ML20012D466

Baltimore Gas & Electric Co,1989 Annual Rept

ML20012D466
Person / Time
Site:	Calvert Cliffs
Issue date:	12/31/1989
From:	Mcgowan G BALTIMORE GAS & ELECTRIC CO.
To:
References
NUDOCS 9003270374
Download: ML20012D466 (72)

Text

s.

t A LT I hg o g

. gas AND g L B C T R E,r, O Af p g N y 1939 ^ ^' A' lJ A t n g,,9 l

.J,j g

4 Y-r f

^:

z.

5.

? m~ ; Gm N

f. h ik c,;yK p %fA we JJ g;

pi O'i -

wg.4:;,;;

4

'Iy

"* -e i x

lB%9gg3 r

n hh o\\r f

x~

J

y-.

t i

[

H I G H Li G'H T S maa,,m,,c-o,.an-,+cc,#mya,a.s,awal L.

(in millions, extrpt per share amounta) lyttent 1989 1988 Change L

COMMON STOCK DATA Earnings Per Share Utility Operations

$ 2.111

$ 3.23 (13.0)%

Diversified Activities

.24

.24

'Ibtal.

$ 3.05

$ 3.47 (12.1)%

Dividends Declared Per Share

$ 2.075

$ 1.975 5.1 %

Average Sharee Outstanding 15 0. 0 79.1 1.2 %

Return on Average Common Equity 12.6%

15.1 %

Hook Value Per Share-Year End

$24.91

$23.77 4.11 %

hlarket Price Per Share-Year End Close 34 %

31 %

10.11 %

FINANCIAL DATA Revenues L

Electric

$1,519

$1,435 5.9 %

Gas 412 3fil 7.9 % '

I Diversified Activities 73 4fl 53.5 %

r

'Ibtal

$2,004

$1,1164 7.5' %

CONTENTS Net income

$ 276

$ 303 (11.9)%

Earnings Applicable to Common Stock

$ 244

$ 274 (11.0)%

letter to Shareholders......... 2 Fina ncial Review.................]

Assets Calvert Cliffs Review........... 6 Utility

$5,149

$4,503 14.3 %

Utility Operations Review.... 11 Diversified 113 7 623 34.3 %

Constellation Companies....... 10

'Ibtal

$5,9116

$5,126 1 6.11 %

hiceting the Energy Needs Cq it file..........,..

' Utility Construction Expenditures

$ 447

$ 3111 40.7 %

IlG&E Investment in Constellation Selected financial Data...... 26 Companies

$ 251

$ 225 11.5 %

hianagement's Discussion and Analysis...

.27 UTILITY SALES DATA Report of h1anagement......... 32

. Electric Sales-megawatthours 24.8 24.0 3.4 %

Report ofIndependent Auditom. 32 Conso ated Statements Gas Sales-dekatherms 110.7 109.5 1.1 %

of I ncome.................. 33 Consolidated H. dance Sheets.... 34 Consolidated Statements of Cash flows....

. 36 i

Consolidated Statements of Dividends Paid on the Common Stock Common Shareholders' Equity. 37 Continuously Since 1910-Always Earned-Never Reduced Consolidated Statements or Capitalization.

.38 Consolidated Statements of Taxes.40 '

Notes to Consolidated 1

Financial Statements....

.41 Utility Operating Statistics..

. 51 Corporate and Utility Ollicers.. 52 Hoard of Directors.

.53 C(mstellation Subsidiaries

. 5-1 Corporate Organization

.56 Shareholder information.. Inside llack Cover 6

2

1s n

!/./g__

'***i.

m

~ ~*%n u s a w$ &, ~

[

is PW l

J 4

f t % 2g gy&g

?.>

C

-.f, :.

3 s

.l; I a,g6Maang&Q%,

QMEf q~kx*f9 q

if 1%Q

~ '

4'*

f l

g,, J I 4,

[Qi'f 6'!*

• cos's",igyeo r,..,0,,

Ei

~_

,3

~~

~.~

t

~,

Shk f

. l 3350 ~

l

' ' ~,

i j

- +,2 W

4l%f

t i

l

$2.50 m,.

~

j

&l 4 ';

r 52.00 ~ ~,

$W*

~*

II.50

.l

. m

,lV St.as i

• so f

,5

~ ~"%w~

V M :'

^

l I

I

1. r 1

y t

I 1

aj y m,,.,3-g /

Dmnenos Eunings l!

&:g[~;x Declaec

• • • • • dl Eunings (Cose

"'s ne un,

y am :,

1 t p. n

/l' 'I'

-- w N,o c

~ ~,,_,,_, u m

- I..... -

h*

Hf ^d W

y'? l

..s i

u.~* a+...-

4 C

.f

[ n' ' '"

V l.

i?

c h.

+:;

6

y_op y;c u

a w%

? f5"?? _

~

');

.a

}

j*r/2, q

=se. y

< gr.:

ff 3.y, 3,

o$ -

y"*

+j; * ;y y

m..

)~

, b.;[.

.~,

s

n d fuel n.n.,,,

+h

'p.

.l '

en gf% 30g m

n y,4. ms u

'.&:[;I r

n

. ~ yJ '

mT)s-

.f 4^

f'

.x f.

! W w.;c.

~

• • d in t

jn e\\g p

• • "*ss at Mankna,c, y, WF'~ Q g ?' T.

% $kg e -

i a

le h 4

4

.3 m

'E j&'?jf. g w; ;

Dep,g tiv

'J y

q-

,,,mk-

- 4 re

~'

'0*

p

.piV '.

/

a

~~~

i g,

l* *Y -

4

k. }3.;

i m

,...f._w w,.'

s w*

s. ~

l Y,e 4

. l s * :.

i w +pa,

e4 )

g*

s e

, w: #;p. siv:H:t,;;

_p i$s. 7,,u; - [;..'f.

% &. g

! *g39

,-g.> t & a lu fj V.1 r-4T

' li,::

< ~.

,f r.

4 h y.

m l

' s:- n N

a f

• ? l.d,.

k4 A

)

1 I

1 1

l 1

l W.

l stwng perfbnner"-that's an apt

\\ c\\'u'$

ticscription of BG&E's Centml hianj-y p

nd senrice tenitor)), in 1989, the tonal econorny continued to outixtce y

the national at:cmge, again msulting in w

c; a simng demand fbr encogt). We ucm able to meet 1

't

-a that demand because stmtegic planning gate us yag the flexibilitsj to handle mpid gmwth in spite of f S equiprnent adscrsitics and the unpredictable etents j

of the energtj marketplace.

i en c.

L; At BG&E, planning is a dynamic pmcess, As g w*l" ~

our long-tenn ymjections evolic into short-tenn y

k;.

decisions, uc adjust our plans to fit changing j

h The BG&E utility service conditions. Our engincem today am building for t

area includes Baltsmore the ninetics, and, at the same time, our planttem City and all or part of nine Central Maryland counties art dcicloping the stmtegics to meet Central

)

The area served with elec-hianjland's electric arid natuml gas ncCds irl thC tricity approximates 2.300 square miles with 2.458.000 ncVt centunj.

c, te mologt), &c ensimnment, the se ed w th g inclu es 614 square miles with a economij, deregidation-these issues and mom population of 1.875.000 must be factored into our choices today to enable us to meet the encogsj needs of tomonvw. Pmviding energs) is more than building pouer plants. It's a Electric eak Loadion.nour)

,g g

g issues to ensum the amilability of an economical and mliable stq) ply of encogi). That's been ourjob in Centml hianjiand for nearly 175 years. And as j

uno uc plan for the futtar of the region, uv am looking a

fonvard to the ncvt centunj of carpomte gmwth.

g,,

'b uoo -

1985 1986 1967 1988 1989 W

Oi N DE October 12,1989, contract but for BG&E and its' Su mar Peak Workers " topped out the customers, as well.

Summer Peak chimney" on Unit 2 of Reaching this milestone 4 a 4 ee ;3., w Brandon Shores. Com-means that Central Wlmer Peak % r.u, pleting the 700' concrete Maryland Will soon begin m

e.w

..g,.

chimney was a cause for benefiting from the plant's r y uu. r w g

g,

o 23 LETTE R TO SHAREHOLDERS V

L I

4 hidlcnging-pnxhtctis t-opwning of the US Dejmnonent of Encryrfs inuouling. 'thken together; pmposed n]nository for spent fhcl now

usnds gite you a sense appears delayed until 2010 at the earliest.

989 at HG&C. Sales in our The contituted delays hate cornpelled us to core utility business utre "Res0lVlng the mote ahead with plans to constntet an s voy good; our dh ersified enterprises abotv-gwund, spent fuel, clnj-stomge facility problems at CY]kouled; our peoplC perfortned superbly in on the Cahert Cliffs sitC Although this often highly stressful situations; and our Calvert Clitfs, snuctun, will be annpletely secmc and fbssil genemting units achieted outstanding ynwide us with stomge capacity well beyond perfonnance letris, At the sarne tirne, there ICIUIDlnQ III0 2010, it is not a pennanent suhttion to the i

1 utrY sources offnestuttion: Cahert Cliffs ggnglgg, ggg issue of sjwnt fuel. 'llun nmts in due hands l

Nuclear l\\nter plant being categori:cd by of the fcdend gottnnnent, which nmst act i

the Nuclear Regulaton) Contanission as a preparing lt to decishely and build a pennanent orpository.

plant requiring close anonitoring and our

\\\\'hile incwased enpenses at Cahert maintain a high discenvoy of a difficult ur-resohc technical Cli))s wporsent a significant portion of our l

i pmblem in the pwssuri:cr of Unit 2.

l eye l gj gperatlgngl additional ny>cmlitmes, ut also face Cahen Clif]s wmains a key component considcmble capenses on other[mnts. The in our gencmtion stmtegij for the fhtuur.

BXC0ll00C0 BIC th0 mpid gnnedt in many areas of our sen* ice Resolving the pmblerns at the plant, wturn-g n:niuny ncauhates a maimmqmnsion of '

y;g ggg p7lg7lglgg

. ing it to sencice, and purjmrittg it to main-our electric distribution system. Centml tain a high leiel of operational excellence of your Company."

Mani and's need fbr additional genemting l

are the highest yn'orities ofyour Company.

capacity in the ninctics means that we are I'm confident that Cahert Cliffs will once imvhrd in an acthe constntction pmgnun.

again be among the nation's top nuclear Our G-10-megawatt coal-fired Umndon plants, but the pmcess will be both time.

Shours Unit 2 is scheduled to be placed in consmning and costly. In the simplest sen' ice in 1991. At the sarne time, ut am

~ terms, ur are unmienti:ing Cahert Cli))s, moving ahead on two 100-megawatt, gas-bringing the 15 year old facility up to firrd, combined <ycle facilitics at our persent standants. \\\\'c c.qxet that the Irrryntan site in liarftnd County, Many Nuclear Regulatory Comunission will land. The initial combustion turbine phase require other compcmics with plants of of this pmicct is schethded to begin opcm-

/

compamble vintage to undertake a sirnilar tion in the unid ninctics.

pmcess. \\\\'c are making pmgmss. It is slou; The higher costs ut are incurring will but our gtxd is quality, not speed, and I am pwparc us to meet Centml Maryland's satisfied that ut mr meeting this objectiiv.

gnnving energy needs. In the short tenn.

One of the nuclear industry's most howener; higher costs will utsult in lower persistent pmblems-the lack of a carnings. As we cy>ccted, incurased utility l

pennanent spent-nuclearfuel trpositanj-ca]wnses in combinntion with a retunt to caperienced another setback in 1989. The rnare nonnat suunner tentpemtures in 1989 depirssed our financial perfonnance for the

3 o

l I

l car. Tblal Cinpomtr carntngs, inchuling a storngthrnal their positions m thr gmups' stabic perjonnance innn oto non-tttiltty four an:as of bu.siness: rnergy projects, subsiiliaries, urre S.105 per shan. a intestruents anti financial services, real 12.1 percent ticcline fnnn the terather-estate, anti sentor living. c.onstellation's assisteil highs of 1937 aml 1988. carnings for 1989 ut or Sl9.130,000, The litworl of Directors notect to raisc contributing 2-I cents a share to total l quarterly connnon stock divulends to 52.5 (;<nnpcoty results. l cents a sharr, cflectar trutir the cheidend 1.noking to the rever drctulc, the frustra-paid July I 1989 This represents a 10-t ent-tuons and achirtronents of 1989 haar gitrn per-sharr anernal Incorase to the nrte yearly us a forsh appre ciatton Itn tht pmblern-mte vf S2.IU a sharr. solving abilitics of om propic. It sea.s a yeto Effectitt l>rt ronber 19.19H9. the Public avhen ter streded then tvry best-arid they Service Cennmission of Marylanti andtort:rd cante thmugh. Ittu innn slackening, the l a 1.5 percent itterra.sr irt our clectric rates part of activun at lit,HE us uttensifyirrg as l and a U.9 percent derrense in pas mies. ur bring om plans for the ninctics into Although certam aspects of the orrier urre reality. I knuse that u hatetro challenges lie disappointing, out the tehole ur evere ahead, our propIr u ill mvrt thern neith enconmged n'ith the (.ornmisston's et cogne-nrativity. resnurretuhtchs, anti dabratunt. tion of our need to increase caperulitmrs in -7 the years ahrail. y3 4f p* / IIGHC tvill certainly be allected by the clean air legislati<nt ntne in Congress. \\\\'r / hatt been follinving its pmgress closely y / (;,o,u a ( w z;o w and utnking tvith legislattnh to enctno- ??f (Ihairuuan of the Htwo11 age a oralistic appnwuch to the political ang c y;,,g 9,.(ugjn,(yqq;((, and emotional issues surnntndirty cravinno- %q~ (c979,7y g3,;999 mentalpmtection. \\\\'r are in favor of strict A air-quahty simulants-our recend of cornpliance seith Maryland's stringent requirentents speaks to that poitut --but ter also nrrd the (1cxibility to contml emissions in the trays that air most appmpriate for our customers and Cennpany. Constellation had a pm-ditctitt year as its companics Gunua L W (som

14 9 F I N A N C I A L -R E V I E W EARNINGS shart,10 cents higher than the previous - Earnings per shart of common stock rate. BG&E has paid a dividend on its wtre $3.05 in 1989, representing a 12.1 common stock in each of the past 80 Return on years, a dividend that has always been percent decline from the record high of k$ earned and never reduced. $3.47 carned in both 1988 and 1987. The 1989 decline is attributable to lower RATE MATTERS earnings fmm BG&E's utility business. 20 Earnings from diversified business On May 22,1989, BG&E filed an applica-p T-tion with the Public Service Commission activities were unchanged. Ibr-share camings are summarized below: of Maryland (Maryland Commission) for r 5 1989 1983 higher electric and gas base rates designed Utility operations..... $2.81 $3.23 te:5 ise6- ~iesfiess 19se-to produce an increase in annual revenue Diversified activities... .24 .24 of $120.2 million. BG&E's case was initiated IN~Wiii2% tsi% ig to reficct its increased cost of capital since 'Ibtal............... $3.05 $3.47 the authorized rate of return was last The decrease in 1989 utility earnings established in May 1987, to recover is attributable to increased operations increases in operations and maintenance and maintenance expenses, higher expenses, and to provide for a cash return financing costs, and lower rates of sales on an additional portion of construction growth as compared to 1988. The lower w rk in progress related to Brandon Shores o MM rates of sales growth resulted from less Price and Book Value-petition filed on March 22,1989, with the favorable weather than in 1988 during ~ ~ ^ ' ~ ~ ~ ~ ~ ~ Unit 2. BG&E's filing also responded to a the summer cooling months. The Maryland Commission by the Office of increased operations and maintenance 535 ~~ Itople's Counsel, which requested a total expenses principally reflect substantially sao-rate reduction of $836 million. higher levels of expenditures at the 525 On December 15,1989, the Maryland Calvert Cliffs Nuclear power Plant. s20 Commission issued an order authorizing Earnings from diversified business a $21.5 million, or 1.5 percent, annual $35 activities represent the results of opera-increase in electric base rates and a $3.5 tions of Constellation IIoldings, Inc. and million, or 0.9 percent, annual decrease 33 its subsidiaries (Constellation Companies). in gas base rates. The electric revenue 8 _The Constellation Companies' carnings ines ises isc ines 1see increase provided for a higher authorized in 1989 reflect income associated with the m m rate of return of 10.01 percent, including a construction of certain energy projects, eng maraN" 13.00 percent return on common equity, c gains on the sale of real estate, and and for the ret Nnition ofincreases in increased income from financial invest-y's,'cigggggig operations and maintenance expenses. ments. Earnings were offset by higher The gas revenue decrease reflected the 3,,, u,, operating expenses and interest expense. $1935 $207[lidisiir $2i9T difference between the newly authorized Market to Book _Hatio _. ___ rate of return and the return actually DMDEND INCREASED earned during the test period. The quarterly dividend rate on the Com. In its decision, the Maryh.nd Com-pany's common stock was increased to inission also directed that expenditures 52% cents per share effective with the associated with nonrecurring phases of July 1,1989 payment. The new rate is certain nuclear operations projects be equivalent to an annual rate of $2.10 per deferred, included in rate base, and

a-t o-5 amortimd over the remaining Nfe of the was spent on construction of Brandon Calvert Cliffs Nuclear Rmur Plant. The Shores Unit 2 and $41 million was Maryland Commission denied a cash expended on gas facilities. - p return on additional expenditures at Current estimates indicate that the Brandon Shores Unit 2 and ordered ilG&E utility's 1990 construction expenditures to reinstitute the accrual of allowance for will amount to $503 million, including funds used during construction (AFC) on $53 million in AFC. Included in 1990's . approximately $54 million ofits invest-expenditures are $133 million dollars = ment in that unit, which had been Utility estimated to be spent on Brandon Shores discontinued in April 1988 based on f-Unit 2. accounting changes appmved by the !? Maryland Commission, m FINANCING The Maryland Commission agreed Long term financings in 1989 relating to - with BG&E that a surcharge is the appro. utility operations consisted of $100 million priate rate mechanism to recover capacity of mortgage lxmds, $100 million of un- ' charges related to peaking capacity to be secured notes, $25 million of economic l purchased from June 1990 to June 1991 M development loans, $100 million of redeem-L under an agreement with Ibnnsylvania 52 able preference stock, and $32 million of - ( lbwer & Light Company. The Maryland Dimim a memimi common stock through the Dividend ~ Commission has agreed to authorize the Q lleinvestment and Stock Purchase Plan . surcharge if it determines that the Com-conieuction uc and the Emph>yce Savings Plan Addi-pany would otherwise be unable to tionally, during 1989, ilG&E retired $46 Construction achieve its authorized rate of return. - mo micirmo sm 5450 million oflong-term debt and $7 million -j l uc of redeemable preference stock. l SECURITY RATINGS m a mi a m m In December 1989, ilG&E filed two During the summer of 1989, three major Tomi shelf registrations with the Securities and sa s2s4 ms um sw sse rating agencies downgraded their ratings Exchange Comm,ss,on (SEC) for the.issu-i i on BG&E's debt, pmferred stock, and ance of up to $200 million of additional l preference stock. The ratings on IIG&E's First itefunding Mortgage Honds and commercial paper were unaffected. The 1,000.000 shares ($100 million) of addi-rating agencies' actions were in anticipa-tional preference stock, in addition, in . tion of a deterioration in BG&E's debt-January 1990, a shelf registration was pmtection measurements during the next filed with the SEC for the issuance of up few years because of higher overall con-to 2,000,000 shares of additional common struction expenditures and increased stock. These shelf registrations allow costs associated with the operations at HG&E to sell securities on short notice Calvert Cliffs. and, therefore, gain additional ficxibility in meeting f'mancial requimments. _ UTilJTY CONSTRUCTION EXPENDITURES The diversified activities of the Con-During 1989, the utility's construction stellation Companies were financed in expenditures amounted to $447 million, 1989 by $188 million of long-term borrow-including $33 million in AFC. Construc-ings by the various companics. During tion expenditures for electric facilities the year, $89 million of debt was repaid, were $406 million, of which $112 million

67 C A L V E R T CLIFFS R E VI E W vas a difficuh year for our nuclear At year end, both reactors remained ir program. We knew from the shut down. We have delayed the restart of ct that we faced a stressful and Unit I to perform additional maintenance mging period. fbilowing a and mcxlification work to enhance the series of events that occurred in 1988 " Inspectors have reliability of various salety systems, ~ involving failures to adhere to plant including the operation of the plant's given us high procedures, Calvert Cliffs Nuclear l'uwer mstrument av equipment under accident Plant began the year operating under marks On the conditions. We fbund that the present increased scrutiny by the Nuclear Regula-configuration of the air supply to some lory Commission (NRC). In spring 1989, QU3IIIY 30d of the saltwater system valves may not during a normal refueling outage on attitude Of Our P * "I"" " "4""'" "" "'I I" "I**"'" " " Unit 2,~ our engineers fbund evidence of valves under a remote set of circumstances. minor leakage around the heater s!ceves employees," Simultaneous with the hardware of the pressurizer that regulates the activitics, we have embarked on a major temperature and pressure of the reactor's. overhaul of our management systems and primary cooling system. Although there procedures at Calvert Cliffs as a vital com-was no evidence of leakage on Unit I, ponent of our " retooling" for the ninetics. we shut it down immediately as a safety The initial phase of this effort, descrilmd precaution and began a thorough in a document submitted to the NRC last exambiation of its pressuri/cr. spring entitled, "Itrformance Improus Last fall, after exhaustive testing and ment Plan," is expected to take three evaluation oflxuh units' pressurizem and years. These activitics will ultimately heater sleeves, we determined that Unit 2's become institutionalized. We established leakage resulted from stress-corrosion several new functions, including an cracking. Since our discovery, similar independent safety evaluation unit. We problems have been detected in some have also increased personnel in many other reactors in the United States and existing programs, Oncluding quality abroad. We are replacing all 120 of Unit assurance and engineering. Along with 2's heater skeves. There was a difference this reorganization, we are upgrading the in the fabrication techniques used fbr the plant's more than 9.000 procedures using twu units to install the pressurizer sleeves. the latest human engineering techniques. Unit'l does not exhibit any signs of crack-Sophisticated information systems to ing at the present time. The NRC concurs improve ef ficiency, safety, and security in our finding that the reactor can be are being installed. safely operated without modification or replacement of its heater sleeves, but under a program of expanded inspections.

7 o In 19119, we made a number of fin ility at Calvert Cliffs. The vault-like personnel moves to strengthen our structure shouhl be read 3 for service in nuclear organization. These included the 1992 to meet our needs well into the assignment of several experiented people 21st century. from within the Company and the in one respect,19119 has been a l recruitment of a few senior nuticar rewarding vear our people have sus-petwnmel f rom outside organizations. tained a high lesel of activity under l As we implement these and othei enormous pressure, despite the stressful thanges, we are engaged in an ongoing i onditions. Inspe( tors have given us high dialogue with the NRC.113 year end, we marks on the quality and attitude of out had participated in more than 12,000 empimees. On the strength of that man-hours of inspections 00nducted foundation, uc are (ontident that we (.an primarily by the NRC. Thc3 have pointed return both units to service and achieve I to strengths as well as areas for improve-the level of operational estellen< c we 1 l ment, and Mc ate fully committed to want in an environment u heie safets holstering our strengths and rebuilding and quality < ome first. Our goal is to our weak points. Although this pm< ess make Calvert Clifis one of the best has resulted in higher expenditures-nu< leai plants in the nation. That is not a fact of life throughout the nuticar a resting plac e, but a hfetime journey industry-the electricity pinluted b3 Cahert Cliffs will continue to be our lowest cost energv. The plant will be y s a source of substantial fuel s. wings to Central Maryland for many years to come. ._l In planning for the future of Calvert Cliffs, uv must also deal with the issue of spent nuclear fuel. In response to continued delays in the U.S. I)cpartment of Energv's plans to build a permanent spent f uel repository, we are proceeding with our application to the NRC for a license to build a teinporary, alxne-ground, dry-storage Cunisn n 11. Poisorvan Vu v (Iwtrnum of the lloard

8 o UTILITY O P E R ATIO N S REVIEW ur utility employees um-onter provided for a higher authorized med their unmmitment to rate of return and recognition of dity in all aspects of our increased operating unsts, including siness in 19119, surpassing additional expenses at our Calvert Cliffs our quality-of-service goal Nuclear Pimcr Plant. The gas revenue under the Corporate ihrformance Awant decrease refleued the difference letween Program and lif ting ilG&E's customer the newly authorized rate of return and i approval rating to 94 percent. We have the actual gas test-year rate of return. implemented a system to monitor our in addition, the Commission agreed in serviu:, allowing us to respond to any principle with the Company's proposal indications of deteriorating quality with to recover $10 million of expenses asso-modifications of procedums and policies ciated with purchased capacity from designed to meet cusmmers' needs more Pennsylvania ibwer & l.ight Company i ellectivolv. beginning in.hme 1990. ELECTRIC SALES GAS 'Ibtal electric sahts for 19119 increased by 'Ibtal gas sales increased 1.1 percent over 3.4 percent over 1 9 1111 Ndet. All customer 191111 Ndes. Commercial and industrial classes advanced: commercial and indus-sales increased 2.2 percent, reflecting trial sales increased 3.11 penent, while robust manufacturing activity, especially residential sales grew 2.11 percent. These in the steci sector of the local economy, results reflect the milder weather experi-and the suu. css of our delivery service enuxl in 19119. On a weather-adjusted tarif f for transportation of custemer-basis, clectric Ndes increased by 4.2 per-owned gas. N1ilder weather drove residen-cent, remaling a healthy serv ce territory oal sdes down 0.l! percent. On a weather-with stmng underlying grtmth in num-adjusted basis, however, total sales rose hers of customers and use per customer. .74 1.4 perumt. In fact, we added our om> millionth In January 19119, the Public Service l customer in late hlay 19119. The 19119 g Commission of N1aryland approved the D pass-through to our gas customers of summer one-hour peak load al 5,304 direct-billed, take-or pay costs assessed megawatts, set on July 11, was slightly g' hmer than our all-time peak reumhxl to llG&E by Columbia Gas 'Iransmis-I during the abnormally hot summer sion Corporation. These costs result of~ 19111t A new all-time winter one-from the resolution of pipeline hour peak of 5,192 megawatts take-or pay umtracts under the was set on thxrmber 22,19119. l'cderal Energy Regulatory Commission's (l'ERC) Order RATE CASE No. 500. We began unthtting On December 15, 1 9119, the Public these costs in September 19111L Service Commission of' hlaryland flGRE played a leader-issued an order authorizing a ship role in negotiating a $21.5 million, or 1.5 percent, i comprehensive settlement annual intmase in electric base with its principal gas rates and a $3.5 million, or O.9 f pipeline suppliers, pcrt ent, annual decrease in gas Columbia Gas 'Iransmis-base rates. The Commission's sion (:orporation and EDWARD A. CRooht Prc.sident-Il ilitsj Opemtion.s t

{ 9 Columbia Culf Transraission Company. cad the HabimonsWashington corridor. The se tiement, appnwed by IIRC, we are lx ginning to umven the 115 kiki-resobed more than 30 outstanding volt ring cintuit to 2301,ilovolts and also regul. tory protecclings and 23 related extend 230 kihnult transmission to the coun appeals. As a result, our natural gas terryman generating site, along with build-customers will ntcive over $17 million in ing additional substations. When it is u>m-dinx:t refunds and futuir sinings. pleted in June 1992, the northern ring I:qually imponant, we nxcive41 a projttt will pnwide load relief to existing number of updatext services f rom the lines as well as cin uits for new generation. Columbia pipelines, effective Novernher 1, 1989, that will provide us future fhwibility "Our utility INFORMATiON SYSTEMS in autuiring unmpetitively priced gas Advanu s in computer technology are while maintaining long-term supply reli. employees helping to impnwe pmductivity and ability. These services include increased efficiency thioughout the Company, cu ess to pipeline capacity for transpon. Continued their in addition to upgrading the unnputer ing gas purthasul directly at the utilhead, systems at our fossil plants, we are C0mmitment cs util as the ability to stort some of this implementing a Nucicar Information Systems plan at Calvert Clif ts to enhance gas on the Columbia system for dehvery g gg during the wmter peak heating perimi, planning and maintenance apabilitics. This is in addidon to a m w unnpumdnxl 8Sp6CIS Of Our GENERATION security system and a system to track and The loss of generation from our Calvert busin0ES..." auamnt for nuclear fuel. A Distribution - Cliffs Nuclear power Plant has fon.ed us Cemstruction information System now to mly more heavily on our fossil plants computerizes work orders for electric and cnd the Itnnsylvania-New Jersey-gas meter services. A new Customer Maryland (pJM) [xmtr pool to meet our Infortnation System will give us speed customers' suxxis. The superb perfor-and ih xibility in handling custamens' mance of both umn.cs, plus less severe needs, and the new iluman Resourtes summer uvather umditions, enabled us information System will pmvide a - - to handle the major reduction in capacity modern paytuli and personnel system. suu.cssiully. During the period Inun Juno through August, we purchased more than HURRICANE HUGO 2A million megawatthours of powtr from in response to a request imm South PJM. Despite the frustrations of wikicat Carolina I.lectric & Gas, nearly 100 strikes against some of our unal suppliers volunteers, members of crews f rom during the summer, our people rose to throughout IKsht;'s nine-umnty service the challenge. area, spent 12 days last september helping to restore power to North Charleston in DISTRIBUTION the wake of Ilurriame llugo. Our people 1b ensure the reliability and efficiency of coonlinated a massive cifort in their our electric transmission system, we have assigned sector and repainxi mom than begun a series of projects designed to 17 miles of powvr lines and replauxl or reinfone and extend our distribution repalmd hundreds of utility poles and netwurk in the areas of heaviest gtwth: transformers. We are proud of our volun-northern ikdtimore and liarforti countics, tects and all those who kept things going Westminster, the inner liarbor, Annapolis, here at home while they were away. i k

10 0 C O N ST E L L ATIO N COMPANIES l his was a su(4 essful seat for Irlationshilw anumg independent lumrt c ( 4mstellation (empanies pn(turers ( enstellation has sutwtantial $r continued to establish holdings in vx urities, finatu ial serrioes position in four maior ( ompanies, and aqux ialized investment areas of business encryv partnerships ( onstellation is also an projerts, itneuments and finant ial at tisc real estate developer and a selet tive servio:s, tral estate, and senior hving innestor in the v nior-livmg indui.trv. The omstellation ( ompanies ( ontributed in 6.um, (vnstellation is espct ted to 514,140,000, or bl (ents a share, to total ( ontinue to contribute to it(.hl 's usrporate catnings in 14f14 This repte-finatu ial f utute sented an itu rease of 4 pen ent mer 14 tut. and ref1(x ts income asvu iated u nh the ENERGY GROUP construt tion of enetys proict ts, as well ( unstellation's I nergy (.roup is at tive irl as itu ome Inam finaru ial mvestinents the ( hanging wutid of elet tric pourt I and the sale of real estate generation. Wholesde pourt generation, ( ottstellation's ( ont m urd progress, int luding tunh (pialified fac ilities and j trflet ts the soundness of IM.hl 's of iginal independent powrt proout tion, repre-l disersific ation strategs. h(.h l lot tned sents a si/able por tion of the new power l Constellation to meet two f utulaniental genet.ition being built in the t 3 tod.n l objectises. first, to pros ide an additional and is espc( ted to ( ontitiue to grow to sour (c of car nings; and scoond, to meet espanding powrt needs. ( onstella-position the (atuparn to tenefit f rom tion is positiotiing itself to supph geneta-m etnciping opportunities 10 date, ( un' tion to this market at tonipetitive priocs stellation is, inceting these objet tises using high-quality, encrys ellit icnt, and gm. it prosides carnings support to the environinentalk sensitise tet hnologies. v y CompotWs core utilits operations Me he now have an 'nctship position capet t that the lesel of this support in 17 (ogeneration and small pourr will grow as energs and real prtuhu tion f at ilities with a total estate inseMments mature. output of apprositnatch 475 Through its ownership megawatts and are.u tisch interests in aheniaine seeking opportunities to j energs projc( ts at ross desclop suitable new projet ts. the i:ation, ( onstella-sis of our alternative encrys lion gives us a window proic( ts urnt into servic e on destloping energs-during Um9. int luding three produt tion tet huologies, geothermal proicots, one such as (ir< ularitig biomass plant, and out fity fluidifed bed boilers t w o ( oal-fited ( ogeneration as wrli as a netuutk of plants, both lot ated in the thu ( i N1. hmii n l*revdent and i hsel lacrutter Offi< cr. ( onucilatton IIoldmgs. Im. l l E-

r l l a k. a s -[. ' s 8 A og y .j ,.e .+ x .2 '4 _p g 4 8, + .y . ' C {, ,ss . :4-y :g - ? a. .. n.;.-%. * %,g.; ? M ": #,< W e ' n y n ~. ~,y _ w. ,v. :. '..4 + -t m 4 4 , =.. a. p r., 4 .,r .g. t,,J* r.4, s 1.%. a 8.+ g 9 9 I k

3...,q

...,.I:- v, #.f!y. h., > c.1v w, w', 4'&.,.,. l-}.. ; ',hAf,..,9 ~ w '.{' ; \\, _ l,f.. 'f < sf li,. t i.

f

' ys _ %d \\'t{.,.9 '\\s ~; -_,,K't';f s. e, ' ,t - a s } a; g ;j l;. y M.., ';, g & f ( lg yll y& y [,

n }w w..e

+ n

,f,yp')a c#'pV +n jyjf

ygg,h,f$g,y'f f f gg yp

-Qfig;kj f CQ, h r &' { W ' f.; i y vm:%m!Q '~ en, p. y mm c w . W 'h

• k f' e - ) dIh W h >hfij'. W u[4 3 m m a,,

h uppwlL.hI ww[;. m [ b.+ ':k,N N m -. m t, 2 kkh'&, M[ ', ',r b" 7 l J .. i..a.,.;... A,..w,N.,Lp., s *C M.,,c,.r. --, e%e e, a t4 4 %ep ~ m.g - ,. c M ' 't 1 ' '.n 9 v.wr.s.. c ia. s 8 /t*, t ... < e ;. J, h f,,%cw' n

a.. q u; e c.c;,.pu a;7o. w1;jf, ;,m.

,c 1 3 n.A a.. g,. . 3 c . t. ~.,,w n

v. s o

g.a t .c 3 s 4 f g, U M.4;m,,n$. s m -u 0.,:YG-dN.,@n,d. f. M, )d}i.h,'- y 0 ( A g.. tc- -ty Q,q:: - ?,lyWfy2 % u 4

}% g ; " mm.c. ;m i e, 4 hl4.. _,

( v_ ga m y _.., a t z.- p y 9 y [yd' Nb

1. ~

4~

4...n..i,g,m.4...

4%NMf%.T N 4.T(i t s -3,. y } er z -. -- ,, d f. .i. 4 x f' , 9, 4: 4 - f 3 c-s m 9" +... .f.$ W 'N A + w {i* .4 w M h +. k 3 e P 1 1

12 o Hakersfield, California, area. In addition Piney Ort.hant, a residential and to generating electricity, these togenera-business (nmmunity under construction tion facilitics prtwide steam for enhanocci in Anne Arundel County, Maryland,is oil rtuwery. The Encry,y Gmup, primarily one of Constellation's most ambitious thmugh a 50 pcrtent owned joint venture, "We Continued pmjects-including plans for more than clso has contracted to operate and main-4,000 homes, a retail center, and a 200-to establish Our tain 15 alternative energy pmjects,10 of acre business park. Nearby, on the utst which are in service-P0titiOR in 90ur side of the Italtimorc> Washington expressway, Constellation is developing CONSTELLATION INVESTMENn inal0r areas the 174-acre National ilusiness Park. Constellation Investments, thmugh its Three buildings are now under construo-management of a ponfolio of wruritics tion, including a 12-story office building and sgxtlallmt limited pannen, hips, has energy pr0l0 Cts, designed to pitwide the premier oliite becn the largest umtributor of net income space in the <ntridor. I II 8"d to the Omstellation companics. Placing in 1989, Qmstellation also acquinxi a stmng emphasis on liquidity and finanClal Sdet, the remaining ownen. hip of Churt;h Street preservation of capital, we have designed Station and Churt.h Stnet Exchange, an an asset mix that blends current imame fBal estate, and entenainment, dining, and retail unnph:x with the potential for capital apprecia-in downtown Orlando, Florida. tion. Utilitics, banking, and the financial guaranty industry are the focal points of SENIOR LMNG Constellation Imtstments' disciplined Omstellation IIcalth Services tuntinues investment style. to explore opportunitics in the senior-living market. "Ib date, we have made REAL ESTATE imestments in thme major senior-living Constellation's real estate activitics hicus pnxlucts: Independent living, assisted-primarily on the Italtimort> Washington living, and long-term cam facilitics corridor. Our strategy in to build a reputa-(nun,ing homes). Constellation's projects, tion as a quality developcc Thmugh based on joint ownenhip with quality The KMS Gmup, we are invohtxt in partners, include two retirement com-34 pmjects, including industrial and rnunitics, two assisted-living domiciles, business parks, off1(c buiklings, shopping and four nursing homes with options on and specialty attail centers, and minxi-four more, all of which are heated in the use (nmmunitics. Mid-Atlantic states or I'lorida. I

l s l l 2. l \\ \\ ?. f ~ ~- . g / mf).e ':.W %, i ' ' ' i. ' / k i -s.,,. Vr : g; - 4 w'e f g..' f-3[. 4: r 2

3..,

\\ l 'yl ... s r I -h {. 4 6 %.g,A .y., '. ..., i>w &W w 9'96be... A ... 3. 3 a y%, Q.. 3-. 3,. %. 4 -s x '+ ~. t '+ A . s. 4 t ^:w[ g

1 r

- +. .............. v... r j The 12 story office tower Baltimore-Washington the Baltimore-Washington nearing completion at corndor. Located in western international Airport, and Constellation's National Anne Arundel County on the Ft. Meade area The Business Park will provide the Baltimore-Washington Park's first two low. rise. 250,000 square teet of Parkway, the National flexible-use buildinDs are high quality office space in Business Park offers easy complete and ready for the center of the thnving access to the Parkway.1-95. occupancy l

14 o M E E T I N G THE ENERGY NEEDS OF THE FUTURE , he conscistone of11G&E's MAXIMlZING OUR PCITENTIAL-ntegy to encer futeur encign GETTING THE MOST FROM EXISTING FACIUTIES J ls is an integrated Resource in 1989, BG{rEfiassil poner plants achiestd p an traching into the next record leerls ofgeneration. Despite teildcat century. Beginning seith fint-strikes against soone of our ccxd supplicos, casts of hmd grtneth, ur destlop dernand-fitel procurernent and operating personnel side as urll as supply side stuntegics to uncct ,,",,pp, ' \\h* rnanaged to awrdinate sufficient coal U 0* our custorners' dernands for energt1. These power plant with the coat delitrries frons altentate supplicrs to usert i HdL I i5 S3 stuntegics inchede ncnc generating plants, ,yggggg;gy,,0*}k,g dunwgn ca our plank our connninnent to ,o purthused penter; fiscl, and conscnntion. in most aspects of electrlc safety uns not contprornised by the priority

• ", *,, fuc,I*[,0lI *M,,,

placal on plant aunHabihnj cnn the jmst n pactoring its both nonnal-and unpid-gnneth

,y,

scenarios sharpens our focus on the ade-years on the gas side of ycar. Also, the nossil Ducogsj Dicision quacy ofcach resourer, ,bu'l} *'}I FO' surymssed the tuv-unillion-onan hour unark ourfintcasters capcct about a 1.5 has been a fuel Han6ling seithout a lost tirne or restricted urnk case. UU9 I penrnt annual incorase in electric peak ',* h0 [g*g,*' A progrant of targeted irnpnnrrnents g,, demand thnnightmt the ninctics. 7b rncet is an extra cha\\lenge for scill significantly incorase the pnulucticity this growth, our plans first call for the fidt dj0 h 'y',* and cost-effcctheness of our fossil units as g use of anvilabic cxisting c<qmcity. Then role in the process of pro. urll as allow us to unaintain the cffcctitr-g c1 cny for toda1 ness of soonc oldco units urll beyond the they identif.ij had unanagenwnt ognions, 9 pcmcr purthase op;xntunitics, and new tuns of the centswt1. The finihcr dentlop-genconting plant acquierencnts. Our Inte. mcnt of cut-site tunining povgunons for gnued Resource plan is squiated continually opwmtors, craft utn kers, and fitel handicos and ordesigned to gitt us the flexibihty to wdl hcip us unaintain the perfunnance respond to changes. leurls ur need to get the most out ofour As ur kmk to the yrms ahead, ur ccm cquipment and maintam a safe usuk see the success of pnreious planning cycles: encirvrunent. ut hatt enterrd the ninctics util-positioned FINE TUNING THE SCHEDULE-in tenns of coal and nuclear basehxul BRANDON SHORES UNIT 2 gencmtion. Our tun &l0-meganatt units at limndon Shours tarmplif.ij the adaptability of our pkinning pmccss, tVe began con-hym ':f: h stntction on the.se plants in the t j j% x ,-)

l i ,./ y' y - . 'l : ' f_ -. y m '. ; g _.;. -. 'W' 'O.._ [ J PJ Y 4 i i 4 ~. u ..v ] au g & ,a ~ Q ? a, a - ' py ?. .\\ i r l.- .. Q g ,.l ' e,P. g,.hi.:{ ]

4 9 f f%l !

? l ~., ? .[ - ,g e .. s ' ti { l . lf r s A* ~ ;~.m c - - ~ - ., v: i f ', [ ,.4.? a f< _n 7 \\ 't .) ~:' 3 3y w, y .e ; QY .L. L i5 4 At. ~. ; L'

y..

, 4 :l d l 'f* g ,N i 4 g.. t 'i;- ' +

- [

j' Q ~ k ,,7 g y r.- .a. f;z.s. <- h $d ' \\ ~ l l 'k

• 'v l

, :,x .v;. r = l x. s . -y .:.r/VAkb =- '.jjg Q 4, f Qg, %

\\;.'i,,

k\\ X k4. ~ ' , jp { 5 '? I-. '. ' I yy_<(('. y ,; y ' _ ' [_-;!;;;;.' jy During the winter months, pulled into an electrically coal arriving at BG&E's heated thaw shed for up C. R Crane Power Plant to two hours. An entire directly from the mines trainload of frozen coal must be thawed before 11 can take up to a week to can be conveyed to the unload when this thawing coal pile. Railroad cars is required hiled with frozen coal are

.............,,....s .s. w c s A 9 h.,. . '*~ ,s n: 4 ,4. . } ' s.. .3 ( ^ d ,,,.s: s.m a + n m - p h. g s .2 A-y a n. s. w \\ i ,s. a i ei$it== ~ l y 4, se, 4 4s '. + bdm,, u sMWW W e . p~ =me-: .4 ,j " } -3 w .1 .g;,, m,,, 2+ wj .,.m .smy - -- } n, w., -~--:,, 1 m, +. + ,x +- M ~.* ,gi .....+ ,n I - ...g r 4 ~ 9 p .a _3 s N n> A I - ' 3A t =* s -t N b. i.; c >. n._. ~ f ,4 . ben @' "' :$.v.%,v gg,, ::m' ' ;y-p QQ.;^[ ' T, Q.n 9-h u p 'W e q J y a LM @3i g >. +qy n " ' '.- w $:S N . e End Np*,. %- w -.. 1.-q,m

• d 3 % 5 ' N eM %lhh%iwfN The dispatcher above is helping us meet our system enabling them to meet monitoring the electric demand in 1989. PJM their customers' demands transmission Orld of the operators use sophisticated with the most cost.

Pennsylvania.New Jersey. computer systems to coor. effective energy available. Maryland (PJM) Inter. dinate the generation and This power may come from connection at their office transmission facilities of generating units of PJM in Norristown, Pennsylvania. member companies, members or be purchased PJM played a vital part in from outside sources.

l 17 i l carly sesentics, intending to burn oil, but also in addition to matching itxulgrvleth, designing in the option to comert to coal. by managing the constnterion schedule for By the late scarntics, ur had excurised that Unit 2, u c bencfited both fann technological opnion. The plant's design pennitted buns. Thirty year old Todd Carter cubrunces and knoteledge gainedfann the i is an Associate Systems ing loussulphur ccxd, alloscing us to meet Analyst in the Information opcmting history ofl' nit 1. Ihr taarnph; i Ataryland's airajuality cmission orquin:ments Systems Department. A our decision to incniase Unit 2's puhrri:cr Graduate of the University without intulem.ng our customers seith the of Maryland Baltimore capacity. and therrby its opcmting and cost offlue gas-desulphurization systems, County, Todd develops and maintenance fhwibilitsj, grew directly out of maintains computer soft. known as sentbbers. ware applications tot our extn rience trith Unit 1. In another When huut gnneth nuxlcmted in the BGSE's major systems. instance, HG&l:spentsored rescarth into the In his two years with the setrntics, ur adj.usted the sen' ice darcs fo.r Company. Todd has come causes for condenser tube failures tus l' nit 1. the tuv Hamdon Short units to match to understand the tom' This information should tmnslate into plexities involved in Centml htaryland's needs. l' nit I urnt into meeting a community's impmtrd urliability Jur Unit 2. The acw cornmcorial opcmtion in Afay 1934 and energy needs: "l know unit's envinmunental features, its digital that what I do today will since then has been an encinnrunentally make l1 easier tot us to unstml system, and the cooling tourr's sound, reliabic, hmwst gencmtor of communicate with the efficient counter-flow design are also people we serve tomorrow!, clectricity..In 1984, the plant mn at an ynxlucts of recent tct knology. equimlent antilability factor of 92 perrent-util brytntd industnj standants cud abour ENSURING OUR RESERVES-CONTRACTS FOR PURCHASED ENERGY our enen gtxds for the plant. last spring, in resptntsc to the storngth The contmet with Irnnsyhrmia Itwrr & of customer demand, ur adjusted the in. I.ight Contjutny (plWI.), signed in 198tl service date for Unit 2, cuhruncing it funn plays a key n>le in our planning. Hy allow. Afarth 1992 to Afay 1991. The dirret super. ing us to pmthase truying amounts of Iwal-w vision of our own on-site pmject unanage. ) ing cajutcity-up to 275 mcgaurttts-at disunmted mtes, the contmet ment team, etnnbined seith decorasmg inflation and a etnnpctitine constntc-impnnes ursent margists at tion market, has allourd us to cut t sarmps to our customers of h; up to Sli million annualig, $43 million, or 10 pctrent, oJJ the budget for Unit 2 during k' ? We arr pmthasing nearly 200 onegaurttts fnnn PIBI, the past tinte years. s ] in 1990, but the contmet 9 f ( a m . j. f ~, pp'.r.u 0' Y e fgg

.~ [, ' h' '5 r p . f...y - y 4 1 + a .a . 4e. - e 'g .f a, r v- . k.)._. A 5 Q g i. w e.. + T.. ' .~ 7,. 1 s ( ..3 4. u. i g f. w-3 + v ~ j .,.....---[ x ' N $..... ( '. - 1 !n"

,.y

. g b ;.. _.

v. *

.y p e c.o r ^ N.. ....ys.. s ' ; ~ * + 4;f*"' ( , -i Q h,' p <' * ^ ~ 5 b-5 ^ .i... i k ,' ' - ' g.., j - gg g l This 8" thich stab of steel bounded from the difficult translate into hlDher quality has just been cut on the years of the early eighties and greater competitiveness new $300 million by investin0 in improve-for Bethlehem Steel on the continuous-stab caster at ments like tht: continuous international marketplace. Bethlehem Steel's Sparrows caster and a $200 million Bethlehem Steel s pros-Point. Maryland. plant. moderntration of its hot-perity contributes to a Bethlehem Steel. our strip mill These up0rades healthy economic future largest customer, has re-for all of Central Maryland

19 i t i 1 gites us the flexibility to suspend pmthascs It nyrnan. Unlike basc-hmd c<wd or nuclear in 1991 when Bmndon Sharrs Unit 2 begins plants, these units gitt us ficribility in commercial opcmtion. In acklition, the schululing savice dates. If needed ur could contmct includes liS megauntts of capacity begin construction on the combustion-and nuclear enngy fornn the Susquchanna tsubinc phase in 1991. By the tune of the Steam Occtric Station. trntury, ur should need at least one of the A contmet with Ikdtimour-based etnnbined<ycle contrrsitnus. BRl3CO, openttors ofone of the nation's COUNTING ON DEMAND SIDE RESOURCES-largest tmsh-buneing plants (55 megauntts), to purchase its electric gencmting capacity Thitty year old Senior THE ENERGY MANAGER also helps to defer our inanediate need for fu"nDYb Ik*""d'*iU' '""""#'*'"' 5" "" 'll"'5'* c l-as umstnuction. \\Yc will continue to uvrk with marketing program. lack toolfor mculemting peak-load gnneth unt! ahensate supplins to esplore addiritmal fo*fce fe't h. " tons '"""""#'"A '""EU 'lI5' "'N' 5'" "50"'" cost <ffectist energy sourre.s of coal ash, t1 by product of gted is to ruhtcc the need for fittsor ionest-l "TH' I" #CHC"dIH# UVMCif# U punides j tion to na inD ur to I-LOOKING TO THE MID NINETIES-PERRYMAN ash structural fill opera-dernand-side pnigmms to mrct the raceds of tions in Baltimore and cach customer class. The phased installation of tuo dual-fiseled, Anne Arundelcounties, cennbined-cycle units at ener ik nyman site Monika's lob Involves Our pmgnun for ursidential customers, in liarftnd County is the final supply-side findinD Inn 0V*\\lV* COM' knou n as the Ducrgy Afaweger; offas a menu t Inercial uses for the ash, annpmtent ofour Integmted Resounc plan ofoptients. Custennns can select [nnn an capanding mnge of alternatists, including for the armainder of this centmy. \\Ve plan hmd contmilns fin centml air conditioners, n. to use natuml gas dwing the seasons when gwp it can be punhased at cccmomical prices, pmgm.nmable unter heater timers, and \\ Othenvisc, the plant will opcmte on oil. \\Vc time-ofuse mics. Abnost 4:t000 ocsidential i also haue the option of building encinm. customas art alnady participating. mentally sound aml-gasification units at Commacial and industrial customas it:rryman, neclficzibility has pnnen also can contribute to peak h ad orduction cffcctite for us in the past, and achine significant savings on their in ikccmber 1989, ur applied to the bills. \\Vc offi:r cordits to qualifying ~O hfmyland puddic Scn ice Commission for c.e" 3 customers for the use of their a certificate to buihl these tuu 400-y f'v 3 7f emcogency gencmting equip-V l rnent and for the op;mr. %j- }})5 megauntt, annbined-cycle units at w o ac 1 gy w 4.- j -[ y (( g., Z[lf ~ .f,

?

t x -Q l f }? , g,,)'; [.f N i* e i

'$ o l tunity to curtail service during peak equrt sales govwth to be significantly l periculs. In acklition, alunost 85 percent of influcnced by deurlojnnent thnntghout l all cornoncerial and industrial sales me Centml Afaryland. provided under time-of-use mtes. In 1989, to LcepIxsce seith this cymnd. Through aggressiur mmketing effmts, ing customer base, ur desigred and built ur espect our demand-side pwgmms to 34 nne distribution ferdcas, cyxended sesen archtcc peak demand by moor than 220 existing substations, and built tince nne mcpausutts by 1992. This orduction substadions. Ostr the jxtst tuv yems, ur njntsents the meidance of a $120 million Alexander Flllpkowski is a hme acquirrd a nuntlxr of additional '*'**',**Yg,pp, g,p,,,gfg*,,subundon shes, aU Icx:au:d us noinionhc du? imrstment in a pourr plant th?st uvuhl othenvisc be needed. 11 years, the 48 year old <ntmil costs of cy>anding our chttric A5^5I"5"" '*'l"5'U' Yl*"'"5""" " elpl g G&E ul the FROM THE PLANTS TO THE PEOPLE-pipelines and facilities under uvy to buiki tuo major high tvitage EXPANDING OUR DISTRIBUTION NETWORK that supply Central Mary. land with natural gas. With tmnsmission pmjects in the cmly ninetics: Designing gencmtion and supply stmtegics the Cwpany's expansion a stritching station designed to cvrend is only pan of the pictsnc. We also hmr to of the gas supplv system 33.nikah service to the new Otter IUint and the increasing popu-custne that the distribution system Lceps larity of gas for home substation in liarfind County and the pace wsth the gnneth of our tenitory. heating A\\enandetforesees a busy future, and that's , y,,.'l,g, (,,,g,; 9 9g g,g,,,,;((,9 g,( Centml Afar?) land forms part of the lust the way he wants it. Irmpnan pencmtion site. he addition, ur dynamic Italtimore-Washington conidor; pg, p(ggg gg, upgmding and wbuilding of inte of the fastest gnnving mrtnyx>litan doc cxisting ils-kilotvlt northens tmnsmis-wras in the country. Our sen' ice-based smn ring system to allow it u, opcmte at . cconomy has enet-per:fonned the national 230 kihnvits, assnuing adequate jxmtr mrmge thnmghout the sesvn-ycar-long 3f supply to our distribution system utliinto econontic cyxmsion, and ur cyxrt this dic 21u centunj. llsis high leurl of activity trend to continue neith thefonnali:ation a is the ursult of our samtegic planning, in the early ninctics of the Haltimon. pmject comdination, and vrsource Washington Conunon AfmLct. unanagement, coupled with During the 1990-94 period, cfficient caccution by ur mr[curcasting a 2.5 our constnnction fentes. pcotent annual intwase .yQ t~ in electric sales. We Vi I

1 1 1 1 l l ) l s ':1 ,, 'j,;;,4 4@.'. - V ( y w +% W-a Mmg~ L y~.-Lys.;EfLly e;.

,.,.; 7

-.,7 3 $ Y '_,, j, .e,, , w y l . s 4>,. 6.* -QFR .co ,qp .*3 / A k g[" 1 ~ [p-y;g . p,. g'g,.; g ; 3. ;. y;g'q' y fy. n_ .%F yz .wy3 4 , _g. - T J lG; p,} .[;jQ,.1,.

}.!g 1

l.. jf g non .. ' Jl;il!ggfa'iQ k;.., y .d,g ~ y, 3, q{, " . w. 4 ((-; .d f 1Y. ,, p s y. y j y. - v /ve n j.. A..

f '.

'O f'. ] ?# ) .c

p!.

cy;g;q, 1 l s I

HO F I s Looking ahrail, ur hmv implementctl it shouhl pnn itic a nuxlemting influence on a tnunber ofimpnnements to enhance the gnneth ofclectric peak cicmanti. the pcrfm, nance of emr electric system. Durinnumental camcents gise tuhlal incimling the use of hightfuality, faihnr-impetus to the scan:h for nne uscs of natuml n:sistant umingnnmtl cable matic of gas. In 1988, schile on an econontic clarlop-cthylene-pmpylcnc mbber; whrmcetl ment unission lett by htarylurul's gastnwr, tmiring pmgumns amti cenrynetency testing \\\\'illiam Ikonald Scharfer, in 7tnvnto, for line mechanics aml inmbleshtx> ten, anti Chainnan George V. AlcGousm learned nne regional stunn centers to unanage our nuove almut natuml-gas-pourted huses. 7tn n: sources nune c)ficiently during emergency hfarylaml huscs scill smm he nuuning ens conditions. natum! gas as jwat of a falcmily fiuuletl test pmgmm whninistard by BGhl: aml AN INCREASINGLY IMPORTANT RESOURCE-the state of htmyland. In conjunuion seith NATURAL GAS this invicct, ur mr taplan.ng thefe.assbility Natumlgas is a cirms fuel. Thnntgh of using nannal gas as a fiscl for our enen impnnrel mellability and competitist mul other cornonenialJh ct opcmtions. In priciety, it has becorne an attmrtisc choice addition, m an'innrstigating the pn> cess of for our enen generation mix arul a stmmi co.]hing a mhtun' of ruauralgm mud nud cnnytt choice for many of our custennen. as an nnisions cornml altenmtise at our \\\\'c artisvly nun ket the gas option Ihnmgh-C p Cume, IL A. \\\\'agun; arul Dmrulon out ntuch of tner tenittny. Ily the unid-S;,on., p a,gg, g 1990s, ur anticipate close to L5 percent annual innrase in gas sales ami deliserics, OUR GOAL FOR THE FUTURE much ri it coming funn nuu Leting pmgmms \\\\'ith the mat centunt alocady em the f smycting ncsc residential constructient. henixem, ur arr positioned to supply our hs addition, ur mc utnLing seith the custinnatynneth and to gnne as an encogtI gas industry to dnvlop nne technohngics to business. Our fomulation is stnnsg: fitaible hnwulen the <qrplications for gas coul to stmtegic planning; trliabic, cronomical make its use eten mme attmctisc for all genemtion; pn>ductisr demand-onanagement custenner classes. Iligh-cfficicm.sj gas tools; an tajwouled clectrical distribution hentos aluvuly chamatically shorten the system; and an aggremitt mm keting pm-payback peritwl for cornrrsitm fnnn oil gnun for natuml gas. These fmulamernals, to gas lxillen. Ncsc types ofgas air' coupled n'ith our long tuulition of hands <ns nnulitioning and dchumidifica scill be management, gise us the ability to adapt to commarially contpetitim in the not too-the challenges that lie ahead mul to distant futtur. As our gas business ex;wnuls, uricenne change as opjxntunity. s L,.,,... ,.,,,,a

l i l l .. v. ;,--, - 1 + ,I h .x 3 I !g.. i-j '~'l h.e n 4 e s- ..f- ~] c 1 .s. -, j. { ' ;./ 6" y v. 1 + q .y , }[ '- - h' k - L ~ {, f %. e . N . 5 ; -,.. N J L. 7. : _, g,,:q w ,N NN-i s.+ wmmem ~, , ~ n Y p y g gjfr-flM 10 -e; (, ] g ep.,. Q$ ,K' ' q. 4 + q p._ ~' ^l l b_ =. y __ 9' %Q g M. l r .y g, m As '. ~ {$di'Q ( ( ,T' s g. y

• M

< [* .M +

1. ,. s

~: 5-J,* %Q: %d 5 ; ' ~.c ~ ./ g *,".. v y-s. r At the Raphael Road tubin0 conductors that will area Ultimately. the transmission switchin0 eventually be installed on Raphael Road switch-station now under the girders in the back-ing station will btr the construction in Hariord ground Raphael Road is point where Generation County, Maryland. part of our Otter Point from the Perryman Plant mechanics are assem-master substation project enters our electrical blin0 insulator stacks designed to meet growth system to serve the They will support the in the Harford County homes and business 230-kilovolt aluminum of Central Maryland

4 ~ r s 3 S 4 n a w s 1' 9 .g', 4: tai e n9 fM r + k 4.*I l ** .e-o ,. 2 ppm k '} l . j. .f-eg e ' 'i % e ash,,. v y. n...; y' ss '4 w i. ~- , t.. 4 ' - ' 'Mw g-4 eter '- ..O, % -n-,....u.u, 9,

• w a, s

g, 9 M *' .p!. - ' . p.:.. "GK. m.., - em g 9 gg -

• M.

~ uns t s '.f'. fg jf44E" + ' g +r s ,7;. ~ ~ ww '. -. y. ,z.

f. #..

.4~ ?

4=

4 J y:.s + , w15g%,h,--, g.. 4,

g..

N. Tyg6 -, - y. u. f ~,. i'bg. _. J~ik s' i W +. ,3 y ,, s 4 b y -4 Located in downtown Balti. yard in the toreground. more. the Monument Street power is transformed from substation is a local point 115-kilovolts to the 13-for the distribution of t,lec. kilovolt and tout kilovolt i tricity to a strong. vibrant electricity needed by communhy In the switch homes and businesses L

- - - -. -l CORPORATE P R O F I L E

• 25 i

nour position as one 1 titinmre Gas and Ekttric Company is an investor-<nened company that unnhines its unre ) l-I ility business with disersified non-utility operations. As the first gas utility and one of the j t electric utilities in the United States, we have a long tr.nlition of superior setvite and ] iability. Our utility strategy for the futum focuses on maintaining lxith that tradition and - j I activitics, under the dirrction of Constellation floklings, are designtxl un pnwide meaninglul carnings support to the Cannpany while allowing us to take advantage of new business opportunities that use l our expenise and taperience. Constellation iloidings hohls the stock of' three companies that are l involved in real estate development, senior living and heahh care, energy and environmental pmjects, md imestments and financial services. l IING, Inc., another wholly owned subsidiary of the Company, irwests in natural gas reserves and I obtains gas f rom nontraditional soun.cs. The Canupany and its wholly owned subsidiaries have over 9,000 employees. ) l IITilrtT Oct IMTioNs 13 I RMilt o Ac*r n ITil s ..T { 3% g g' [{} j / y, Dia 'y-d 9 t b.6,*"N.A 2 6009 T Energy and l Gas and Electric Environmental Real Estate Investments il4tJIMoRI: G4s AND El.t(~rkic CoWrt.11.ATloN IIol.lilNGs i Central Maryland is one of the fastest gnnving The operating tampanics in the Constellation group focus and coonomically healthiest arras in the on four major businew lines. Thmugh out ownership posi-oountry. 'Ib wnr its elet tric tweds, itGlsE tion in 17 energy and envinmmental projttts and inmhr-operates 10 elet trio generating plants in ment in 11 umtrac ts for operations and maintenante Central Maryland, including the Cahert Clith services, we are not only pnxlucing c urtrnt itu ome but are Nuoh ar limvr plant, which pnxtuces the also gaining valuabic esperience in the deitgulated umer l l_ kmest oost ekttricity generated by HGlit. generation market. We also maintain shared ownership of thn e Our 3-1 tral estate pndcots are heavily < oncentrated generating facilitics in Itnnsylvania: two within the mid-Atlantic region. This growing and dhet. minemouth plants and sale liarbor Water sified portfolio :anging irom completed offic c buildings hmer Corporation, a pnxluc er of hydne and shopping centers to land awemblages will pnnide a l ch'ctric 1xmvr. In addition, we belong to the blend of on going erntal inmme as wc!) as gains on future Ibnnsylvania.New Jersey-Maryland Inter + sales. Our Real Estate Gmup is also invohed in pmjects umncotion that affords us access to pooled associated specific.dly with the rapidly growing <ntr-M (apacity on famiable terms. segment of our population. Through joint ventuits, wr have We meet virtually all our customers' gas brought our financ ial sterngth and stability to the senior-requirements thmugh purchases inun pipeline living and health care market. 'Icamed with a nationally suppliers and natural gas pnxtuters. As a known pnwider of health care seni<cs, we own four supplement to this supply of natural gas, we nursing homes and tuu retirement home proje< ts. maintain facilitics at three plants in Central Our gositions in imestments and financial seni es Maryland for the pnxluttion and storage of let us blend < urrent inunne with the longer-term < apital-liquified natural gas, substitute natural gas, appntiation-type proje< ts in our other business lines to and propanc. pnnlute the desired total corporate resuh. The broadly Other business includes the s.de of gas dncrsified imestment portfolio pnwides the year to-year and rhttric appliantes. t ore amount of inwmc for all Constellation activities.

-SELECTED FIN ANCI AL DATA 19fl9 19ful 19ft7 IfM16

!! MIS (oollar Amoumn in Thouunds. Imept Prr Wre Amounts) Sum' nary el Operaleons Revenues Elttt ric..................... $1,519,294 $1,434,562 $1,393,735 51,3fl8,251 51,301,463 Gas...... 411,tl01 3111,5 3 6 415,456 445,769 453,309 Diversified activitics 73,041 47,570 27,555 20,086 9,767 'Ibtal revenucs............. 2,0(N I 36 1,I163,66ft 1,836,746 1,854,106 1,764,539 Expensca Other Than Interest and Income Thics Okttric fuel and purchauxi energy 370,131 311,510 296,543 327,317 295,747 Gas purchased Ior resale. 223,462 198,431 233,702 271,383 274,706 Operations............ 4711,194 433,ft2fl 31ul,973 369,277 33fl,236 Maintena nte................ 149,014 132,746 124,1137 120,052 116,647 Deprrtiation... 156,546 147,076 134,1138 128,002 125,451 'Thws other than inwmc taxes... 150,204 143,127 135,731 131,554 123,455 lbtal expenses other than interest and income ta xes. 1,527,551 1,366,7111 1,314,624 1,3 4 7,5115 1,274,242 Income l' rom Operations. 4 7 6,5115 496.950 522,122 506,521 490,297 Other income Allowance for equity funds uvxl during construction.... 111,564 16,056 16,870 16,1171 14,597 Equity in carnings of Safe llarbor Water Itmer Corporation.......... 5,176 5,570 6,331 5,765 2,665 Net other income and deductions......... 7,1till 1,92tl 945 (619) 1,771 'Ibt.d other Inwmc.. 30,9211 23,554 24,146 22,017 19,033 incorne llclore Interest and Income 'Ihws.. 507,513 $20,504 546,2611 5 211,5 311 509,330 Interest Expenut Intenist Charges. 164,369 136,071 129,871 126,324 121,952 ? Allowance for lornmed Iunds used during construction......, (14,776) (12,075) (14,069) ( 1 3,5112 ) (11,750) Net interest expense.... 149,593 123,996 115,1102 112,742 110,202 inwmc Ilefore income lhws.. 357,920 396,5011 430,466 415,796 399,12fl income *Ihws.. 151,629 93,096 130,36fl 141,177 151,82tl Net inwmc... 276,291 303,412 300,09f1 274,619 247,300 Pmicrred and Preferenw Stock Dividends. 32,3til 29,375 26,406 26,1176 27,370 Earnings Appikahic to Common Stock 243,910 274,037 273.692 247,743 219,930 Common Stock Dividends 166,067 156,142 147,1146 139,567 131,692 Earnings Reimusted in the ilusiness.. $ 77,1143 $ 117,1195 $ 125,796 5 1011,176 $ lut.23tl Average Shares of Common Stock Outstanding (Thousimds)..... 79,997 79,052 78,1161 711,627 78,622 Earnings ltr Share of Common Stock....... $3.05 $3.47 $3.47 $3.15 $2.80 Dividends Declared Per Share of Common Stix.k. $2.075 $1.975 $1.!!75 $1.775 $1.675 Ratio of I arnings to risc41 Chargc.s............ 3.12 3.11 3 4.22 4.19 4.14 Ratio of Carnings to riwd Charges and Preferred and Prefemnte Sto0L Dividends Combined 2.50 3.01 3.29 3.20 3.08 Financial Statistics at Year End 1btid Assets 55,9115,679 $5.126,362 51,780,167 $4.5112,670 $4,273,72 I Capitalization long-term debt 52,076,620 $1,769,066 $1,707,407 $1,596,275 51,494,442 Preferred stock.... 59,185 59,185 5 9,1115 5 4,1115 5 9,1115 Redecmable preferente sto(.k. 322,1100 229,600 1(16,400 50,00() fl0.(KM) Prefercrue stock not subject to mandatory nxlemption...... I 10,tX)0 11(),(XK) i 10,(XX) 11(),(XK) 175,000 Common shareholders' equity. 2,0 0 1,11111 1,tul5,2-15 1,755.368 1,629,795 1,521,960 l 'Ibtal capit.dization $4,569,793 $4,053,046 $3 filft,360 $3,445,255 $3,330,587 l Ilook Value Per Share of Common Stock $24.91 $23.77 $22.24 $20.72 $19.36 Number of Common Shareholders.. 70,395 73,786 75,682 76,972 79,474 Iksitterwur Gces emd i:leraric Comptmp emd hubWhtmn

JAN AGECENT'S DISCUSSION AND AN ALYSIS OF FIN ANCI AL CONDITION AND RESULTS OF OPER ATIONS 27 o ( All Noic reinenm hercuruler are to the Nitra to (bnsulkl. uni iinaruial statements ) RESULTS OF OPERATIONS Ikirnings Earnings per share of unnnum sux.k for Italtimore Gas On December 15 linl4. the Mar 3 and Commission t cnd Electric Onnpany (BG&E) and Subsidiaries (collec-isvuxi an onter authorizing a $21.5 million annual titely, the Qnnpany) were $105 in 1989 compared to increase in electric thisc rates and a $3.5 million antnial $3.47 in 19ful arul 19tl7. The 19119 results are :.ttributable decrtsisc in gas ihne rates. The $3.5 million gas skx reax to kmtr carnings from liG&E's utility inisiness, tombined incluckxl a 52.11 million tkx rease previously onlerext on with unchanged carnings f rom discrwified business October lit 19119. The electric increase reflected IIG&E's cetivitics. l'arnings in 19118 were unchangal unnpaux! higher operations and maintenante expenses, primarily to 19117 due to lower utility carnings, offset by higher at the Qihrrt Cliffs Nuolcar limvr plant, and an inutsne carnings from diversified business actisities. l'er share in its authorinst rate of return from 9.7tl% to 10.01%, while carnings are summarinxl as folkmx the gas decrease reflected that the gas inminess h.nl carned in m m the mv audm&d rate M nwn (Mng & imig 19tui 1987 test period. Utility operations..... $2.111 $3.23 $3.30 Diverwific41Inniness activitics .24 .24 .17 Electric Revenues arul hates 'Ibtal... 53.05 53.47 53.47 I:lectric revenues increav41 by 584.7 millio 1, or %.9%, in 19119 arul by $40.11 million, or 2.9%, in 19 tut The incn aw in 1989 is attributable primarily to higher sales and to The (k crease in utility cartiings in 19119 is attributable higher fuct rate revenue resuhing innn inucased lucl to increased operations and maintenante espenses, highc: u><s. 'Mm thanges foi loth cars are Miturnarin41 below: 3 financing unts, and hmtr rates of sdes growth as unn-panxl to 191u1 The lourr rates of sdes gnmth resulted I"0"'d'C(D " " W 'l f rom less famrable weather than in 19tul, ikirticularly runn Prior Year during the summer moling montln. The increavxt opera-19n9 imut tions and maintenanu' expenses principally tolicot Md> gn gno,,[ stantially higher levels of expenditures at the Cilvert Ndes. 531.2 560.5 Clifth Nuticar Ibwrr plant, in 1990, operations and H.nc rMc MuMments. .4 (40.5 ) maintenance expenses air expected to contmue to fuel rate adjustments, 53.1 2 0.11 incre.nc. While the ellcots thereof will be partially offset by the Dcocmber 1989 electric baw rate incle.nc ' uthor. Net itu re.ises. 584.7 540.li a irnt by the public service Onnmission of Maryland (Maryland Commission) discussnl below, carnings in Elc< tric sales volumes inucaml by 3.4% in 1989 atul 1990 are expected to continue to decline. 6.2% in 191ut The increases inun the prior year by class of The decrease in utility carnings in 191111 was attributable customer are shown below. The 198tl inutsises for the primarily to the ef fects of several accounting thanges small unnmen.ial and large connnettial and itulustrial authoriecd by the Marylatul Onnmission eth ctive April classes have been restated to rciles t a reclassification 191ut and to higher operations and maintenance expenses. between thesc (lasses umsistent with the current year's partially offset by an inacase in electric sdes. Utility presentation. earnings in 191HI also reflected the ellects of the May 19117 19a9 imin base rate nxtuction of $71L3 million on an annual basis. Res kndal..... _. p,, gjf,N u oilset in part by the cifcct of the louvr federal inunne tax h * " U """ ""'" I" ~~ rate in ettect during that year. U"W """""*I'd ""d : *"I"* ". I' *

• 3." I

1. 0 Utility carnings were reduced in 1989 and 19 tut unn-paicd to the wrresponding prior ye,arw by a total of 4c

& hms in A mbne fm luh 1989 and 19tui and,lic per common share, respettively, as a result of the Mhdde m Wh in h mdmf muonu n Aprd 191u1 au.ounting changes. See Note,1:. and to the mntinued strength of the hu.al cumomy. Ndes Earnings f rom diversified business.,ictivitms represent oM in 191ul & knedted bn favorable weather, the res.ilts of operations of Constellatmn iloidings, Inc. 14' duig Om mer Mig mm and Inun a Comparo,d its subsid1ancs (< ollectively, the Omstellation daHe in cleic pim N mex mdm emer (Cill) an es). Ihe Constellatmn Onnpames, carnings in 1989 reflect ino>me asviciated with t.n benefits innu the weather in 1989 substantially reduux! the rme of growth construction oi certain energy projects, gains on the sale in electric sdes as mmpanxi to 19 tut Ndes to residential o dmi in dm medu d Nadng of nul estate, and morcased inmme Imm imancial customers of ILS% in 1989 and 9.11% in 191ML Qimmercial mvestments. Earnmgs m 191MI reflect a mor;c favorable and industrial sdes mlumes were enhanuxl during loth performance by the omstellanon nunlunues smck port-ea de d mndnud hvouble eununnic umdi-foho following the impact of the Octoocr 1987 stm k g ggg.s sen it e territory. market decline. These fattors were offset m luth years by higher operating expenses and interest expense. 1 Isainmorr Gas anti I.Irco k nmqmny aml xubwhm un

If e n al i Ibture electric Ades mlumes will umtinue to be on sales to customers with ahernate fuel utpability as a affected h weather, the price of electricity, customer result of higher oil prices. The changes from the prior - grtm th, and the general emnomic wnditions in ItG&r's year by class of customer utte as follows: senice tei ritory. 1 1989 l'MW1 Gan Reven uch and Sales Residential....... (.fi)% 5.2% Gas wvenues increased by $30.3 million, or 7.9%, in 19119 Small com mertial............ 1.4 7.2 and dc( reawxi by $33.9 million, or R2%, in 19ful These large mmmercial and industrial.. 2.2 7.1 i changes worr attributable p'imarily to changes in the cost of pun.havxt gas reflecting current conditions in the The incicases in gas wiles volumes during both years natural gas market, and are summarized below. were attributable to the strength of the local emnomy, inucav- ( neucase) particularly in the manufacturing uttor, as reflected by f rom 1*rior vrar the interavxt utilization of delivery servim gas by certain 1989 l' nut of IIG&I;'s large mmmen:ial and industrial customers. (in suttinmj Ndes also reflect the oficots of the colder winter weather Sahw...... $ 4.1 5 4.4 in 19ful and the warmer winter weather in 19119 as mm-liase rate adjustments. (.6) ( 1.2 ) panxi to the respective prior years. Ndes volumes in 19ful Gas cost adjustments.. 2fi.Il (37.1) also benclited from the decline in the price of gas. Gas sales mlumes include gas transported under Net changes. $30.3 Sf 33.9) ggggg;.s ddiu i-, service scheduk. Under this schedukt, customers purchase gas directly f rom gas pnxtuceri Gas Ndes volumes increased by 1.1% in 19119 and 6.4% and pipelines and pay llG&E a delivery service fee to in 1911tL Although sales volumes increased less in 19119 transport the gas through IlGhE's scrdre ter+itory. The than in 19ful,19119 revenues reflect more favorable pricing delivery service fee provides itG&E with an operating Sales of Electricity ~ bidor usattsui g,g,g,9 g,, ~ (wens aiDeufsidi 26 - ~ i 24- - - - - 120 - - gg..-- 310 - - - - i gg 1%.. - - 18 90 tilling Degree Days-16 80 Billing Degree Days-Cooling _ _. _ y HealinD _ 12 60 jg - _._.._... - _ _ 10 60 6.000 ~ 300 '"' 8 40 4M 600 6 30 3.000 l 400 4 20 2.000 200 2 10 1 000 0 0 0 g 1985 1906 1987 1988 1989 1985 1966 1 7 1968 1989 1985' 1986 1 1988 1989 ) m g ktual Normal Residential Commercial Residential Commercial Etual 140rmal 00 ** Average 1 and industrial and Industrial 00 ha Ave'aeol ktual klual _943.. _913.. 6% 71 78 85 92 _. . Residential _ ,_401 _ 398 4158 4N5 4 661. 48'5__45 _ Residential _ _ _ 779 907 95 30 4 3f 6 38 1 -Normal ao he aversoon ~8%^ Commercial and industrial Commercial and Industrial Normal 90 he Minosi ~ ~ ' 806 ~ BJb 96 13 4 14 1 14 8 15 3 ' ~ 605 588 64 8 694 " 309 4 I6 4M ~4M N ~4 m 82 83 lotal _ _. 24 0 _ ?48__ 10tal 10 7 71 2 22 6 90 9 974 102 9 1395 107 Baltimuur Gas suul 1:let tric Cennpcmq coul aubsicliaries

if p s 8-O $ f m:rgin equivalent to the margin on gas it sells to sinular gxmcr generat<xl by llGhl:, outages at the Calvert Cliffs customers. Thus, aldKnugh delivery service volumes plant have a substantial offeu on f uel costs, and the alxive generate less revenue per unit than do sales to similar outages hine resulted in replatcenent energy costs of customers, delivery service volumes generally result in appnnimately 5140 million thniugh Dcocmix r 31,14fl4. It the same uintribution to olx rating inumic.1)clivery is espected that the Maryland C<nnmission will review the service repnwented.30.9% and 6.6% of total gas w>lumes significant replac ement energy u>sts resulting itum these and gas operving re,cnues, espedively, in 19119, as c om-and other outages. Although no assurances om lxt given, .parext to 37.3% aine 5.1%, respetrively, in 198R haux! uinm the present plans to return both Cadvert Clills I'uture gas sales wilumes will continue to be affected by units to service, itGht; is of the opinion that the ultimate the price of gas and akernate fuels, weather umditions, resolution of these replacement energy tost issues will general emnomic conditions the espansion of IlGht's not hme a material adverse efic< t on its operations or gas distribution system, and the ergulatory climate in the financial umdition. Nec Notes 1 and 11. natural gas industry. If gas prices were unable to remain pun.hased gas espense was as follows: unmpetitive with alternate luch. Conversions f rom gas by pyg pg large unnmen tal and industnal customers would be anticipated. The delivery service v hedule, in umjunction On udhane i with flexible pricing provisions, should enable gas to Auual u>sts 5233.9 5220 6 5217.9 compete f nurably with oil as a primary fuel v>urte and Net deferral of unsts under m<xicrate these timte winns as long as natural gas prit es pun.hawd gas ad.jugnu nt icmain competitiee and interstate pipeline trans[x>rtation clause (10.4) (22.2 ) 1 5.11 is awallable-lutal espense.. 5223.5 51911..I 5233.7 I)hersified Arth;itics llevenue" The intn av> in aumd purchmt ga < osts in 19fi9 $25.5 nyillion, or 53.5%, in 19tN and $;tivities mtscased by Revenues from dnrrsihed business 4K rdicus higiu r ge prites and M2.3 mHlion of take-or-pay 20.0 milion, or ungs biHed to llGht; in au.ontante with I'ederal F.ncry'v 72.6%, in 191LR 'I he in< rease in 19119 tellects inucases m. Regulatory Commission Unter No. 500, partially ofIset t,he real estate group's i;ctenues and higher inunne f torn hv the efic< ts of a 2.11% decirase in gas output. The f mancial investments. The intnme in 19tul revenues S < reav in omput in HUN resulted Irom incnmed sales scilects a mosc favorable 1x rfonnante by the Constella-under the delivery sen ice v.hedule. Gas transported tion Compames'sux k portfolio following the impaa t of undn dus aheduh dom not involve die purchase and the Onober 19117 stock maiket decline. ompm of ga by llGhi' and h nm rdleru d in purdav d gas u>sts. The im rease in actual purchasal gas costs in I;uel and punhased I..ncigy IXpense Huul was attributable to a 11.9% increase in gas output I Lininc fuel and purchased energy mpense was as follmvs: and dm incunente of R3 million of take-or pay costs, imm tw iw partially offset by reductions in the cost of ge from suppliers. The thanges in the unst of gas in both years on uanony cu gennp inarku unmbdons and th cHeus of. n Actual rosts.. 56011.2 5322.0 51111.!! Net deferral of (osts under llGht's umtmued ellorts to secute gas dirertly Innu snnal gas pnnluters and suppliers in onter to minimlic cleottit fuel rate <lause ( 2 311.1 ) ( 10.5 ) ( 12.3 ) pun.hased ga costs. 1btal espense. 5370.1 5311.5 5296.5 Opemtions and Maintename Ihpeng's 9 """ N"* N"HHg and In.N m im W intnww in bom g.us am The ititicase in at tual itiel and pun hased energy costs m in 1989 is due primarily to a less favorable generation mis ersulting f rom miended outages at both units of the due prund, y m Wyn um at tk Mun Ws Nmkar mn ant amt to lugher payroll and f ringe benefit u>sts, Calvert Cliffs Nuticar linver plant. The inonme in 19119 in I)ctemix r 191 1, the Cahcrt Cliffs pkmt sus oategor. aho scfletts a 3.3% inucase in elettric output. as well as lini dm udu Regulatory ConunNion W, as a higher prites for oil and toal. The decrease in m tual fuel P ""' '"4"III"E 'I"'" *""II"IIng and increased NW, I costs in 191ut was due to louvr coal and oil prites and a ""C "'I""' ^ * " '"*"I' "I I"IN b,* '"""" I ' * "" ' '" I

• I **"

j more favorable generation mis reflecting greater nuclear , P"'"""" * " d " d "

• P"" d "" '

and coal generation, partially offset by the eficots of a '" "P""d""""!".

• Y""*""""' N
• P

" P"" h6% increase in electric output. I""" # " N ""

• lloth units at the Calvert Clifh plant hme been out of b *""I * "*

"ml an hmWwcl m mucae m appnunaub service sime the spring of 19114. These outages wrre N2I "":b.""'"I9"" precipitated by an equipment problem with Unit 2 whith was disunvred during a planned refueling outage. L'nder Deperciation thpense the present M bcduk, it is espected that the process of I)cpreciation espense increasal in 19fN and 19ful as a restarting Unit I will begin in Ichruary 199n llowvser. resuh of higher leveh of' depreciable plant in serviu. In Unit 1 is scheduled for a planned shutdmvn in Man h addition, h>th years reflect the impact of the April 19118 1990 to c onduct required periodic surveillam c wsts, and m oounting thanges authorized by the Maryland Com-the possibility of unnhining the current and planned mission. hi 1990, depreciation es' pense will reflect a outages is under umtinuing uview by Management. It i' 52.9 million annual inacase in nuticar dn onunission-mpetted that l' nit 2 wiH be restarted in the summer of ing aorruals as authoriecd by the Maryland Conunission 199R in that nuticar generation represents the lowest c ost in its December 19fN tate order (see Note 1). nahunwr 6m mut newn conymny aunt subwtim,a

i I f thxes Other Than inwmc 'Unes lines other than inwmc taxes inc n auxl in Itul9 and 19ful hvels reflet t greatu wnstnetion capenditunts, including due to higher utpital stoc k, paupeny, Maryland gniss msts asvx iated with the construction of lirandon Shores nx.cipts, and payrull t ncs. Unit 2, and incrrauxl defernxl chx.tric fuel msts trsulting Inim the lag in collecting through the electric fuel rate Allowanw for ITmds Uvxl During Om#truction non auxl fuel msts asvx:iated with the outages at Calvert The allowanw for funds used during mnstruction ( AIC) Clif h. These factors are expected to wntinue to n sult in increauxl in 19119 and (htmauxl in 19tuL The 19119 acklitional financing nxtuirements during 1990. The increase was attritmtable to the continued umstruction Constellation Q>mpanics' higher h vels of debt out-of Ilrandon shonw Unit 2 and other chttric projects, standing during lxith vcars tellet t financings to support panially othet by the ellen of the April 19ful removal of increauxl diven,ified liusiness activitics. certain firandon shores expenditures from the base to preferrtxl and preference sux k dividends increasc<l which AIC is applied. The decrease in 19ful nas attrib-in 19119 and 19ful as a result of a gmater anumnt of utable to the April 19ful change in the AIC ime and to pn len nce stock outstanding the June 19117 n duction in the AIC rate. During 1990, AIC attnials will erflect mntinued umstruction activity Inmme 'Ilnes ct Ilrandon shores, the increase in the AlU rate f rum Inwmc tax expense decreauxl in both 19119 and 191111. The 11.55% to ill10%, and the inclusion in the Alt base of dectrase in 19119 in the result of lourt taxahic carnings, wrtain of the lirandon shores expenditures pn viously while the decmase in 19till prirnarily trilects the nxtur-rernove I in April 19118 (see Note 1). tion in the wriorate tax rate fruen 40% to 34% under the "Ihs iteform Art of 19116 (the Act). Innnst Charyes and Prefernxi and parlemnce Although the Act generally n pealed the investment tax Divideml" crux! t, under the transition ' rules mntained therein, the The increases in interest charges in 1909 and 19 tut were qualified property at lirandon shores Unit 2 is cligible for attributahlc pnmanly to inucawd levels of debt out-the investinent tax Ort dit standing and to higher interest rates. IlGlfl!'s 19119 debt UQUIDITY AND CAP 11AL HESOURCES overview IlGirl:'s Capital trquirements reflect the capital-intensive equity securitic. and the internal generation of cash. The naturr of the utility business and are attributable prin-timing and mixture of l'uture debt and equity financings cipally to its mnstruction program, expenditures for will depetut primarily upon economic and financial nuclear fuel, and funds for the retirement of outstanding market conditions and the needs of the Qnnpany, debt atid the trdemption of preferrnce st<K k. The capital mquhrments of the Constellation Companics consist pri. Giphal Requimnu nts matily ol "mals for the retirrment of outstanding debt and ^(tual capital tvquirements for 19117 through 19119, along for huit)'co innitments relating to various innostruents. wHh estimated amounts for 1990 through 1992, are shown lite Onnpny anticipates that f uture capital requins below, pnor years' amounts f.or the Constellation Onn-ments v ill tr met through the issuaruc of debt and panics' rrtirement of debt have tren restated to confonn with the current year's presentation. 14a7 14m Pmy 199u 1991 1992 DGirl: (in Mdhum) Omstruction expenditures (excluding AIC).. 5224 5290 $414 $450 $450 $425 31 2 11 33 51 31 11 AIC Deferred nuclear expenditures ~ 10 27 2 11 26 Nuclear f uel (uranium purchases and pnx.cssing charges).. 53 47 17 26 45 55 lletirement of debt and redemption of preferrnoc sitK k. 130 21 53 66 90 45 'Ibtal llGiv i........... 4 311 3fl6 527 622 644 562 Omstellation Companics itetirement of debt. 5 131 11 9 11 2fl6 31 I quity cornmitments and other. 122 103 154 44 4 '1btal Omstellation Companics 127 234 173 52 290 31

• 1btal

$565 5620 $700 5674 5934 $593 4 IIGIVI:'s construction program is subject to umtinuous mates. The increase is attiibutable to impnwements to review and mmlification. Actual construction and nuclear ilGirl"s existing power plants and to its transmission and fuel expenditures may vary from the estimates above distribution system, gas system, and wmmon facilitics. because of a number of factors such as inflation, cwnomic The most significant pmjcot in the (onstruction program mnditions, regulation, legislation, load growth, environ-is the coal fired lirandon shores Unit 2. Ahhough this mental protection standards, and the cost and availability Unit's in-serviw date has been changed f rom 1992 to May of capital.The construction expenditures set forth alxne 1991, this aowleration did not wntribute to the increase have inomased umsiderably as unnpared to prior esti-in IIGirl:'s wnstruction program. hdtinwrr Gm emit I:la tric Cimrymy mutt %buildwin

o 31 Internal Gencaution of Cash fium Utility Operations The internal generation of cash frtun utility operations in Dcocenber 1989, IWW<E fikxl shell registrations with uinsists of utility net intoine adjustal for non< ash iterns the Securitics and lathange Corniniwion (SEC) for E nd nxluux! by dividends. During 19119, ll% of the funds 5200 million of acklitional I'in.t Refunding hjortgage nxiuirtxt for IKil<E's constnu tion, nuticar fuel, and llonds and $100 rnillion of acklitional preference st(x k. t dcIctred ntu. lear expenditurm was pnwided frorn the In January 1940, IKilst fikxl wkh the SEC a shelf n gistra-internal generation of co.h. The significant n duction tion for the iwuance of twti rnillion shares of a(klitional frtun the 91% and 74% pnwided by internally genciated unnnion st<x k. *Ihc arnount and tirning of the sales of funds in 1987 and 198tl, resimotively, is (lue to lower net these securitics will depend privnarily upon snarket inunne, increased defernxl electric fuel unsts resulting uinditions and IKil<l;'s nents. Innu the lag in udhx ting thniugh the electric fuel rate nnnincrcial paper notes are iwued by IK;I<E to satisfy inon asmi fuel unsts awn.latal with the outages at Calvert interim financing itxiuitvinents. Itoth IlGivE and Clll Cliffs, and greater uinstruction expenditures. It is antioi-inaintain credit facilitiew with various banks in onler to patal that appnnirnately 60% of the futuls nxiuinxl for pnwide acklitional liquidity and inect their respective unnstruuion, nuclear fuel, and deferrtxl nuticar expen-shon terin bornnving needs, ditures during IWO through 1992 will be pnwided from During 1989, hhux!y's investors Service, Inc., $tandant l< internal sounts, lbor's Oiqmration, and Duff (< phelps Inc. downgr,uled their ratings on ILGl<E's debt, prefernxl sam k, and prefer-laternal l'inancings ente stock. The ratings on IKil<E's unnenertial paper During the years 1987 thniugh 1989, the Onnpany's program wric unaf fected. 'Ihc rating agentics' ations aggregate issuances and retirements of long-term debt, were in anticipation of a m<xictate deterioration in pielerted and preferente stak, and conunon stm k wrtr IKW<E's debt pnncotion measurements during the neat a follows: few ye.m because of higher tnerall umstration expendi. Net tures and inutused costs awiciated with the operating bauamen Retirememn inn tra,e pmblems at the Qihrrt Clif ts Nutica linver plant. (In Mahunn) long term debt I;flects of llegulation IKit'<E. $ 337 5116 5221 IKil<l?s utility operations air subject to regulation by the Constellation Onnpanics. 479 225 254 hlaevland Conuniwinn This regulation is designed to Preferred and preferrnte luovide for the scunery of operating tosts and the oppor-stm k............. 250 8% 165 tunity to carn a fair return on funds invested in the utility Cominun stock... 54 54 businen. llowever, the segulatory pnx. css imposes a time lag during which inucased operating tapensw inay not 'llnal. $1,120 $426 5694 he tax. overed exu pt to the extent that they are forecast in rate decisions, included in unst reuncry clauses, or offset by increases in s. des n venues. Althoug'h the teplacement issuanus of long-term debt wem as follows: ndue of utility plant awets generally esteeds their o n Mininn'0 hisuls praulu: un pennh scuwerv of the intnused unts of riod lxmk value, it has been the Ataryland nunmis-yg gg, s on l'irst refunding mortgage bonds..... 5200 d n'i ating unh awen, ungether with the opportututy to Unsecuted notes. 100 can a fair nuurn theimn, beginning at the tune of Economic development loan.......... 32 "Y d"'"* " I' Adjustable rate pollution conttul hsm... 5 Constellation Onnpanics Caphal Stnu tum htortgage and umstruction hians and other 'the onnpany's ob}n tive is to maintain a capit.d struu collateralized notes.. 79 ture that presents an appropriate b. dance between debt loans under credit agirements... 2 16 and niuity. All debt, referttxl and preferente stm k, and Unsecured notes, 164 """'""" *"*1 I"."" N IKM*I.' Ib.uvx(to finaru c in utility operations. The dnvrsihed acnviuch of the Constellanon 5816 Companics am finamed through the retained carnings ponion of the Onnpany's unnmon equity and through The unnmon stock iwued was thmugh the Dividend debt issued by the Constellation nunpanics. The Com-Reinvestment and Sux.k Purchase Plan and the Employee pany's umwolid.ned capital structure is persented below: Stock ownership Plan-At Dcocmber 31, I in October 1987, IKil<E establishnt a $100 million ning inna i937 hiedium'Ihrm Note program. As of December 31,1989, no securities had been inued under this pmgram. The I*"R~ term debt.. 44.9% 43.4% 44.5% hiediumTerm Notes, Series A. may range in maturity Short term borrowings. 2.6 1.9 1.3 from one to lif teen vcars and can be sold on short n' otic e Pmfernd and ptfemnut sud 10.5 9.7 9.3 as market umdition's warrant or unrporate requirements Onnnmn equ, y. 42,0 M .M a dictate. 'Ibtal 100.0 % 100.0 % 100.0 % au-mems _ niillHIEO9t' (slu (GHil f:ltTlF'Et t.UNEfWUttj (Ultl ht400%illg(lt t(L%

?"~'" .e REPORT OF MANAGEMENT i hianagement is responsible for the information and Coopers It Lybrand, independent auditors, arr engaged repreumtations contained in the Company's financial to audit the financial statements and espress their opinion statements. The financial statements are pmpaux! in thenon. Their audit is made in acuntl.mcc with generally aucrdimoc with generally aucpted accounting principles aucpted auditing standards which include a nview of lused uixm currently available facts and circumstantes internal umtrols, cnd hianagement's best estimates and judgments of The Aud;t Committee of the lloard of Directors, which known umditions. consists of four outside Dirrctors, meets peri <xliudly with The Comomy maintains an aucunting system and hianagement, internal auditors, and Coopers IV Lyhrand tel:ted system of internal umtrols which are designed to to nwiew the activitics of each in discharging their 1 l: provide mas <mahic assurance that the financial reconis resimnsibilitics. The internal audit stall and Coopers IV i c re accurate and that the Company's assets are protected. Iybrand have free aucss to the Audit Committec. "Ihc Company's stafI of internal auditors, whit h rrports directly to the Chairman of the ikurd, conducts periodic nvicuw to maintain the clicctiveness of internal umtiul prm odures. o REPORT OF INDEPENDENT AU DITO R S lb the $hatchohictw of ILdtimone Gas and Llectric Company We base audited the auempmying consolidated balance disclosures in the financial statements. An audit also sheets and statements of capitalization of Italtimore Gas includes awessing the aununting principles used and and I'lectric Company and Subsidiaries at December 31, signifiumt estimates made by Alanagement, as urli as 19119 and 19ful, and the related umsolidated statements of twaluating the overall financial statement presentation. inumic, cash ihms, u>ramon shareholders' equity, and We believe that our audits provide a trasonable lusis for tases for each of the three years in the perimi ended our opinion. December 31,19119, These financial statements are the in our opinion, the financial statements icferivd to responsibility of the Corupany's Alanagement. Our alvve present fairly, in all material respects, the tesponsibility is to espress an opinion on these financial consolidated financial position of flaltimore Cas and ttatements lum! on our audits. I'lectric Company and Subsidiaries at December 31,19fl9 We omducted our audits in accordance with generally and 191W1, and the consolidated resuhs of their operations au egned auditing standants. Those standants irquite that and their rash ihmw for each of the three years in the we plan and perform the audit to obtain reasonable period ended Deuimler 31,19119 in conforinity with assurance about whether the financial statements are f ree generally au.cpted accounting principles. of material misstatement. Ar. audit includes esamining, on a test lusis, evidence supporting the amoums and b d / Coopers li Lybrand llaltimore, h1aryland January 111, 1990 lialtimmr (,m tuul 1:lectric Company nml hulnititar un

C O N S O LI D AT E D ST AT E M E N TS OF INCOM E o 33 Year Ende() necember 3i, 19119 19titt 19117 (in Thousan(Is I.urpt l'er shore Amounts) lleWenues Elcr.t ri c.................................. $1,519,294 $1,434,562 $1,393.735 Gas.... 411,1101 3111,5 3 6 415,456 Diverbified activitics.. 73,041 47,570 27,555 'Ibtal rtnrn ues...................... 2,004,136 1,116 3.6 611 1,1136,746 Expenses Other Than interest and income Taxes Electric luel and purchauxl energy......... 370,131 311.510 296,543 Gas purt.haux! lor resale............... 223,462 1914,431 233.702 Operations................. 4711,194 433,112!! 3till,973 Maintenante 149,014 132,746 124,1137 Deprecia t ion.................. 156,546 147,076 1 3 4.11311 Taxes other than income taxes........... 150,204 143.127 135,731 'Ibtal expenses other than interest and income ta\\es........... 1,527,551 1,366,71tl 1,314,624 income trom 0perations...... 4 7 6,5115 496.950 522,122 Olher income Alkmimcc for equity funds used during umstruction.... 111,564 16,056 16,1170 Equity in carnings of Safe liarbor Water Itmer Corporation 5,176 5.570 6.331 Net other income and deductions..... 7, 1 1111 1,9 211 945 'Ibtal other income...... 30,921l 23.554 24,146 income Before interest and income Taxes........ 507,513 520.504 546,2611 Interest Expense I n terest cha rges....................... 164,369 136,071 129,1171 All<munce for lernmtxl funds uMxt during umstruction (14,776) (12,075) (14.069) Net interest ex1x nse... 149,593 123,996 115,1102 income Before income lates........... 357,920 346.5011 430,466 income lanes.......... 111,629 93,096 130,3611 Not income......................... 276,291 303,412 300,0411 Proterred and Preference Stock Dividends 3 2,3111 29,375 26.4(Hi Earnings Applicable le Common Stock.,......,..................... $ 243,910 $ 274,037 5 273.692 Average Shares of Common Stock Outstanding..... 79,997 79,052 711,116 1 Earnings Per Share of Common Stock. $3.05 $3.47 $3.47 src notes to consolittatal unant tal statements Innitunure Gas anil 1:lectsic Coungnanno aml sul.sisharies

- 34 o C O N S O L I D A T E D BALANCE SHEETS At Decemler 31, 1 9119 198!1 (in nou ands) ASSEIS current Assets Ciu.h and uish equivalents..... lil,fMKI $ 33,fl96 Accounts rtteivanic (net of allosmnce for unuilh*ctibles). 2114,0 2 0 232,914 l'uclstocks............... 45,499 49,ll65 Materials and supplies................ 111,643 102.202 Inunme tases ref undable...... 73,144 Prepaid tases other than inuime tases. 311,6 111 46,083 Other prrpayments.... 34,247 21,191 Other...................... 5.625 7.74fl "Ibtal current assets.. 611,696 493.1199 investments and Other Assets l'inancial imrstments........ 326,341 302,933 Real estate pioperty, development, and joint ventunes.............. 275,540 189,101 Alternative rnergy systems.... 112,941 411,371 Safe liarlor Water limer Corporation.. 40,421 40,341 Senior livirig facilitics................ 27,009 24,255 Nuthm deusmmiwloning trust fund..... 12,313 4,761 Other......................... 311,120 2 2,6115 'Ibtal investments and other awets. 1132,6115 632.447 Utility Plant Plant in service Elect ric...................... 4,034,444 3,1174,266 Gas.....,....... 471,740 451,564 Common... 3011,492 263,33fl 'Ibted plant in service..... 4,1114,676 3.Sil9,16tl Accumulated depreciation. (1,561,329) (1,426,344) Net plant in henvice............. 3,253,347 3.l(i2.fl24 plant held for fututt use... 1 0,5153 10.fl53 Ctmstruction wurk in pn>gress.... 704,931 509.512 Nuclear fuel (net of amortiution)... 175,559 170,0fl5 Net utility plant. 4,144,420 3.lL53,274 Delerred Charges Delerird f uel costs... 345,104 96,632 Other....... 51,774 50.110 7btal deferird tharges........ 3 9 6,11711 146,742 Total Assets.....,...............,., 55,9tl5,ti79 $5,126,362 Sec nou s to umudidated financ ial statements. l . Italtimoor Gins smal 1:lectric comptmy smal hulnittuaries

C O N S O LID AT E D BALANCE SHEETSo 35 At D(teinher 31, 1 9119 19ftfl (in ' thous.mds) UA8luTIES AND CAPITAUZATION Cwtont Uabilities Short tcrin horriswings $ 123,807 5 79.425 Curitint portions of long-tcriti debt and prefett'nt c kttx,k................,. 72,965 59,954 A(4 0u n ts payable......................... 256.4111 130.245 Custornet deposith............ 12,361 12,540 A(4:ITit%I ta sch............ 22,501 24,325 A(47Ut%l ititercht 41,920 39,023 DIViden(15 (leclanXI.......................... 5 0,9113 47,220 A(4TLH41 Vaultion U3 Nth.... 25,4tl2 23.952 Othet 32,459 16.551 'Ibtal ontTetit Ilahilitich..... 6 315.119 6 433.235 Delerted Clodits and Other Uabilities Deferic41 incorne tases. 570,723 434,334 Deferred investinent tax on dith.... 1114,9 9 1 1116,3 9 0. Other........... 21,2 _76 19,307 lbtal defern41 ctedits and ofher liabilitics. 776,990 640.031 Capitalizallon long-tertu debt 2,076,620 1.769,066 Piclerrexi stock............... 5 9,1115 59.1115 Itedecinable prelentnce httx.k............... 322,1100 229,600 Pitlerett.c ht(x.k not huhject to inandatory federnption. I10,000 110,OtK) Coininon Shareholdetw' equity... 2,00 1,11111 1,IllL5.245 lutal capitallution 4,569,793 4,053,096 Commitments and Contingencies-See Note 11 Total uabilities and Captialization.... 55.9115.679 $5,126.362 see noten to eonmlidated tinant tal st.itements. I llaltinunt Gm anti IJertric Cennptusy tuul hulnithanies e

1 36 c C O N S O L I D AT E D ST AT E M E N T S OF CASH FLOWS Year F.nded December 31, 1 9119 1 9 1111 19117 (in ' thousands) Cash Flows From Operal6ng kt6vit6es Net income $ 276,291 5303.412 5300,098 Adiustments to reconcile to net cash provided by operating activities 170,706 199,533 182,1109 Depreciation and amortization.......... 4................... Defertxxl income taxes.......................... 1 3 6,3113 42,299 55,108 Investment tax crtxlit adjustments... (1,47tl) (7,196) (11,622) Defertext f uel costs.................................... (24tl,472) (32,739) (2 6,4117 ) Allommoc for equity funds usul during umstruction............ (Ill,564) (16,056) (16,1170) ratuity in carnings of afliliates and joint ventures (net)......... (6,449) (7,034) (7,600) Changes in current assets and current liabilitics Au cu n t s reu i vable........................................ (51,030) (30,161) 5,603 Materials, supplies, and fuel stocks......'............... (5,075) 3,819 (4,059) Income taxes refundable.... (73,144) Aucu n ts payable.................... 124,011 26,462 (26,939) (1,112 4) ( 1 4,11119 ) 11,7 311 Accrued ta ses.............................. Other current assets and current liabilitics. 17,969 5,291 4,0 511 Other........................... 1,095 (1,760) 2,297 Net cash prtn ide41 by operating activities.... 320,424 470.981 46tl.134 Cash Flows From Financing ktivit6es Pngceds from issuance of Short-term bot nnvings (net)............. 44,3tl2 24,299 (72,310) 1,296,310 452.282 262,165 long-term debt Pre f e rence htt x.k....................................... 100,(M)0 50,(KK) 100,(KK) Com mon stock............... 31,305 11,949 7,959 Reaupaisition of long-term debt..................... (1,020,029) (370,41l) (151,450) Pnuceds (repayment) of other noncurirnt liabilities.. ( 5,2 211) Rc41cmption and repurthase of preference sux.k................. (6,800) (6,tKKI) (73.200) Com mon stock dividends paid.......................... (163,534) (153,976) (145,801) Preferred and preference stock dividends paid..., (31,151) (27,56ft) (27,462) Other................. (94) (1,26ti) 696 Net (sh provided by (used in) financing activitics... 250,389 (21.493) (104,631) Cash Flows From investing ktMties Utility construction expenditures.... (447.339) (3111,0lt!) (254,530) .Allommcc for equity funds used during umstruction. 111,564 16,056 16,1170 Nuclear fuel expenditures (17,431) (46,511) (52,620) Deferird nuch:ar expenditures. (9,605) Nuch ar decommissioning trust fund..... (6,9 611) (4.761) ~ Tinancial investments.... (1,04t!) (14,396) (ll.171 ) - Real estaw property, development, and joint ventutrs, (4 0,2112) (110,742) (64,780) (65,702) (2.940) (34,1102) Alternative energy systems......... Senior living facilitics......... (4,390) (451) (277) (11,6011) (5,612) 372 Other........ Net cash used in imrsting activitics.....,... (585,809) (457,375) (397,938) Nel Decrease in Cash and Cash Equivalents....... (14,996) ( 7,11117 ) (34,435) Cash and Cash Equivalents at Beginning of Year..... 33,1196 41,783 76,2111 Cash and Cash Equivalents at End of Year.. 18,900 5 33,1196 5 41,783 Other Cash Flow Inlonnation Cash paid during the year fon Interest (net of amounts capitallnxl) S 150,178 5124,278 SI 111,504 Income tases... S 14,390 $ 76,ll10 5 75,016 See notes to consolidated financial statements. Certain prior year amounts have been rest.urd to conform with the tunent year's presentation. . Ikdtimo.e Gas cmti Llectric Comprmy emd hubskikeries

,.^s C O N S O LI D AT E D ST AT E M E N TS LOT :C O M M O N: SH AREHOLDERS' E Q U I T Y-37 Years Tmkxl December 31,19119,191111, and 19117 Net Unmalized Premium on - loss on - Common Stock Prefi:rred lletained Marketable 'Ibtal N Shares Amount Stock I'arnings Securities Amount (in Thous.mds) ' flalance at December 31,1986................ 78,640 $1109,554 $157 $ 1120,156 $ (72) 51,629,795 - Net income.......... 300,098-300,0911 Dividemls declared Preferred and pmference stock................ (26,406) (26,406)' Common stock ($1.875 per share)............ (147,1196) . (147,1196 ) Common stock issued under Dividend Itcinvestment and Stock Purchase Plan., 154 4,770 4,770 Employee Stock Ownership Plan.............. 118 4,197 4,197 Costs assm:iated with issuance of redeemable preference stock.........,...........,..... (1,008) Premiums paid on rehrement of preference (1,0 011) stock................................... (1,426) (1,426) Change in vet tmrealized loss on marketable securities. (6.756) (6.756) Ikdance at December 31,19117....... . 78,912 817,513 157 944,526 ( 6,11211) 1,755,368 - Net i n co me............. 303,412 303,412 Dividends declared Prefi:rred and preference stock............ (29,375) (29,375) Common stock ($1.975 per share)............ (156,142) (156,142) Common stock issued under Dividend Itcinvestment and Stock Purchase Plan.. 386 12.2211 12,2211-Costs associated with issuance of redeemable preference stock......................... (279) (279) Change in net unrealized loss on marketable . securities.... 33 33 llalance at December 31,19118........,,.. 79,2911 (129,462 157 1,062,421 (6,795) 1,1135,245 .. Net i nco me.................. 276,291 276,291 Dividends declared Prefi'rmd and preference stock.... (32,381) (32,381) Common stock ($2.075 per share).. (166,067) (166,067) Common stock issued under Dividend Itcimestment and Stock Purchase Plan. 116 0 26,465 26,465 Employee Stock OwnersU.p Man.. 190 '5,980 5,9110 Costs associated with issuance of redeemable preference stock......... (1,140) (1,140) j Change in net unrealized loss on' marketable securities. 6,795 6,795 Italance at December 31,1989.... . 80,3411 $ll60,767 $157 $1,140,264 $ $2,001,11111 { y l See notes to consolidated unancial statements. i { ikultirnene Gas and Electric Cunnpernfj and Subsidiaries

L 'WC O N S O LI D AT E D STAT E M E N TS- 0 F C A PITAllZ ATIO N i At December 31,- 19119 198tl l Lan8)ltrin Debt (in 'shousands) L finit refunding mortgage Imnds Series Z 3%, duc July 15.19119~,.......... $ 32,260 3%% Scrics, duc December 1,1990.... 2 9,6112 29,682' 4 S% Scries, duc July l5,1992... 25,0(K) 25,(XX) 4% Series, due hlarch 1,1993... 24,095 21,095 4W% Series, due July 15,1994........ 2 9,9119 29,989 5%% Series, duc April 15,1996................ 26,680 26,680 11%9a Series, due lune 15,1997. 100,(M)0 100,(XX) 6%% Series, duc August 1,1997............. 24,1Mi7 24,967 5%% installment Series, duc August 15,19911... 56,770 59,070 7% Scries. duc December 15,1998. 211,684 28,690 . Il%% Scries, duc September 15,1999. 22,184 22,191 IL40% Scries, duc October 15,1999 100,000 Il%% Scries, duc September l5, 2000....... 11,414 11,415 7%% Scrics duc April 15,2001 59,999 59,999 g 7%9u Series, duc September 1, 2001...,........... 60,000 60,000 7%% Scries, duc January 1,2(X12, 19,999 50,(MX) 7h% Scries, duc July 1, 2002......... 50,000 50,000 Sh% Installment Series, duc July 15,2002.. 12,500 12,500 7%% Series, duc September 15,2002. 50,(XX) 50,(KM) 11%% Series, duc Ichruary 1,2(M14 7 4,9116 e 4,9216 til10% Serics, due Septemher 15, 200-1.,.. 20,000 20,000 IIM% Scrics. duc September 15,2006. 74,995 74,995 11%% Series, duc September 15,2007.. 75,000 75,(MX) 9M% Series, duc July 1, 20011. 411,918 511,550 6.90% installment Scrics, duc September 15,2(M19. 55,0(M) 55,000 9M% Series, due hlarch 1,2016. 911,000 100,(XX) - 'Ihtal fint refunding mortgage lxmds.,... 1,208,862 1,155,069 Gther long4crm debt lam under nwolving credit agicenient...... 50,000 50,000 4%% Sinking f und debentures, duc August 1,1990... 15,545 15,545 9%% Notes, duc hlay 1,1993 100,000 Floating rate notes, duc July 1,1995,..... 100,000 100,000 I hkting rate notes, duc October 15.1995 Series 11.,,...,,....., 100,000 100.(XX) lbil lion control loan, duc July l. 20ll,. 36,000 36,000 lbrt iacilitics lo.m, duc Junc l. 2013. 48,000 48,000 Adjustable rate pollution contml loan, duc July 1,2014.... 20,000 20,(M10 f.conomic development loan, due December 1,2018,, 32,100 7,296 'lbtal other long term debt. 501,645 376,1141 1.ong-term debt of Constellation Companics Alortgage and construction lo.ms and other collaterali/cd notes IL75%, duc August 1,1991.. 21,250 21,250 Variable rates, due through 1995 70,434 27,666 10.31%, duc August 1,1997.. 19,354 19,598 Industrial park latilitics bonds.. 2,150 2,850 lams under en:dit agreements. 210,971 60,511 IJnsecured notes (L5M%, due february 2 8, 19219 50,000 ' IL875%, duc August 1,1991 15,000 15,000 IL30%, duc April 12,1993 100,000 100,(XM) - Thtal long term debt of Constellation Companies... 439,159 296,!!75. Unamortized discount and premium (6,881) (6,565) Current portion oflong term debt. (66,165) (53,154) 'Ibtal long term debt. $2,076,620 $1,769,066 See nouw to wnxolidated financial statements. Italtimorr Gas smil Electric Compamj mul Subsiiliaries

p

CO N S O LID AT E D STAT E M E NTS '0 F C APITALIZ ATION o 39 At December 31, 19119 198tl (in Thousands)

Prelened 81ock Cumulative, $100 par value,1,(XX),0(X) shares authoriicd Series 11, 4 % %, 222,921 shares outstaruling, callable at $110 per share. $ 22,292 $ 22,292 Series C,4%,6fl,9211 shares outstanding, callable at $105 per share. 6,119 3 6,119 3 ' Series D. 5.40%,300,0(X) shares outstanding, callable at $101 per share.....,, 30,000 30,000 'Ibtal preferred stock........ 59,185 59,1115 Preference Slock Cumulative, $100 par value,6,000.fXXWsttiaothorized Itedeemable preference stock '12%, 1981 Series A,136,(XX)aa6 +04.00'l shareA. mspecth'ely, outst.uuling.. 13,600 20,400 12 %, 19111 Series 11,160.0(M thn: s (Mt Amding. 16,000 16,000 7.50%,19116 Series,500D00 shano.>atstanding, callable M t 2% txT khare prior to Octohet 1,1991 and at lesser amounts thereafter.. 50,000 50,000 (i75%,19117 Series 500.000 shares outstanding, callable at $106.75 pci share prior to April 1,1992 and at lesser amounts thereafter.... 50,000 50,000 6.9 5 % 19117 Series, 500,(XX) shares ou tst.mding.......................... 50,000 50,(X)0 7M%,19811 Series,500,(XX) shares outstanding, callable at $107.64 per share prior to.luly 1,1993 and at lesser amounts thereaf ter...... 50,000 50,(X)0 7.110%,19119 Series, 500,000 shares outstanding in 1989.. 50,(XX) (L25%,19119 Series,500,(XX) shares outstanding in 19119. 50,000 Current portion of redeemable preference stock. (6,110 0 ) (6,1XX)) Tbtal redeemable preference stock 322,800 229,(iOO r Preference shx.k not sul ject to mandatory redemption t 7.1111%, 1971 Series,500,000 shares outstanding, callable at $101 per share 50,(XX) 50,(XX) 7.75%,-1972 Series, 400,000 shares outstimding, callable at $101 per share.... 40,(XX) 40,(XX) 7,711%,1973 Series,200,fX)0 shares outstanding, callable at $101 per share 20,(XX) 20,000 'Ibtal prefercom stock not sul ject to mandatory redemption I10,000 110,000 t Common Shareholders' *, Common stock- ..ar value-100,000,000 shares authorized; 80,348,1115 and 79,2911,013 shona,ssued and outst.mding at December 31,19119 and 1 9 1111, respectively, ( At December 31,1989,477,627 shares were resened for the Employee Savings Plan and 4,11111,004 shares were mserved for the ' Dividend Itcinvestment and Stock Purchase Plan.) 660,767-1129,462 Premium on pmferred stock. 157 157 l Itetained carnings.. 1,140,264 1,062,421 . Net unrealiecd loss on marketable securities (6,795 ). 1btal common shareholders' equity 2,001,188 1,885,245 Total Capitalization $4,569,793 $4,053,0tXi see notes to consolid.ned financial statements. l IIaltimenc Gas aml I:lectric Connjmny aml k,hsidiaries

3 + C O N S 0 LID AT E D ST AT E M E N TS OF. TAXES Year Ended December 31, 1989 198tl 1987 (Dollar Amounts in Thousands) income bx Expense . Cu rrent.......... $(53,281) $ 57,993 $ I!3.675

Deferred Deferred fuci tosts.....

84,4111 11,777 9,938 ' Accelerated depreciation...... 64,540 43,37tl 45,1194 Current tax rate differential...................... 15,325 Customer information system development costs....... 7,790 3.105 Irveraged leases............... 4,Il77 6,066 6,939 Deferred nuclear expenditums...... 3,259 ~ ltrcentage mpair allowance... 1,452 1,045 1,9 511 Alternative minimum tax..... (25,336) U nbilled reven ue......................... (9,420) (11,957) (2,542) Contributions in aid of ccmstruction.......... (2,7115 ) (3,510) (4,820) Capitalized intemst and overheads............. (1,958) (1,632) (1,682) Other.......... (5,837) (5,973) (577) lbtal deferred taxes.......... 1 3 6,3118 42,299 55,108 investment tax credit adjustments - Current tax credits deferred............... 6,4 211 3,564 2,337 Amonization of deferred tax credits..,.. (7,906) (10,760) (10,752) . Investment tax credit adjustments.. ( 1,4 711) (7,196) (11,415) Tbtal income tax expense... $ 81,629 $ 93,096 $130,368 Reconciliation of Total income Tax Expense and income Tax Computed al Statutory Federal Rate 1ncome befom income taxes $357,920 $396,5011 $430,466 Statutory federal income tax mte.. 34 % 34 % 40%. Income tax computed at statutory federal rate 121,693 134,813 172,11!6 Increases (decmases) in tax due to Depreciation differences not normalized 4,610 4,990 5,352 Allommcc for funds used during construction. (11,336) (9,565) (12,376) . Amortization of deferred investment tax credits (7,906) (10,760) (10,752) Investment tax credits flowed through to income.. (10,219) (11.556) . (5,126) Dividends received deduction....... (5,111) (5,0f14) ( 6,9 711) Equity in carnings of Safe liarbor Water linmr Corporation (1,760) (1,894) (2,532) Inss on disposition of assets. (2,230) (4,329). (2,077) Deferred tax rate differential. (2,673) ( 3,3115 ) (1,772) Other., (3,439) (3,134) (5,557) lbtal income tax expense........ $ Ill 629 $ 93,096 $130.368 EfTectim federal income tax rate. 22.11% 23.5 % 30.3 % Taxes Other Than income Taxes Capital suick. $ 46,515 $ 44,328 $ 41,7118 Property............ 36,444 34,475 31,654 Maryland gross receipts... 38,293 36,040 35,915 Social security. 27,Il43 25,980 24,073 Other 7,094 7,909 7,291 1 5 6,1119 148,732 140,77i Amounts included above charged to accounts other than taxes. (5,985) (5,605) (4,990) Tbtal taxes other than income taxes. $150,204 $143,127 $135,731 see notes to t.onsolidated financial st.nements. Ikultimour Gas aml I:lectric Compnmy ated Subsidiaries

'e n NOTES-TO C O N S O LI D AT E D FIN ANCI AL STATEM ENTS o 41 Note 1. Significant Accounting Polides Natum of the ilusiness l 11altimore Gas and Electric Company (IIG&E) and Sub. The purchasal gas adjustment is based on ntent sidiaries (collectively, the Gmninuiy) is engaged primarily annual volumes of gas amt the related current prices in the business of pnulucing, pun.hasing, and selling charged by IlG&E's gas supplien As authorimi by the electricity, and purchasing, selling, and transporting Maryland Commission, any defernxi underrcunvrics or natural gas in a service territory which encompanes overreawcries of pun.hased gas costs for the twelve flattimore City and all or part of nine Central Maryland months ended November 30 each year are charged or countics. The Company is also engagal in diversifint onxtited to customen, over the ensuing calemlar year business activitics as f urther described in Note 3. (see Note 11). The nndernmvered costs deferred under the fuel Principles of Conwilidation clauses were as follows: The consolidated financial statements include the At December 31, accounts of IlG&E and all subsidiaries in which IlG&E inns in owns directly or indirectly a majority of the voting stock. gn mong Intercompany tulances and transactions have been I:lectric. $322,1120 $114,6116 climinated in consolidation. Corporate joint ventures' Gas. 2 2,2114 11,946 partnerships, and at1111ated comlunic> 'n which a 50% or less ownership interest is hchi are scounted for under 'Ibta l.............. $343,104 $96,632 the equity or cost meth(xis. Undec this policy, the l accounts of Constellation iloldir.gs, Inc, and its sulv income Taken l sidiaries (collectively, the Const.:llation Companics) and The Company records certain revenue and mpense items ilNG, Inc. are consoiidated in the financial, statements, for financial reporting purposes in years dilh: rent from l and Sale llarlmr Water Ibwer (orporatmn is reported the years in which they are recognized for income tax l under the equity methml. purposa. Deferred income taxes are generally provided on timing differences except those irrtaining to acceler-1 llegulation of Utility Openstions ated depreciation on pre 197fi property acklitions. The ilG&E's utility operations att subject to regulation by the cumulative net amount of timing diflerences for which public Service Onnmission of Maryland (Maryland Com-deferred inunne taxes have not lx en pnwided approxi-mission). The accounting for utility operations is in mated $227 million.md $241 million as of December 31, accordance with the Uniform System of Accoums pn* 19119 and 191111, respectively, scribed by the rederal Energy Regulatory Commission investment tax credit (110) associated with IlG&E's and adopted by the Maryland Commission. The accoum-regulated utility operations is deferred and amortized to ing imlicies and practices used in the determination of income ratably over the lives of the subject property. ITU service rates are also generally used for financial report-associated witit nonregulated activitics (except leveraged 1 ing purposes in acconLmcc with generally accepted leases) is flowvd through to income.. i accounting principles for regulated industries. The 19119 current tax refund of $53,2111,(xx) consists of a j regular tax refund of $711,617,(XX) reduced by an ahernative Utility llevenues minimum tax ( AMT) of $25,336,tKX). The regular tax Utility revenues ate recogniml at the time customers' refund represents principally the tax benefit of a 19119 tax meters are read on a monthly cycle basis. net operating loss (NOL). Tliis NOL is being carried luck to recover taxes previously paid in 19116 at a 46 peicent l ruel and Pun:hased Encryy Costs federal tax rate. The AMT liability can be utilized as a tax Subject to the approval of the Maryland Commission, the credit in futurc years when the regular tax liability I cost of fuel used in generating electricity and the cost of exceeds the AMT liability. In that the NOL and AMT are gas sold may im accovered through zcm-based electric fuel attributable to timing diilerences, deferred taxes were rate and purchased gas adjnstment clauses (see Note 11). provided thereon under generally accepted accounting 1b the extent actual fuel costs differ from revenues under principles as prescribed by Accounting principles lloard the clauses, IIGRE defers the luct costs and accumulates ( Apil) Opinion No.11, and, as a result, total income tax them on the balance sheet to be recovered from or expense is unaffected by these items. refunded to customem in future perimls. Statement of Financihl Accounting Stamlards No. 96, As implemented by the Maryland Commission, the which presently must be adopted by 1992, requires a electric fuel rate formula is based upon the latest twenty-change in the accounting for deferred income taxes fmm s (but month generation mix and the latest three month the deferred method as prescribed by Apli Opinion No.11 l average fuel cost for cach generating unit. The fuel rate to the liability mmhod. Under the liability method, the does not change unicss the calculated rate is more than Company will be required to accruc deferred income 5% almve or below the rate then in of fcct. The Maryland taxes on substantially all temporary dif ferences between l Commission has authorized ilG&E to recover $60 million the Ixmk and tax luses of assets and liabilitics, to adjust I of underrecovered electric fuel costs via an electric fuel deterred income tax lulances upon enactment of changes rate surcharge over a period of 411 months beginning with in tax rates or laws, and to discontinue net of. tax reporting April 19117. Through December 31,19119, $4111 million of of the allowance ihr funds used during construction. these costs had been recovered through the surcharge. Ballintore Ga.s cuulI:lectric Compnmp toul Aninittuariam

b( V. E f -) y v. p-

Upon adoption of Statement No. 96, the balance of" Nuclear decommissioning costs are accrued by and

~ locumulated (k:ferred income taxes will increase. recovenxi thmugh a sinking fund methmlokigy, in its S Although changes in utility-related accumulated defermd : December 1989 rate onter, the Maryland Commission -

income tases arising fmm the initial application of State-authorized ilG&C to increase its nuck

ar decommission-h, t ment No. 96 generally will be deferred and recovered -

ing accrual to accumulate a reserve of $235 million in - j from or avfunded to ratepayers in future years, changes 19118 dollars by the end of the Calvert Clif1s service life. Essociated with nonregulated activities will be flowed - A previous incmase in the decommissioning accrual through to income. As a msult ofits effbet on non-authorimd by the klaryland Commission elk:cthe April regulated activities, Statement Nn 96 is expected to result 191121 resulted in a nxtuction in net income of $1,024/XX),' - in an immaterial incivase in net income for the year in or Ic per common share, in 19fl9 and $2,036/XX), or 3C per ' which it is adopted. common share, in 19titt as compared to the corresponding prior years. The toud decommissioning reserve of -Inventory Valuation. ls and supplies are generaHy $41,135,tXX) and $33,412,000 at December 31,1989 and 191111, fuel sttxis and matena wspecthcly, is included in accumulated depreciation in - 1 stated at average cost, the Consolidated Italance Sheets. Investments Effective July 27,1990, IlG&E will be required by regula-fMarketable securities are stated at the lower of aggregate tions of the Nuclear Reguleory Cmumission,(NRC) to cost or market value, mijusted, where appmpriate, for pmnde financial assurance that decommissmning funds amortization of premium and discount computed on a 3".an annount at least equal to an NRC-prescribed - straight line basis. Other securities are stated at amortized imnimum level will be accumulated pmspectively over - J cost. Gains and losses on the sale ofinvestment securities dm mmaining service life of each Cahert Clif1s unit, are recogninxi upon realization on a specific identifica- ^Ccordmgly, llG&E has established a tax-qualified decom. s , tion basis. imssioning trust to which a portion of decommissioning ' costs accrued have been contributed. Utility Plant and Depmciation Utility plant in service is stated at original cost, which All wance for runds Used During Construction 1

lncludes material, labor, construction overhead costs, and.

The alkmance for iunds used during construction ( AFC) - wl hem applicable, an alkmance for funds used during is an accoundng pmcedum whemby the cost of ftmds construction. Construction wurk in progress, plant held used to finance utility construction pnuccts is capitalized ' for futum use, and nuck ar fuel are stated at cost. as part of utility plant on the balance sheet and is credited as a non-cash item on the income statement. The cost of -l Additions to utility plant and replacements of units of property are capitalized to utility plant accounts. The Imrrowed and equity fimds is segregated Imtween net L original cost of plant retired is removed from utility interest charges and other income, respectively, ilG&E - plant, and such cost,' phis removal cost, less s.dvage'value, may n' cover, subject to the approval of the Maryland is charged to the accumulated provision fnr depreciation. Cmumission, the capitalized Arc and a return thereon < Maintenance and repairs of pmperty and replacements of after the related utility plant is placed in service and items of property determined to be less than a unit of included in dermiable assets and rate base. Arc does i pmperty are charged to maintenance expense. ""t "p"'*'nt tmNe incmne and the depreciation of Depreciation is generally computed using composite capitalized AFC is not a tax-deductible expense. straight line mtes, applied to the average investment in Dunng the penmi January through May 1987,.an classes of depreciahic pmperty. The composite deprecia. after tax Arc rate of 9.08%, compounded annually, was tion rates by class of depreciable property for the years. applied to all major electnc pmjects. Elicctive June 1987, l 1987 through 19:19 were 2J10% for the Caivert Cliffs the after tax AfC_ rate was reduced to 11.55%, compounded Nuclear Ptmer plant,2.75% lbr the Brandon Shoms Ibwer annually, with no change in the construction projects to plant,3.26% for other ch ctric plant,3.12% for gas plant, which it was applied. ElIcctive April 19811, $37,603,000 of (

and 4.02% fhr common plant other than vehick s. Vehicles tirandon Shores Ptmer plant common facilities previously are depmciated based on their estimated useful lives, considered part of Unit 2 Ihr regulatory purposes, as well Heginning in June 1987, nuclear depreciation accruals as $54,344,000 of construction expenditures on Unit 2, were removed from the base to which the 1155% Arc rate have been reduced by $21tl6,000 annually, representing

> amortization of an excess accumulated depreciation was applied. Effective December 15, 19119, the after tax

b. dance resulting from the 1985 extension of the Calvert AFC rate uus increased to n80%, compounded annually, Cliffs operating licenses.

and the $54,344,(XX) of construction expenditures on As authorized by the Maryland Commission, ellective Ilrandon shores Unit 2 were minstated to the Arc hase. April 1988 IIG&E initiated the recording of depreciation The A,pril 1988 change in the Arc base had the elkct of expense on $37,603,000 of Ilrandon Shores common "'ducmg smt income by $2,314,0(x), or 3c per common - flicilities previously considered Ihr ratemaking purposes share, in 1989 and $5,846,000, or 7c per common share, as part of Unit 2 which is scheduled Ihr completion in 1988, as c mpared to the correspondmg prior years, in'1991.

Italtirnent Gm aml Clectric Cornprury cutd Sutnidiarren

E s a o 43 n - Nuclear ruel Nuclear fuel expenditums are capitalized and amortino $9,605,000 of expenditures on these project phases. This - ts a uimponent of actual fuel costs based on the energy amount, net of 19119 amortization, is included in Deferred produced over the life of the fuel, recs for the future charges-Other in the Consolidated llalance Sheet. disposd of spent fuel are paid quarterly to the Depart-ment of Energy and are accrued basc41 on the kihmutt-long'n'rm Dcht houns of electricity generated. Nuclear fuel expenses are The discount or pmmium and expense of issuance subject to rexuvery through the electric fuel rate, associated with long-term debt is deferred and amortized over the lives of the mspective debt issues. Gains and Dcfermd Nuck'ar l'xpenditums losses on the reacquisition of debt are amortized over the in auvrdance with the Maryland Commission's remaining original lives of the issues. December 1989 rate order, the expenditures associated with non recurring phases of certain nuclear operations Cash riows projects are being deferred, included in rate base, and Ibr the purpose of reporting cash flows, highly liquid amortized over the temaining life of the Calvert Cliffs investments purchased with a maturity of three months Nuclear Ptmer plant. During 1989, ilG&C incurred or less are considered to be cash equivalents. Note 2. Segment information Year Ended December 31, Hm9 1988 1987 ,) (in Thousands) Ik venues... $1,519,294 $1,434,562 $1,393,735 income from operations, 31111,07 1 418,647 453,739 income from operationc net of income taxes, 307,300 326,1182 326,658 Depreciation.............. 135,735 127,784 1111,081-Construction expenditures.... 406,410 276,278 230,067 Identifiable assets at December 31 4,279,399 3,746,1126 3,597,999 G2s Revenues.... S 411,1101 $ 381,536 $ 415,456 income from operations. 55,230 54,505 56,102 Income from operations net of income taxes. 42,343 40,251 39,721 Depreciatkm. 16,169 1 5,1114 '14,251 C<mstruction expenditures... 40,929 41,740 24,463 Identifiable assets at December 31 433,2411 394,013 361,934 Diversified Activitics ik' venues. 73,041 5 47,570 $ 27,555 income from operations. 3 3,2114 23,798 12,281 income from operations net ofincome taxes. 45,313 36,721 25,375 Depreciation. 4,642 4,1 011 2,506 Identinable assets at December 31 836,530 622,860 483,322 'Ibtal Revenues.. $2,004,136 $1,1163,668 $1,Il36,746 income from operations. 476,5fl5 496,950 - 522,122 income from operations net of income taxes 394,956 403,854 391,754 Depreciation 156,546 147,076 134.83tl Construction expenditures... 447,339 318,018 254,530 identifiable assets at December 31 5,549,177 4,763,699 4,443,255 Other assets at December 31 436,502 362,663 336,912 'Ibtal assets at December 31 5,9115,67 9 5,126,362 4,7110,167 Certain prior 3 ear amounts h ne tren restated to umform with the (.urrent 3rar's presentation. l lialtiment Gas anel Electric Cennputy anel Subsistiaries

g Note 3. Subaltliary information Dhcrsified business activities consist of the operations of the equity method. Thls investment represents tutethirds Constellation iloldings, Inc. and its subsidiaries and HNG, of Safe llarlor's total capital stock, including one half of inc. Constellation iloidings, Inc., a wholly owned sub the voting stock, and a tmethirds interest in the sub-sidiary, holds all of the stock of three other subsidiaries, sidiary's retained earnings. Constellation investments, Inc., Constellation Develoi> The following is condensed financial information for ment, Inc., and Omstellation Real Estate Group, Inc. Constellation iloldings, Inc. and its subsidiaries and Safe These companies are engaged in diversified business llarlor Water Ibwer Corporation as of and for the yean activities including financial investment, the develoIF ended December 31. Similar information is not presented ment, ownenihip, and operation of alternative energy for HNG, Inc. as its financial position (shareholder's equity systems, real estate development, and ownership of senior of $7.8 million) and results of operations are immaterial living facilities. IING, Inc. is a wholly owned subsidiary to the consolidated financial statements. The condensed which imests in natural gas reserves and obtains gas from financial information for the Omstellation Companies nontraditional sources. does not reficct the climination of intercompany balances The investment in Safe liarlor Water Ibwer Corpora-and transactions which are eliminated in the Company's tion, a prmlucer of hydroelectric power, is reported under consolidated financial statements. 1989 1988 1987 (in Thousands rurpt h'r Shant Amounu) Omstellation llo1 dings, Inc. and Subsidiaries Revenues......... $ 77,7117 $ 51,433 $ 29,939 Expenses other than interest and income taxes 44,966 27,261 17,207 . Income from operations.... 32,ll21 24,172 12,732 Other income 340 196 (150)' Interest expenso. 28,709 111,917 11,300 income tax expense (benefit)... (14,6711) (13,108) (12.387) Net income. $ 19,130 $ 111,559 $ 13,669 Qmtribution to the Company's carnings per shair of common stock.,, S .24. .24 .17 Current assets. $ Gil,Il5tl $ 38,942 $ 25,495 Noncurrent assets., 7(io,6118 575,991 454,952 'lbtal assets. $829,546 $614,933 $480,447 Current liabilities. $ 26,73fi $ 25,599 $ 32,514 Noncurrent liabilities.. 5 5 1,4112 363,931 242,852 Shareholder's equity. 251,3211 225,403 205,081 'Ibtal liabilities and shareholder's equity $1129,546 $614.933 - $480,447 Safe liartmr Water Ibwer Cor1xmition Revenues... $ 28,713 $ 29,454 $ 34,665 Expenses other than interest and income taxes 12,337 12,138 11,305 income from operations 16,376 17,316 23,360 J Other income.... 700 211 108 Interest expense. 4,700 4,727 5,483 income taxes.. 4,(il 2 4,8111 11,052 Net income... $ 7,764 $ 7,919 $ 9,933 ilG&E's equity in carnings $ 5,17(i $ 5.570 6,331 Current assets. $ 15,464 $ 9.600 $ 3,705 Noncurrent assets. 124,932 127,947 130,851 'Ibt.d assets $140,396 $137,547 $134,556 Current liabilities. $ 3,801 $ 3,788 5 2,900 Noncurrent liabilities. 75,963 73,247 71,143 Shareholdery/ equity. 60,632 60,512 60,513 'Ibtal liabilities and shareholders' equity $140,396 $137,547 $134.556 IlG&E's investment. $ 40,421 $ 40.341 $ 40,051 Ikdtimmr Gem and Electric cennptmy and hubsidiaries

L.. 45 o _ Note 4. FinancialInvestments and Real Estate Properly, Development, and Joint Ventures l'inancial investments consisted of the following At December 31, - investments held by the Constellation Companies: 19a9 tons At December 31, on Thow.and9 1989-imm Rental properties (net of on 1housando accumulated depreciation).. $125,391 $ 511,1111 hlarketable securities Properties under development . At cost................. $ 79,355 $ 94,595 (net of accumulated (6,795) dCPICC3d'I"") * ,6,295 52,fil9 Net unrealimi loss.......... Real estatejomt ventures At lower of aggregate cost and loans. 73,1154 78,101 or market value..... 79,355 117,110 0 Other securities............ 22,216 29,2911 Tbtal.. $275,540 $1119,101 Financial limited partnerships, 121,556 86,73fl 'j insurance companics 62,704 57,501 In August 1989, a subsidiary of C(mstellation iloldings, leveraged leases. 40,510 41,596 Inc. acquired 100% of the assets and liabilities of a real "Ibta l................... $326,341 $302,933 estate partnership in which it previously held a 50% equity mterest.The assets acquired totaled $66,934,000, including $62,354,0(X) of real estate property, and the ~ Real estate property, development, and Jo, t ventures liab lities assumed totaled $50,306,000, including m consisted of the following investments held by the $43,0iin,000 of long-term debt. The acquisition was Constellation Companies:

n. corded using the puichase method of accounting.

i Note 5. Jointly Owned Dectric Utility Plant ilG&E owns an undivided interest in the Keystone and The following data represent ilG&E's share of thejointly Conemaugh mine mouth electric generating plants owned properties at December 31,19119: located in western l'ennsylvania, as well as in the 1ransmission transmission line which ' transports the plants' output Keystone Conemaugh unc to the joint owners' service territories. Financing and (DoHar Amoums in Thousando accounting for these properties are the same as for Ownership interest 20.99 % 10.56 % 7.00 % wholly owned utility plant. IlG&E's share of the direct Utility plant in service., $70,fttrl $40,420 $ 1,456 expenses and assets and liabilities of the joint property Accumulated is included in the corresponding sections of the Con-depreciation 22.005 13,933 619 solidated Statements of Income and Consolidated Construction wurk llala1cc Sheets. in progress 3,4 411 1,0!!9 Note 6. Short-Temi Bonowings The Company maintains lunk lines of credit to provide pensating balances which have no withdranul restrictions. backup financing capacity thr commercial paper notes Ikunmings under the lines are at the banks' prime rates, issued by flG&E, to satisfy interim financing require-base interest rates, or at various money market rates. ments, and to permit short-term borrowing flexibility. Information concerning commercial paper notes and . In support of the lines of credit, the Company pays lines of credit is set forth below: commitment fees and, in some cases, maintains com. 1989 iuan 19m I""""^"'""""i""""""#" IIG&E's Commertial Ibper Notes llorrowings outstimding at December 31. <. $I 17,300 $ 72,030 $ 45.(XX) Weighted average interest rate of notes outstanding at December 31..

11. 6 9 %

9.63 % 7.74 % Unused lines of credit supporting commercial paper notes at December 31. $200,000 $150,200 $150,200 Maximum borrowings during the year $212,350 $ (13,000 S t t14.500 Average daily borrowings during the year (a). $ !!7,025 $ 23,514 $ 73,006 Weighted average interest rate for the year (b). 9.26 %

11. 0 7 %

6.67 % Constellation Companies' Lines of Cmdit inorrowings outstanding at December 31 $ 6,507 $ 7,375 $ 6,065 Weighted average interest rate of borrowings outstanding at December 31 10.65 % 10.64 %

11. 4 0 %

Unused lines of credit at December 31. $ 7,493 $ 1,625 $ 1,435 Maximum Imrrowings during the year $ 7,130 $ 12,359 $ 6,065 Average daily borrowings during the year (a). $ 5,5118 $ 7,905 $ 4,113 9 Weighted average interest rate for the year (b) I1.12 % 9.14 % (1.40% (a) The sum of dollar days of outstanding borrowings divided by the number of days in the period. (b)%tal imcrent aurued during the period divided by aserage daily borrowino Ittdtimore Geu twil ikctric Compcmy emti hubsidiaries

ow. 4 f m;6 y 5 l Note 7. Long-Term Debi First Refunding Mortgage Ikmda in Decemlet 1 9 1111, Anne Arundel County, hlaryland, Substantially all of the principal properties and fran. Issued $35 million of Economic Development Revenue chises owned by llG&E, as well as the capital stock of bonds (11altimore Gas and Electric Company Project)

Constellation Iloldings, Inc., Safe liarbor Water Ibwer Series 1988 due December 1,20111 The pnx.ceds of the Corporation, and ilNG, Inc., are subject to a lien under issue were deposited with a trustee to be loaned to llG&C

? ' the mortgage under which IlG&C's first Hefunding hjort-as needed to finance the acquisition and construction of gage Ilonds are issued. pollution contml and solid waste disposal facilities at the On August 1 of each year, ilG&C is required to pay to tirandon Shores Ibwer plant. At December 31,19159, BG&C = the mortgage trustee an annual sinking fund payment had bornmed $32,100,000 of the net pmceeds. equal to 1% of the largest amount of hlortgage Ikmds out-standing under the mortgage during the preceding twelve lamgelbrm ikbt of C<mstellation Companies months. Such funds are to be used, as provided in the - The Constellation Companics maintain committed credit mortgage, for the purchase and retirement by the trustee agreements providing for total bornnvings of up to $242 of hlortgage Ikmds of any series other than the Install; million. These agreements expire at various dates through. ment Series of 1998, 2002, and 2009, the IL40% Series of August 1991 and permit loans at various interest rates. 1999, and the 6.80% Series of 2004. purchases may be Commitment fees are paid on the daily average of the ! made by the trustee in the open market and/or t'hrough unborrowed portion of the commitments. The Constella-res[xmses to invitations for scaled tender offers if pur. tion Companies also maintain uncommitted cardit agree-chases are possible at or below the applicahic redemption ments which are supported by liquidity facilities fbr price, or directly through the redemption provisions to Imrrmvnigs under a loan sale program at various interest which the hlortgage Ikmds are subject if purchases at a rates. At December 31,1989, the Constellation Companies more fiivorable price are not pmsible. BG&E may pur. had borrowed $211 million under these credit agreements. chase outst.mding hlortgage Ikmds from time to time and The mortgage and construction loans and other col-may submit its scaled proposal for the sale of such h1 ort. lateralized notes require monthly principal and interest gage Ikmds to the trustee ihr the sinking fund. payments through matunty. The principal amounts of Installment Series hlortgage The Industrial Park f acilities Bonds require principal Ikmds payable each year are as follows: lwiyments of $7m).000 per year in 1990 and 1991, and a N"" N

• b I*

ihmds Due ihmd3 Due ikmds Due semi-annually at a weightext average rate of 10.25E Year 1998 2002 2009 The $100 milhon ofIL30% unsecured notes are subject tin Thouunas) m a shoy sidig fud wh uM M M h principal amount will be redeemed at par in each of the jggi ynN 1992 $ 3,000 years 1991 and 1992, with the remaining 40% being 1993.. 3,000 $ 420 redeemed at par in 1993. 1994,..... 3.000 430 .Ke g tei h d Avemge Interrst Rates for Variable Rate Debt SnN1997..$ The weighted average interest rates for variable rate debt 1998.. 33,000 690 during 1989 and 1988 were as follows: 1999..... 690 1989 In 2000 and 2001.. mi5 HG&C 2002.. 6,725 Lam under revolving credit agreement. 9.56 % 7.92 % 2005 through 2008. $ 3,250 flauing rate notes. 9.67 ILl6 '2009 42,000 Floatmg rate notes Series 11.. 9.51 ILl4 Other lamg'Ibnn Debt Ibliution control loan.. 6.35 5.30 BG&E maintains a revolving credit agreement providing Ibrt facilities lo.m.. 6.32 5.25 ' tbr borrowings of up to $50 million. This agreement Adjustable rate pollution contml hwm 5.91 5.06 expires in December 1991. Under the terms of the agree. Economic development kwm. 6.4 5 6.62 ment, BG&E may, at its option, obtain loans at various Constellation Companies interest rates. A commitment fee is paid on the daily Mortgage and construction hxms average of the unborrowed portion of the commitment. and other collateratinxi notes ..I1.13 '9.79 At December 31,1989, BG&E had lorrowed all of the $50 Loans under credit agreements. 9.48 8.47 million available under the nwolving credit, agreement. Aggmgate Maturities Interest rates on the $100 nulhon of floating Rate Notes The combined aggregate maturities and sinking fund ,duc 1995 are determined quarterly based on the 91 day requirements for all of the Company's long-term borrow-Reasury liill auction rate (expressed on a bond-equivalent ings for each of the next five years are as follows: basis) plus 1.1% The mterest rate is subject to a minimum - and maximum of 8% and 12%, respectively, per annum. 1"d ' Miuirements ! merest rates on the $100 million of floating lute Notes O n 't houunas) 1990. $ 66,165 duc 1995 Series 11 are determined quarterly based on the 1991 351,158 91 day 'Reasury Bill auction rate (expressed on a Imnd. 1992. 70,599 equivalent basis) plus 1.125% The interest rate is subject 1991. 222,389 to a minimum and maximum of 7.9% and 11.9%, respec-1994. 44.531 tively, per annum. . Ikultimore Gm ened Electric Cannjxusy tend Subsidiaries

r e o 47 Note 8. Redeemable Preference Stock The 12%,19111 Series A is subject to mandatory nxiemp. The 7.64%,19f111 Series is subject to an annual man-tion at par at the rate of 6fyloo shates in txnh 1990 and datory redemption of 100,(KK) shares at par beginning in 1991. purwuant to the nxlemption requirements, bil,tXK) 1994. At ilG&E's option, commencing in 1994, an a(kli-chares were redeemed at par in each of the years 1987 tional number of shares, not to exceed 100,(XX) shares, through 19119. The 12%,1981 Series it is subject to man-may be redeemed at par in any year. ~ datory nxlemption ir its entirety at par on July 1,1991. The IL25%,1989 Series is subject to an annual manda-The 7.50%,1986 Series is subject to an annual man-tory redemption of 100.000 shares at par beginning in datory nulemption of 15,(WK) shares at par beginning in 1995. At ilG&E's option, commencing in 1995, an addi-1992. At ilG&E's option, commencing in 1992, an addi-tional number of shares, not to exceed 100.txx) shares, tional number of shares, not to exceed 15,tKK) shares, may may be redeemed at par in any year. The IL25%,19119 be redeemed at par in any year. Series is not redeemabic except through operation of the The 6.75%,19117 Series is subject to an annual man-sinking fund. The 7.80%,1989 Series is subject to manda-datory redemption of 15,000 shares at par beginning in tory redemption in its entirety at par on Juiy 1,1997, 1993. At ilG&E's option, commencing in 1993, an addi-With regard to payment of dividends or assets available tional number of shares, not to exceed 15,000 shares, may in the event ofliquidation, preferred stock ranks prior to he redeemed at par in any year. The 6.95%,19117 Series is preference stock; all issues of preference stex;k, u hether -subject to mandatory redemption in its entirety at par on subject to mandatory redemption or not, rank equally; October 1,1995. and all preibrred and pirference stock rank prior to common stock. 1 Note 9. I. eases The Company, as lessee, contracts for certain facilitics certain of the Constellation Companico, as lessor, hase and equipment under lease agreemems with various entered into operating leases for retail space. These leases - expiration dates and renewal options. Consistent with the expire over periods ranging from I to 20 years, with . n'gulatory treatment, lease payments for operating and options to renew. The net book value of property under capital leases for utility operations are charged to expense operating leases was $flo,050,txx) and $55,700.000 at in the Consolidated Statements of Income. Lease expense December 31,19119 and 1988, respectively. The future was as follows for the three years ended December 31: minimum rentals to be received under operating leases in effect at December 31,19119 are as follows: 1989 1988 Na7 O n muwnas) g y Ope, rating leases. $15,031 $14,014 $10,897 1990... $ 6#)7 Capital leases... 365 113 9 1,393 1991 6,797 'Ibtal lease expense. $15,396 $14,1153 $12,290 1992. 6,691 l 1993. 6,411 l Capital leases included in the financial statements but 1994 6,047 4 not disclosed separately represent assets and obligations Thereafter.... 34,746 l of $1,211,000 at December 31,19119 and $1,547,000 at 'Ibtal minimum rentals.. $67,299 i December 31,19111L The future minimum lease payments at December 31, 1989 for long term noncancelable leases are as folkmw: Operating Capital ,%ca r

t. cases 1.ra ws j

p n muuna.) i 1990. $ 7,595 5 499 1991.. 5,2 711 320 1992-.... 4,712 221 i 1993 4,432 109 1994 4 1,910 100 Thereafter 5,3111 653 'Ibtal minimum lease payments $29,308 1,902 Less interest portion.. 691 present vidue of net minimum lease payments $1,211 Ikulti,mnr Gm ami clectsic Cemtjxuty aml Subsklhutes i

y 'C-4 I - Note 10. Pension and Other Postretirement Benefits ~ The Company spmsors neveral noncontributory defined The Company's policy is to fund annually the cost of benefit pension plans, the laryest of which (the Itnsion the Itnsion Plan as detennined under the aggrrgate cost Pl:n) ctwers IIG&E employees and certain employees of method. Plan assets at December 31,1989 consisted the constellation Companies. The other plans, which are primarily of marketable securities, gmup annuity con-not material in amount, provide supplemental benefits tracts, and short term investments. to certain key employees. Ilenefits under the plans are The following tables set forth the combined financial . generally based on age, yean of service, and compensa-status of the plans and the composition of total net tion levels. pension cost: Prior service cost associated with retroactive plan

cmendments is amortized on a straight.llne basis over the arrage remaining service period of active employees.

At Deceraber 31, 1989 1988 (Dollar Amounta in Timuunds) Accumulated benefit obligation Vested............................................,........ $355,232 $324,675 . No n ves ted.................................................. 11,758 15,791 'Ibtal........................................................ $366,990 $340.466 Plan assets at fair value................................. $475,333 $438,292 less: Projected benefit obligation................ 446,540 419,208 Excess of plan assets over projected benefit obligation...... 28,793 19,084 Unrecognized prior service cost............................. I1,404 5,157

Less: U n recognized net gain....................................

47,649 23,457 Unamortizett net asset fmm adoption of Statement Na (17... 2,718 2,945 Accrued pen sion cost...................................... $(10,170) $ (2,161) Assumptions Discount rate. 9.25 % 9.25 % Average increase in future compensation levels...., 4.5 % 4.5 % Expected long-tenn rate of return on assets......... 9.5 % 9.5 % Year Ended December 31, 1989 1988 1987 (in Thouunds) Comp <ments of net pension cost Service cost-benefits carned during the period.................. $ 10,1193 $ 9,Ill3 $ 11,106 ' Interest cost on projected lxmelit obligation.... 38,042 35,508 33,398 Actual return on plan assets.. (64,593) (41,068) (29,227) Net amortization and deferral..................... 24,507 1,744 ( 8,976) Tbtal net pension cost.... 8,Il49 5,997 6,301 l-Amount capitalized as construction cost (1,237) (802) (1,052) Amount charged to expense..... $ 7,612 $ 5,195 $ 5,249 In addition to providing pension benefits, certain benefits and the number of active and retired employees health care and life insurance benefits are provided for covered by these benefit plans were as folkms: I retired IlG&E employees and certain retired employees of 1989 1988 1987 the Constellation Companies. The cost of these benefits l and similar benefits for active employees is generally (Dollar Amounts in Thousanda) recognized as the benefits are paid. The total cost of the Cost. $32,060 $31,454 $25,839 Active employees. 9,024 8,754 8,767 Retired employees.. 3,041 2,969 2,118 9 Iikdtimore Gas and Electric Comptmy and Subsidearies

e e 49 o Note It Comrnitments and Contingencies Commitments and Guanmtces llG&E has made substantial unnmitments in connection including contaunination. The Cuess Insurance currently with its umstruction pnigram for 1990 and subsequent provides unerage for an additional $1.375 billion (or a yean. In addition, certain of the Constellation Companies total of $1.1175 billion) of physical damage to the olant, have usmmitted to contribute additional capital and to including contamination. Any damage to the plant in make mklitional hians to certain affiliates, joint ventures. excess of 51.1175 billion mmld be the financial respon-and partnerships in which they have an interest. sibility of IlG&E. The Eucss insurance protection is llG&E has agreed to guarantee tut > thirds of certain provided through a combination of nuclean insurance indebtedness incurred by Safe Itador Water limvr Ixxils and an industry-owried rutitual insurance company. Corporation (see Note 3). The amount of such in. The major portion of any claim paid thmugh the Excess debtedness totals $50 million, of which $33.3 million losurance uwerage for d.unage to any nuclear power represents llG&E's share of the guanmtce. Also, the Con-plant insured by the industry <nrned mutual insurance stellation Companies have agived to guarantee certain company would be funded thmugh insurance unnpany + .bornnvings of various alternative energy and real estate resents and an assessment of each member. The con-projects. As of December 31,19:19, the total outstanding tingent hability to llG&E for such assessments currently loans guaranteed by the Constellation Companies were is $11.1 million in any one policy year, $235 million. The Company assesses that the risk of in the etern of an outage at Cahert Clifts, llG&E would material loss on the loans guaranteed is minimal. h.nc to obtain trplacement Ixmtr f rom other souru s. Due to the relatively low unit cost of the Ixnver generated Nuclear Contingencies at ilG&E's nuclear plant, replacement power wuuld be The twu units at ilG&E's Cah'ert Clills Nuclear limvr more expensive, in the event of an outage cemsed by plant are its principal generating facilities and pnnluce physical darnage to die nuclear plant which is insured as the lowest cost power generated by llG&E, An incident at discussed alxwe, other insurance provided thmugh an this plant could have a substantial advene effect on industry owned mutual insurance company wuuld pro-BG&E. The primary contingencies resulting Irom an vide coverage Ibr a portion of the replacement p<mer incident at the Calvert Clif ts plant wuuld involve ilG&E's costs if the outage lasts more than 21 weeks. Currently, liability to thint parties for property damage and lxxiily this insurance provides for a maximum weekly indem-it jury, the physical damage to the plant, and the cost of nity per unit of the lesser of $3.5 million or 100% of replacement power. IlG&C's calculated replacement power wst for that unit. The current price Anderson Act (Act) places a maxi-This maximum wrekly indemnity would lui available for mum liability of $7.11 billion for third party claims that up to a 52 wrek pericxt. During the second and thini ensu-could arise innn a nuclear incident involving any ing 52-week perimis, the maximum weekly indemnity licensed nuclear facility in the country. This limit is wuukt then im reduced to the lesser of 67% and 33%, subject to an increase to reflect the ellects of inflation respectively, of IIG&E's replacement p(mvr cost or $3.5 - and changes in the nmnber oflicensed reactors. This million. For one insured m.currence causing Imth Calvert pmential liability to llG&E is covered by primary liability Cliffs units to be shut down beyond 21 weeks, the weekly insurance of $200 million and Secondary financial indemnity payments would then begin for each unit at protection (Srp) currently amounting to a $7.6 billion a rate of 110% of the fnregoing This replacement power limit. In the event of a nuclear incident at any licensed insurance wuuld f und claims through insurance company nuclear reactor in the country, each licensee could be reserves and an assessment of each member. The con-assessed up to $63 million payable at $10 million per year tingent liability to ilG&E fbr these assessments currently as prt,vided under Srp This assessment is subject to a is $11.3 million in any one policy year. potential smtharge of 5% if claims and legal costs llG&E does not considm the amounts of insurance dis-approach the limit and will be indexed Int inflation in cussed above to be adequate to cover the costs that could the future. BG&E's contingent liability under the Act result from a major incident or an extended outage at uvuld be $132 million pm incident (based on two either of the Calvert Cliffs units; howeser, the insurance licensed reactors at Cab crt Clifts, each being assessed described alxwe is the only insurance currently available $63 million plus the 5% potential surcharge) payable at to cover such public liability, radiation injury claims, a rate of $20 million per year. property damage, and replacement energy costs. As addi-IIG&E participates in an industry-wide master wurkers tional amounts of insurance become available, ilG&E will policy which provides $200 million of coverage fnr radia-consider increasing its insurance limit af ter evaluating tion injury claims presented by certain nuclear workers. the economic justification for such an increase. IlG&E Claims are funded by an assessment of each insured wuuld seek to have any unrecmcred costs included in its I which in the aggregate is equal to 95% of the claims less service rates, but cannot assure that the public Service accumulated reserves and earnings. The contingent Commission of Alaryland ( Ataryland Commission) wuuld liability to llG&E in any one year is approximately allow such reuwery. $6.6 million, it is the opinion of IlG&E that Srp, as described in the preceding paragraph, could be effective itecovembility of Electric ruel Costs after twu full limits in losses have been paid. Ily statute, actual electric f uel costs are recoverable so llG&E's insurance fnr physical damage to its nuclear long as the Ntaryland Commission finds that ILG&E power plant is structured to provide a hvel of primary demonstrates that, among other things, it has maintained Insurance and a level of Excess insurance, The primary the pnxluctive capacity of its generating plants at a l-Insurance, provided through nuclear insurance pools, reasonable level. The Ntaryland Commission and Alary. l wvers up to $500 million of physical damage to the plant, land's highest appellate court have interpreted thi> as naltiomue Gas aml I:Intric commmy amt sulnideanes

= &O permitting a subjectise evaluation of each unplanned associated with those outages should be disallowed by the outage at ItG&E's generating plants to determine whether Commission. The most significant outage was for 66 days or not ItG&E had implemented all reasonable and cost in onter to chcument compliance with environmental of fcctive maintenance and operating control pnx.edures qualification and mechanical commercial quality appmpriate for preventing the outage. ItG&E is perimlic-requircinents of the Nuclear Regulatory Commission ally involved in fuel rate pmceedings and issues concern-(NRC). The remaining six outages totaled approximately ing individual plant outages are usually raised in those nine days. BG&E estimates that the total replacement proceedings. During 19ml the Maryland Commission encry,y costs for the 1937 outages wrie apprmimately authorized the establishment of a Generating Unit $33 million. Itriormance Program (GUPP), cflective January 1,1987, During a planned refueling outage for Calvert Clif fs to measure utility compilance with maintaining the pro-Unit 2 in the spring of 1989, a leak was discovered around ductive capacity of generating plants at reasonable levels the Unit 2 pressuriecr heater sleeves. As a resuh, the Unit by establishing a system-wide generatmg performam c 2 pressurizer heater sleeves are being replaced, and the target and individual performance targets for each base unit is expected to be restarted in the summer of 1990. load generating unit. In f uture fuel rat s hearings, actual llG&E shut (knen Unit I as a precautionary measure on gancrating performance af ter adjustment for planned May 6,1989 to inspect for similar leaks and to await a outages will be comrared to the system wide target and, determination of the cause of the Icakage in Unit 2. It if met, shouki signif3 that HG&E has unnplied with the was ultimately determined in October 1989 that Unit I requirements of Maryland law. Failure to meet the did not have a similar problem however, the outage has system wide target will result in r view of cath unit's been extended m perform mklitional maintenance and aljusted actual generating performance versus its modification uurk to enhante the reliability of various performance target in determining compliance with safety systems thmughout the plant. It is expected that the law and the basis for possibly imposing a penalty on the process of restarting Unit I will begin in February BG&E. Parties to fuel rate hearings may still question the 1990. Ilowever, Unit 1 is scheduled for a planned shut-prudence of hG&E's actions or inactions with respe(t to down in Nlarch 1990 to conduct required periodic any given generating plant outage, which could msult in surveillance tests, and the possibility of combining the the disallowance of replacement energy costs by the current and planned outages is under continuing review Maryland Commission. IlG&E cannot estimate the by Management. Regardless of IlG&E's performance amount of mplacement energy costs that could lx: denied under the GUPP pmgram for 1989, the extended outages in future electric fuel rate pmceedings, but such amounts experienced at both Cahert Clifts units during 1989 will coukt be material. be reviewed by the Maryland Commission, and BG&E in October 1988, HGRE filed its first fuel rate applica-anticipates that Maryland Itople's Counsel will challenge tion for a change in its electric fuel rate under the GUPP recovery of smne part of the associated replacement program. The resultant case before the Maryland Com-energy costs. Through December 31,1989, these costs mission covers BG&E's operating performance in calen-totaled apprmimately $140 million, dar year 1987, and BG&E's filing demonstrated that it met Although no assurances can be given, based upm the the system-wide and individual plant performance tamets present plans to return both Calvert Clifis units to service, for 1987, in November 1989, testimony was filed on behalf HG&E is of the opinion that the ultimate resolution of the of Maryland Itople's Counsel alleging that sesen outages replacement energy cost issues with respect to the at the Calvert Cliffs plant in 19117 were due to manage-outages discussed above will not have a material adserse ment imprudence and that the replacement energy costs effect on its operations or financial condition. Note 12. Quarterly Financial Data (Unaudited) The following data are unaudited but, in the opinion of peak sales perimis generally occurring during the summer management, include all adjustments necessary for a fair and wmter months. Accordingly, comparisons among presentation, quarters of a year may not be indicative of overall trends BG&E's utility business is seasonal in nature with the and changes in operations. Earnings Income Applicable Earnings ltr l' rom Net to Common Share of Quarter Ended Revenues Operations income Stock Common Stock (In Thousmds ru rpt in sh.m Amotmts) March 31,1989.. $ 523,852 $115,763 $ 70,527 $ fi2,956 $.79 June 30,1989 434,763 111,438 43,952 36,284 .45 September 30,1989 560,010 19fi,7311 117,751 109,409 1.37 December 31,1989.. 485,511 82,646 44,061 35,261 .44 $2,004,136 $476,585 $276,291 $243,910 $3.05 March 31,1988. 5 503,102 $131,743 $ 81,584 $ 74,764 $.95 June 30,1988 389,198 76,370 43,335 35,921 .46 September 30,1988 544,993 215,338 134,558 126,988 1.6 i December 31,1988. 426,375 73A99 43,935 36,364 .46 $1,863,668 $496,950 $303Al2 $274,037 $3.47 'Ikeltiment Gm amt I:lectric Comptmy aml Sulnkliarin

i ~ q; j = L UTILITY O P E R ATIN G -STATISTIC S o 51-19119 19118 1 9117 19116 19115 (Dollar Amounts in Thousanda) Ik' venues - Residential.,...................,. A 64tl,884 $ 620,660 $ 594,2fl3 $ 575,774 $ 528,676 - Small Commercial................. 194,573 1711,727 175,322 177,667 166,611 latyc Commercial and Industrial.... 666,042 626,300 615,723 626,022 596,410 Other........................... 9,795 8,875 8,407 8,7118 9,766 7b tal....................... $1,519,294 $1,434,562 $1,393,735 51,388,251 $1,301,463 Sales-hlWil Residential............. 9,4 5 0,9114 9,196,433 8,521,3fl1 7,797,Il58 7,0113,5 64 Small Com mercial............... 2,460,592 2,292,764 2,139,164 2,007,040 1,117 1,1111 Large Commercial and Industrial... 1 2,I17 9,4116 12,491,505 11,914,420 11,430,725 10,743,9110 g % ta l.....................,. 24,791,062 23,980,702 22,574,965 21,235,623 19,698,725 Customers Residential...... 913,910 !! 9 5,1111 i fl76,ll2fi 1153,976 1131,423 Small Com mercial................ 90,647 87,049 83,247 Il0,3fH 77,570 Large Commercial and Industrial,, 7,5117 11,175 11,395 7,954 7,685 %ta l.................. 1,012,144 991,105 96ft,468 942,314 916,678 Average use per Residential - ) Cu stomer-KWil....,,........... 10,438 10,362 9,837 9,255 11,613 Average Rate per KWit-C. 6.09 5.95 6.14 6.50 6.56 Itak Load (one-hour)-hlW........ 5,304 5,3fll 5,190 4.618 4,458 Capability at Summer Itak-hlW. 6,164 5,930 5,888 ' 5.797 5,586 l Gas Operating Stalistics - Revenues l Residential........ $242,389 $225,035 $242,240 $256,975 $256,499 1 40,011 36,394 321,538 39,659 42,147 . Small Commetrial Large Commetrial and Industrial.. I111,052 112,001 127,257. 141,781 148,305 Other.... I1,349 11,106 e,421 5,354 6,358 % tid.......... $411,110I $381,536 $415,456 $445,769 $453,309 Sales-LTril Resident!al........ 39,Il05,833 40,140,1KX) 38,142,I(13 38.629,757 36,381,366 Small Commercial.............. 6,11111!,4 3 9 6,791,1137 6,335,806 5,960,010 6,255,159 Latye Commercial and Industrial.. 64,002,438 ~ 62.596,755 58,463,326 52,7116,120 54,244,959 'Ibtal.......,,. I10,696,730 109.529,392 102,941,315 97,375,887 96,881,484 j 1 Customers Residential......... 4112,538 482,011 482,023 482,394 481,188 Small Commercial.. 31,1181 3 1,5112 31,108 30,1120 29,449 1/arge Commercial and Industrial. 5,307 5,160 5,001 4,117 3 5,726 Tbtal..... 519,726 5111,753 518,132 518,087 516,363 Average use per Residential Customer-UrlI 112.6 83.3 79.I 80.2 75.7 Average Rate per Uril (excluding delivery service)-$ 5.70 5.15 5.93 6.29 6.47 Itak Day Sendout-Urli. 663,200 669,500 636,000 624,700 677,300 Itak Day Capability-Urii.. 761,000 793,000 731,000 748,000 827,000 Certain prior year amounts h.nc heen restated to conform with the current year's prewntation. IIaltimore Gas ami lllectric Comyxmy aml Subsidiaries

52 o CORPORATE AND UTILITY OFFICERS GioRGL Y. N1cGow AN Chairman of the lloard and Chief Executive Officer [ h CliRisTI AN ll, l'otNolXII:R 1 Vice Chairman of the Itoard 1;Ow ARD A. CRookt ,o Mn.McGowas l' resident-l'tility Operations ... 3 Vice l* resident, Accounting and l'.conomics i yy ~ '.3 j Niicit At:L 1. Ct:1.ssi:R + .l ~, r. Vic e l' resident, Consumer SetTites l ILRitt:RI-1). Coss,,1R. V te President, General Services Mn.ItusntxTru Mn Cunokt Mn. linAin h Vice l' resident, Nuticar Energy ~,. g 1 I

[

I k GI:oRut Il l:NGlaNo E Vite President, Distribution ~' oloN hl.I'lLLs Mn. Cm.asr.n Mn. coss Mn.i:non Vice President, Nianagement Services ~ ,lollN W. GORL, slR. '.y, f Vite l'resi(ktit, Electrit Intertonnection and Operatioris . { Cil ARLt:S W. StilVt:R) p Vice President, Corporate l'inant e, Tteasurer, and Secretary , lost:l'It A. 'llLRN AN e Ma. Esotaso Mu. nus Mn. Goar Vice President, Corporate A(iministration sl. Tito.\\t As WELLl:N LR g -k' ... g' Vic e President, l'ossil Energ3 4 .Itt i PIT l..I M is Assistant Secretary ~ ' {, ' Thost As I. Rt 's/.I N, J R. MR.Sutvtav M n. 'lltus ss Mn. Wrtttstn Assistant Reasurer CHANGES IN ORGANIZATION Effective August 1, 19119, Christian 11. Poindexter, fortnerly I' resident and Chief Executive Officer, Constellation iloidings, Inc., was elected to the new position of Vice Chairman of the lloard of the llaltimore Gas and Ele ( tric Company. Italt mon Gw, amt Lin er u commuur imit %hwiuo un

n a s BOARD OF D I R E C T O R S:o 53: l GLonco V. McGoWAN Chairman of the lloard and Chief Executive Officer CllRISTIAN ll PolNDExT0n Vice Chairinan of the 11oard

11. Itxtosa llALDWIN Chainnan of the lloani and Chief Executive Officer, hiercantile llankshares Corporation (llank 11okling Company), llattimore J. OWEN Coll Chairman of the Executive Qnnmittee of the lloani of Directors, First klaryland llancorp (llank flokling Company), llaltimore EDWARD A.Cno0KC President-Utility Operations Ltsuc il DisilAnooN lbrmer Chairman of the lloard and President, hionumelital.

Corporation (Insunmcc), llaltimore SisTon KATDtitN FrcLtv, S.S.N.D. Pmsident, College of Notre Dame of hlaryland (Education), llattimore Jcnout W GtcKu: Chainnan of the floani(Itet.), Pilli Corporation (Vehicle, llelocation, and thcilitics Atanagement Services), llaltimore WILLAnD ll AcKonurN Pmsident and Chief Executive Officer, The Whiting'1brucr Contracting Company (Construction and Construction h1anagement), llaltimore PAUL G. hlit.Ltn Chairman of the ikiani, Supercomputer Systems, Inc. (Design, Alanufacturing, and Sales of Supercomputers), laurel, h1aryland Gronac G. RADcurro Ibrmer Chairman of the lloard and Chief Executive Officer, The llaltimore Life insutance Company (Insurance), Italtimore GronG0 L. ResscLL, Jn. Partner, Piper & N1arbury (Law Firm), Baltimore llCRN AnD C. htU0scillIn Chairman of the Executive Committec II Anny K. Wct.ts ronner Chairman of the lloani, hicCormick & Company, Inc. (Rxxl Processing, Spices, etc.), llaltimore COMMITTEES OF THE BOARD Audit Qunmittec Onnmittee on Atanagement Executive Onr mittee Committee on Nuclear Ibwer - hir. ItadclllTc, hir. Geckle, Alr. Wucschler, Alr. Wells, Chainnan Chainnan Chainnan Chainnan Alr. Haldwin Alr. Cole At r. Crtx)ke Sister recicy hlr. Cole - Alr. Dishanum Alr. Disharoon Alr. flackerman hir. Ilussell. Alr. Wucschler Sister R:clcy h1r. hillier i hir. hicGowan h1r. Ibindexter h1r. Ibindexter Alr. Itadcliffe llaltimore Gcm ans! I:lectuic cont; sun.sj temi Sulniiclicuries

54 o C O N S T E L L A T I O N SU BSIDI ARIES OFFICERS k Gi onct. V. McGowAN i as ..w

f..y. :...

h' Q. h, Chairnum of the Hoard, Constellation lloklings, Inc. ,g t' j, 7 : ;- ' lint =ct M. Asuu.tn E .) President and Chief Executive Officer, I - Constellation iloidings, Inc. 3 hin. McGowas Mn. Austen Mn. Oatiinst gtggy L ()agg7ggg _.m. 7 President, Constellation Development, Inc. h W. E. ( ptTi.) Sisisioss, Jn. 1 . 7%.., _g. President, Constellation Real Estate Group, Inc. 3 >b4 C. MicitAtt Cnoss f President, Church Street Station, Inc. DON ALD V. GRAI / Mn. Smuass Mn. Cnoss Mn. GnAF prp3jdent, Constellation Operating bcG'iles, Inc, gg: President, Constellation llealth services, Inc. yt --

1. j

, gi ' STN D. ha'.R

• L President, Constellation Investments. Inc.

-c pg7tg y,[qigg President, The RAIS Group, int. a MR.Jtncorr Mn. Krsan Mn. Kink l l CONSTELLATION HOLDINGS CONSTELLATION REAL ESTATE GROUP Constellation lloidings provides direction to all of its This is the parent company of several businesses-operating subsidiaries and f urnishes them with legal, including Church Street Station in Orlando, I'lorida-financial, tax, accounting, and personnel services. In that seek new business opportunities in several broad addition, decisions on all new investment or acquisi-categories. The KN15 Group performs real estate i tion opportunities are (ontrolled from Constellation development, construction, and operational activities, iloldings. and Constellation IIcalth services, through joint ventures, owns senior living and retirement com-munities, as well as nursing facilities for the elderiv, i CONSTELLATION DEVELOPMENT l This is the senior member of our Enerp and Environ-CONSTELLATION INVESTMENTS mental Group. t'nder the auspices of Constellation l Development, we participate in a number of alterna-The largest single company at this time, Constellation tive energy and togeneration projects producing imestments senes as the primary provider of currer,t electricity for sale to other utilities. Constellation income f rom its investments in various sc< urities, Operating Services is the group member that provides investment partnenhips, and financial-service operation, maintenance, and man.u;cment services to < o m pa nies. alternative energy and togeneration fac ilities. i Ikelltunne Gts:, ternal rire tr u l Imtykturug nrul %ulnulutrtn

e. '

. e,. CONSTELLATION SUBSIDI ARIES o 55 LBOARD OF UIRECTORS - G00nG0 V. hicGowAN Chairinan of the lloaiti, Constellation lloidings, Inc. Chairman of the floard and Chief Executive Officer,llaltimore Gas and Electric Company linoct h1, Astnttu President and Chief Executive Officer, C<mstellation iloidings, Inc. i

11. PenwNo ilAtuwiN Chairman of the lloard and Chief Executive Officer, Mercantile llankshares Corporation Lostic II. Disit snooN -

f ormer Chairman of the lloard and President, Monumental Corporation l .lcnout W. GEcKLc Chairinan of the lloard (Itet.), Pill! Corporation Wit.LAnn ll AcK0nM AN President and Chief Executive Officer, The Whiting'Ibrner Contracting Company EDwAnn W. KAv Ibrmer co-Chairman and Chief Operating Officer, Ernst & Whinney j PAUL G. hilLLl;n Chairman of the lloard, Supercomputer Systems, Inc.. l Clinim AN 11. POINDrXIEn Vice Chairman of the lloard, llaltimore Gas and Electric Company i i lirRN AnD C. ThUEscitLEn Chairman of the Executive Committee, Italtimore Gas and Electric Company i COMMITTEES OF THE BOARD Audit Cmumittee Committee on Management Mr. Kay, Chairman Mr. Geckle, Chainnan Mr. Italdwin Mr. Disharoon - Mr. Miller Mr. 'lhieschler j i CHANGES IN ORGANIZATION Effective August 1, 19119, llruce M. Ambler was elected C. Michael Crossjoined Church Street Station on President and Chief Executive Officer of Constellation April 1,19119, and was subsequently elected President. lloldings, Inc., replacing Christian 11. Ibindexter, who of Church Street Station, Inc. was elected Vice Chairman of the lloard of flaltimore Gas and Electric Company. Effective June 13,19119, James W. Jeffcoat was elected President of Constellation licalth Services, Inc., and Effective December 15,19119,'Ihrry L. Ogletree was continues to serve as"Ircasurer of Constellation elected President of Constellation Development, Inc. I toldings, Inc. Iuatimme c,as amt nectric comymy wut subsutiaries

56 o C O R P O R A T E O RG A NIZ ATIO N Chairman of the Board f and } Chief Executive Officer n.,um,maa.1<m - m aud Vice President 3 Vice President i Corporate Administration Corporate Finance ? waa - u m.t._,_,m_. I i f Vice Chairman President j, of the Board President and / l Chief Executive Officer, 5 UtilW Operations j f Constellation Holdings 2,_--- i m.m.m._m a m. u_.m ,..a Vice President num Vice President 5 Accounting and Em Nuclear Energy N w u m.a. m a Vice President 3 I Censumer Services ~ j g 1 u m m m.u w d Constellation ) Constellation Real Estate Group Development ad ] } ' VIce i nt g umm D I emaumacaa.% uma Church Street Station Vice President 3 Operatin S r ces Electric interconnection 1

• ""**** u%t

%---~3 and Operations j mmwu - A .l Vice President f Constellation f Health Services j j Fossil Energy f. J . m,ma % ut %>umauma l Vice President 3 l I '" General Services man The KMS Group m g u s. a w.m m w.au d 9 LismaaswAweve~ln w.44ummAwa u kd Vice President } Management Services 1 ..-mmm J IMitimore Gas aml Electric Company aml Subsidiaries

SHAREHOLDER IN FORM ATION COMMON STOCK DMDENDS AND PRICE RANGES 1989 1988 Dividend Price Dividend Price Declanxl Illgh low Declamd liigh lam-First Quarter. $.50 $32% $28% $.475 $33% $29% Sec(m d Qua rter........................... .525 32% 29 .50 33 % 30 Thi rtl Qua rte r........................... .525 33% 31 % .50 32 % 30 Fourth Qua rter................... .525 34% 30 % .50 32 % 30% '1btai.................................. $2.075 $1.975 1 DIVIDEND POUCY ANNUAL MEETING The common stock is entitled to dividends when and The annual meeting of shamholders will be held at as declared by the lloard of Directors. Therr am no 10:00 a.m. on April 20,1990, in the llunt Vailey limitations in any indenture or other agtvements on Hallroom of Marriott's llunt Valley Inn,245 Shawan = payment of dividends; h<mvver, hoklens of prefernxl Road (N13 at Shamm Road), flunt Valley, Maryland. stock (first) and holders of prtlcrence stock (next) arc entitled to receive, when and as declamd, from the FORM 10-K surplus or net pmfits, cumulative yearly dividends at Ulmn wtMen nxtuest, the Company will furnish, j the fixed pmferential rate specified for each series anci without charge, a copy of its Form 10-K annual no mom, payable quarterly, and to mccive when duc "'Imrt, inclucHng financial statements. after it is filed the applicable preferrnce stock redemption payments, with the Securitics and Exchange Commission in befom any dividend on the common stock shall be March 1990. Requests should be addmssed to Charles paid or set apart. W. Shivery, Vice Prvsident, Secrvtary, and 'nvasuror, Dividemis have been paid on the common stock P.O. Ilox 1475, Italtimom, Maryland 21203 1475. continuously since 1910. Futum dividends depend AUDl10RS upon future carnings, the financial condition of the Coopers & Lybrand Company, and other factors. Quarterly dividends wtre declarrd on the common stock during 1989 and 1988 EXECUTIVE OFFICES in the amounts set forth above. Gas and Electric Hullding Charles Center COMMON STOCK DMDEND DATES Haltimore, Maryland 21201 Record dates are normally on the 10th of March, June, a P.O. Hox 105 September, and December. Quarterly dividends are customarily mailed to cach sharrholder on or about Haldinom, Maryland 21203-M75 l the 1st of April, July, October, and January. SHAREHOLDERS' INQUIRIES AND ASSISTANCE - DMDEND REINVESTMENT AND STDCK PURCHASE PLAN Shareholders (k: siring assistance with lost or stolen l' The Company's Dividend Reimtstment and Stock stock certificates or dividend checks, name changes, l Purchase Plan provides an opportunity for holders of address changes, stock transfers, or other matters the Company's common s.tock to acquim additional should can dm Shareholder Services Repitsentatives on - shares of such stock in a convenient and economical our toll-fire telephone numbers. . manner. Participants in the Plan may minvest cash The foUning toll-free telephone numbers are avail. dividends on all or a portion of their shares of able during our business hours,8:00 a.in. to 4:45 p.m. common stock and/or make optional cash payments. Italtimore Metropolitan Arra 783-5920 l Within Maryland 1-800 492-2861 STDCK TRADING Outside ofilaryland The Company's cominon stock, which is traded under 14100-225-2432 the ticker symbol HGE, is listed on the New York, Written communication should be addressed to: Midwest, and lucific stock exchanges, and has unlisted Haltimore Gas and Electric Company trading privik ges on the Hoston, Cincinnati, and Shareholder Services Philadelphia exchanges. 110. Ilox 1642 As of December 31,1989, there were 70,395 Common llaltimore, Maryland 212031642 Shareholders of record. TRANSFER AGENT AND REGISTRAR Maryland National llank, Haltimore llalti,,norr Gas cmd 1:lectric Co,nptmy med Subsialiaries

l V g4j:;a5'p gs8 \\ s ,,6** * \\ \\ \\ \\ x N \\ N / , - ' ' / , - ' '}}