UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   FORM 10-Q

 /X/    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the quarterly period ended June 30, 2001
                                       -------------

                                      OR

 / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934


                        Commission file number  1-3559

                        Atlantic City Electric Company
                        ------------------------------
            (Exact name of registrant as specified in its charter)

          New Jersey                                         21-0398280
          ----------                                         ----------
    (State of incorporation)                              (I.R.S. Employer
                                                         Identification No.)

800 King Street, P.O. Box 231, Wilmington, Delaware            19899
- -----------------------------------------------------      ------------
    (Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code         302-429-3018
                                                           ------------

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

                       Yes    X   No
                             ---     ---

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

All 18,320,937 issued and outstanding shares of Atlantic City Electric Company
common stock, $3 per share par value, are owned by Conectiv.



                         Atlantic City Electric Company
                         ------------------------------

                               Table of Contents
                               -----------------


                                                                            Page
                                                                            ----
Part I.    Financial Information:

  Item 1.  Financial Statements

           Consolidated Statements of Income for the three and six months
           ended June 30, 2001, and June 30, 2000........................      1

           Consolidated Balance Sheets as of June 30, 2001 and
           December 31, 2000.............................................    2-3

           Consolidated Statements of Cash Flows for the six months
           ended June 30, 2001, and June 30, 2000........................      4

           Notes to Consolidated Financial Statements....................    5-9

  Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations...........................  10-15

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk....     15

Part II.  Other Information

  Item 1.  Legal Proceedings.............................................     16

  Item 6.  Exhibits and Reports on Form 8-K..............................     16

Signature................................................................     16


                                       i


                        Part 1.  FINANCIAL INFORMATION

                         Item 1.  Financial Statements

                        ATLANTIC CITY ELECTRIC COMPANY
                        ------------------------------
                       CONSOLIDATED STATEMENTS OF INCOME
                            (Dollars in Thousands)
                                  (Unaudited)



                                                       Three Months Ended                Six Months Ended
                                                            June 30,                          June 30,
                                                     ----------------------           ----------------------
                                                       2001          2000               2001          2000
                                                     --------      --------           --------      --------
                                                                                        
OPERATING REVENUES                                   $300,877      $236,249           $531,415      $445,135
                                                     --------      --------           --------      --------
OPERATING EXPENSES
    Electric fuel and purchased energy and capacity   149,737       105,180            260,147       195,135
    Operation and maintenance                          66,593        60,510            123,222       121,552
    Depreciation and amortization                      21,712        25,612             43,548        51,307
    Taxes other than income taxes                       8,627         8,536             17,888        18,050
                                                     --------      --------           --------      --------
                                                      246,669       199,838            444,805       386,044
                                                     --------      --------           --------      --------
OPERATING INCOME                                       54,208        36,411             86,610        59,091
                                                     --------      --------           --------      --------
OTHER INCOME                                            2,080         1,394              5,742         3,016
                                                     --------      --------           --------      --------

INTEREST EXPENSE
    Interest charges                                   14,465        18,971             32,270        38,837
    Allowance for borrowed funds used during
      construction and capitalized interest              (136)         (183)              (261)         (359)
                                                     --------      --------           --------      --------
                                                       14,329        18,788             32,009        38,478
                                                     --------      --------           --------      --------

PREFERRED DIVIDEND REQUIREMENTS ON
    PREFERRED SECURITIES OF SUBSIDIARY TRUSTS           1,904         1,904              3,809         3,809
                                                     --------      --------           --------      --------
INCOME BEFORE INCOME TAXES                             40,055        17,113             56,534        19,820

INCOME TAXES                                           16,702         3,000             23,905         4,134
                                                     --------      --------           --------      --------
NET INCOME                                             23,353        14,113             32,629        15,686

DIVIDENDS ON PREFERRED STOCK                              533           532              1,066         1,065
                                                     --------      --------           --------      --------
EARNINGS APPLICABLE TO COMMON STOCK                  $ 22,820      $ 13,581           $ 31,563      $ 14,621
                                                     ========      ========           ========      ========

See accompanying Notes to Consolidated Financial Statements.

                                      -1-


                        ATLANTIC CITY ELECTRIC COMPANY
                        ------------------------------
                          CONSOLIDATED BALANCE SHEETS
                            (Dollars in Thousands)
                                  (Unaudited)



                                                                June 30,        December 31,
                                                                  2001              2000
                                                               ----------       ------------
ASSETS
                                                                          
Current Assets
  Cash and cash equivalents                                    $    9,003       $      8,117
  Accounts receivable, net of allowances
    of $5,789 and $4,423, respectively                            179,821            140,785
  Investment in Conectiv money pool                                34,703            147,954
  Inventories, at average cost                                     23,616             13,604
  Deferred income taxes, net                                            -             15,750
  Prepayments                                                      29,627              1,738
                                                               ----------       ------------
                                                                  276,770            327,948
                                                               ----------       ------------
Investments                                                       116,348            112,501
                                                               ----------       ------------
Property, Plant and Equipment
  Electric generation                                             142,243            142,243
  Electric transmission and distribution                        1,270,738          1,255,184
  Other electric facilities                                       117,964            119,782
  Other property, plant, and equipment                              5,772              5,772
                                                               ----------       ------------
                                                                1,536,717          1,522,981
  Less: Accumulated depreciation                                  664,465            640,103
                                                               ----------       ------------
  Net plant in service                                            872,252            882,878
  Construction work-in-progress                                    59,839             50,247
  Leased nuclear fuel, at amortized cost                           22,413             28,352
                                                               ----------       ------------
                                                                  954,504            961,477
                                                               ----------       ------------
Deferred Charges and Other Assets
  Recoverable stranded costs                                      945,047            958,883
  Deferred energy supply costs                                     25,039                  -
  Unrecovered purchased power costs                                13,488             14,487
  Deferred recoverable income taxes                                13,079             13,978
  Unrecovered New Jersey state excise taxes                         3,906             10,360
  Deferred debt refinancing costs                                  11,924             12,409
  Deferred other postretirement benefit costs                      28,732             29,981
  Unamortized debt expense                                         12,716             12,842
  Other                                                            32,958             26,516
                                                               ----------       ------------
                                                                1,086,889          1,079,456
                                                               ----------       ------------
Total Assets                                                   $2,434,511       $  2,481,382
                                                               ==========       ============



See accompanying Notes to Consolidated Financial Statements.

                                      -2-


                        ATLANTIC CITY ELECTRIC COMPANY
                          CONSOLIDATED BALANCE SHEETS
                            (Dollars in Thousands)
                                  (Unaudited)



                                                                                     June 30,      December 31,
                                                                                       2001           2000
                                                                                    ----------     -----------
CAPITALIZATION AND LIABILITIES
                                                                                             
Current Liabilities
  Long-term debt due within one year                                                $  112,200     $    97,200
  Variable rate demand bonds                                                            22,600          22,600
  Accounts payable                                                                      77,762          50,744
  Taxes accrued                                                                          3,397          10,243
  Interest accrued                                                                      17,697          18,193
  Dividends payable                                                                      6,302          17,871
  Current capital lease obligation                                                      15,480          15,480
  Deferred income taxes                                                                  8,793               -
  Deferred energy supply costs                                                               -          34,650
  Above-market purchased energy contracts and
    other electric restructuring liabilities                                             7,269           7,586
  Other                                                                                 23,760          30,268
                                                                                    ----------     -----------
                                                                                       295,260         304,835
                                                                                    ----------     -----------
Deferred Credits and Other Liabilities
  Deferred income taxes, net                                                           401,715         405,385
  Regulatory liability for New Jersey income tax benefit                                49,262          49,262
  Above-market purchased energy contracts and
    other electric restructuring liabilities                                            16,737          16,744
  Deferred investment tax credits                                                       34,595          35,851
  Long-term capital lease obligation                                                     6,933          12,872
  Pension benefit obligation                                                            28,911          26,948
  Other postretirement benefit obligation                                               35,578          37,614
  Other                                                                                 29,540          28,918
                                                                                    ----------     -----------
                                                                                       603,271         613,594
                                                                                    ----------     -----------
Capitalization
  Common stock, $3 par value; shares authorized:
    25,000,000; shares outstanding: 18,320,937                                          54,963          54,963
  Additional paid-in capital                                                           410,194         410,194
  Retained earnings                                                                    124,439         114,962
                                                                                    ----------     -----------
  Total common stockholder's equity                                                    589,596         580,119
  Preferred stock not subject to mandatory redemption                                    6,231           6,231
  Preferred stock subject to mandatory redemption                                       12,450          23,950
  Preferred securities of subsidiary trusts subject
    to mandatory redemption                                                             95,000          95,000
  Long-term debt                                                                       832,703         857,653
                                                                                    ----------     -----------
                                                                                     1,535,980       1,562,953
                                                                                    ----------     -----------
  Commitments and Contingencies (Note 8)
                                                                                    ----------     -----------
Total Capitalization and Liabilities                                                $2,434,511     $ 2,481,382
                                                                                    ==========     ===========


See accompanying Notes to Consolidated Financial Statements.

                                      -3-


                        ATLANTIC CITY ELECTRIC COMPANY
                        ------------------------------
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Dollars in Thousands)
                                  (Unaudited)


                                                                          Six Months Ended June 30,
                                                                          -------------------------
                                                                            2001             2000
                                                                          --------        ---------
                                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                              $ 32,629        $  15,686
  Adjustments to reconcile net income to
   net cash provided by operating activities:
    Depreciation and amortization                                           49,520           57,688
    Investment tax credit adjustments, net                                  (1,256)          (1,901)
    Deferred income taxes, net                                              21,772            6,137
    Deferred energy supply costs                                           (59,689)          (6,601)
    Net change in:
      Accounts receivable                                                  (39,036)           7,296
      Inventories                                                          (10,012)           6,316
      Prepaid New Jersey sales & excise taxes                              (31,100)         (33,308)
      Accounts payable                                                      27,018           (6,554)
      Taxes accrued                                                         (6,846)          70,355
      Other current assets and liabilities (1)                              (3,793)           6,908
    Other, net                                                               3,393            3,961
                                                                          --------        ---------
    Net cash (used) / provided by operating activities                     (17,400)         125,983
                                                                          --------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES
    Decrease in investment in Conectiv money pool                          113,251           18,406
    Capital expenditures                                                   (30,472)         (28,112)
    Deposits to nuclear decommissioning trust funds                           (825)            (405)
    Other, net                                                              (1,476)          (1,567)
                                                                          --------        ---------
    Net cash provided / (used) by investing activities                      80,478          (11,678)
                                                                          --------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES
    Dividends paid on common stock                                         (33,655)         (33,655)
    Dividends paid on preferred stock                                       (1,066)          (1,230)
    Long-term debt redeemed                                                (10,000)         (46,000)
    Preferred stock redeemed                                               (11,500)               -
    Principal portion of capital lease payments                             (5,971)          (6,381)
    Net change in short-term debt                                                -          (30,000)
                                                                          --------        ---------
    Net cash used by financing activities                                  (62,192)        (117,266)
                                                                          --------        ---------
    Net change in cash and cash equivalents                                    886           (2,961)
    Cash and cash equivalents at beginning of period                         8,117            7,924
                                                                          --------        ---------
    Cash and cash equivalents at end of period                            $  9,003        $   4,963
                                                                          ========        =========


    (1) Other than debt and deferred income taxes classified as current.

    See accompanying Notes to Consolidated Financial Statements.

                                      -4-


                         ATLANTIC CITY ELECTRIC COMPANY
                         ------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                  (Unaudited)


Note 1.  Financial Statement Presentation
- -------  --------------------------------

The consolidated condensed interim financial statements contained herein include
the accounts of Atlantic City Electric Company (ACE) and its wholly owned
subsidiaries and reflect all adjustments, consisting of only normal recurring
adjustments, necessary in the opinion of management for a fair presentation of
interim results.  In accordance with regulations of the Securities and Exchange
Commission (SEC), disclosures that would substantially duplicate the disclosures
in ACE's 2000 Annual Report on Form 10-K have been omitted.  Accordingly, ACE's
consolidated condensed interim financial statements contained herein should be
read in conjunction with ACE's 2000 Annual Report on Form 10-K and Part II of
this Quarterly Report on Form 10-Q for additional relevant information.

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets."  SFAS
No. 141 requires that business combinations initiated after June 30, 2001 be
accounted for under the purchase method of accounting and does not permit the
use of the pooling of interests method of accounting for business combinations.
SFAS No. 142 will be effective January 1, 2002 for companies with a calendar
fiscal year, including ACE.  Under SFAS No. 142, goodwill will no longer be
amortized, but instead will be tested periodically for impairment.  If an
impairment of goodwill occurs, then a charge to earnings would result.  Under
SFAS No. 142, historical operating results will not be restated; instead pro
forma earnings, adjusted to exclude goodwill amortization, will be disclosed.
SFAS No. 141 and No. 142 are not expected to have a material effect on ACE's
financial position or results of operations.

On August 9, 2001, the FASB issued SFAS No. 143, "Accounting For Asset
Retirement Obligations," which establishes the accounting requirements for asset
retirement obligations (ARO) associated with tangible long-lived assets.
Obligations related to asset retirements for which an entity may have a legal
obligation for settlement will be recognized in the financial statements, when
the obligation meets the criteria for a liability under FASB Concepts Statement
No. 6, Elements of Financial Statements. Under SFAS No. 143, the cost associated
with an ARO is capitalized and allocated to expense by using a systematic and
rational method. The initial measurement of an ARO is based on the fair value of
the obligation. SFAS No. 143 will be effective January 1, 2003 for companies
with a calendar fiscal year, including ACE. Upon adoption, SFAS No. 143 requires
the use of a cumulative-effect approach to recognize transition amounts for any
existing ARO liabilities, asset retirement costs, and accumulated depreciation.

Management plans to conduct reviews of SFAS No. 141, 142, and 143 that are more
comprehensive and may identify additional expected impacts on ACE's financial
statements which may result from implementation of these new accounting
standards.

                                      -5-


Note 2.  Supplemental Cash Flow Information
- -------  ----------------------------------

                                           Six Months Ended
                                               June 30,
                                        ---------------------
                                           2001       2000
                                        ---------  ----------
                                        (Dollars in thousands)
Cash paid (received) for:
  Interest, net of amounts capitalized    $32,566    $ 35,699
  Income taxes, net of refunds            $10,413    $(69,013)

For the six months ended June 30, 2000, ACE received federal and state income
tax refunds of $79.3 million and made estimated tax payments of $10.3 million,
resulting in $69.0 million of net income tax refunds received.  The income tax
refund was related to the tax benefit associated with ACE's payment of $228.5
million on December 28, 1999 to terminate ACE's purchase of electricity under a
contract with the Pedricktown Co-generation Limited Partnership (Pedricktown).
For additional information concerning the contract termination, see Note 8 to
the Consolidated Financial Statements included in Item 8 of Part II of ACE's
2000 Annual Report on Form 10-K.


Note 3.  Income Taxes
- -------  ------------

The amount computed by multiplying "Income before income taxes" by the federal
statutory rate is reconciled in the table below to income tax expense.



                              Three Months Ended June 30,        Six Months Ended June 30,
                            -------------------------------   -------------------------------
                                 2001             2000             2001             2000
                            --------------   --------------   --------------   --------------
                            Amount    Rate   Amount    Rate   Amount    Rate   Amount    Rate
                            -------   ----   -------   ----   -------   ----   -------   ----
                                                  (Dollars in Thousands)
                                                                 
Statutory federal income
 tax expense                $14,019     35%  $ 5,990     35%  $19,787     35%  $ 6,937     35%
State income taxes, net
 of federal benefit           2,625      7     1,295      7     3,920      7     1,794      9
Plant basis differences         704      2       625      4     1,408      2     1,250      6
Investment tax credit
 amortization                  (628)    (2)   (1,267)    (7)   (1,256)    (2)   (1,901)   (10)
Resolution of income
 tax matters *                   --     --    (4,254)   (25)       --     --    (4,254)   (21)
Other, net                      (18)    --       611      4        46     --       308      2
                            -------   ----   -------   ----   -------   ----   --------  ----
                            $16,702     42%  $ 3,000     18%  $23,905     42%  $ 4,134     21%
                            =======   ====   =======   ====   =======   ====   =======   ====

*  Reflects a change in estimate of previously accrued income taxes due to
resolution of matters with taxing authorities.


Note 4.  Regulatory Matters
- -------  ------------------

An update to the information previously reported in Note 7 to the Consolidated
Financial Statements included in Item 8 of Part II of ACE's 2000 Annual Report
on Form 10-K is presented below.

                                      -6-


New Jersey Electric Utility Industry Restructuring

Final Decision and Order

As previously disclosed, the New Jersey Board of Public Utilities (NJBPU) issued
a Summary Order to ACE in July 1999 concerning restructuring ACE's electricity
supply business and indicated that a more detailed order would be issued at a
later time.  The Final Decision and Order of the NJBPU, dated March 30, 2001,
for ACE was publicly posted on the NJBPU's internet website in mid-May 2001.
Management believes that the substantive provisions of the Final Decision and
Order are not materially different from the substantive provisions of the
Summary Order filed with and discussed in ACE's Form 8-K filing dated July 15,
1999.

Petition for Securitization of Stranded Costs

As previously disclosed in Note 7 to the Consolidated Financial Statements
included in Item 8 of Part II of ACE's 2000 Annual Report on Form 10-K, New
Jersey's Electric Discount and Energy Competition Act (the New Jersey Act)
permits securitization of stranded costs through the issuance of transition
bonds.  On June 25, 2001, ACE filed a petition with the NJBPU, seeking the
authority to: (i) issue through a special purpose entity up to $2 billion in
transition bonds in one or more series; (ii) collect from ACE's customers a non-
bypassable, per kilowatt-hour (kWh) delivered, transition bond charge (TBC)
sufficient to fund principal and interest payments on the bonds and related
expenses and fees; (iii) collect from ACE's customers a separate non-bypassable,
per kWh delivered, charge for recovery of the income tax expense associated with
the revenues from the TBC; and (iv) sell "bondable transition property," which
is the irrevocable right to collect TBC, to a special purpose financing entity.

The transition bonds are expected to be issued after the NJBPU issues a bondable
stranded costs rate order (Financing Order) establishing "bondable transition
property," as provided for in the New Jersey Act.  To facilitate the issuance of
transition bonds, ACE formed Atlantic City Electric Transition Funding LLC (ACE
Transition Funding) on March 28, 2001. Assuming that the NJBPU issues a
Financing Order containing terms and conditions satisfactory to ACE, subsequent
to issuance of such order, ACE Transition Funding is expected to issue
transition bonds and use the proceeds to purchase the bondable transition
property from ACE. The New Jersey Act requires utilities, including ACE, to use
the proceeds from the sale of bondable transition property to redeem debt or
equity or both, restructure purchased power contracts with non-utility
generators, or otherwise reduce costs in order to decrease regulated electricity
rates.


Note 5.  Agreements for the Sale of Electric Generating Plants
- -------  -----------------------------------------------------

For information concerning agreements for the sale of the electric generating
plants of ACE, see Note 11 to the Consolidated Financial Statements included in
Item 8 of Part II of ACE's 2000 Annual Report on Form 10-K.

Effective June 22, 2001, ACE agreed to amendments to agreements with NRG Energy,
Inc. (NRG), and NRG Power Marketing, Inc. (NRG Power), including the following:

 . The termination dates of the sale agreements between ACE and NRG relating to
  Deepwater Station, Conemaugh and Keystone Stations and B.L. England Station
  were extended; and
 . ACE terminated a purchased power agreement with NRG Power originally intended
  to be effective after the sale of certain electric generating plants to NRG.

                                      -7-


Subject to the receipt of the required approvals from the NJBPU and the
satisfaction of other closing conditions, ACE expects to complete the sale of
certain electric generating assets during 2001.  However, there can be no
assurances that such approvals will be obtained, or that such sales will be
completed.  As of June 30, 2001, the ACE plants that are under agreements for
sale had an agreed upon total sales price of approximately $189 million (before
certain adjustments and expenses), a net book value of approximately $130
million and electric generating capacity of 1,122.7 megawatts (MW).  Any gain
that may be realized on the sale of these plants would reduce the amount of
stranded costs to be recovered from ACE's utility customers.


Note 6.  Redemption of Preferred Stock
- -------  -----------------------------

On May 1, 2001, ACE redeemed 115,000 shares of its $7.80 annual dividend rate
preferred stock, which has mandatory redemption provisions, at the $100 per
share stated value or $11.5 million in total.


Note 7.  Debt
- -------  ----

On May 15, 2001, ACE redeemed $10 million of 7.0%, Medium Term Notes at
maturity.

On August 1, 2001, ACE redeemed $30 million of 6.81% Medium Term Notes at
maturity.


Note 8.  Contingencies
- -------  --------------

Environmental Matters

ACE is subject to regulation with respect to the environmental effects of its
operations, including air and water quality control, solid and hazardous waste
disposal, and limitation on land use by various federal, regional, state, and
local authorities.  Costs may be incurred to clean up facilities found to be
contaminated due to past disposal practices.  Federal and state statutes
authorize governmental agencies to compel responsible parties to clean up
certain abandoned or uncontrolled hazardous waste sites.  ACE is a potentially
responsible party at a state superfund site and has agreed, along with other
responsible parties, to remediate the site pursuant to an Administrative Consent
Order with the New Jersey Department of Environmental Protection.  ACE is also a
defendant in an action to recover costs at a federal superfund site in
Gloucester County, New Jersey.  ACE's liability for clean-up costs is affected
by the activities of these governmental agencies and private land-owners, the
nature of past disposal practices, the activities of others (including whether
they are able to contribute to clean-up costs), and the scientific and other
complexities involved in resolving clean-up related issues (including whether
ACE or a corporate predecessor is responsible for conditions on a particular
parcel).  There is $4.0 million included in ACE's current liabilities as of June
30, 2001 ($1.0 million as of December 31, 2000) for remediation activities at
these sites.  ACE does not expect such future costs to have a material effect on
its financial position or results of operations.

On July 11, 2001, the New Jersey Department of Environmental Protection (NJDEP)
denied ACE's request to renew a permit variance, effective through July 30,
2001, that authorized Unit 1 at the B.L. England station to burn coal containing
greater than 1% sulfur.  ACE has appealed the denial.  NJDEP has issued a 60-day
stay of the denial and has authorized ACE to operate Unit 1 with the current
fuel.  Management is not able to predict the outcome of ACE's appeal.

                                      -8-


Nuclear Insurance

In conjunction with the ownership interests of ACE in Peach Bottom Atomic Power
Station (Peach Bottom), Salem Nuclear Generating Station (Salem), and Hope Creek
Nuclear Generating Station (Hope Creek), ACE could be assessed for a portion of
any third-party claims associated with an incident at any commercial nuclear
power plant in the United States.  Under the provisions of the Price Anderson
Act, if third-party claims relating to such an incident exceed $200 million (the
amount of primary insurance), ACE could be assessed up to $30.7 million on an
aggregate basis for such third-party claims.  In addition, Congress could impose
a revenue-raising measure on the nuclear industry to pay such claims.

The co-owners of Peach Bottom, Salem, and Hope Creek maintain property insurance
coverage of approximately $1.8 billion for each unit for loss or damage to the
units, including coverage for decontamination expense and premature
decommissioning.  An industry mutual insurance company (NEIL) provides
replacement power cost coverage to members in the event of a major accidental
outage at a nuclear power plant.  Under these coverages, ACE is subject to
potential retrospective loss experience assessments of up to $1.9 million on an
aggregate basis.

Other

On October 24, 2000, the City of Vineland, New Jersey, filed an action in a New
Jersey Superior Court to acquire ACE electric distribution facilities located
within the City limits by eminent domain.  The City has offered approximately
$11 million for these assets, including the right to provide electric service in
this area.  ACE believes that, properly evaluated, the assets sought by the City
are worth approximately $40 million.  The City's Superior Court action has been
dismissed, based on the failure to hold a referendum, and the City has appealed
this decision.  Management cannot predict the outcome of this matter.


Note 9.  Business Segments
- -------  -----------------

Conectiv's organizational structure and management reporting information is
aligned with Conectiv's business segments, irrespective of the subsidiary, or
subsidiaries, through which a business is conducted.  Businesses are managed
based on lines of business, not legal entity.  Business segment information is
not produced, or reported, on a subsidiary by subsidiary basis.  Thus, as a
Conectiv subsidiary, no business segment information (as defined by SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information") is
available for ACE on a stand-alone basis.  However, ACE's principal business is
expected to be the transmission and distribution of electricity upon completion
of the sale of the electric generating plants of ACE (as discussed in Note 11 to
the Consolidated Financial Statements included in Item 8 of Part II of ACE's
2000 Annual Report on Form 10-K).  The transfer of the combustion turbines to
Conectiv effective July 1, 2000, resulted in electricity transmission and
distribution representing a greater proportion of ACE's business.

                                      -9-


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

Forward-Looking Statements
- --------------------------

The Private Securities Litigation Reform Act of 1995 (Litigation Reform Act)
provides a "safe harbor" for forward-looking statements to encourage such
disclosures without the threat of litigation, provided those statements are
identified as forward-looking and are accompanied by meaningful, cautionary
statements identifying important factors that could cause the actual results to
differ materially from those projected in the statement.  Forward-looking
statements have been made in this report.  Such statements are based on
management's beliefs as well as assumptions made by and information currently
available to management.  When used herein, the words "intend," "will,"
"anticipate," "estimate," "expect," "believe," and similar expressions are
intended to identify forward-looking statements.  In addition to any assumptions
and other factors referred to specifically in connection with such forward-
looking statements, factors that could cause actual results to differ materially
from those contemplated in any forward-looking statements include, among others,
the following: the effects of deregulation of energy supply and the unbundling
of delivery services; the ability to enter into purchased power agreements on
acceptable terms; market demand and prices for energy, capacity, and fuel;
weather variations affecting energy usage; operating performance of power
plants; an increasingly competitive marketplace; results of any asset
dispositions; sales retention and growth; federal and state regulatory actions;
future litigation results; costs of construction; operating restrictions;
increased costs and construction delays attributable to environmental
regulations; nuclear decommissioning and the availability of reprocessing and
storage facilities for spent nuclear fuel; and credit market concerns.  ACE
undertakes no obligation to publicly update or revise any forward- looking
statements, whether as a result of new information, future events or otherwise.
The foregoing list of factors pursuant to the Litigation Reform Act should not
be construed as exhaustive or as any admission regarding the adequacy of
disclosures made prior to the effective date of the Litigation Reform Act.

Earnings Results Summary
- -------------------------

Earnings applicable to common stock were $22.8 million for the second quarter of
2001, compared to $13.6 million for the second quarter of 2000, and $31.6
million for the six months ended June 30, 2001, compared to $14.6 million for
the six months ended June 30, 2000.  The earnings increases of $9.2 million for
the second quarter of 2001 and $17.0 million for the six months ended June 30,
2001 were mainly due to higher volumes of regulated electricity sales and
deliveries, reflecting higher electricity usage that resulted from colder winter
weather and warmer weather in June 2001.  Although ACE experienced higher
average energy costs in serving its Basic Generation Service (BGS) customers,
additional revenues were recognized based on the regulated cost-based, rate-
recovery mechanism for BGS, as discussed in Notes 1 and 7 to the Consolidated
Financial Statements included in Item 8 of Part II of ACE's 2000 Annual Report
on Form 10-K.  The earnings increases also reflect higher other income, lower
depreciation and amortization expenses and lower interest expense.  The
variances that positively affected earnings were partly offset by negative
earnings variances attributed to a higher effective income tax rate and the
transfer of the combustion turbine electric generating units to Conectiv on July
1, 2000.

                                      -10-


New Jersey Electric Utility Industry Restructuring
- --------------------------------------------------

Final Decision and Order

As previously disclosed, the New Jersey Board of Public Utilities (NJBPU) issued
a Summary Order to ACE in July 1999 concerning restructuring ACE's electricity
supply business and indicated that a more detailed order would be issued at a
later time.  The Final Decision and Order of the NJBPU, dated March 30, 2001,
for ACE was publicly posted on the NJBPU's internet website in mid-May 2001.
Management believes that the substantive provisions of the Final Decision and
Order are not materially different from the substantive provisions of the
Summary Order filed with and discussed in ACE's Form 8-K filing dated July 15,
1999.

Petition for Securitization of Stranded Costs

As previously disclosed in Note 7 to the Consolidated Financial Statements
included in Item 8 of Part II of ACE's 2000 Annual Report on Form 10-K, New
Jersey's Electric Discount and Energy Competition Act (the New Jersey Act)
permits securitization of stranded costs through the issuance of transition
bonds.  On June 25, 2001, ACE filed a petition with the NJBPU, seeking the
authority to: (i) issue through a special purpose entity up to $2 billion in
transition bonds in one or more series; (ii) collect from ACE's customers a non-
bypassable, per kilowatt-hour (kWh) delivered, transition bond charge (TBC)
sufficient to fund principal and interest payments on the bonds and related
expenses and fees; (iii) collect from ACE's customers a separate non-bypassable,
per kWh delivered, charge for recovery of the income tax expense associated with
the revenues from the TBC; and (iv) sell "bondable transition property," which
is the irrevocable right to collect TBC, to a special purpose financing entity.

The transition bonds are expected to be issued after the NJBPU issues a bondable
stranded costs rate order (Financing Order) establishing "bondable transition
property," as provided for in the New Jersey Act.  To facilitate the issuance of
transition bonds, ACE formed Atlantic City Electric Transition Funding LLC (ACE
Transition Funding) on March 28, 2001. Assuming that the NJBPU issues a
Financing Order containing terms and conditions satisfactory to ACE, subsequent
to issuance of such order, ACE Transition Funding is expected to issue
transition bonds and use the proceeds to purchase the bondable transition
property from ACE. The New Jersey Act requires utilities, including ACE, to use
the proceeds from the sale of bondable transition property to redeem debt or
equity or both, restructure purchased power contracts with non-utility
generators, or otherwise reduce costs in order to decrease regulated electricity
rates.

Agreements for the Sale of Electric Generating Plants
- -----------------------------------------------------

For information concerning agreements for the sale of the electric generating
plants of ACE, see Note 11 to the Consolidated Financial Statements included in
Item 8 of Part II of ACE's 2000 Annual Report on Form 10-K.

Effective June 22, 2001, ACE agreed to amendments to agreements with NRG Energy,
Inc. (NRG), and NRG Power Marketing, Inc. (NRG Power), including the following:

 . The termination dates of the sale agreements between ACE and NRG relating to
  Deepwater Station, Conemaugh and Keystone Stations and B.L. England Station
  were extended; and
 . ACE terminated a purchased power agreement with NRG Power originally intended
  to be effective after the sale of certain electric generating plants to NRG.


                                      -11-


Subject to the receipt of the required approvals from the NJBPU and the
satisfaction of other closing conditions, ACE expects to complete the sale of
certain electric generating assets during 2001. However, there can be no
assurances that such approvals will be obtained, or that such sales will be
completed. As of June 30, 2001, the ACE plants that are under agreements for
sale had an agreed upon total sales price of approximately $189 million (before
certain adjustments and expenses), a net book value of approximately $130
million and electric generating capacity of 1,122.7 MW. Any gain that may be
realized on the sale of these plants would reduce the amount of stranded costs
to be recovered from ACE's utility customers.


Operating Revenues
- ------------------

                                   Three Months Ended   Six Months Ended
                                         June 30,             June 30,
                                   ------------------   ----------------
                                      2001      2000      2001     2000
                                   --------   --------  -------  -------
                                            (Dollars in millions)
Regulated electric revenues          $296.2    $215.3   $521.4   $412.1
Non-regulated electric revenues         3.3      19.2      6.7     28.3
Other revenues                          1.4       1.7      3.3      4.7
                                     ------    ------   ------   ------
Total operating revenues             $300.9    $236.2   $531.4   $445.1
                                     ======    ======   ======   ======


The table above shows the amounts of electric revenues earned that are subject
to price regulation (regulated) and that are not subject to price regulation
(non-regulated).  "Regulated electric revenues" include revenues for delivery
(transmission and distribution) service and BGS.

"Regulated electric revenues" increased by $80.9 million for the three months
ended June 30, 2001 and $109.3 million for the six months ended June 30, 2001
due to the following factors:



                                                               Increase (Decrease) in
                                                             Regulated Electric Revenues
                                                             ---------------------------
                                                              Three Months   Six Months
                                                             --------------  -----------
                                                                       
  Additional revenues recognized under the regulated
   cost-based rate-recovery mechanism for BGS                    $38.7       $ 49.7
  Increased retail and interchange sales and other *              42.2         59.6
                                                                 -----       ------
                                                                 $80.9       $109.3
                                                                 =====       ======

  *  These increases were primarily due to higher volumes of regulated
    electricity sales and deliveries, reflecting higher electricity usage that
    resulted from colder winter weather and warmer weather in June 2001.

"Non-regulated electric revenues" decreased by approximately $15.9 million for
the three months ended June 30, 2001 and $21.6 million for the six months ended
June 30, 2001 mainly due to the transfer of the combustion turbine electric
generating units to Conectiv on July 1, 2000.

                                      -12-


Operating Expenses
- -------------------

Electric Fuel and Purchased Energy and Capacity

"Electric fuel and purchased energy and capacity" increased $44.6 million and
$65.0 million for the three months and six months ended June 30, 2001,
respectively, mainly due to increased volumes of electricity purchased at a
higher average cost.  More electricity was purchased primarily due to ACE's
"Wholesale Transaction Confirmation Letter Agreements" (Letter Agreements),
under which ACE is selling its interest in the output of nuclear electric
generating plants to the companies that operate the plants.  For more
information concerning the letter agreements, see Note 12 to the Consolidated
Financial Statements in Item 8 of Part II of ACE's 2000 Annual Report on Form
10-K.

Operation and Maintenance Expenses

Operation and maintenance expenses increased $6.1 million and $1.7 million for
the three months and six months ended June 30, 2001, respectively, mainly due to
increased costs associated with the clean up of environmental contamination.

Depreciation and amortization

Depreciation and amortization expenses decreased $3.9 million and $7.8 million
for the three months and six months ended June 30, 2001, respectively, mainly
due to expiration of the amortization of a regulatory asset for purchased
capacity costs.

Other Income
- ------------

Other income increased $0.7 million and $2.7 million for the three months and
six months ended June 30, 2001, respectively, primarily due to a higher average
investment balance in Conectiv's money pool.

Interest Expense
- ----------------

Interest expense, net of amounts capitalized, decreased $4.5 million and $6.5
million for the three months and six months ended June 30, 2001, respectively,
due to less interest expense attributed to deferred energy supply costs and
decreases in other miscellaneous interest expenses.  Energy supply costs that
were incurred during the second quarter of 2001 and were not recovered from
customers caused the balance for the deferred energy supply costs to change from
a liability to an asset, representing amounts to be recovered from customers in
the future.

Income Taxes
- ------------

Income taxes increased $13.7 million and $19.8 million for the three months and
six months ended June 30, 2001, respectively, due to higher income before income
taxes and also because the effective income tax rate for the same periods last
year had been decreased by a change in estimate of previously accrued income
taxes due to resolution of matters with taxing authorities.

Liquidity and Capital Resources
- --------------------------------

Due to $17.4 million of cash used by operating activities, $80.5 million of cash
provided by investing activities, and $62.2 million of cash used by financing
activities, cash and cash equivalents increased by $0.9 million during six
months ended June 30, 2001.

                                      -13-


Net cash from operating activities decreased by $143.4 million, to $17.4 million
of cash used by operations for the six months ended June 30, 2001, from $126.0
million of cash provided by operations for the six months ended June 30, 2000.
Income tax refunds received during the six months ended June 30, 2000 and higher
amounts of purchased electricity during the six months ended June 30, 2001 were
the primary reasons for the decrease in net cash from operating activities.

During the six months ended June 30, 2001, ACE converted to cash $113.3 million
of its investment in Conectiv's "money pool," in which Conectiv subsidiaries
invest in or borrow from, depending on their cash position.  ACE's Cash Flows
From Investing Activities for the six months ended June 30, 2001 also reflect
$30.5 million of cash used for capital expenditures, which were primarily for
the electric transmission and distribution systems of ACE.

Cash Flows From Financing Activities for the six months ended June 30, 2001
included $33.7 million of dividends paid on ACE's common stock held by Conectiv,
the redemption of $10.0 million of 7.0% Medium Term Notes, the redemption of
$11.5 million of preferred stock ($7.80 annual dividend rate per each $100
share), $6.0 million of capital lease principal payments, and $1.1 million of
dividends paid to preferred stockholders.

ACE's capital structure, expressed as a percentage of total capitalization, is
shown below as of June 30, 2001 and December 31, 2000.



                                                               June 30,    December 31,
                                                                 2001         2000
                                                               --------    ------------
                                                                   
Common stockholder's equity                                     35.3%          34.5%
Preferred stock and preferred trust securities                   6.8%           7.4%
Long-term debt and variable rate demand bonds                   51.2%          52.3%
Short-term debt and current maturities of long-term debt         6.7%           5.8%

On August 1, 2001, ACE redeemed $30 million of 6.81% Medium Term Notes at
maturity.

ACE's ratio of earnings to fixed charges and ratio of earnings to fixed charges
and preferred stock dividends under the SEC Methods are shown below.  See
Exhibit 12-A, Ratio of Earnings to Fixed Charges, and Exhibit 12-B, Ratio of
Earnings to Fixed Charges and Preferred Dividends, for additional information.



                                               12 Months
                                                 Ended         Year Ended December 31,
                                                June 30,    ----------------------------
                                                 2001       2000  1999  1998  1997  1996
                                                 ----       ----  ----  ----  ----  ----
                                                                 
 Ratio of Earnings to
   Fixed Charges (SEC Method)                    2.57       2.03  2.57  1.66  2.84  2.59
 Ratio of Earnings to Fixed Charges and
  Preferred Stock Dividends (SEC Method)         2.46       1.95  2.44  1.55  2.58  2.16


                                      -14-


New Accounting Standards
- ------------------------

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS
No. 141 requires that business combinations initiated after June 30, 2001 be
accounted for under the purchase method of accounting and does not permit the
use of the pooling of interests method of accounting for business combinations.
SFAS No. 142 will be effective January 1, 2002 for companies with a calendar
fiscal year, including ACE. Under SFAS No. 142, goodwill will no longer be
amortized, but instead will be tested periodically for impairment. If an
impairment of goodwill occurs, then a charge to earnings would result. Under
SFAS No. 142, historical operating results will not be restated; instead pro
forma earnings, adjusted to exclude goodwill amortization, will be disclosed.
SFAS No. 141 and No. 142 are not expected to have a material effect on ACE's
financial position or results of operations.

On August 9, 2001, the FASB issued SFAS No. 143, "Accounting For Asset
Retirement Obligations," which establishes the accounting requirements for asset
retirement obligations (ARO) associated with tangible long-lived assets.
Obligations related to asset retirements for which an entity may have a legal
obligation for settlement will be recognized in the financial statements, when
the obligation meets the criteria for a liability under FASB Concepts Statement
No. 6, Elements of Financial Statements. Under SFAS No. 143, the cost associated
with an ARO is capitalized and allocated to expense by using a systematic and
rational method. The initial measurement of an ARO is based on the fair value of
the obligation. SFAS No. 143 will be effective January 1, 2003 for companies
with a calendar fiscal year, including ACE. Upon adoption, SFAS No. 143 requires
the use of a cumulative-effect approach to recognize transition amounts for any
existing ARO liabilities, asset retirement costs, and accumulated depreciation.

Management plans to conduct reviews of SFAS No. 141, 142, and 143 that are more
comprehensive and may identify additional expected impacts on ACE's financial
statements which may result from implementation of these new accounting
standards.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk
- -------  ----------------------------------------------------------

As previously disclosed under "Quantitative and Qualitative Disclosures About
Market Risk" on page II-13 to ACE's 2000 Annual Report on Form 10-K, ACE is
subject to market risks, including interest rate risk, equity price risk, and
commodity price risk.  There were no material changes in ACE's level of market
risks as of June 30, 2001 compared to December 31, 2000.

                                      -15-


                           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings
- -------  -----------------

Information reported under the heading "Other" in Note 8 to the Consolidated
Financial Statements under Item 1 in Part I herein, concerning an action filed
in a New Jersey Superior Court by the City of Vineland, is incorporated by
reference.


Item 6.  Exhibits and Reports on Form 8-K
- -------  --------------------------------

(a) Exhibits
- -------------

Exhibit 12-A, Ratio of Earnings to Fixed Charges (filed herewith)

Exhibit 12-B, Ratio of Earnings to Fixed Charges and Preferred Dividends (filed
herewith)

(b) Reports on Form 8-K
- ------------------------

On June 28, 2001, ACE filed a Current Report on Form 8-K dated June 22, 2001
reporting on Item 5, Other Events, and Item 7, Financial Statements, Pro Forma
Financial Information and Exhibits.



                                   SIGNATURE


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



                                   Atlantic City Electric Company
                                   ------------------------------
                                           (Registrant)



Date:  August 13, 2001         /s/ John C. van Roden
       ---------------         ------------------------------------------
                               John C. van Roden, Chief Financial Officer


                                      -16-


                                 Exhibit Index
                                 -------------

        Exhibit 12-A, Ratio of Earnings to Fixed Charges

        Exhibit 12-B, Ratio of Earnings to Fixed Charges and Preferred Dividends