovered an accounting error that caused an overstatement of net income derived from utility operations for the quarter ended March 31, 2001. As a result, the Company has restated its interim statements as of March 31, 2001 and for the three and six months then ended. Note 1 to the financial statements included in this Form 10-Q/A provides more details on the effects of this accounting error.

For purposes of this Form 10-Q/A, and in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Company has amended and restated in its entirety each item of its fiscal 2001 second quarter Form 10-Q which has been affected by the restatement. In order to preserve the nature and character of the disclosures originally set forth in the fiscal 2001 second quarter Form 10-Q filed on May 15, 2001, this Form 10-Q/A does not reflect events occurring after the filing of the original Form 10-Q, or modify or update those disclosures in any way, except as required to reflect the effects of the restatement.

Form 10-Q/A
For the Second Fiscal Quarter Ended March 31, 2001

TABLE OF CONTENTS

PART I. Financial Information
Item 1Financial Statements:
	WGL Holdings, Inc.:
		Consolidated Balance Sheets	4
		Consolidated Statements of Income	5
		Consolidated Statements of Cash Flows	7
	Washington Gas Light Company:
		Consolidated Balance Sheets	8
		Consolidated Statements of Income	9
		Consolidated Statements of Cash Flows	11
	Notes to Consolidated Financial Statements		12
		(WGL Holdings, Inc. and Washington Gas Light Company —Combined)
Item 2Management’s Discussion and Analysis of Financial
	Condition and Results of Operations		21
	WGL Holdings, Inc.		21
	Washington Gas Light Company		34
Item 3Quantitative and Qualitative Disclosures About
	Market Risks of the Company		38
PART II. Other Information
99       Additional Exhibits			37
Signatures			40

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FILING FORMAT

      This Quarterly Report on Form 10-Q/A is a combined report being filed by two separate registrants: WGL Holdings, Inc. (WGL Holdings or the Company) and Washington Gas Light Company (Washington Gas or the Utility).

      Effective November 1, 2000, Washington Gas and its subsidiaries became subsidiaries of WGL Holdings, a newly formed holding company that was established under thePublic Utility Holding Company Act of 1935. At that time, all of the shares of common stock of Washington Gas, a regulated natural gas utility, were converted into an equal number of shares of common stock of WGL Holdings. WGL Holdings also owns all of the shares of common stock of Washington Gas’ former wholly owned subsidiaries (Hampshire Gas Company, Washington Gas Resources Corp. and Crab Run Gas Company), and its former 50 percent equity investment in Primary Investors, LLC.

      Part I —Financial Informationof this Quarterly Report on Form 10-Q includes separate consolidated financial statements (i.e., balance sheets, statements of income and statements of cash flows) for WGL Holdings and Washington Gas. The WGL Holdings financial statements (pages 4 through 7) present the consolidated financial position and results of operations of WGL Holdings for the respective periods indicated after the November 1, 2000 restructuring, as well as the consolidated financial position of Washington Gas prior to the restructuring (i.e., the highest level of consolidation). The consolidated results of operations and financial position of Washington Gas immediately before the restructuring is essentially identical to the financial position and results of operations of WGL Holdings immediately after the restructuring (i.e., legal entity results).

      The consolidated financial statements for Washington Gas (pages 8 through 11) present the financial position and results of operations of Washington Gas throughout the reported periods, as well as the consolidated financial position and results of operations of Washington Gas’ former subsidiaries prior to the November 1, 2000 restructuring.

      A single set of Notes to the Consolidated Financial Statements begins on page 12 which applies equally to WGL Holdings and Washington Gas, except where otherwise noted.

      This report includes a Management’s Discussion and Analysis of Financial Condition and Results of Operations for WGL Holdings as well as a separate discussion for Washington Gas. However, due to the similarity of the operating results of the two entities, the reader is directed to the WGL Holdings disclosure unless otherwise specified in the Washington Gas Management’s Discussion and Analysis.

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WGL Holdings, Inc.
CONSOLIDATED BALANCE SHEETS

					March 31,			September 30,
(Thousands)					2001			2000
					Restated
ASSETS						(Unaudited	)
	Property, Plant and Equipment
			At original cost		$	2,268,647		$	2,225,312
			Accumulated depreciation and amortization			(793,415	)		(765,032	)
				Net Property, Plant and Equipment		1,475,232			1,460,280
	Current Assets
			Cash and cash equivalents			25,935			24,336
			Accounts receivable			381,573			106,446
			Gas costs due from customers			15,128			2,313
			Allowance for doubtful accounts			(16,529	)		(7,186	)
			Accrued utility revenues			87,846			21,497
			Materials and supplies—principally at average cost			12,715			16,341
			Storage gas—at cost (first-in, first-out)			32,639			138,684
			Deferred income taxes			27,604			16,232
			Other prepayment—principally taxes			6,830			7,467
			Deferred gas costs—unregulated operations			—			13,741
			Other			624			5,991
				Total Current Assets		574,365			345,862
		Deferred Charges and Other Assets
			Regulatory assets			83,354			78,364
			Unrecovered gas costs			74,383			—
			Equity in 50%-owned residential HVAC investment			16,085			16,247
			Prepaid pensions and benefits			28,202			17,327
			Other			24,878			21,760
				Total Deferred Charges and Other Assets		226,902			133,698
				Total Assets	$	2,276,499		$	1,939,840
CAPITALIZATION AND LIABILITIES
		Capitalization
			Common shareholders’ equity		$	795,577		$	711,496
			Washington Gas preferred stock			28,173			28,173
			Long-term debt			597,465			559,575
				Total Capitalization		1,421,215			1,299,244
		Current Liabilities
			Current maturities of long-term debt			29,724			1,668
			Notes payable			206,443			161,423
			Accounts payable			176,268			138,218
			Wages payable			15,075			13,875
			Deferred gas costs—unregulated operations			14,909			—
			Dividends declared			14,974			14,738
			Customer deposits and advance payments			7,852			10,746
			Gas costs due to customers			12,003			5,640
			Accrued taxes			52,973			8,252
			Other			4,313			5,441
				Total Current Liabilities		534,534			360,001
		Deferred Credits
			Unamortized investment tax credits			18,090			18,539
			Deferred income taxes			219,659			169,442
			Accrued pensions and benefits			35,361			37,936
			Other			47,640			54,678
				Total Deferred Credits		320,750			280,595
				Total Capitalization and Liabilities	$	2,276,499		$	1,939,840

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

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WGL Holdings, Inc.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

					Three Months Ended
					March 31,
(Thousands, Except Per Share Data)					2001			2000
					Restated
UTILITY OPERATIONS
Operating Revenues					$	605,155		$	392,314
	Less: Cost of goods sold					391,730			200,214
		Revenue taxes				15,120			15,540
			Utility Net Revenues			198,305			176,560
Other Operating Expenses
	Operation					42,501			39,534
	Maintenance					9,709			7,686
	Depreciation and amortization					17,038			16,326
	General taxes					11,630			5,905
	Income Taxes					40,785			35,547
			Other Operating Expenses			121,663			104,998
				Utility Operating Income		76,642			71,562
NON-UTILITY OPERATIONS
Operating Revenues
	Energy marketing					143,218			63,255
	Heating, ventilating and air conditioning					25,943			12,038
	Consumer financing					872			1,111
	Other non-utility					263			253
			Non-Utility Operating Revenues			170,296			76,657
Equity Loss in 50%-Owned Residential HVAC Investment						(343	)		(366	)
Other Operating Expenses (Income)
	Operating expenses					166,989			70,815
	Gains on sales of non-utility assets					—			(346	)
	Income taxes					1,003			1,457
			Non-Utility Operating Expenses (Income)			167,992			71,926
				Non-Utility Operating Income		1,961			4,365
TOTAL OPERATING INCOME						78,603			75,927
Other Income (Expenses)—Net						(2,666	)		615
INCOME BEFORE INTEREST EXPENSE						75,937			76,542
INTEREST EXPENSE
	Interest on long-term debt					10,546			9,043
	Other					3,054			2,256
			Total Interest Expense			13,600			11,299
WASHINGTON GAS PREFERRED STOCK DIVIDENDS						330			330
NET INCOME					$	62,007		$	64,913
AVERAGE COMMON SHARES OUTSTANDING						46,488			46,475
EARNINGS PER AVERAGE COMMON SHARE—BASIC(Note 3)					$	1.33		$	1.40
EARNINGS PER AVERAGE COMMON SHARE —DILUTED(Note 3)					$	1.33		$	1.39
DIVIDENDS DECLARED PER COMMON SHARE					$	0.315		$	0.310

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

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WGL Holdings, Inc.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

					Six Months Ended
					March 31,
(Thousands, Except Per Share Data)					2001			2000
					Restated
UTILITY OPERATIONS
Operating Revenues					$	1,145,512		$	702,830
	Less: Cost of goods sold					744,541			365,116
		Revenue taxes				33,149			27,222
			Utility Net Revenues			367,822			310,492
Other Operating Expenses
	Operation					80,912			75,074
	Maintenance					17,592			14,153
	Depreciation and amortization					33,894			32,291
	General taxes					19,072			10,365
	Income Taxes					73,628			58,070
			Other Operating Expenses			225,098			189,953
				Utility Operating Income		142,724			120,539
NON-UTILITY OPERATIONS
Operating Revenues
	Energy marketing					232,726			107,009
	Heating, ventilating and air conditioning					42,237			22,414
	Consumer financing					1,627			1,687
	Other non-utility					382			644
			Non-Utility Operating Revenues			276,972			131,754
Equity Loss in 50%-Owned Residential HVAC Investment						(918	)		(527	)
Other Operating Expenses (Income)
	Operating expenses					273,733			122,964
	Gains on sales of non-utility assets					—			(711	)
	Income taxes					616			2,612
			Non-Utility Operating Expenses (Income)			274,349			124,865
				Non-Utility Operating Income		1,705			6,362
TOTAL OPERATING INCOME						144,429			126,901
Other Income (Expenses)—Net						(4,616	)		90
INCOME BEFORE INTEREST EXPENSE						139,813			126,991
INTEREST EXPENSE
	Interest on long-term debt					20,514			17,495
	Other					6,211			4,474
			Total Interest Expense			26,725			21,969
WASHINGTON GAS PREFERRED STOCK DIVIDENDS						660			663
NET INCOME					$	112,428		$	104,359
AVERAGE COMMON SHARES OUTSTANDING						46,483			46,472
EARNINGS PER AVERAGE COMMON SHARE—BASIC(Note 3)					$	2.42		$	2.25
EARNINGS PER AVERAGE COMMON SHARE —DILUTED(Note 3)					$	2.42		$	2.24
DIVIDENDS DECLARED PER COMMON SHARE					$	0.625		$	0.615

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

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WGL Holdings, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

				Six Months Ended
				March 31,
				2001			2000
(Thousands)				Restated
OPERATING ACTIVITIES
Net income				$	112,428		$	104,359
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
	(USED IN) OPERATING ACTIVITIES
		Depreciation and amortization(a)			37,080			34,881
		Deferred income taxes—net			32,148			7,801
		Amortization of investment tax credits			(449	)		(450	)
		Accrued/deferred pension cost			(7,533	)		(6,713	)
		Allowance for funds used during construction			(315	)		(439	)
		Equity loss in 50%-owned residential HVAC investment			918			527
		Other non-cash credits—net, including gains and losses on investing activities			(412	)		(508	)
					173,865			139,458
CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable and accrued utility revenues			(332,133	)		(159,540	)
		Gas costs due from/to customers—net			(6,452	)		(4,932	)
		Storage gas			106,045			51,782
		Other prepayments—principally taxes			637			3,449
		Accounts payable			37,752			9,118
		Wages payable			1,200			4,337
		Customer deposits and advance payments			(2,894	)		(7,843	)
		Accrued taxes			44,721			38,252
		Accrued interest			297			(15	)
		Deferred purchased gas cost—net (utility)			(78,478	)		6,577
		Deferred purchased gas costs (non-utility)			28,650			4,158
		Other—net			612			462
			Net Cash Provided by (Used in) Operating Activities		(26,178	)		85,263
FINANCING ACTIVITIES
		Long-term debt issued			67,095			1,830
		Long-term debt retired			(1,091	)		(775	)
		Debt issuance costs			(393	)		(118	)
		Notes payable—net			45,020			(9,178	)
		Dividends on common stock			(28,817	)		(28,332	)
		Other financing activities			542			443
			Net Cash Provided by (Used in) Financing Activities		82,356			(36,130	)
INVESTING ACTIVITIES
		Capital expenditures			(47,853	)		(49,706	)
		50%-owned residential HVAC investment			—			(4,800	)
		Other investing activities			(6,726	)		(1,392	)
			Net Cash Used in Investing Activities		(54,579	)		(55,898	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS(b)					1,599			(6,765	)
Cash and Cash Equivalents at Beginning of Year (b)					24,336			26,935
Cash and Cash Equivalents at End of Year (b)				$	25,935		$	20,170
(a) Includes amounts charged to other accounts.
(b) Cash equivalents are highly liquid investments with a maturity of three months or less when purchased.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
		Income taxes paid		$	14,870		$	19,354
		Interest paid		$	26,269		$	22,035

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

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Washington Gas Light Company
CONSOLIDATED BALANCE SHEETS

					March 31,			September 30,
					2001			2000
(Thousands)					Restated
					(Unaudited)
ASSETS
	Property, Plant and Equipment
		At original cost			$	2,247,302		$	2,225,312
		Accumulated depreciation and amortization				(780,726	)		(765,032	)
			Net Property, Plant and Equipment			1,466,576			1,460,280
	Current Assets
		Cash and cash equivalents				21,622			24,336
		Accounts receivable (See Note 7)				265,931			106,446
		Gas costs due from customers				15,128			2,313
		Allowance for doubtful accounts				(15,060	)		(7,186	)
		Accrued utility revenues				87,846			21,497
		Materials and supplies—principally at average cost				12,475			16,341
		Storage gas—at cost (first-in, first-out)				32,639			138,684
		Deferred income taxes				16,923			16,232
		Other prepayments—principally taxes				5,788			7,467
		Deferred gas costs—unregulated operations				—			13,741
		Other				—			5,991
			Total Current Assets			443,292			345,862
	Deferred Charges and Other Assets
		Regulatory assets				83,354			78,364
		Unrecovered gas costs				74,383			—
		Equity in 50%-owned residential HVAC investment				—			16,247
		Prepaid pensions and benefits				28,059			17,327
		Other				28,977			21,760
			Total Deferred Charges and Other Assets			214,773			133,698
				Total Assets	$	2,124,641		$	1,939,840
CAPITALIZATION AND LIABILITIES
	Capitalization
		Common shareholder’s equity			$	728,650		$	711,496
		Preferred stock				28,173			28,173
		Long-term debt				597,181			559,575
			Total Capitalization			1,354,004			1,299,244
	Current Liabilities
		Current maturities of long-term debt				29,403			1,668
		Notes payable				179,474			161,423
		Accounts payable (See Note 7)				148,319			138,218
		Wages payable				14,813			13,875
		Dividends declared				14,981			14,738
		Customer deposits and advance payments				7,852			10,746
		Gas costs due to customers				12,003			5,640
		Accrued taxes				38,478			8,252
		Other				3,583			5,441
			Total Current Liabilities			448,906			360,001
	Deferred Credits
		Unamortized investment tax credits				18,053			18,539
		Deferred income taxes				221,142			169,442
		Accrued pensions and benefits				35,217			37,936
		Other				47,319			54,678
			Total Deferred Credits			321,731			280,595
				Total Capitalization and Liabilities	$	2,124,641		$	1,939,840

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

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Washington Gas Light Company
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

					Three Months Ended
					March 31,
(Thousands)					2001			2000
					Restated
UTILITY OPERATIONS
Operating Revenues(See Note 7)					$	609,186		$	392,314
	Less: Cost of goods sold (See Note 7)					395,761			200,214
		Revenue taxes				15,120			15,540
			Utility Net Revenues			198,305			176,560
Other Operating Expenses
	Operation (See Note 7)					43,108			39,534
	Maintenance					9,660			7,686
	Depreciation and amortization					16,875			16,326
	General taxes					11,517			5,905
	Income Taxes					40,670			35,547
			Other Operating Expenses			121,830			104,998
				Utility Operating Income		76,475			71,562
NON-UTILITY OPERATIONS
Operating Revenues
	Energy marketing					—			63,255
	Heating, ventilating and air conditioning					—			12,038
	Consumer financing					872			1,111
	Other non-utility					263			253
			Non-Utility Operating Revenues			1,135			76,657
Equity Loss in 50%-Owned Residential HVAC Investment						—			(366	)
Other Operating Expenses (Income)
	Operating expenses					607			70,815
	Gains on sales of non-utility assets					—			(346	)
	Income taxes					97			1,457
			Non-Utility Operating Expenses (Income)			704			71,926
				Non-Utility Operating Income		431			4,365
TOTAL OPERATING INCOME						76,906			75,927
Other Income (Expenses)—Net						(2,372	)		615
INCOME BEFORE INTEREST EXPENSE						74,534			76,542
INTEREST EXPENSE
	Interest on long-term debt					10,546			9,043
	Other					2,973			2,256
			Total Interest Expense			13,519			11,299
NET INCOME						61,015			65,243
DIVIDENDS ON PREFERRED STOCK						330			330
NET INCOME APPLICABLE TO COMMON STOCK					$	60,685		$	64,913

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

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Washington Gas Light Company
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

					Six Months Ended
					March 31,
(Thousands)					2001			2000
					Restated
UTILITY OPERATIONS
Operating Revenues(See Note 7)					$	1,151,653		$	702,830
	Less: Cost of goods sold (See Note 7)					750,682			365,116
		Revenue taxes				33,149			27,222
			Utility Net Revenues			367,822			310,492
Other Operating Expenses
	Operation (See Note 7)					81,731			75,074
	Maintenance					17,515			14,153
	Depreciation and amortization					33,623			32,291
	General taxes					18,898			10,365
	Income Taxes					73,519			58,070
			Other Operating Expenses			225,286			189,953
				Utility Operating Income		142,536			120,539
NON-UTILITY OPERATIONS
Operating Revenues
	Energy marketing					17,755			107,009
	Heating, ventilating and air conditioning					5,066			22,414
	Consumer financing					1,627			1,687
	Other non-utility					382			644
			Non-Utility Operating Revenues			24,830			131,754
Equity Loss in 50%-Owned Residential HVAC Investment						(167	)		(527	)
Other Operating Expenses (Income)
	Operating expenses					24,080			122,964
	Gains on sales of non-utility assets					—			(711	)
	Income taxes					(21	)		2,612
			Non-Utility Operating Expenses (Income)			24,059			124,865
				Non-Utility Operating Income		604			6,362
TOTAL OPERATING INCOME						143,140			126,901
Other Income (Expenses)—Net						(4,149	)		90
INCOME BEFORE INTEREST EXPENSE						138,991			126,991
INTEREST EXPENSE
	Interest on long-term debt					20,514			17,495
	Other					6,215			4,474
			Total Interest Expense			26,729			21,969
NET INCOME						112,262			105,022
DIVIDENDS ON PREFERRED STOCK						660			663
NET INCOME APPLICABLE TO COMMON STOCK					$	111,602		$	104,359

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

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Washington Gas Light Company
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

				Six Months Ended
				March 31,
				2001			2000
(Thousands)				(Restated)
OPERATING ACTIVITIES
Net income				$	112,262		$	105,022
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
	(USED IN) OPERATING ACTIVITIES
		Depreciation and amortization (a)			36,572			34,881
		Deferred income taxes—net			43,370			7,801
		Amortization of investment tax credits			(447	)		(450	)
		Accrued/deferred pension cost			(7,487	)		(6,713	)
		Allowance for funds used during construction			(315	)		(439	)
		Equity loss in 50%-owned residential HVAC investment			167			527
		Other non-cash credits—net, including gains and losses on investing activities			(412	)		(508	)
					183,710			140,121
CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable and accrued utility revenues			(245,939	)		(159,540	)
		Gas costs due from/to customers—net			(6,452	)		(4,932	)
		Storage gas			106,045			51,782
		Other prepayments—principally taxes			1,562			3,449
		Accounts payable			21,881			9,118
		Wages payable			1,053			4,337
		Customer deposits and advance payments			(2,894	)		(7,843	)
		Accrued taxes			32,948			38,252
		Accrued Interest			297			(15	)
		Deferred purchased gas costs—net (utility)			(78,478	)		6,577
		Deferred purchased gas costs (non-utility)			(2,405	)		4,158
		Other—net			(1,391	)		462
			Net Cash Provided by Operating Activities		9,937			85,926
FINANCING ACTIVITIES
		Long-term debt issued			66,809			1,830
		Long-term debt retired			(934	)		(775	)
		Debt issuance costs			(393	)		(118	)
		Notes payable—net			18,051			(9,178	)
		Dividends on common and preferred stock			(29,470	)		(28,995	)
		Other financing activities			392			443
			Net Cash Provided by (Used in) Financing Activities		54,455			(36,793	)
INVESTING ACTIVITIES
		Capital expenditures			(48,583	)		(49,706	)
		Cash transfer related to formation of holding company (See Note 7)			(11,797	)		—
		50%-owned residential HVAC investment			—			(4,800	)
		Other investing activities			(6,726	)		(1,392	)
			Net Cash Used in Investing Activities		(67,106	)		(55,898	)
DECREASE IN CASH AND CASH EQUIVALENTS(b)					(2,714	)		(6,765	)
Cash and Cash Equivalents at Beginning of Year (b)					24,336			26,935
Cash and Cash Equivalents at End of Year (b)				$	21,622		$	20,170
(a) Includes amounts charged to other accounts.
(b) Cash equivalents are highly liquid investments with a maturity of three months or less when purchased.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
		Income taxes paid		$	12,790		$	19,354
		Interest paid		$	26,008		$	22,035

The accompanying Notes to Consolidated Financial Statements are an integral part of these consolidated statements.

-11-

WGL Holdings, Inc. and
Washington Gas Light Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1—GENERAL
Restated Financial Statements

In August 2001, the Company discovered an accounting error that affected previously reported net income derived from utility operations for the quarter ended March 31, 2001. As a result, the Company has restated the interim financial statements as of March 31, 2001 and for the three and six months then ended included in this Form 10-Q/A. The details of the accounting error were provided in a Form 8-K, filed with the Securities and Exchange Commission on August 13, 2001. No restatement was made to the results for any other periods as a result of this correction.

As a result of the foregoing, the Company’s financial statements as of March 31, 2001, have been restated as follows to reflect the correction of the consolidated statements of income and consolidated balance sheets for WGL Holdings and Washington Gas. Additionally, the consolidated statements of cash flows for WGL Holdings and Washington Gas for the six months ended March 31, 2001 and notes to consolidated financial statements were also restated to reflect the resulting impact of the changes to the statements of income and balance sheets shown below.

WGL Holdings, Inc.
Consolidated Statements of Income
(Unaudited)

			Three Months Ended				Six Months Ended
			March 31, 2001				March 31, 2001
			(As Reported)		(Restated)		(As Reported)		(Restated)
Operating Revenues			$	605,155	$	605,155	$	1,145,512	$	1,145,512
	Less: Cost of Gas			383,969		391,730		736,780		744,541
		Revenue taxes		15,120		15,120		33,149		33,149
Utility Net Revenues			$	206,066	$	198,305	$	375,583	$	367,822
Income Taxes			$	43,731	$	40,785	$	76,574	$	73,628
Utility Operating Income				81,457		76,642		147,539		142,724
Income before Interest Expense				80,752		75,937		144,628		139,813
Net Income				66,822		62,007		117,243		112,428
Earning per Average Common Share			$	1.44	$	1.33	$	2.52	$	2.42
Basic and Diluted

Consolidated Balance Sheets	As of
	March 31, 2001
	(As Reported)		(Restated)
Unrecovered Gas Costs	$	82,144	$	74,383
Total Deferred Charges & Other Assets		234,663		226,902
Total Assets		2,284,260	$	2,276,499
Common Shareholders’ Equity		800,392		795,577
Total Capitalization		1,426,030		1,421,215
Deferred Income Taxes		222,605		219,659
Total Deferred Credits		323,696		320,750
Total Capitalization and Liabilities	$	2,284,260	$	2,276,499

Washington Gas Light Company
Consolidated Statements of Income
			Three Months Ended				Six Months Ended
			March 31, 2001				March 31, 2001
			(As Reported)		(Restated)		(As Reported)		(Restated)
Operating Revenue			$	609,186	$	609,186	$	1,151,653	$	1,151,653
	Less: Cost of Gas			388,000		395,761		742,921		750,682
		Revenue taxes		15,120		15,120		33,149		33,149
Net Revenues			$	206,066	$	198,305	$	375,583	$	367,822
Income Taxes			$	43,616	$	40,670	$	76,465	$	73,519
Utility Operating Income				81,290		76,475		147,351		142,536
Income before Interest Expense				79,349		74,534		143,806		138,991
Net Income				65,500		60,685		116,417		111,602

Consolidated Balance Sheets	As of
	March 31, 2001
	(As Reported)		(Restated)
Unrecovered Gas Costs	$	82,144	$	74,383
Total Deferred Charges & Other Assets		222,534		214,773
Total Assets		2,132,402	$	2,124,641
Common Shareholders’ Equity		733,465		728,650
Total Capitalization		1,358,819		1,354,004
Deferred Income Taxes		224,088		221,142
Total Deferred Credits		324,677		321,731
Total Capitalization and Liabilities	$	2,132,402	$	2,124,641

     Financial Statement Presentation

     Effective November 1, 2000, Washington Gas Light Company (Washington Gas or the Utility) and its subsidiaries became subsidiaries of WGL Holdings, Inc. (WGL Holdings or the Company), a newly formed holding company that was established under thePublic Utility Holding Company Act of 1935. At that time, all of the shares of common stock of Washington Gas, a regulated natural gas utility, were converted into an equal number of shares of common stock of WGL Holdings. WGL Holdings also owns all of the shares of common stock of Washington Gas’ former wholly owned subsidiaries (Hampshire Gas Company, Washington Gas Resources Corp., and Crab Run Gas Company), and its former 50 percent equity investment in Primary Investors, LLC. See the fiscal year 2000 Washington Gas Annual Report on Form 10-K for additional details about this restructuring.

     This Quarterly Report on Form 10-Q is a combined report of WGL Holdings and Washington Gas. Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are presented as follows:

WGL Holdings—For all periods reported in this Quarterly Report on 10-Q prior to November 1, 2000, the consolidated financial position and results of operations reflect Washington Gas and its subsidiaries. The consolidated financial position and results of operations of Washington Gas immediately before the November 1, 2000, restructuring are essentially identical to the consolidated financial position and results of operations of WGL Holdings immediately after the November 1, 2000, restructuring.

Washington Gas—For all periods reported in this Quarterly Report on 10-Q, the Washington Gas consolidated financial statements present the financial position and results of operations reported for Washington Gas. The Washington Gas consolidated statements also include the results of operations and cash flows of its former wholly owned subsidiaries and 50 percent equity investment in Primary Investors prior to the November 1, 2000 corporate restructuring.

     These notes are an integral part of the accompanying consolidated financial statements of WGL Holdings and its subsidiaries, including Washington Gas. Except where otherwise noted, these Notes to Consolidated Financial Statements apply equally to WGL Holdings and Washington Gas. In the opinion of WGL Holdings and Washington Gas, these financial statements, including the notes hereto, reflect all adjustments (which include only normal recurring adjustments) necessary for a fair statement of the results of operations for the periods presented. These financial statements, including the notes thereto, should be read together with Washington Gas’ Annual Report on Form 10-K for the fiscal year ended September 30, 2000. Certain amounts in the financial statements of prior years have been reclassified to conform to the presentation of the current year.

     Washington Gas’ financial position and results of operations account for the vast majority of the WGL Holdings’ financial position and results of operations. Due to the seasonal nature of Washington Gas’ business, the results of operations shown do not necessarily represent the expected results of either WGL Holdings or Washington Gas for the entire fiscal year ending September 30, 2001.

-12-

     Use of Estimates in Preparation of Financial Statements

     In accordance with generally accepted accounting principles in the United States, management makes estimates and assumptions regarding: 1) reported amounts of assets and liabilities; 2) disclosure of contingent assets and liabilities at the date of the financial statements; and 3) reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NOTE 2—LONG-TERM DEBT

     Unsecured Medium-Term Notes

     In October 2000, Washington Gas issued $25,000,000 of unsecured Medium Term Notes (MTNs) at a fixed interest rate of 7.31 percent, which mature in October 2007. In January 2001, Washington Gas also issued $30,000,000 of unsecured MTNs at a fixed interest rate of 6.64 percent, which mature in January 2011. The Utility has the option to redeem all, or part, of either issue of these MTNs at any time prior to maturity at the greater of 100 percent of the principal amount or the present value of the remaining scheduled payments of the notes to be redeemed, discounted to the redemption date on a semiannual basis at the comparable treasury rate plus 15 basis points and 20 basis points, respectively, plus accrued interest to the date of redemption.

NOTE 3—COMMON STOCK, PREFERRED STOCK AND EARNINGS PER SHARE

     Earnings Per Share

     Basic earnings per share (EPS) is computed by dividing net income applicable to common stock by the weighted-average number of common shares outstanding during the reported period. Diluted EPS assumes the conversion of convertible preferred stock and the issuance of common shares pursuant to stock-based compensation plans at the beginning of the applicable period. The following tables show the computation of basic and diluted EPS of WGL Holdings for the three months and six months ended March 31, 2001 and 2000.

Basic and Diluted Earnings Per Average Common Share

					Net				Per Share
					Income		Shares		Amount
For the Three Months Ended March 31, 2001 (Restated)    Basic EPS:
		Net Income			$	62,007		46,488	$	1.33
		Effect of Dilutive Securities:
			Stock-Based Compensation Plans			—		71
	Diluted EPS:
		Net Income			$	62,007		46,559	$	1.33
For the Three Months Ended March 31, 2000
	Basic EPS:
		Net Income			$	64,913		46,475	$	1.40
		Effect of Dilutive Securities:
			$4.60 and $4.36 Convertible Preferred
				Stock, Assuming Conversion on January 1, 2000*		—		14
			Stock-Based Compensation Plans			—		53
	Diluted EPS:
		Net Income Plus Assumed Conversions			$	64,913		46,542	$	1.39

     All outstanding convertible preferred stock was either converted or redeemed on February 1, 2000.

-13-

Basic and Diluted Earnings Per Average Common Share

					Net				Per Share
					Income		Shares		Amount
For the Six Months Ended March 31, 2001 (Restated)
	Basic EPS:
		Net Income			$	112,428		46,483	$	2.42
		Effect of Dilutive Securities:
			Stock-Based Compensation Plans			—		66
	Diluted EPS:
		Net Income			$	112,428		46,549	$	2.42
For the Six Months Ended March 31, 2000
	Basic EPS:
		Net Income			$	104,359		46,472	$	2.25
		Effect of Dilutive Securities:
			$4.60 and $4.36 Convertible Preferred
				Stock, Assuming Conversion on
				October 1, 2000*		3		19
			Stock-Based Compensation Plans			—		51
	Diluted EPS:
		Net Income Plus Assumed Conversions			$	104,362		46,542	$	2.24

     All outstanding convertible preferred stock was either converted or redeemed on February 1, 2000.

NOTE 4—PRIMARY INVESTORS, LLC

     In August 1999, Washington Gas and Thayer Capital Partners (Thayer) formed Primary Investors, LLC (Primary Investors), a limited liability company. Effective November 1, 2000, in connection with its formation of a holding company underthe Public Utility Holding Company Act of 1935, Washington Gas transferred its ownership interest to WGL Holdings, its newly formed holding company parent.

     Primary Investors, through its wholly owned subsidiary Primary Service Group, LLC (PSG), focuses on investment opportunities in after-market products and services in the heating, ventilating and air conditioning (HVAC) industry. PSG primarily sells, installs, repairs and maintains HVAC equipment in the residential and light commercial markets in the District of Columbia and parts of Maryland and Virginia. PSG has acquired nine companies with approximately $50 million of annualized revenues. WGL Holdings and Thayer each own 50 percent of Primary Investors and each has an equal number of representatives on Primary Investors’ Board of Directors. As co-investors, WGL Holdings and Thayer each committed to invest up to $25 million of equity capital in Primary Investors.

     Through March 31, 2001, WGL Holdings has made investments in Primary Investors totaling $19.0 million. Thayer has contributed equal amounts to Primary Investors. Since inception, Primary Investors has generated operating losses totaling $5.8 million, of which WGL Holdings has recorded its 50-percent share totaling $2.9 million, using the equity method of accounting. WGL Holdings has also recorded $1.1 million for the related income tax benefits of the losses. At March 31, 2001, WGL Holdings’ equity investment was $16.1 million.

-14-

     Thayer and WGL Holdings’ relationship is governed by an investors agreement. This agreement grants independent rights to each of the owners of Primary Investors that could affect the timing of and the ultimate amount realized from the investment of each party in Primary Investors.

     Primary Investors has performed an impairment test on its investments using the provisions of Statement of Financial Accounting Standards No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The estimates of future cash flows used in the test contain assumptions that Primary Investors’ management believes are reasonable for the purpose of developing such estimates. Such assumptions are inherently subjective and future results may differ significantly from the projections. Additionally, the ultimate success of Primary Investors depends upon its ability to attract any needed capital from investors and lenders. Consequently, WGL Holdings’ realization of its investment depends on Primary Investors’ ability to achieve its plans consistent with the results underlying the impairment test.

     Primary Investors’ impairment test does not indicate impairment at March 31, 2001. However, WGL Holdings will continue to monitor Primary Investors’ performance relative to its plans and to assess its investment in Primary Investors for potential impairment.

NOTE 5—DERIVATIVE ACTIVITY

     At March 31, 2001, Washington Gas Energy Services, Inc. (WGEServices) held certain contracts for the sale and purchase of natural gas that qualify as derivative instruments under the provisions of Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities(SFAS No. 133). WGEServices originally entered into the sales contracts with the intent of taking delivery of the commodity and selling it to its retail customers. During the second quarter of fiscal year 2001, WGEServices determined that it would no longer require this supply in the time period it had originally anticipated. As a result, WGEServices entered into an agreement to sell this gas to certain of the original suppliers. The contracts do not qualify as hedges under the definitions included in SFAS No. 133. Therefore, the contracts are recognized at their fair value on the Company’s balance sheet and recorded net in the caption “Deferred gas costs—unregulated activities.” The gains and losses on these contracts were reflected in the earnings of the Energy Marketing segment in the quarter ended March 31, 2001.

NOTE 6—OPERATING SEGMENT REPORTING

     WGL Holdings reports four operating segments: 1) regulated utility; 2) energy marketing; 3) HVAC activities; and 4) consumer financing.

     With over 90 percent of WGL Holdings’ assets, the regulated utility segment is its core business. Represented almost entirely by Washington Gas, the regulated utility segment provides regulated gas distribution services (including the purchase and delivery of natural gas, meter reading, responding to customer inquiries, and bill preparation) to customers in metropolitan Washington, D.C. and parts of Maryland and Virginia.

     Through WGL Holdings’ subsidiary WGEServices, the energy marketing segment sells natural gas and electricity directly to customers, both inside and outside Washington Gas’ traditional service territory, in competition with unregulated gas and electricity marketers. Through two wholly owned subsidiaries, Washington Gas Energy Systems, Inc. (WGESystems) and American Combustion Industries, Inc. (ACI) and as a partner in Primary Investors, the HVAC segment designs, renovates and services mechanical heating, ventilating and air conditioning systems for commercial, governmental and residential customers. The consumer

-15-

financing segment provides financing for consumer purchases of natural gas appliances and energy-related equipment.

     The following table presents operating segment information.

OPERATING SEGMENT FINANCIAL INFORMATION

						Non-Utility Operations
			Regulated			Energy						Consumer			Other
(Thousands)			Utility			Marketing			HVAC			Financing			Activities			Total
Three Months Ended March 31, 2001 (Restated)
Total Revenues			$	605,155		$	143,218		$	25,943		$	872		$	263		$	170,296
Operating Expenses Depreciation and Amortization				17,038			16			91			1			—			108
	Other Operating Expense (a)			470,690			144,300			21,633			811			137			166,881
	Income Tax Expense (Benefit)			40,785			(486	)		1,413			26			50			1,003
		Total Operating Expenses		528,513			143,830			23,137			838			187			167,992
Equity in Net Loss of Affiliate				—			—			(343	)		—			—			(343	)
Operating Income (Loss)				76,642			(612	)		2,463			34			76			1,961
Interest Expense—Net				12,868			289			332			(5	)		(2	)		614
Other Non-Operating Inc. (Exp.) (b)				(1,542	)		—			(77	)		—			—			(77	)
WGL Preferred Dividends				330			—			—			—			—			—
Net Income (Loss)			$	61,902		$	(901	)	$	2,054		$	39		$	78		$	1,270
Total Assets			$	2,101,418		$	97,131		$	48,176		$	12,468		$	757		$	158,532
Capital Expenditures/Investments			$	33,032		$	6		$	64		$	—		$	—		$	70
Three Months Ended March 31, 2000
Total Revenues			$	392,314		$	63,255		$	12,038		$	1,111		$	253		$	76,657
Operating Expenses
	Depreciation and Amortization			16,326			7			142			—			—			149
	Other Operating Expenses (a)			268,879			59,855			10,098			518			(151	)		70,320
	Income Tax Expense (Benefit)			35,547			1,186			606			212			(547	)		1,457
		Total Operating Expenses		320,752			61,048			10,846			730			(698	)		71,926
Equity in Net Loss of Affiliate				—			—			(366	)		—			—			(366	)
Operating Income				71,562			2,207			826			381			951			4,365
Interest Expense—Net				10,473			5			234			45			—			284
Other Non-Operating Inc. (Exp.) (b)				—			—			(260	)		—			—			(260	)
WGL Preferred Dividends				330			—			—			—			—			—
Net Income			$	60,759		$	2,202		$	332		$	336		$	951		$	3,821
Total Assets			$	1,781,828		$	56,597		$	34,118		$	7,855		$	332		$	98,902
Capital Expenditures/Investments			$	27,230		$	6		$	34		$	—		$	—		$	40

[Additional columns below]

[Continued from above table, first column(s) repeated]

			Eliminations/
(Thousands)			Other			Consolidated
Three Months Ended March 31, 2001 (Restated)
Total Revenues			$	—		$	775,451
Operating Expenses Depreciation and Amortization				—			17,146
	Other Operating Expense (a)			—			637,571
	Income Tax Expense (Benefit)			—			41,788
		Total Operating Expenses		—			696,505
Equity in Net Loss of Affiliate				—			(343	)
Operating Income (Loss)				—			78,603
Interest Expense—Net				118			13,600
Other Non-Operating Inc. (Exp.) (b)				(1,047	)		(2,666	)
WGL Preferred Dividends				—			330
Net Income (Loss)			$	(1,165	)	$	62,007
Total Assets			$	16,549		$	2,276,499
Capital Expenditures/Investments			$	—		$	33,102
Three Months Ended March 31, 2000
Total Revenues			$	—		$	468,971
Operating Expenses
	Depreciation and Amortization			—			16,475
	Other Operating Expenses (a)			—			339,199
	Income Tax Expense (Benefit)			—			37,004
		Total Operating Expenses		—			392,678
Equity in Net Loss of Affiliate				—			(366	)
Operating Income				—			75,927
Interest Expense—Net				542			11,299
Other Non-Operating Inc. (Exp.) (b)				875			615
WGL Preferred Dividends				—			330
Net Income			$	333		$	64,913
Total Assets			$	8,924		$	1,889,654
Capital Expenditures/Investments			$	—		$	27,270

     (a)  Includes cost of gas and revenue taxes during all reported periods and gains on sales of non-utility assets during the three months ended March 31, 2000.

     (b)  The amounts reported for Other Non-Operating Income (Expense) are net of applicable income taxes.

-16-

OPERATING SEGMENT FINANCIAL INFORMATION

						Non-Utility Operations
			Regulated			Energy						Consumer		Other
(Thousands)			Utility			Marketing			HVAC			Financing		Activities			Total
Six Months Ended March 31, 2001 (Restated)
Total Revenues			$	1,145,512		$	232,726		$	42,237		$	1,627	$	382		$	276,972
Operating Expenses
	Depreciation and Amortization			33,894			58			225			1		—			284
	Other Operating Expenses(a)			895,266			235,941			35,560			1,401		547			273,449
	Income Tax Expense (Benefit)			73,628			(1,264	)		1,872			61		(53	)		616
		Total Operating Expenses		1,002,788			234,735			37,657			1,463		494			274,349
Equity in Net Loss of Affiliate				—			—			(918	)		—		—			(918	)
Operating Income (Loss)				142,724			(2,009	)		3,662			164		(112	)		1,705
Interest Expense—Net				25,394			338			706			44		—			1,088
Other Non-Operating Inc. (Exp.) (b)				(2,517	)		—			(130	)		—		—			(130	)
WGL Preferred Dividends				660			—			—			—		—			—
Net Income (Loss)			$	114,153		$	(2,347	)	$	2,826		$	120	$	(112	)	$	487
Total Assets			$	2,101,418		$	97,131		$	48,176		$	12,468	$	757		$	158,532
Capital Expenditures/Investments			$	47,527		$	6		$	197		$	123	$	—		$	326
Six Months Ended March 31, 2000
Total Revenues			$	702,830		$	107,009		$	22,414		$	1,687	$	644		$	131,754
Operating Expenses
	Depreciation and Amortization			32,291			14			285			—		—			299
	Other Operating Expenses (a)			491,930			102,675			18,844			727		(292	)		121,954
	Income Tax Expense (Benefit)			58,070			1,568			1,061			338		(355	)		2,612
		Total Operating Expenses		582,291			104,257			20,190			1,065		(647	)		124,865
Equity in Net Loss of Affiliate				—			—			(527	)		—		—			(527	)
Operating Income				120,539			2,752			1,697			622		1,291			6,362
Interest Expense—Net				20,932			5			448			86		1			540
Other Non-Operating Inc. (Exp.) (b)				—			—			(199	)		—		—			(199	)
WGL Preferred Dividends				663			—			—			—		—			—
Net Income (Loss)			$	98,944		$	2,747		$	1,050		$	536	$	1,290		$	5,623
Total Assets			$	1,781,828		$	56,597		$	34,118		$	7,855	$	332		$	98,902
Capital Expenditures/Investments			$	49,544		$	32		$	130		$	—	$	—		$	162

[Additional columns below]

[Continued from above table, first column(s) repeated]

			Eliminations/
(Thousands)			Other			Consolidated
Six Months Ended March 31, 2001 (Restated)
Total Revenues			$	—		$	1,422,484
Operating Expenses
	Depreciation and Amortization			—			34,178
	Other Operating Expenses(a)			—			1,168,715
	Income Tax Expense (Benefit)			—			74,244
		Total Operating Expenses		—			1,277,137
Equity in Net Loss of Affiliate				—			(918	)
Operating Income (Loss)				—			144,429
Interest Expense—Net				243			26,725
Other Non-Operating Inc. (Exp.) (b)				(1,969	)		(4,616	)
WGL Preferred Dividends				—			660
Net Income (Loss)			$	(2,212	)	$	112,428
Total Assets			$	16,549		$	2,276,499
Capital Expenditures/Investments			$	—		$	47,853
Six Months Ended March 31, 2000
Total Revenues			$	—		$	834,584
Operating Expenses
	Depreciation and Amortization			—			32,590
	Other Operating Expenses (a)			—			613,884
	Income Tax Expense (Benefit)			—			60,682
		Total Operating Expenses		—			707,156
Equity in Net Loss of Affiliate				—			(527	)
Operating Income				—			126,901
Interest Expense—Net				497			21,969
Other Non-Operating Inc. (Exp.) (b)				289			90
WGL Preferred Dividends				—			663
Net Income (Loss)			$	(208	)	$	104,359
Total Assets			$	8,924		$	1,889,654
Capital Expenditures/Investments			$	—		$	49,706

     (a)  Includes cost of gas and revenue taxes during all reported periods and gains on sales of non-utility assets during the six months ended March 31, 2000.

     (b)  The amounts reported for Other Non-Operating Income (Expense) are net of applicable income taxes.

NOTE 7—TRANSACTIONS BETWEEN WASHINGTON GAS AND AFFILIATES

     Washington Gas and other subsidiaries of WGL Holdings may engage in transactions during the ordinary course of business. All significant intercompany balances have been eliminated from the consolidated financial statements of WGL Holdings. In addition, all such significant transactions between Washington Gas and its affiliates that occurred prior to the November 1, 2000 restructuring have similarly been eliminated from the consolidated financial statements of Washington Gas.

     In compliance with generally accepted accounting principles, transactions between Washington Gas and its affiliates which occurred after the November 1, 2000 restructuring, as well as intercompany balances remaining on Washington Gas’ balance sheet on March 31, 2001, have not been eliminated from the Washington Gas consolidated financial statements. Because of the relatively small size of these transactions, these transactions are not disclosed on the face of the Washington Gas consolidated financial statements.

     From time-to-time, Washington Gas provides administrative and general support to affiliates and has filed consolidated tax returns, which include affiliated company tax obligations. All such costs are billed to the appropriate affiliates and are reflected in accounts receivable on Washington Gas’ Consolidated Balance Sheets. Washington Gas may also, on

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occasion, borrow funds from, or lend funds to, affiliated companies. At March 31, 2001, the Washington Gas Consolidated Balance Sheet reflected a total of $5.9 million of intercompany receivables and $12.7 million of intercompany payables. All affiliated company transactions, including these balances, were eliminated from the WGL Holdings Consolidated Balance Sheet in accordance with generally accepted accounting principles.

     On an ongoing basis, Washington Gas transports gas for its third party marketers, including WGEServices. Associated with this transportation, Washington Gas incurs certain system balancing charges, which it passes to the third-party marketers with no mark-up. In turn, the third party marketers pass these costs to their customers. For consolidation purposes, WGL Holdings eliminates both sides of this transaction from the utility operations, to avoid distorting either the utility or non-utility net operating income.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Certain matters discussed in this report, excluding historical information, include forward-looking statements. Certain words, such as, but not limited to, “estimates,” “expects,” “anticipates,” “intends,” “believes,” “plans,” and variations of these words, identify forward-looking statements that involve uncertainties and risks. These statements are necessarily based upon various assumptions with respect to the future, including: 1) economic, competitive, political and regulatory conditions and developments; 2) capital and energy commodity market conditions; 3) changes in relevant laws and regulations, including tax, environmental and employment laws and regulations; 4) weather conditions; 5) legislative, regulatory, and judicial mandates and decisions; 6) timing and success of business and product development efforts; 7) technological improvements; 8) the pace of deregulation efforts and the availability of other competitive alternatives; and 9) other uncertainties.

     Such uncertainties are difficult to predict accurately and are generally beyond WGL Holdings, Inc.’s direct control. Accordingly, while it believes that the assumptions are reasonable, WGL Holdings, Inc. (WGL Holdings or the Company) cannot ensure that all expectations and objectives will be realized. Readers are urged to use care and consider the risks, uncertainties and other factors that could affect the Company’s business as described in this Quarterly Report on Form 10-Q. All forward-looking statements made in this report rely upon the safe harbor protections provided under thePrivate Securities Litigation Reform Act of 1995.

     This Management’s Discussion and Analysis of Financial Condition and Results of Operations is divided into the following two major sections:

• WGL Holdings—This section describes the financial condition and results of operations of WGL Holdings and its subsidiaries on a consolidated basis. This section includes separate discussions of WGL Holdings’ utility and non-utility operations.

• Washington Gas Light Company (Washington Gas or the Utility)—Washington Gas comprises the vast majority of WGL Holdings’ utility segment. As such, the financial condition and results of operations of Washington Gas’ utility operations and WGL Holdings utility segment are essentially the same. Therefore, the discussion of Washington Gas’ financial condition and results of operations only describes those results which are significantly different from those operations which are described in WGL Holdings’ Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     The Management’s Discussion and Analysis of Financial Condition and Results of Operations for both WGL Holdings and Washington Gas should be read in conjunction with the respective company’s Consolidated Financial Statements and the combined Notes thereto.

WGL HOLDINGS, INC.

Results of Operations—Three Months Ended March 31, 2001 vs.
   March 31, 2000

     EARNINGS

     For the three months ended March 31, 2001, the second quarter of its fiscal year, WGL Holdings reported net income of $62.0 million, a $2.9 million decrease over the results reported for the same period last year. Basic earnings per average common share in the current quarter were $1.33, compared to $1.40 for the quarter ended March 31, 2000. Diluted earnings were also $1.33 per average common share in the current quarter, which represented a 4.3 percent decrease over

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diluted earnings of $1.39 for the same period last year. Results for the quarter ended March 31, 2000 included a $0.02 per average common share gain from the sales of certain non-utility investments. WGL Holdings’ utility operations contributed $1.31 to diluted earnings per average common share for the three months ended March 31, 2001, and 2000.

     Net revenues from the Utility Segment rose by $21.7 million, due to an 8.7 percent rise in firm therm deliveries over the same quarter last year. This increase was primarily attributable to a 3.6 percent increase in Washington Gas’ customer base and a 14.3 percent increase in the number of heating degree days over the same quarter last year. Weather during the current quarter was approximately 4.8 percent colder than normal. The growth in the current quarter’s utility net revenues was partially offset by a $5.0 million increase in operation and maintenance expenses primarily attributable to a $5.3 million increase in the Utility’s uncollectible accounts expense.

     The impact of the improved performance of the Company’s utility operations on earnings was reduced somewhat as net income from the Company’s major non-utility operations declined from $2.9 million in the second quarter of fiscal year 2000, to $1.2 million in the current quarter. This variation reflects significant increases from the commercial heating, ventilating and air conditioning (HVAC) segment driven by more contracts with continuing strong margins. Additionally, lower gross margins and higher selling, general and administrative expenses incurred by the Company’s energy marketing segment negatively affected the non-utility results. Earnings per average common share from the Company’s major non-utility operations declined from $0.06 during the three months ended March 31, 2000, to $0.03 in the current quarter. Other non-utility results for the quarter ended March 31, 2000 included a nonrecurring $0.02 per average common share gain from the sales of two minor non-utility investments.

     In addition, interest expense rose from $11.3 million during the three months ended March 31, 2000, to $13.6 million during the current fiscal quarter, primarily because of an increase in the cost and level of debt used to fund: (1) capital additions; (2) the higher average cost of storage gas inventory and unrecovered gas costs; (3) higher levels of accounts receivable; and (4) the additional investment in the Company’s residential HVAC segment.

     UTILITY SEGMENT NET REVENUES

     Utility net revenues for the quarter ended March 31, 2001, increased $21.7 million (12.3 percent) from the same period last year to $198.3 million. This represents a $0.29 per average common share improvement this quarter over the three months ended March 31, 2000.

     Included in the increase in net revenues are $7.5 million of revenues the Utility is collecting from newly-enacted rights-of-way fees in the District of Columbia and income taxes in Maryland and Virginia, which the Utility is allowed to recover from its customers. Therefore, these higher expenses do not affect net income.

     As shown in the following table, a 14.3 percent increase in the number of heating degree days, coupled with a 3.6 percent increase in the Utility’s customer base, resulted in an 8.7 percent increase in firm therm deliveries over the same quarter last year.

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Gas, Weather and Meter Statistics

					Three Months Ended
					March 31,
													Percent
					2001		2000			Variance			Inc. (Dec.)
Gas Sales and Deliveries(thousands of therms)
	Firm
		Gas Sold and Delivered				386,006		368,684			17,322			4.7
		Gas Delivered for Others				180,124		152,337			27,787			18.2
			Total Firm			566,130		521,021			45,109			8.7
	Interruptible
		Gas Sold and Delivered				1,971		8,705			(6,734	)		(77.4	)
		Gas Delivered for Others				82,276		81,892			384			0.5
			Total Interruptible			84,247		90,597			(6,350	)		(7.0	)
	Electric Generation—Delivered for Others					20,622		27,598			(6,976	)		(25.3	)
				Total Deliveries		670,999		639,216			31,783			5.0
Degree Days
	Actual					2,232		1,953			279			14.3
	Normal					2,130		2,135			(5	)		(0.2	)
		Percent Colder (Warmer) than Normal				4.8%		(8.5%	)		—			—
Customer Meters(end of period)						903,383		872,122			31,261			3.6

     Gas Delivered to Firm Customers

     The level of gas delivered to firm customers is highly sensitive to weather variability because a large portion of the natural gas delivered by Washington Gas is used for space heating. The Utility’s rates are based on normal weather and none of the tariffs for the jurisdictions in which it operates currently have a weather normalization provision. Nonetheless, declining block rates in the Utility’s Maryland and Virginia jurisdictions reduce the impact that deviations from normal weather have on net revenues.

     During the three months ended March 31, 2001, firm therm deliveries rose by 45.1 million therms or 8.7 percent over the same quarter last year. This increase primarily reflects 14.3 percent more heating degree days in the current quarter compared to last year and a 3.6 percent rise in the number of firm customer meters. Weather for the three months ended March 31, 2001, was 4.8 percent colder than normal, while weather for the same period last year was 8.5 percent warmer than normal. Since the Utility passes the cost of the natural gas commodity to customers without a mark-up, rising gas prices during the current fiscal year did not affect the Utility’s net revenues.

     An increasing number of customers are choosing to buy the natural gas commodity from third-party suppliers, rather than purchasing the natural gas commodity from Washington Gas “bundled” together with the delivery of the natural gas. As a result, the volume of firm therm deliveries by the Utility to customers who purchase both the natural gas commodity and delivery service as a “bundled” service increased at a slower rate than the delivery of firm therms for others. Gas sold and delivered to firm customers with bundled service increased 4.7 percent during the current quarter from 368.7 million therms in the three months ended March 31, 2000, to 386.0 million therms during the quarter ended March 31, 2001. In contrast, the volume of firm gas delivered for others rose from 152.3 million therms to 180.1 million therms, an 18.2 percent increase. On a per unit basis, the net revenues that Washington Gas earns from delivering gas for others are the same as it earns from bundled gas sales in which customers purchase both the

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natural gas commodity and the associated delivery service from Washington Gas. Therefore, the Utility does not experience any loss of margins when customers choose to purchase their gas from a third-party supplier.

     Gas Delivered to Interruptible Customers

     Therm deliveries to Washington Gas’ interruptible customers were 7.0 percent lower during the three months ended March 31, 2001 than the same period last year. This decrease reflects a 1.3 percent decrease in interruptible meters.

     The effect on net income of any changes in delivered volumes and prices to the interruptible class is minimized by margin-sharing arrangements embedded in Washington Gas’ interruptible rate design. Under these arrangements, Washington Gas applies a majority of the margins earned on interruptible gas sales and deliveries to firm customers’ rates. This margin sharing occurs once Washington Gas reaches a pre-established gross margin threshold in exchange for shifting many of the fixed costs of providing service from the interruptible to the firm class of customers.

     Gas Delivered for Electric Generation

     Washington Gas sells and/or delivers natural gas for use at two electric generation facilities in Maryland, which are each owned by separate companies that are independent of WGL Holdings. During the current quarter, deliveries to these customers were 25.3 percent lower than the same period last year. Deliveries were higher in the quarter ended March 31, 2000, primarily because an operational problem at one customer’s electric generation facility precluded it from receiving delivery of other alternate fossil fuels, which it typically includes in its fuel mix, during most of calendar year 2000. The restrictions imposed on these customers were lifted on December 1, 2000, causing gas deliveries for electric generation to be at more normal levels in the current fiscal year.

     Washington Gas shares a significant majority of the margins earned from gas deliveries to electric generation customers with firm customers. Therefore, changes in the volume of interruptible gas deliveries to these customers do not have a material effect on either net revenues or net income.

     OTHER UTILITY SEGMENT OPERATING EXPENSES

     Operation and maintenance expenses for the three months ended March 31, 2001, increased by $5.0 million (10.6 percent) from the prior year’s levels. This increase caused earnings per average common share to decline by $0.07 from the same quarter of last year. Key factors that contributed to the variance in operation and maintenance expenses for this quarter compared with the same quarter last year include:

• a $5.3 million increase in uncollectible accounts expense, which directly relates to higher natural gas costs and colder weather in the current year, causing an increase in the Utility’s customer accounts receivable balance;

• a $1.0 million increase relating to higher natural gas distribution expenses; and

• a $1.5 million decrease in labor and labor-related costs and information system support costs compared with the same quarter last year.

     Depreciation and amortization expense increased by $0.7 million (4.4 percent) in the current quarter primarily because of Washington Gas’ increased investment in property, plant and equipment. The general taxes incurred by the utility operations during the quarter ended March 31, 2001 increased largely due to the inclusion of $3.8 million in the current quarter for a

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newly enacted right-of-way fee imposed by the District of Columbia. As previously discussed, this fee is recovered currently from customers and has no impact on net income.

     Utility income taxes rose $5.2 million primarily due to an increase in pre-tax income this quarter. For utility operations, the effective income tax rates were 39.0 percent for the second fiscal quarter of 2001 and 37.0 percent for the same period in fiscal year 2000. The rise in the effective income tax rate reflects recently enacted utility income taxes in Maryland and Virginia. The utility’s revenues have been increased by an offsetting amount to reflect collection of these new taxes from customers, thereby mitigating any earnings impact associated with the change.

     NON-UTILITY OPERATING RESULTS

     WGL Holdings has three major unregulated operating segments: 1) energy marketing; 2) HVAC; and 3) consumer financing. The net income from those operations decreased from $2.9 million during the quarter ended March 31, 2000 to $1.2 million in the current quarter. Earnings per average common share from these major non-utility activities declined from $0.06 during the three months ended March 31, 2000, to $0.03 in the current quarter. Other non-utility results for the quarter ended March 31, 2000 included a nonrecurring gain of $0.02 per average common share from sales of certain venture funds and a preferred stock interest. The following table compares the financial results from major non-utility activities for the quarters ended March 31, 2001 and 2000.

Net Income (Loss) Applicable to Major Non-Utility Activities

		Three Months Ended
		March 31
(In thousands of dollars)		2001			2000			Variance
Energy Marketing		$	(901	)	$	2,202		$	(3,103	)
HVAC:
	Commercial		2,437			670			1,767
	Residential		(383	)		(338	)		(45	)
Consumer Financing			39			336			(297	)
Total		$	1,192		$	2,870		$	(1,678	)

     Energy Marketing Segment

     WGL Holdings’ retail energy marketing segment, through its subsidiary, Washington Gas Energy Services, Inc. (WGEServices), sells natural gas and electricity in competition with unregulated marketers and unregulated subsidiaries of other utility companies. WGEServices continued to expand rapidly as the subsidiary sold 19.6 billion cubic feet (bcf) of gas in the current quarter, an increase of 6.5 percent from 18.4 bcf sold in the second quarter of fiscal year 2000. During the quarters ended March 31, 2001 and 2000, respectively, 24.7 percent and 24.4 percent of these sales were made to customers outside of the service territory of the regulated utility.

     In addition to supplying gas to 110,000 residential customers, during the three months ended March 31, 2001, WGEServices sold 202.3 gigawatt-hours to over 8,000 electric accounts, in Maryland, Virginia and the District of Columbia. WGEServices has won a $16 million, two-year contract to supply electricity to all Washington Metropolitan Area Transit Authority facilities in the District of Columbia and Maryland. WGEServices was also recently awarded a $125 million contract to supply electricity to 47 large federal facilities in the District of Columbia and suburban Maryland. These facilities will receive service for up to three and one-half years under the contract. WGEServices’ total energy marketing revenues have more

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than doubled, increasing from $63.3 million in the quarter ended March 31, 2000, to $143.2 million in the quarter ended March 31, 2001.

     Net income earned by WGEServices declined from $2.2 million in the quarter ended March 31, 2000, to a $0.9 million loss in the current quarter as gross margins fell and selling, general and administrative expenses rose in the current year. Despite the significant increase in the volume of natural gas sold, rapidly rising natural gas prices combined with higher selling, general and administrative expenses during the current quarter have suppressed the earnings produced by this segment. Nevertheless, gross margins remained positive in both periods. Results for the quarter ended March 31, 2000 benefited from a general decline in natural gas prices in 1999, which provided higher gross margins. As a start-up product line, the sales of electricity resulted in a small net loss during the current quarter as WGEServices incurred initial customer acquisition costs and initiated transmission arrangements. The earnings pattern for the natural gas portion of the energy marketing segment tends to be seasonal with narrower margins in the winter months and higher margins in the summer. Because of this seasonality, the Company expects energy marketing earnings to improve during the remainder of fiscal year 2001.

     HVAC Segment

     Two subsidiaries, American Combustion Industries, Inc. and Washington Gas Energy Systems, Inc., offer large-scale HVAC installations and related services to commercial and government customers. In addition, the Company has a 50 percent equity investment in Primary Investors, LLC (Primary Investors), a limited liability company that, through its investment in Primary Services Group, LLC (PSG), has invested in nine companies that offer HVAC products and services to residential and light commercial customers.

     Revenues from the Company’s commercial HVAC activities doubled, increasing from $12.0 million in the quarter ended March 31, 2000 to $25.9 million in the quarter ended March 31, 2001. Net income from these operations rose from $0.7 million to $2.4 million, as gross profit margins continue to be strong. During the remainder of fiscal year 2001, net income from the commercial HVAC operations is expected to continue to rise because of a $64 million contract that the Company signed in December 2000 with the federal government to modernize a U.S. General Services Administration central heating and refrigeration plant in Washington, D.C.

     The HVAC operations for the three months ended March 31, 2001 and 2000, include net losses of $0.4 million and $0.3 million, respectively, from the Company’s 50 percent equity investment in Primary Investors. (See Note 4 to the Consolidated Financial Statements for a further discussion of Primary Investors).

     Consumer Financing Segment

     The consumer financing segment provides financing for consumer purchases of natural gas appliances and energy-related equipment. During the three months ending March 31, 2001 and 2000, net income from the consumer financing segment was $39,000 and $336,000, respectively. Net income from this segment declined because of fewer contracts sold to banks in the current quarter and increased labor costs and other expenses incurred during the three-month period as this segment acquires additional resources to help it evaluate its operations and the potential for expanding its products and markets.

     OTHER INCOME (EXPENSES)—NET

     The $3.3 million decrease in Other Income (Expenses)-Net (after income taxes) was primarily attributable to a $1.5 million expense (net of income tax benefits) for the premium on the weather insurance policy purchased in October 2000 by Washington Gas that was allocated

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to the current quarter based on a normal level of heating degree days. No recoveries have been received under this policy in the current quarter.

     INTEREST EXPENSE

     Total WGL Holdings interest expense increased by $2.3 million (20.4 percent) from the same period last year, reflecting the following changes in interest expense:

Composition of Interest Expense
(In thousands of dollars)

		WGL Holdings						Washington Gas
		Three Months Ended						Three Months Ended
		March 31,						March 31,
		2001		2000		Variance		2001		2000		Variance
Long-Term Debt		$	10,546	$	9,043	$	1,503	$	10,546	$	9,043	$	1,503
Short-Term Debt			2,838		2,153		685		2,838		2,153		685
Other (Includes AFUDC)			216		103		113		135		103		32
	Total	$	13,600	$	11,299	$	2,301	$	13,519	$	11,299	$	2,220

     Interest on long-term debt increased $1.5 million primarily due to a $100.1 million increase in average balance, which reflects the issuance of $108.0 million of Medium Term Notes (MTNs) since April 2000. The average long-term debt balance increased from $498.3 million during the three months ended March 31, 2000 to $598.4 million during the same quarter of the current fiscal year, and the weighted average cost of such debt increased by 0.15 percentage points during the same period. The embedded cost of long-term debt outstanding at March 31, 2001, was 6.9 percent.

     Interest on short-term debt increased $0.7 million because of a $50.3 million rise in the average short-term debt balance, partially offset by a 0.12 percentage point decrease in the weighted-average cost of such debt.

     WGL Holdings increased its average level of debt during the quarter ended March 31, 2001, over the same period last year in order to finance construction and higher working capital requirements associated with higher accounts receivable, inventory and yet-to-be-recovered gas cost balances and increased unregulated non-utility investments. The Company expects its interest expense during fiscal year 2001 to be higher than previous years because of its continuing requirement for increased working capital. This impact may continue as long as natural gas prices remain at relatively high levels.

Results of Operations—Six Months Ended March 31, 2001 vs.
   March 31, 2000

     EARNINGS

     For the six months ended March 31, 2001, WGL Holdings reported net income of $112.4 million, or $8.1 million higher than the results reported for the same period last year. Basic earnings per average common share in the current six-month period were $2.42, compared to $2.25 for the six months ended March 31, 2000. Diluted earnings were also $2.42 per average common share in the current six-month period, which represented a 8.0 percent improvement over diluted earnings

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of $2.24 per average common share for the same period last year. Recurring earnings per average common share for the most recent six months were $2.45, excluding a $0.03 per average common share adjustment for certain general taxes in the first quarter of fiscal year 2001. This compares to recurring diluted earnings per average common share of $2.22 for the first six months of fiscal year 2000, excluding a $0.02 per average common share gain from the sale of certain non-utility investments in that six-month period. WGL Holdings’ utility operations contributed $2.41 and $2.12, respectively, to diluted earnings per average common share for the six months ended March 31, 2001, and 2000.

     Utility net revenues rose by $57.3 million, due to an 18.5 percent rise in the Utility’s firm therm deliveries over the six months ended March 31, 2000. This increase was primarily attributable to a 3.6 percent increase in Washington Gas’ customer base and a 22.2 percent increase in the number of heating degree days over the same six-month period last year. Weather during the first six months of fiscal year 2001 was approximately 13.7 percent colder than normal. The growth in the current six month’s utility net revenues was partially offset by a $9.3 million increase in operation and maintenance expenses primarily attributable to a $6.0 million increase in the Utility’s uncollectible accounts expense.

     The impact of the improved performance of the Company’s utility operations on earnings was reduced somewhat as net income from the Company’s major non-utility operations declined from $4.3 million in the first six months of fiscal year 2000, to $0.6 million in the current six-month period. This variance reflects substantial improvements in the Company’s commercial HVAC segment, lower gross margins and higher selling, general and administrative expenses incurred by the Company’s energy marketing segment, as well as increased losses incurred by the residential portion of its HVAC segment. Earnings per average common share from the Company’s major non-utility operations declined from $0.09 during the six months ended March 31, 2000, to $0.01 in the current six-month period. Other non-utility results for the six months ended March 31, 2000 included the aforementioned nonrecurring $0.02 per average common share gain from the sales of minor non-utility investments.

     In addition, interest expense rose from $22.0 million during the six months ended March 31, 2000, to $26.7 million during the current six-month period, primarily because of an increase in the cost and level of debt used to fund: (1) capital additions; (2) the higher average cost of storage gas inventory and unrecovered gas costs; (3) higher levels of accounts receivable; and (4) an increase in unregulated non-utility investments.

     UTILITY SEGMENT NET REVENUES

     Utility net revenues for the six months ended March 31, 2001, increased $57.3 million (18.5 percent) from the same period last year to $367.8 million. This represents an $0.75 per average common share improvement this period over the six months ended March 31, 2000.

     Included in the net revenue increase is $11.8 million of additional revenues for the previously discussed newly-enacted fees and income taxes.

     As shown in the following table, a 22.2 percent increase in the number of heating degree days, coupled with a 3.6 percent increase in the Utility’s customer base, resulted in an 18.5 percent increase in firm therm deliveries over the same six-month period last year.

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					Six Months Ended
					March 31,
													Percent
					2001		2000			Variance			Inc. (Dec.)
Gas Sales and Deliveries(thousands of therms)
	Firm
		Gas Sold and Delivered				749,248		652,894			96,354			14.8
		Gas Delivered for Others				276,724		212,853			63,871			30.0
			Total Firm			1,025,972		865,747			160,225			18.5
	Interruptible
		Gas Sold and Delivered				6,596		18,122			(11,526	)		(63.6	)
		Gas Delivered for Others				154,525		156,196			(1,671	)		(1.1	)
			Total Interruptible			161,121		174,318			(13,197	)		(7.6	)
	Electric Generation—Delivered for Others					72,760		53,353			19,407			36.4
				Total Deliveries		1,259,853		1,093,418			166,435			15.2
Degree Days
	Actual					3,970		3,248			722			22.2
	Normal					3,492		3,503			(11	)		(0.3	)
		Percent Colder (Warmer) than Normal				13.7%		(7.3%	)		—			—
Customer Meters(end of period)						903,383		872,122			31,261			3.6

     Gas Delivered to Firm Customers

     During the six months ended March 31, 2001, firm therm deliveries rose by 160.2 million therms or 18.5 percent over the same period last year. This increase primarily reflects 22.2 percent more heating degree days in the current six-month period compared to last year and a 3.6 percent rise in the number of firm customer meters. Weather for the six months ended March 31, 2001, was 13.7 percent colder than normal, while weather for the same period last year was 7.3 percent warmer than normal.

     The volume of firm therm deliveries to customers who purchase “bundled” service from Washington Gas increased 14.8 percent during the current six-month period from 652.9 million therms in the six months ended March 31, 2000, to 749.2 million therms during the six months ended March 31, 2001. The volume of firm gas delivered for others rose from 212.9 million therms to 276.7 million therms, a 30.0 percent increase, as an increasing number of customers are choosing to buy the natural gas commodity from third-party suppliers.

     Gas Delivered to Interruptible Customers

     Interruptible therm deliveries to Washington Gas’ interruptible customers were 7.6 percent lower during the six months ended March 31, 2001 than the same period last year. This decrease reflects a 1.3 percent decrease in interruptible meters. As previously described in this report, the effect on net income of changes in gas deliveries to interruptible customers is minimal due to margin-sharing arrangements in each of the Utility’s jurisdictions.

     Gas Delivered for Electric Generation

     Volumes delivered for electric generation were 36.4 percent higher than the same period last year. Deliveries were higher in the six months ended March 31, 2001, primarily because of the previously discussed operational problem at one customer’s electric generation facility.

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Margins earned on such deliveries are being shared with firm customers as described previously in this report.

     OTHER UTILITY OPERATING EXPENSES

     Operation and maintenance expenses for the six months ended March 31, 2001, increased by $9.3 million (10.4 percent) from the prior year’s levels. This increase caused earnings per average common share to decline by $0.12 from the same period last year. Key factors that contributed to the variance in operation and maintenance expenses for the current six-month period compared with last year include:

• a $6.0 million increase in uncollectible accounts expense, which directly relates to higher natural gas costs and colder weather, causing a corresponding increase in the Utility’s customer accounts receivable balance;

• a $1.5 million increase relating to higher natural gas distribution expenses; and

• a $1.3 million increase in labor and labor-related costs, primarily reflecting increases in employee wages and incentives.

     Depreciation and amortization expense increased by $1.6 million (5.0 percent) in the current six-month period primarily because of Washington Gas’ increased investment in property, plant and equipment. The general taxes incurred by the utility operations during the six months ended March 31, 2001 increased largely due to:

• a $2.2 million one-time adjustment to a Virginia business license tax made as a result of a tax law restructuring that replaced some taxes with an income tax on utility operations; and

• the inclusion of $5.6 million in the current six-month period for a newly enacted right-of-way fee imposed by the District of Columbia. This fee is recovered currently from customers and has no impact on net income.

     Utility income taxes rose $15.6 million primarily due to an increase in pre-tax income for the current six-month period. For utility operations, the effective income tax rates were 38.6 percent for the first six months of fiscal quarter of 2001 and 36.7 percent for the same period in fiscal year 2000. The rise in the effective income tax rate reflects recently enacted utility income taxes in Maryland and Virginia. The Utility’s revenues have been increased by an offsetting amount to reflect collection of this new tax from customers, thereby mitigating any earnings impact associated with the change.

     NON-UTILITY OPERATING RESULTS

     During the six months ended March 31, 2001, the net income from the Company’s major unregulated energy marketing, HVAC and consumer financing activities decreased to $0.6 million compared to $4.3 million earned during the same period last year. Earnings per average common share from non-utility activities declined from $0.09 during the six months ended March 31, 2000, to $0.01 in the current six-month period. Other non-utility results for the six months ended March 31, 2000 include a nonrecurring gain of $0.02 per average common share from sales of certain venture funds and a preferred stock interest. The following table compares the financial results from non-utility activities for the six months ended March 31, 2001 and 2000.

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Net Income (Loss) Applicable to Non-Utility Activities

		Six Months Ended
		March 31
(In thousands of dollars)		2001			2000			Variance
Energy Marketing		$	(2,347	)	$	2,747		$	(5,094	)
HVAC:
	Commercial		3,757			1,561			2,196
	Residential		(931	)		(511	)		(420	)
Consumer Financing			120			536			(416	)
Total		$	599		$	4,333		$	(3,734	)

     Energy Marketing Segment

     WGEServices sold 36.1 bcf of gas in the current six-month period, an increase of 13.5 percent from 31.8 bcf sold in the first six months of fiscal year 2000. During the six-month periods ended March 31, 2001 and 2000, respectively, 23.0 percent and 22.2 percent of these sales were made to customers outside of the service territory of the regulated utility. WGEServices’ total energy marketing revenues, including sales of electricity in fiscal year 2001, have more than doubled, increasing from $107.0 million in the six months ended March 31, 2000, to $232.7 million in the current six-month period.

     Net income earned by WGEServices declined from $2.7 million in the six months ended March 31, 2000, to a $2.3 million loss in the current six-month period as gross margins fell and selling, general and administrative expenses rose in the current year. Despite the significant increase in the volume of natural gas sold, rapidly rising natural gas prices combined with higher selling, general and administrative expenses during the current fiscal year have suppressed the earnings produced by this segment. Margins were, nevertheless, positive in all periods. Results for the first half of fiscal year 2000 benefited from a general decline in natural gas prices in 1999, which provided higher gross margins. As a start-up product line, the sales of electricity resulted in a small net loss in fiscal year 2001 as WGEServices incurred initial customer acquisition costs and initiated transmission arrangements.

     HVAC Segment

     Revenues from the Company’s commercial HVAC activities increased from $22.4 million in the six months ended March 31, 2000 to $42.2 million in the six months ended March 31, 2001, an 88.4 percent increase. Net income from these operations rose from $1.6 million to $3.8 million, as a result of continued growth in sales at strong gross profit margins.

     The HVAC operations for the six months ended March 31, 2001 and 2000, include net losses of $0.9 million and $0.5 million, respectively, from the Company’s 50 percent equity investment in Primary Investors. In part, the loss in the current year occurred because of a seasonal decline in the demand for residential HVAC products and services, which was further exacerbated by colder-than-normal winter temperatures. A portion of the net losses incurred by Primary Investors in the current six-month period stems from difficulties integrating the nine HVAC companies it acquired. Excluding its share of the net losses incurred to date, WGL Holdings has invested $19.0 million in Primary Investors as of March 31, 2001. (See Note 4 to the Consolidated Financial Statements for a further discussion of Primary Investors).

     Consumer Financing Segment

     During the six months ending March 31, 2001 and 2000, net income from the consumer financing segment was $120,000 and $536,000, respectively. Net income from this segment

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declined because of increased labor costs and other expenses incurred during the current fiscal year as this segment explores potential market opportunities. Throughout the periods reported in this Form 10-Q, a portion of the consumer financing operations were performed by Washington Gas as a non-utility activity.

     Sale of Non-Utility Assets

     During the six months ended March 31, 2000, a non-utility Company subsidiary sold a preferred stock investment and recorded a pre-tax book gain of $300,000. In addition, the same subsidiary recorded a pre-tax gain of $411,000 from the sales of certain venture funds. In total, the Company recorded a $1,154,000 after-tax gain on these transactions, which includes the tax benefit of capital loss carrybacks.

     OTHER INCOME (EXPENSES)—NET

     The $4.7 million decrease in Other Income (Expenses)-Net was primarily attributable to the premium on the weather insurance policy purchased in October 2000 by Washington Gas that was allocated to the first two quarters of fiscal year 2000 based on a normal level of heating degree days. Nearly the entire premium for fiscal year 2001 ($2.6 million, net of income taxes) has been expensed in the current six-month period. No recoveries have been received under this policy in the six months ended March 31, 2001.

     INTEREST EXPENSE

     Total WGL Holdings interest expense increased by $4.8 million (21.7 percent) from the same period last year, reflecting the following changes in interest expense:

Composition of Interest Expense
(In thousands of dollars)

		WGL Holdings						Washington Gas
		Six Months Ended						Six Months Ended
		March 31,						March 31,
		2001		2000		Variance		2001		2000		Variance
Long-Term Debt		$	20,514	$	17,495	$	3,019	$	20,514	$	17,495	$	3,019
Short-Term Debt			5,985		4,330		1,655		5,985		4,330		1,655
Other (Includes AFUDC)			226		144		82		230		144		86
	Total	$	26,725	$	21,969	$	4,756	$	26,729	$	21,969	$	4,760

     Interest on long-term debt increased $3.0 million primarily due to an $84.8 million increase in average balance, which reflects the issuance of $108.0 million of MTNs since April 2000. The average long-term debt balance increased from $498.2 million during the six months ended March 31, 2000 to $583.0 million during the current fiscal year, and the weighted average cost of such debt increased by 0.13 percentage points during the same period.

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     Interest on short-term debt increased $1.7 million because of a $46.0 million rise in the average short-term debt balance and a 0.30 percentage point increase in the weighted-average cost of such debt.

     WGL Holdings increased its average level of debt during the first six months of fiscal year 2001 in order to finance construction and higher working capital requirements associated with higher accounts receivable, storage gas inventory and yet-to-be-recovered gas cost balances and increased unregulated non-utility investments. The Company expects its interest expense during fiscal year 2001 to be higher than previous years because of its continuing requirement for increased working capital. This impact may continue as long as natural gas prices remain at relatively high levels.

LIQUIDITY AND CAPITAL RESOURCES

     Short-Term Cash Requirements and Related Financing

     The Company’s business is highly weather sensitive and seasonal. Approximately 75 percent of Washington Gas’ therm deliveries (excluding deliveries for electric generation) occur in the first and second fiscal quarters. This weather sensitivity causes short-term cash requirements to vary significantly during the year. Cash requirements peak in the fall and winter months when accounts receivable, accrued utility revenues and storage gas are at, or near, their highest levels. After the winter heating season, these assets are converted into cash and are generally used to liquidate short-term debt and acquire storage gas for the subsequent heating season.

     At March 31, 2001, the Company had notes payable outstanding, which consist of bank loans and commercial paper, of $206.4 million compared to $161.4 million at September 30, 2000. The increase in notes payable from September 30, 2000 was primarily due to the Company’s increased use of short-term debt to finance increases in accounts receivable, accrued utility revenues, storage gas inventory and unrecovered gas costs due to colder than normal winter weather and the significant rise in natural gas commodity prices.

     Long-Term Cash Requirements and Related Financing

     To fund construction expenditures and other capital requirements, the Company draws upon both internal and external sources of cash. The Company’s ability to generate adequate cash internally depends upon a number of factors, including the timing and amount of rate increases received and the level of therm deliveries. The Company’s last significant base rate increase became effective in December 1994. The number of customer meters and the variability of the weather from normal levels significantly affect the level of therms delivered.

     Cash Flow from Operating Activities

     Net cash used in operating activities totaled $26.2 million during the first six months of fiscal year 2001 compared to $85.3 million of net cash provided by operating activities for the same period last year. The $111.4 million decline in cash from operating activities was primarily the result of:

• higher funds used to support increased levels of utility accounts receivable and accrued utility revenues, which resulted from increased firm therm deliveries and higher natural gas costs. In addition, a rise in third party and off-system gas sales also contributed to the increased levels of utility accounts receivable in the current year; and

• a significant under-recovery of purchased gas costs due from utility customers during the six months ended March 31, 2001 compared to an over-recovery in the prior fiscal

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year period. This was partially offset by an increase in the over-recovery of purchased gas costs from non-utility operations during the same periods.

     Partially offsetting these uses of cash were:

• a $34.4 million increase in net income, adjusted for non-cash items;

• an increase in the level of accounts payable related primarily to gas cost increases;

• a reduction in the volume of gas stored during the six months ended March 31, 2001 compared with the same period last year, partially offset by a significantly higher price per therm of the stored gas this year; and

• an increase in accrued taxes, primarily due to higher taxable income.

     Cash Flow from Financing Activities

     During the first six months of fiscal year 2001, no cash was generated through common stock issued and no cash was used to reacquire common stock.

     During the six months ended March 31, 2001, the Company issued $67.1 million of long-term debt, including $55.0 million of Medium-Term Notes (MTNs) with a weighted average coupon rate of 6.94 percent and $12.1 million of long-term debt used primarily to fund construction projects.

     The dividends paid by the Company during the six months ended March 31, 2001, increased by $0.5 million due to the six-month impact of the $0.005 quarterly dividend increase per common share paid.

     Cash Flow from Investing Activities

     During the six months ended March 31, 2001, WGL Holdings had consolidated capital expenditures of $47.9 million, on a budget of $133.5 million for fiscal year 2001, compared to capital expenditures of $49.7 million for the first six months of fiscal year 2000.

     Sales of Accounts Receivable

     During the six months ended March 31, 2001, Washington Gas sold, with recourse, $12.8 million of non-utility accounts receivable, compared to $13.6 million in the six months ended March 31, 2000.

WASHINGTON GAS LIGHT COMPANY

     As discussed on page 2, this Quarterly Report on Form 10-Q includes separate consolidated financial statements for WGL Holdings (pages 4 through 7), as well as for Washington Gas (pages 8 through 11). This section of the Quarterly Report on Form 10-Q discusses the consolidated financial position and results of operations of Washington Gas throughout the reported periods. As previously noted, all results for Washington Gas prior to the November 1, 2000 corporate restructuring are reported on a consolidated basis, in accordance with generally accepted accounting principles. This consolidation reflects the results of Washington Gas’ operations, as well as those of its subsidiaries prior to the restructuring. All results of operations reported after the restructuring reflect the financial position and results of Washington Gas alone.

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     In many cases, the reasons for the changes in the financial position and results of operations for both WGL Holdings and Washington Gas are essentially the same. In those instances, the reader is referred to the WGL Holdings Management’s Discussion and Analysis of Financial Condition and Results of Operations, which begins on page 21. The following management’s discussion of Washington Gas’ financial position and results of operations only describes those instances in which the reasons for changes in the financial results or results of operations vary significantly from those of WGL Holdings.

RESULTS OF OPERATIONS—THREE MONTHS ENDED
   MARCH 31, 2001 VS. MARCH 31, 2000

     EARNINGS

     For the three months ended March 31, 2001, Washington Gas reported net income applicable to common stock of $60.7 million, a $4.2 million decline over the results reported for the same period last year. Washington Gas results for the current quarter are $1.3 million lower than for WGL Holdings because they do not include net income generated by Washington Gas’ former subsidiaries (including the 50 percent equity investment in Primary Investors), as well as operating expenses incurred by the holding company. In compliance with generally accepted accounting principles, the subsidiary earnings for the current quarter were recognized on the consolidated financial statements of WGL Holdings, the new parent company of Washington Gas’ former subsidiaries.

     The primary reason for the improvement in Washington Gas’ results was an 8.7 percent increase in firm therm deliveries over the same quarter last year, which reflected a 14.3 percent increase in the number of heating degree days and a 3.6 percent increase in its customer base. These increases resulted in a $21.7 million improvement in utility net revenues. Included in the net revenue increase are $7.5 million of revenues the Utility is collecting from recently enacted rights-of-way fees and state income taxes.

     Corresponding to the current quarter’s net revenue growth was a partially offsetting $5.5 million increase in operation and maintenance expenses primarily attributable to a $5.3 million increase in the Utility’s uncollectible accounts expense. The general taxes incurred by the Utility during the quarter ended March 31, 2001 increased largely due to the inclusion of $3.8 million in the current quarter for a newly enacted right-of-way fee imposed by the District of Columbia. This fee is recovered currently from customers and has no impact on net income.

     Non-utility operating income was $4.4 million in the second quarter of fiscal year 2000 and $0.4 million in the current quarter. The Washington Gas consolidated financial statements were prepared in accordance with generally accepted accounting principles, and therefore, non-utility results reported on these statements for the quarters ended March 31, 2001 and 2000 are not comparable because of the absence of the results for the energy marketing and HVAC segments in the current quarter. These entities became subsidiaries and investments of WGL Holdings pursuant to the November 1, 2000 corporate restructuring. Comparable results for the non-utility operations are reflected in WGL Holdings’ consolidated financial statements and notes thereto which begin on page 4, and the WGL Holdings Management’s Discussion and Analysis of Financial Condition and Results of Operations which begins on page 21.

     In addition, interest expense rose from $11.3 million during the three months ended March 31, 2001, to $13.5 million during the current fiscal quarter, because of an increase in the cost and level of debt used to fund: (1) capital additions; (2) the higher average cost of storage gas balances and unrecovered gas costs; (3) higher levels of accounts receivable; and (4) increased investment in the Company’s HVAC segment. The $3.0 million decrease in Other Income (Expenses)-Net was primarily attributable to the premium that was allocated to the current quarter on the weather insurance policy purchased in October 2000 by Washington Gas.

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     UTILITY NET REVENUES

     The operating revenues and cost of gas for the three months ended March 31, 2001 (reported on the Washington Gas Consolidated Statements of Income on page 9), both include offsetting amounts of $4.0 million for system balancing transactions with WGEServices, a subsidiary of Washington Gas before the November 1, 2000 restructuring. These intercompany charges were eliminated on WGL Holdings’ Consolidated Statements of Income (page 5). The reasons for the remaining variances in Washington Gas’ utility net revenues are essentially identical to theUtility Segment Net Revenuesresults discussed in WGL Holdings’ Management’s Discussion and Analysis beginning on page 22.

     OTHER UTILITY OPERATING EXPENSES

     The other utility operating expenses reported by Washington Gas for the quarter ended March 31, 2001, include $0.8 million of expenses for transactions with Hampshire Gas Company (Hampshire), a subsidiary of Washington Gas before the restructuring. These intercompany charges were eliminated on WGL Holdings’ Consolidated Statements of Income (page 5). The utility operating expenses reported by Washington Gas exclude $0.6 million of other utility operating expenses incurred by Hampshire in the second quarter of fiscal year 2001. The reasons for the remaining variances in Washington Gas’ other utility operating expenses are essentially identical toOther Utility Segment Operating Expenses, discussed in WGL Holdings’ Management’s Discussion and Analysis which begins on page 24.

     NON-UTILITY OPERATING RESULTS

     The non-utility results of operations reported by Washington Gas for the current quarter exclude the results of its former energy marketing and HVAC segments. For a discussion of the results of these segments for the three months ended March 31, 2001 and 2000, seeNon-Utility Operating Results, beginning on page 25 of WGL Holdings’ Management’s Discussion and Analysis.

     A portion of the Company’s consumer financing activities continued to be performed by Washington Gas during the three months ended March 31, 2001, prior to the movement of this activity to a subsidiary of WGL Holdings. SeeConsumer Financing Segmenton page 26 of the WGL Holdings’ Management’s Discussion and Analysis for a complete discussion about the results of operations for the consumer financing segment.

     OTHER INCOME (EXPENSES)—NET AND INTEREST EXPENSE

     The primary reasons for the changes in Washington Gas’ Other Income (Expenses)-Net and Interest Expense are essentially as those described in WGL Holdings’ Management’s Discussion and Analysis on page 26.

RESULTS OF OPERATIONS—SIX MONTHS ENDED
   MARCH 31, 2001 VS. MARCH 31, 2000

     EARNINGS

     For the six months ended March 31, 2001, Washington Gas reported net income applicable to common stock of $111.6 million, a $7.2 million improvement over the results reported for the same period last year. Washington Gas results for the current quarter are $0.8 million lower than for WGL Holdings because they do not include net income generated by Washington Gas’ former subsidiaries (including the 50 percent equity investment in Primary Investors) after the November 1, 2000 corporate restructuring, as well as operating expenses incurred by the holding company during the current six-month period. In compliance with generally accepted accounting principles, the subsidiary earnings reported after November 1,

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2000 were recognized on the consolidated financial statements of WGL Holdings, the new parent company of Washington Gas’ former subsidiaries.

     The primary reason for the improvement in Washington Gas’ results was an 18.5 percent increase in firm therm deliveries over the same six-month period last year, which reflected a 22.2 percent increase in the number of heating degree days and a 3.6 percent increase in its customer base. These increases resulted in a $57.3 million improvement in utility net revenues.

     Corresponding to the net revenue growth in the current six-month period was a partially offsetting $10.0 million increase in operation and maintenance expenses primarily attributable to a $6.0 million increase in the Utility’s uncollectible accounts expense. The general taxes incurred by Washington Gas during the six months ended March 31, 2001 increased largely due to:

• a $2.2 million one-time adjustment to a Virginia business license tax made as a result of a tax law restructuring that replaced some taxes with an income tax on utility operations; and

• the inclusion of $5.6 million in the current quarter for a newly enacted right-of-way fee imposed by the District of Columbia. This fee is recovered currently from customers and has no impact on net income.

     Non-utility operating income was $6.4 million in the six months ended March 31, 2000 and $0.6 million in the same period this year. The Washington Gas non-utility results for the six months ended March 31, 2001 and 2000 are not comparable because of the absence of results for the energy marketing and HVAC segments subsequent to the November 1, 2000 corporate restructuring. At that time, these entities became subsidiaries and investments of WGL Holdings. Comparable results for the non-utility operations are reflected in WGL Holdings’ consolidated financial statements and notes thereto which begin on page 4, and the WGL Holdings Management’s Discussion and Analysis of Financial Condition and Results of Operations which begins on page 21.

     In addition, interest expense rose from $22.0 million during the six months ended March 31, 2000, to $26.7 million during the current six-month period, because of an increase in the cost and level of debt used to fund: (1) capital additions; (2), the higher average cost of storage gas balances and unrecovered gas costs; (3) higher levels of accounts receivable; and (4) increased investment in the Company’s HVAC segment. The $4.2 million decrease in Other Income (Expenses)-Net was primarily attributable to the premium that was allocated to the first two quarters of fiscal year 2001 on the weather insurance policy purchased in October 2000 by Washington Gas.

     UTILITY NET REVENUES

     The operating revenues and cost of gas for the six months ended March 31, 2001 (reported on the Washington Gas Consolidated Statements of Income on page 10), both include offsetting amounts of $6.1 million for system balancing transactions with WGEServices, a subsidiary of Washington Gas before the November 1, 2000 restructuring. These intercompany charges were eliminated on WGL Holdings’ Consolidated Statements of Income (page 6). The reasons for the remaining variances in Washington Gas’ utility net revenues are essentially identical to theUtility Segment Net Revenuesresults discussed in WGL Holdings’ Management’s Discussion and Analysis beginning on page 28.

     OTHER UTILITY OPERATING EXPENSES

     The other utility operating expenses reported by Washington Gas for the six months ended March 31, 2001, include $1.2 million of expenses for transactions with Hampshire. These

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intercompany charges were eliminated on WGL Holdings’ Consolidated Statements of Income (page 6). The utility operating expenses reported by Washington Gas exclude $1.0 million of other utility operating expenses incurred by Hampshire subsequent to November 1, 2000. The reasons for the remaining variances in Washington Gas’ other utility operating expenses are essentially identical toOther Utility Operating Expenses, discussed in WGL Holdings’ Management’s Discussion and Analysis which begins on page 30.

     NON-UTILITY OPERATING RESULTS

     The non-utility results of operations reported by Washington Gas exclude the results of its former energy marketing and HVAC segments after November 1, 2000. For a complete discussion of the results of these segments for the six months ended March 31, 2001 and 2000, seeNon-Utility Operating Results beginning on page 30 of WGL Holdings’ Management’s Discussion and Analysis.

     OTHER INCOME (EXPENSES)—NET AND INTEREST EXPENSE

     The primary reasons for the changes in Washington Gas’ Other Expenses-Net and Interest Expense are essentially as those described in WGL Holdings’ Management’s Discussion and Analysis on page 32.

LIQUIDITY AND CAPITAL RESOURCES

     This section does not differ materially from the disclosure provided in the WGL Holdings Management’s Discussion and Analysis. However, Washington Gas’ investing activities for the current six-month period includes an $11.8 million cash transfer related to the formation of the holding company and the related dividend of the former subsidiaries. Please refer to the Washington Gas Statements of Cash Flows on page 11.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
                 OF THE COMPANY

     INTEREST RATE RISK EXPOSURE RELATED TO OTHER FINANCIAL INSTRUMENTS

     WGL Holdings and its subsidiary, Washington Gas, have interest rate risk exposure related to long-term debt. For information regarding the exposure related to these risks, see Item 7A in Washington Gas’ most recently filed Form 10-K. Neither WGL Holdings nor Washington Gas’ risk associated with interest rates have materially changed from September 30, 2000.

     RISKS RELATED TO RETAIL ENERGY MARKETING OPERATIONS

     WGL Holdings’ subsidiary, WGEServices, markets both natural gas and electricity. In the course of its business, WGEServices makes fixed-price sales commitments to customers. WGEServices purchases the corresponding physical supplies at fixed prices to lock in margins. WGEServices has exposure to changes in gas prices related to the volumetric differences between the purchase commitments and sales commitments. WGEServices has managed the risk associated with gas price fluctuations by closely matching purchases from suppliers with sales commitments to customers.

     Historically, the responsibility for managing daily demand fluctuations from WGEServices customers resulting from variability in weather was assumed by WGL Holdings’ regulated utility subsidiary through the use of its storage and peaking capacity. The regulated utility charged WGEServices a fee for this service.

     Effective April 1, 2001, WGEServices assumed a major portion of the responsibility to deliver the appropriate level of gas to its customers on a daily basis. WGEServices will continue to be able to avail itself of certain peak shaving capacity that the regulated utility provides for a fee and also

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is acquiring a pro-rata portion of the utility’s storage gas capacity to manage its load. Therefore, variations in demand caused by fluctuations in weather applicable to approximately 50 percent of WGEServices’ annual sales volumes could result in WGEServices having contracted for more or less gas than its customers require on any given day. As a result, WGEServices is modifying its risk management and procurement policies to reflect the need to obtain storage capacity and other contractual arrangements to meet the weather-related variability in its demand and to ensure the financial exposure caused by this variability in demand is adequately controlled.

PART II. OTHER INFORMATION

99 Additional Exhibits

99.0	Computation of Ratio of Earnings to Fixed Charges—WGL Holdings
99.1	Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends—WGL Holdings
99.2	Computation of Ratio of Earnings to Fixed Charges—Washington Gas
99.3	Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends—Washington Gas

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WGL HOLDINGS, INC

and

WASHINGTON GAS LIGHT COMPANY

(Co-Registrants)

Date:       August 15, 2001	/s/ Robert E. Tuoriniemi
	Robert E. Tuoriniemi Controller (Principal Accounting Officer)

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