Pepco 10-Q 7 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2010 ATLANTIC CITY ELECTRIC CO	Mar. 31, 2010 ATLANTIC CITY ELECTRIC CO	3 Months Ended Mar. 31, 2010 DELMARVA POWER & LIGHT CO /DE/	Mar. 31, 2010 DELMARVA POWER & LIGHT CO /DE/	3 Months Ended Mar. 31, 2010 POTOMAC ELECTRIC POWER CO	Mar. 31, 2010 POTOMAC ELECTRIC POWER CO
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	POM
Entity Registrant Name	PEPCO HOLDINGS INC	ATLANTIC CITY ELECTRIC CO		DELMARVA POWER & LIGHT CO /DE/		POTOMAC ELECTRIC POWER CO
Entity Central Index Key	0001135971	0000008192		0000027879		0000079732
Current Fiscal Year End Date	--12-31	--12-31		--12-31		--12-31
Entity Filer Category	Large Accelerated Filer	Non-accelerated Filer		Non-accelerated Filer		Non-accelerated Filer
Entity Common Stock, Shares Outstanding	223,210,345		8,546,017		1,000		100

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME ( PEPCO HOLDINGS INC, USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
PEPCO HOLDINGS INC
Operating Revenue
Power Delivery	$1,262	$1,372
Competitive Energy	1,087	1,139
Other	10	9
Total Operating Revenue	2,359	2,520
Operating Expenses
Fuel and purchased energy	1,654	1,887
Other services cost of sales	137	96
Other operation and maintenance	244	236
Depreciation and amortization	100	96
Other taxes	93	91
Deferred electric service costs	(19)	(27)
Effect of settlement of Mirant bankruptcy claims		(14)
Total Operating Expenses	2,209	2,365
Operating Income	150	155
Other Income (Expenses)
Interest and dividend income		1
Interest expense	(88)	(90)
Loss from equity investments	(1)	(1)
Other income	6	4
Total Other Expenses	(83)	(86)
Income Before Income Tax Expense	67	69
Income Tax Expense (Benefit)	31	24
Net Income	36	45
Retained Earnings at Beginning of Period	1,268	1,271
Dividends Paid	(60)	(59)
Retained Earnings at End of Period	1,244	1,257
Basic and Diluted Share Information
Weighted average shares outstanding	222	219
Earnings per share of common stock	0.16	0.21
ATLANTIC CITY ELECTRIC CO
Operating Revenue
Operating Revenue	317	344
Operating Expenses
Purchased energy	235	277
Other operation and maintenance	50	48
Depreciation and amortization	24	25
Other taxes	6	5
Deferred electric service costs	(19)	(27)
Total Operating Expenses	296	328
Operating Income	21	16
Other Income (Expenses)
Interest expense	(16)	(17)
Other income		1
Total Other Expenses	(16)	(16)
Income Before Income Tax Expense	5
Income Tax Expense (Benefit)	7	(2)
Net Income	(2)	2
Retained Earnings at Beginning of Period	143	166
Dividends Paid		(24)
Retained Earnings at End of Period	141	144
DELMARVA POWER & LIGHT CO /DE/
Operating Revenue
Electric	299	321
Natural Gas	95	131
Operating Revenue	394	452
Operating Expenses
Purchased energy	201	219
Gas purchased	66	101
Other operation and maintenance	61	59
Depreciation and amortization	20	19
Other taxes	10	10
Total Operating Expenses	358	408
Operating Income	36	44
Other Income (Expenses)
Interest expense	(10)	(11)
Other income	1
Total Other Expenses	(9)	(11)
Income Before Income Tax Expense	27	33
Income Tax Expense (Benefit)	13	12
Net Income	14	21
Retained Earnings at Beginning of Period	472	448
Dividends Paid		(28)
Retained Earnings at End of Period	486	441
POTOMAC ELECTRIC POWER CO
Operating Revenue
Operating Revenue	552	577
Operating Expenses
Purchased energy	315	349
Other operation and maintenance	88	79
Depreciation and amortization	38	35
Other taxes	75	73
Effect of settlement of Mirant bankruptcy claims		(14)
Total Operating Expenses	516	522
Operating Income	36	55
Other Income (Expenses)
Interest and dividend income		1
Interest expense	(25)	(25)
Other income	3	2
Total Other Expenses	(22)	(22)
Income Before Income Tax Expense	14	33
Income Tax Expense (Benefit)	6	14
Net Income	8	19
Retained Earnings at Beginning of Period	730	624
Dividends Paid	(25)
Retained Earnings at End of Period	$713	$643

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)
In Millions	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC	3 Months Ended Mar. 31, 2009 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
Net income	$36	$45
Losses on commodity derivatives designated as cash flow hedges:
Losses arising during period	(209)	(256)
Amount of losses reclassified into income	97	104
Net losses on commodity derivatives	(112)	(152)
Losses on Treasury Rate Locks reclassified into income	1	1
Other comprehensive loss, before income taxes	(111)	(151)
Income tax benefit	(45)	(62)
Other comprehensive loss, net of income taxes	(66)	(89)
Comprehensive loss	(30)	(44)
ATLANTIC CITY ELECTRIC CO
Net income	(2)	2
DELMARVA POWER & LIGHT CO /DE/
Net income	14	21
POTOMAC ELECTRIC POWER CO
Net income	$8	$19

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS ( PEPCO HOLDINGS INC, USD $)
In Millions	3 Months Ended Mar. 31, 2010	12 Months Ended Dec. 31, 2009
PEPCO HOLDINGS INC
CURRENT ASSETS
Cash and cash equivalents	$38	$46
Restricted cash equivalents	10	11
Accounts receivable, less allowance for uncollectible accounts	1,205	1,213
Inventories	226	252
Derivative assets	70	43
Prepayments of income taxes	163	167
Deferred income tax assets, net	110	126
Prepaid expenses and other	52	68
Total Current Assets	1,874	1,926
INVESTMENTS AND OTHER ASSETS
Goodwill	1,407	1,407
Regulatory assets	1,792	1,801
Investment in finance leases held in trust	1,382	1,386
Income taxes receivable	135	141
Restricted cash equivalents	3	4
Assets and accrued interest related to uncertain tax positions	12	12
Derivative assets	64	43
Other	198	196
Total Investments and Other Assets	4,993	4,990
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment	13,883	13,717
Accumulated depreciation	(4,918)	(4,854)
Net Property, Plant and Equipment	8,965	8,863
TOTAL ASSETS	15,832	15,779
CURRENT LIABILITIES
Short-term debt	727	530
Current portion of long-term debt and project funding	521	536
Accounts payable and accrued liabilities	640	712
Capital lease obligations due within one year	7	7
Taxes accrued	64	48
Interest accrued	92	68
Derivative liabilities	110	104
Other	292	297
Total Current Liabilities	2,453	2,302
DEFERRED CREDITS
Regulatory liabilities	610	613
Deferred income taxes, net	2,550	2,600
Investment tax credits	34	35
Pension benefit obligation	296	290
Other postretirement benefit obligation	412	409
Income taxes payable	7	5
Liabilities and accrued interest related to uncertain tax positions	95	96
Derivative liabilities	85	62
Other	146	158
Total Deferred Credits	4,235	4,268
LONG-TERM LIABILITIES
Long-term debt	4,493	4,470
Transition bonds issued by ACE Funding	359	368
Long-term project funding	16	17
Capital lease obligations	92	92
Total Long-Term Liabilities	4,960	4,947
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock	2	2
Premium on stock and other capital contributions	3,239	3,227
Accumulated other comprehensive loss	(307)	(241)
Retained earnings	1,244	1,268
Total Equity	4,178	4,256
Non-controlling interest	6	6
Total Equity	4,184	4,262
TOTAL LIABILITIES AND EQUITY	15,832	15,779
ATLANTIC CITY ELECTRIC CO
CURRENT ASSETS
Cash and cash equivalents	4	7
Restricted cash equivalents	10	10
Accounts receivable, less allowance for uncollectible accounts	161	176
Inventories	17	15
Prepayments of income taxes	38	38
Prepaid expenses and other	7	12
Total Current Assets	237	258
INVESTMENTS AND OTHER ASSETS
Regulatory assets	705	712
Prepaid pension expense	61	63
Income taxes receivable	71	76
Restricted cash equivalents	3	4
Assets and accrued interest related to uncertain tax positions	59	57
Other	12	9
Total Investments and Other Assets	911	921
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment	2,358	2,328
Accumulated depreciation	(707)	(699)
Net Property, Plant and Equipment	1,651	1,629
TOTAL ASSETS	2,799	2,808
CURRENT LIABILITIES
Short-term debt	114	83
Current portion of long-term debt and project funding	35	35
Accounts payable and accrued liabilities	104	120
Accounts payable due to associated companies	25	58
Taxes accrued	16	5
Interest accrued	17	13
Other	41	42
Total Current Liabilities	352	356
DEFERRED CREDITS
Regulatory liabilities	157	178
Deferred income taxes, net	608	604
Investment tax credits	9	9
Other postretirement benefit obligation	26	25
Other	10	11
Total Deferred Credits	810	827
LONG-TERM LIABILITIES
Long-term debt	632	609
Transition bonds issued by ACE Funding	359	368
Total Long-Term Liabilities	991	977
COMMITMENTS AND CONTINGENCIES
REDEEMABLE SERIAL PREFERRED STOCK	6	6
EQUITY
Common stock	26	26
Premium on stock and other capital contributions	473	473
Retained earnings	141	143
Total Equity	640	642
TOTAL LIABILITIES AND EQUITY	2,799	2,808
DELMARVA POWER & LIGHT CO /DE/
CURRENT ASSETS
Cash and cash equivalents	24	26
Accounts receivable, less allowance for uncollectible accounts	191	193
Inventories	35	40
Prepayments of income taxes	54	64
Prepaid expenses and other	16	19
Total Current Assets	320	342
INVESTMENTS AND OTHER ASSETS
Goodwill	8	8
Regulatory assets	220	207
Prepaid pension expense	155	157
Other	31	28
Total Investments and Other Assets	414	400
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment	2,846	2,807
Accumulated depreciation	(872)	(860)
Net Property, Plant and Equipment	1,974	1,947
TOTAL ASSETS	2,708	2,689
CURRENT LIABILITIES
Short-term debt	105	105
Current portion of long-term debt and project funding	31	31
Accounts payable and accrued liabilities	76	106
Accounts payable due to associated companies	24	14
Taxes accrued	4	3
Interest accrued	13	6
Derivative liabilities	21	15
Other	64	64
Total Current Liabilities	338	344
DEFERRED CREDITS
Regulatory liabilities	302	290
Deferred income taxes, net	490	489
Investment tax credits	7	7
Other postretirement benefit obligation	24	23
Above-market purchased energy contracts and other electric restructuring liabilities	17	17
Liabilities and accrued interest related to uncertain tax positions	19	20
Derivative liabilities	12	13
Other	22	23
Total Deferred Credits	893	882
LONG-TERM LIABILITIES
Long-term debt	655	655
COMMITMENTS AND CONTINGENCIES
EQUITY
Premium on stock and other capital contributions	336	336
Retained earnings	486	472
Total Equity	822	808
TOTAL LIABILITIES AND EQUITY	2,708	2,689
POTOMAC ELECTRIC POWER CO
CURRENT ASSETS
Cash and cash equivalents	200	213
Restricted cash equivalents		1
Accounts receivable, less allowance for uncollectible accounts	352	354
Inventories	47	43
Prepayments of income taxes	67	79
Prepaid expenses and other	26	48
Total Current Assets	692	738
INVESTMENTS AND OTHER ASSETS
Regulatory assets	163	166
Prepaid pension expense	292	295
Investment in trust	25	25
Income taxes receivable	63	64
Other	70	70
Total Investments and Other Assets	613	620
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment	5,925	5,865
Accumulated depreciation	(2,514)	(2,481)
Net Property, Plant and Equipment	3,411	3,384
TOTAL ASSETS	4,716	4,742
CURRENT LIABILITIES
Current portion of long-term debt and project funding		16
Accounts payable and accrued liabilities	149	154
Accounts payable due to associated companies	93	111
Capital lease obligations due within one year	7	7
Taxes accrued	36	37
Interest accrued	37	18
Other	126	124
Total Current Liabilities	448	467
DEFERRED CREDITS
Regulatory liabilities	151	145
Deferred income taxes, net	897	893
Investment tax credits	8	8
Other postretirement benefit obligation	71	71
Income taxes payable	5	5
Liabilities and accrued interest related to uncertain tax positions	30	29
Other	57	58
Total Deferred Credits	1,219	1,209
LONG-TERM LIABILITIES
Long-term debt	1,539	1,539
Capital lease obligations	92	92
Total Long-Term Liabilities	1,631	1,631
COMMITMENTS AND CONTINGENCIES
EQUITY
Premium on stock and other capital contributions	705	705
Retained earnings	713	730
Total Equity	1,418	1,435
TOTAL LIABILITIES AND EQUITY	$4,716	$4,742

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Share data	Mar. 31, 2010 PEPCO HOLDINGS INC	Dec. 31, 2009 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
Accounts receivable, allowance for uncollectible accounts	$47	$45
Common stock, par value	0.01	0.01
Common stock, shares authorized	400,000,000	400,000,000
Common stock, shares outstanding	223,210,345	222,269,895
ATLANTIC CITY ELECTRIC CO
Accounts receivable, allowance for uncollectible accounts	8	7
Common stock, par value	$3	$3
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares outstanding	8,546,017	8,546,017
DELMARVA POWER & LIGHT CO /DE/
Accounts receivable, allowance for uncollectible accounts	14	12
Common stock, par value	2.25	2.25
Common stock, shares authorized	1,000	1,000
Common stock, shares outstanding	1,000	1,000
POTOMAC ELECTRIC POWER CO
Accounts receivable, allowance for uncollectible accounts	$17	$17
Common stock, par value	0.01	0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares outstanding	100	100

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC	3 Months Ended Mar. 31, 2009 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
OPERATING ACTIVITIES
Net income	$36	$45
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	100	96
Non-cash rents from cross-border energy lease investments	(13)	(14)
Effect of settlement of Mirant bankruptcy claims		(14)
Changes in restricted cash equivalents related to Mirant settlement		38
Deferred income taxes	42	39
Net unrealized losses on commodity derivatives	2	40
Other	(3)	(1)
Changes in:
Accounts receivable	21	147
Inventories	26	28
Prepaid expenses	17	(27)
Regulatory assets and liabilities, net	(1)	22
Accounts payable and accrued liabilities	(49)	(144)
Pension benefit obligation	18	20
Cash collateral related to derivative activities	(162)	(258)
Taxes accrued	(3)	96
Interest accrued	24	25
Other assets and liabilities	12	(12)
Net Cash (Used By) From Operating Activities	67	126
INVESTING ACTIVITIES
Investment in property, plant and equipment	(208)	(180)
Changes in restricted cash equivalents	2
Net other investing activities	(1)
Net Cash Used By Investing Activities	(207)	(180)
FINANCING ACTIVITIES
Dividends paid on common stock	(60)	(59)
Common stock issued for the Dividend Reinvestment Plan	8	7
Issuances of common stock	7	8
Issuances of long-term debt	23	110
Reacquisition of long-term debt	(24)	(58)
Issuances of short-term debt, net	197	240
Net other financing activities	(19)	2
Net Cash (Used by) From Financing Activities	132	250
Net (Decrease) Increase in Cash and Cash Equivalents	(8)	196
Cash and Cash Equivalents at Beginning of Period	46	384
CASH AND CASH EQUIVALENTS AT END OF PERIOD	38	580
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash (received) paid for income taxes (includes payments to PHI for Federal income taxes)	2	(98)
ATLANTIC CITY ELECTRIC CO
OPERATING ACTIVITIES
Net income	(2)	2
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	24	25
Deferred income taxes	3	21
Changes in:
Accounts receivable	15	20
Inventories	(2)
Regulatory assets and liabilities, net	(22)	(41)
Accounts payable and accrued liabilities	(49)	(13)
Taxes accrued	15	(2)
Interest accrued	4	3
Other assets and liabilities	4	4
Net Cash (Used By) From Operating Activities	(10)	19
INVESTING ACTIVITIES
Investment in property, plant and equipment	(38)	(28)
Changes in restricted cash equivalents	1
Net Cash Used By Investing Activities	(37)	(28)
FINANCING ACTIVITIES
Dividends paid on common stock		(24)
Issuances of long-term debt	23
Reacquisition of long-term debt	(8)	(8)
Issuances of short-term debt, net	31
Net other financing activities	(2)	(3)
Net Cash (Used by) From Financing Activities	44	(35)
Net (Decrease) Increase in Cash and Cash Equivalents	(3)	(44)
Cash and Cash Equivalents at Beginning of Period	7	65
CASH AND CASH EQUIVALENTS AT END OF PERIOD	4	21
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash (received) paid for income taxes (includes payments to PHI for Federal income taxes)		13
DELMARVA POWER & LIGHT CO /DE/
OPERATING ACTIVITIES
Net income	14	21
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	20	19
Deferred income taxes		12
Changes in:
Accounts receivable	2	(12)
Inventories	5	16
Regulatory assets and liabilities, net	13	35
Accounts payable and accrued liabilities	(25)	(35)
Taxes accrued	12	(2)
Interest accrued	7	7
Other assets and liabilities	5	5
Net Cash (Used By) From Operating Activities	53	66
INVESTING ACTIVITIES
Investment in property, plant and equipment	(48)	(37)
Net other investing activities	(1)
Net Cash Used By Investing Activities	(49)	(37)
FINANCING ACTIVITIES
Dividends paid on common stock		(28)
Net other financing activities	(6)	(2)
Net Cash (Used by) From Financing Activities	(6)	(30)
Net (Decrease) Increase in Cash and Cash Equivalents	(2)	(1)
Cash and Cash Equivalents at Beginning of Period	26	138
CASH AND CASH EQUIVALENTS AT END OF PERIOD	24	137
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash (received) paid for income taxes (includes payments to PHI for Federal income taxes)	(1)	5
POTOMAC ELECTRIC POWER CO
OPERATING ACTIVITIES
Net income	8	19
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	38	35
Effect of settlement of Mirant bankruptcy claims		(14)
Changes in restricted cash equivalents related to Mirant settlement		38
Deferred income taxes	16	8
Changes in:
Accounts receivable	2	14
Inventories	(4)	(4)
Regulatory assets and liabilities, net	8	28
Accounts payable and accrued liabilities	(15)	(16)
Taxes accrued	13	91
Interest accrued	19	20
Other assets and liabilities	12	5
Net Cash (Used By) From Operating Activities	97	224
INVESTING ACTIVITIES
Investment in property, plant and equipment	(65)	(67)
Changes in restricted cash equivalents	1
Net other investing activities		2
Net Cash Used By Investing Activities	(64)	(65)
FINANCING ACTIVITIES
Dividends paid on common stock	(25)
Issuances of long-term debt		110
Reacquisition of long-term debt	(16)	(50)
Net other financing activities	(5)	(9)
Net Cash (Used by) From Financing Activities	(46)	51
Net (Decrease) Increase in Cash and Cash Equivalents	(13)	210
Cash and Cash Equivalents at Beginning of Period	213	146
CASH AND CASH EQUIVALENTS AT END OF PERIOD	200	356
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash (received) paid for income taxes (includes payments to PHI for Federal income taxes)	$23	$81

ORGANIZATION

ORGANIZATION
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
ORGANIZATION	(1)ORGANIZATION Pepco Holdings, Inc. (PHI or Pepco Holdings), a Delaware corporation incorporated in 2001, is a diversified energy company that, through its operating subsidiaries, is engaged primarily in two businesses: the distribution, transmission and default supply of electricity and the delivery and supply of natural gas (Power Delivery), conducted through the following regulated public utility companies, each of which is a reporting company under the Securities Exchange Act of 1934, as amended: Potomac Electric Power Company (Pepco), which was incorporated in Washington, D.C. in 1896 and became a domestic Virginia corporation in 1949, Delmarva Power Light Company (DPL), which was incorporated in Delaware in 1909 and became a domestic Virginia corporation in 1979, and Atlantic City Electric Company (ACE), which was incorporated in New Jersey in 1924. competitive energy generation, marketing and supply (Competitive Energy) conducted through subsidiaries of Conectiv Energy Holding Company (collectively Conectiv Energy) and Pepco Energy Services, Inc. and its subsidiaries (collectively, Pepco Energy Services). PHI Service Company, a subsidiary service company of PHI, provides a variety of support services, including legal, accounting, treasury, tax, purchasing and information technology services to PHI and its operating subsidiaries. These services are provided pursuant to a service agreement among PHI, PHI Service Company, and the participating operating subsidiaries. The expenses of the PHI Service Company are charged to PHI and the participating operating subsidiaries in accordance with cost allocation methodologies set forth in the service agreement. The following is a description of each of PHIs two principal business operations: Power Delivery The largest component of PHIs business is Power Delivery. Each of Pepco, DPL and ACE is a regulated public utility in the jurisdictions that comprise its service territory. Each company owns and operates a network of wires, substations and other equipment that is classified either as transmission or distribution facilities. Transmission facilities are high-voltage systems that carry wholesale electricity into, or across, the utilitys service territory. Distribution facilities are low-voltage systems that carry electricity to end-use customers in the utilitys service territory. Together the three companies constitute a single segment for financial reporting purposes. Each company is responsible for the delivery of electricity and, in the case of DPL, natural gas, in its service territory, for which it is paid tariff rates established by the applicable local public service commissions. Each company also supplies electricity at regulated rates to retail customers in its service territory who do not elect to purchase electricity from a competitive energy supplier. The regulatory term for this supply service is Standard Offer Service in Delaware, the District of Columbia and Maryland, and Basic Generation Service (BGS) in New Jersey. In this Form 10-Q, these supply services are referred to generally as Default Electricity Suppl
ATLANTIC CITY ELECTRIC CO
ORGANIZATION	(1) ORGANIZATION Atlantic City Electric Company (ACE) is engaged in the transmission and distribution of electricity in southern New Jersey. ACE also provides Default Electricity Supply, which is the supply of electricity at regulated rates to retail customers in its service territory who do not elect to purchase electricity from a competitive supplier. Default Electricity Supply is also known as Basic Generation Service in New Jersey. ACE is a wholly owned subsidiary of Conectiv, which is wholly owned by Pepco Holdings, Inc. (Pepco Holdings or PHI).
DELMARVA POWER & LIGHT CO /DE/
ORGANIZATION	(1) ORGANIZATION Delmarva Power Light Company (DPL) is engaged in the transmission and distribution of electricity in Delaware and portions of Maryland and provides gas distribution service in northern Delaware. Additionally, DPL provides Default Electricity Supply, which is the supply of electricity at regulated rates to retail customers in its territories who do not elect to purchase electricity from a competitive supplier, in both Delaware and Maryland. Default Electricity Supply is known as Standard Offer Service in both Delaware and Maryland. DPL is a wholly owned subsidiary of Conectiv, which is wholly owned by Pepco Holdings, Inc. (Pepco Holdings or PHI).
POTOMAC ELECTRIC POWER CO
ORGANIZATION	(1)ORGANIZATION Potomac Electric Power Company (Pepco) is engaged in the transmission and distribution of electricity in the District of Columbia and major portions of Prince Georges County and Montgomery County in suburban Maryland. Pepco also provides Default Electricity Supply, which is the supply of electricity at regulated rates to retail customers in its territories who do not elect to purchase electricity from a competitive supplier, in both the District of Columbia and Maryland. Default Electricity Supply is known as Standard Offer Service in both the District of Columbia and Maryland. Pepco is a wholly owned subsidiary of Pepco Holdings, Inc. (Pepco Holdings or PHI).

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
SIGNIFICANT ACCOUNTING POLICIES	(2)SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation Pepco Holdings unaudited consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Pursuant to the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. Therefore, these financial statements should be read along with the annual financial statements included in PHIs Annual Report on Form 10-K for the year ended December31, 2009. In the opinion of PHIs management, the consolidated financial statements contain all adjustments (which all are of a normal recurring nature) necessary to present fairly Pepco Holdings financial condition as of March31, 2010, in accordance with GAAP. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Interim results for the three months ended March31, 2010 may not be indicative of PHIs results that will be realized for the full year ending December31, 2010, since its Power Delivery and Competitive Energy businesses are seasonal. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Although Pepco Holdings believes that its estimates and assumptions are reasonable, they are based upon information available to management at the time the estimates are made. Actual results may differ significantly from these estimates. Significant matters that involve the use of estimates include the assessment of goodwill and long-lived assets for impairment, fair value calculations for certain derivative instruments, the costs of providing pension and other postretirement benefits, evaluation of the probability of recovery of regulatory assets, estimation of storm restoration accruals, and the recognition of income tax benefits as it relates to investments in finance leases held in trust associated with PHIs portfolio of cross-border energy lease investments. Additionally, PHI is subject to legal, regulatory, and other proceedings and claims that arise in the ordinary course of its business. PHI records an estimated liability for these proceedings and claims, when the loss is determined to be probable and is reasonably estimable. During the first quarter of 2010, Pepco, DPL and ACE incurred significant costs associated with the February 2010 severe winter storms that affected their respective service territories. The total costs of the restoration efforts have been estimated at $37 million with $19 million charged to Other Operation and Maintenance expense for repair work and $18 million recorded as capital expenditures. A large portion of the costs of the restoration work relate to services provided by outside contractors and other utilitie
ATLANTIC CITY ELECTRIC CO
SIGNIFICANT ACCOUNTING POLICIES	(2)SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation ACEs unaudited consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Pursuant to the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. Therefore, these financial statements should be read along with the annual financial statements included in ACEs Annual Report on Form 10-K for the year ended December31, 2009. In the opinion of ACEs management, the consolidated financial statements contain all adjustments (which all are of a normal recurring nature) necessary to present fairly ACEs financial condition as of March31, 2010, in accordance with GAAP. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Interim results for the three months ended March31, 2010 may not be indicative of results that will be realized for the full year ending December31, 2010 since the sales of electric energy are seasonal. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Although ACE believes that its estimates and assumptions are reasonable, they are based upon information available to management at the time the estimates are made. Actual results may differ significantly from these estimates. Significant matters that involve the use of estimates include the assessment of contingencies, the calculation of future cash flows and fair value amounts for use in asset impairment evaluations, pension and other postretirement benefits assumptions, unbilled revenue calculations, the assessment of the probability of recovery of regulatory assets, estimation of storm restoration accruals, and income tax provisions and reserves. Additionally, ACE is subject to legal, regulatory, and other proceedings and claims that arise in the ordinary course of its business. ACE records an estimated liability for these proceedings and claims when the loss is determined to be probable and is reasonably estimable. During the first quarter of 2010, ACE incurred significant costs associated with the February 2010 severe winter storms that affected its service territory. The total costs of the restoration efforts have been estimated at $16 million with $3 million charged to Other Operation and Maintenance expense for repair work and $13 million recorded as capital expenditures. A large portion of the costs of the restoration work relate to services provided by outside contractors and other utilities, and billings for such services in most instances have not yet been received and have been estimated. Actual billings may vary significantly from the estimates of such billings. Consolidation of
DELMARVA POWER & LIGHT CO /DE/
SIGNIFICANT ACCOUNTING POLICIES	(2) SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation DPLs unaudited financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Pursuant to the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. Therefore, these financial statements should be read along with the annual financial statements included in DPLs Annual Report on Form 10-K for the year ended December31, 2009. In the opinion of DPLs management, the financial statements contain all adjustments (which all are of a normal recurring nature) necessary to present fairly DPLs financial condition as of March31, 2010, in accordance with GAAP. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Interim results for the three months ended March31, 2010 may not be indicative of results that will be realized for the full year ending December31, 2010 since the sales of electric energy are seasonal. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. Although DPL believes that its estimates and assumptions are reasonable, they are based upon information available to management at the time the estimates are made. Actual results may differ significantly from these estimates. Significant matters that involve the use of estimates include the assessment of contingencies, the calculation of future cash flows and fair value amounts for use in asset impairment evaluations, fair value calculations (based on estimated market pricing) associated with derivative instruments, pension and other postretirement benefits assumptions, unbilled revenue calculations, the assessment of the probability of recovery of regulatory assets, estimation of storm restoration accruals, and income tax provisions and reserves. Additionally, DPL is subject to legal, regulatory, and other proceedings and claims that arise in the ordinary course of its business. DPL records an estimated liability for these proceedings and claims when the loss is determined to be probable and is reasonably estimable. During the first quarter of 2010, DPL incurred significant costs associated with the February 2010 severe winter storms that affected its service territories. The total costs of the restoration efforts have been estimated at $6 million with $4 million charged to Other Operation and Maintenance expense for repair work and $2 million recorded as capital expenditures. A large portion of the costs of the restoration work relate to services provided by outside contractors and other utilities, and billings for such services in most instances have not yet been received and have been estimated. Actual billings may vary significa
POTOMAC ELECTRIC POWER CO
SIGNIFICANT ACCOUNTING POLICIES	(2)SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation Pepcos unaudited financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Pursuant to the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. Therefore, these financial statements should be read along with the annual financial statements included in Pepcos Annual Report on Form 10-K for the year ended December31, 2009. In the opinion of Pepcos management, the financial statements contain all adjustments (which all are of a normal recurring nature) necessary to present fairly Pepcos financial condition as of March31, 2010, in accordance with GAAP. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Interim results for the three months ended March31, 2010 may not be indicative of results that will be realized for the full year ending December31, 2010 since the sales of electric energy are seasonal. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. Although Pepco believes that its estimates and assumptions are reasonable, they are based upon information available to management at the time the estimates are made. Actual results may differ significantly from these estimates. Significant matters that involve the use of estimates include the assessment of contingencies, the calculation of future cash flows and fair value amounts for use in asset impairment evaluations, pension and other postretirement benefits assumptions, unbilled revenue calculations, the assessment of the probability of recovery of regulatory assets, estimation of storm restoration accruals, and income tax provisions and reserves. Additionally, Pepco is subject to legal, regulatory, and other proceedings and claims that arise in the ordinary course of its business. Pepco records an estimated liability for these proceedings and claims when the loss is determined to be probable and is reasonably estimable. During the first quarter of 2010, Pepco incurred significant costs associated with the February 2010 severe winter storms that affected its service territories. The total costs of the restoration efforts have been estimated at $15 million with $11 million charged to Other Operation and Maintenance expense for repair work and $4 million recorded as capital expenditures. A large portion of the costs of the restoration work relate to services provided by outside contractors and other utilities, and billings for such services in most instances have not yet been received and have been estimated. Actual billings may vary significantly from the estimates of such billings. Taxes Assessed by a Governmental Autho

NEWLY ADOPTED ACCOUNTING STANDA

NEWLY ADOPTED ACCOUNTING STANDARDS
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
NEWLY ADOPTED ACCOUNTING STANDARDS	(3) NEWLY ADOPTED ACCOUNTING STANDARDS Transfers and Servicing (ASC 860) The FASB issued new guidance that removes the concept of a qualifying special-purpose entity (QSPE) from the current guidance on transfers and servicing and the QSPE scope exception in current guidance on consolidation. The new guidance also changed the requirements for derecognizing financial assets and requires additional disclosures about a transferors continuing involvement in transferred financial assets. The guidance was effective for transfers of financial assets occurring in fiscal periods beginning on January1, 2010 for PHI. As of January1, 2010, PHI has adopted the provisions of this guidance and determined that the guidance did not have a material impact on PHIs overall financial condition, results of operations, or cash flows, nor does it expect it to in the future. Consolidation of Variable Interest Entities (ASC 810) The FASB issued new consolidation guidance regarding variable interest entities effective January1, 2010 that eliminated the existing quantitative analysis requirement and added new qualitative factors to determine whether consolidation is required. The new qualitative factors are applied on a quarterly basis to interests in variable interest entities. Under the new guidance, the holder of the interest with the power to direct the most significant activities of the entity and the right to receive benefits or absorb losses significant to the entity would consolidate. The new guidance retained the existing provision that allows entities created before December31, 2003 to be scoped out from a consolidation assessment if exhaustive efforts are taken and there is insufficient information to determine the primary beneficiary. PHI has adopted the provisions of the new FASB guidance on consolidation of variable interest entities, and it did not have a material impact on PHIs overall financial condition, results of operations, or cash flows. Fair Value Measurement and Disclosures (ASC 820) The FASB issued new disclosure requirements for recurring and non-recurring fair value measurements. The guidance, effective for PHIs March31, 2010 financial statements, required the disaggregation of balance sheet items measured at fair value into classes (that is, subsets of balance sheet items) based on the nature and risks of the items. The standard requires description of pricing inputs and valuation methodologies for instruments with Level 2 or 3 valuation inputs. In addition, the standard requires information about any transfers of instruments between Level 1 and 2 valuation categories. These additional disclosures can be found in Note (13), Fair Value Disclosures. Subsequent Events (ASC 855) The FASB issued new guidance which eliminates the requirement for PHI to disclose the date through which it has evaluated subsequent events beginning with its March31, 2010 financial statements. PHI has modified its disclosure in Note (2), Significant Accounting Policies.
ATLANTIC CITY ELECTRIC CO
NEWLY ADOPTED ACCOUNTING STANDARDS	(3) NEWLY ADOPTED ACCOUNTING STANDARDS Transfers and Servicing (Accounting Standards Codification (ASC) 860) The FASB issued new guidance that removes the concept of a qualifying special-purpose entity (QSPE) from the current guidance on transfers and servicing and the QSPE scope exception in current guidance on consolidation. The new guidance also changed the requirements for derecognizing financial assets and requires additional disclosures about a transferors continuing involvement in transferred financial assets. The guidance was effective for transfers of financial assets occurring in fiscal periods beginning on January1, 2010 for ACE. As of January1, 2010, ACE has adopted the provisions of this guidance and determined that the guidance did not have a material impact on ACEs overall financial condition, results of operations, or cash flows, nor does it expect it to in the future. Consolidation of Variable Interest Entities (ASC 810) The FASB issued new consolidation guidance regarding variable interest entities effective January1, 2010 that eliminated the existing quantitative analysis requirement and added new qualitative factors to determine whether consolidation is required. The new qualitative factors are applied on a quarterly basis to interests in variable interest entities. Under the new guidance, the holder of the interest with the power to direct the most significant activities of the entity and the right to receive benefits or absorb losses significant to the entity would consolidate. The new guidance retained the existing provision that allows entities created before December31, 2003 to be scoped out from a consolidation assessment if exhaustive efforts are taken and there is insufficient information to determine the primary beneficiary. ACE has adopted the provisions of the new FASB guidance on consolidation of variable interest entities, and it did not have a material impact on ACEs overall financial condition, results of operations, or cash flows. Fair Value Measurement and Disclosures (ASC 820) The FASB issued new disclosure requirements for recurring and non-recurring fair value measurements. The guidance, effective for ACEs March31, 2010 financial statements, required the disaggregation of balance sheet items measured at fair value into classes (that is, subsets of balance sheet items) based on the nature and risks of the items. The standard requires description of pricing inputs and valuation methodologies for instruments with Level 2 or 3 valuation inputs. In addition, the standard requires information about any transfers of instruments between Level 1 and 2 valuation categories. These additional disclosures can be found in Note (9), Fair Value Disclosures. Subsequent Events (ASC 855) The FASB issued new guidance which eliminates the requirement for ACE to disclose the date through which it has evaluated subsequent events beginning with its March31, 2010 financial statements. ACE has modified its disclosure in Note (2), Significant Accounting Policies.
DELMARVA POWER & LIGHT CO /DE/
NEWLY ADOPTED ACCOUNTING STANDARDS	(3) NEWLY ADOPTED ACCOUNTING STANDARDS Transfers and Servicing (ASC 860) The FASB issued new guidance that removes the concept of a qualifying special-purpose entity (QSPE) from the current guidance on transfers and servicing and the QSPE scope exception in current guidance on consolidation. The new guidance also changed the requirements for derecognizing financial assets and requires additional disclosures about a transferors continuing involvement in transferred financial assets. The guidance was effective for transfers of financial assets occurring in fiscal periods beginning on January1, 2010 for DPL. As of January1, 2010, DPL has adopted the provisions of this guidance and determined that the guidance did not have a material impact on DPLs overall financial condition, results of operations, or cash flows, nor does it expect it to in the future. Consolidation of Variable Interest Entities (ASC 810) The FASB issued new consolidation guidance regarding variable interest entities effective January1, 2010 that eliminated the existing quantitative analysis requirement and added new qualitative factors to determine whether consolidation is required. The new qualitative factors are applied on a quarterly basis to interests in variable interest entities. Under the new guidance, the holder of the interest with the power to direct the most significant activities of the entity and the right to receive benefits or absorb losses significant to the entity would consolidate. The new guidance retained the existing provision that allows entities created before December31, 2003 to be scoped out from a consolidation assessment if exhaustive efforts are taken and there is insufficient information to determine the primary beneficiary. DPL has adopted the provisions of the new FASB guidance on consolidation of variable interest entities, and it did not have a material impact on DPLs overall financial condition, results of operations, or cash flows. Fair Value Measurement and Disclosures (ASC 820) The FASB issued new disclosure requirements for recurring and non-recurring fair value measurements. The guidance, effective for DPLs March31, 2010 financial statements, required the disaggregation of balance sheet items measured at fair value into classes (that is, subsets of balance sheet items) based on the nature and risks of the items. The standard requires description of pricing inputs and valuation methodologies for instruments with Level 2 or 3 valuation inputs. In addition, the standard requires information about any transfers of instruments between Level 1 and 2 valuation categories. These additional disclosures can be found in Note (11), Fair Value Disclosures. Subsequent Events (ASC 855) The FASB issued new guidance which eliminates the requirement for DPL to disclose the date through which it has evaluated subsequent events beginning with its March31, 2010 financial statements. DPL has modified its disclosure in Note (2), Significant Accounting Policies.
POTOMAC ELECTRIC POWER CO
NEWLY ADOPTED ACCOUNTING STANDARDS	(3) NEWLY ADOPTED ACCOUNTING STANDARDS Transfers and Servicing (Accounting Standards Codification (ASC) 860) The Financial Accounting Standards Board (FASB) issued new guidance that removes the concept of a qualifying special-purpose entity (QSPE) from the current guidance on transfers and servicing and the QSPE scope exception in current guidance on consolidation. The new guidance also changed the requirements for derecognizing financial assets and requires additional disclosures about a transferors continuing involvement in transferred financial assets. The guidance was effective for transfers of financial assets occurring in fiscal periods beginning on January1, 2010 for Pepco. As of January1, 2010, Pepco has adopted the provisions of this guidance and determined that the guidance did not have a material impact on Pepcos overall financial condition, results of operations, or cash flows, nor does it expect it to in the future. Consolidation of Variable Interest Entities (ASC 810) The FASB issued new consolidation guidance regarding variable interest entities effective January1, 2010 that eliminated the existing quantitative analysis requirement and added new qualitative factors to determine whether consolidation is required. The new qualitative factors are applied on a quarterly basis to interests in variable interest entities. Under the new guidance, the holder of the interest with the power to direct the most significant activities of the entity and the right to receive benefits or absorb losses significant to the entity would consolidate. The new guidance retained the existing provision that allows entities created before December31, 2003 to be scoped out from a consolidation assessment if exhaustive efforts are taken and there is insufficient information to determine the primary beneficiary. Pepco has adopted the provisions of the new FASB guidance on consolidation of variable interest entities, and it did not have a material impact on Pepcos overall financial condition, results of operations, or cash flows. Fair Value Measurement and Disclosures (ASC 820) The FASB issued new disclosure requirements for recurring and non-recurring fair value measurements. The guidance, effective for Pepcos March31, 2010 financial statements, required the disaggregation of balance sheet items measured at fair value into classes (that is, subsets of balance sheet items) based on the nature and risks of the items. The standard requires description of pricing inputs and valuation methodologies for instruments with Level 2 or 3 valuation inputs. In addition, the standard requires information about any transfers of instruments between Level 1 and 2 valuation categories. These additional disclosures can be found in Note (9), Fair Value Disclosures. Subsequent Events (ASC 855) The FASB issued new guidance which eliminates the requirement for Pepco to disclose the date through which it has evaluated subsequent events beginning with its March31, 2010 financial statements. Pepco has modified its disclosure in Note (2), Significant Accounting Policies.

RECENTLY ISSUED ACCOUNTING STAN

RECENTLY ISSUED ACCOUNTING STANDARDS, NOT YET ADOPTED
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
RECENTLY ISSUED ACCOUNTING STANDARDS, NOT YET ADOPTED	(4) RECENTLY ISSUED ACCOUNTING STANDARDS, NOT YET ADOPTED Fair Value Measurement and Disclosures (ASC 820) The new FASB disclosure requirements that will be effective beginning with PHIs March31, 2011 financial statements require that the items within the reconciliation of the Level 3 valuation category be presented in separate categories for purchases, sales, issuances, and settlements, if significant. PHI is evaluating the impact of this part of the guidance on PHIs overall financial statements.
ATLANTIC CITY ELECTRIC CO
RECENTLY ISSUED ACCOUNTING STANDARDS, NOT YET ADOPTED	(4) RECENTLY ISSUED ACCOUNTING STANDARDS, NOT YET ADOPTED Fair Value Measurement and Disclosures (ASC 820) The new FASB disclosure requirements that will be effective beginning with ACEs March31, 2011 financial statements require that the items within the reconciliation of the Level 3 valuation category be presented in separate categories for purchases, sales, issuances, and settlements, if significant. ACE is evaluating the impact of this part of the guidance on ACEs overall financial statements.
DELMARVA POWER & LIGHT CO /DE/
RECENTLY ISSUED ACCOUNTING STANDARDS, NOT YET ADOPTED	(4) RECENTLY ISSUED ACCOUNTING STANDARDS, NOT YET ADOPTED Fair Value Measurement and Disclosures (ASC 820) The new FASB disclosure requirements that will be effective beginning with DPLs March31, 2011 financial statements require that the items within the reconciliation of the Level 3 valuation category be presented in separate categories for purchases, sales, issuances, and settlements, if significant. DPL is evaluating the impact of this part of the guidance on DPLs overall financial statements.
POTOMAC ELECTRIC POWER CO
RECENTLY ISSUED ACCOUNTING STANDARDS, NOT YET ADOPTED	(4) RECENTLY ISSUED ACCOUNTING STANDARDS, NOT YET ADOPTED Fair Value Measurement and Disclosures (ASC 820) The new FASB disclosure requirements that will be effective beginning with Pepcos March31, 2011 financial statements require that the items within the reconciliation of the Level 3 valuation category be presented in separate categories for purchases, sales, issuances, and settlements, if significant. Pepco is evaluating the impact of this part of the guidance on Pepcos overall financial statements.

SEGMENT INFORMATION

SEGMENT INFORMATION
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
SEGMENT INFORMATION	(5)SEGMENT INFORMATION Pepco Holdings management has identified its operating segments at December31, 2009 as Power Delivery, Conectiv Energy, Pepco Energy Services, and Other Non-Regulated. Corporate and Other includes unallocated Pepco Holdings (parent company) capital costs, such as acquisition financing costs, and the depreciation and amortization expense related to purchase accounting adjustments for the fair value of Conectiv assets and liabilities as of the August1, 2002 acquisition date. Segment financial information for the three months ended March31, 2010 and 2009, is as follows: Three Months Ended March31, 2010 (millions of dollars) Competitive Energy Segments Power Delivery Conectiv Energy Pepco Energy Services Other Non- Regulated Corporate and Other (a) PHI Consolidated Operating Revenue $ 1,262 $ 603 (b) $ 547 $ 13 $ (66 ) $ 2,359 Operating Expense (c) 1,169 (b) 583 522 1 (66 ) 2,209 Operating Income 93 20 25 12 150 Interest Income 1 (1 ) Interest Expense 51 5 5 4 23 88 Other Income (Expense) 4 1 (1 ) 1 5 Preferred Stock Dividends 1 (1 ) Income Tax Expense (Benefit) 26 (d) 7 8 3 (13 )(e) 31 Net Income (Loss) 20 8 13 4 (9 ) 36 Total Assets 10,223 2,111 757 1,533 1,208 15,832 Construction Expenditures $ 151 $ 50 $ 1 $ $ 6 $ 208 (a) Includes unallocated Pepco Holdings (parent company) capital costs, such as acquisition financing costs, and the depreciation and amortization expense related to purchase accounting adjustments for the fair value of Conectiv assets and liabilities as of the August1, 2002 acquisition date. Additionally, the Total Assets line item in this column includes Pepco Holdings goodwill balance. Corporate and Other includes intercompany amounts of $(65) million for Operating Revenue, $(63) million for Operating Expense, $(14) million for Interest Income, $(13) million for Interest Expense, and $(1) million of Preferred Stock Dividends. (b) Power Delivery purchased electric energy and capacity and natural gas from Conectiv Energy in the amount of $58 million for the three months ended March31, 2010. (c) Includes depreciation and amortization expense of $100 million, consisting of $82 million for Power Delivery, $11 million for Conectiv Energy, $4 million for Pepco Energy Services, and $3 million for Corporate and Other. (d) Includes $8 million reversal of accrued interest income on uncertain and effectively settled state income tax positions. (e) Includes $8 million reversal of valuation allowances on deferred tax assets related to state net operating losses partially offset by a charge of $4 million to write off a deferred tax asset related to the Medicare PartD subsidy. Three Months Ende
ATLANTIC CITY ELECTRIC CO
SEGMENT INFORMATION	(5)SEGMENT INFORMATION The company operates its business as one regulated utility segment, which includes all of its services as described above.
DELMARVA POWER & LIGHT CO /DE/
SEGMENT INFORMATION	(5)SEGMENT INFORMATION The company operates its business as one regulated utility segment, which includes all of its services as described above.
POTOMAC ELECTRIC POWER CO
SEGMENT INFORMATION	(5)SEGMENT INFORMATION The company operates its business as one regulated utility segment, which includes all of its services as described above.

GOODWILL

GOODWILL
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
GOODWILL	(6)GOODWILL PHIs goodwill balance of $1.4 billion was unchanged during the three month period ended March31, 2010. Substantially all of PHIs $1.4 billion goodwill balance was generated by Pepcos acquisition of Conectiv in 2002 and is allocated to the Power Delivery reporting unit based on the aggregation of its components for purposes of assessing impairment under FASB guidance on goodwill and other intangibles (ASC 350). PHIs annual impairment tests as of July1, 2009 and November1, 2009 indicated that goodwill was not impaired. As of March31, 2010, after review of its significant assumptions in the goodwill impairment analysis, PHI concluded that there were no events requiring it to perform an interim goodwill impairment test. Although PHIs market capitalization was below book value at March31, 2010, PHIs market capitalization has improved compared to earlier periods. PHI performed its previous annual goodwill impairment tests as of November1, 2009 and July1, 2009, and interim impairment tests as of March31, 2009 and December31, 2008 when its market capitalization was further below book value than at March31, 2010, and concluded that its goodwill was not impaired at those earlier dates. PHI will continue to closely monitor for indicators of goodwill impairment, including the sustained period of time that PHIs stock price has been below its book value. A roll forward of PHIs goodwill balance is set forth below in millions of dollars: Balance,December 31, 2008 $ 1,411 Less: Impairment charge associated with wind-down of Pepco Energy Services retail energy business (4 ) Balance, December31, 2009 1,407 Less: Adjustments Balance, March31, 2010 $ 1,407
DELMARVA POWER & LIGHT CO /DE/
GOODWILL	(6) GOODWILL DPLs goodwill balance of $8 million was unchanged during the three month period ending March31, 2010. All of DPLs goodwill was generated by its acquisition of Conowingo Power Company in 1995. DPLs annual impairment tests as of July1, 2009 and November1, 2009 indicated that goodwill was not impaired. As of March31, 2010, after review of its significant assumptions in the goodwill impairment analysis, DPL concluded that there were no events requiring it to perform an interim goodwill impairment test. DPL will continue to closely monitor for indicators of goodwill impairment.

LEASING ACTIVITIES

LEASING ACTIVITIES (PEPCO HOLDINGS INC)
	3 Months Ended Mar. 31, 2010
LEASING ACTIVITIES	(7)LEASING ACTIVITIES Investment in Finance Leases Held in Trust As of March31, 2010 and December31, 2009, Pepco Holdings had cross-border energy lease investments of $1.4 billion consisting of hydroelectric generation and coal-fired electric generating facilities and natural gas distribution networks located outside of the United States. The components of the cross-border energy lease investments at March31, 2010 and at December31, 2009 are summarized below: March31, 2010 December31, 2009 (millions of dollars) Scheduled lease payments to PHI, net of non-recourse debt $ 2,265 $ 2,281 Less:Unearned and deferred income (883 ) (895 ) Investment in finance leases held in trust 1,382 1,386 Less:Deferred income tax liabilities (747 ) (748 ) Net investment in finance leases held in trust $ 635 $ 638 Income recognized from cross-border energy lease investments was comprised of the following for the three months ended March31, 2010 and 2009: ThreeMonthsEnded March 31, 2010 2009 (millions of dollars) Pre-tax income from PHIs cross-border energy lease investments (included in Other Revenue) $ 13 $ 14 Income tax expense 4 4 Net income from PHIs cross-border energy lease investments $ 9 $ 10

PENSION AND OTHER POSTRETIREMEN

PENSION AND OTHER POSTRETIREMENT BENEFITS
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
PENSION AND OTHER POSTRETIREMENT BENEFITS	(8)PENSION AND OTHER POSTRETIREMENT BENEFITS The following Pepco Holdings information is for the three months ended March31, 2010 and 2009: PensionBenefits OtherPostretirement Benefits 2010 2009 2010 2009 (millions of dollars) Service cost $ 11 $ 9 $ 2 $ 2 Interest cost 30 28 10 10 Expected return on plan assets (33 ) (28 ) (4 ) (4 ) Prior service credit component (1 ) (1 ) Gain component 11 12 3 3 Net periodic benefit cost $ 19 $ 21 $ 10 $ 10 Pension The pension net periodic benefit cost for the three months ended March31, 2010, of $19 million includes $4 million for Pepco, $2 million for ACE and $2 million for DPL before intercompany allocations from the PHI Service Company. The three utility subsidiaries are generally responsible for approximately 80% to 85% of total PHI net periodic benefit cost. Historically, a portion of the net periodic benefit cost is capitalized as part of the cost of labor for internal construction projects. The pension net periodic benefit cost for the three months ended March31, 2009, of $21 million includes $5 million for Pepco, $2 million for ACE and $3 million for DPL before intercompany allocations. Pension Contributions PHIs funding policy with regard to PHIs noncontributory retirement plan (the PHI Retirement Plan) is to maintain a funding level that is at least equal to the funding target level under the Pension Protection Act of 2006. During 2009, discretionary tax-deductible contributions totaling $300 million were made to the PHI Retirement Plan which brought plan assets to at least the funding target level for 2009 under the Pension Protection Act. Of this amount, $240 million consisted of tax-deductible contributions made by Pepco, ACE and DPL in the amounts of $170 million, $60 million and $10 million, respectively. The remaining $60 million consisted of tax-deductible contributions made by the PHI Service Company. Although PHI projects there will be no minimum funding requirement under the Pension Protection Act guidelines in 2010, PHI currently estimates it may make discretionary tax-deductible contributions in 2010 of approximately $100 million to bring its plan assets to at least the funding target level for 2010 under the Pension Protection Act. Other Postretirement Benefits The other postretirement net periodic benefit cost for the three months ended March31, 2010, of $10 million includes $3 million for Pepco, $2 million for ACE and $2 million for DPL before intercompany allocations from the PHI Service Company. The other postretirement net periodic benefit cost for the three months ended March31, 2009, of $10 million includes $3 million for Pepco, $2 million for ACE and $2 million for DPL before intercompany allocations.
ATLANTIC CITY ELECTRIC CO
PENSION AND OTHER POSTRETIREMENT BENEFITS	(6)PENSION AND OTHER POSTRETIREMENT BENEFITS ACE accounts for its participation in the Pepco Holdings benefit plans as participation in a multi-employer plan. PHIs pension and other postretirement net periodic benefit cost for the three months ended March31, 2010 before intercompany allocations from the PHI Service Company, of $29 million, included $4 million for ACEs allocated share. PHIs pension and other postretirement net periodic benefit cost for the three months ended March31, 2009 before intercompany allocations from the PHI Service Company, of $31 million, included $4 million for ACEs allocated share.
DELMARVA POWER & LIGHT CO /DE/
PENSION AND OTHER POSTRETIREMENT BENEFITS	(7) PENSION AND OTHER POSTRETIREMENT BENEFITS DPL accounts for its participation in the Pepco Holdings benefit plans as participation in a multi-employer plan. PHIs pension and other postretirement net periodic benefit cost for the three months ended March31, 2010 before intercompany allocations from the PHI Service Company, of $29 million, included $4 million for DPLs allocated share. PHIs pension and other postretirement net periodic benefit cost for the three months ended March31, 2009 before intercompany allocations from the PHI Service Company, of $31 million, included $5 million for DPLs allocated share.
POTOMAC ELECTRIC POWER CO
PENSION AND OTHER POSTRETIREMENT BENEFITS	(6)PENSION AND OTHER POSTRETIREMENT BENEFITS Pepco accounts for its participation in the Pepco Holdings benefit plans as participation in a multi-employer plan. PHIs pension and other postretirement net periodic benefit cost for the three months ended March31, 2010 before intercompany allocations from the PHI Service Company, of $29 million, included $7 million for Pepcos allocated share. PHIs pension and other postretirement net periodic benefit cost for the three months ended March31, 2009 before intercompany allocations from the PHI Service Company, of $31 million, included $8 million for Pepcos allocated share.

DEBT

DEBT
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
DEBT	(9)DEBT Credit Facilities PHIs principal credit source is an unsecured $1.5 billion syndicated credit facility, which can be used by PHI and its utility subsidiaries to borrow funds, obtain letters of credit and support the issuance of commercial paper. This facility is in effect until May 2012 and consists of commitments from 16 lenders, no one of which is responsible for more than 8.5% of the total $1.5 billion commitment. PHIs credit limit under the facility is $875 million. The credit limit of each of Pepco, DPL and ACE is the lesser of $500 million and the maximum amount of debt the company is permitted to have outstanding by its regulatory authorities, except that the aggregate amount of credit used by Pepco, DPL and ACE at any given time collectively may not exceed $625 million. In November 2008, PHI entered into a second unsecured credit facility in the amount of $400 million with a syndicate of nine lenders, which was amended and restated in October 2009 to extend the facility termination date to October15, 2010. Under the facility, PHI has access to revolving and swingline loans over the term of the facility. The facility does not provide for the issuance of letters of credit.These two facilities are referred to collectively as PHIs primary credit facilities. At March31, 2010 and December31, 2009, the amount of cash plus borrowing capacity under PHIs primary credit facilities available to meet the future liquidity needs of PHI and its utility subsidiaries on a consolidated basis totaled $1.2 billion and $1.4 billion, respectively. PHIs utility subsidiaries had a combined cash and borrowing capacity under the $1.5 billion credit facility of $546 million and $582 million, respectively. In May 2009, PHI entered into a $50 million, 18-month bilateral credit agreement, which only can be used for the purpose of obtaining letters of credit. As of March31, 2010, $25 million in letters of credit were outstanding under the agreement. Other Financing Activities In January2010, ACE Funding made principal payments of $5.9 million on Series 2002-1 Bonds, ClassA-2, and $2.3 million on Series 2003-1 Bonds, ClassA-2. In March 2010, Pepco redeemed at maturity, $16 million of Prince Georges County 5.75% Pollution Control Revenue Refunding Bonds Series 1995. In March 2010, ACE resold $23.2 million in aggregate principal amount of Pollution Control Revenue Refunding Bonds Series 2004A due June1, 2029 issued by The Pollution Control Financing Authority of Salem County.The bonds were repurchased by ACE in April 2008 in response to the disruption in the tax-exempt bond market that made it difficult for the remarketing agent to successfully remarket the bonds. As the owner of the bonds, ACE received the proceeds of the sale, which it intends touse for general corporate purposes. The bonds bear interest at the fixed rate of 4.875%per annum, payable each March1 and September1, commencing September1, 2010. Financing Activity Subsequent to March31, 2010 In April2010, ACE Funding made principal payments of $5.3 million on Series 2002-1 Bonds, ClassA-2, and $2.1 million on Series 2003-1 Bonds, ClassA-2. In April 2010, DPL completed a t
ATLANTIC CITY ELECTRIC CO
DEBT	(7)DEBT Credit Facilities PHI, Potomac Electric Power Company (Pepco), Delmarva Power Light Company (DPL) and ACE maintain an unsecured credit facility to provide for their respective short-term liquidity needs. The aggregate borrowing limit under the facility is $1.5 billion, all or any portion of which may be used to obtain loans or to issue letters of credit. PHIs credit limit under the facility is $875 million. The credit limit of each of Pepco, DPL and ACE is the lesser of $500 million and the maximum amount of debt the company is permitted to have outstanding by its regulatory authorities, except that the aggregate amount of credit used by Pepco, DPL and ACE at any given time collectively may not exceed $625 million. At March31, 2010 and December31, 2009, the amount of cash plus borrowing capacity under PHIs $1.5 billion credit facility available to meet the liquidity needs of PHIs utility subsidiaries was $546 million and $582 million, respectively. Other Financing Activities During the three months ended March31, 2010, the following financing activities occurred: In January2010, ACE Funding made principal payments of $5.9 million on Series 2002-1 Bonds, ClassA-2, and $2.3 million on Series 2003-1 Bonds, ClassA-2. In March 2010, ACE resold $23.2 million in aggregate principal amount of Pollution Control Revenue Refunding Bonds Series 2004A due June1, 2029 issued by The Pollution Control Financing Authority of Salem County.The bonds were repurchased by ACE in April 2008 in response to the disruption in the tax-exempt bond market that made it difficult for the remarketing agent to successfully remarket the bonds. As the owner of the bonds, ACE received the proceeds of the sale, which it intends touse for general corporate purposes. The bonds bear interest at the fixed rate of 4.875%per annum, payable each March1 and September1, commencing September1, 2010. Financing Activity Subsequent to March31, 2010 In April2010, ACE Funding made principal payments of $5.3 million on Series 2002-1 Bonds, ClassA-2, and $2.1 million on Series 2003-1 Bonds, ClassA-2.
DELMARVA POWER & LIGHT CO /DE/
DEBT	(8) DEBT Credit Facilities PHI, Potomac Electric Power Company (Pepco), DPL and Atlantic City Electric Company (ACE) maintain an unsecured credit facility to provide for their respective short-term liquidity needs. The aggregate borrowing limit under the facility is $1.5 billion, all or any portion of which may be used to obtain loans or to issue letters of credit. PHIs credit limit under the facility is $875 million. The credit limit of each of Pepco, DPL and ACE is the lesser of $500 million and the maximum amount of debt the company is permitted to have outstanding by its regulatory authorities, except that the aggregate amount of credit used by Pepco, DPL and ACE at any given time collectively may not exceed $625 million. At March31, 2010 and December31, 2009, the amount of cash plus borrowing capacity under PHIs $1.5 billion credit facility available to meet the liquidity needs of PHIs utility subsidiaries was $546 million and $582 million, respectively. Financing Activity Subsequent to March31, 2010 In April 2010, DPL completed a tax-exempt bond financing in which The Delaware Economic Development Authority (DEDA) issued and sold $78.4 million of its Gas Facilities Refunding Revenue Bonds, Series 2010, due February1, 2031.The proceeds from the issuance of the bonds were loaned by DEDA to DPL pursuant to a loan agreement, dated as of April1, 2010, between DEDA and DPL.The payment obligations under the loan agreement correspond to the payments of principal, premium, if any, and interest when and as due on the bonds.The bonds bear interest at the fixed rate of 5.40%per annum, payable each February1 and August1, commencing August1, 2010.Beginning on August1, 2020, the bonds are subject to optional redemption at the direction of DPL, in whole or in part, at a redemption price equal to the principal amount thereof, plus accrued interest, if any, to the redemption date. DPL used the proceeds of the bonds to effect the redemption of all outstanding amounts of the following series of tax-exempt bonds previously issued by DEDA for the benefit of DPL (such bonds collectively are referred to as the Prior Bonds): $11.15 million of Exempt Facilities Refunding Revenue Bonds (Delmarva Power Light Company Project) Series 2000A; $27.75 million of Exempt Facilities Refunding Revenue Bonds (Delmarva Power Light Company Project) Series 2000B; $20 million of Exempt Facilities Refunding Revenue Bonds (Delmarva Power Light Company Project) Series 2001A; $4.5 million of Exempt Facilities Refunding Revenue Bonds (Delmarva Power Light Company Project) Series 2001B; and $15 million of Exempt Facilities Refunding Revenue Bonds (Delmarva Power Light Company Project) Series 2002A. The Prior Bonds were repurchased by DPL in 2008 in response to the disruption in the tax-exempt bond market that made it difficult for the remarketing agent to successfully remarket the bonds. As the owner of the bonds, DPL received the proceeds from the redemption of the Prior Bonds, which it intends to use for general corporate purposes.
POTOMAC ELECTRIC POWER CO
DEBT	(7)DEBT Credit Facilities PHI, Pepco, Delmarva Power Light Company (DPL) and Atlantic City Electric Company (ACE) maintain an unsecured credit facility to provide for their respective short-term liquidity needs. The aggregate borrowing limit under the facility is $1.5 billion, all or any portion of which may be used to obtain loans or to issue letters of credit. PHIs credit limit under the facility is $875 million. The credit limit of each of Pepco, DPL and ACE is the lesser of $500 million and the maximum amount of debt the company is permitted to have outstanding by its regulatory authorities, except that the aggregate amount of credit used by Pepco, DPL and ACE at any given time collectively may not exceed $625 million. At March31, 2010 and December31, 2009, the amount of cash plus borrowing capacity under PHIs $1.5 billion credit facility available to meet the liquidity needs of PHIs utility subsidiaries was $546 million and $582 million, respectively. Other Financing Activities During the three months ended March31, 2010, the following financing activity occurred: In March 2010, Pepco redeemed at maturity, $16 million of Prince Georges County 5.75% Pollution Control Revenue Refunding Bonds Series 1995.

INCOME TAXES

INCOME TAXES
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
INCOME TAXES	(10)INCOME TAXES A reconciliation of PHIs consolidated effective income tax rate is as follows: ThreeMonthsEnded March 31, 2010 2009 Federal statutory rate 35.0 % 35.0 % Increases (decreases) resulting from: State income taxes, net of federal effect 6.9 5.8 Change in estimates and interest related to uncertain and effectively settled tax positions 13.3 (3.5 ) Depreciation 1.8 2.2 Tax credits (1.5 ) (1.6 ) Cross-border energy lease investments (1.8 ) (1.9 ) Release of valuation allowance (11.5 ) Medicare Part D subsidy 6.3 Other, net (2.2 ) (1.2 ) Consolidated Effective Income Tax Rate 46.3 % 34.8 % PHIs effective tax rates for the three months ended March31, 2010 and 2009 were 46.3% and 34.8%, respectively. A portion of the increase in the rate resulted from changes in estimates and interest related to uncertain and effectively settled tax positions, primarily related to a $2 million reversal of accrued interest income on state income tax positions that PHI no longer believes is more likely than not to be realized and the reversal of $6 million of erroneously accrued interest income on uncertain and effectively settled state income tax positions, as discussed in Note 2, Significant Accounting Policies. The effective tax rate also reflects a deferred tax basis adjustment related to change in taxation of the Medicare Part D subsidy enacted by the Patient Protection and Affordable Care Act (Act). PHI receives a tax-free federal subsidy for the costs it incurs for certain prescription drugs covered under its post-employment benefit plan. Prior to the Act, the costs incurred for those prescription drugs was tax deductible. The Act includes a provision, effective beginning in 2013, which eliminates the tax deductibility of the prescription drug costs. As a result, PHI wrote off $5 million of deferred tax assets. Of this amount, $3 million was established as a regulatory asset, which the Company anticipates will be recoverable from its utility customers in the future. This change increased PHIs first quarter 2010 tax expense by $4 million, which was partially offset through a reduction in Operating Expenses resulting in a $2 million decrease to net income. The increases above are partially offset by the release of $8 million of valuation allowances on deferred tax assets related to state net operating losses resulting from the planned restructuring of certain PHI subsidiaries. On April1, 2010 as part of an ongoing effort to simplify PHIs organizational structure, certain of PHIs subsidiaries were converted to single member limited liability corporations. In addition to increased organizational flexibility and reduced administrative costs, a consequence of converting these entities is to allow PHI to include income or losses in the former corporations in a single state income tax return, thus permitting the release of the valuation allowances. In March 2009, the Internal Revenue Service (IRS) issued a Revenue Agents Report (RAR) for the audit of PHIs consolidated f
ATLANTIC CITY ELECTRIC CO
INCOME TAXES	(8)INCOME TAXES ACEs consolidated effective tax rate for the three months ended March31, 2010 was 140%. ACEs income before income tax for the three months ended March31, 2009 was less than $1 million; therefore the consolidated effective tax rate is not meaningful. The primary item impacting the 2010 effective tax rate was the reversal of $6 million of accrued interest income on uncertain and effectively settled state income tax positions, as discussed in Note2, Significant Accounting Policies. In March 2009, the Internal Revenue Service (IRS) issued a Revenue Agents Report (RAR) for the audit of PHIs consolidated federal income tax returns for the calendar years 2003 to 2005. The IRS has proposed adjustments to PHIs tax returns, including adjustments to ACEs capitalization of overhead costs for tax purposes and the deductibility of certain ACE casualty losses. In conjunction with PHI, ACE has appealed certain of the proposed adjustments and believes it has adequately reserved for the adjustments included in the RAR. During the first quarter of 2009, primarily as a result of the RAR, ACE reduced uncertain tax benefits by $15 million ($7 million as a result of agreements with taxing authorities and $8 million as adjustments to prior year tax positions).
DELMARVA POWER & LIGHT CO /DE/
INCOME TAXES	(9) INCOME TAXES A reconciliation of DPLs effective income tax rate is as follows: ThreeMonths EndedMarch 31, 2010 2009 Federal statutory rate 35.0 % 35.0 % Increases (decreases) resulting from: Depreciation 0.7 1.2 State income taxes, net of federal effect 5.2 5.5 Tax credits (0.7 ) (0.6 ) Change in estimates and interest related to uncertain and effectively settled tax positions 7.4 (3.6 ) Other, net 0.6 (1.1 ) Effective Income Tax Rate 48.2 % 36.4 % DPLs effective tax rates for the three months ended March31, 2010 and 2009 were 48.2% and 36.4%, respectively. The increase in the rate primarily resulted from an increase in changes in estimates and interest related to uncertain and effectively settled tax positions, primarily related to a $2 million reversal of accrued interest income on state income tax positions that DPL no longer believes is more likely than not to be realized. In March 2009, the Internal Revenue Service (IRS) issued a Revenue Agents Report (RAR) for the audit of PHIs consolidated federal income tax returns for the calendar years 2003 to 2005. The IRS has proposed adjustments to PHIs tax returns, including adjustments to DPLs capitalization of overhead costs for tax purposes and the deductibility of certain DPL casualty losses. In conjunction with PHI, DPL has appealed certain of the proposed adjustments and believes it has adequately reserved for the adjustments included in the RAR. During the first quarter of 2009, primarily as a result of the RAR, DPL reduced uncertain tax benefits by $23 million ($17 million as a result of settlements with taxing authorities and $6 million as adjustments to prior year tax positions).
POTOMAC ELECTRIC POWER CO
INCOME TAXES	(8)INCOME TAXES A reconciliation of Pepcos effective income tax rate is as follows: ThreeMonthsEnded March 31, 2010 2009 Federal statutory rate 35.0 % 35.0 % Increases (decreases) resulting from: Depreciation 8.6 3.6 Asset removal costs (3.5 ) (1.8 ) State income taxes, net of federal effect 5.7 5.8 Software amortization 1.2 Tax credits (2.9 ) (1.2 ) Change in estimates and interest related to uncertain and effectively settled tax positions 7.1 1.8 Permanent differences related to deferred compensation funding (1.4 ) (0.6 ) Other, net (5.7 ) (1.4 ) Effective Income Tax Rate 42.9 % 42.4 % Pepcos effective tax rates for the three months ended March31, 2010 and 2009 were 42.9% and 42.4% respectively. The increase in the rate primarily resulted from changes in estimates and interest relating to uncertain and effectively settled positions, partially offset by the effect of certain permanent and flow through tax differences as a percentage of pre-tax income. In March 2009, the Internal Revenue Service (IRS) issued a Revenue Agents Report (RAR) for the audit of PHIs consolidated federal income tax returns for the calendar years 2003 to 2005. The IRS has proposed adjustments to PHIs tax returns, including adjustments to Pepcos capitalization of overhead costs for tax purposes and the deductibility of certain Pepco casualty losses. In conjunction with PHI, Pepco has appealed certain of the proposed adjustments and believes it has adequately reserved for the adjustments included in the RAR.

EARNINGS PER SHARE

EARNINGS PER SHARE (PEPCO HOLDINGS INC)
	3 Months Ended Mar. 31, 2010
EARNINGS PER SHARE	(11)EARNINGS PER SHARE Reconciliations of the numerator and denominator for basic and diluted earnings per share (EPS) of common stock calculations are shown below: ThreeMonths EndedMarch 31, 2010 2009 (millionsofdollars,exceptpershare data) Income (Numerator): Earnings Applicable to Common Stock $ 36 $ 45 Shares (Denominator): Weighted average shares outstanding for basic computation: Average shares outstanding 222 219 Adjustment to shares outstanding Weighted Average Shares Outstanding for Computation of Basic Earnings Per Share of Common Stock 222 219 Net effect of potentially dilutive shares (a) Weighted Average Shares Outstanding for Computation of Diluted Earnings Per Share of Common Stock 222 219 Basic earnings per share of common stock $ .16 $ .21 Diluted earnings per share of common stock $ .16 $ .21 (a) The number of options to purchase shares of common stock that were excluded from the calculation of diluted EPS because they were anti- dilutive were 285,266 and 363,366 for the three months ended March31, 2010 and 2009, respectively.

DERIVATIVE INSTRUMENTS AND HEDG

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES	(12)DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES PHIs Competitive Energy business uses derivative instruments primarily to reduce its financial exposure to changes in the value of its assets and obligations due to commodity price fluctuations. The derivative instruments used by the Competitive Energy business include forward contracts, futures, swaps, and exchange-traded and over-the-counter options. The Competitive Energy business also manages commodity risk with contracts that are not classified and not accounted for as derivatives. The two primary risk management objectives are: (i)to manage the spread between the cost of fuel used to operate electric generating facilities and the revenue received from the sale of the power produced by those facilities, and (ii)to manage the spread between retail sales commitments and the cost of supply used to service those commitments to ensure stable cash flows and lock in favorable prices and margins when they become available. Conectiv Energy purchases energy commodity contracts in the form of futures, swaps, options and forward contracts to hedge price risk in connection with the purchase of physical natural gas, oil and coal to fuel its generation assets for sale to customers. Conectiv Energy also purchases energy commodity contracts in the form of electricity swaps, options and forward contracts to hedge price risk in connection with the purchase of electricity for delivery to requirements-load customers. Conectiv Energy sells electricity swaps, options and forward contracts to hedge price risk in connection with electric output from its generating facilities. Conectiv Energy accounts for most of its futures, swaps and certain forward contracts as cash flow hedges of forecasted transactions. Derivative contracts purchased or sold in excess of probable amounts of forecasted hedge transactions are marked-to-market through current earnings. All option contracts are marked-to-market through current earnings. Certain natural gas and oil futures and swaps are used as fair value hedges to protect the value of natural gas transportation contracts and physical fuel inventory. Some forward contracts are accounted for using standard accrual accounting since these contracts meet the requirements for normal purchase and normal sale accounting. Pepco Energy Services purchases energy commodity contracts in the form of electric and natural gas futures, swaps, options and forward contracts to hedge price risk in connection with the purchase of physical natural gas and electricity for delivery to customers. Pepco Energy Services accounts for its futures and swap contracts as cash flow hedges of forecasted transactions. Certain commodity contracts that do not qualify as cash flow hedges of forecasted transactions or do not meet the requirements for normal purchase and normal sale accounting are marked-to-market through current earnings. Forward contracts are accounted for using standard accrual accounting since these contracts meet the requirements for normal purchase and normal sale accounting. In the Power Delivery business, DPL uses derivative instruments in the form of forward contracts, futures, s
DELMARVA POWER & LIGHT CO /DE/
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES	(10) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES DPL uses derivative instruments in the form of forward contracts, futures, swaps, and exchange-traded and over-the-counter options primarily to reduce gas commodity price volatility and limit its customers exposure to increases in the market price of gas. DPL also manages commodity risk with physical natural gas and capacity contracts that are not classified as derivatives. All premiums paid and other transaction costs incurred as part of DPLs natural gas hedging activity, in addition to all gains and losses related to hedging activities, are deferred under FASB guidance on regulated operations (ASC 980) until recovered based on the fuel adjustment clause approved by the DPSC. The table below identifies the balance sheet location and fair values of derivative instruments as of March31, 2010 and December31, 2009: As of March31, 2010 Balance Sheet Caption Derivatives Designated as Hedging Instruments Other Derivative Instruments Gross Derivative Instruments Effects of Cash Collateral and Netting Net Derivative Instruments (millions of dollars) Derivative Assets (current assets) $ $ $ $ $ Derivative Assets (non-current assets) Total Derivative Assets Derivative Liabilities (current liabilities) (15 ) (23 ) (38 ) 17 (21 ) Derivative Liabilities (non-current liabilities) (14 ) (14 ) 2 (12 ) Total Derivative Liabilities (15 ) (37 ) (52 ) 19 (33 ) Net Derivative (Liability) Asset $ (15 ) $ (37 ) $ (52 ) $ 19 $ (33 ) As of December31, 2009 Balance Sheet Caption Derivatives Designated as Hedging Instruments Other Derivative Instruments Gross Derivative Instruments Effects of Cash Collateral and Netting Net Derivative Instruments (millions of dollars) Derivative Assets (current assets) $ $ $ $ $ Derivative Assets (non-current assets) Total Derivative Assets Derivative Liabilities (current liabilities) (10 ) (15 ) (25 ) 10 (15 ) Derivative Liabilities (non-current liabilities) (14 ) (14 ) 1 (13 ) Total Derivative Liabilities (10 ) (29 ) (39 ) 11 (28 ) Net Derivative (Liability) Asset $ (10 ) $ (29 ) $ (39 ) $ 11 $ (28 ) Under FASB guidance on the offsetting of balance sheet accounts (ASC 210), DPL offsets the fair value amounts recognized for derivative instruments and fair value amounts re

FAIR VALUE DISCLOSURES

FAIR VALUE DISCLOSURES
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
FAIR VALUE DISCLOSURES	(13)FAIR VALUE DISCLOSURES Fair Value of Assets and Liabilities Excluding Debt PHI has adopted FASB guidance on fair value measurement and disclosures (ASC 820) which established a framework for measuring fair value and expanded disclosures about fair value measurements. As defined in the guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). PHI utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. Accordingly, PHI utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). PHI classifies its fair value balances in the fair value hierarchy based on the observability of the inputs used in the fair value calculation as follows: Level 1 Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis, such as the New York Mercantile Exchange (NYMEX). Level 2 Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using broker quotes in liquid markets and other observable data. Level 2 also includes those financial instruments that are valued using internally developed methodologies that have been corroborated by observable market data through correlation or by other means. Significant assumptions are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. The instruments primarily consist of electricity derivatives and wholesale gas futures and swaps at March31, 2010. Level 2 power swaps are priced at liquid trading hub prices or valued using the liquid hub prices plus a congestion adder that is calculated using historical regression analysis. Natural gas futures and swaps are valued using broker quotes in liquid markets, and other observable pricing data. Executive deferred compensation plan assets and liabilities include life insurance policies that are categorized as level 2 assets because they are priced based on the underlying assets in the policy. The underlying assets of these life insurance contracts consist of short term cash equivalents and fixed income securit
ATLANTIC CITY ELECTRIC CO
FAIR VALUE DISCLOSURES	(9)FAIR VALUE DISCLOSURES Fair Value of Assets and Liabilities Excluding Debt ACE has adopted FASB guidance on fair value measurement and disclosures (ASC 820) which established a framework for measuring fair value and expanded disclosures about fair value measurements. As defined in the guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). ACE utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. Accordingly, ACE utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). ACE classifies its fair value balances in the fair value hierarchy based on the observability of the inputs used in the fair value calculation as follows: Level 1 Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using broker quotes in liquid markets and other observable data. Level 2 also includes those financial instruments that are valued using internally developed methodologies that have been corroborated by observable market data through correlation or by other means. Significant assumptions are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Executive deferred compensation plan assets and liabilities include life insurance policies that are categorized as level 2 assets because they are priced based on the underlying assets in the policy. The underlying assets of these life insurance contracts consist of short term cash equivalents and fixed income securities that are priced using observable market data. The level 2 liability of the life insurance contract represents deferred compensation obligation, the value of which are tracked via underlying insurance sub-accounts. The sub-accounts are designed to track and mirror existing mutual funds and money market funds that are observable and actively traded. Level 3 Pricing inputs include significant inputs that are generally less observable than those from obj
DELMARVA POWER & LIGHT CO /DE/
FAIR VALUE DISCLOSURES	(11)FAIR VALUE DISCLOSURES Fair Value of Assets and Liabilities Excluding Debt DPL has adopted FASB guidance on fair value measurement and disclosures (ASC 820) which established a framework for measuring fair value and expanded disclosures about fair value measurements. As defined in the guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). DPL utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. Accordingly, DPL utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). DPL classifies its fair value balances in the fair value hierarchy based on the observability of the inputs used in the fair value calculation as follows: Level 1 Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis, such as the New York Mercantile Exchange (NYMEX). Level 2 Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using broker quotes in liquid markets and other observable data. Level 2 also includes those financial instruments that are valued using internally developed methodologies that have been corroborated by observable market data through correlation or by other means. Significant assumptions are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Executive deferred compensation plan assets and liabilities include life insurance policies that are categorized as level 2 assets because they are priced based on the underlying assets in the policy. The underlying assets of these life insurance contracts consist of short term cash equivalents and fixed income securities that are priced using observable market data. The level 2 liability of the life insurance contract represents deferred compensation obligation, the value of which are tracked via underlying insurance sub-accounts. The sub-accounts are designed to track and mirror existing mutual funds and money market funds that are observable and actively traded. Level 3 Pricing inputs include significant inputs tha
POTOMAC ELECTRIC POWER CO
FAIR VALUE DISCLOSURES	(9)FAIR VALUE DISCLOSURES Fair Value of Assets and Liabilities Excluding Debt Pepco has adopted FASB guidance on fair value measurement and disclosures (ASC 820) which established a framework for measuring fair value and expanded disclosures about fair value measurements. As defined in the guidance, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Pepco utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. Accordingly, Pepco utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). Pepco classifies its fair value balances in the fair value hierarchy based on the observability of the inputs used in the fair value calculation as follows: Level 1 Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using broker quotes in liquid markets and other observable data. Level 2 also includes those financial instruments that are valued using internally developed methodologies that have been corroborated by observable market data through correlation or by other means. Significant assumptions are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Executive deferred compensation plan assets and liabilities include life insurance policies that are categorized as level 2 assets because they are priced based on the underlying assets in the policy. The underlying assets of these life insurance contracts consist of short term cash equivalents and fixed income securities that are priced using observable market data. The level 2 liability of the life insurance contract represents deferred compensation obligation, the value of which are tracked via underlying insurance sub-accounts. The sub-accounts are designed to track and mirror existing mutual funds and money market funds that are observable and actively traded. Level 3 Pricing inputs include significant inputs that are generally less observable than those

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES
	3 Months Ended Mar. 31, 2010 PEPCO HOLDINGS INC
PEPCO HOLDINGS INC
COMMITMENTS AND CONTINGENCIES	(14)COMMITMENTS AND CONTINGENCIES Regulatory and Other Matters Proceeds from Settlement of Mirant Bankruptcy Claims In 2007, Pepco received proceeds from the settlement of its Mirant Corporation (Mirant) bankruptcy claims relating to a power purchase agreement between Pepco and Panda-Brandywine L.P. (Panda PPA). In September 2008, Pepco transferred the Panda PPA to an unaffiliated third party, along with a payment to the third party of a portion of the settlement proceeds. In March 2009, the District of Columbia Public Service Commission (DCPSC) approved an allocation between Pepco and its District of Columbia customers of the District of Columbia portion of the Mirant bankruptcy settlement proceeds remaining after the transfer of the Panda PPA. As a result, Pepco recorded a pre-tax gain of $14 million in the first quarter of 2009 reflecting the District of Columbia proceeds retained by Pepco. On April20, 2010, the DCPSC issued an order concluding that there are no remaining issues to be resolved in the Mirant bankruptcy proceeding, and requested parties to file requests identifying additional unresolved issues, if any, by April30, 2010. Because no such requests were received by the deadline, the DCPSC closed the proceeding without further action. Rate Proceedings In recent electric service distribution base rate cases, PHIs utility subsidiaries have proposed the adoption of revenue decoupling methods for retail customers. To date: A bill stabilization adjustment mechanism (BSA) has been approved and implemented for both Pepco and DPL electric service in Maryland and for Pepco electric service in the District of Columbia. A modified fixed variable rate design (MFVRD) has been approved in concept for DPL electric service in Delaware and a settlement among the parties to the ongoing base rate proceeding (as described below) has been submitted to the DPSC, which provides for the implementation of the MFVRD after the conclusion of DPLs pending electric base rate case (under Delaware law, the MFVRD must be in place by December31, 2010). An MFVRD has been approved in concept for DPL natural gas service in Delaware and may be implemented either in the context of a pending decoupling case or DPLs next Delaware natural gas distribution base rate case (under Delaware law, the MFVRD must be in place by December31, 2010). A proposed BSA remains pending for ACE in New Jersey. Under the BSA, customer delivery rates are subject to adjustment (through a credit or surcharge mechanism), depending on whether actual distribution revenue per customer exceeds or falls short of the revenue-per-customer amount approved by the applicable public service commission. The BSA increases rates if actual distribution revenues fall below the approved level and decreases rates if actual distribution revenues are above the approved level. The result is that, over time, the utility collects its authorized revenues for distribution deliveries. As a consequence, a BSA decouples distribution revenue from unit sales consumption and ties the growth in distribution revenues to the growth in the number of customers. Some adv
ATLANTIC CITY ELECTRIC CO
COMMITMENTS AND CONTINGENCIES	(10)COMMITMENTS AND CONTINGENCIES Regulatory and Other Matters Rate Proceeding In August 2009, ACE submitted a petition to the NJBPU to increase its electric distribution base rates, including a request for the implementation of a BSA. Based on a test year ending December31, 2009, adjusted for known and measurable changes, ACE requested an annual net increase in its current retail distribution rates for electric service in the amount of approximately $54million (which includes a reduction to its Regulatory Asset Recovery Charge (RARC)) based on a requested ROE of 11.50% (or an increase of approximately $52million, based on an ROE of 11.25%, if the BSA were approved). Excluding any adjustment to the RARC, as well as sales and use taxes, the amounts in the original application would be approximately $51.6million without the BSA and $49.8million with the BSA. On February19, 2010, ACE made a filing based on an updated test period, adjusting the requested increase to approximately $45.8million without the BSA and $44.1million with the BSA (excluding any adjustment to the RARC, as well as sales and use taxes). On April28, 2010, all of the parties to the proceeding, including ACE, the NJBPU Staff, the New Jersey Department of the Public Advocate, Division of Rate Counsel, the Natural Resources Defense Council, and Wal-Mart Stores East, LP and Sams East, signed a settlement agreement and submitted it to the Administrative Law Judge (ALJ) in the proceeding for review. The settlement agreement provides for an increase in electric distribution rates, effective for service rendered on and after June1, 2010, of approximately $20million (excluding any adjustment to the RARC, as well as sales and use taxes), based on a stated ROE of 10.30%. The agreement also provides that the BSA and certain other issues will be considered in a Phase II proceeding. On April30, 2010, the ALJ issued an initial decision ordering the parties to comply with the settlement terms. The settlement agreement is subject to final review and approval by the NJBPU. The parties have requested that the NJBPU consider the matter at the public meeting currently scheduled for May12, 2010. If the settlement is not approved, the matter will be scheduled for hearings. Under the BSA, customer delivery rates are subject to adjustment (through a credit or surcharge mechanism), depending on whether actual distribution revenue per customer exceeds or falls short of the revenue-per-customer amount approved by the NJBPU. The BSA increases rates if actual distribution revenues fall below the approved level and decreases rates if actual distribution revenues are above the approved level. The result is that, over time, ACE would collect its authorized revenues for distribution deliveries. As a consequence, a BSA decouples distribution revenue from unit sales consumption and ties the growth in distribution revenues to the growth in the number of customers. Some advantages of the BSA are that it (i)eliminates revenue fluctuations due to weather and changes in customer usage patterns and, therefore, provides for more predictable distribution revenues that are better aligned with costs, (ii)provid
DELMARVA POWER & LIGHT CO /DE/
COMMITMENTS AND CONTINGENCIES	(12) COMMITMENTS AND CONTINGENCIES Regulatory and Other Matters Rate Proceedings In recent electric service distribution base rate cases, DPL has proposed the adoption of revenue decoupling methods for retail customers. To date: A bill stabilization adjustment mechanism (BSA) has been approved and implemented for electric service in Maryland. A modified fixed variable rate design (MFVRD) has been approved in concept for electric service in Delaware and a settlement among the parties to the ongoing base rate proceeding (as described below) has been submitted to the DPSC, which provides for the implementation of the MFVRD after the conclusion of DPLs pending electric base rate case (under Delaware law, the MFVRD must be in place by December31, 2010). An MFVRD has been approved in concept for natural gas service in Delaware and may be implemented either in the context of a pending decoupling case or DPLs next Delaware natural gas distribution base rate case (under Delaware law, the MFVRD must be in place by December31, 2010). Under the BSA, customer delivery rates are subject to adjustment (through a credit or surcharge mechanism), depending on whether actual distribution revenue per customer exceeds or falls short of the revenue-per-customer amount approved by the applicable public service commission. The BSA increases rates if actual distribution revenues fall below the approved level and decreases rates if actual distribution revenues are above the approved level. The result is that, over time, DPL collects its authorized revenues for distribution deliveries. As a consequence, a BSA decouples distribution revenue from unit sales consumption and ties the growth in distribution revenues to the growth in the number of customers. Some advantages of the BSA are that it (i)eliminates revenue fluctuations due to weather and changes in customer usage patterns and, therefore, provides for more predictable distribution revenues that are better aligned with costs, (ii)provides for more reliable fixed-cost recovery, (iii)tends to stabilize customers delivery bills, and (iv)removes any disincentives for DPL to promote energy efficiency programs for its customers, because it breaks the link between overall sales volumes and distribution revenues. The MFVRD adopted in Delaware provides for a fixed customer charge (i.e., not tied to the customers volumetric consumption) to recover the utilitys fixed costs, plus a reasonable rate of return. Although different from the BSA, DPL views the MFVRD as an appropriate distribution revenue decoupling mechanism. Delaware In August 2009, DPL submitted its 2009 GCR filing, which permits DPL to recover gas procurement costs through customer rates, to the DPSC. The filing requested a 10.2% decrease in the level of GCR, to become effective on a temporary basis on November1, 2009. This rate proposal was approved by the DPSC on September9, 2009, subject to refund and pending final DPSC approval. In September 2009, DPL submitted an application with the DPSC to increase its electric distribution base rates. The filing sought approval of an annual rate increase of approximately $
POTOMAC ELECTRIC POWER CO
COMMITMENTS AND CONTINGENCIES	(10) COMMITMENTS AND CONTINGENCIES Regulatory and Other Matters Proceeds from Settlement of Mirant Bankruptcy Claims In 2007, Pepco received proceeds from the settlement of its Mirant Corporation (Mirant) bankruptcy claims relating to a power purchase agreement between Pepco and Panda-Brandywine L.P. (Panda PPA). In September 2008, Pepco transferred the Panda PPA to an unaffiliated third party, along with a payment to the third party of a portion of the settlement proceeds. In March 2009, the District of Columbia Public Service Commission (DCPSC) approved an allocation between Pepco and its District of Columbia customers of the District of Columbia portion of the Mirant bankruptcy settlement proceeds remaining after the transfer of the Panda PPA. As a result, Pepco recorded a pre-tax gain of $14 million in the first quarter of 2009 reflecting the District of Columbia proceeds retained by Pepco. On April20, 2010, the DCPSC issued an order concluding that there are no remaining issues to be resolved in the Mirant bankruptcy proceeding, and requested parties to file requests identifying additional unresolved issues, if any, by April30, 2010. Because no such requests were received by the deadline, the DCPSC closed the proceeding without further action. Rate Proceedings In recent electric service distribution base rate cases, Pepco has proposed the adoption of revenue decoupling methods for retail customers. A BSA has been approved and implemented for Pepco electric service in Maryland and in the District of Columbia. Under the BSA, customer delivery rates are subject to adjustment (through a credit or surcharge mechanism), depending on whether actual distribution revenue per customer exceeds or falls short of the revenue-per-customer amount approved by the applicable public service commission. The BSA increases rates if actual distribution revenues fall below the approved level and decreases rates if actual distribution revenues are above the approved level. The result is that, over time, Pepco collects its authorized revenues for distribution deliveries. As a consequence, a BSA decouples distribution revenue from unit sales consumption and ties the growth in distribution revenues to the growth in the number of customers. Some advantages of the BSA are that it (i)eliminates revenue fluctuations due to weather and changes in customer usage patterns and, therefore, provides for more predictable distribution revenues that are better aligned with costs, (ii)provides for more reliable fixed-cost recovery, (iii)tends to stabilize customers delivery bills, and (iv)removes any disincentives for Pepco to promote energy efficiency programs for its customers, because it breaks the link between overall sales volumes and distribution revenues. District of Columbia In January 2008, the DCPSC approved, effective in February 2008, a revenue requirement increase for Pepco of approximately $28million, based on an authorized return on rate base of 7.96%, including a 10% return on equity (ROE). In June 2008, the District of Columbia Office of Peoples Counsel (the DC OPC), citing alleged errors by the DCPSC, filed with the DCPSC a motion for recons

SUBSEQUENT EVENT

SUBSEQUENT EVENT (PEPCO HOLDINGS INC)
	3 Months Ended Mar. 31, 2010
SUBSEQUENT EVENT	(15) SUBSEQUENT EVENT On April20, 2010, the Board of Directors of PHI approved a plan for the disposition of Conectiv Energy. The plan consists of the sale of Conectiv Energys Generation Business and the liquidation of all of Conectiv Energys load service supply contracts, energy hedging portfolio, certain tolling agreements and non-core assets. In accordance with the plan, PHI on the same day entered into the Purchase Agreement. Under the terms of the Purchase Agreement, Calpine will purchase a subsidiary of PHI, which after a reorganization will hold the assets and liabilities of the Generation Business, for a purchase price of $1.65 billion, plus the market value of the fuel oil inventory at closing, and subject to various adjustments, including adjustments for (i)the level of working capital and non-fuel oil inventory at closing and (ii)actual capital expenditures relative to budgeted capital expenditures through the closing date. The targeted closing date for the sale is June30, 2010. Beginning July1, 2010, and until the closing occurs, the purchase price will be reduced by a specified amount per day. The amount of the per diem reduction is (i)$360,000 in July, (ii)$363,500 in August, (iii)$237,500 in September, (iv)$195,000 in October, (v)$189,500 in November, and (vi)$219,500 in December. If the closing does not occur on or before December31, 2010, either PHI or Calpine may elect to terminate the Purchase Agreement so long as the inability to close the transaction as of that date is not the result of either partys failure to fulfill any of its obligations under the Purchase Agreement. Completion of the transaction requires the approval of the Federal Energy Regulatory Commission and satisfaction of the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Each partys obligation to complete the sale also is contingent on other customary closing conditions, including the material accuracy of the other partys representations and warranties and the compliance by the other party with its covenants. The obligation of Calpine to complete the purchase is also subject to various other conditions, including the condition that subsequent to April20, 2010, no event, condition or development shall have occurred that has or is reasonably likely to have a material adverse effect (i)on the Generation Business as a whole, (ii)on any of Conectiv Energys principal generating facilities or (iii)on any combination of Conectiv Energys other generating facilities that together constitute 50% of the generating capacity of those other generating facilities. Either PHI or Calpine can elect to terminate the transaction if the other party breaches a representation, warranty or covenant (generally after being afforded a period to cure the breach). If the breach is willful and intentional, the terminating party will be entitled to a payment in the amount of $175 million as liquidated damages. If the breach is negligent, the terminating party will be entitled to a payment in the amount of $40 million as liquidated damages. If PHIs breach is neither willful and intentional nor negligent, Calpine will be entitled to a paymen

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS
	3 Months Ended Mar. 31, 2010 ATLANTIC CITY ELECTRIC CO
ATLANTIC CITY ELECTRIC CO
RELATED PARTY TRANSACTIONS	(11) RELATED PARTY TRANSACTIONS PHI Service Company provides various administrative and professional services to PHI and its regulated and unregulated subsidiaries including ACE. The cost of these services is allocated in accordance with cost allocation methodologies set forth in the service agreement using a variety of factors, including the subsidiaries share of employees, operating expenses, assets, and other cost causal methods. These intercompany transactions are eliminated by PHI in consolidation and no profit results from these transactions at PHI. PHI Service Company costs directly charged or allocated to ACE for the three months ended March31, 2010 and 2009 were $26 million and $25 million, respectively. In addition to the PHI Service Company charges described above, ACEs financial statements include the following related party transactions in the consolidated statements of income: ThreeMonths EndedMarch31, Income (Expense) 2010 2009 (millionsofdollars) Purchased power under Default Electricity Supply contracts with Conectiv Energy Supply, Inc. (a) $ (39 ) $ (46 ) Meter reading services provided by Millennium Account Services LLC (b) (1 ) (1 ) Intercompany use revenue (c) 2 (a) Included in purchased energy expense. (b) Included in other operating and maintenance expense. (c) Included in operating revenue. As of March31, 2010 and December31, 2009, ACE had the following balances on its balance sheets due to related parties: Asset (Liability) March31 2010 December31, 2009 (millions of dollars) Payable to Related Party (current)(a) PHI Service Company $ (11 ) $ (38 ) PHI Parent Company (3 ) Conectiv Energy Supply, Inc. (12 ) (15 ) Other (2 ) (2 ) Total $ (25 ) $ (58 ) (a) These amounts are included in the Accounts payable due to associated companies balance on the consolidated balance sheets.
DELMARVA POWER & LIGHT CO /DE/
RELATED PARTY TRANSACTIONS	(13)RELATED PARTY TRANSACTIONS PHI Service Company provides various administrative and professional services to PHI and its regulated and unregulated subsidiaries including DPL. The cost of these services is allocated in accordance with cost allocation methodologies set forth in the service agreement using a variety of factors, including the subsidiaries share of employees, operating expenses, assets, and other cost causal methods. These intercompany transactions are eliminated by PHI in consolidation and no profit results from these transactions at PHI. PHI Service Company costs directly charged or allocated to DPL for the three months ended March31, 2010 and 2009 were $34 million and $32 million, respectively. In addition to the PHI Service Company charges described above, DPLs financial statements include the following related party transactions in its statements of income: ThreeMonths EndedMarch 31, Income (Expense) 2010 2009 (millionsofdollars) Purchased power under Default Electricity Supply contracts with Conectiv Energy Supply, Inc. (a) $ (19 ) $ (37 ) Intercompany lease transactions (b) 2 2 (a) Included in purchased energy expense. (b) Included in electric revenue. As of March31, 2010 and December31, 2009, DPL had the following balances on its balance sheets due to related parties: Asset (Liability) March31, 2010 December31, 2009 (millions of dollars) Receivable from (Payable to) Related Party (current)(a) PHI Service Company $ (16 ) $ 22 PHI Parent Company (1 ) (27 ) Conectiv Energy Supply, Inc. (5 ) (7 ) Pepco Energy Services, Inc. and its subsidiaries (Pepco Energy Services) (b) (3 ) (3 ) Other 1 1 Total $ (24 ) $ (14 ) (a) These amounts are included in the Accounts payable due to associated companies balances on the balance sheet. (b) DPL bills customers on behalf of Pepco Energy Services where customers have selected Pepco Energy Services as their alternative supplier.
POTOMAC ELECTRIC POWER CO
RELATED PARTY TRANSACTIONS	(11)RELATED PARTY TRANSACTIONS PHI Service Company provides various administrative and professional services to PHI and its regulated and unregulated subsidiaries, including Pepco. The cost of these services is allocated in accordance with cost allocation methodologies set forth in the service agreement using a variety of factors, including the subsidiaries share of employees, operating expenses, assets, and other cost causal methods. These intercompany transactions are eliminated by PHI in consolidation and no profit results from these transactions at PHI. PHI Service Company costs directly charged or allocated to Pepco for the three months ended March31, 2010 and 2009 were approximately $45 million and $43 million, respectively. Certain subsidiaries of Pepco Energy Services perform utility maintenance services, including services that are treated as capital costs, for Pepco. Amounts charged to Pepco by these companies for the three months ended March31, 2010 and 2009 were approximately $1 million and $2 million, respectively. As of March31, 2010 and December31, 2009, Pepco had the following balances on its balance sheets due to related parties: March31, 2010 December31, 2009 Asset (Liability) (millions of dollars) Payable to Related Party (current) (a) PHI Parent Company $ $ (8 ) PHI Service Company (20 ) (3 ) Pepco Energy Services (b) (73 ) (99 ) Other (1 ) Total $ (93 ) $ (111 ) Money Pool Balance with Pepco Holdings (included in Cash and cash equivalents) $ 194 $ 203 (a)These amounts are included in the Accounts payable due to associated companies balances on the balance sheet. (b)Pepco bills customers on behalf of Pepco Energy Services where customers have selected Pepco Energy Services as their alternative supplier or where Pepco Energy Services has performed work for certain government agencies under a General Services Administration area-wide agreement.