Exhibit (99)
Commonwealth Edison Company
Form 8-K File No. 1-1839

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 1999 AND 1998

Commonwealth Edison Company and Subsidiary Companies

Forward-Looking Information. Except for historical data, the information
contained herein constitutes forward-looking statements. Forward-looking
statements are inherently uncertain and subject to risks. Such statements
should be viewed with caution. Actual results or experience could differ
materially from the forward-looking statements as a result of many factors.
Forward-looking statements in this report include, but are not limited to: (1)
statements regarding expectations of revenue reductions and collections of
future CTC revenues as a result of the 1997 Act in "Management's Discussion
and Analysis of Financial Condition and Results of Operations," subcaption
"Changes in the Electric Utility Industry--The 1997 Act," and in Notes 1 and 3
of Notes to Financial Statements, (2) statements regarding estimated capital
expenditures in "Management's Discussion and Analysis of Financial Condition
and Results of Operations," subcaptions "Liquidity and Capital Resources--
UTILITY OPERATIONS--Construction Program" and "Liquidity and Capital
Resources--UNREGULATED OPERATIONS--Construction Program," and "Changes in the
Electric Utility Industry--Response to Regulatory Changes," (3) statements
regarding the costs of decommissioning nuclear generating stations in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," subcaption "Regulation--Nuclear Matters," and in Note 1 of Notes
to Financial Statements, under "Depreciation, Amortization of Regulatory
Assets and Liabilities, and Decommissioning," (4) statements regarding cleanup
costs associated with MGPs and other remediation sites in Note 22 of Notes to
Financial Statements, (5) statements regarding the estimated fair value of
forward energy contracts in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," subcaption "Liquidity and Capital
Resources--UTILITY OPERATIONS--Market Risks," (6) statements regarding the
risks and uncertainties relating to Year 2000 issues set forth in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," subcaption "Liquidity and Capital Resources--UTILITY OPERATIONS--
Year 2000 Conversion," including ComEd's dependence upon the Year 2000
readiness of third parties with whom it has significant business relationships
and the estimated costs for final project wrap-up activities, (7) statements
regarding the use of fossil plant sale proceeds in "Management's Discussion
and Analysis of Financial Condition and Results of Operations," subcaptions
"Changes in the Electric Utility Industry--Fossil Plant Sale," "Liquidity and
Capital Resources--UTILITY OPERATIONS--Construction Program," and "Liquidity
and Capital Resources--UNREGULATED OPERATIONS--Capital Resources," and in Note
5 of Notes to Financial Statements, (8) statements regarding estimates of
claims resulting from the summer of 1999 outages set forth in Note 22 of Notes
to Financial Statements and (9) statements regarding the Merger Agreement in
Note 2 of Notes to Financial Statements and in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" subcaption "Changes
in the Electric Utility Industry--Merger Agreement." Management cannot predict
the course of future events or anticipate the interaction of multiple factors
beyond management's control and their effect on revenues, project timing and
costs. The statements regarding revenue reductions and collections of future
CTC revenues are subject to unforeseen developments in the market for
electricity in Illinois resulting from regulatory changes. The statements
regarding estimated capital expenditures, decommissioning costs, cleanup costs
and Year 2000 wrap-up costs are subject to changes in the scope of work and
manner in which the work is performed and consequent changes in the timing and
level of the projected expenditure, and are also subject to changes in laws
and regulations or their interpretation or enforcement. The statements
regarding expectations for Year 2000 readiness are also subject to the risk
that Year 2000 remediation efforts of other parties with whom ComEd has
significant business relationships are not successful. The statements
regarding the fair value of forward energy contracts are subject to changes in
generating capability and a reduction in the demand for electricity. The
statement regarding the use of proceeds from the fossil plant sale is subject
to the possibility that regulatory action might affect the amount and use of
such proceeds and the possibility that, due to changing market conditions,
Unicom and ComEd may determine that other uses of the proceeds may be in their
best interest. The statements regarding estimates of claims resulting from the
summer of 1999 outages are subject to the risk that the actual

amount of losses suffered by customers and restoration costs may exceed the
estimated amounts. The statements regarding the Merger Agreement and the
associated repurchase of shares are subject to the risk of a significant delay
in the expected completion of, and unexpected consequences resulting from, the
transactions contemplated by the Merger Agreement, including the inability to
close the transaction, and to changes in the number of shares of outstanding
common stock of Unicom and PECO for unforeseen reasons. Unicom and ComEd make
no commitment to disclose any revisions to the forward-looking statements, or
any facts, events or circumstances after the date hereof that may bear upon
forward-looking statements.

INDEX

Page
-----

Definitions.............................................................. 4
Summary of Selected Consolidated Financial Data.......................... 5
Cash Dividends Paid per Share of Common Stock............................ 5
1999 Consolidated Revenues and Sales..................................... 5
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 6-22
Report of Independent Public Accountants................................. 23
Consolidated Financial Statements--
Statements of Consolidated Operations for the years 1999, 1998 and
1997.................................................................. 24
Consolidated Balance Sheets as of December 31, 1999 and 1998........... 25-26
Statements of Consolidated Capitalization as of December 31, 1999 and
1998.................................................................. 27
Statements of Consolidated Retained Earnings (Deficit) for the years
1999, 1998 and 1997................................................... 28
Statements of Consolidated Comprehensive Income for the years 1999,
1998 and 1997......................................................... 28
Statements of Consolidated Cash Flows for the years 1999, 1998 and
1997.................................................................. 29
Notes to Financial Statements.......................................... 30-56

DEFINITIONS

The following terms are used in this document with the following meanings:

Term Meaning
------------------- ---------------------------------------------------------

1997 Act Illinois Electric Service Customer Choice and Rate Relief
Law of 1997, as amended
AFUDC Allowance for funds used during construction
APB Accounting Principles Board
APX Automated Power Exchange Inc., a California company
ARES Alternative Retail Electric Suppliers
CERCLA Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended
City City of Chicago
ComEd Commonwealth Edison Company, a Unicom subsidiary
ComEd Funding ComEd Funding, LLC, a ComEd subsidiary
ComEd Funding Trust ComEd Transitional Funding Trust, a ComEd Funding
subsidiary
Congress U.S. Congress
Cotter Cotter Corporation, a ComEd subsidiary
CTC Non-bypassable "competitive transition charge"
DOE U.S. Department of Energy
Edison Development Edison Development Canada Inc., a ComEd subsidiary
EME Edison Mission Energy, an Edison International subsidiary
EPS Earnings/(Loss) per Common Share
ESPP Employee Stock Purchase Plan
FAC Fuel adjustment clause
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
Fossil Plant ComEd's six coal-fired generating plants, an oil and gas-
fired plant, and nine peaking unit sites
GAAP Generally Accepted Accounting Principles
ICC Illinois Commerce Commission
IDR Illinois Department of Revenue
Indiana Company Commonwealth Edison Company of Indiana, Inc., a ComEd
subsidiary
INPO Institute of Nuclear Power Operations
ISO Independent System Operator
MGP Manufactured gas plant
NEIL Nuclear Electric Insurance Limited
NRC Nuclear Regulatory Commission
O&M Operation and maintenance
PECO PECO Energy Company, a Pennsylvania company
RES Retail Electric Supplier
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
SPEs Special purpose entities
S&P Standard & Poor's
Trusts ComEd Financing I and ComEd Financing II, ComEd
subsidiaries
Trust Securities ComEd-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely ComEd's
subordinated debt securities
Unicom Unicom Corporation
Unicom Investment Unicom Investment Inc., a Unicom Enterprises subsidiary
U.S. EPA U.S. Environmental Protection Agency

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

Summary of Selected Consolidated Financial Data

1999 1998 1997 1996 1995
------- ------- ------- ------- -------
(Millions Except per Share Data)

Electric operating revenues.. $ 6,767 $ 7,089 $ 7,073 $ 6,935 $ 6,910
Net income (loss)............ $ 623(1) $ 594 $ (774)(2) $ 743 $ 717(3)
Net income (loss) on common
stock....................... $ 599(1) $ 537 $ (834)(2) $ 679 $ 647(3)
Cash dividends declared per
common share................ $ 1.60 $ 1.60 $ 1.60 $ 1.60 $ 1.60
Total assets (at end of
year)....................... $23,160 $25,451 $22,458 $23,217 $23,119
Long-term obligations at end
of year excluding current
portion:
Long-term debt, preference
stock and preferred
securities subject to
mandatory redemption
requirements............... $ 7,312 $ 8,097 $ 6,087 $ 6,376 $ 6,950
Accrued spent nuclear fuel
disposal fee and related
interest................... $ 763 $ 728 $ 693 $ 657 $ 624
Capital lease obligations... $ 162 $ 334 $ 438 $ 475 $ 374
Other long-term obligations. $ 3,185 $ 2,953 $ 3,177 $ 1,983 $ 1,819

- --------
(1) Includes an extraordinary loss related to the early redemption of long-
term debt of $28 million (after-tax). Also, includes $12 million (after-
tax), for premiums paid in connection with the redemption of preference
stock.
(2) Includes an extraordinary loss for the write-off of generation-related net
regulatory assets of $810 million (after-tax), the loss on the early
retirement of Zion nuclear generating station of $523 million (after-tax)
and the positive impact of a one-time cumulative effect for a change in
accounting principle for revenue recognition of $197 million (after-tax).
(3) Includes an extraordinary loss related to the early redemption of long-
term debt of $20 million (after-tax).

Cash Dividends Paid per Share of Common Stock

1999 (by quarters) 1998 (by quarters)
------------------------- -------------------------
Fourth Third Second First Fourth Third Second First
------ ----- ------ ----- ------ ----- ------ -----

Cash dividends paid......... 40c 40c 40c 40c 40c 40c 40c 40c

1999 Consolidated Revenues and Sales

Electric % Increase/ % %
Operating (Decrease) Kilowatthour Increase/ Increase/
Revenues Over Sales (Decrease) (Decrease)
(Thousands) 1998 (Millions) Over 1998 Customers Over 1998
----------- ----------- ------------ ---------- --------- ----------

Residential............. $2,205,066 (12.8)% 23,716 (0.9)% 3,145,712 0.4%
Small commercial and
industrial............. 2,196,069 0.4 29,125 7.9 309,828 1.9
Large commercial and
industrial............. 1,290,926 (8.2) 22,474 (6.5) 1,783 (0.6)
Public authorities...... 463,482 (9.2) 7,778 4.1 18,194 29.5
Electric railroads...... 20,317 (34.5) 408 (5.9) 2 --
---------- ------- ---------
Ultimate consumers..... $6,175,860 (7.3) 83,501 0.7 3,475,519 0.6
Sales for resale........ 490,938 40.3 19,487 58.9 58 (6.5)
Other revenues.......... 100,094 36.4 -- -- -- --
---------- ------- ---------
Total.................. $6,766,892 (4.5) 102,988 8.2 3,475,577 0.6
========== ======= =========

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Changes in the Electric Utility Industry

Unicom and its predominant business, electric energy generation,
transmission and distribution, are in a period of fundamental change. These
changes are attributable to changes in technology and regulation. Federal law
and regulations have been amended to provide for open transmission system
access, and various states, including Illinois, are considering, or have
adopted, new regulatory structures to allow access by some or all customers to
energy suppliers, in addition to the local utility.

Electric Utility Industry. The electric utility industry historically has
consisted of vertically integrated companies which combine generation,
transmission and distribution assets; serve customers within relatively
defined service territories; and operate under extensive regulation with
respect to rates, operations and other matters. Utilities have operated under
a regulatory compact with the state, with a statutory obligation to serve all
of the electricity needs within their service territory in a nondiscriminatory
manner. Historically, investment and operating decisions have been made based
upon the utilities' respective assessment of the current and projected needs
of their customers. In view of this obligation, regulation has focused on
investment and operating costs, and rates have been based on recovery of some
or all of such prudently incurred costs plus a return on invested capital.
Such rate regulation, and the ability of utilities to recover investment and
other costs through rates, have provided the basis for recording certain costs
as regulatory assets. These assets represent costs which are allocated over
future periods reflecting related regulatory treatment, rather than expensed
in the current period.

Federal Regulation. The Federal Energy Policy Act of 1992, among other
things, empowered the FERC to introduce a greater level of competition into
the wholesale marketplace for electric energy. Under FERC Order No. 888,
utilities are required to file open access tariffs with regard to their
transmission systems. These tariffs set forth the terms, including prices,
under which other parties and the utility's wholesale marketing function may
use the utility's transmission system. ComEd has an approved open access
tariff with the FERC. A companion FERC rule, Order No. 889, requires the
separation of the transmission operations and wholesale marketing functions so
as to ensure that unaffiliated third parties have access to the same
information as to system availability and other requirements. The FERC Order
further requires utilities to operate an electronic bulletin board to make
transmission price and access data available to all potential users. A key
feature of FERC Order No. 888 is that it contemplates full recovery of a
utility's costs "stranded" by competition. These costs are "stranded" or
"strandable" to the extent market-based rates would be insufficient to allow
for their full recovery. To recover stranded costs, the utility must show that
it had a reasonable expectation that it would continue to serve the customer
in question under its regulatory compact. In addition, some governmental
entities, such as cities, may elect to "municipalize" a utility's distribution
facilities through condemnation proceedings. Such municipalities would then be
able to purchase electric power on a wholesale basis and resell it to
customers over the newly acquired facilities. The FERC Order provides for the
recovery of a utility's investment stranded by municipalization.

The 1997 Act. In December 1997, the Governor of Illinois signed into law the
1997 Act, which established a phased process to introduce competition into the
electric industry in Illinois under a less regulated structure. The 1997 Act
was amended in June 1999.

As a result of the 1997 Act and FERC rules, prices for the supply of
electric energy are expected to change from cost-based, regulated rates to
rates determined by competitive market forces. Accordingly, the 1997 Act
provides for, among other things, gradual customer access to other electric
suppliers or a power purchase option which allows the purchase of electric
energy from ComEd at market based prices, and the collection of a CTC from
customers who choose to purchase electric

energy from a RES or elect the power purchase option during a transition
period that extends through 2006. Effective October 1, 1999, the CTC was
established in accordance with a formula defined in the 1997 Act. The CTC,
which is applied on a cents per kilowatthour basis, considers the revenue
which would have been collected from a customer under tariffed rates, reduced
by the revenue the utility will receive for providing delivery services to the
customer, the market price for electricity and a defined mitigation factor,
which represents the utility's opportunity to develop new revenue sources and
achieve cost savings. The CTC allows ComEd to recover some of its costs which
might otherwise be unrecoverable under market-based rates. Nonetheless, ComEd
will need to take steps to address the portion of such costs which are not
recoverable through the CTC. Such steps may include cost control efforts,
developing new sources of revenue and asset dispositions. See "Response to
Regulatory Changes" and "Fossil Plant Sale" below for additional information.

On October 1, 1999, more than 41,000 non-residential customers became
eligible to choose a new electric supplier or elect the purchase power option.
The remainder of the non-residential customers will become eligible to choose
an electric supplier or the purchase power option between June 1 and December
31, 2000. As of December 31, 1999, over 4,700 non-residential customers,
representing approximately ten percent of ComEd's 1998 retail kilowatthour
sales, elected to receive their electric energy from a RES or chose the
purchase power option. As a result of the collection of CTC's from such
customers, ComEd does not expect these elections to have a material effect on
its results of operations in the near term.

Utilities are required to continue to offer delivery services, including the
transmission and distribution of electric energy, such that customers who
select a RES can receive electric energy from that supplier using existing
transmission and distribution facilities. Such services will continue to be
offered under cost-based, regulated rates. The ICC issued orders in August and
September approving, with modifications, ComEd's delivery service tariffs.

The 1997 Act committed ComEd to spend at least $2 billion during the period
1999 through 2004 on transmission and distribution facilities outside of the
City and to contribute $250 million to an environmental trust, as a result of
the closing of the fossil plant sale.

The 1997 Act also provides for a 15% residential base rate reduction which
became effective August 1, 1998 and an additional 5% residential base rate
reduction in October 2001. ComEd's operating revenues were reduced by
approximately $170 million in 1998 due to the 15% residential base rate
reduction. The 15% rate reduction further reduced ComEd's operating revenues
by approximately $226 million in 1999, compared to 1998 rate levels.

Notwithstanding the rate reductions and subject to certain earnings tests, a
rate freeze will generally be in effect until at least January 1, 2005. During
this period, utilities may reorganize, sell or assign assets, retire or remove
plants from service, and accelerate depreciation or amortization of assets
with limited ICC regulatory review. A utility may request a rate increase
during the rate freeze period only when necessary to ensure the utility's
financial viability, but not before January 1, 2000. Under the earnings
provision of the 1997 Act, if the earned return on common equity of a utility
during this period exceeds an established threshold, one-half of the excess
earnings must be refunded to customers. The threshold rate of return on common
equity for ComEd is based on the 30-Year Treasury Bond rate, plus 5.5% in the
years 1998 and 1999, and plus 8.5% in the years 2000 through 2004. The
utility's earned return on common equity and the threshold return on common
equity are each calculated on a two-year average basis. The earnings sharing
provision is applicable only to ComEd's earnings. In accordance with the
provisions of the 1997 Act, increased amortization of regulatory assets may be
recorded, thereby reducing the earned return on common equity, if earnings
otherwise would have exceeded the maximum allowable rate of return. The
potential for earnings sharing or increased amortization of regulatory assets
could limit earnings in future periods.

The 1997 Act also requires utilities to establish or join an ISO that will
independently manage and control utility transmission systems. Additionally,
the 1997 Act includes the leveling of certain regulatory requirements to
permit operational flexibility, the leveling of certain regulatory and tax
provisions as applied to various electric suppliers and a new, more stringent,
reliability requirement applicable to ComEd in the event of a major outage.
See "Response to Regulatory Changes" below for additional information.

See Notes 1, under "Regulatory Assets and Liabilities," and 3 of Notes to
Financial Statements for the accounting effects related to the 1997 Act.

Response to Regulatory Changes. Unicom has announced several business and
operational objectives designed to focus efforts in responding to the energy
market changes that are expected to develop from the 1997 Act. Among other
things, these strategic objectives call for a focus on operations to: (1)
provide a reliable supply of electricity as the competitive marketplace
evolves, (2) become a top quartile operator of competitive nuclear plants, (3)
deliver competitive earnings while restructuring the balance sheet to reflect
the realities of the marketplace, (4) expand the offering of energy-related
products and services, and (5) transform the corporate culture of Unicom.

Under the 1997 Act, the role of electric utilities in the supply and
delivery of energy is expected to change. Utilities, such as ComEd,
traditionally have been responsible for providing both adequate supply and
reliable delivery of electricity to customers within their service areas. In
the future, ComEd will continue to be obligated to provide a reliable delivery
system. However, ComEd will be obligated to supply electricity only to those
customers that it continues to serve under tariffs for electricity, but not
for those customers who choose to rely on the marketplace. Nonetheless, during
the transition period to a competitive supply marketplace, ComEd must provide
both an adequate supply and reliable delivery of electricity. Given the tight
capacity situation in ComEd's market, ComEd will be working to maintain its
available capacity, as well as working to assist in the development of a
competitive supply marketplace in Illinois.

ComEd has a significant commitment to, and investment in, nuclear generating
capacity. ComEd has installed a management team responsible for improving
nuclear operations. Such improvements are aimed at increasing levels of energy
generation, or capacity factors, at ComEd's nuclear generating units while
simultaneously improving ComEd's record of meeting NRC requirements and INPO
performance standards. Increased capacity factors generally result in lower
unit production costs and an improved opportunity to generate and sell
electricity in a competitive marketplace. Efforts are also being made to
control capital and operating costs through increased efficiencies, such as
the reduction of downtime and expenses associated with generating unit
maintenance and refueling outages.

ComEd also evaluated the recoverability of its generating plant investment
in 1998 as a result of the 1997 Act. See Note 1 of Notes to Financial
Statements, under "Regulatory Assets and Liabilities," for additional
information. Notwithstanding these efforts, there continues to be an ongoing
analysis of the ability of ComEd's various nuclear plants to generate and
deliver electric energy safely at

competitive prices in the competitive market for energy. Although short-term
system reliability and capacity constraints are likely to support the
continued operation of ComEd's nuclear units in the near term, expected longer
term developments are likely to make decision-making a function of economic
considerations. In the absence of short-term reliability and capacity
constraints, if a generating plant cannot produce power safely at a cost below
the competitive market price, it will be disposed of or closed. Plant
impairment adjustments have reduced the carrying value of nuclear plants, and
depreciation rates reflecting shortened estimated useful lives for certain
stations will reduce the carrying value further during the next several years.
However, closure of a plant could involve additional charges associated with
the write-off of its then-current carrying value. In January 1998, Unicom and
ComEd announced the decision to permanently cease nuclear generating
operations at ComEd's Zion Station. The related retirement resulted in a
charge in 1997 of $523 million (after-tax), reflecting both a write down of
the plant's carrying value and a liability for future closing costs. A portion
of Zion Station is used to provide voltage support in the transmission system
that serves ComEd's northern region. See Note 5 of Notes to Financial
Statements for additional information.

ComEd joined with other Midwestern utilities to design the Midwest ISO in
1998. These utilities have agreed to place their transmission systems under
the control of the Midwest ISO as soon as it achieves operational status in
2001. The Midwest ISO, a key element in accommodating the FERC-directed
restructuring of the electric industry, is expected to promote enhanced
reliability of the transmission system, equal access to the transmission
system, and foster increased competition. The Midwest ISO will control the
transmission system and will have authority to require modification in the
operation of generators connected to that system during system emergencies.
ComEd, like other utilities, will retain ownership of its transmission lines.
The formation of the Midwest ISO was approved by the FERC in September 1998,
subject to certain conditions. In December 1999, ComEd and other Midwestern
utilities filed a request with the FERC for a Declaratory Order approving a
different organizational template for the regional transmission grid. The
request seeks approval for the creation of for-profit transmission companies,
operating under the general oversight of the Midwest ISO, but fully separated
from their previous vertically integrated utilities. The request was approved,
in part, on February 24, 2000, subject to further development of its elements.

In the absence of an ISO-related power exchange, ComEd has also agreed to
cooperate with APX in the creation of the first electronic energy exchange in
Illinois. Initial products may include hourly, daily and weekly electricity
delivered to and from interconnection points on ComEd's transmission system,
and a standard system of credit and trading interfaces. Unicom has made a $3
million venture capital investment in APX in order to help finance its
expansion in Midwest. Neither ComEd nor Unicom will receive any voting rights.
The power exchange will be independently owned and managed by APX and will
allow wholesale and retail market participants to trade electricity
anonymously through an internet-based computerized system. ComEd will be
treated like any other market participant and will be an active participant in
the power exchange which opened in Illinois in the fourth quarter of 1999.

Merger Agreement. In September 1999, the Boards of Directors of Unicom and
PECO Energy Company (PECO) approved a merger of equals that will create a new
holding company, Exelon. The merger is conditioned, among other things, upon
the approvals of the shareholders of both companies and by various regulatory
bodies. The merger is currently expected to be completed in the latter half of
2000.

Under the merger agreement, as amended and restated in January 2000, PECO
and ComEd will become the principal utility subsidiaries of Exelon. This
result will be achieved by a mandatory exchange of the outstanding common
stock of PECO for common stock of Exelon, and a merger of Unicom with and into
Exelon wherein holders of Unicom common stock will receive 0.875 shares of
Exelon common stock plus $3.00 in cash for each of their shares of Unicom
common stock. The merger transaction will be accounted for as a purchase of
Unicom by PECO.

Prior to the consummation of the merger, Unicom expects to repurchase
approximately $1.0 billion of its outstanding common shares. These share
repurchases are in addition to the 26.3 million shares of Unicom common stock
that Unicom repurchased in January 2000 upon settlement of certain forward
purchase contracts. The $1.0 billion additional share repurchases will be
funded from available funds, including funds resulting from the fossil plant
sale.

The Amended and Restated Agreement and Plan of Exchange and Merger, dated as
of January 7, 2000, was filed on January 13, 2000 by Unicom with the SEC as an
exhibit to a Form 8-K, and reference to that filing is made for more detailed
information.

Fossil Plant Sale. In December, 1999, ComEd completed the sale of its fossil
generating assets to EME for a cash purchase price of $4.8 billion. The fossil
plant assets represent an aggregate generating capacity of approximately 9,772
megawatts.

Just prior to the consummation of the fossil plant sale, ComEd transferred
these assets to an affiliate, Unicom Investment. In consideration for the
transferred assets, Unicom Investment paid ComEd consideration totalling $4.8
billion in the form of a demand note in the amount of approximately $2.4
billion and an interest-bearing Note with a maturity of twelve years. Unicom
Investment immediately sold the fossil plant assets to EME, in consideration
of which Unicom Investment received $4.8 billion in cash from EME. Immediately
after its receipt of the cash payment from EME, Unicom Investment paid the
$2.4 billion aggregate principal due to ComEd under the demand note. Unicom
Investment will use the remainder of the cash received from EME to fund other
business opportunities, including the share repurchases. Of the cash received
by ComEd, $1.8 billion is expected to be used to pay the costs and taxes
associated with the fossil plant sale including ComEd's contribution of $250
million of the proceeds to an environmental trust as required by the 1997 Act.
The remainder of the demand note proceeds will be available to ComEd to fund,
among other things, transmission and distribution projects, nuclear generation
station projects, and environmental and other initiatives.

The sale produced an after-tax gain of approximately $1.6 billion, after
recognizing commitments associated with certain coal contracts ($350 million),
recognizing employee-related costs ($112 million) and contributing to the
environmental trust. The coal contract costs include the amortization of the
remaining balance of ComEd's regulatory asset for unrecovered coal reserves of
$178 million and the recognition of $172 million of settlement payments
related to the above-market portion of coal purchase commitments ComEd
assigned to EME at market value upon completion of the fossil plant sale. The
severance costs included pension and post-retirement welfare benefit
curtailment and special termination benefit costs of $51 million and
transition, separation and retention payments of $61 million. A total of 1,730
fossil station employee positions were eliminated upon completion of the
fossil plant sale on December 15, 1999. As of December 31, 1999, 1,590 of the
employees whose positions were eliminated had been terminated and 140 affected
employees were in a transition program which generally extends 60 days from
the date of the fossil plant sale. Consistent with the provisions of the 1997
Act, the (pre-tax) gain on the sale of $2.587 billion resulted in a regulatory
liability, which was used to recover regulatory assets. Therefore, the gain on
the sale, excluding $43 million of amortization of investment tax credits, was
recorded as a regulatory liability in the amount of $2.544 billion and
amortized in the fourth quarter of 1999. The amortization of the regulatory
liability and additional regulatory asset amortization of $2.456 billion are
reflected in depreciation and amortization expense on ComEd's Statement of
Consolidated Operations and resulted in a net reduction to depreciation and
amortization expense of $88 million.

As part of the sale transaction, ComEd entered into transitional, limited
term power purchase agreements with the buyer. Such purchase power agreements
will increase ComEd's purchased power costs.

Liquidity and Capital Resources

UTILITY OPERATIONS

Construction Program. ComEd has a construction program for the year 2000
which consists principally of improvements to its existing nuclear production,
transmission and distribution facilities. The program, as currently approved
by ComEd, includes the following estimated expenditures (excluding nuclear
fuel expenditures of approximately $260 million).

2000
----

Nuclear................................................................ $215
Transmission and Distribution.......................................... 536
General................................................................ 146
----
$897
====

In response to several outages in the summer of 1999, ComEd conducted an
extensive evaluation of the reliability of its transmission and distribution
systems. The construction program above reflects a preliminary evaluation of
improvements necessary to improve reliability of ComEd's transmission and
distribution systems. ComEd is currently evaluating its construction program
for the years 2000, 2001 and 2002. The final results of this planning process
cannot be determined at this time.

ComEd's forecasts of peak load for its traditional service territory
indicate a need for additional resources to meet demand, through generating
capacity, equivalent purchased power and/or the development of additional
demand-side management resources, in 2000 and each year thereafter for the
foreseeable future. ComEd believes that adequate resources, including cost-
effective demand-side management resources, non-utility generation resources,
power purchases and generation resources from ARES, can be obtained in
sufficient quantities to meet such forecasted needs. See "Unregulated
Operations," subcaption "Construction Program" below, for additional
information.

Purchase commitments for ComEd, principally related to construction, nuclear
fuel and coal in support of certain power purchase agreements approximated
$670 million at December 31, 1999. In addition, ComEd's estimated commitments
for expected capacity payments and fixed charges related to certain power
purchase agreements were as follows:

Commitments(1)
Period ($Millions)
------ --------------

2000............................................... $ 783
2001............................................... 698
2002............................................... 427
2003-2004.......................................... 540
2005-2012.......................................... 1,039
------------
$3,487
============

- --------
(1) Capacity payments may be adjusted based on certain conditions. No
estimate of future cost escalation has been made.

See "Changes in the Electric Utility Industry," subcaptions "The 1997 Act"
and "Fossil Plant Sale" above, for additional information.

Capital Resources. In December 1998, ComEd initiated the issuance of $3.4
billion of transitional trust notes through its SPEs, ComEd Funding and ComEd
Funding Trust. The proceeds from the transitional trust notes, net of
transaction costs, were, as required, used to redeem $1,101 million of long-
term debt and $607 million of preference stock in 1999 and reduce ComEd's
outstanding short-term debt by $500 million. In 1999, ComEd recorded an
extraordinary loss related to the early redemptions of such long-term debt,
which reduced net income on common stock by approximately

$28 million (after-tax). ComEd also recorded $12 million (after-tax) for
premiums paid in connection with the redemption of such preference stock. As
more fully described below, ComEd has repurchased approximately 26.3 million
shares of ComEd common stock using $924 million of the proceeds. The remaining
proceeds from the issuance of the transitional trust notes will be used for
the payment of fees and additional common stock repurchases.

In the fourth quarter of 1998, ComEd entered into a forward purchase
arrangement with Unicom for the repurchase of $200 million of ComEd common
stock. This contract, which was accounted for as an equity instrument as of
December 31, 1998, was settled on a net cash basis in February 1999.

During 1999, ComEd also entered into forward purchase arrangements with
Unicom for the repurchase of approximately 26.3 million shares of ComEd common
stock. The repurchase arrangements were settled in January 2000 on a physical
basis. The terms of the repurchase arrangements between ComEd and Unicom are
identical to the terms of Unicom's repurchase arrangements with financial
institutions. The repurchase arrangements between ComEd and Unicom are
expected to be settled on the same basis Unicom settles its repurchase
arrangements with the financial institutions. Effective January 2000, the
share repurchases will reduce ComEd's outstanding shares and common stock
equity. Prior to settlement, the repurchase arrangements were recorded as a
receivable on the Consolidated Balance Sheets based on the aggregate market
value of the shares deliverable under the arrangements. In 1999, net
unrealized losses of $44 million (after-tax) were recorded related to the
arrangements. The settlement of the arrangements in January 2000 resulted in a
gain of $113 million (after-tax). See Note 24 of Notes to Financial Statements
for additional information.

See Notes 3 and 7 of Notes to Financial Statements for additional
information regarding the redemptions and repurchases of debt and equity.

ComEd forecasts that internal sources will provide approximately three-
fourths of the funds required for ComEd's 2000 construction program and other
capital requirements, including nuclear fuel expenditures, contributions to
nuclear decommissioning funds, sinking fund obligations and scheduled debt
maturities. See Notes 10 and 12 of Notes to Financial Statements for the
summaries of the annual sinking fund requirements and scheduled maturities for
ComEd preference stock and long-term debt, respectively.

See "Changes in the Electric Utility Industry," subcaption "Fossil Plant
Sale" above, for a description of ComEd's planned uses of the fossil plant
sale proceeds.

The type and amount of external financing will depend on financial market
conditions and the needs and capital structure of ComEd at the time of such
financing. ComEd had total unused bank lines of credit of $800 million at
December 31, 1999, which may be borrowed at various interest rates. Of that
amount, $500 million expires on December 15, 2000 and $300 million expires on
December 17, 2002. The interest rate is set at the time of a borrowing and is
based on several floating rate bank indices plus a spread, which is dependent
upon the credit ratings of ComEd's outstanding first mortgage bonds or on a
prime interest rate. See Note 13 of Notes to Financial Statements for
additional information concerning lines of credit. See the Statements of
Consolidated Cash Flows for the construction expenditures and cash flow from
operating activities for the years 1999, 1998 and 1997. Cash flows from
operating activities were adversely affected in 1998 and positively affected
in 1999 as a result of delayed billings related to the transition to a new
customer information and billing system beginning in July 1998. See Note 1 of
Notes to Financial Statements, under "Customer Receivables and Revenues", for
additional information.

As of January 31, 2000, ComEd has an effective "shelf" registration
statement with the SEC for the future sale of up to an additional $280 million
of debt securities and cumulative preference stock for general corporate
purposes of ComEd, including the discharge or refund of other outstanding
securities.

ComEd's securities and other securities guaranteed by ComEd are currently
rated by three principal securities rating agencies as follows:

Standard Duff &
Moody's & Poor's Phelps
------- -------- ------

First mortgage and secured pollution control bonds..... Baa1 BBB+ A-
Publicly-held debentures and unsecured pollution con-
trol obligations...................................... Baa2 BBB BBB+
Convertible preferred stock............................ baa3 BBB- BBB
Preference stock....................................... Baa2 BBB- BBB
Trust Securities....................................... baa3 BBB- BBB
Commercial paper....................................... P-2 A-2 D-1

ComEd Funding Trust's securities are currently rated by three principal
securities rating agencies as follows:

Standard Duff &
Moody's & Poor's Phelps
------- -------- ------

Transitional trust notes.......................... Aaa AAA AAA

All three agencies raised their ratings for ComEd in 1999: Duff & Phelps in
December; Moody's in September; and S&P in June.

Capital Structure. ComEd's ratio of long-term debt to total capitalization
has decreased to 55.2% at December 31, 1999 from 58.0% at December 31, 1998.
As of December 31, 1999 and 1998, $852 million and $580 million, respectively,
of retained earnings had been appropriated for ComEd's future dividend
payments.

Year 2000 Conversion. ComEd completed a successful transition to the Year
2000 as systems performed without interruption during the rollover from
December 31, 1999 to January 1, 2000. All ComEd Year 2000 Command Centers were
activated during the critical rollover period.

In addition to 12/31/99, other key Year 2000 dates that ComEd has completed
without Year 2000 problems are 1/1/99, 4/9/99 (99th day of 1999), 8/21/99
(Global Positioning System rollover) and 9/9/99. The ComEd Year 2000 Team will
continue with minor preparations for one remaining Year 2000 critical date.
The Year 2000 is a leap year; so the rollover from 2/28/00 to 2/29/00 is
another transition ComEd prepared for in its Corporate-wide Year 2000 Program.

ComEd depends upon third parties, including customers, suppliers, government
agencies and financial institutions, to reliably deliver its products and
services. ComEd completed an analysis of the Year 2000 readiness programs of
its critical vendors and obtained Year 2000 warranties in certain new
contracts and licenses. ComEd also has introduced protocols for assuring that
software and embedded systems remain Year 2000 ready on a continuing basis.
Even though mission critical products and services of the ComEd supply chain
are Year 2000 ready, contingency plans were developed to prevent or mitigate
interruptions caused by ComEd suppliers.

As of December 31, 1999, approximately $37.4 million has been expended for
external labor, hardware and software costs, and for the costs of ComEd
employees who are dedicated full-time to the Year 2000 project. All of such
costs were expensed as incurred. The foregoing amounts do not include the cost
of new software applications installed as a result of strategic replacement
projects. Such replacement projects were not accelerated because of Year 2000
issues. ComEd expects to incur minimal expenditures for final project wrap-up
activities.

ComEd's Year 2000 project focused on those facets of its business that are
required to deliver reliable electric service. The project encompassed the
computer systems that support core business functions, such as customer
information and billing, finance, procurement, supply and personnel, as

well as the components of metering, transmission, distribution and generation
support. The project also focused on embedded systems, instrumentation and
control systems in facilities and plants. In accordance with business plans,
ComEd has replaced certain of its financial, human resources and payroll and
customer service and billing software with new software that is Year 2000
ready and that addresses ComEd's strategic needs as it enters a less regulated
environment.

Market Risks. ComEd is exposed to market risk due to changes in interest
rates and the market price for electricity. Exposure for interest rate changes
relates to its long-term debt and preferred equity obligations. Exposure to
electricity market price risk relates to forward activities taken to manage
effectively the supply of, and demand for, the electric generation capability
of ComEd's generating plants. ComEd has implemented an integrated risk
management framework to manage such risks. A corporate Risk Management
Committee defines the Company's risk tolerance and establishes appropriate
position limits, and corporate policies and procedures have been implemented
to minimize the exposure to market risk. ComEd does not currently utilize
derivative commodity or financial instruments for trading or speculative
purposes. See "Energy Risk Management Contracts" in Note 1 of Notes to
Financial Statements regarding the accounting for energy risk management
contracts.

Interest Rate Exposure. The table below provides the fair value and average
interest or fixed dividend rates of ComEd's outstanding debt and preferred
stock equity instruments as of December 31, 1999.

Expected Maturity Date Fair Value
ComEd and Subsidiary --------------------------------------------- as of
Companies (millions) 2000 2001 2002 2003 2004 Thereafter Total 12/31/99
- -------------------- ---- ---- ---- ---- ---- ---------- ------ ----------

Long-Term Debt--
Fixed Rate............. $ 382 $ 5 $ 305 $ 105 $ 237 $3,547 $4,581 $4,523
Average Interest Rate.. 6.72% 4.55% 7.92% 6.53% 7.52% 7.69%
Variable Rate.......... $ 92 $ 92 $ 92
Average Interest Rate.. 5.49%
Transitional Trust
Notes................. $ 350 $ 340 $ 340 $ 340 $ 340 $1,360 $3,070 $2,894
Average Interest Rate.. 5.31% 5.32% 5.38% 5.42% 5.44% 5.66%
Preferred and Preference
Stock--
Subject to Mandatory
Redemption............ $ 69 $ 69 $ 70
Average Dividend Rate.. 6.93%
Not Subject to Manda-
tory Redemption....... $ 2 $ 2 $ 1
Average Dividend Rate.. 4.48%
Trust Securities........ $ 350 $ 350 $ 339
Average Dividend Rate.. 8.49%

Market Price Exposure. ComEd's energy purchases from other suppliers have
increased as a result of reductions in owned generating capability and system
load growth. The market price of energy is subject to price volatility
associated with changes in supply and demand in the electric supply markets.
In the normal course of business, ComEd utilizes contracts for the forward
sale and purchase of energy to assure system reliability and manage
effectively the utilization of its available generating capability. ComEd also
utilizes put and call option contracts and energy swap arrangements to limit
the market price risk associated with the forward commodity contracts. The
estimated December 31, 1999 fair value of the forward contracts, including
options, for the purchase and sale of energy for the years 2000 through 2007,
was approximately $(70) million. The estimated fair value is based on the
estimated net settlement value of the contracts derived from forward price
curves and market quotes, discounted at a 10% rate. A 10% increase in the
forward price of electricity would decrease the December 31, 1999 fair value
of the forward energy contracts for the years 2000-2007 by approximately $120
million, of which approximately $65 million is for contracts for the period
2000-2002. Likewise, a 10% decrease would increase the fair value of the
energy contracts by $120 million. Notwithstanding these price risk management
activities, an unexpected loss of generating capability or reduction in demand
could increase ComEd's exposure to market price risks and could have a
material adverse effect on operating results.

Regulation

ComEd and Indiana Company are subject to federal and state regulation in the
conduct of their respective businesses, including the operations of Cotter.
Such regulation includes rates, securities issuance, nuclear operations,
environmental and other matters. Particularly in the cases of nuclear
operations and environmental matters, such regulation can and does affect
operational and capital expenditures.

Rate Matters. See "Changes in the Electric Utility Industry," subcaption
"The 1997 Act" above, for information regarding the effect of the 1997 Act on
rate matters.

Nuclear Matters. Nuclear operations have been, and remain, an important
focus of ComEd. ComEd operates five nuclear plants--Braidwood, Byron, Dresden,
LaSalle and Quad Cities Stations, and is committed to safe, reliable and
efficient operation. See "Changes in the Electric Utility Industry,"
subcaption "Response to Regulatory Changes" above, for information regarding
ComEd's permanent cessation of nuclear generation operations at its Zion
Station.

On May 6, 1999, ComEd's LaSalle Station was officially removed from the
NRC's listing of plants that require increased regulatory scrutiny. LaSalle
Station had been on this list since January 1997. Concurrent with the LaSalle
Station action, the NRC announced the formal removal of the Quad Cities
Station from its list of plants with declining performance trends. Quad Cities
Station had been on the declining trend list since January 1998. With these
actions, all of ComEd's nuclear plants are now placed in the NRC's "routine
oversight" category. This represents the first time since 1990 that none of
ComEd's nuclear generating units are under special NRC oversight.

The NRC and representatives of ComEd's management have met, and will
continue to meet periodically as part of the NRC's normal oversight process,
to discuss the overall performance of the ComEd nuclear program.

Based on ComEd's most recent study, decommissioning costs are estimated to
be $5.7 billion in current-year (2000) dollars, including a contingency
allowance. This estimate includes $617 million of non-radiological costs,
which are included in ComEd's proposed rider for recovery, as discussed below.
ComEd's decommissioning cost expenditures at the end of the units' operating
lives are estimated to total approximately $13.8 billion. These expenditures
are expected to occur primarily during the period from 2007 through 2034. All
such costs are expected to be funded by the external decommissioning trusts,
which ComEd established in compliance with Illinois law and into which ComEd
has been making annual contributions. Future decommissioning cost estimates
may be significantly affected by the adoption of or changes to NRC
regulations, as well as changes in the assumptions used in making such
estimates, including changes in technology, available alternatives for the
disposal of nuclear waste and inflation.

Since 1995, ComEd has collected decommissioning costs from its ratepayers in
conjunction with a rider to its tariffs. The rider allows annual adjustments
to decommissioning cost collections outside the context of a traditional rate
proceeding and will continue under the 1997 Act. The current estimated
decommissioning costs include a contingency allowance, but, except at Dresden
Unit 1, exclude amounts for alternative spent fuel storage installations,
which may be necessary to store spent fuel during the period beginning at the
end of the NRC license lives of the plants to the date when the DOE accepts
the spent fuel for permanent storage. Contingency allowances used in
decommissioning cost estimates provide for currently unspecifiable costs that
are likely to occur after decommissioning begins and generally range from 20%
to 25% of the currently specifiable costs. Under its most recent annual rider,
filed with the ICC on February 26, 1999, ComEd has proposed to increase its
estimated annual decommissioning cost accrual from $84 million to $130
million. The proposed increase primarily reflects an increase in low-level
waste disposal cost escalation, the inclusion of $219 million in current-

year (2000) dollars for safety-related costs of maintaining Zion Station in a
mothballed condition until dismantlement begins, and the inclusion of non-
radiological costs in the decommissioning cost estimates for recovery under
the rider. See Note 1 of Notes to Financial Statements, under "Depreciation,
Amortization of Regulatory Assets and Liabilities, and Decommissioning," for
additional information regarding decommissioning costs.

Environmental Matters. ComEd is involved in administrative and legal
proceedings concerning air quality, water quality and other matters. The
outcome of these proceedings may require increases in future construction
expenditures and operating expenses and changes in operating procedures. See
Note 22 of Notes to Financial Statements for additional information.

Results of Operations

ComEd's operating results for the years 1999, 1998 and 1997 were as follows:

1999 1998 1997
-------- -------- ---------
(Thousands of Dollars)

Net Income (Loss) before Extraordinary Item and
Cumulative Effect of Change in Accounting
Principle........................................ $650,308 $594,206 $(160,138)
======== ======== =========
Net Income (Loss) on Common Stock................. $598,973 $537,322 $(834,259)
======== ======== =========

On Common Stock for the Year 1999. The increase in ComEd's net income in
1999 reflects, among other factors, increased energy sales, the fossil plant
sale, lower-than-expected closing costs for Zion nuclear station and improved
nuclear performance which resulted in lower fuel and purchased power costs.

Kilowatthour sales increased 8% for the year 1999, compared to 1998, driven
largely by a 59% increase in sales for resale. See "Operating Revenues" below
for additional information.

Fuel and purchased power costs decreased 14% in 1999, compared to 1998,
resulting from improved nuclear performance. See "Fuel Costs" and "Purchased
Power" below for additional information.

O&M expenses increased 3% for the year 1999, compared to the year 1998, as
discussed in "Operation and Maintenance Expenses" below.

Earnings for the year 1999 were positively impacted by the fossil plant
sale. Consistent with the provisions of the 1997 Act, the after-tax gain on
the fossil plant sale of $1.56 billion resulted in a regulatory liability.
Increased regulatory asset amortization amounted to $2.46 billion, before-tax,
as discussed in Note 5 of Notes to Financial Statements. A reduction in the
estimated liability for closing costs related to the Zion Station also
increased earnings by $16 million (after-tax). The earnings increase was also
partially offset by a net unrealized loss of $44 million (after-tax), related
to a forward share repurchase arrangements, a charge of $41 million (after-
tax) for an increase in the estimated liability for the remediation of former
MGP sites, extraordinary losses related to the early redemptions of long-term
debt, which reduced net income on common stock by $28 million (after-tax), and
premiums of $12 million (after-tax) paid in connection with the redemption of
preference stock. ComEd's net income for the year 1999 represents the maximum
return on average common equity allowable for the year before triggering the
earnings sharings provision of the 1997 Act.

Net Income on Common Stock for the Year 1998. The increase in earnings for
1998 was primarily due to increased kilowatthour sales, which increased both
operating revenues and energy costs, reduced O&M expenses, lower depreciation
and amortization expenses, lower than expected Zion Station closing costs,
gains on the sales of certain assets and a lower effective income tax rate. In
December 1997, ComEd discontinued regulatory accounting practices for the
generation portion of its business and recorded other non-recurring accounting
charges as a result of the 1997 Act, which primarily contributed to the loss
for 1997. The 1997 operating results also include the write-off for the
closure of Zion nuclear generating station, partially offset by a cumulative
one-time positive impact of $197 million (after-tax) for a change in
accounting method for revenue recognition to record ComEd's revenues
associated with service which has been provided to customers but has not yet
been billed at the end of each accounting period, retroactive to January 1,
1997.

Fuel and purchased power costs increased 10% in 1998, compared to the year
1997, reflecting increased demand for electricity, as well as the effects of
higher purchased power prices. See "Purchased Power" below for additional
information.

O&M expenses decreased 7% for the year 1998, compared to the year 1997, as
discussed in "Operation and Maintenance Expenses" below.

The year 1998 includes a 6% decrease in depreciation and amortization
expenses, as discussed in "Depreciation and Amortization" below, and a $15
million (after-tax) reduction in the estimated liability for closing costs
related to the Zion nuclear generating station, both of which increased
operating results.

Also, 1998 operating results reflect realized gains on the sales of certain
assets of $31 million (after-tax). The sold assets consisted principally of
surplus inventory of emission allowances.

Net Loss on Common Stock for the Year 1997. ComEd's kilowatthour sales,
including sales to wholesale customers, increased 5% during 1997, compared to
1996, as discussed below. In 1997, O&M expenses increased 12%, as discussed
below.

Also, 1997 operating results were reduced by $336 million for increased fuel
and purchased power costs, as discussed below. In addition, a 4% increase in
depreciation expense, primarily due to an increase in certain nuclear plant
depreciation, resulted in a charge of $23 million (after-tax).

ComEd discontinued regulatory accounting practices for the generation
portion of its business in the fourth quarter of 1997 due to the expected
transition of electric generation services to market-based pricing as a result
of the 1997 Act. Accordingly, ComEd's generation-related net regulatory
assets, which represent assets and liabilities properly recorded under
regulatory accounting practices but which would not be recorded under GAAP for
non-regulated entities, were written off, resulting in an extraordinary charge
in 1997 of $810 million (after-tax).

In addition, pursuant to an option contained in the 1997 Act, ComEd filed a
tariff in December 1997 to eliminate its FAC. Under ComEd's regulated rates,
the FAC provided for the recovery of changes in fossil and nuclear fuel costs
and the energy portion of purchased power costs, compared to the fuel and
purchased energy costs included in ComEd's base rates. The 1997 Act provided
that upon the elimination of the FAC, ComEd would be required to refund to
customers the net FAC charges billed during the calendar year 1997. Net FAC
charges billed by ComEd during the year 1997 were $25 million (after tax).
These costs, as well as deferred, underrecovered energy costs of $19 million
(after-tax) which ComEd would have been entitled to recover if the FAC had
remained in effect, were recorded as a charge to operating results in the
fourth quarter of 1997. Elimination of the FAC could increase volatility in
future earnings due to changes in fuel and purchased power costs.

Additionally, the elimination of the FAC and the transition to market-based
pricing for generation-related costs required ComEd to write-off its
investment in uranium-related properties. An impairment study indicated the
expected incremental costs of mining and milling uranium at those properties
would exceed the expected market price for uranium. These costs, which were
previously recoverable through the FAC, are not expected to be recoverable in
a competitive market. A write-off of uranium-related properties to reflect
market value resulted in a charge of $60 million (after-tax) in December 1997.

Partially offsetting the charges to operations for 1997 was a change in the
accounting method for revenue recognition to record ComEd's revenues
associated with service which has been provided to customers but has not yet
been billed at the end of each accounting period, retroactive to January 1,
1997. This change in accounting method had a one-time cumulative positive
impact for years prior to 1997 of $197 million (after-tax).

The year 1997 also included a charge of $523 million (after-tax) reflecting
the write-off of the unrecoverable portion of the cost of ComEd's Zion Station
plant and inventories, and a liability for future closing costs, resulting
from the decision in January 1998 to permanently cease nuclear generation
operations at Zion Station.

Operating Revenues. ComEd's electric operating revenues reflect revenues
from sales to ultimate consumers (including residential, commercial and
industrial customers within its service territory) and revenues from sales for
resale (i.e., sales to wholesale customers, principally other electric
utilities). Operating revenues are affected by kilowatthour sales and rate
levels. Kilowatthour sales, in turn, are affected by weather, the level of
economic activity within ComEd's service area, and off-system or wholesale
sales to other utilities. Off-system sales are affected by a number of
factors, including nuclear generating station availability and performance.
Revenues have also been reduced by a change in presentation for certain
utility taxes. The 1997 Act changed the nature of several state and municipal
taxes that are collected through customer billings. Before August 1998, the
utility taxes were assessed against the utility. Effective August 1998, the
utility taxes are assessed on the electric consumer rather than the utility.
Accordingly, ComEd records the collections as liabilities and no longer
records the taxes collected through billings as revenues and tax expense. The
change in presentation for utility taxes did not have an effect on results of
operations. See Note 1 of Notes to Financial Statements, under "Use of
Estimates" and "Customer Receivables and Revenues", for additional
information.

Operating revenues decreased $322 million in 1999, compared to 1998, due in
part to the approximately $226 million impact of the 15% residential base rate
reduction that took effect August 1, 1998. Operating revenues for 1999 also
were reduced by approximately $174 million, compared to 1998, due to the
change in presentation for certain state and municipal taxes. Kilowatthour
sales increased 8%, primarily due to sales for resale. In 1998, operating
revenues increased $15 million, compared to the year 1997, primarily due to
warmer summer weather experienced in 1998 and continued economic growth in
ComEd's service territory, partially offset by a 15% residential rate
reduction ($170 million) and reserves for various federal and state litigation
matters ($35 million). Operating revenues for 1998 were reduced by
approximately $110 million, compared to 1997, due to the change in
presentation for certain state and municipal taxes. During 1997, electric
operating revenues increased $139 million, primarily due to a 29% increase in
kilowatthour sales to wholesale customers. Kilowatthour sales to ultimate
consumers during 1997 increased 1%, compared to 1996, reflecting continued
economic growth in ComEd's service territory. Operating revenues in 1997 were
reduced by the provision for revenue refunds of $45 million, including revenue
taxes, related to the elimination of the FAC.

Fuel Costs. Changes in fuel expense for the years 1999, 1998 and 1997
primarily resulted from changes in the average cost of fuel consumed, changes
in the mix of fuel sources of electric energy generated and changes in net
generation of electric energy. Fuel mix is determined primarily by system
load, the costs of fuel consumed and the availability of nuclear generating
units. The cost of fuel

consumed, net generation of electric energy and fuel sources of kilowatthour
generation were as follows:

1999 1998 1997
--------------- ----------------- -----------------
Cost Cost Cost
Fuel per per per
Costs KWh Fuel Costs KWh Fuel Costs KWh
-------- ----- ---------- ----- ---------- -----
(000's) (000's) (000's)

Cost of fuel consumed:
Nuclear..................................... $380,489 0.52c $ 286,619 0.53c $ 263,163 0.54c
Coal........................................ 525,896 2.26 626,442 2.51 810,144 2.44
Oil......................................... 7,854 5.43 20,822 6.26 17,829 5.50
Natural gas................................. 83,023 3.22 123,644 3.04 113,082 3.50
-------- ---------- ----------
Total/Average costs all fuels............... $997,262 1.00c $1,057,527 1.27c $1,204,218 1.40c
======== ========== ==========

Net generation of electric energy (millions of
kilowatthours)............................... 99,684 83,302 85,861

Fuel sources of kilowatthour generation:
Nuclear..................................... 74% 65% 57%
Coal........................................ 23 30 39
Oil......................................... -- -- --
Natural gas................................. 3 5 4
--- --- ---
100% 100% 100%
=== === ===

The increases in net generation of electric energy and nuclear generation
for 1999, compared to the prior years, are primarily due to significant
improvement in the performance of ComEd's nuclear fleet. The overall nuclear
capacity factor was 89% for 1999, compared to 66% for 1998 and 49% for 1997.
The decreases in the net generation of electric energy for 1998, compared to
1997, are primarily due to the sales of State Line and Kincaid Station in
December 1997 and February 1998, respectively, and lower nuclear plant
availability in 1997. The decrease in net generation of electric energy from
1997 to 1998 due to the sale of State Line Station was 2,378,413 megawatthours
and the decrease from 1997 to 1998 due to the sale of Kincaid Station was
2,357,488 megawatthours. See "Regulation," subcaption "Nuclear Matters" above,
for information regarding ComEd's nuclear generating stations.

Purchased Power. Amounts of purchased power are primarily affected by system
load, the availability of ComEd's generating units and the availability and
cost of power from other utilities. Purchased power decreased $196 million and
increased $348 million in 1999 and 1998, compared to 1998 and 1997,
respectively. The decrease in 1999 was due to the improved nuclear and fossil
operating performance which reduced the need to purchase power from other
parties. The increase in purchased power costs in 1998 reflects the effects of
an extraordinary combination of heat, storms and equipment problems
experienced throughout the Midwest in late June 1998 which resulted in
unprecedented purchased power price levels. See "Regulation," subcaption
"Nuclear Matters" above, for information regarding ComEd's nuclear generating
stations. For additional information concerning ComEd's purchased power
commitments, see "Liquidity and Capital Resources," subcaption "UTILITY
OPERATIONS--Construction Program," above and Note 22 of Notes to Financial
Statements.

The number and average cost of kilowatthours purchased were as follows:

1999 1998 1997
------ ------ ------

Kilowatthours (millions)............................. 11,561 20,704 16,672
Cost per kilowatthour................................ 4.77c 3.84c 2.40c

The market price for electricity is subject to price volatility associated
with changes in supply and demand in the electric supply markets. ComEd
utilizes energy put and call option contracts and energy swap arrangements to
limit market price risk associated with forward commodity contracts. See
"Liquidity and Capital Resources," subcaption "UTILITY OPERATIONS--Market
Risks" above, for additional information.

Operation and Maintenance Expenses. O&M expenses include the expenses
associated with operating and maintaining ComEd's generation, transmission and
distribution assets, as well as administrative overhead and support. Given the
variety of expense categories covered, there are a number of factors which
affect the level of such expenses within any given period. Two major
components of such expenses, however, are the costs associated with operating
and maintaining ComEd's generating facilities. Generating station expenses are
affected by the cost of materials, regulatory requirements and expectations,
the age of facilities and cost control efforts.

During the three years presented in the financial statements, the aggregate
level of O&M expenses increased 3% in 1999 compared to 1998, decreased 7% in
1998 compared to 1997, and increased 12% in 1997 compared to 1996.

O&M expenses associated with nuclear generating stations decreased $75
million and $172 million and increased $122 million for the years 1999, 1998
and 1997, respectively. The decrease in 1999 was due to shorter refueling
outages and fewer forced outages. The decrease in 1998 was principally due to
the permanent cessation of nuclear generation operations at Zion Station. The
increase in 1997 was a result of increased levels of activities associated
with the repair, replacement and improvement of nuclear generating facility
equipment. See "Changes in the Electric Utility Industry," subcaption
"Response to Regulatory Changes" above, regarding the permanent cessation of
nuclear operations at Zion Station.

O&M expenses associated with fossil generating stations decreased $42
million, $5 million and increased $31 million for the years 1999, 1998 and
1997, respectively. The decrease in 1999 was primarily due to reductions in
plant refurbishment and maintenance costs. The decrease related to fossil
generating stations in 1998 was primarily due to the sales of State Line and
Kincaid Stations in December 1997 and February 1998, respectively, ($25
million) partially offset by plant refurbishment costs ($19 million).

O&M expenses associated with ComEd's transmission and distribution system
increased $77 million, $32 million and $15 million, for the years 1999, 1998
and 1997, respectively. The increase in 1999 was primarily due to an increase
in tree trimming expenses and the costs associated with ComEd's extensive
evaluation of the reliability of its transmission and distribution system
following outages which occurred during the summer of 1999. The increase also
reflects restoration and other outage-related costs associated with the
summer heat wave. The 1998 and 1997 increases are primarily due to increased
emergency restoration of electric service, higher maintenance expenses and
tree trimming costs. O&M expenses associated with customer-related activities
increased $40 million, $19 million and $11 million for the years 1999, 1998
and 1997, respectively. The increase in 1999 was primarily due to the ongoing
implementation of a new customer information and billing system.

O&M expenses for the year 1999 reflect an increase of $68 million in the
estimated environmental liability for the remediation of former manufactured
gas plant sites.

O&M expenses also include employee benefits expenses. Since 1995, ComEd has
reduced the size of its workforce by offering incentives for employees to
leave the company voluntarily. Such incentives included both current payments
and earlier eligibility for postretirement health care benefits, in addition
to certain other employee-related costs, resulting in charges of $10 million,
$48 million and $39 million for the years 1999, 1998 and 1997, respectively.

Other employee benefits expenses, excluding the effects of employee
separation plans and certain other employee-related costs increased
$16 million and $41 million and decreased $11 million for the years 1999, 1998
and 1997, respectively. The increase for the year 1999 was primarily due to
higher accruals for incentive compensation. The increase in 1998 was primarily
due to accruals for estimated incentive compensation recorded in 1998. The
decrease in 1997 was primarily due to a reduction in medical costs for active
employees.

O&M expenses included a $25 million charge for the year 1999 as a result of
a franchise related settlement agreement with the City.

O&M expenses associated with certain administrative and general costs
decreased $7 million and $22 million and increased $35 million for the years
1999, 1998 and 1997, respectively. The 1999 decrease due to a variety of
reasons, including reductions in nuclear insurance ($38 million), partially
offset by increased charges for uncollectible accounts resulting from billing
and collection delays experienced following the implementation of a new
customer information system ($25 million). The decrease in 1998 reflects a
reduction of $34 million in certain nuclear maintenance costs due to
technological improvements, compared to 1997. The effects of inflation have
also increased O&M expenses during the years and are also reflected in the
increases and decreases discussed herein.

Depreciation, Amortization and Decommissioning. Depreciation, amortization
and decommissioning expense decreased $101 million and $63 million and
increased $34 million for the year 1999, 1998 and 1997, respectively. The
decrease in the year 1999 was primarily due to the fossil plant sale.
Consistent with the provisions of the 1997 Act, the (pre-tax) gain on the sale
of $2.587 billion resulted in a regulatory liability, which was used to
recover regulatory assets. Therefore, the gain on the sale, excluding $43
million of amortization of investment tax credits, was recorded as a
regulatory liability in the amount of $2.544 billion and amortized in the
fourth quarter of 1999. The amortization of the regulatory liability and
additional regulatory asset amortization of $2.456 billion are reflected in
depreciation and amortization expense on ComEd's Statement of Consolidated
Operations and resulted in a net reduction to depreciation and amortization
expense of $88 million. Depreciation expense decreased $95 million and
increased $36 million for the years 1998 and 1997, respectively. The decrease
in 1998 reflects the retirement of Zion Station ($31 million), the reduction
in depreciable plant due to the plant impairment recorded by ComEd in the
second quarter of 1998 ($65 million), the sales of State Line and Kincaid ($4
million), lower depreciation of steam generators at Byron Unit 1 and Braidwood
Unit 1 in 1998 compared to 1997 ($25 million), partially offset by plant
additions ($16 million) and shortened depreciable lives for certain nuclear
stations ($14 million). The $36 million increase in depreciation expense in
1997 is principally due to the early retirement of the steam generators at
Byron Unit 1 and Braidwood Unit 1. See Note 1 of Notes to Financial
Statements, under "Depreciation, Amortization of Regulatory Assets and
Liabilities, and Decommissioning," for additional information.

The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry, including ComEd, regarding the
recognition, measurement and classification of decommissioning costs for
nuclear generating stations in the financial statements of electric utilities.
In response to these questions, the FASB is reviewing the accounting for asset
removal costs including those related to nuclear decommissioning. If current
electric utility industry accounting practices for such decommissioning costs
are changed, annual provisions for decommissioning could increase and the
estimated costs of decommissioning could be recorded as a liability rather
than as accumulated depreciation. Decommissioning costs of currently retired
nuclear plants are recorded as a liability. Unicom and ComEd do not believe
that such changes, if required, would have an adverse effect on their results
of operations due to ComEd's ability to recover decommissioning costs through
rates.

Interest on Debt. Changes in interest on long-term debt and notes payable
for the years 1999, 1998 and 1997 were due to changes in average interest
rates and in the amounts of long-term debt and notes payable outstanding.
Changes in interest on ComEd's long-term debt also reflected new issues of
debt, the retirement and early redemption of debt, and the retirement and
redemption of issues which were refinanced at generally lower rates of
interest. See Notes 3 and 7 of Notes to Financial Statements for information
regarding the redemptions and repurchases of debt and equity. The average
amounts of ComEd's long-term debt and notes payable outstanding and average
interest rates thereon were as follows:

1999 1998 1997
------ ------ ------

Long-term debt outstanding:
Average amount (millions).......................... $8,119 $6,099 $6,256
Average interest rate.............................. 6.76% 7.06% 7.65%
Notes payable outstanding:
Average amount (millions).......................... $ 320 $ 344 $ 153
Average interest rate.............................. 5.82% 5.68% 5.95%

Other Items. The amounts of AFUDC reflect changes in the average levels of
investment subject to AFUDC and changes in the average annual capitalization
rates as discussed in Note 1 of Notes to Financial Statements, under "AFUDC
and Interest Capitalized." ComEd discontinued SFAS No. 71 regulatory
accounting practices in December 1997 for the generation portion of its
business, and as a result, began capitalizing interest in 1998. ComEd
capitalized $22 million and $28 million for the years 1999 and 1998,
respectively, of interest costs on its generation-related construction work in
progress and nuclear fuel in process. AFUDC and interest capitalized do not
contribute to the current cash flow of ComEd.

ComEd's ratios of earnings to fixed charges for the years 1999, 1998 and
1997 were 2.45, 2.59 and 0.58, respectively. ComEd's ratios of earnings to
fixed charges and preferred and preference stock dividend requirements for the
years 1999, 1998 and 1997 were 2.32, 2.24 and 0.49, respectively.

Business corporations, in general, have been adversely affected by inflation
because amounts retained after the payment of all costs have been inadequate
to replace, at increased costs, the productive assets consumed. Electric
utilities, in particular, have been especially affected as a result of their
capital intensive nature and regulation which limits capital recovery and
prescribes installation or modification of facilities to comply with
increasingly stringent safety and environmental requirements. Because the
regulatory process limits the amount of depreciation expense included in
ComEd's revenue allowance to the original cost of utility plant investment,
the resulting cash flows are inadequate to provide for replacement of that
investment in future years or preserve the purchasing power of common equity
capital previously invested.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Commonwealth Edison Company:

We have audited the accompanying consolidated balance sheets and statements
of consolidated capitalization of Commonwealth Edison Company (an Illinois
corporation) and subsidiary companies as of December 31, 1999 and 1998, and
the related statements of consolidated operations, retained
earnings/(deficit), comprehensive income and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Commonwealth Edison
Company and subsidiary companies as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999, in conformity with generally accepted
accounting principles.

As discussed in Note 4, effective January 1, 1997, the Company changed its
method of accounting for revenue recognition.

Arthur Andersen LLP
Chicago, Illinois
January 31, 2000

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED OPERATIONS

The following Statements of Consolidated Operations for the year 1999, 1998
and 1997 reflect the results of past operations and are not intended as any
representation as to results of operations for any future period. Future
operations will necessarily be affected by various and diverse factors and
developments, including changes in electric prices, regulation, population,
business activity, asset dispositions, competition, taxes, environmental
control, energy use, fuel, cost of labor, purchased power and other matters,
the nature and effect of which cannot now be determined.

1999 1998 1997
---------- ---------- -----------
(Thousands of Dollars)

Electric Operating Revenues............... $6,766,892 $7,088,542 $ 7,073,088
---------- ---------- -----------
Electric Operating Expenses and Taxes:
Fuel.................................... $ 997,262 $1,057,527 $ 1,204,218
Purchased power......................... 551,575 748,017 400,055
Operation............................... 1,541,435 1,457,346 1,715,016
Maintenance............................. 774,310 789,262 689,729
Depreciation and amortization........... 836,145 937,604 1,001,149
Taxes (except income)................... 506,326 697,151 799,167
Income taxes--
Current--Federal...................... 1,466,994 287,865 214,168
--State................................ 315,713 52,233 65,248
Deferred--Federal--net................ (1,155,409) 30,761 56,111
--State--net........................... (247,993) 12,538 2,544
Investment tax credits deferred--net.... (25,828) (27,730) (31,015)
---------- ---------- -----------
$5,560,530 $6,042,574 $ 6,116,390
---------- ---------- -----------
Electric Operating Income................. $1,206,362 $1,045,968 $ 956,698
---------- ---------- -----------
Other Income and (Deductions):
Interest on long-term debt, net of
interest capitalized................... $ (526,750) $ (430,602) $ (478,530)
Interest on notes payable............... (18,602) (19,560) (9,134)
Allowance for funds used during
construction........................... 21,812 16,464 42,325
Income taxes applicable to nonoperating
activities............................. 27,083 4,974 11,010
Provision for dividends on company-
obligated mandatorily redeemable
preferred securities of subsidiary
trusts holding solely the Company's
subordinated debt securities........... (29,710) (29,710) (28,860)
Loss of nuclear plant closure........... -- -- (885,611)
Income tax effect of nuclear plant
closure................................ -- -- 362,952
Miscellaneous--net...................... (29,887) 6,672 (130,988)
---------- ---------- -----------
$ (556,054) $ (451,762) $(1,116,836)
---------- ---------- -----------
Net Income (Loss) before Extraordinary
Item and Cumulative Effect of Change in
Accounting Principle..................... $ 650,308 $ 594,206 $ (160,138)
Extraordinary Loss, less Applicable Income
Taxes.................................... (27,579) -- (810,335)
Cumulative Effect of Change in Accounting
Principle................................ -- -- 196,700
---------- ---------- -----------
Net Income (Loss)......................... $ 622,729 $ 594,206 $ (773,773)
Provision for Dividends on Preferred and
Preference Stocks........................ 23,756 56,884 60,486
---------- ---------- -----------
Net Income (Loss) on Common Stock......... $ 598,973 $ 537,322 $ (834,259)
========== ========== ===========

The accompanying Notes to Financial Statements are an integral part of the
above statements.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

December 31
------------------------
ASSETS 1999 1998
------ ----------- -----------
(Thousands of Dollars)

Utility Plant:
Plant and equipment, at original cost (includes
construction work in progress of $653 million and
$857 million, respectively)....................... $25,007,637 $27,801,246
Less--Accumulated provision for depreciation....... 13,729,223 15,234,320
----------- -----------
$11,278,414 $12,566,926
Nuclear fuel, at amortized cost.................... 843,724 874,979
----------- -----------
$12,122,138 $13,441,905
----------- -----------
Investments:
Nuclear decommissioning funds...................... $ 2,546,540 $ 2,267,317
Subsidiary companies............................... 77,061 48,636
Other investments, at cost......................... 63,702 57,031
----------- -----------
$ 2,687,303 $ 2,372,984
----------- -----------
Current Assets:
Cash and temporary cash investments................ $ 1,254,868 $ 27,154
Cash held for redemption of securities............. 285,056 3,062,816
Special deposits................................... 45,730 271
Receivables--
Customers........................................ 1,183,505 1,364,760
Forward share repurchase contract................ 813,046 --
Other............................................ 2,631,793 155,492
Provisions for uncollectible accounts............ (49,344) (48,008)
Coal and fuel oil, at average cost................. 14,222 134,965
Materials and supplies, at average cost............ 220,398 229,532
Deferred income taxes related to current assets and
liabilities....................................... 54,796 26,486
Prepayments and other.............................. 30,539 18,387
----------- -----------
$ 6,484,609 $ 4,971,855
----------- -----------
Deferred Charges and Other Noncurrent Assets:
Regulatory assets.................................. $ 1,792,907 $ 4,578,427
Other.............................................. 73,308 85,406
----------- -----------
$ 1,866,215 $ 4,663,833
----------- -----------
$23,160,265 $25,450,577
=========== ===========

The accompanying Notes to Financial Statements are an integral part of the
above statements.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

December 31
-----------------------
CAPITALIZATION AND LIABILITIES 1999 1998
------------------------------ ----------- -----------
(Thousands of Dollars)

Capitalization (see accompanying statements):
Common stock equity.................................. $ 5,302,915 $ 5,055,854
Preferred and preference stocks without mandatory
redemption requirements............................. 8,768 91,479
Preference stock subject to mandatory redemption
requirements........................................ -- 69,475
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely the
Company's subordinated debt securities*............. 350,000 350,000
Long-term debt....................................... 6,962,448 7,677,219
----------- -----------
$12,624,131 $13,244,027
----------- -----------
Current Liabilities:
Notes payable........................................ $ 4,750 $ 276,356
Current portion of long-term debt, redeemable
preference stock and capitalized lease obligations.. 909,900 2,226,868
Accounts payable..................................... 545,329 605,712
Accrued interest..................................... 147,044 178,238
Accrued taxes........................................ 1,409,626 165,466
Dividends payable.................................... 92,656 104,022
Customer deposits.................................... 68,128 56,954
Accrued plant closing costs.......................... -- 78,430
Other................................................ 307,040 149,304
----------- -----------
$ 3,484,473 $ 3,841,350
----------- -----------
Deferred Credits and Other Noncurrent Liabilities:
Deferred income taxes................................ $ 2,456,447 $ 3,787,978
Nuclear decommissioning liability for retired plants. 1,259,700 1,215,400
Accumulated deferred investment tax credits.......... 484,717 562,285
Accrued spent nuclear fuel disposal fee and related
interest............................................ 763,427 728,413
Obligations under capital leases..................... 161,602 333,653
Regulatory liabilities............................... 596,157 595,005
Other................................................ 1,329,611 1,142,466
----------- -----------
$ 7,051,661 $ 8,365,200
----------- -----------
Commitments and Contingent Liabilities (Note 22)
$23,160,265 $25,450,577
=========== ===========

*As described in Note 11 of Notes to Financial Statements, the sole asset of
ComEd Financing I, a subsidiary trust of ComEd, is $206.2 million principal
amount of ComEd's 8.48% subordinated deferrable interest notes due September
30, 2035. The sole asset of ComEd Financing II, also a subsidiary trust of
ComEd, is $154.6 million principal amount of ComEd's 8.50% subordinated
deferrable interest debentures due January 15, 2027.

The accompanying Notes to Financial Statements are an integral part of the
above statements.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CAPITALIZATION

December 31
------------------------
1999 1998
----------- -----------
(Thousands of Dollars)

Common Stock Equity:
Common stock, $12.50 par value per share--
Outstanding--213,973,810 shares and 214,057,171
shares, respectively............................ $ 2,677,995 $ 2,677,969
Premium on common stock and other paid-in capital. 2,207,287 2,223,706
Capital stock and warrant expense................. (12,537) (15,664)
Retained earnings................................. 433,001 176,643
Other comprehensive income........................ 7,539 --
Treasury stock--264,406 shares and 178,982 shares,
respectively..................................... (10,370) (6,800)
----------- -----------
$ 5,302,915 $ 5,055,854
----------- -----------
Preferred and Preference Stocks Without Mandatory
Redemption Requirements:
Preference stock, non-cumulative, without par val-
ue--
Outstanding--1,120 shares and 2,600 shares, re-
spectively....................................... $ 6,978 $ 16,991
Preference stock, cumulative, without par value--
Outstanding--No shares and 13,499,549 shares,
respectively ................................... -- 504,957
Current redemption requirements for preference
stock included in current liabilities............ -- (432,320)
$1.425 convertible preferred stock, cumulative,
without par value--
Outstanding--56,291 shares and 58,211 shares, re-
spectively...................................... 1,790 1,851
----------- -----------
$ 8,768 $ 91,479
----------- -----------
Preference Stock Subject to Mandatory Redemption Re-
quirements:
Preference stock, cumulative, without par value--
Outstanding--700,000 shares and 1,720,345 shares,
respectively.................................... $ 69,475 $ 171,348
Current redemption requirements for preference
stock included in current liabilities............ (69,475) (101,873)
----------- -----------
$ -- $ 69,475
----------- -----------
Company-Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Solely the
Company's Subordinated Debt Securities............. $ 350,000 $ 350,000
----------- -----------
Long-Term Debt:
First mortgage bonds:
Maturing 2000 through 2004--6 3/8% to 9 3/8%.... $ 698,245 $ 1,080,000
Maturing 2005 through 2014--4.40% to 8 3/8%..... 1,299,400 1,485,400
Maturing 2015 through 2023--5.85% to 9 7/8%..... 1,589,443 1,981,000
----------- -----------
$ 3,587,088 $ 4,546,400
Transitional trust notes, due 2000 through 2008--
5.29% to 5.74%................................... 3,070,000 3,400,000
Sinking fund debentures, due 2001 through 2011--2
3/4% to 4 3/4%................................... 30,866 94,159
Pollution control obligations, due 2007 through
2014--5.3% to 5 7/8%............................. 139,200 140,700
Other long-term debt.............................. 916,351 1,056,346
Current maturities of long-term debt included in
current liabilities.............................. (732,077) (1,497,706)
Unamortized net debt discount and premium......... (48,980) (62,680)
----------- -----------
$ 6,962,448 $ 7,677,219
----------- -----------
$12,624,131 $13,244,027
=========== ===========

The accompanying Notes to Financial Statements are an integral part of the
above statements.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED RETAINED EARNINGS/(DEFICIT)

1999 1998 1997
-------- -------- ----------
(Thousands of Dollars)

Balance at Beginning of Period................. $176,643 $(19,172) $1,157,956
Add--Net income/(loss)......................... 622,729 594,206 (773,773)
-------- -------- ----------
$799,372 $575,034 $ 384,183
-------- -------- ----------
Deduct--
Dividends declared on--
Common stock............................... $342,285 $342,776 $ 342,763
Preferred and preference stocks............ 8,532 55,320 60,159
Other capital stock transactions--net....... 15,554 295 433
-------- -------- ----------
$366,371 $398,391 $ 403,355
-------- -------- ----------
Balance at End of Period (Includes $852
million, $580 million and $384 million of
appropriated retained earnings at December 31,
1999, 1998 and 1997, respectively)............ $433,001 $176,643 $ (19,172)
======== ======== ==========

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

1999 1998 1997
-------- -------- ---------
(Thousands of Dollars)

Net Income/(Loss) on Common Stock................. $598,973 $537,322 $(834,259)
Other Comprehensive Income
Unrealized gains on securities.................. 12,471 -- --
Income taxes on other comprehensive income...... (4,932) -- --
-------- -------- ---------
Other comprehensive income, net of tax.......... 7,539 -- --
-------- -------- ---------
Comprehensive Income/(Loss)....................... $606,512 $537,322 $(834,259)
======== ======== =========

The accompanying Notes to Financial Statements are an integral part of the
above statements.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

1999 1998 1997
----------- ----------- -----------
(Thousands of Dollars)

Cash Flow from Operating Activities:
Net income (loss)...................... $ 622,729 $ 594,206 $ (773,773)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization........ 902,035 989,147 1,047,603
Deferred income taxes and investment
tax credits--net.................... (1,451,910) 62,775 (348,889)
Contribution to environmental trust.. (250,000) -- --
Recovery of coal reserve regulatory
assets.............................. 197,974 108,372 82,441
Increase in MGP liability............ 68,078 -- --
Extraordinary loss related to write-
off of certain net regulatory as-
sets................................ -- -- 810,335
Cumulative effect of change in ac-
counting principle.................. -- -- (196,700)
Loss on nuclear plant closure........ -- -- 885,611
Write-down of uranium-related proper-
ties................................ -- -- 64,387
Provisions/(payments) for revenue re-
funds--net.......................... (22,603) (23,622) 45,470
Equity component of allowance for
funds used during construction...... (7,789) (6,959) (23,770)
Provisions/(payments) for liability
for separation costs--net........... (62,396) 9,757 15,986
Net effect on cash flows of changes
in:
Receivables........................ (83,600) (485,833) 21,194
Note receivable from Unicom Invest-
ment.............................. (2,208,956) -- --
Coal and fuel oil.................. 1,559 (14,301) 19,698
Materials and supplies............. (7,157) 22,519 41,659
Accounts payable excluding nuclear
fuel lease principal payments and
separation costs--net............. (57,618) 111,981 233,360
Accrued interest and taxes......... 1,240,975 (22,659) (6,465)
Other changes in certain current
assets and liabilities............ 124,425 141,942 38,873
Other--net........................... 1,837 64,916 117,013
----------- ----------- -----------
$ (992,417) $ 1,552,241 $ 2,074,033
----------- ----------- -----------
Cash Flow from Investing Activities:
Construction expenditures.............. $(1,083,398) $ (928,365) $ (969,626)
Nuclear fuel expenditures.............. (253,483) (166,168) (185,373)
Sales of generating plants............. 4,885,720 177,454 60,791
Equity component of allowance for
funds used during construction........ 7,789 6,959 23,770
Contributions to nuclear
decommissioning funds................. (89,945) (136,771) (114,825)
Other investments and special depos-
its................................... (38,518) (681) (4,703)
Plant removal costs--net............... (74,584) (86,988) (85,923)
----------- ----------- -----------
$ 3,353,581 $(1,134,560) $(1,275,889)
----------- ----------- -----------
Cash Flow from Financing Activities:
Issuance of securities--
Transitional trust notes............. $ -- $ 3,382,629 $ --
Other long-term debt................. -- 222,068 297,663
Company-obligated mandatorily redeem-
able preferred securities of
subsidiary trusts holding solely the
Company's subordinated debt
securities.......................... -- -- 150,000
Capital stock........................ 60 244 288
Retirement and redemption of securi-
ties--
Transitional trust notes............. (330,000) -- --
Other long-term debt................. (1,199,969) (498,192) (734,768)
Capital stock........................ (649,355) (34,066) (44,111)
Repurchase of common stock............. (813,046) (6,800) (9,500)
Cash dividends paid on capital stock... (391,892) (429,867) (426,916)
Proceeds from sale/leaseback of nu-
clear fuel............................ -- 101,038 149,955
Nuclear fuel lease principal payments.. (255,402) (255,605) (166,411)
Increase/(decrease) in short-term
borrowings............................ (271,606) 118,206 29,400
----------- ----------- -----------
$(3,911,210) $ 2,599,655 $ (754,400)
----------- ----------- -----------
Change in Net Cash Balance.............. $(1,550,046) $ 3,017,336 $ 43,744
Cash, Temporary Cash Investments and
Cash Held for Redemption of
Securities:
Balance at Beginning of Period......... 3,089,970 72,634 28,890
----------- ----------- -----------
Balance at End of Period............... $ 1,539,924 $ 3,089,970 $ 72,634
=========== =========== ===========

The accompanying Notes to Financial Statements are an integral part of the
above statements.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies.

Corporate Structure and Basis of Presentation. Unicom is the parent holding
company of ComEd and other unregulated subsidiaries. ComEd, a regulated
electric utility, is the principal subsidiary of Unicom.

The consolidated financial statements include the accounts of ComEd, Indiana
Company, Edison Development, the Trusts, ComEd Funding and ComEd Funding
Trust. All significant intercompany transactions have been eliminated.
Although the accounts of ComEd Funding and ComEd Funding Trust, which are
SPEs, are included in the consolidated financial statements, as required by
GAAP, ComEd Funding and ComEd Funding Trust are legally separated from Unicom
and ComEd. The assets of the SPEs are not available to creditors of Unicom or
ComEd and the transitional property held by the SPEs are not assets of Unicom
or ComEd.

Use of Estimates. The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Due to the transition to a new
customer information and billing system, a larger portion of customer revenues
and net receivables were based on estimates for the periods July 1998 through
November 1999 than in previous periods.

Regulation. ComEd is subject to regulation as to accounting and ratemaking
policies and practices by the ICC and FERC. ComEd's accounting policies and
the accompanying consolidated financial statements conform to GAAP applicable
to rate-regulated enterprises for the non-generation portion of its business,
including the effects of the ratemaking process in accordance with SFAS
No. 71, Accounting for the Effects of Certain Types of Regulation. Such
effects on the non-generation portion of its business concern mainly the time
at which various items enter into the determination of operating results in
order to follow the principle of matching costs with the applicable revenues
collected from or returned to customers through future rates. See Note 3 for
information regarding the write-off of generation-related regulatory assets
and liabilities in December 1997.

ComEd's investment in generation-related net utility plant, not subject to
cost-based rate regulation, including construction work in progress and
nuclear fuel, and excluding the decommissioning costs included in the
accumulated provision for depreciation was $7.8 billion and $9.2 billion as of
December 31, 1999 and 1998. See "Regulatory Assets and Liabilities" below
regarding the plant impairment recorded by ComEd in the second quarter of
1998.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Regulatory Assets and Liabilities. Regulatory assets are incurred costs
which have been deferred and are amortized for ratemaking and accounting
purposes. Regulatory liabilities represent amounts to be settled with
customers through future rates. Regulatory assets and liabilities reflected on
the Consolidated Balance Sheets at December 31, 1999 and 1998 were as follows:

December 31
---------------------
1999 1998
---------- ----------
(Thousands of
Dollars)

Regulatory assets:
Impaired production plant............................... $ 366,221 $2,955,154
Deferred income taxes (1)............................... 688,946 680,356
Nuclear decommissioning costs--Dresden Unit 1........... 202,308 255,031
Nuclear decommissioning costs--Zion Units 1 and 2....... 496,638 443,130
Coal reserves........................................... -- 197,975
Unamortized loss on reacquired debt (2)................. 38,794 46,781
---------- ----------
$1,792,907 $4,578,427
========== ==========
Regulatory liabilities:
Deferred income taxes (1)............................... $ 596,157 $ 595,005
========== ==========

- --------
(1) Recorded in compliance with SFAS No. 109, Accounting for Income Taxes, for
non-generation related temporary differences.
(2) Amortized over the remaining lives of the non-generation related long-term
debt issued to finance the reacquisition. See "Loss on Reacquired Debt"
below for additional information.

ComEd performed a SFAS No. 121 impairment analysis in 1998 which concluded
that future revenues, excluding the collection of the CTC expected to be
recovered from electric supply services, would be insufficient to cover the
costs of certain of its generating assets. Because future regulated cash
flows, which include the CTC, tariff revenues and gains from the disposition
of assets, are expected to provide recovery of the impaired plant assets, a
regulatory asset was recorded for the same amount. This regulatory asset is
currently being amortized as it is recovered through regulated cash flows over
a transition period that extends through 2006. Consistent with the provisions
of the 1997 Act, the (pre-tax) gain on the sale of $2.587 billion resulted in
a regulatory liability, which was used to recover regulatory assets.
Therefore, the gain on the sale, excluding $43 million of amortization of
investment tax credits, was recorded as a regulatory liability in the amount
of $2.544 billion and amortized in the fourth quarter of 1999. The
amortization of the regulatory liability and additional regulatory asset
amortization of $2.456 billion are reflected in depreciation and amortization
expense on ComEd's Statement of Consolidated Operations and resulted in a net
reduction to depreciation and amortization expense of $88 million. See Note 3
for additional information regarding amortization of regulatory assets with
respect to limits on ComEd's earnings due to statutory sharing provisions. See
Note 5 for additional information regarding the fossil plant sale.

The regulatory assets for Dresden Unit 1 and Zion Units 1 and 2 represent
unrecovered nuclear decommissioning costs, which are expected to be recovered
over the periods 2000-2011 and 2000-2013, respectively, through a separate
rate recovery rider provided for by the 1997 Act. See "Depreciation,
Amortization of Regulatory Assets and Liabilities, and Decommissioning" below
for additional information.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Depreciation, Amortization of Regulatory Assets and Liabilities, and
Decommissioning. Depreciation, amortization of regulatory assets and
liabilities, and decommissioning for the years 1999, 1998 and 1997 were as
follows:

1999 1998 1997
-------- -------- ----------
(Thousands of Dollars)

Depreciation expense.................. $706,237 $782,373 $ 877,256
Amortization of regulatory assets and
liabilities--net..................... 46,088 65,211 15,272
-------- -------- ----------
$752,325 $847,584 $ 892,528
Decommissioning expense............... 83,820 90,020 108,621
-------- -------- ----------
$836,145 $937,604 $1,001,149
======== ======== ==========

Provisions for depreciation, including nuclear plant, were at average annual
rates of average depreciable utility plant and equipment for the years 1999,
1998 and 1997 as follows:

1999 1998 1997
---- ---- ----

Average annual depreciation rates............................. 2.66% 3.02% 3.36%

Depreciation is provided on a straight-line basis by amortizing the cost of
depreciable plant and equipment over estimated service lives for each class of
plant. The decrease in the average depreciation rates for the year in 1999,
compared to 1998, relates primarily to a reduction in nuclear depreciation
rates due to the partial impairment of production plant, which was recorded as
a component of accumulated depreciation, partially offset by shortened
depreciable lives for certain nuclear stations. See "Regulatory Assets and
Liabilities" above for additional information on the partial impairment of
production plant.

Nuclear plant decommissioning costs generally are accrued over the current
NRC license lives of the related nuclear generating units. The accrual is
based on an annual levelized cost of the unrecovered portion of estimated
decommissioning costs, which are escalated for expected inflation to the
expected time of decommissioning and are net of expected earnings on the trust
funds. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," subcaption "Results of Operations--Depreciation,
Amortization and Decommissioning," for a discussion of questions raised by the
staff of the SEC and a FASB review regarding the electric utility industry's
method of accounting for decommissioning costs. Dismantling is expected to
occur relatively soon after the end of the current NRC license life of each
generating station currently operating. The accrual for decommissioning is
based on the prompt removal method authorized by NRC guidelines. ComEd's ten
operating units have remaining current NRC license lives ranging from 7 to 28
years. ComEd's Zion Station and its first nuclear unit, Dresden Unit 1, are
retired and are expected to be dismantled beginning in the years 2014 and
2011, respectively, which is consistent with the regulatory treatment for
recovery of the related decommissioning costs.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
significantly affected by the adoption of or changes to NRC regulations, as
well as changes in the assumptions used in making such estimates, including
changes in technology, available alternatives for the disposal of nuclear
waste and inflation.

Since 1995, ComEd has collected decommissioning costs from its ratepayers in
conjunction with a rider to its tariffs. The rider allows annual adjustments
to decommissioning cost collections outside the context of a traditional rate
proceeding and will continue under the 1997 Act. The current estimated
decommissioning costs include a contingency allowance, but, except at Dresden
Unit 1, exclude amounts for alternative spent fuel storage installations,
which may be necessary to store spent fuel during the period beginning at the
end of the NRC license lives of the plants to the date when the DOE accepts
the spent fuel for permanent storage. Contingency allowances used in
decommissioning cost estimates provide for currently unspecifiable costs that
are likely to occur after decommissioning begins and generally range from 20%
to 25% of the currently specifiable costs. In February 1998, the ICC
authorized a reduction in the annual decommissioning cost accrual from $109
million to $84 million. The reduction primarily reflected stronger than
expected after-tax returns on the external trust funds and lower than expected
escalation in low-level waste disposal costs, partially offset by the higher
current-year cost estimates, including a contingency allowance.

Under its most recent annual rider, filed with the ICC on February 26, 1999,
ComEd has proposed to increase its estimated annual decommissioning cost
accrual from $84 million to $130 million. The proposed increase primarily
reflects an increase in low-level waste disposal cost escalation, the
inclusion of $219 million in current-year (2000) dollars for safety-related
costs of maintaining Zion Station in a mothballed condition until
dismantlement begins, and the inclusion of non-radiological costs in the
decommissioning cost estimates for recovery under the rider.

The proposed annual decommissioning cost accrual of $130 million was
determined using the following assumptions: the decommissioning cost estimate
of $5.7 billion in current-year (2000) dollars, after-tax earnings on the tax-
qualified and nontax-qualified decommissioning funds of 7.49% and 6.83%,
respectively, and an escalation rate for future decommissioning costs of
4.84%. The proposed annual accrual provided over the current NRC license lives
of the nuclear plants, coupled with the expected fund earnings and amounts
previously recovered in rates, is expected to aggregate to approximately $13.8
billion.

For the ten operating nuclear units, decommissioning cost accruals are
recorded as portions of depreciation expense and accumulated provision for
depreciation on the Statements of Consolidated Operations and the Consolidated
Balance Sheets, respectively, as such costs are recovered through rates. As of
December 31, 1999, the total decommissioning costs included in the accumulated
provision for depreciation were $2.1 billion.

For ComEd's retired nuclear units, the total estimated liability for nuclear
decommissioning in current-year (2000) dollars is recorded as a noncurrent
liability. The unrecovered portion of the liability is recorded as a
regulatory asset. The nuclear decommissioning liability for retired plants as
of December 31, 1999 was as follows:

Zion
Dresden Units
Unit 1 1 and 2 Total
-------- -------- ----------
(Thousands of Dollars)

Amounts recovered through rates and investment
fund earnings.................................... $104,792 $455,962 $ 560,754
Unrecovered portion of the liability.............. 202,308 496,638 698,946
-------- -------- ----------
Nuclear decommissioning liability for retired
plants.......................................... $307,100 $952,600 $1,259,700
======== ======== ==========

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Under Illinois law, decommissioning cost collections are required to be
deposited into external trusts. Consequently, such collections do not add to
the cash flows available for general corporate purposes. The ICC has approved
ComEd's funding plan, which provides for annual contributions of current
accruals and ratable contributions of past accruals over the remaining current
NRC license lives of the nuclear plants. The fair value of funds accumulated
in the external trusts at December 31, 1999 was $2,547 million, which includes
pre-tax unrealized appreciation of $721 million. The earnings on the external
trusts for operating plants accumulate in the fund balance and accumulated
provision for depreciation. Nuclear decommissioning funding as of December 31,
1999 was as follows:

(Thousands of Dollars)

Amounts recovered through rates and investment fund
earnings for operating plants (included in the accumu-
lated provision for depreciation)...................... $2,099,796
Amounts recovered through rates and investment fund
earnings for retired plants............................ 560,754
Less past accruals not yet contributed to the trusts.... 114,010
----------
Fair value of external trust funds..................... $2,546,540
==========

Customer Receivables and Revenues. ComEd is engaged principally in the
production, purchase, transmission, distribution and sale of electricity to a
diverse base of residential, commercial, industrial and wholesale customers.
ComEd's electric service territory has an area of approximately 11,300 square
miles and an estimated population of approximately eight million as of
December 31, 1999. It includes the City, an area of about 225 square miles
with an estimated population of approximately three million from which ComEd
derived approximately 30 percent of its ultimate consumer revenues in 1999.
ComEd had approximately 3.5 million electric customers at December 31, 1999.
Revenues are recognized as electric and delivery services are provided to
customers.

As a result of the implementation of a new customer billing and information
system in July 1998, billing and collection delays have temporarily increased
accounts receivable from customers. ComEd has recorded increased provisions
for uncollectible accounts to recognize the estimated portion of the
receivables that are not expected to be recoverable. Such provisions increased
O&M expenses by $35 million and $10 million in 1999 and 1998, respectively,
compared to normally expected levels. See "Use of Estimates" above for
additional information regarding ComEd's revenues and net receivables.

See Notes 3 and 19 for additional information.

Nuclear Fuel. The cost of nuclear fuel is amortized to fuel expense based on
the quantity of heat produced using the unit of production method. As
authorized by the ICC, provisions for spent nuclear fuel disposal costs have
been recorded at a level required to recover the fee payable on the current
nuclear-generated and sold electricity and the current interest accrual on the
one-time fee payable to the DOE for nuclear generation prior to April 7, 1983.
The one-time fee and interest thereon have been recovered and the current fee
and interest on the one-time fee are presently being recovered through base
rates. See Note 14 for additional information concerning the disposal of spent
nuclear fuel, one-time fee and interest accrual on the one-time fee. Nuclear
fuel expenses, including leased fuel costs and provisions for spent nuclear
fuel disposal costs, were $380 million, $325 million and $298 million for the
years 1999, 1998 and 1997, respectively.

Income Taxes. Deferred income taxes are provided for income and expense
items recognized for financial accounting purposes in periods that differ from
those for income tax purposes. Income taxes

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
deferred in prior years are charged or credited to income as the book/tax
temporary differences reverse. Prior years' deferred investment tax credits
are amortized through credits to income generally over the lives of the
related property. Income tax credits resulting from interest charges
applicable to nonoperating activities, principally construction, are
classified as other income.

AFUDC and Interest Capitalized. In accordance with the uniform systems of
accounts prescribed by regulatory authorities, ComEd capitalizes AFUDC,
compounded semiannually, which represents the estimated cost of funds used to
finance its construction program for the non-generation portion of its
business. The equity component of AFUDC is recorded on an after-tax basis and
the borrowed funds component of AFUDC is recorded on a pre-tax basis. The
average annual capitalization rates were 7.81%, 8.34% and 9.39% for the years
1999, 1998 and 1997, respectively. ComEd discontinued SFAS No. 71 regulatory
accounting practices in December 1997 for the generation portion of its
business, and as a result began capitalizing interest in 1998. ComEd
capitalized $22 million and $28 million for the years 1999 and 1998,
respectively, in interest costs on its generation-related construction work in
progress and nuclear fuel in process. AFUDC and interest capitalized do not
contribute to the current cash flow of Unicom or ComEd.

Interest. Total interest costs incurred on debt, leases and other
obligations were $622 million, $535 million and $588 million for the years
1999, 1998 and 1997, respectively.

Debt Discount, Premium and Expense. Discount, premium and expense on long-
term debt of ComEd are being amortized over the lives of the respective
issues.

Loss on Reacquired Debt. Consistent with regulatory treatment, the net loss
from ComEd's reacquisition, in connection with the refinancing of first
mortgage bonds, sinking fund debentures and pollution control obligations
prior to their scheduled maturity dates, is deferred and amortized over the
lives of the long-term debt issued to finance the reacquisition for non-
generation related financings. See "Regulatory Assets and Liabilities" above
and Note 3 for additional information.

Stock Option Awards/Employee Stock Purchase Plan. ComEd has elected to adopt
SFAS No. 123, Accounting for Stock-Based Compensation, for disclosure purposes
only. ComEd accounts for its stock option awards and ESPP under APB Opinion
No. 25, Accounting for Stock Issued to Employees. See Note 8 for additional
information.

Energy Risk Management Contracts. In the normal course of business, ComEd
utilizes contracts for the forward sale and purchase of energy to manage
effectively the utilization of its available generating capability. ComEd also
utilizes put and call option contracts and energy swap arrangements to limit
the market price risk associated with the forward commodity contracts. As
ComEd does not currently utilize financial or commodity instruments for
trading or speculative purposes, any gains or losses on forward commodity
contracts are recognized when the underlying transactions affect earnings.
Revenues and expenses associated with market price risk management contracts
are amortized over the terms of such contracts.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards requiring that every derivative instrument, including certain
derivative instruments embedded in other contracts, be recorded on the
Consolidated Balance Sheets as either an asset or liability measured at its
fair value. SFAS No. 133 requires that changes in the derivative's fair value
be recognized currently in earnings, unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's gains

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
and losses to offset related results on the hedged item on the Statements of
Consolidated Operations, and requires ComEd to formally document, designate,
and assess the effectiveness of transactions that receive hedge accounting.

The effective date of SFAS No. 133 has been delayed for one year, to fiscal
years beginning after June 15, 2000. SFAS No. 133 may be implemented prior to
June 15, 2000, but such implementation cannot be applied retroactively. SFAS
No. 133 must be applied to (i) derivative instruments and (ii) certain
derivative instruments embedded in hybrid contracts that were issued,
acquired, or substantively modified after January 1, 1998 or January 1, 1999
at the Company's election.

ComEd is in the process of reviewing its various contracts to determine
which contracts meet the requirements of SFAS No. 133 and would need to be
reflected as derivatives under the standard and accounted for at fair value.
Among the contracts that are being reviewed are purchase power agreements,
contracts related to electricity purchases and sales, normal purchase orders,
securities issued and insurance contracts. ComEd has not yet quantified the
effects on its financial statements of adopting SFAS No. 133. However,
adoption of SFAS No. 133 could increase volatility in earnings and other
comprehensive income.

Reclassifications. Certain prior year amounts have been reclassified to
conform with current period presentation. These reclassifications had no
effect on operating results.

Cash Held for Redemption of Securities. As of December 31, 1999, the cash
held for redemption of securities reported on the Consolidated Balance Sheets
includes $222 million in unused cash proceeds from the issuance of the
transitional trust notes and $63 million of escrowed cash and pending
instrument funding charges collected from ComEd customers to be applied to the
principal and interest payment on the transitional trust notes. See Note 3 for
additional information.

Statements of Consolidated Cash Flows. For purposes of the Statements of
Consolidated Cash Flows, temporary cash investments, generally investments
maturing within three months at the time of purchase, and cash held for
redemption of securities are considered to be cash equivalents. Supplemental
cash flow information for the years 1999, 1998 and 1997 was as follows:

1999 1998 1997
-------- -------- --------
(Thousands of Dollars)

Supplemental Cash Flow Information:
Cash paid during the period for:
Interest (net of amount capital-
ized).............................. $588,402 $439,706 $502,260
Income taxes (net of refunds)....... $485,198 $302,289 $280,368
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Capital lease obligations incurred.... $ 1,744 $106,370 $158,412

(2) Merger Agreement. In September 1999, the Boards of Directors of Unicom
and PECO approved a merger of equals that will create a new holding company,
Exelon. The merger is conditioned, among other things, upon the approvals of
the shareholders of both companies and by various regulatory bodies. The
merger is currently expected to be completed in the latter half of 2000.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
Unicom with and into Exelon wherein holders of Unicom common stock will
receive 0.875 shares of Exelon common stock plus $3.00 in cash for each of
their shares of Unicom common stock. The merger transaction will be accounted
for as a purchase of Unicom by PECO.

(3) Accounting Effects Related to the 1997 Act. In December 1997, the
Governor of Illinois signed into law the 1997 Act, which established a phased
process to introduce competition into the electric industry in Illinois under
a less regulated structure. The 1997 Act was amended in June 1999.

As a result of the 1997 Act and FERC rules, prices for the supply of
electric energy are expected to transition from cost-based, regulated rates to
rates determined by competitive market forces. Accordingly, the 1997 Act
provides for, among other things, gradual customer access to other electric
suppliers or a power purchase option which allows the purchase of electric
energy from ComEd at market based prices, and the collection of a CTC from
customers who choose to purchase electric energy from a RES or elect the power
purchase option during a transition period that extends through 2006.
Effective October 1, 1999, the CTC was established in accordance with a
formula defined in the 1997 Act. The CTC, which is applied on a cents per
kilowatthour basis, considers the revenue which would have been collected from
a customer under tariffed rates, reduced by the revenue the utility will
receive for providing delivery services to the customer, the market price for
electricity and a defined mitigation factor, which represents the utility's
opportunity to develop new revenue sources and achieve cost savings. The CTC
allows ComEd to recover some of its costs which might otherwise be
unrecoverable under market-based rates. Nonetheless, ComEd will need to take
steps to address the portion of such costs which are not recoverable through
the CTC. Such steps may include cost control efforts, developing new sources
of revenue and asset dispositions. See Note 5 for additional information.

On October 1, 1999, more than 41,000 non-residential customers became
eligible to choose a new electric supplier or elect the purchase power option.
The remainder of non-residential customers will become eligible to choose an
electric supplier or the purchase power option between June 1 and December 31,
2000. As of December 31, 1999, over 4,700 non-residential customers,
representing approximately ten percent of ComEd's 1998 retail kilowatthour
sales, elected to receive their electric energy from a RES or chose the
purchase power option. As a result of the collection of CTCs from such
customers, ComEd does not expect these elections to have a material effect on
its results of operations in the near term.

Utilities are required to continue to offer delivery services, including the
transmission and distribution of electric energy, such that customers who
select a RES can receive electric energy from that supplier using existing
transmission and distribution facilities. Such services will continue to be
offered under cost-based, regulated rates. The ICC issued orders in August and
September 1999 approving, with modifications, ComEd's delivery service
tariffs.

The 1997 Act also provides for a 15% residential base rate reduction which
became effective August 1, 1998 and an additional 5% residential base rate
reduction in October 2001. ComEd's

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
operating revenues were reduced by approximately $170 million in 1998 due to
the 15% residential base rate reduction. The 15% rate reduction further
reduced ComEd's operating revenues by approximately $226 million in 1999,
compared to 1998 rate levels.

Notwithstanding the rate reductions and subject to certain earnings tests, a
rate freeze will generally be in effect until at least January 1, 2005. During
this period, utilities may reorganize, sell or assign assets, retire or remove
plants from service, and accelerate depreciation or amortization of assets
with limited ICC regulatory review. A utility may request a rate increase
during the rate freeze period only when necessary to ensure the utility's
financial viability, but not before January 1, 2000. Under the earnings
provision of the 1997 Act, if the earned return on common equity of a utility
during this period exceeds an established threshold, one-half of the excess
earnings must be refunded to customers. The threshold rate of return on common
equity is based on the 30-Year Treasury Bond rate, plus 5.5% in the years 1998
and 1999, and plus 8.5% in the years 2000 through 2004. The utility's earned
return on common equity and the threshold return on common equity for ComEd
are each calculated on a two-year average basis. The earnings sharing
provision is applicable only to ComEd's earnings. Consistent with provisions
of the 1997 Act, increased amortization of regulatory assets may be recorded,
thereby reducing the earned return on common equity, if earnings otherwise
would have exceeded the maximum allowable rate of return. The potential for
earnings sharing or increased amortization of regulatory assets could limit
earnings in future periods.

The 1997 Act also allows a portion of ComEd's future revenues to be
segregated and used to support the issuance of securities by ComEd or a SPE.
The proceeds, net of transaction costs, from such security issuances must be
used to refinance outstanding debt or equity or for certain other limited
purposes. The total amount of such securities that may be issued is
approximately $6.8 billion. In December 1998, ComEd initiated the issuance of
$3.4 billion of transitional trust notes through its SPEs, ComEd Funding and
ComEd Funding Trust. The proceeds from the transitional trust notes, net of
transaction costs, were, as required, used to redeem $1,101 million of long-
term debt and $607 million of preference stock in 1999 and reduce ComEd's
outstanding short-term debt by $500 million. During the year 1999, ComEd
recorded an extraordinary loss related to the early redemptions of such long-
term debt, which reduced net income on common stock by approximately $28
million (after-tax). ComEd also recorded $12 million (after-tax) for premiums
paid in connection with the redemption of such preference stock. The
preference stock premiums were included in the provision for dividends for
preference stocks of ComEd on the Statements of Consolidated Operations. As
more fully described in Note 7 of Notes to Financial Statements, ComEd has
repurchased approximately 26.3 million shares of ComEd common stock using $924
million of proceeds. The remaining proceeds from the issuance of the
transitional trust notes will be used for the payment of fees and additional
common stock repurchases. See Note 7 for additional information regarding
ComEd's share repurchases.

Because the 1997 Act is expected ultimately to lead to market-based pricing
of electric generation services, ComEd discontinued SFAS No. 71 regulatory
accounting practices for the generation portion of its business in December
1997. ComEd evaluated the regulatory assets and liabilities related to the
generation portion of its business and determined that it was not probable
that such costs would be recovered through the cash flows from the regulated
portion of its business. Accordingly, the generation-related regulatory assets
and liabilities were written off in the fourth quarter of 1997, resulting in
an extraordinary charge of $810 million (after-tax). The fourth quarter of
1997 also reflected charges totaling $44 million (after-tax) as a result of
ComEd's elimination of its FAC pursuant to an option in the 1997 Act, and a
charge of $60 million (after-tax) for a write down of ComEd's investment

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
in uranium-related properties to realizable value. Projections of the market
price for uranium indicated that the expected incremental costs of mining and
milling uranium at the properties would exceed the expected market price for
uranium and such costs are not expected to be recoverable in a competitive
market.

The 1997 Act also requires utilities to establish or join an ISO that will
independently manage and control utility transmission systems. Additionally,
the 1997 Act includes the leveling of certain regulatory requirements to
permit operational flexibility, the leveling of certain regulatory and tax
provisions as applied to various electric suppliers and a new, more stringent,
liability standard applicable to ComEd in the event of a major outage.

(4) Cumulative Effect of a Change in Accounting Principle. In the fourth
quarter of 1997, ComEd changed its accounting method for revenue recognition
to record revenues associated with service which has been provided to
customers but has not yet been billed at the end of each accounting period,
retroactive to January 1, 1997. This change in accounting method increased
operating results for the year 1997 to reflect the one-time cumulative effect
of the change for years prior to 1997 by $197 million (after-tax).

(5) Sale of Plants and Closure. In December 1999, ComEd completed the sale
of its fossil generating assets to EME for a cash purchase price of $4.8
billion. The fossil generating assets represent an aggregate generating
capacity of approximately 9,772 megawatts.

Just prior to the consummation of the fossil plant sale, ComEd transferred
these assets to an affiliate, Unicom Investment. In consideration for the
transferred assets, Unicom Investment paid ComEd consideration totalling
approximately $4.8 billion in the form of a demand note in the amount of
approximately $2.4 billion and an interest-bearing Note with a maturity of
twelve years. Unicom Investment immediately sold the fossil plant assets to
EME, in consideration of which Unicom Investment received approximately $4.8
billion in cash from EME. Immediately after its receipt of the cash payment
from EME, Unicom Investment paid the $2.4 billion aggregate principal due to
ComEd under the demand note. Unicom Investment will use the remainder of the
cash received from EME to fund other business opportunities, including the
share repurchases. Of the cash received by ComEd, $1.8 billion is expected to
be used to pay the costs and taxes associated with the fossil plant sale
including ComEd's contribution of $250 million of the proceeds to an
environmental trust as required by the 1997 Act. The remainder of the demand
note proceeds will be available to ComEd to fund, among other things,
transmission and distribution projects, nuclear generation station projects,
and environmental and other initiatives.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
program which generally extends 60 days from the date of the fossil plant
sale. Consistent with the provisions of the 1997 Act, the (pre-tax) gain on
the sale of $2.587 billion resulted in a regulatory liability, which was used
to recover regulatory assets. Therefore, the gain on the sale, excluding $43
million of amortization of investment tax credits, was recorded as a
regulatory liability in the amount of $2.544 billion and amortized in the
fourth quarter of 1999. The amortization of the regulatory liability and
additional regulatory asset amortization of $2.456 billion are reflected in
depreciation and amortization expense on ComEd's Statement of Consolidated
Operations and resulted in a net reduction to depreciation and amortization
expense of $88 million. See Note 1, under "Regulatory Assets and Liabilities,"
for additional information.

In January 1998, the Boards of Directors of Unicom and ComEd authorized the
permanent cessation of nuclear generation operations and retirement of
facilities at ComEd's 2,080 megawatt Zion nuclear generating station. Such
retirement resulted in a charge in the fourth quarter of 1997 of $523 million
(after-tax). The charge included a liability for estimated future closing
costs associated with the retirement of the station, excluding severance
costs, resulting in a charge of $117 million (after-tax). ComEd has recorded
reductions to the expected liability for future closing costs of $16 million
(after-tax) and $15 million (after-tax) in 1999 and in 1998, respectively, to
reflect employees being reassigned or removed from the payroll sooner than
anticipated, and lower support costs and use of contractors. See Note 17 for
information regarding costs of voluntary employee separation plans.

ComEd completed the sale of its State Line and Kincaid coal-fired generating
stations (representing 1,598 megawatts of generating capacity) in December
1997 and February 1998, respectively. The net proceeds of the sales, after
income tax effects and closing costs, were approximately $190 million. The
proceeds were used to retire or redeem existing debt in the first quarter of
1998. ComEd has entered into 15-year purchased power agreements for the output
of the stations.

(6) Authorized Shares, Voting Rights and Stock Rights of Capital Stock. At
December 31, 1999, the authorized shares of capital stock were: common stock--
250,000,000 shares; preference stock--7,510,451 shares; $1.425 convertible
preferred stock--56,291 shares; and prior preferred stock--850,000 shares. The
preference and prior preferred stocks are issuable in series and may be issued
with or without mandatory redemption requirements. Holders of shares at any
time outstanding, regardless of class, are entitled to one vote for each share
held on each matter submitted to a vote of such shareholders, with the right
to cumulate votes in all elections for directors.

(7) Common Equity. In the fourth quarter of 1998, ComEd entered into a
forward purchase arrangement with Unicom for the repurchase of $200 million of
ComEd common stock. This contract, which was accounted for as an equity
instrument as of December 31, 1998, was settled on a net cash basis in
February 1999, resulting in a $16 million reduction to common stock equity on
the Consolidated Balance Sheets.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
a receivable on the Consolidated Balance Sheets based on the aggregate market
value of the shares deliverable under the arrangements. In 1999, net
unrealized losses of $44 million (after-tax) were recorded related to the
arrangements. The settlement of the arrangements in January 2000 resulted in a
gain of $113 million (after-tax). See Note 24 of Notes to Financial Statements
for additional information.

At December 31, 1999, shares of common stock were reserved for the following
purposes:

Conversion of $1.425 convertible preferred stock................... 57,416
Conversion of warrants............................................. 25,230
------
82,646
======

Shares of common stock issued for the years 1999, 1998 and 1997 were as
follows:

1999 1998 1997
----- ----- -----

Conversion of $1.425 convertible preferred stock.............. 1,954 7,848 9,261
Conversion of warrants........................................ 109 228 362
----- ----- -----
2,063 8,076 9,623
===== ===== =====

As of December 31, 1999 and 1998, 264,406 and 178,982 shares, respectively,
of ComEd common stock were reacquired and held as treasury stock at a cost of
$10 million and $7 million, respectively.

At December 31, 1999 and 1998, 75,692 and 76,079, respectively, of ComEd
common stock purchase warrants were outstanding. The warrants entitle the
holders to convert such warrants into common stock of ComEd at a conversion
rate of one share of common stock for three warrants.

As of December 31, 1999 and 1998, $852 million and $580 million,
respectively, of retained earnings had been appropriated for future dividend
payments.

(8) Stock Option Awards/Employee Stock Purchase Plan. Unicom has a
nonqualified stock option awards program under its Long-Term Incentive Plan.
The stock option awards program was adopted by Unicom in July 1996 to reward
valued employees responsible for, or contributing to, the management, growth
and profitability of Unicom and its subsidiaries. The stock options granted
expire ten years from their grant date. One-third of the shares subject to the
options vest on each of the first three anniversaries of the option grant
date. In addition, the stock options will become fully vested immediately if
the holder dies, retires, is terminated by the Company, other than for cause,
or qualifies for long-term disability. Options granted before July 22, 1998
also vest in full upon a change in control, while options granted on or after
July 22, 1998 vest in full if the option holder is terminated within 24 months
after a change of control.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Stock option transactions for the years 1999, 1998 and 1997 are summarized
as follows:

Number of Weighted Average
Options Exercise Price
--------- ----------------

Outstanding as of January 1, 1997................... 1,188,000 $25.500
Granted during the year............................. 1,339,350 22.313
Exercised during the year........................... (23,423) 25.500
Expired/cancelled during the year................... (212,549) 23.632
---------
Outstanding as of December 31, 1997................. 2,291,378 23.810
Granted during the year............................. 1,379,525 35.234
Exercised during the year........................... (404,082) 24.244
Expired/cancelled during the year................... (123,928) 25.715
---------
Outstanding as of December 31, 1998................. 3,142,893 28.694
Granted during the year............................. 1,848,050 35.750
Exercised during the year........................... (313,231) 24.102
Expired/cancelled during the year................... (179,076) 33.551
---------
Outstanding as of December 31, 1999................. 4,498,636 31.719
=========

Of the stock options outstanding at December 31, 1999, 1,676,854 had vested
with a weighted average exercise price of $27.

The fair value of each stock option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions:

Stock Option Grant Date
-----------------------
1999 1998 1997
------- ------- -------

Expected option life.................................. 7 years 7 years 7 years
Dividend yield........................................ 4.50% 4.54% 7.20%
Expected volatility................................... 23.02% 21.95% 22.29%
Risk-free interest rate............................... 4.83% 5.58% 6.25%

The estimated weighted average fair value for each stock option granted in
1999, 1998 and 1997 was $6.48, $6.62 and $2.79, respectively.

The ESPP allows employees to purchase Unicom common stock at a ten percent
discount from market value. Substantially all of the employees of Unicom,
ComEd and their subsidiaries are eligible to participate in the ESPP. Unicom
issued 89,500, 94,270 and 196,003 shares of common stock for the years 1999,
1998 and 1997, respectively, under the ESPP at a weighted average annual
purchase price of $33.58, $33.11 and $19.15, respectively.

ComEd has adopted the disclosure-only provisions of SFAS No. 123. For
financial reporting purposes, ComEd has adopted APB No. 25, and thus no
compensation cost has been recognized for the stock option awards program or
ESPP. If ComEd had recorded compensation expense for the stock options granted
and the shares of common stock issued under the ESPP in accordance with SFAS
No. 123 using the fair value based method of accounting, the additional charge
to operations would have been $4 million (after-tax), $2 million (after-tax)
and $2 million (after-tax) for the years 1999, 1998 and 1997, respectively.

(9) Preferred and Preference Stocks Without Mandatory Redemption
Requirements. During the year 1999, 13,449,549 shares of preferred or
preference stock without mandatory redemption requirements were redeemed and
no shares were issued. No shares of preferred or preference stocks

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
without mandatory redemption requirements were issued or redeemed during 1998
and 1997. All series other than Series $1.425 have been redeemed.

The outstanding shares of $1.425 convertible preferred stock are convertible
at the option of the holders thereof, at any time, into common stock at the
rate of 1.02 shares of common stock for each share of convertible preferred
stock, subject to future adjustment. The convertible preferred stock may be
redeemed by ComEd at $42 per share, plus accrued and unpaid dividends, if any.
The involuntary liquidation price of the $1.425 convertible preferred stock is
$31.80 per share, plus accrued and unpaid dividends, if any.

(10) Preference Stock Subject to Mandatory Redemption Requirements. During
1999, 1998 and 1997, no shares of preference stock subject to mandatory
redemption requirements were issued. During 1999, 1998 and 1997, 1,020,345,
338,215 and 438,215 shares, respectively, of preference stock subject to
mandatory redemption requirements were reacquired to meet sinking fund
requirements or were part of the early redemption in 1999. There were 700,000
shares of Series $6.875 preference stock outstanding at December 31, 1999, at
an aggregate stated value of $69 million. This series is non-callable and is
required to be redeemed on May 1, 2000. The sinking fund price is $100 and the
involuntary liquidation price is $99.25 per share, plus accrued and unpaid
dividends, if any. The $69 million is included in current liabilities.

(11) Company-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trusts Holding Solely Company's Subordinated Debt Securities. In
September 1995, ComEd Financing I, a wholly-owned subsidiary trust of ComEd,
issued 8,000,000 of its 8.48% ComEd-obligated mandatorily redeemable preferred
securities. The sole asset of ComEd Financing I is $206.2 million principal
amount of ComEd's 8.48% subordinated deferrable interest notes due September
30, 2035. In January 1997, ComEd Financing II, a wholly-owned subsidiary trust
of ComEd, issued 150,000 of its 8.50% ComEd-obligated mandatorily redeemable
capital securities. The sole asset of ComEd Financing II is $154.6 million
principal amount of ComEd's 8.50% subordinated deferrable interest debentures
due January 15, 2027. There is a full and unconditional guarantee by ComEd of
the Trusts' obligations under the securities issued by the Trusts. However,
ComEd's obligations are subordinate and junior in right of payment to certain
other indebtedness of ComEd. ComEd has the right to defer payments of interest
on the subordinated deferrable interest notes by extending the interest
payment period, at any time, for up to 20 consecutive quarters. Similarly,
ComEd has the right to defer payments of interest on the subordinated
deferrable interest debentures by extending the interest payment period, at
any time, for up to ten consecutive semi-annual periods. If interest payments
on the subordinated deferrable interest notes or debentures are so deferred,
distributions on the preferred securities will also be deferred. During any
deferral, distributions will continue to accrue with interest thereon. In
addition, during any such deferral, ComEd may not declare or pay any dividend
or other distribution on, or redeem or purchase, any of its capital stock.

The subordinated deferrable interest notes are redeemable by ComEd, in whole
or in part, from time to time, on or after September 30, 2000, and with
respect to the subordinated deferrable interest debentures, on or after
January 15, 2007, or at any time in the event of certain income tax
circumstances. If the subordinated deferrable interest notes or debentures are
redeemed, the Trusts must redeem preferred securities having an aggregate
liquidation amount equal to the aggregate principal amount of the subordinated
deferrable interest notes or debentures so redeemed. In the event of the
dissolution, winding up or termination of the Trusts, the holders of the
preferred securities will be entitled to receive, for each preferred security,
a liquidation amount of $25 for the securities of ComEd Financing I and $1,000
for the securities of ComEd Financing II, plus accrued and unpaid

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
distributions thereon, including interest thereon, to the date of payment,
unless in connection with the dissolution, the subordinated deferrable
interest notes or debentures are distributed to the holders of the preferred
securities.

(12) Long-Term Debt. ComEd initiated the issuance of $3.4 billion of
transitional trust notes through its SPEs, ComEd Funding and ComEd Funding
Trust, in the fourth quarter of 1998. The current amount outstanding is as
follows:

Series Principal Amount
------------------------ ----------------------
(Thousands of Dollars)

5.38% due March 25, 2000........................... $ 94,967
5.29% due June 25, 2001............................ 425,033
5.34% due March 25, 2002........................... 258,861
5.39% due June 25, 2003............................ 421,139
5.44% due March 25, 2005........................... 598,511
5.63% due June 25, 2007............................ 761,489
5.74% due December 25, 2008........................ 510,000
----------
$3,070,000
==========

For accounting purposes, the liabilities of ComEd Funding Trust for the
transitional trust notes are reflected as long-term debt on the Consolidated
Balance Sheets of Unicom and ComEd.

The proceeds, net of transaction costs, from the transitional trust notes
have been used, as required, to redeem debt and equity. During 1999, ComEd
redeemed or reacquired $1,121 million of long-term debt.

Sinking fund requirements and scheduled maturities remaining through 2004
for ComEd's first mortgage bonds, transitional trust notes, sinking fund
debentures and other long-term debt outstanding at December 31, 1999, after
deducting deposits made for the retirement of sinking fund debentures, are
summarized as follows: 2000--$732 million; 2001--$345 million; 2002--$645
million; 2003--$445 million; and 2004--$577 million.

At December 31, 1999, ComEd's outstanding first mortgage bonds maturing
through 2004 were as follows:

Principal Amount
Series ----------------------
(Thousands of Dollars)

9 3/8% due February 15, 2000....................... $ 42,245
6 1/2% due April 15, 2000.......................... 230,000
6 3/8% due July 15, 2000........................... 100,000
7 3/8% due September 15, 2002...................... 200,000
6 5/8% due July 15, 2003........................... 100,000
5 3/10% due January 15, 2004....................... 26,000
--------
$698,245
========

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Other long-term debt outstanding at December 31, 1999 is summarized as
follows:

Principal
Debt Security Amount Interest Rate
- -------------------------- ---------- ------------------------------------------
(Thousands
of
Dollars)

Notes:
Medium Term Notes, Series
3N due various dates
through October 15, 2004 $156,000 Interest rates ranging from 9.17% to 9.20%
Notes 50 Variable interest rate
Notes due January 15,
2004 150,000 Interest rate of 7.375%
Notes due October 15,
2005 235,000 Interest rate of 6.40%
Notes due January 15,
2007 150,000 Interest rate of 7.625%
Notes due July 15, 2018 225,000 Interest rate of 6.95%
--------
$916,050
--------
Purchase Contract Obliga-
tion
due April 30, 2005 $ 301 Interest rate of 3.00%
--------
$916,351
========

Long-term debt maturing within one year has been included in current
liabilities.

ComEd's outstanding first mortgage bonds are secured by a lien on
substantially all property and franchises, other than expressly excepted
property, owned by ComEd.

(13) Lines of Credit. ComEd had total unused bank lines of credit of $800
million at December 31, 1999. Of that amount, $500 million expires on December
15, 2000 and $300 million expires on December 17, 2002. The interest rate is
set at the time of a borrowing and is based on several floating rate bank
indices plus a spread which is dependent upon the credit rating of ComEd's
outstanding first mortgage bonds or on a prime interest rate. ComEd is
obligated to pay commitment and facility fees with respect to the line of
credit.

(14) Disposal of Spent Nuclear Fuel. Under the Nuclear Waste Policy Act of
1982, the DOE is responsible for the selection and development of repositories
for, and the disposal of, spent nuclear fuel and high-level radioactive waste.
ComEd, as required by that Act, has entered into a contract with the DOE to
provide for the disposal of spent nuclear fuel and high-level radioactive
waste from ComEd's nuclear generating stations. The contract with the DOE
requires ComEd to pay the DOE a one-time fee applicable to nuclear generation
through April 6, 1983 of $277 million, with interest to date of payment, and a
fee payable quarterly equal to one mill per kilowatthour of nuclear-generated
and sold electricity after April 6, 1983. Pursuant to the contract, ComEd has
elected to pay the one-time fee, with interest, just prior to the first
delivery of spent nuclear fuel to the DOE. The liability for the one-time fee
and the related interest is reflected on the Consolidated Balance Sheets. The
contract also provided for acceptance by the DOE of such materials to begin in
January 1998; however, that date was not met by the DOE and is expected to be
delayed significantly. The DOE's current estimate for opening a facility to
accept such waste is 2010. This extended delay in spent nuclear fuel
acceptance by the DOE has led to ComEd's consideration of additional dry
storage alternatives. On July 30, 1998, ComEd filed a complaint against the
United States in the United States Court of Federal Claims seeking to recover
damages caused by the DOE's failure to honor its contractual obligation to
begin disposing of spent nuclear fuel in January 1998. On November 5, 1999,
ComEd's case was stayed pending the decision of the United States Court of
Appeals for the Federal Circuit in several similar cases brought by other
utilities.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

(15) Fair Value of Financial Instruments. The following methods and
assumptions were used to estimate the fair value of financial instruments
either held, or issued and outstanding. The disclosure of such information
does not purport to be a market valuation of ComEd and subsidiary companies as
a whole. The impact of any realized or unrealized gains or losses related to
such financial instruments on the financial position or results of operations
of ComEd and subsidiary companies is primarily dependent on the treatment
authorized under future ratemaking proceedings.

Investments. Securities included in the nuclear decommissioning funds have
been classified and accounted for as "available for sale" securities. The
estimated fair value of the nuclear decommissioning funds, as determined by
the trustee and based on published market data, as of December 31, 1999 and
1998 was as follows:

December 31, 1999 December 31, 1998
-------------------------------- --------------------------------
Unrealized
Gains/ Unrealized
Cost Basis (Losses) Fair Value Cost Basis Gains Fair Value
---------- ---------- ---------- ---------- ---------- ----------
(Thousands of Dollars)

Short-term investments.. $ 41,362 $ 95 $ 41,457 $ 40,907 $ 42 $ 40,949
U.S. Government and
Agency issues.......... 245,399 (1,993) 243,406 197,240 20,213 217,453
Municipal bonds......... 383,816 (940) 382,876 416,121 24,124 440,245
Corporate bonds......... 196,942 (5,699) 191,243 241,111 8,790 249,901
Common stock............ 832,802 732,893 1,565,695 740,956 565,630 1,306,586
Other................... 125,072 (3,209) 121,863 11,345 838 12,183
---------- -------- ---------- ---------- -------- ----------
$1,825,393 $721,147 $2,546,540 $1,647,680 $619,637 $2,267,317
========== ======== ========== ========== ======== ==========

At December 31, 1999, the debt securities held by the nuclear
decommissioning funds had the following maturities:

Cost Basis Fair Value
---------- ----------
(Thousands of
Dollars)

Within 1 year....................................... $47,853 $48,421
1 through 5 years................................... 263,588 263,117
5 through 10 years.................................. 227,927 225,860
Over 10 years....................................... 409,823 400,358

The net earnings of the nuclear decommissioning funds, which are recorded in
the accumulated provision for depreciation, for the years 1999, 1998 and 1997
were as follows:

1999 1998 1997
---------- ---------- ----------
(Thousands of Dollars)

Gross proceeds from sales of securities....... $1,765,000 $1,795,484 $2,163,522
Less cost based on specific identification.... 1,718,151 1,728,092 2,088,300
---------- ---------- ----------
Realized gains on sales of securities......... $ 46,849 $ 67,392 $ 75,222
Other realized fund earnings, net of expenses. 62,927 40,374 39,123
---------- ---------- ----------
Total realized net earnings of the funds...... $ 109,776 $ 107,766 $ 114,345
Unrealized gains.............................. 101,510 190,503 198,741
---------- ---------- ----------
Total net earnings of the funds.............. $211,286 $ 298,269 $ 313,086
========== ========== ==========

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Securities held by certain trusts, which were established to provide for
supplemental retirement benefits and executive medical claims, have been
classified and accounted for as "available for sale." The estimated fair value
of these securities, as determined by the trustee and based on published
market data, as of December 31, 1999 was as follows:

Cost Unrealized Fair
Basis Gain Value
------- ---------- -------
(Thousands of Dollars)

Short-term investments.............................. $ 162 $ -- $ 162
Registered investment companies..................... 21,641 12,471 34,112
------- ------- -------
$21,803 $12,471 $34,274
======= ======= =======

Current Assets. Cash, temporary cash investments, cash held for redemption
of securities and special deposits are stated at cost, which approximates
their fair value because of the short maturity of these instruments. The
securities included in these categories have been classified as "available for
sale" securities.

Capitalization. The estimated fair values of preferred and preference
stocks, Company-obligated mandatorily redeemable preferred securities of
subsidiary trusts holding solely Company's subordinated debt securities,
transitional trust notes and long-term debt were obtained from an independent
consultant. The estimated fair values, which include the current portions of
redeemable preference stock and long-term debt but exclude accrued interest
and dividends, as of December 31, 1999 and 1998 were as follows:

December 31, 1999 December 31, 1998
--------------------------------- --------------------------------
Unrealized
Carrying Losses/ Carrying Unrealized Fair
Value (Gains) Fair Value Value Losses Value
---------- ---------- ---------- ---------- ---------- ----------
(Thousands of Dollars)

Preferred and preference
stocks................. $ 71,265 $ 58 $ 71,323 $ 678,156 $ 11,500 $ 689,656
Company-obligated
mandatorily redeemable
preferred securities of
subsidiary trusts
holding solely
Company's subordinated
debt securities........ $ 350,000 $ (10,595) $ 339,405 $ 350,000 $ 20,678 $ 370,678
Transitional trust
notes.................. $3,057,112 $(163,600) $2,893,512 $3,382,821 $ 67,168 $3,449,989
Long-term debt.......... $4,637,062 $ (22,237) $4,614,825 $5,791,757 $442,077 $6,233,834

Current Liabilities. The carrying value of notes payable, which consists of
commercial paper and bank loans maturing within one year, approximates the
fair value because of the short maturity of these instruments. See
"Capitalization" above for a discussion of the fair value of the current
portion of long-term debt and redeemable preference stock.

Other Noncurrent Liabilities. The carrying value of accrued spent nuclear
fuel disposal fee and related interest represents the settlement value as of
December 31, 1999 and 1998; therefore, the carrying value is equal to the fair
value.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

(16) Pension and Postretirement Benefits. As of December 31, 1999, ComEd had
a qualified non-contributory defined benefit pension plan which covers all
regular employees of ComEd and certain of Unicom's subsidiaries. Benefits
under this plan reflect each employee's compensation, years of service and age
at retirement. Funding is based upon actuarially determined contributions that
take into account the amount deductible for income tax purposes and the
minimum contribution required under the Employee Retirement Income Security
Act of 1974, as amended. The December 31, 1999 and 1998 pension liabilities
and related data were determined using the January 1, 1999 actuarial
valuation. Additionally, ComEd maintains a nonqualified supplemental
retirement plan which covers any excess pension benefits that would be payable
to management employees under the qualified plan but which are limited by the
Internal Revenue Code. In 1998, Indiana Company's qualified defined benefit
pension plan was merged into ComEd's pension plan as a result of the sale of
Indiana Company's State Line Station and the transfer of its remaining
employees to ComEd.

ComEd provides certain postretirement medical, dental and vision care, and
life insurance for retirees and their dependents and for the surviving
dependents of eligible employees and retirees. Generally, the employees become
eligible for postretirement benefits if they retire no earlier than age 55
with ten years of service. The liability for postretirement benefits is funded
through trust funds based upon actuarially determined contributions that take
into account the amount deductible for income tax purposes. The health care
plans are contributory, funded jointly by the companies and the participating
retirees. The December 31, 1999 and 1998 postretirement benefit liabilities
and related data were determined using the January 1, 1999 actuarial
valuations.

Reconciliations of the beginning and ending balances of the projected
pension benefit obligation and the accumulated postretirement benefit
obligation, and the funded status of these plans for the years 1999 and 1998
were as follows:

Twelve Months Ended Twelve Months Ended
December 31, 1999 December 31, 1998
-------------------------- --------------------------
Other Other
Pension Postretirement Pension Postretirement
Benefits Benefits Benefits Benefits
---------- -------------- ---------- --------------
(Thousands of Dollars)
Change in benefit
obligation
- -----------------

Benefit obligation at
beginning of period.... $4,326,000 $1,236,000 $4,010,000 $1,139,000
Service cost............ 120,000 41,000 115,000 38,000
Interest cost........... 285,000 82,000 273,000 78,000
Plan participants' con-
tributions............. -- 4,000 -- 3,000
Actuarial loss/ (gain).. (458,000) (188,000) 165,000 25,000
Benefits paid........... (241,000) (51,000) (237,000) (47,000)
Special termination ben-
efits.................. 62,000 27,000 -- --
---------- ---------- ---------- ----------
Benefit obligation at
end of period......... $4,094,000 $1,151,000 $4,326,000 $1,236,000
---------- ---------- ---------- ----------

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Fair value of plan as-
sets at beginning of
period................. $4,015,000 $ 865,000 $3,706,000 $ 767,000
Actual return on plan
assets................. 492,000 105,000 535,000 122,000
Employer contribution... 3,000 24,000 11,000 20,000
Plan participants' con-
tributions............. -- 4,000 -- 3,000
Benefits paid........... (241,000) (51,000) (237,000) (47,000)
---------- --------- ---------- ---------
Fair value of plan as-
sets at end of period. $4,269,000 $ 947,000 $4,015,000 $ 865,000
---------- --------- ---------- ---------
Plan assets
greater/(less) than
benefit obligation..... $ 175,000 $(204,000) $ (311,000) $(371,000)
Unrecognized net actuar-
ial loss/(gain)........ (523,000) (555,000) 36,000 (371,000)
Unrecognized prior serv-
ice cost/(asset)....... (51,000) 41,000 (60,000) 48,000
Unrecognized transition
obligation/(asset)..... (79,000) 276,000 (101,000) 323,000
---------- --------- ---------- ---------
Accrued liability for
benefits.............. $ (478,000) $(442,000) $ (436,000) $(371,000)
========== ========= ========== =========

The assumed discount rate used to determine the benefit obligation as of
December 31, 1999 and 1998 was 7.75% and 6.75%, respectively. The fair value
of plan assets excludes $25 million and $21 million held in grantor trust as
of December 31, 1999 and 1998, respectively, for the payment of benefits under
the supplemental plan and $9 million and $7 million held in a grantor trust as
of December 31, 1999 and 1998, respectively, for the payment of postretirement
medical benefits.

The components of pension and other postretirement benefit costs, portions
of which were recorded as components of construction costs, for the years
1999, 1998 and 1997 were as follows:

1999 1998 1997
-------- -------- --------
Pension Benefit Costs
- --------------------- (Thousands of Dollars)

Service cost..................................... $120,000 $115,000 $100,000
Interest cost on projected benefit obligation.... 285,000 273,000 261,000
Expected return on plan assets................... (362,000) (342,000) (310,000)
Amortization of transition asset................. (13,000) (12,000) (13,000)
Amortization of prior service asset.............. (4,000) (4,000) (4,000)
Recognized loss.................................. 3,000 2,000 2,000
Curtailment (gain)/loss.......................... 16,000 -- (5,000)
-------- -------- --------
Net periodic benefit cost....................... $ 45,000 $ 32,000 $ 31,000
======== ======== ========
Other Postretirement Benefit Costs
- ----------------------------------
Service cost..................................... $ 41,000 $ 38,000 $ 34,000
Interest cost on accumulated benefit obligation.. 82,000 78,000 76,000
Expected return on plan assets................... (76,000) (69,000) (61,000)
Amortization of transition obligation............ 22,000 22,000 22,000
Amortization of prior service cost............... 4,000 4,000 4,000
Recognized gain.................................. (14,000) (14,000) (13,000)
Severance plan cost.............................. 1,000 6,000 8,000
Curtailment loss................................. 35,000 -- --
-------- -------- --------
Net periodic benefit cost....................... $ 95,000 $ 65,000 $ 70,000
======== ======== ========

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

In accounting for the pension costs and other postretirement benefit costs
under the plans, the following weighted average actuarial assumptions were
used for the periods during 1999, 1998 and 1997:

Other
Pension Benefits Postretirement Benefits
----------------- -----------------------
1999 1998 1997 1999 1998 1997
----- ----- ----- ------- ------- -------

Annual discount rate................. 6.75% 7.00% 7.50% 6.75% 7.00% 7.50%
Annual long-term rate of return on
plan assets......................... 9.25% 9.50% 9.75% 8.97% 9.20% 9.40%
Annual rate of increase in future
compensation levels................. 4.00% 4.00% 4.00% -- -- --

The pension curtailment gain in December 1997 represents the recognition of
prior service costs, the transition asset and the decrease in the projected
benefit obligation related to the reduction in the number of employees due to
Indiana Company's sale of State Line Station. The pension and other
postretirement benefit curtailment losses in December 1999 represent the
recognition of prior service costs and transition obligations and an increase
in the benefit obligations resulting from special termination benefits related
to the reduction in the number of employees due to the sale of the fossil
stations.

The health care cost trend rates used to measure the expected cost of the
postretirement medical benefits are assumed to be 8.0% for pre-Medicare
recipients and 6.0% for Medicare recipients for 1999. Those rates are assumed
to decrease in 0.5% annual increments to 5% for the years 2005 and 2001,
respectively, and to remain level thereafter. The health care cost trend
rates, used to measure the expected cost of postretirement dental and vision
benefits, are a level 3.5% and 2.0% per year, respectively. Assumed health
care cost trend rates have a significant effect on the amounts reported for
the health care plans. A one percentage point change in the assumed health
care cost trend rates would have the following effects:

1 Percentage 1 Percentage
Point Increase Point Decrease
-------------- --------------
(Thousands of Dollars)

Effect on total 1999 service and interest cost
components...................................... $ 26,000 $ (20,000)
Effect on postretirement benefit obligation...... 190,000 (151,000)

In addition, an employee savings and investment plan is available to
eligible employees of ComEd and certain of its subsidiaries. Under the plan,
each participating employee may contribute up to 20% of such employee's base
pay and the participating companies match the first 6% of such contribution
equal to 100% of the first 2% of contributed base salary, 70% of the next 3%
of contributed base salary and 25% of the next 1% of contributed base salary.
The participating companies' contributions were $32 million, $32 million and
$33 million for each of the years 1999, 1998 and 1997, respectively.

(17) Separation Plan Costs. O&M expenses included $10 million, $48 million
and $39 million for the years 1999, 1998 and 1997, respectively, for costs
related to voluntary separation offers to certain employees of ComEd and
Indiana Company, as well as certain other employee-related costs. Such costs
resulted in charges of $6 million (after-tax), $29 million (after-tax), and
$24 million (after-tax) for the years 1999, 1998 and 1997, respectively. See
Note 5 of Notes to Financial Statements regarding employee separation costs
related to the fossil plant sale.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

(18) Income Taxes. The components of the net deferred income tax liability
at December 31, 1999 and December 31, 1998 were as follows:

December 31, December 31,
1999 1998
------------ ------------
(Thousands of Dollars)

Deferred income tax liabilities:
Accelerated cost recovery and liberalized deprecia-
tion, net of removal costs......................... $2,781,601 $4,007,681
Overheads capitalized............................... 159,836 140,922
Repair allowance.................................... 221,502 233,861
Regulatory assets recoverable through future rates.. 688,946 680,356
Deferred income tax assets:
Postretirement benefits............................. (376,207) (331,566)
Unamortized investment tax credits.................. (161,756) (191,135)
Regulatory liabilities to be settled through future
rates.............................................. (596,157) (595,005)
Nuclear plant closure............................... (5,456) (38,354)
Other--net.......................................... (310,658) (145,268)
---------- ----------
Net deferred income tax liability.................... $2,401,651 $3,761,492
========== ==========

The $1,360 million decrease in the net deferred income tax liability from
December 31, 1998 to December 31, 1999 is comprised of a $1,378 million credit
to net deferred income tax expense pertaining primarily to the fossil plant
sale, a $7 million increase in regulatory assets net of regulatory liabilities
pertaining to income taxes for the period and $11 million related to other
items. The amount of accelerated cost recovery and liberalized depreciation
included in deferred income tax liabilities for both periods includes amounts
related to the regulatory asset for impaired production plant. The amount of
regulatory assets included in deferred income tax liabilities primarily
relates to the equity component of AFUDC which is recorded on an after-tax
basis, the borrowed funds component of AFUDC which was previously recorded net
of tax and other temporary differences for which the related tax effects were
not previously recorded. The amount of other regulatory liabilities included
in deferred income tax assets primarily relates to deferred income taxes
provided at rates in excess of the current statutory rate.

The components of net income tax expense charged/(credited) to continuing
operations for the years 1999, 1998 and 1997 were as follows:

1999 1998 1997
----------- -------- ---------
(Thousands of Dollars)

Operating income:
Current income taxes....................... $ 1,782,707 $340,098 $ 279,416
Deferred income taxes...................... (1,403,402) 43,299 58,655
Investment tax credits deferred--net....... (25,828) (27,730) (31,015)
Other (income) and deductions:
Current income taxes....................... 457 (51,816) 1,116
Deferred income taxes...................... 25,739 59,458 (385,994)
Investment tax credits..................... (51,740) (12,107) (22,526)
----------- -------- ---------
Net income taxes charged/(credited) to con-
tinuing operations......................... $ 327,933 $351,202 $(100,348)
=========== ======== =========

Provisions for current and deferred federal and state income taxes and
amortization of investment tax credits resulted in the following effective
income tax rates for the years 1999, 1998 and 1997:

1999 1998 1997
-------- -------- ---------

Pre-tax book income (loss) (thousands)........... $978,241 $945,408 $(260,486)
Effective income tax rate........................ 33.5% 37.1% 38.5%

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

The principal differences between net income taxes charged/(credited) to
continuing operations and the amounts computed at the federal statutory rate
of 35% for the years 1999, 1998 and 1997 were as follows:

1999 1998 1997
-------- -------- ---------
(Thousands of Dollars)

Federal income taxes computed at statutory rate. $342,384 $330,893 $ (91,170)
Equity component of AFUDC which was excluded
from taxable income............................ (436) (390) (8,320)
Amortization of investment tax credits, net of
deferred income taxes.......................... (48,216) (25,503) (53,541)
State income taxes, net of federal income taxes. 48,062 43,699 3,470
Unrealized loss/(gain) on forward share
repurchase contract............................ 15,390 -- --
Earnings on nontax-qualified decommissioning
fund........................................... (8,915) -- --
Differences between book and tax accounting,
primarily property-related deductions.......... (20,336) 2,503 49,213
-------- -------- ---------
Net income taxes charged/(credited) to
continuing operations.......................... $327,933 $351,202 $(100,348)
======== ======== =========

(19) Taxes, Except Income Taxes. Provisions for taxes, except income taxes,
for the years 1999, 1998 and 1997 were as follows:

1999 1998 1997
-------- -------- --------
(Thousands of Dollars)

Illinois public utility revenue............... $ 981 $114,981 $228,350
Illinois invested capital..................... -- -- 99,503
Illinois electricity distribution tax......... 114,241 110,025 --
Municipal utility gross receipts.............. 99,701 152,501 168,094
Real estate................................... 114,394 124,131 150,179
Municipal compensation........................ 73,349 89,210 78,286
Energy assistance and renewable energy charge. 34,423 32,736 --
Other--net.................................... 69,237 73,567 74,755
-------- -------- --------
$506,326 $697,151 $799,167
======== ======== ========

Effective January 1, 1998, the Illinois invested capital tax was repealed
and the Illinois electricity distribution tax was enacted as a replacement.
The new tax is based on the kilowatthours delivered to ultimate consumers.

The 1997 Act changed the nature of several state and municipal taxes that
are collected through customer billings. Before August 1998, the utility taxes
were assessed against the utility. Effective August 1998, the utility taxes
are assessed on the electric consumer rather than the utility. Accordingly,
ComEd records the collections as liabilities and no longer records the taxes
collected through billings as revenues and tax expense. The reduction in
operating revenues and taxes, except income taxes, due to the change in
presentation for such taxes was approximately $174 million in 1999, compared
to 1998, and $110 million in 1998, compared to 1997. This change in
presentation for such taxes did not have an effect on operations.

See Note 22 for additional information regarding Illinois invested capital
taxes.

(20) Lease Obligations of Subsidiary Companies. Under its nuclear fuel lease
arrangement, ComEd may sell and lease back nuclear fuel from a lessor who may
borrow an aggregate of $267 million, consisting of intermediate term notes, to
finance the transactions. A commercial paper/bank borrowing portion expired on
November 23, 1999. With respect to the intermediate term notes, $75 million
expires on November 23, 2000, $115 million expires on November 23, 2001 and
$77 million

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued
expires on November 23, 2003. At December 31, 1999, ComEd's obligation to the
lessor for leased nuclear fuel amounted to approximately $270 million. ComEd
has agreed to make lease payments which cover the amortization of the nuclear
fuel used in ComEd's reactors plus the lessor's related financing costs. ComEd
has an obligation for spent nuclear fuel disposal costs of leased nuclear
fuel.

As of December 31, 1999, future minimum rental payments, net of executory
costs, for capital leases are estimated to aggregate to $298 million,
including $121 million in 2000, $96 million in 2001, $48 million in 2002 and
$33 million in 2003. The estimated interest component of such rental payments
aggregates $27 million. The estimated portions of obligations due within one
year under capital leases of $108 million and $195 million at December 31,
1999 and 1998, respectively, were included in current liabilities on the
Consolidated Balance Sheets.

Future minimum rental payments at December 31, 1999 for operating leases are
estimated to aggregate to $271 million, including $31 million in 2000, $24
million in 2001, $25 million in 2002, $22 million in 2003, $21 million in 2004
and $148 million in 2005-2043.

(21) Joint Plant Ownership. ComEd has a 75% undivided ownership interest in
the Quad Cities nuclear generating station. Further, ComEd is responsible for
75% of all costs which are charged to appropriate investment and O&M accounts,
and provides its own financing. ComEd's net plant investment, including
construction work in progress, in Quad Cities Station on the Consolidated
Balance Sheets was $22 million at December 31, 1999, after reflecting the
accounting impairment recorded in the second quarter of 1998. See Note 1,
under "Regulatory Assets and Liabilities," for additional information.

(22) Commitments and Contingent Liabilities. Purchase commitments,
principally related to construction, nuclear fuel and coal in support of
certain power purchase agreements, approximated $670 million at December 31,
1999. In addition, ComEd has substantial commitments for expected capacity
payments and fixed charges related to certain power purchase agreements. Upon
completion of the fossil plant sale with EME, ComEd entered into arrangements
to assign or settle a substantial portion of its coal purchase commitments and
entered into purchase power agreements with EME. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations," subcaption
"Liquidity and Capital Resources--UTILITY OPERATIONS--Construction Program,"
for additional information regarding ComEd's purchase commitments.

ComEd is a member of NEIL which provides insurance coverage against property
damage and associated replacement power costs occurring at members' nuclear
generating facilities. All companies insured with NEIL are subject to
retrospective premium adjustments if losses exceed accumulated reserve funds.
Capital has been accumulated in the reserve funds such that ComEd would not be
liable for any single incident. However, ComEd could be subject to assessments
in any policy year for each of three types of coverage provided. The maximum
assessments are approximately $53 million for primary property damage, $73
million for excess property damage and $22 million for replacement power.

The NRC's indemnity for public liability coverage under the Price-Anderson
Act is supported by a mandatory industry-wide program under which owners of
nuclear generating facilities could be assessed in the event of nuclear
incidents. Based on the number of nuclear reactors with operating licenses,
ComEd would currently be subject to a maximum assessment of $1,145 million in
the event of an incident, limited to a maximum of $130 million in any calendar
year.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

In addition, ComEd participates in the American Nuclear Insurers Master
Worker Program, which provides coverage for worker tort claims filed for
bodily injury caused by the nuclear energy hazard. This program was modified,
effective January 1, 1998, to provide coverage to all workers whose "nuclear-
related employment" began on or after the commencement date of reactor
operations. ComEd will not be liable for a retrospective assessment under this
new policy. However, ComEd is still subject to a maximum retroactive
assessment of up to $36 million in the event losses incurred under the small
number of policies in the old program exceed accumulated reserves.

Three of ComEd's wholesale municipal customers filed a complaint and request
for refund with the FERC alleging that ComEd failed to properly adjust their
rates, as provided for under the terms of their electric service contracts, to
track certain refunds made to ComEd's retail customers in the years 1992
through 1994. In the third quarter of 1998, the FERC granted the complaint and
directed that refunds be made, with interest. ComEd filed and was granted a
request for rehearing for purposes of reconsideration with the FERC. If the
order is upheld, ComEd must make refunds within 15 days of the resolution for
rehearing. ComEd's management believes an adequate reserve has been
established in connection with this case.

During 1989 and 1991, actions were brought in federal and state courts in
Colorado against ComEd and Cotter seeking unspecified damages and injunctive
relief based on allegations that Cotter has permitted radioactive and other
hazardous material to be released from its mill into areas owned or occupied
by the plaintiffs resulting in property damage and potential adverse health
effects. With respect to Cotter, in 1994 a federal jury returned nominal
dollar verdicts against Cotter on eight plaintiffs' claims in the 1989 cases,
which verdicts were upheld on appeal. The remaining claims in the 1989 actions
have been settled and dismissed. On July 15, 1998, a jury verdict was rendered
in Dodge v. Cotter (United States District Court for the District of Colorado,
Civil Action No. 91-Z-1861), a case relating to 14 of the plaintiffs in the
1991 cases. The verdict against Cotter and in favor of the plaintiff, after an
amended judgement was issued March 11, 1999, totaled approximately $6 million,
including compensatory and punitive damages, interest, and medical monitoring.
On February 11, 2000, the Tenth Circuit Court of Appeals agreed with Cotter,
found that the trial judge had erred in critical rulings and reversed the jury
verdict, remanding the case for new trial. A case involving the next group of
plaintiffs is set for trial in federal district court in Denver on October 2,
2000. Although ComEd sold its investment in Cotter in February 2000, ComEd
will continue to be liable for any court verdicts in favor of the plaintiffs.
The other 1991 cases will necessarily involve the resolution of numerous
contested issues of law and fact. It is Unicom and ComEd's assessment that
these actions will not have a material impact on their financial position or
results of operations.

In August 1999, three class action lawsuits were filed against ComEd related
to a series of service interruptions during the summer of 1999. The combined
effect of these events resulted in over 100,000 customers losing service. On
August 12, 1999, service was interrupted to ComEd customers on the near north
and near west side of the City's central business district. While major
commercial customers were affected, all service was restored on the same date.
The class action complaints have been consolidated and seek to recover damages
for personal injuries and property damage, as well as economic loss for these
events. Further, ComEd initiated expedited claim settlements for those with
primarily food spoilage claims. Conditional class certification has been
approved by the Court for the sole purpose of exploring settlement talks. The
lawsuits are pending in the Circuit Court of Cook County. ComEd has filed a
motion challenging the legal sufficiency of the consolidated complaints. The
plaintiff's response is due April 14, 2000 and any reply by ComEd is due May
12, 2000. The motion to dismiss is currently scheduled to be argued on May 23,
2000. ComEd's management believes adequate reserves have been established in
connection with these cases.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Continued

Following the above-referenced series of service interruptions, the ICC
opened a three-phase investigation of the design and reliability of ComEd's
transmission and distribution system. At the conclusion of each phase of the
investigation, the ICC will issue a report that will include specific
recommendations for ComEd and a timetable for executing the recommendations.
Hearings on Phase I of the investigation were held the week of January 3,
2000, which focused on the outages of July and August 1999. Reports on Phase
II and Phase III, focusing on the transmission and distribution system
generally, are anticipated in the second quarter of 2000. The final phase of
the investigation is expected to conclude in early 2001.

ComEd is involved in administrative and legal proceedings concerning air
quality, water quality and other matters. The outcome of these proceedings may
require increases in future construction expenditures and operating expenses
and changes in operating procedures. ComEd and its subsidiaries are or are
likely to become parties to proceedings initiated by the U.S. EPA, state
agencies and/or other responsible parties under CERCLA with respect to a
number of sites, including MGP sites, or may voluntarily undertake to
investigate and remediate sites for which they may be liable under CERCLA.

ComEd generally did not operate MGPs as a corporate entity but did, however,
acquire MGP sites as part of the absorption of smaller utilities.
Approximately half of these sites were transferred to then Northern Illinois
Gas Company (Nicor Gas) as part of a general conveyance in 1954. ComEd also
acquired former MGP sites as vacant real estate on which ComEd facilities have
been constructed. To date, ComEd has identified 44 former MGP sites for which
it may be liable for remediation. In the fourth quarter of 1999, ComEd re-
evaluated its environmental remediation strategies. As a result of this re-
evaluation, ComEd's current best estimate of its costs of former MGP site
investigation and remediation is $93 million in current-year (2000) dollars
(reflecting a discount rate of 6.5%). Such estimate, reflecting an estimated
inflation rate of 3% and before the effects of discounting, is $182 million.
It is expected that the costs associated with investigation and remediation of
former MGP sites will be substantially incurred through 2012, however
monitoring and certain other costs are expected to be incurred through 2042.
ComEd's current best estimate of its costs of former MGP site investigation
and remediation of $93 million has been included in other noncurrent
liabilities on the Consolidated Balance Sheets as of December 31, 1999. The
increase in ComEd's estimated costs of former MGP sites of $68 million in 1999
over 1998 was included in operation and maintenance expenses on ComEd's
Statements of Consolidated Operations. In addition, as of December 31, 1999
and 1998, a reserve of $8 million has been included in other noncurrent
liabilities on the Consolidated Balance Sheets, representing ComEd's estimate
of the liability associated with cleanup costs of sites other than former MGP
sites. These costs estimates are based on currently available information
regarding the responsible parties likely to share in the costs of responding
to site contamination, the extent of contamination at sites for which the
investigation has not yet been completed and the cleanup levels to which sites
are expected to have to be remediated. While ComEd may have rights of
reimbursement under insurance policies, amounts that may be recoverable from
other entities are not considered in establishing the estimated liability for
the environmental remediation costs.

The IDR has issued Notices of Tax Liability to ComEd alleging deficiencies
in Illinois invested capital tax payments for the years 1988 through 1997. The
alleged deficiencies, including interest and penalties, totaled approximately
$52 million as of December 31, 1999. ComEd has protested the notices, and the
matter is currently pending before the IDR's Office of Administrative
Hearings. Interest will continue to accumulate on the alleged tax
deficiencies.

COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES

NOTES TO FINANCIAL STATEMENTS--Concluded

On March 22, 1999, ComEd reached a settlement agreement with the City to end
the arbitration proceeding between ComEd and the City regarding the January 1,
1992 franchise agreement and a supplemental agreement between them. Under the
terms of the settlement agreement, the pending arbitration is to be dismissed
with prejudice and the City is to release ComEd from all claims the City may
have under the supplemental agreement. The settlement agreement was approved
by the City Council on May 12, 1999.

As part of the settlement agreement, ComEd and the City have agreed to a
revised combination of ongoing work under the franchise agreement and new
initiatives that will result in defined transmission and distribution
expenditures by ComEd to improve electric service in the City. The settlement
agreement provides that ComEd will be subject to liquidated damages if the
projects are not completed by various dates, unless it is prevented from doing
so by events beyond its reasonable control. ComEd's current construction
budget considers these projects. In addition, ComEd and the City established
an Energy Reliability and Capacity Account, into which ComEd deposited $25
million following the effectiveness of the settlement agreement and ComEd has
conditionally agreed to deposit up to $25 million at the end of each of the
years 2000, 2001 and 2002, to help ensure an adequate and reliable electric
supply for the City.

The 1997 Act also committed ComEd to spend at least $2 billion from 1999
through 2004 on transmission and distribution facilities outside of the City.

(23) Quarterly Financial Information

Net
Income
Electric Electric on
Operating Operating Net Common
Three Months Ended Revenues Income Income Stock
- ------------------ ---------- --------- -------- -------- ---
(Thousands of Dollars) ---

March 31, 1999....................... $1,528,800 $254,782 $ 94,401 $ 79,104
June 30, 1999........................ $1,678,983 $239,814 $129,985 $126,942
September 30, 1999................... $2,064,011 $435,777 $287,049 $285,219
December 31, 1999.................... $1,495,098 $275,989 $111,294 $107,708

March 31, 1998....................... $1,662,275 $196,169 $ 71,833 $ 57,286
June 30, 1998........................ $1,776,972 $220,452 $104,453 $ 89,991
September 30, 1998................... $2,089,547 $400,913 $286,071 $272,018
December 31, 1998.................... $1,559,748 $228,434 $131,849 $118,027

(24) Subsequent Event. In January 2000, ComEd physically settled the forward
share repurchase arrangements it had with Unicom for the repurchase of 26.3
million ComEd common shares. Prior to settlement, the repurchase arrangements
were recorded as a receivable on Consolidated Balance Sheets based on the
aggregate market value of the shares under the arrangements. In 1999, net
unrealized losses of $44 million (after-tax) were recorded related to the
arrangements. The settlement of the arrangements in January 2000 resulted in a
gain of $113 million (after-tax), which will be recorded in the first quarter
of 2000. The settlement of the arrangements will also result in a reduction in
ComEd's outstanding common shares and common stock equity, effective January
2000.