WGL (WGL) 10-Q 2002 Q2 Quarterly report

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

FORM 10-Q

(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, 2002

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
0-49807	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 each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to filing requirements for the past 90 days, 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:

WGL Holdings, Inc. common stock, no par value, outstanding as of April 30, 2002: 48,565,858 shares

All of the outstanding shares of common stock ($1 par value) of Washington Gas Light Company were held by WGL Holdings, Inc. as of April 30, 2002.

Form 10-Q
For the Second Fiscal Quarter Ended March 31, 2002

TABLE OF CONTENTS
PART I. Financial Information
Item 1.	Financial 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 2.	Management's Discussion and Analysis of Financial
		Condition and Results of Operations	19
		WGL Holdings, Inc.	20
		Washington Gas Light Company	34
Item 3.	Quantitative and Qualitative Disclosures About
		Market Risks of the Company	37
PART II. Other Information
Item 4.	Submission of Matters to a Vote of Security Holders		37
Item 5.	Other Items		39
Item 6.	Exhibits and Reports on Form 8-K		39
Signatures			40

2

FILING FORMAT

     This Quarterly Report on Form 10-Q 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 regulated utility). Except where the content clearly indicates otherwise, any reference in the report to “WGL Holdings” or “the Company” is a reference to the consolidated entity of WGL Holdings and all of its subsidiaries, including Washington Gas, a distinct registrant that is a wholly-owned subsidiary of WGL Holdings.

     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 (Crab Run Gas Company, Hampshire Gas Company and Washington Gas Resources Corporation) 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 which reflects transactions that occurred after the November 1, 2000, corporate restructuring, as well as the consolidated financial position of Washington Gas prior to the corporate restructuring. 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 corporate restructuring.

     The consolidated financial statements for Washington Gas, the regulated utility, reflect the corporate restructuring, which took place on November 1, 2000. This restructuring resulted in a change of ownership in several subsidiaries from Washington Gas to WGL Holdings. The consolidated financials of Washington Gas include all pre-restructured transactions of the formerly owned subsidiaries and exclude all post-restructured transactions since such transactions are properly reflected in the financial statements of WGL Holdings. The Consolidated Balance Sheets presented herein, for Washington Gas, are not impacted by the restructuring because the periods presented have no subsidiary transactions reflected thereon since there was no subsidiary ownership on the respective dates of these financial statements. The Consolidated Statements of Income and Consolidated Statements of Cash Flows of Washington Gas reflect transactions of the wholly-owned subsidiaries of Washington Gas for the month of October 2000. Thereafter, such transactions are properly excluded from the Consolidated Statements of Income and Consolidated Statements of Cash Flows because Washington Gas no longer owned the subsidiaries. Such transactions after October 2000 are reflected in the financial statements of WGL Holdings. The October 2000 transactions do not have a material impact on the financial statements of Washington Gas or on the variations between the two periods with respect to comparisons of the financial statements for the various periods.

3

PART I. FINANCIAL INFORMATION

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

					March 31,			September 30,
(Thousands)					2002			2001
ASSETS					(Unaudited)
	Property, Plant and Equipment
		At original cost			$	2,402,539		$	2,340,410
		Accumulated depreciation and amortization				(851,026	)		(820,663	)
			Net Property, Plant and Equipment			1,551,513			1,519,747
	Current Assets
		Cash and cash equivalents				14,406			12,104
		Accounts receivable				291,916			152,914
		Gas costs due from customers				30,464			58,718
		Allowance for doubtful accounts				(20,478	)		(19,539	)
		Accrued utility revenues				39,622			15,180
		Materials and supplies principally at average cost				13,940			14,230
		Storage gas—at cost (first-in, first-out)				26,818			135,762
		Deferred income taxes				11,078			—
		Other prepayments—principally taxes				13,073			19,462
		Exchange gas imbalance—unregulated operations				—			605
		Other				2,199			3,063
			Total Current Assets			423,038			392,499
	Deferred Charges and Other Assets
		Regulatory assets				91,444			98,323
		Equity in 50%-owned residential HVAC investment, excluding tax benefits (Note 4)				3,131			10,802
		Prepaid qualified pension benefits				48,687			38,844
		Other				34,281			20,898
			Total Deferred Charges and Other Assets			177,543			168,867
				Total Assets	$	2,152,094		$	2,081,113
CAPITALIZATION AND LIABILITIES
	Capitalization
		Common shareholders’ equity			$	833,983		$	788,253
		Washington Gas Light Company Preferred stock				28,173			28,173
		Long-term debt				642,603			584,370
			Total Capitalization			1,504,759			1,400,796
	Current Liabilities
		Current maturities of long-term debt				26,211			48,179
		Notes payable				86,911			134,052
		Accounts payable				109,993			116,822
		Wages payable				15,182			15,358
		Dividends declared				15,743			15,621
		Customer deposits and advance payments				9,475			8,657
		Gas costs due to customers				857			1,862
		Deferred income taxes				—			3,539
		Accrued taxes				51,892			13,129
		Other				3,998			3,717
			Total Current Liabilities			320,262			360,936
	Deferred Credits
		Unamortized investment tax credits				17,188			17,640
		Deferred income taxes				203,701			209,292
		Accrued pensions and benefits				33,850			34,840
		Other				72,334			57,609
			Total Deferred Credits			327,073			319,381
				Total Capitalization and Liabilities	$	2,152,094		$	2,081,113

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

4

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

					Three Months Ended
					March 31,
(Thousands, Except Per Share Data)					2002			2001
UTILITY OPERATIONS
	Operating Revenues				$	379,394		$	605,155
		Less: Cost of gas				189,200			391,730
				Revenue taxes		11,779			15,120
				Utility Net Revenues		178,415			198,305
	Other Operating Expenses
		Operation				43,743			42,501
		Maintenance				8,596			9,709
		Depreciation and amortization				18,048			17,038
		General taxes				10,769			11,630
		Income taxes				34,139			40,785
				Utility Other Operating Expenses		115,295			121,663
				Utility Operating Income		63,120			76,642
NON-UTILITY OPERATIONS
	Operating Revenues
		Retail energy-marketing				172,897			143,218
		Heating, ventilating and air conditioning				12,016			25,943
		Other non-utility				512			1,135
				Non-Utility Operating Revenues		185,425			170,296
	Equity Loss in 50%-Owned Residential HVAC Investment(Note 4)					(2,115	)		(343	)
	Impairment of Residential HVAC Investment(Note 4)					(7,300	)		—
	Other Operating Expenses
		Operating expenses				182,318			166,989
		Income taxes				1,173			1,003
				Non-Utility Operating Expenses		183,491			167,992
				Non-Utility Operating Income (Loss)		(7,481	)		1,961
TOTAL OPERATING INCOME						55,639			78,603
Other Income (Expenses)—Net						1,782			(2,666	)
INCOME BEFORE INTEREST EXPENSE						57,421			75,937
INTEREST EXPENSE
			Interest on long-term debt			10,610			10,546
			Other			721			3,054
				Total Interest Expense		11,331			13,600
DIVIDENDS ON WASHINGTON GAS PREFERRED STOCK						330			330
NET INCOME					$	45,760		$	62,007
AVERAGE COMMON SHARES OUTSTANDING						48,565			46,488
EARNINGS PER AVERAGE COMMON SHARE- BASIC AND DILUTED (Note 3)					$	0.94		$	1.33
DIVIDENDS DECLARED PER COMMON SHARE					$	0.3175		$	0.3150

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

5

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

					Six Months Ended
					March 31,
(Thousands, Except Per Share Data)					2002			2001
UTILITY OPERATIONS					$	646,050		$	1,145,512
	Operating Revenues
		Less:		Cost of gas		315,733			744,541
				Revenue taxes		19,644			33,149
			Utility Net Revenues			310,673			367,822
	Other Operating Expenses
		Operation				81,084			80,912
		Maintenance				18,234			17,592
		Depreciation and amortization				35,699			33,894
		General taxes				18,071			19,072
		Income taxes				53,486			73,628
			Utility Other Operating Expenses			206,574			225,098
				Utility Operating Income		104,099			142,724
NON-UTILITY OPERATIONS
	Operating Revenues
		Retail energy-marketing				302,009			232,726
		Heating, ventilating and air conditioning				32,772			42,237
	Other non-utility					1,084			2,009
			Non-Utility Operating Revenues			335,865			276,972
	Equity Loss in 50%-Owned Residential HVAC Investment(Note 4)					(2,822	)		(918	)
	Impairment of Residential HVAC Investment(Note 4)					(7,300	)		—
	Other Operating Expenses
		Operating expenses				329,715			273,733
		Income taxes				2,209			616
			Non-Utility Operating Expenses			331,924			274,349
				Non-Utility Operating Income (Loss)		(6,181	)		1,705
TOTAL OPERATING INCOME						97,918			144,429
Other Income (Expenses)—Net						1,980			(4,616	)
INCOME BEFORE INTEREST EXPENSE						99,898			139,813
INTEREST EXPENSE
			Interest on long-term debt			21,363			20,514
			Other			1,878			6,211
				Total Interest Expense		23,241			26,725
DIVIDENDS ON WASHINGTON GAS PREFERRED STOCK						660			660
NET INCOME					$	75,997		$	112,428
AVERAGE COMMON SHARES OUTSTANDING						48,561			46,483
EARNINGS PER AVERAGE COMMON SHARE—BASIC AND DILUTED(Note 3)					$	1.56		$	2.42
DIVIDENDS DECLARED PER COMMON SHARE					$	0.6325		$	0.6250

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

6

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

			Six Months Ended
			March 31,
(Thousands)			2002			2001
OPERATING ACTIVITIES
Net income			$	75,997		$	112,428
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
	Depreciation and amortization (a)			38,657			37,080
	Deferred income taxes net			(17,367	)		32,148
	Amortization of investment tax credits			(452	)		(449	)
	Accrued/deferred pension cost			(7,041	)		(7,533	)
	Allowance for funds used during construction			—			(315	)
	Equity loss in 50%-owned residential HVAC investment			2,822			918
	Impairment of residential HVAC investment			7,300			—
	Other non-cash credits net, including gains and losses on investing activities			830			(412	)
				100,746			173,865
CHANGES IN ASSETS AND LIABILITIES
	Accounts receivable and accrued utility revenues			(162,505	)		(332,133	)
	Gas costs due from/to customers—net			27,249			(6,452	)
	Storage gas			108,944			106,045
	Other prepayments—principally taxes			6,390			637
	Accounts payable			(7,729	)		37,752
	Wages payable			(176	)		1,200
	Customer deposits and advance payments			818			(2,894	)
	Accrued taxes			38,763			44,721
	Accrued interest			79			297
	Deferred purchased gas cost—net			11,553			(78,478	)
	Exchange gas imbalance-unregulated operations			605			28,650
	Other—net			6,674			612
		Net Cash Provided by (Used in) Operating Activities		131,411			(26,178	)
FINANCING ACTIVITIES
	Long-term debt issued			66,351			67,095
	Long-term debt retired			(30,106	)		(1,091	)
	Debt issuance costs			(500	)		(393	)
	Notes payable			(47,141	)		45,020
	Dividends on common stock			(30,595	)		(28,817	)
	Other financing activities			371			542
		Net Cash Provided by (Used in) Financing Activities		(41,620	)		82,356
INVESTING ACTIVITIES
	Capital expenditures			(68,552	)		(47,853	)
	50%-owned residential HVAC investment (Note 4)			(2,450	)		(750	)
	Other investing activities			(16,487	)		(5,976	)
		Net Cash Used in Investing Activities		(87,489	)		(54,579	)
INCREASE IN CASH AND CASH EQUIVALENTS(b)				2,302			1,599
Cash and Cash Equivalents at Beginning of Period(b)				12,104			24,336
Cash and Cash Equivalents at End of Period(b)			$	14,406		$	25,935
(a) Includes amounts charged to other accounts
(b) Cash equivalents are highly liquid investments, maturing in three months or less when purchased
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
	Income taxes paid		$	30,569		$	14,870
	Interest paid		$	22,636		$	26,269

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

7

Washington Gas Light Company
CONSOLIDATED BALANCE SHEETS

					March 31,			September 30,
(Thousands)					2002			2001
					(Unaudited)
ASSETS
	Property, Plant and Equipment
		At original cost			$	2,379,529		$	2,317,566
		Accumulated depreciation and amortization				(836,337	)		(806,730	)
		Net Property, Plant and Equipment				1,543,192			1,510,836
	Current Assets
		Cash and cash equivalents				12,049			7,537
		Accounts receivable (Note 7)				165,134			69,481
		Gas costs due from customers				30,464			58,718
		Allowance for doubtful accounts				(17,024	)		(17,279	)
		Accrued utility revenues				39,622			15,180
		Materials and supplies—principally at average cost				13,709			14,000
		Storage gas—at cost (first-in, first-out)				22,432			109,674
		Receivables from associated companies (Note 7)				3,619			8,500
		Deferred income taxes				9,936			—
		Other prepayments—principally taxes				10,488			16,641
		Total Current Assets				290,429			282,452
	Deferred Charges and Other Assets
		Regulatory assets				91,444			98,323
		Prepaid qualified pension benefits				48,444			38,647
		Other				32,301			18,656
		Total Deferred Charges and Other Assets				172,189			155,626
				Total Assets	$	2,005,810		$	1,948,914
CAPITALIZATION AND LIABILITIES
	Capitalization
		Common shareholders’ equity			$	796,891		$	723,886
		Preferred stock				28,173			28,173
		Long-term debt				642,437			584,165
			Total Capitalization			1,467,501			1,336,224
	Current Liabilities
		Current maturities of long-term debt				26,096			47,937
		Notes payable				19,473			98,724
		Accounts payable (Note 7)				67,296			74,597
		Wages payable				14,435			14,928
		Dividends declared				15,757			15,627
		Customer deposits and advance payments				9,475			8,657
		Payables to associated companies (Note 7)				3,500			14,700
		Gas costs due to customers				857			1,862
		Deferred income taxes				—			4,114
		Accrued taxes				48,911			8,364
		Other				3,357			3,428
			Total Current Liabilities			209,157			292,938
	Deferred Credits
		Unamortized investment tax credits				17,157			17,606
		Deferred income taxes				206,919			210,469
		Accrued pensions and benefits				33,722			34,730
		Other				71,354			56,947
			Total Deferred Credits			329,152			319,752
				Total Capitalization and Liabilities	$	2,005,810		$	1,948,914

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

8

Washington Gas Light Company
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

					Three Months Ended
					March 31,
(Thousands)					2002		2001
UTILITY OPERATIONS
	Operating Revenues(Note 7)				$	385,046	$	609,186
		Less: Cost of gas (Note 7)				194,852		395,761
			Revenue taxes			11,779		15,120
			Utility Net Revenues			178,415		198,305
	Other Operating Expenses
		Operation (Note 7)				44,261		43,108
		Maintenance				8,553		9,660
		Depreciation and amortization				17,882		16,875
		General taxes				10,678		11,517
		Income taxes				34,009		40,670
			Utility Other Operating Expenses			115,383		121,830
				Utility Operating Income		63,032		76,475
NON-UTILITY OPERATIONS
	Operating Revenues
		Other non-utility				456		1,135
			Non-Utility Operating Revenues			456		1,135
	Other Operating Expenses (Income)
		Operating expenses				350		607
		Income taxes				41		97
			Non-Utility Operating Expenses			391		704
				Non-Utility Operating Income		65		431
TOTAL OPERATING INCOME						63,097		76,906
Other Income (Expenses)—Net						2,815		(2,372	)
INCOME BEFORE INTEREST EXPENSE						65,912		74,534
INTEREST EXPENSE
		Interest on long-term debt				10,610		10,546
		Other				992		2,973
			Total Interest Expense			11,602		13,519
NET INCOME						54,310		61,015
DIVIDENDS ON PREFERRED STOCK						330		330
NET INCOME APPLICABLE TO COMMON STOCK					$	53,980	$	60,685

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

9

Washington Gas Light Company
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

					Six Months Ended
					March 31,
(Thousands)					2002		2001
UTILITY OPERATIONS
	Operating Revenues(Note 7)				$	655,685	$	1,151,653
		Less: Cost of gas (Note 7)				325,368		750,682
			Revenue taxes			19,644		33,149
			Utility Net Revenues			310,673		367,822
	Other Operating Expenses
		Operation (Note 7)				82,107		81,731
		Maintenance				18,150		17,515
		Depreciation and amortization				35,368		33,623
		General taxes				17,905		18,898
		Income taxes				53,262		73,519
			Utility Other Operating Expenses			206,792		225,286
				Utility Operating Income		103,881		142,536
NON-UTILITY OPERATIONS
	Operating Revenues
		Retail energy-marketing				—		17,755
		Heating, ventilating and air conditioning				—		5,066
		Other non-utility				928		2,009
			Non-Utility Operating Revenues			928		24,830
	Equity Loss in 50%-Owned Residential HVAC Investment					—		(167	)
	Other Operating Expenses (Income)
		Operating expenses				738		24,080
		Income taxes				21		(21	)
			Non-Utility Operating Expenses			759		24,059
				Non-Utility Operating Income		169		604
TOTAL OPERATING INCOME						104,050		143,140
Other Income (Expenses)—Net						3,614		(4,149	)
INCOME BEFORE INTEREST EXPENSE						107,664		138,991
INTEREST EXPENSE
		Interest on long-term debt				21,363		20,514
		Other				2,408		6,215
			Total Interest Expense			23,771		26,729
NET INCOME						83,893		112,262
DIVIDENDS ON PREFERRED STOCK						660		660
NET INCOME APPLICABLE TO COMMON STOCK					$	83,233	$	111,602

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

10

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

			Six Months Ended
			March 31,
(Thousands)			2002			2001
OPERATING ACTIVITIES
Net income			$	83,893		$	112,262
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
	Depreciation and amortization(a)			37,785			36,572
	Deferred income taxes—net			(15,442	)		43,370
	Amortization of investment tax credits			(449	)		(447	)
	Accrued/deferred pension cost			(6,962	)		(7,487	)
	Allowance for funds used during construction			—			(315	)
	Equity loss in 50%-owned residential HVAC investment			—			167
	Other non-cash charges (credits)—net, including gains and losses on investing activities			807			(412	)
				99,632			183,710
CHANGES IN ASSETS AND LIABILITIES
	Accounts receivable and accrued utility revenues			(115,469	)		(245,939	)
	Gas costs due from/to customers—net			27,249			(6,452	)
	Storage gas			87,242			106,045
	Other prepayments—principally taxes			6,153			1,562
	Accounts payable			(19,100	)		21,881
	Wages payable			(493	)		1,053
	Customer deposits and advance payments			818			(2,894	)
	Accrued taxes			40,547			32,948
	Accrued Interest			79			297
	Deferred purchased gas costs—net (utility)			11,553			(78,478	)
	Exchange gas imbalance-unregulated operations			—			(2,405	)
	Other—net			5,644			(1,391	)
		Net Cash Provided by Operating Activities		143,855			9,937
FINANCING ACTIVITIES
	Long-term debt issued			66,279			66,809
	Long-term debt retired			(29,952	)		(934	)
	Debt issuance costs			(500	)		(393	)
	Paid-in capital			20,186			—
	Notes payable—net			(79,251	)		18,051
	Dividends on common and preferred stock			(31,246	)		(29,470	)
	Other financing activities			223			392
		Net Cash Provided by (Used in) Financing Activities		(54,261	)		54,455
INVESTING ACTIVITIES
	Capital expenditures			(68,595	)		(48,583	)
	Cash transfer related to formation of holding company			—			(11,797	)
	Other investing activities			(16,487	)		(6,726	)
		Net Cash Used in Investing Activities		(85,082	)		(67,106	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS(b)				4,512			(2,714	)
Cash and Cash Equivalents at Beginning of Period(b)				7,537			24,336
Cash and Cash Equivalents at End of Period(b)			$	12,049		$	21,622
(a) Includes amounts charged to other accounts
(b) Cash equivalents are highly liquid investments, maturing in three months or less when purchased
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
	Income taxes paid		$	30,298		$	12,790
	Interest paid		$	22,314		$	26,008

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

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

NOTE 1—GENERAL

     Effective November 1, 2000, Washington Gas Light Company (Washington Gas or the regulated utility) and its subsidiaries became subsidiaries of WGL Holdings, Inc. (WGL Holdings or the Company), a newly formed holding company that was established under the Public 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 (Crab Run Gas Company, Hampshire Gas Company and Washington Gas Resources Corporation), and its former 50-percent equity investment in Primary Investors, LLC (Primary Investors). Refer to WGL Holdings fiscal year 2001 Annual Report on Form 10-K for additional details about this corporate 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 Form 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, corporate restructuring are essentially identical to the consolidated financial position and results of operations of WGL Holdings immediately after the November 1, 2000, corporate restructuring.

     Washington Gas  For all periods reported in this Quarterly Report on Form 10-Q, the Washington Gas consolidated financial statements present the financial position and results of operations reported for Washington Gas. 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. 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, 2002.

     Basis of Presentation and Use of Estimates in Preparation of Financial Statements

     The interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Therefore, certain information and footnote disclosures accompanying annual financial statements prepared in accordance with generally accepted accounting principles (GAAP) in the United States are omitted in this interim report pursuant to the SEC rules and regulations. The interim consolidated financial statements and notes thereto should be read in conjunction with the combined Annual Report on Form 10-K for WGL Holdings and Washington Gas for the fiscal year ended September 30, 2001.

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     In accordance with GAAP, the Company’s management makes certain 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.

     The accompanying unaudited consolidated financial statements for WGL Holdings and Washington Gas reflect all normal recurring adjustments that are necessary, in the opinion of management, to present fairly the results of operations in accordance with GAAP.

     Reclassifications

     Certain amounts in the prior year’s financial statements were reclassified to conform to current year presentation.

NOTE 2—LONG-TERM DEBT

     Unsecured Medium-Term Notes

     In February 2002, Washington Gas issued a $25 million unsecured Medium-Term Note (MTN) at a fixed interest rate of 6.0 percent, which matures in 2012. Washington Gas has the option to redeem the MTN 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 MTN to be redeemed, discounted to the redemption date on a semiannual basis at the comparable treasury rate plus 20 basis points plus accrued interest to the date of redemption.

NOTE 3—COMMON STOCK AND EARNINGS PER SHARE

     Earnings Per Share

     Basic earnings per average common share (EPS) is computed by dividing net income by the weighted-average number of common shares outstanding for each period presented. Diluted EPS assumes 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, 2002 and 2001.

Basic and Diluted Earnings Per Average Common Share

				Net				Per Share
				Income		Shares		Amount
For the Three Months Ended March 31, 2002
	Basic EPS:
		Net Income		$	45,760		48,565	$	0.94
		Effect of Dilutive Securities:
			Stock-Based Compensation Plans		—		86
	Diluted EPS:
		Net Income		$	45,760		48,651	$	0.94
For the Three Months Ended March 31, 2001
	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

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Basic and Diluted Earnings Per Average Common Share

				Net				Per Share
				Income		Shares		Amount
For the Six Months Ended March 31, 2002
	Basic EPS:
		Net Income		$	75,997		48,561	$	1.56
		Effect of Dilutive Securities:
			Stock-Based Compensation Plans		—		84
	Diluted EPS:
		Net Income		$	75,997		48,645	$	1.56
For the Six Months Ended March 31, 2001
	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

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 the corporate restructuring, Washington Gas transferred its ownership interest to WGL Holdings.

     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 to date. WGL Holdings and Thayer each own 50-percent of Primary Investors and each has an equal number of representatives on Primary Investors’ Board of Managers. In 1999 as co-investors, WGL Holdings and Thayer each committed to invest up to $25 million of equity capital in Primary Investors.

     Through March 31, 2002, WGL Holdings and Thayer each have made investments in Primary Investors totaling $21.8 million. In April and May 2002, WGL Holdings made additional investments totaling $0.8 million. Thayer has contributed an equal amount to Primary Investors. Primary Investors has a loan from a commercial bank with an outstanding balance at March 31, 2002, of $6.75 million. WGL Holdings has neither guaranteed nor cosigned this loan and, accordingly, has no obligation to repay this loan. However, WGL Holdings recognizes that, to preserve shareholder value, it could elect to repay this loan or a part thereof on behalf of Primary Investors. Since inception, Primary Investors has generated operating losses totaling $14.8 million, of which WGL Holdings has recorded its 50-percent share totaling $7.4 million before the impairment allowance, utilizing the equity method of accounting. WGL Holdings has also recognized $1.8 million of deferred tax assets associated with its share of Primary Investor’s operating loses.

     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 and the ultimate amount realized from the investment of each party in Primary Investors.

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     At this point either WGL Holdings or Thayer may exercise its right to sell its individual interest to a third party, after offering the other investor the opportunity to purchase the interest. Subject to certain conditions, either investor can also require the other party to sell. As a result, the ultimate value of WGL Holdings’ investment in Primary Investors could depend on the nature and timing of the exercise of these rights.

     WGL Holdings assessed the realization of its equity investment in Primary Investors as of March 31, 2002. Based on its operating history and Primary Investors’ performance relative to its plan, the Company determined that the fair value of its investment in Primary Investors was less than the carrying amount in its financial statements. Therefore, the Company reflected an impairment in the amount of $7.3 million for the period ended March 31, 2002. Previously, at September 30, 2001, the Company recorded an impairment of $3.9 million. The Company will continue to monitor Primary Investors’ performance relative to its plan and assess its investment in Primary Investors for potential impairment. The Company’s assets reflect a net investment of $3.1 million at March 31, 2002.

NOTE 5—DERIVATIVE ACTIVITY

     Effective October 1, 2000, the Company adopted Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities(SFAS No. 133), as amended by Statement of Financial Accounting Standards No. 138,Accounting for Certain Derivative Instruments and Certain Hedging Activities(SFAS No. 138). SFAS No. 133, as amended, requires derivative instruments, including certain derivative instruments embedded in other contracts, to be recorded at fair value as either an asset or a liability. Changes in the derivative’s fair value would be recorded in earnings, unless the derivative meets specific hedge accounting criteria. Special accounting for qualifying hedges allows derivative gains and losses to offset related results on the hedged item in the income statement or to be recorded in other comprehensive income. Furthermore, this accounting requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting.

     The Company’s regulated utility subsidiary, Washington Gas, enters into forward contracts for the purchase of natural gas that qualify as derivatives under SFAS No. 133. The Company has determined that these forward contracts qualify as normal purchases and sales, as defined in SFAS No. 133, and are therefore exempt from that standard’s reporting requirements.

     During the six months ended March 31, 2002, Washington Gas Energy Services, Inc. (WGEServices), the Company’s retail energy-marketing subsidiary, entered into call and put options for the purchase and sale of natural gas in order to mitigate the impact of weather variations on customers’ usage and, ultimately, the impact on cost of gas and gross margins. The call options fix the cost of gas WGEServices would incur if colder than anticipated weather required the purchase of additional natural gas over the amounts it has currently contracted and in inventory. Conversely, the put options fix the price that WGEServices can sell excess natural gas if demand for gas is lower than anticipated. The contracts qualify as derivative instruments under SFAS No. 133; however, they do not qualify as hedges under that standard.

     At September 30, 2001, WGEServices held certain contracts for the sale and purchase of natural gas and they were recognized at their fair value in the Company’s balance sheet. For the six months ended March 31, 2002, WGEServices recorded a $0.1 million loss associated with these option contracts. At March 31, 2002, WGEServices did not hold any material option contracts.

NOTE 6—OPERATING SEGMENT REPORTING

     WGL Holdings reports three operating segments: 1) regulated utility; 2) retail energy- marketing; and 3) HVAC activities.

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     With over 93 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, customer based services, call center operations, bill preparation and payment processing) to customers in metropolitan Washington, D.C. and parts of Maryland and Virginia. In addition, the regulated utility segment also includes the operation of an underground natural gas storage facility regulated by the Federal Energy Regulatory Commission.

     Through a non-regulated subsidiary, WGEServices, the retail energy-marketing segment sells natural gas and electricity directly to customers, both inside and outside Washington Gas’ traditional service territory, in competition with other unregulated gas and electricity marketers. Through two other subsidiaries, Washington Gas Energy Systems, Inc. and American Combustion Industries, Inc., and through the Company’s investment in Primary Investors, the HVAC segment designs, renovates and services mechanical heating, ventilating and air conditioning systems for commercial, governmental and residential customers.

     The following table presents operating segment information.

OPERATING SEGMENT FINANCIAL INFORMATION
						Non-Utility Operations
			Regulated			Retail Energy						Other						Eliminations/
(Thousands)			Utility			Marketing			HVAC			Activities			Total			Other			Consolidated
Three Months Ended March 31, 2002
Total Revenues			$	385,708		$	172,897		$	12,016		$	512		$	185,425		$	(6,314	)	$	564,819
Operating Expenses
	Depreciation and Amortization			18,048			97			151			152			400			—			18,448
	Other Operating Expenses(a)			270,401			170,503			10,999			416			181,918			(6,314	)		446,005
	Income Tax Expense (Benefit)			34,139			724			480			(31	)		1,173			—			35,312
		Total Operating Expenses		322,588			171,324			11,630			537			183,491			(6,314	)		499,765
Equity in Net Loss of Affiliate				—			—			(2,115	)		—			(2,115	)		—			(2,115	)
Operating Income (Loss)				63,120			1,573			(1,729	)		(25	)		(181	)		—			62,939
Interest Expense – Net				10,953			246			122			10			378			—			11,331
Other Non-Operating Inc. (Exp.)(b)				3,486			—			63			—			63			(1,767	)		1,782
Residential HVAC impairment				—			—			(7,300	)		—			(7,300	)		—			(7,300	)
Dividends on Washington Gas Preferred Stock				330			—			—			—			—			—			330
Net Income (Loss)			$	55,323		$	1,327		$	(9,088	)	$	(35	)	$	(7,796	)	$	(1,767	)	$	45,760
Total Assets			$	2,011,690		$	119,183		$	27,962		$	12,058		$	159,203		$	(18,799	)	$	2,152,094
Capital Expenditures/Investments			$	39,896		$	—		$	2,019		$	—		$	2,019		$	(8	)	$	41,907
Three Months Ended March 31, 2001
Total Revenues			$	609,993		$	143,218		$	25,943		$	1,135		$	170,296		$	(4,838	)	$	775,451
Operating Expenses
	Depreciation and Amortization			17,038			16			91			1			108			—			17,146
	Other Operating Expenses(a)			475,528			144,300			21,633			948			166,881			(4,838	)		637,571
	Income Tax Expense (Benefit)			40,785			(486	)		1,413			76			1,003			—			41,788
		Total Operating Expenses		533,351			143,830			23,137			1,025			167,992			(4,838	)		696,505
Equity in Net Loss of Affiliate				—			—			(343	)		—			(343	)		—			(343	)
Operating Income (Loss)				76,642			(612	)		2,463			110			1,961			—			78,603
Interest Expense — Net				12,868			289			332			(7	)		614			118			13,600
Other Non-Operating Inc. (Exp.)(b)				(1,542	)		—			(77	)		—			(77	)		(1,047	)		(2,666	)
Dividends on Washington Gas Preferred Stock				330			—			—			—			—			—			330
Net Income (Loss)			$	61,902		$	(901	)	$	2,054		$	117		$	1,270		$	(1,165	)	$	62,007
Total Assets			$	2,101,418		$	97,131		$	48,176		$	13,225		$	158,532		$	16,549		$	2,276,499
Capital Expenditures/Investments			$	33,032		$	6		$	64		$	—		$	70		$	—		$	33,102

(a)	Includes cost of gas and revenue taxes during all reported periods.
(b)	The amounts reported for Other Non-Operating Income (Expense) are net of applicable income taxes.

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OPERATING SEGMENT FINANCIAL INFORMATION
						Non-Utility Operations
			Regulated			Retail Energy						Other						Eliminations/
(Thousands)			Utility			Marketing			HVAC			Activities			Total			Other			Consolidated
Six Months Ended March 31, 2002
Total Revenues			$	657,012		$	302,009		$	32,772		$	1,084		$	335,865		$	(10,962	)	$	981,915
Operating Expenses
	Depreciation and Amortization			35,699			224			302			310			836			—			36,535
	Other Operating Expenses(a)			463,728			297,834			30,136			909			328,879			(10,962	)		781,645
	Income Tax Expense (Benefit)			53,486			1,215			1,045			(51	)		2,209			—			55,695
		Total Operating Expenses		552,913			299,273			31,483			1,168			331,924			(10,962	)		873,875
Equity in Net Loss of Affiliate				—			—			(2,822	)		—			(2,822	)		—			(2,822	)
Operating Income (Loss)				104,099			2,736			(1,533	)		(84	)		1,119			—			105,218
Interest Expense — Net				22,480			479			269			13			761			—			23,241
Other Non-Operating Inc. (Exp.)(b)				6,521			—			91			—			91			(4,632	)		1,980
Residential HVAC Impairment				—			—			(7,300	)		—			(7,300	)		—			(7,300	)
Dividends on Washington Gas Preferred Stock				660			—			—			—			—			—			660
Net Income (Loss)			$	87,480		$	2,257		$	(9,011	)	$	(97	)	$	(6,851	)	$	(4,632	)	$	75,997
Total Assets			$	2,011,690		$	119,183		$	27,962		$	12,058		$	159,203		$	(18,799	)	$	2,152,094
Capital Expenditures/Investments			$	68,711		$	—		$	2,442		$	—		$	2,442		$	(151	)	$	71,002
Six Months Ended March 31, 2001
Total Revenues			$	1,154,071		$	232,726		$	42,237		$	2,009		$	276,972		$	(8,559	)	$	1,422,484
Operating Expenses
	Depreciation and Amortization			33,894			58			225			1			284			—			34,178
	Other Operating Expenses(a)			903,825			235,941			35,560			1,948			273,449			(8,559	)		1,168,715
	Income Tax Expense (Benefit)			73,628			(1,264	)		1,872			8			616			—			74,244
		Total Operating Expenses		1,011,347			234,735			37,657			1,957			274,349			(8,559	)		1,277,137
Equity in Net Loss of Affiliate				—			—			(918	)		—			(918	)		—			(918	)
Operating Income (Loss)				142,724			(2,009	)		3,662			52			1,705			—			144,429
Interest Expense — Net				25,394			338			706			44			1,088			243			26,725
Other Non-Operating Inc. (Exp.)(b)				(2,517	)		—			(130	)		—			(130	)		(1,969	)		(4,616	)
Dividends on Washington Gas Preferred Stock				660			—			—			—			—			—			660
Net Income (Loss)			$	114,153		$	(2,347	)	$	2,826		$	8		$	487		$	(2,212	)	$	112,428
Total Assets			$	2,101,418		$	97,131		$	48,176		$	13,225		$	158,532		$	16,549		$	2,276,499
Capital Expenditures/Investments			$	47,527		$	6		$	197		$	123		$	326		$	—		$	47,853

(a)	Includes cost of gas and revenue taxes during all reported periods.
(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 with each other during the ordinary course of business. All significant inter-company transactions and 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 GAAP, transactions between Washington Gas and its affiliates which occurred after the November 1, 2000 restructuring, as well as inter-company balances remaining on Washington Gas’ Balance Sheet on March 31, 2002, have not been eliminated from Washington Gas’ financial statements. Because of the relatively small and immaterial size and number of these transactions, these transactions are not disclosed on the face of Washington Gas’ financial statements.

     Washington Gas provides administrative and general support to affiliates and has filed consolidated tax returns, which include affiliated taxable transactions. The actual cost of these

17

services are billed to the appropriate affiliates and to the extent such billings are not yet paid, they are reflected in “Accounts receivable” on Washington Gas’ Balance Sheets. Washington Gas does not recognize revenues or expenses associated with providing these balancing services.

     Washington Gas may also borrow funds from, or lend funds through the operation of a money pool. At March 31, 2002, the Washington Gas Balance Sheet reflected a total of $3.6 million of inter-company receivables and $3.5 million of inter-company payables. All affiliated transactions, including these balances, were eliminated from the WGL Holdings Consolidated Balance Sheet in accordance with GAAP.

     Additionally, Washington Gas provides gas balancing services relating to storage, injections, withdrawals and deliveries to all energy marketers participating in the choice programs that operate in its service territory. Washington Gas records revenues for these balancing services pursuant to tariffs approved by the appropriate regulatory bodies. In conjunction with such services, Washington Gas has charged an affiliate, WGEServices, $5.7 million for the quarter ended March 31, 2002. The related-party amounts have been eliminated in the Consolidated Financial Statements of WGL Holdings.

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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 within the meaning of thePrivate Securities Litigation Reform Act of 1995with respect to the outlook for earnings, revenues and other future financial business performance or strategies and expectations. Forward-looking statements are typically identified by words such as, but not limited to, “estimates”, “expects”, “anticipates”, “intends”, “believes”, “plans” and similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could”. Although the Company believes such forward-looking statements are based on reasonable assumptions, it cannot give assurance that every objective will be achieved. Forward-looking statements speak only as of today, and the Company assumes no duty to update them. The following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: 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 the direct control of WGL Holdings, Inc.’s (WGL Holdings or the Company) or Washington Gas Light Company (Washington Gas). Accordingly, while it believes that the assumptions are reasonable, WGL Holdings 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 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’ regulated utility operations and its non-regulated operations.

Washington Gas – This section comprises the vast majority of WGL Holdings’ regulated utility segment. As such, the financial condition and results of operations of Washington Gas’ utility operations and WGL Holdings regulated 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.

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WGL HOLDINGS, INC.

RESULTS OF OPERATIONS—THREE MONTHS ENDED MARCH 31, 2002 VS.
     MARCH 31, 2001

     EARNINGS

     For the three months ended March 31, 2002, the second quarter of its fiscal year, WGL Holdings reported net income of $45.8 million compared to $62.0 million for the prior year period. Basic and diluted earnings per average common share in the current quarter was $0.94, compared to $1.33 for the quarter ended March 31, 2001. A 4.5 percent increase in the average number of common shares outstanding reduced utility earnings per average common share in the current quarter by $0.04 compared to the same quarter last year.

     WGL Holdings’ regulated utility segment contributed $1.10 and $1.31 to earnings per average common share for the three months ended March 31, 2002, and 2001, respectively. Regulated utility net revenues decreased by $19.9 million or 10.0 percent from the same quarter last year reflecting a 12.2 percent decline in firm therm deliveries attributable to a 16.2 percent decrease in the number of heating degree-days. In addition, the weather during the current quarter was 11.8 percent warmer than normal, which reduced earnings per average common share by approximately $0.26. The impact of the warmer than normal weather was partially mitigated by the regulated utility’s weather insurance policy which improved earnings by $0.10 per average common share.

     The current quarter’s utility operation and maintenance expenses remained relatively flat compared with those of the prior year period. The provision for uncollectible accounts decreased by $2.5 million from the same period last year to $4.3 million, reflecting the impact of warmer than normal weather and lower gas costs. Offsetting this decline was an increase in expenditures incurred in relation to promoting operational efficiencies and other labor related items.

     Depreciation and amortization expense rose by $1.0 million reflecting an increase in property, plant and equipment necessary to accommodate the utility’s growing customer base.

     Utility income taxes declined by $6.6 million to $34.1 million as a result of the decrease in utility pretax income, reflecting the current quarter’s warmer weather.

     The Company’s retail energy-marketing segment yielded income of $1.3 million in the second quarter of fiscal year 2002, compared to a $0.9 million loss for the same period last year. The increase reflects improvements in both the sales and margins of natural gas and electricity in addition to a 33 percent increase in total gas customers. Further, electricity sales increased as a result of adding approximately 50,000 new electricity accounts since last year. Earnings per average common share from this segment improved by $0.05, over the quarter ended March 31, 2001, to $0.03 in the current quarter.

     Earnings from the Company’s heating, ventilating and air conditioning, (HVAC) segment reflected a loss from recurring operations of $1.8 million or $0.04 per average common share in the current quarter compared to income of $2.1 million in the second quarter of the prior year. This variation reflects a decline in the number and size of commercial projects, the impact of warmer than normal weather and higher selling, general and administrative costs in relation to sales. Other HVAC results for the quarter ended March 31, 2002 include an impairment of $7.3 million, or $0.15 charge per average common share.

     Interest expense decreased from $13.6 million during the three months ended March 31, 2001, to $11.3 million during the current fiscal quarter. While interest on long term-debt remained relatively flat, interest on short-term debt declined by $2.3 million reflecting reduced financing requirements from

20

lower levels of accounts receivable and storage gas inventory balances compared to the same period last year.

     UTILITY SEGMENT NET REVENUES

     Utility net revenues for the quarter ended March 31, 2002, decreased $19.9 million (10.0 percent) from the same period last year to $178.4 million. This represents a $0.26 per average common share decline this quarter over the three months ended March 31, 2001.

Gas, Weather and Meter Statistics

					Three Months Ended
					March 31,
														Percent
					2002			2001			Variance			Inc. (Dec.)
Gas Sales and Deliveries(thousands of therms)
	Firm
		Gas Sold and Delivered				335,735			386,006			(50,271	)		(13.0	)
		Gas Delivered for Others				161,331			180,124			(18,793	)		(10.4	)
			Total Firm			497,066			566,130			(69,064	)		(12.2	)
	Interruptible
		Gas Sold and Delivered				3,249			1,971			1,278			64.8
		Gas Delivered for Others				93,880			82,276			11,604			14.1
			Total Interruptible			97,129			84,247			12,882			15.3
	Electric Generation—Delivered for Others					14,099			20,622			(6,523	)		(31.6	)
				Total Deliveries		608,294			670,999			(62,705	)		(9.3	)
Degree Days
	Actual					1,870			2,232			(362	)		(16.2	)
	Normal					2,121			2,130			(9	)		(0.4	)
		Percent Colder (Warmer) than Normal				(11.8	%)		4.8	%		—			—
Customer Meters(end of period)						932,817			903,385			29,432			3.3

     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 regulated 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 regulated 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, 2002, firm therm deliveries declined by 69.1 million therms or 12.2 percent over the same quarter last year. This decrease reflects 16.2 percent fewer heating degree days in the current quarter versus the prior year, tempered by a 3.3 percent rise in the number of firm customer meters. Weather for the three months ended March 31, 2002, was 11.8 percent warmer than normal, while weather for the same period last year was 4.8 percent colder than normal.

     Even though an increasing number of customers are buying the natural gas commodity from third-party suppliers, rather than purchase the natural gas commodity from Washington Gas as a “bundled” product, the percentage decline in firm therms of gas sold and delivered and gas delivered for others was relatively constant reflecting the impact of warmer than normal weather.

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     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 natural gas commodity and the associated delivery service from Washington Gas. Therefore, the regulated utility does not experience any gain or loss of margins when customers choose to purchase the natural gas commodity from a third-party marketer or to switch back to Washington Gas as their bundled supplier.

     Gas Delivered to Interruptible Customers

     Therm deliveries to Washington Gas’ interruptible customers were 15.3 percent higher during the three months ended March 31, 2002 than the same period last year. This increase reflects the termination of interruptible curtailment in the current quarter because of the warm weather and higher demand due to lower gas costs partially offset by 3.7 percent reduction 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 declined by 6.5 million therms to 14.1 million therms reflecting warmer weather in the current quarter. During the same period last year, higher level of deliveries resulted from a one-time marketing opportunity due to the operational problem that precluded an electric generation facility customer from receiving delivery of other alternate fossil fuels until January 2001.

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

     OTHER UTILITY SEGMENT OPERATING EXPENSES

     Operation and maintenance expenses for the three months ended March 31, 2002, remained relatively flat compared to the prior year’s levels. The provision for uncollectible accounts decreased by $2.5 million from the same period last year to $4.3 million. The decline reflects the impact warmer than normal weather had on customer accounts receivable and lower gas costs in the current quarter versus the same quarter of the prior year. Partially offsetting this decline was an increase in expenditures incurred in relation to promoting operational efficiencies and other labor related items.

     Depreciation and amortization expense increased by $1.0 million (5.9 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, 2002, decreased by approximately $1.0 million reflecting a substantial reduction in net right-of-way fees imposed by the District of Columbia, offset by an increase for accrued maintenance fees for a new assessment by Prince George’s County, Maryland.

     Utility income taxes declined by $6.6 million primarily due to a decrease in pre-tax income this quarter. For utility operations, the effective income tax rates were 39.7 percent for the second fiscal quarter of 2002 and 39.0 percent for the same period in fiscal year 2001.

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     NON-UTILITY OPERATING RESULTS

     WGL Holdings has two unregulated operating segments: 1) retail energy-marketing; and 2) HVAC. The net income from these and other non-utility recurring operations decreased from a $1.3 million gain during the quarter ended March 31, 2001, to a $0.5 million net loss in the current quarter. Earnings per average common share from non-utility activities reduced earnings during the quarter ended March 31, 2002, from a $0.02 gain during the same quarter last year, to a $0.01 loss in the current quarter. The following table compares the financial results from non-utility activities for the quarters ended March 31, 2002 and 2001.

Net Income (Loss) Applicable to Non-Utility Activities
		Three Months Ended
		March 31
(In thousands of dollars)		2002			2001			Variance
Retail energy-marketing		$	1,327		$	(901)		$	2,228
HVAC:
	Commercial		385			2,438			(2,053	)
	Residential		(2,173	)		(384	)		(1,789	)
Other non-utility operations			(34	)		117			(151	)
	Subtotal – recurring operations		(495	)		1,270			(1,765	)
Residential HVAC Impairment			(7,300	)		—			(7,300	)
Total		$	(7,795	)	$	1,270		$	(9,065	)

     Retail Energy-Marketing Segment

     WGL Holdings’ retail energy-marketing subsidiary, WGEServices, sells natural gas and electricity in competition with other unregulated marketers. The subsidiary sold 24.0 billion cubic feet (bcf) of gas in the current quarter, an increase of 22.5 percent from 19.6 bcf sold in the same quarter last year. During the quarters ended March 31, 2002 and 2001, respectively, 17.4 percent and 23.7 percent of these sales were made to customers outside of the service territory of the regulated utility. During the quarter ended March 31, 2002, WGEServices sold 1,388.8 gigawatt-hours of electricity to 58,000 accounts, in Maryland, Virginia, and the District of Columbia, compared to 202 million kilowatt hours to 8,000 accounts within the same quarter in the prior year. In total, WGEServices’ revenues increased from $143.2 million in the quarter ended March 31, 2001, to $172.9 million in the quarter ended March 31, 2002.

     WGEServices’ earnings improved from a $0.9 million net loss in the quarter ended March 31, 2001, to net income of $1.3 million in the quarter ended March 31, 2002, reflecting an increase in volume, gas margins and profits made on the sale of electricity compared to the same prior year period. The key factor driving this improvement was the drop in the cost of gas in the current fiscal year reflected in the forward price curve that enabled WGEServices to derive wider gas margins.

     HVAC

     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 Service 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 decreased from $25.9 million in the quarter ended March 31, 2001 to $12.0 million in the quarter ended March 31, 2002. Net income from these operations declined from $2.4 million to $0.4 million due to a decline in the number of large projects and thus more work originating from smaller, lower margin construction

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projects. The HVAC operations for the three months ended March 31, 2002 and 2001, incurred net losses of $2.2 million and $0.4 million, respectively, from the Company’s 50-percent equity investment in Primary Investors. The current quarterly results reflect the impact of the unusually warm weather with a lower number of heating system service calls as compared to the same period last year when the weather was 19 percent colder than this year. In addition to the warmer weather, the continued low sales levels and low growth profit margins coupled by higher than expected expenses are the factors that prompted the Company to record a $7.3 million impairment to appropriately reflect the performance and value of this business. The impairment resulted in a $0.15 charge to earnings per average common share for the quarter ended March 31, 2002.

     OTHER INCOME (EXPENSES)—NET

     The $4.4 million increase in Other Income (Expenses)-Net was primarily attributable to a pre-tax $8.1 million benefit ($4.9 million, after tax, or $0.10 per average common share) recorded from the weather insurance policy purchased in October 2000, by Washington Gas.

     INTEREST EXPENSE

     WGL Holdings total interest expense decreased by $2.3 million from the same period last year, reflecting the following changes.

Composition of Interest Expense Changes

(In thousands of dollars)

		WGL Holdings							Washington Gas
		Three Months Ended							Three Months Ended
		March 31,							March 31,
		2002		2001		Variance			2002		2001		Variance
Long-Term Debt		$	10,610	$	10,546	$	64		$	10,610	$	10,546	$	64
Short-Term Debt			548		2,838		(2,290	)		433		2,838		(2,405	)
Other (Includes AFUDC)			173		216		(43	)		559		135		424
	Total	$	11,331	$	13,600	$	(2,269	)	$	11,602	$	13,519	$	(1,917	)

     Interest on long-term debt increased $0.1 million primarily due to a $17.6 million increase in the average balance of debt outstanding. The weighted-average cost of such long-term debt decreased by 0.09 percentage points during the same period. The embedded cost of long-term debt outstanding at March 31, 2002, was 6.7 percent.

     Interest on short-term debt decreased $2.3 million reflecting a $77.2 million decline in the average short-term debt balance and a 3.95 percentage point decrease in the weighted-average cost of such debt.

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RESULTS OF OPERATIONS—SIX MONTHS ENDED MARCH 31, 2002 VS.
MARCH 31, 2001

     EARNINGS

     For the six months ended March 31, 2002, WGL Holdings reported net income of $76.0 million, or $36.4 million lower than the results reported for the same period last year. Basic and diluted earnings per average common share in the current six-month period were $1.56, compared to $2.42 for the six months ended March 31, 2001. Recurring earnings per average common share for the most recent six months were $1.75, excluding a $0.15 per average common share adjustment for residential HVAC impairment in the second quarter of fiscal year 2002 and a $0.04 charge recorded in the first quarter relating to business activities with a bankrupt energy company. This compares to recurring earnings per average common share of $2.45 for the first six months of fiscal year 2001, excluding a $0.03 per average common share non-recurring charge related to a Virginia business license tax incurred as a result of a tax law restructuring during the first quarter of the prior year. WGL Holdings’ utility operations contributed $1.70 and $2.41, respectively, to earnings per average common share for the six months ended March 31, 2002, and 2001.

     Utility net revenues declined by $57.1 million, due to a 20.6 percent drop in the regulated utility’s firm therm deliveries over the six months ended March 31, 2001. This decrease reflected a 25.0 percent decline in the number of heating degree days over the same six-month period last year tempered by a 3.3 percent increase in Washington Gas’ customer base during the same period. Weather during the first six months of fiscal year 2002 was approximately 14.7 percent warmer than normal, while weather during the first six months of the fiscal year 2001 was 13.7 percent colder than normal. Operation and maintenance expenses remained relatively level during the first six months of fiscal year 2002. Operation and maintenance expenses decreased by $3.0 million for regulated utility’s uncollectible account expense tempered by increases in labor and labor related expenditures.

     The Company’s retail energy-marketing segment yielded net income of $2.3 million or $0.05 per average common share in the first six months of fiscal year 2002, compared to a net loss of $2.3 million or $0.05 per average common share in the same prior year period. The increase reflects improvements in both the sales and margins of natural gas and electricity tempered by increased selling, general and administrative expenses.

     Earnings from the Company’s HVAC segment reflected a net loss from recurring operations of $1.7 million or $0.04 per average common share during the six months ended March 31, 2002 compared to net income of $2.8 million or $0.06 per average common share in the prior year period. This variation reflects a decline in the number and size of commercial projects, the impact of warmer than normal weather and higher selling, general and administrative costs in relation to sales. Other HVAC results for year to date March 31, 2002 include a non-recurring impairment of $7.3 million, or a $0.15 per average common share loss.

     In addition, interest expense decreased from $26.7 million during the six months ended March 31, 2001, to $23.2 million during the current six-month period, reflecting a $66.4 million decrease in the average balance of short-term debt, tempered by a $39.3 million increase in the average balance of long-term debt.

     UTILITY SEGMENT NET REVENUES

     Utility net revenues for the six months ended March 31, 2002, decreased $57.1 million (15.5 percent) from the same period last year to $310.7 million. This represents a $0.74 per average common share decrease this period compared to the six months ended March 31, 2001.

     As shown in the following table, a 25.0 percent decrease in the number of heating degree days tempered by a 3.3 percent increase in the utility’s customer base, resulted in a 20.6 percent decrease in firm therm deliveries compared to the same six-month period last year.

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Gas Deliveries, Weather and Meter Statistics

					Six Months Ended
					March 31,									Percent
					2002			2001			Variance			Inc. (Dec.)
Gas Sales and Deliveries(thousands of therms)
	Firm
		Gas Sold and Delivered				544,113			749,248			(205,135	)		(27.4	)
		Gas Delivered for Others				270,539			276,724			(6,185	)		(2.2	)
			Total Firm			814,652			1,025,972			(211,320	)		(20.6	)
	Interruptible
		Gas Sold and Delivered				6,765			6,596			169			2.6
		Gas Delivered for Others				171,715			154,525			17,190			11.1
			Total Interruptible			178,480			161,121			17,359			10.8
	Electric Generation—Delivered for Others					36,368			72,760			(36,392	)		(50.0	)
				Total Deliveries		1,029,500			1,259,853			(230,353	)		(18.3	)
Degree Days
	Actual					2,977			3,970			(993	)		(25.0	)
	Normal					3,491			3,492			(1	)		0.0
		Percent (Warmer) Colder than Normal				(14.7	%)		13.7	%		—			—
Customer Meters(end of period)						932,817			903,385			29,432			3.3

     Gas Delivered to Firm Customers

     During the six months ended March 31, 2002, firm therm deliveries dropped by 211.3 million therms or 20.6 percent from the same period last year. This decrease primarily reflects 25.0 percent fewer heating degree days in the current six-month period compared to last year tempered by a 3.3 percent rise in the number of firm customer meters. Weather for the six months ended March 31, 2002, was 14.7 percent warmer than normal, while weather for the same period last year was 13.7 percent colder than normal.

     The volume of firm therm deliveries to customers who purchase “bundled” service from Washington Gas decreased 27.4 percent during the current six-month period from 749.2 million therms in the six months ended March 31, 2001, to 544.1 million therms during the six months ended March 31, 2002. The volume of firm gas delivered for others decreased from 276.7 million therms to 270.5 million therms, a 2.2 percent decrease.

     Gas Delivered to Interruptible Customers

     Interruptible therm deliveries to Washington Gas’ interruptible customers were 10.8 percent higher during the six months ended March 31, 2002 than the same period last year. This increase reflects termination of interruptible curtailment in the quarter because of warmer weather and higher demand due to lower gas costs tempered by a 3.7 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 regulated utility’s jurisdictions.

     Gas Delivered for Electric Generation

     Volumes delivered for electric generation were 50.0 percent lower than the same period last year reflecting the impact of a one-time marketing opportunity as discussed previously in the three months ended “Gas Delivered for Electric Generation” discussion. Margins earned on such deliveries are being shared with firm customers as described previously in this report.

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     OTHER UTILITY OPERATING EXPENSES

     Operation and maintenance expenses for the six months ended March 31, 2002, increased by $0.8 million from the prior year’s levels. Some of the key factors that contributed to the variance in operation and maintenance expenses for the current six-month period compared with last year include:

a $3.0 million decrease in uncollectible accounts expense, which directly relates to lower natural gas costs and warmer weather, causing a corresponding decrease in the regulated utility’s customer accounts receivable balance;

a $2.8 million increase relating to expenditures incurred in relation to achieving management objectives in obtaining operational efficiency;

a $2.3 million increase in labor and labor-related costs, primarily reflecting increases in pensions and other postretirement benefit expenses.

     Depreciation and amortization expense increased by $1.8 million (5.3 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, 2002, decreased largely due to:

the reduction in the net right-of-way fees imposed by the District of Columbia, a tax expense which is recorded on a volumetric basis and is therefore impacted by the warmer than normal weather; and

higher than normal general tax for the first quarter of fiscal year 2001, which reflected a $2.2 million one-time adjustment to a Virginia business license tax made as a result of a tax law restructuring.

     Utility income taxes decreased by $20.1 million primarily due to a decrease in pre-tax income for the current six-month period. For utility operations, the effective income tax rates were 39.7 percent for the first six months of fiscal year of 2002 and 39.0 percent for the same period in fiscal year 2001. The rise reflects recently enacted taxes in Virginia.

     NON-UTILITY OPERATING RESULTS

     During the six months ended March 31, 2002, net income from unregulated non-utility activities generated a net loss of $6.9 million compared to net income of $0.5 million for the six months ended March 31, 2001. Earnings per average common share from non-utility activities during the quarter ended March 31, 2002, were a $0.14 loss per average common share compared to income of $0.01 per average common share for the same period last year. Included within these results is a $7.3 million, or $0.15 charge per average common share, impairment for the Company’s investment in Primary Investors. The following table compares the financial results from non-utility activities for the six months ended March 31, 2002 and 2001.

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Net Income (Loss) Applicable to Non-Utility Activities

		Six Months Ended
		March 31,
(In thousands)		2002			2001			Variance
Retail energy-marketing		$	2,257		$	(2,347	)	$	4,604
HVAC:
	Commercial		1,240			3,757			(2,517	)
	Residential		(2,951	)		(931	)		(2,020	)
Other non-utility operations			(97	)		8			(105	)
Subtotal – recurring operations			449			487			(38	)
Residential HVAC impairment			(7,300	)		—			(7,300	)
Total		$	(6,851	)	$	487		$	(7,338	)

     Retail Energy-Marketing Segment

     WGEServices sold 41.0 bcf of gas in the current six month period, an increase of 13.6 percent over the first six months of fiscal year 2001. During the six month period ended March 31, 2002 and 2001, 19 percent and 22.0 percent, respectively, of these sales were made to customers outside of the service territory of the regulated utility. During the six months ended March 31, 2002, WGEServices sold 2,518.1 gigawatt-hours of electricity to 58,000 accounts as compared to 251.0 million kilowatt hours to 8,000 accounts during the six months ended March 31, 2001. In total, WGEServices’ revenues increased to $302.0 million compared to $232.7 million in the six months ended March 31, 2002 and 2001 respectively.

     Earnings from WGEServices increased from a $2.3 million net loss for the six months ended March 31, 2001 to net income of $2.3 million for the six months ended March 31, 2002. The improvement is attributable to a 38.3 percent growth in gas customers within the regulated utility’s service area, as well as a lower cost of gas and thus a small increase in gas margins. Slightly offsetting this increase was an 11.2 percent decline in gas customers outside of the regulated utility’s service area.

     HVAC Segment

     Revenues from the Company’s commercial HVAC business decreased from $42.2 million for the six months ended March 31, 2001 to $32.8 million for the six months ended March 31, 2002. Net income from this business decreased to $1.2 million for the six months ended March 31, 2002 from $3.8 million for the six months ended March 31, 2001. The decline in revenue and net income for the commercial HVAC subsidiary is attributed to a decline in high margin service work that positively impacted results for the six months ended March 31, 2001.

     The Company’s 50-percent residential HVAC investment in Primary Investors produced a loss from operations of $3.0 million for the six months ended March 31, 2002, compared to a loss of $0.9 million for the six months ended March 31, 2001. Aside from the warmer winter weather, the residential HVAC business continued to deliver low sales and low profit margins, joined with high selling, general, and administrative expenses in relation to sales.

     To appropriately reflect the performance and value of the residential HVAC investment, the Company recorded a $7.3 million impairment for the six months ended March 31, 2002.

     OTHER INCOME (EXPENSES)—NET

     The $6.6 million improvement in Other Income (Expenses)-Net was primarily attributable to a $14.7 million benefit ($8.9 million, after tax, or $0.18 per average common share) related to the recovery on the weather insurance policy. Additionally, it includes a charge of $2.8 million

28

($1.7 million, after tax, or $0.04 per average common share) resulting from the bankruptcy of an energy company.

     INTEREST EXPENSE

     Total WGL Holdings interest expense decreased by $3.5 million (13.0 percent) from the same period last year, reflecting the following changes in interest expense:

Composition of Interest Expense Changes
(In thousands of dollars)

		WGL Holdings							Washington Gas
		Six Months Ended							Six Months Ended
		March 31,							March 31,
		2002		2001		Variance			2002		2001		Variance
Long-Term Debt		$	21,363	$	20,514	$	849		$	21,363	$	20,514	$	849
Short-Term Debt			1,329		5,985		(4,656	)		1,073		5,985		(4,912	)
Other (Includes AFUDC)			549		226		323			1,335		230		1,105
	Total	$	23,241	$	26,725	$	(3,484	)	$	23,771	$	26,729	$	(2,958	)

     Interest on long-term debt increased $0.8 million primarily due to a $39.3 million increase in the average balance of long-term debt outstanding, which reflects the issuance of $52.0 million of MTNs during fiscal year 2002. The weighted average cost of debt outstanding decreased by 0.09 percentage points during the same period. The embedded cost of long-term debt outstanding at March 31, 2002 was 6.7 percent.

     Interest on short-term debt decreased $4.7 million reflecting a $66.4 million decrease in the average short-term debt balance outstanding and a 4.13 percentage point decrease in the weighted-average cost of such debt reflecting the current period’s significantly lower interest rates. The reduction in short-term borrowings was due to reduced financing needs from lower levels of accounts receivable and storage gas inventory balances.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has a goal to maintain its common equity ratio in the mid-50 percent range of total consolidated capital. In addition, the Company has a general policy to reduce short-term debt balances in the spring because a significant portion of the Company’s current assets are converted to cash at the end of the heating season. Accomplishing these objectives and maintaining sufficient cash flow are necessary to preserve the Company’s and Washington Gas’ credit ratings and to allow access to capital at relatively low costs.

     SHORT-TERM CASH REQUIREMENTS AND RELATED FINANCING

     The regulated utility’s business is highly weather sensitive and seasonal. Approximately 75 percent of Washington Gas’s 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 repay short-term debt and acquire storage gas for the subsequent heating season.

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     The Company uses short-term debt in the form of commercial paper and unsecured short-term bank loans to fund seasonal requirements. The regulated utility has regulatory authority to issue up to $300 million of short-term debt. In support of this program, the regulated utility had bank credit facilities totaling $250.0 million as of March 31, 2002, consistent with its policy of maintaining back up facilities of at least 80 percent of its authorized maximum short-term debt position. WGL Holdings’ policy is to maintain bank credit facilities in an amount equal to or greater than its expected maximum short-term debt position. At March 31, 2002, these credit facilities totaled $85.0 million.

     On May 10, 2002, WGL Holdings and Washington Gas executed new revolving credit agreements with its bank group, in the amounts of $85 million and $220 million respectively. Each company pays a facility fee of 8 basis points. The new credit agreements replace previously existing bank lines of credit of $65 million for WGL Holdings and $240 million for Washington Gas. The credit agreements expire on May 9, 2003. At March 31, 2002, the Company had notes payable outstanding, which consist of commercial paper of $86.9 million compared to $134.1 million at September 30, 2001. The variance in notes payable from September 30, 2001, reflects the Company’s decreased use of short-term debt from financing accounts receivable balance and the issuance, by the regulated utility, of $27 million of Medium Term Notes (MTNs) in October 2001 and another $25 million in February 2002, the proceeds of which were used to reduce commercial paper outstanding.

     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 regulated utility’s last significant base rate increase became effective in December 1994. Because of the annual growth in facilities to serve new customers, the regulated utility is a net borrower of cash on an annual basis. The Company uses a combination of short-term debt as described above, long-term debt and common stock to meet any cash needs not met through operations.

     On February 22, 2002, Washington Gas issued $25 million of long-term debt in the form of MTNs with a coupon of 6.00 percent, maturing February 2012. The notes may be redeemed by Washington Gas prior to maturity.

     At March 31, 2002, Washington Gas was authorized to issue up to $198 million of long-term debt under an existing shelf registration. Washington Gas’ authority from the State Corporation Commission of Virginia (SCC of VA) and the Public Service Commission of the District of Columbia (PSC of DC) to issue long-term debt expires on December 31, 2002. Washington Gas intends to file an application with both commissions to renew its authority.

     SECURITY RATINGS

     The table below shows the ratings on both WGL Holdings’ and Washington Gas’ debt instruments at March 31, 2002.

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	WGL Holdings, Inc.				Washington Gas
	Unsecured
	Medium-Term				Unsecured	Commercial
	Notes (Indicative)		Commercial Paper		Medium-Term Notes	Paper
RATING SERVICE
Fitch, Inc.		A+		F1	AA-		F1+
Moody’s Investors Service		*		P-1	Aa2		P-1
Standard & Poor’s Corporation	AA-			A-1+	AA-		A-1+

• Unpublished

     If the Company or Washington Gas were to experience changes in their debt ratings, the cost of their future short-term and long-term debt would be affected. Furthermore, a change would impact the facility fees paid to banks.

     CONTRACTUAL OBLIGATIONS, OFF-BALANCE SHEET ARRANGEMENTS AND OTHER COMMERCIAL COMMITMENTS

     Washington Gas has entered into contracts in the normal course of business that require it to make fixed and determinable payments for many years in the future. These obligations consist of long-term debt issued to finance the Company’s capital investment, obligations to purchase natural gas commodity and pipeline transportation capacity for its regulated utility operations.

     At the current time, all of the costs incurred under the natural gas commodity and pipeline transportation capacity contracts have ongoing market value and are fully recoverable through purchased gas cost recovery mechanisms in each of the regulated utility’s jurisdictions.

     WGL Holdings and its affiliates have guaranteed certain purchases of natural gas and electricity for its retail energy-marketing segment, WGEServices. At March 31, 2002, these guarantees totaled $196.3 million. Termination of the

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guarantees is coincident with the satisfaction of all obligations of WGEServices covered by the guarantees. WGL Holdings may cancel any or all of the guarantees on written notice to the counterparty.

     Please refer to WGL Holdings fiscal year 2001 Annual Report on Form 10-K for additional details about each of these contractual obligations.

     CASH FLOW FROM OPERATING ACTIVITIES

     Net cash generated by operating activities totaled $132.2 million during the first six months of fiscal year 2002 compared to $26.2 million of net cash used in operating activities for the same period last year. The $158.4 million increase in cash provided by operating activities was primarily the result of lower levels of funds required to support accounts receivable and accrued utility revenues, reflecting lower revenues in the current period due to lower sales volumes and lower costs of gas in the current year. Cash was also provided from the collection of gas cost owed by customers primarily as a result of higher natural gas prices in 2001. Offsetting these higher provisions was a lower source of cash from accounts payable for gas purchases, which declined because of the same volumetric and price reasons and lower net income.

     CASH FLOW FROM FINANCING ACTIVITIES

     During the six months ended March 31, 2002, the Company issued $66.4 million of long-term debt, $66.3 million of which was issued by Washington Gas which includes $52 million of MTNs with a weighted average coupon rate of 6.01 percent and $14.4 million of long-term debt used primarily to fund construction projects.

     The dividends paid by the Company during the six months ended March 31, 2002, increased by $1.8 million reflecting a $0.010 increase per common share paid during the current six months compared to the six months ended March 31, 2001 and the impact of 2,038,500 additional shares of common stock issued in June 2001.

     CASH FLOW FROM INVESTING ACTIVITIES

     During the six months ended March 31, 2002, WGL Holdings had consolidated capital expenditures of $68.6 million, on a budget of $145.7 million for fiscal year 2002, compared to capital expenditures of $47.9 million for the six months ended of fiscal year 2001.

     PRICE RISK RELATED TO RETAIL ENERGY MARKETING OPERATIONS

     The Company’s subsidiary, WGEServices, markets both natural gas and electricity. In the course of its business, WGEServices makes fixed-price sales commitments to customers and 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 large 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 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

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gas than its customers require on any given day. As a result, WGEServices has modified 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.

     WGEServices purchased call and put options in October 2001, in accordance with its risk management policy. WGEServices held no open positions in puts or calls at March 31, 2002. The value of options held at the end of each period are marked-to-market in accordance with the provisions of Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities.

     BASE RATES

     Since its last base rate proceedings in 1994 through December 31, 2001, Washington Gas has successfully maintained a balance between efficient management of resources and the increased costs of doing business. To support the addition of over 175,000 new utility customers since 1994, the regulated utility’s net investment in property, plant and equipment increased 50 percent, or $500 million, while distribution rates remained unchanged. Throughout the same period Washington Gas was able to reduce the level of its operations and maintenance expenses by 14 percent, or $30 million, between fiscal year 1994 and fiscal year 2000. These expense savings were combined with effective deployment of capital to serve new customers.

     As of December 31, 2001, the Washington Gas customer base was 24 percent larger than in 1994 and inflation, as measured by the consumer price index, rose 19 percent. To continue to achieve competitive returns for shareholders, Washington Gas is seeking increased rates in each of its jurisdictions. The following sections summarize the history and current status of the regulatory proceedings in each of the regulated utility’s jurisdictions.

     Washington Gas cannot predict the outcome of any of these rate filings, however, it believes that these cases will each be resolved near the beginning of the fiscal year 2003 heating season. Therefore, it is unlikely that these cases, individually or in total, will have a significant impact on the regulated utility’s financial position or results of operations during fiscal year 2002.

     District of Columbia

     On February 17, 2000, the District of Columbia’s Office of the People’s Counsel (OPC) filed a complaint with the PSC of DC requesting an investigation into the rates and charges of Washington Gas. On February 28, 2000, Washington Gas filed an answer urging the PSC of DC to dismiss the OPC complaint because the OPC’s analysis of the regulated utility’s rates was substantively flawed. On March 21, 2001, the PSC of DC issued an Order granting the OPC’s request to initiate an investigation into the reasonableness of Washington Gas’s base rates. The PSC of DC’s Order required Washington Gas to file base rate information no later than ninety (90) days from March 21, 2001. On June 19, 2001, the regulated utility filed an application requesting a rate increase of $16.3 million, or 6.8 percent of overall annual revenues in the District of Columbia. The request includes a 12.25 percent return on equity, coupled with an incentive rate plan.

     In December 2001, the PSC of DC issued an Order that identified a dozen issues in the case. In addition, the PSC of DC set a procedural case schedule in that Order.

     On March 8, 2002, the D.C. Office of the Peoples Council filed testimony in which it recommended that the PSC of DC order Washington Gas to reduce its rates by $12.0 million, or 5.0 percent. The OPC’s recommendation is premised on a 9.75 percent return on common equity. The OPC also recommended a one-time refund of an estimated $9 million associated with Pensions and Other Postretirement Benefits. Washington Gas filed rebuttal testimony on April 15, 2002, which supported their request for a $16.3 million increase and which rebutted the testimony of OPC and other intervenors in the case. Under the Commission’s procedural schedule, evidentiary hearings will begin

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on May 20, 2002, and a final decision is expected to be rendered by the PSC of DC on July 29, 2002. Based on the procedural schedule, the regulated utility expects that new rates would go into effect in August 2002.

     Maryland Jurisdiction

     On March 28, 2002, Washington Gas filed an application with the Maryland Public Service Commission, (PSC of MD) requesting an increase in revenues of approximately $31.4 million or 9.3 percent. The recently filed request for a revenue increase is predicated on a total revenue requirement of $367.4 million. The request includes a 12.50 percent return on equity, coupled with an incentive rate plan.

     On April 26, 2002, the Commission issued a procedural order that divided the Commission’s review of Washington Gas’ application into two phases. In Phase I, the Commission will review Washington Gas’ base rate case, its proposal regarding incentive rates and a number of other issues associated with Washington Gas’ proposed tariffs and rates. During Phase II the Commission will review issues regarding Washington Gas’ proposal for serving as the “supplier/provider of last resort for natural gas services”. The order also set a procedural schedule for filing pre-filed direct and rebuttal testimony in this case and indicated that evidentiary hearings would be conducted from June 29, 2002 through August 2, 2002.

     Under Maryland law, the PSC of MD has the authority to suspend the implementation of the proposed increase for up to 210 days from the filing. The PSC of MD typically uses the full 210 days to review the reasonableness of the proposed change in rates. If action has not been taken after 210 days, rates may be placed into effect subject to refund. At the present time, the regulated utility anticipates any changes in base rates from this filing will become effective on approximately November 1, 2002

     Virginia Jurisdiction

     Washington Gas expects to file requests with the SCC of VA to increase its regulated utility rates in Virginia during the first half of 2002. This upcoming rate application is predicated primarily on an increase in the property, plant and equipment that serves the significant customer growth, as well as increases in the cost of operations and maintenance.

WASHINGTON GAS

     As discussed on page 3, 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.

     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 19. 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 from those of WGL Holdings.

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RESULTS OF OPERATIONS—THREE MONTHS ENDED
     MARCH 31, 2002 VS. MARCH 31, 2001

     EARNINGS

     For the three months ended March 31, 2002, Washington Gas reported net income applicable to common stock of $54.0 million compared to $60.7 million for the prior year period.

     The primary reason for the decline in Washington Gas’ results was a 16.2 percent decrease in the number of heating degree days when compared to the same period of the prior year. During the current quarter weather was also 11.8 percent warmer than normal as compared to the prior year quarter in which weather was 4.8 percent colder than normal. This in turn directly resulted in a 12.2 percent decline in firm therm deliveries over the same quarter last year, despite a 3.3 percent increase in its customer base. These decreases resulted in a $19.9 million decline in utility net revenues.

     Non-utility operations contributed $0.1 million on net income in the second quarter of fiscal year 2002, compared to net income of $0.4 million for the prior year second quarter. 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 19.

     The $5.2 million improvement inOther Income (Expenses)-Net was primarily attributable to the effects of weather insurance compensation of $8.1 million, the related weather insurance premium of $2.4 million, and their related income tax effects.

     UTILITY NET REVENUES

     The operating revenues and cost of gas for the three months ended March 31, 2002 (reported on the Washington Gas Consolidated Statements of Income on page 10), both include offsetting amounts of $5.7 million for gas services relating to storage, injections and withdrawals with WGEServices. These inter-company 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 21.

     OTHER UTILITY OPERATING EXPENSES

     The other utility operating expenses reported by Washington Gas for the quarter ended March 31, 2002, include $0.6 million of expenses for transactions with Hampshire Gas Company (Hampshire). These inter-company charges are eliminated on WGL Holdings’ Consolidated Statements of Income (page 5). The reasons for the remaining variances in Washington Gas’ other utility operating expenses are essentially identical to theOther Utility Segment Operating Expenses results discussed in WGL Holdings’ Management’s Discussion and Analysis of Financial Condition and Results of Operations which begins on page 22.

     NON-UTILITY OPERATING RESULTS

     The non-utility results of operations reported by Washington Gas for the current quarter exclude the results of its former retail energy-marketing and HVAC segments after October 31, 2000. For a discussion of the results of these segments for the three months ended March 31, 2002 and 2001, seeNon-Utility Operating Results,beginning on page 23 of WGL Holdings’ Management’s Discussion and Analysis.

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     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 24.

RESULTS OF OPERATIONS SIX MONTHS ENDED
     MARCH 31, 2002 VS. MARCH 31, 2001

     EARNINGS

     For the six months ended March 31, 2002, Washington Gas reported net income applicable to common stock of $83.2 million compared to net income of $111.6 million for the prior year period.

     The primary reason for the decline in Washington Gas’ results was a 25.0 percent decrease in the number of heating degree days when compared to the same period of the prior year. During the current six months ended, weather was also 14.7 percent warmer than normal as compared to the prior year six months ended in which weather was 13.7 percent colder than normal. This in turn directly resulted in a 20.6 percent decline in firm therm deliveries over the same prior year period, despite a 3.3 percent increase in its customer base. These decreases resulted in a $57.1 million or 15.5 percent decline in utility net revenues.

     The results for Washington Gas are different than for WGL Holdings because they exclude net income in the current six months ended and net losses in the same period last year from WGL Holdings non-utility subsidiaries after October 31, 2000.

     The non-utility operations contributed $0.2 million of net income for the six months ended March 31, 2002 and $0.6 million in the same period this year. Comparable results for the non-utility operations are reflected in WGL Holdings’ consolidated financial statements and notes thereto which begins on page 4, and the WGL Holdings Management’s Discussion and Analysis of Financial Condition and Results of Operations which begins on page 20.

     The results include the effects of weather insurance compensation of $14.7 million, the related weather insurance premium of $3.9 million, and their related income tax effects.

     UTILITY NET REVENUES

     The operating revenues and cost of gas for the six months ended March 31, 2002 (reported on the Washington Gas Consolidated Statements of Income on page 9), both include offsetting amounts of $9.6 million for system balancing transactions with WGEServices, a subsidiary of Washington Gas before the November 1, 2000 restructuring. These inter-company charges were eliminated on WGL Holdings’ Consolidated Statements of Income on 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 of Financial Condition and Results of Operations beginning on page 25.

     OTHER UTILITY OPERATING EXPENSES

     The other utility operating expenses reported by Washington Gas for the six months ended March 31, 2002, include $1.2 million of expenses for transactions with Hampshire. These inter-company charges were eliminated on WGL Holdings’ Consolidated Statements of Income (page 6). 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 of Financial Condition and Results of Operations which begins on page 22.

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     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 October 31, 2000. For a complete discussion of the results of these segments for the six months ended March 31, 2002 and 2001, seeNon-Utility Operating Results beginning on page 27 of WGL Holdings’ Management’s Discussion and Analysis of Financial Condition and Results of Operation.

     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 beginning on page 28.

LIQUIDITY AND CAPITAL RESOURCES

     Liquidity and capital resources for Washington Gas are generally identical to the liquidity and capital resources of WGL Holdings, except for certain items and the transactions between WGL Holdings and the other non-regulated subsidiaries. For purposes of discussing the liquidity and capital resources of Washington Gas, this section incorporates by reference, the disclosures provided in this document under the similar section for WGL Holdings, titled “Liquidity and Capital Resources”. WGL Holdings provides financing and capital resources to all of its subsidiaries. During March of 2002, WGL Holdings made a $20.2 million capital contribution to Washington Gas. The contribution is reflected in financing activities for the six months ended March 31, 2002. Effective November 1, 2000, Washington Gas no longer has any subsidiaries of its own. At that time, a corporate restructuring moved all subsidiaries previously under Washington Gas, to WGL Holdings, a holding company. Accordingly, as a result of the restructuring , Washington Gas no longer provides financing or capital resources to any of these subsidiaries . However, for the six months ended March 2001, Washington Gas’ investing activities reflect certain pre-restructuring transactions including an $11.8 million cash transfer to WGL Holdings related to the formation of the holding company and dividends of the former subsidiaries that were made prior to the formation of the holding company.

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

     WGL Holdings and its subsidiary, Washington Gas, have interest rate risk exposure related to long-term debt. Additionally, WGL Holdings’ subsidiary, WGEServices has price risk exposure related to gas marketing activities. For information regarding the exposure related to these risks, see page 33 of this Form 10-Q, under the captionPrice Risk Related to Retail Energy Marketingand Item 7A in the combined Annual Report on Form 10-K for WGL Holdings and Washington Gas for the fiscal year ended September 30, 2001. Neither WGL Holdings nor Washington Gas’s risk associated with interest rates have materially changed from September 30, 2001. At March 31, 2002, WGEServices’ open position was not material to WGL Holdings’ financial position or results of operations.

PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The Annual Meeting of Stockholders of WGL Holdings and Washington Gas was held on February 25, 2002.

(b) Matters voted upon at the WGL Holdings meeting:

     The following individuals were elected to the Board of Directors of WGL Holdings at the Annual Meeting on
     February 25, 2002:

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	Votes in Favor		Votes Withheld
Michael D. Barnes		38,004,664		775,999
Daniel J. Callahan, III		38,128,798		651,865
George P. Clancy, Jr.		38,149,703		630,960
James H. DeGraffenreidt, Jr.		38,143,148		637,515
Melvyn J. Estrin		38,128,811		651,852
Debra L. Lee		38,114,943		665,720
Philip A. Odeen		38,157,000		623,663
Karen Hastie Williams		38,020,197		760,466

The same individuals listed above were elected to the Board of Directors of Washington Gas at its annual meeting of shareholders held on February 25, 2002. All the nominees received 46,479,536 votes in favor, there were no votes withheld.

(c) The following additional matters were introduced and voted upon at the Annual Meetings:

WGL Holdings:

The Board of Directors recommended that the Stockholders ratify the appointment of Arthur Andersen LLP, independent public accountants, to audit the books and accounts of the Company for fiscal year 2002. This proposal was approved by a vote of 35,792,427 votes in favor of the proposal, and 2,627,917 against. There were 360,319 abstentions.

A stockholder proposed that the Board of Directors take steps to provide for cumulative voting in the election of Directors. This proposal was defeated by a vote of 8,537,464 in favor of the proposal and 20,563,791 against. There were 1,178,574 abstentions and 8,500,834 broker non-votes.

Washington Gas:

The shareholders ratified the appointment of Arthur Andersen LLP as independent public accountants for fiscal year 2002, by a vote of 46,479,536 in favor, and no votes opposed.

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ITEM 5. OTHER ITEMS

Delisting of Washington Gas Light Company Preferred Stock

     The Philadelphia Stock Exchange (the Exchange) has approved the voluntary delisting of the three series of preferred stock of Washington Gas Washington Gas. These three series of preferred stock are Washington Gas’ $4.25 series preferred stock; $4.80 series preferred stock and $5.00 series preferred stock. Washington Gas applied to voluntarily delist this preferred stock in response to a notice from the Exchange indicating there are an insufficient number of preferred shares outstanding to meet the Exchange’s requirements for continued listing on the Exchange.

     The decision to delist the preferred stock of Washington Gas does not change any rights of the holders of such preferred shares nor the obligations of Washington Gas.

     Washington Gas’ preferred stock will continue to be quoted on the over-the-counter Bulletin Board and in the Pink Sheets.

     The delisting became effective May 10, 2002, at the opening of business, upon an order by the Securities and Exchange Commission. Washington Gas registered the preferred stock under Section 12(g) of theSecurities Exchange Act of 1934.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits required by Item 601 of Regulation S-K:

99.0 Computation of Ratio of Earnings to Fixed Charges WGL Holdings, Inc.

99.1 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends WGL Holdings, Inc.

99.2 Computation of Ratio of Earnings to Fixed Charges Washington Gas Light Company

99.3 Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends Washington Gas Light Company

(b) Reports on Form 8-K

• As co-registrant’s, WGL Holdings, Inc. and Washington Gas Light Company filed a Current Report on Form 8-K dated March 8, 2002, to report that the Office of People’s Counsel filed Direct Testimony in response to a previously filed application to increase rates, in the District of Columbia, by Washington Gas Light Company.

• As co-registrant’s, WGL Holdings, Inc. and Washington Gas Light Company filed a Current Report on Form 8-K dated March 28, 2002, to report the filing of an application with the Public Service Commission of Maryland to increase rates within Maryland.

• As co-registrant’s, WGL Holdings, Inc. and Washington Gas Light Company filed a Current Report on Form 8-K dated April 23, 2002, to report the voluntary delisting of the three series of preferred stock of Washington Gas Light Company.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.

		WGL HOLDINGS, INC.
		and
		WASHINGTON GAS LIGHT COMPANY (Co-Registrants)
Date:	May 15, 2002	/s/ Mark P. O’Flynn Mark P. O’Flynn Controller (Principal Accounting Officer)

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