ML20034H510

Annual Rept

ML20034H510
Person / Time
Site:	Calvert Cliffs
Issue date:	12/31/1992
From:	Denton R BALTIMORE GAS & ELECTRIC CO.
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
NUDOCS 9303180213
Download: ML20034H510 (53)

Text

{{#Wiki_filter:- 3 1. s 4 BALTIMORE GAS AND A.LECTRIC E 1650 CALVERT CLIFFS PARKWAY. LUSBY, MARYLAND 20657-4702 Rost IT E. DENTON V4CL PRESIDENT . March 16,1993 nucle AR ENERGY (ato) reo-44 t.s U.S. Nuclear Regulatory Commission Washington,DC 20555 A'ITENTION: Document Control Desk

SUBJECT:

Calvert Cliffs Nuclear Power Plant Unit Nos.1 & 2; Docket Nos. 50-317 & 50-318 1992 Annual Report Gentlemen: In accordance with the requirements of 10 CFR 50.71(b), enclosed please find a copy of the Baltimore Gas and Electric Company's 1992 Annual Report to its shareholders. Should you have any further questions regarding this matter, we will be pleased to discuss them with you. ruly yours, [T D d i RED /DWM!bjd Enclosure cc: (With Enclosure) P. R. Wilson, NRC L E. Nicholson, NRC (Without Enclosure) D. A. Brune, Esquire J. E. Silberg, Esquire R. A. Capra, NRC D. G. Mcdonald, Jr., NRC T. T. Martin, NRC 1S006n> R. I. McIzan, DNR J. H. Walter, PSC 0 9303180213 921231 ADDCK0500g7 PDR

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'.q 4 n. < hNh mm,. M)$e'm' *, maana;m; >st s - b = ' $ M' i a m) r I "A s-N U 7 i e y h. 'o-r vg, w s s .o ~ 5 HIGHLIGHTS 1992 _ __1991 % Change 1n millwns e.arptper-dwramounn COMMON STOCK DATA Earnings per share Utility operations - 5 1.52 5 1.60 (5.0)% Diversified activities.. .. _0.1 l_ _ _ _ 0.071 57.1 % Tctal 5 1.63 5 1.67 (2.4)% Dividends declared per share 5 1.43 5 1.40 2.1 % Average shares outstanding. 136.2 126.1 8.0 % Return on averap common equiry 9.40 % 9.90 % (5.1)% hook value per share-year end.- 517.63 517.00 3.7 % Market price per share-year end close-. 523.38 522.88 .2.2 % FIN A N CI A L DATA Revenues Electric.- S1,968 51,995 (1.3)% Gas.. 403 358 12.6 % Diversified activities.. 120 25.0 % 96 Total. 52,491 52,449 1.7 % Net income. 5 264 5 253 4.3 % Earnings applicable to common stock.. 5 222 5 211 5.2 % Assets Utility $6,352 56,137 3.5 % Diversified.. _ _1,023. _ _ _ _ . _1,001._ 2.2 % Total 57,375 57,138 3.3 % Utility construction expenditures.- 5 389 5 456 (14.7)% BG&.E investment in Constellation Companies.- 5 295 5 280 5.4 % U TillT Y SYSTEM DATA Electric sales-megawarthours.. .25.3 25.5 (0.8)% Gas sales -dekatherms.. 108.6 101.5 7.0 %

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1 i 3 ~. i T0 0UR SHAREH0LDERS l I 1 3.f ] [4 - gg am honored to address the owners of Bahimore Gas and Electric Company for the ,m y. )} first time as Chairmaa and Chief Executive Officer. I have assumed leadership of a Y i J i g m. 'f proud and datinguished company with a 17tyear tradition of service. Thanks to my j ~4 l d[ friend and now--retired Chairman George McGowan and his predecessors, our company dC eniors a legacy of outstanding business success and community service. q .,w in J ,,O aU Since the Board of Directors elected me Chairman of BG&E last summer, I have met 1 e qli face-to-face with hundreds of employees in vinually every depanment. I am very encouraged by I 4 h_ their talents. enterpri,e, and energy. Indeed, I'm convinced that our employees are the l company's most important tesource. I j As your new Chainnan,I would like to share with you my plans and vision for Baltimore l Gas and Electric for the decade of the Nos. It is undeniably true that the utility indusuy is j facing more wmpetition in power generation, more technological innovation and economic j t/w %.m. od G ed i.m y volatility, and increased customer and government demands. j nrc OFL cr ( /> re u!.e n // For this new era, we have launched a new way of doing business. More than two years ] 1>vi den,. rio.:nd /w ago, we initiated a proactive and forward-looking strategv called the Organizational Perfm-mance Improvement Process-OPIP for shon-to prepare our company to meet the new chal- ,;d U;,f ojoa 04:m / ch..,d.1 Ov4c lenges and emerging competition in our industry and to identify opportunities for growth and or,w annyn Qvicmcr renewal With the cooperation and participation of employees ai every level, our entire organi-Gnm u uiuaw 4 0 cin. zation has evaluated its strengths, weaknesses, goals, and ideals. !!ce. mur ibn J ; "; Gm The OPIP strategy for continuous improvement has affected virtually everv aspect of our i 9 mne vzqdney a yr.y business, fmm management philosophy, staffing budgeting, and planning to employee n/ / .nr Aindkd rf'sicn /r and compensation and attitude. a mn vu ir. We have defined out company's Vision to become a Todd Class energv company, estab-l f 'E ~ lished our company's Minion to achieve complete customer { .'i y '- j satisfaction by providing superior energy products and sermes, and reaflirmed critical compant Values as the key to %, m _ ~ our future success. l I ~ h BG&E is striving to become a premier energy company to achieve better resubs and a higher level of performance for our Ley stateholders. Our goal is ambi- { tious: to be recognized as one of a handful of top utility ~' ~ s 1 1 f companies of distinctive investment quality and consistent i W* l e carnings growth, and to be rankcd among the best in l cuuomer service, value, and reliability. 3 fg 5 Part of performing as a World Class energy company .g j ..F r - means conserung energy resources. I believe conservation is s WJ.ibwu 1 2 i a S the right thing to do for our customers. tommuniry, country, and, indeed, the entire world. Onr Cohcrve 2000 initialisc helps customers reabc cnct}7 savings. Imoi.ts the (ompetitive advantage of area industries, and proiccis the enviromnent, it also serves sharcholder interests by helping to contain power generation costs. Conscreation means, however, that our (ompany must develop all potential sources of revenue for future gmwth. I bebeve our gas business is a Ley area for futu e growth, and I expect 5, ales to inacase as the public and government inacasingly utogni7r tlic advaritages of "IbNE [5 Str[P[ng gas as a Jean burning, ahundant, and competitively priced fucL We are making investment, nc(cwary to expand our gas service and promote naturabgas-powered vchichs. to heroine a prein[rr ConstcHation Hold ngs, our hubsidiary, is also capitali/.ing on new encigy opportunities. With seven ycars of experiente in descloping, opciating, and owning non-regulated power energ,)' rornpanti to projects, the Considlation Companies ate positioned to beurfit from the national trend toward compcution in power pencration. arb/ft'r br/frT TPSid/S 1.ast October, the National Encrgv Act was adopted by Congnss and signed imo law by the President. This fwrexhing legislation presents many opponunitics and challenges, but I and a h[gher /frr/ o[ behese h will har an overall positive impact on ItG&E. The biu gives our company more flex-ibihty to pun base power from independent power producers and provides new faulom to out prifhrinaner/hr our Constellation subsidi ry to devdop coinomical power generation proicas in domestic markets. 1992, Bahimore Gas 2nd E!cctrk carnings were 5143 per sharc, down fmm 5147 hey StahrholderS. " 1:01 per share in 1991. The lower per-sharc carnings resuhed from an inacase in the numbei of shares outstanding and from the adverse effect on utihty operations of unfavorable weather and a s!uggish local cronomy. Diversitied business activitics tontributed 11e per share. up fmm 7c per shaic the pnTious year. The Board of Directors was able to inacase the disidend to 51 A4 per share, a 2.9 penent gain mer 1991, bascJ on the company's long-term prospects for gmwth in carnings. The tompany has paid u:sh dividenth cscry year since 1910, an 83-year tuord of uninterrupted dividend pavmems. I am pleased to leaJ our company in these changing and complex timer.. As inhcritors of a proud nadition of extclicnte at BGNE. we strive to perfono e World Clas by balancing tritkal measurcs of suurss: at hieving outstanding customer service, providing competitive rates for our scrvices,00' ring a favorable return for our sharcholders, pronJing a superior place for e our employees to work, being a good steward of the envimnment, and demoncraring good wrporaic titiwnship. These are the standards by w hich our mmpany sccLs to be judged. His is an extiring time for au of us at BGNE. We live in a world of perpetual thange. I'm tonvinted that through OPIP and our other efforn. our company has the power m capi-tabc on (hange and achicvc our sision of bemming a Wmid Clau energy mmpany. 0 / 4 Y G1# bh-- Cmusuw 11. Pomoi.xu a Gairnau ofdie Bomdand Grieflhecutive Ojlicer I chruary 15.1993 3 s THE LEGACY 0F GEORGE V. McG0WAN 3 .p .~1 corge McGowan likes to describe himself as a born engineer. Maryland Governor n g William Donald Schaefer prefers to think of him as a peerless civic leader. In reality, k George McGowan is both, and BG&E has been the greatest beneficiary of his extraordi-Q jg nary qualities. The strong relationships he has buik with governmcnt and civic leaders hase created for this company an unmanhed fund ofcivic and pohtical capital. George recognized cady the need to forge relationships among business, government, and the community. He was the driving force behind the creation of the Governor's Volunrect Council, and, as the long-standing (hairman of that group, he has involved the private sector in meeting p, urgent civic needs. D M@g As a director and former Campaign Chairman of {g q.- e e g%,, e sg u ' e5 @ the United Way of Central Marvland and Chairman of QW

3 Maryland Economic G.rowth Associates. Inc., he has p%, *; -

- - s -~ u, KG created pannerships with the city and the state that have strengthened the regional economy. He chairs the board of SWa the Bahimore Symphony Orchestra and serves as a trustee I of the Wahers An Gallery-not, he claims, as a patror of .,ex a either art or music. but because he believes that cukural Z institutions are vitally imponant to the life of the city. la C - 0~ As a director of the Greater Baltimore Committee. he worked to establish and now chairs s E e t 's the CollegeBound Foundation, an organization funded by the business community to help disadvantaged young people prepare, apply, and pay for college. As Chairman of the University ,i.<<, <r L of Maryland Board of Regents, George McGowan directed the ucation of the University of i G Maryland System. a far-reaching reorganization of highet education. Always an engineer at hean. he serves as Chairman of the Board of Overseers of his own alma mater, the Bahimore c r; eW Polytechnic Institute, the city's specialiecd science and pre-engineering high school.

i-He has been an equally tireless leader within the utility industry. In 1987, when George was President of the company. BG&E won the I dison Medal, the utility industry's highest o

honor, for its wide-ranging contributions to the community and particularly for its long-icrm !m r Committner r to eduCa! Ion. Throughout his mmmunity and industry involvemem, George McGowan remained a y 7 t forceful, hands-on executive. As Chairman. he guided BG&E through the difficuh challenge of 'y modernizing the Calvert Cliffs nudcar plant, steered the company through a recessionary emnomy, and initiated an organizational improvement plan that has enabled him to leave an , - + organization that, in the words of his successor, Chris Poindexter, is " stronger than any Tve seen m cal power plants, including the Calvert Cliffs Nuclear Power Plant. Augmenting these are 1 three Pennsylvania plants, of which we are pan owners, and membership in the Pennsylvania-New Jersey-Maryland Interconnection, a power pool affording us additional operating relia- / /<r ! Rid /J ntizig 3rn ice ,v e., w/c /t:lt!w n Orr bility at favorable terms. We supply our natural gas customers, numbering more than one-half million in a and <!/ cr girt of nine 600-square-mile gas Gws ' !!ag /m! awnrio, service area, with ~ ~ ~ ~ ~~~ ~~~ / A <en a vrved 1 wh sc-purchases from pipe-Cfu$Y "UU "?/*i"""" hne companies and 9we utila w tid W.IM ~ m lent; eli/e tie nera producers, supple-mented by our own 3m rd wi/4.cz ou! min o m liquefsed gas and } uf;ntri mdet nyd? it pojsh-propane facilities. 2dgy Om of 1 Old O(C ? 1[j g y M jg BG& Es diver-l +t q.

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sified businesses, 9h l -A grouped under our Eg_ .Qs.. s>t um l n Corstellation iloid-1 MA ings subsidiary, MON 7GOMERy r!ftAwAar CDUNTY J include power g VHIGtMA

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estaic development. ,- y ( q l h,-}s and financial invest-i (, i J ments. These produce meaningful earnings WASHitbTON,D C. KEY support, while providing new M TERRIT0ftY SERVED WITH ELICTR: CITY businen opportunities that use our [7Q TERRITORY SERVED WITH ELECTRICITY AND CAS expertise and experience. COUNTY 5 l 1 i UTILITY 0PERATIONS AND C 0 N S T E~L L A T 10 N C0MPANlES REV1EW NTERING A NEW ERA WITH OPIP More than two years ago, we launched the Organizational Performance improvement Process (OPIP) to establish BG&E as Central Maryland's energv company of choice. We believe that performing as a World Class energy company is not a final destination, but a lifelong journey of. continuous improvement and ever-higher standards of performance. Our company enjoys a strong foundation: custorner satisfaction with S ALES OF ELECTRICITY our c mpany is high and outpacu national utility averages. BG&E's latest residential customer m,, ,..n, u, favorability rating of 74 percent is about six points higher than the national average for the utility industry. ,.y While these ratings are encouraging the company continues to strive for improvement in all areas. An explanation of recent accomplishments and other company operations follows. .s _ __.. m__ l _ -. I UTILITY O P E R A TIO N S % ~_ Elect &c Sales i i s-F i-Our electric sales are closely tied to the growth of the Central Maryland economy and the f l weather. While milder summer weather thar. in 1991 and a slow-growing area economy caused N mI~ mi g total electricity sales to decrease less than 1 percent from 1991, electricity sales to residential customers decreased 3.6 percent. Commercial and industrial electric sales, ahhough adversely ,j ,g se ow- ; ,m r mhoe.,... alTected by the recession, increased ai a moderate I percent raie. i Genervition BGNE met generation needs in 1992 through a comminnent to environmentally sound, safe, SALES DF GAS reliable, and competitively priced power production. Fony percent of our total power produc- ,,o o,e, tion was generated by nudear units,54 percent by coal-burning facilities,3 percent by hydro-g electric plants, and 3 percent by oi! natural gas, and purchases. The company achieved substantial progress in safety and quality at its Calven Cliffs w_ 33 __ _ h (._ l ___ Nuclear Power Plant as a result of an ongting, comprehensive prograrn ofimprovement and sn _ _ L g modernization. In February 1992. ihe Nuclear Regulatory Commission (NRC) removed - L_ i Calven Clifts from its list of plants requiring close monitoring. On June 24,1992, the NRC i announced the results ofits most recent Systematic Assessment ofl>icensee Performance-its n-H u ? w l-repon rating Cah'ert Clifts' performance in seven categories from April 1,1991, to March 28, to-1992. In that report, the NRC gave Calven Clifts three superior ratings and four good ratings. g a ,. mi vi rd d ud We continued the competitive positioning of our fossil plants through retirement of high-cost units and a division-wide OPIP efTort that is increasing the productivity of our I am 0., mu, w u ss.' people. Fossil energy plants reduced operating expenses by S6 million in 1992. 6 4 Pouvr hansmission and Distribution Horida's Hurricane Andrew reminded us how vtdnerable transmission and dist.-ibution systems can be to violent storms. While our state was spared such severe weather, a December 1992 storm ripped through Central Maryland, knock;ng out service to nearly 100,000 c ustomers. More than 1,80011G&E crewmen and support staff worked through the night in inclement weather to restore service. At BCNE, we never forget that restoring serdce quiciJy in emergen-cies is a critical part of our commitment to provide superior customer service. ELECTRIC PEAK LD AD The company's strategy for continuous improvement is also demonstrated through comprehensive plans for upgrading and improving our transmission and distribution system. N Significam transmission line upgrades already have been completed in the nonhern and north-eastern portions of the service territory, at a total cost of about 550 milhon. The company is < r;ar y 7~ also cxtending and upgrading 115-kV transmission lines from Waugh Chapel to Cedar Park, a $12.5 million projea that should be completed by 1994. 3 000 + l Prtriccting Our Em'ironment M~ Operation of our power plants will not be significantly affected by the requirements ofI hase 1 1c, k of the Clean Air Act. w hich becomes efTecthe in 1995. Regulations for Phase 11, eficetive in the e L L g_ W * ** E year 2000, are yet to be completed. We are working hard to ensure that our power-generation l plants are among the most environmentally sound in the country, in the last five years, we have M "",c' 8"* m na n> spent over $190 million on environmental imprmemems, and Phase 1 compliance plans are estimaied to cost about 555 million. Planningjbr Future Energy Needs We project that our service area will require additional generating capacity in the '90s. Last year we obtained permission to buikt a 140-megawatt peaking plant at our Perrvman site. We aho filed a competitive bidding plan for purchasing future generating capacity to fulfill a part of our COMMON STOCK MARKET PRICE AND BOOKYALUE longer-rcrm tweds. Cost Containment At the beginning of 1992, we believed it was necessary to implement several cost-containment p. rneasures because of flat tevenue projections. After evaluating all mst-cutting opportunities, the ~ ~ ~ wmpany did not grant a getural wage increase, climinated ovenime pay for most salaricd l employees, and offered a one-time, voluntary early retirement program auepted by 335 p l 33 employees. These actions reduced 1992 operating expenses by approximately 520 million. Our l l f~ ~ ~ ~ D employee mmplement was reduced by about 500 with no layoffs. j C. t-i. BDOSTING DUR FINANCIAL STRENGTH C ' He company completed two public stock offerings in 1992, which totaled 15 million new W""n.a"ndi m M taan common shares. The issues raised 5310 million to help meet capital requirements and for other meno b w general utility purposes. These stock issues improved the utility company's equity ratio to um un mn m ms f ' ' ', ' :.,'",""",.,a"a"s" 45 percent in 1992, up from 38 percent in 1991. Over the past year. the utility has refinanux! ala.%l&,^!R f 7 3 approximately 5230 million of debt, resulting in interest savings of 59.5 million over the life of the refunded securities. Constellation Holdings refmanced $400 million in debt to lengthen maturities and take advantage oflower interest rates. During 1992, the utility's construction expenditures were approximately 5367 mi!! ion, or about 5.8 percent of total utility assets. These construction oudays mainly funded improve-ments to BG&E's existing generating plants and expansion of transmission and distribution UTILITY facilities to new and existing customers. We estimate construction expenditures for 1993 will CONSTRUCT 10N EXPENDITURES ioc approximately,5500 million. mm.. _ _. _ _ - - ~ RATE ADJUSTMENTS m-- Although the company has adopted rigorous cost-control measures, a rate increase has been g, __ _.;_ requested in order to achieve a return on equiry closer to the authorized level of 12.87 percent. BG&E filed with the Maryland Public Service Commission (PSC) for its fusi base-rate increase ,'. p_ ~ m nearly two and a half years on September 25,1992. The 5169 million increase (8.6 percent [

-~ f for electric cusmmers and 1.5 percent for gas) would be effective in April 1993.

m L_i L This action is largely due to the cost ofimprovements and investments in generation, m, l [ _ u transmission and distribution facilities, and hpu operating costs due to in0ation and plant n m u um w.' impmvement requirements. Throughout 1992, the PSC has approved four fuel-rate decreases. "( m "> saving customens approximate!y $114 million annually and significantly offsetting the requested base-rate increase. These fuel-rate reductions are due to emcient operations at our plants, especially Brandon Shores and Calvert, Cliffs. C O N S E RVIN G OUR RESOURCES IS SMART BUSINESS All of BG&E's customers and shareholders benefit from conservation and wise management of our energv resources. Conserve 2000 is BG&E's comprchensi e demand-side management (DSM) pmgram. It includes traditional conservation initiatives, encouraging energy eGciency, as well as load management aimed at reducing peak electricity demand. Both programs help 1992 DPERATING EXPENSES BG&E supply energy at more competitive rates by allowing our company to defer building a maior generating plant. BG&E shareholders also benefit. EfTective July 1,1992, the Public ,A,y %g Service Commission authorized recoverv of costs associated with BGNE's conservation efTous, A<$9 including lost revenues, through the conservation surcharge added to electric rates. ((W $2hr During the 1992 summer peak period Conserve 2000 programs reduced electric demr.nd . %kf by over 350 megawatts, enough power capacity to supply more than 87,000 homes. By the year hy k gf/ 2000, demand-side management is expected m reduce by approximately 16 percent the peak yQQ clectric load that would have occurred in the absence of the program. Between 1992 and the a year 2000, DSM programs are projected to cut in half the peak-load growth for electricity. ni, d i: ,1 , a IB r 20 + 7 H EIG H T E N E D INTEREST IN NATURAL GAS Clean Air Act requirements, which mandate a phase-in of ahernative fuels for flects of 10 or

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gas w-hile improving air quality. Our natural-gas-fuckd Acet, now rnore than 100 vehides, serves w,ar ,, p :# 1 l s J n is, o 8 h as a Visible femitider of BG&E's tomrnitment to a dean and heahby environment. Three aimpressed natural gas fueling stations were buik on company property and opened in 1992. IK;&E has also undertaken a vigomus gas marketing cfTort fmused on buildas and homeowners. The campaign has generated positive resuhs. Our company's new home gas inarkct share etcceded 24 percent in 1992, with over 3.800 new homes connecting to gas mains. The company aho paved the way for expansion of the aiea . y - - = - ~~ sen cd by gas by securing comminnents from a developa in Cail County. ~. Thot.gh the economy grew at a sluggish pace in ~ ' 1992 and new home sales grew only siightly, icsidemial c ] f gas sales nonetheless continued to flourish. Residential gas + l g

s. des inc reased by 6.9 percent, and commercial and indus-trial gas sales rose by 7 penent. primarily due to colder l

wraiher during the 1992 heating season, Total gas sales ' g; inacased by 7 pencnt over 1991. ~ ,1.f f./ 3 .x ' ' y s', V c o N s,t t t un o u n o t o s u c s. EXPLORING NEW O P P O R T U NITIE S l f 0 P. G P, D W T H ] The Constellation Companics are a major part of IW;&E's sirategy to prmide addiiional != A!. Amie. Nb _nue hem mm.iaismd sou,ces Cens,cnaden o mhmes n, fecus om hs m.rc cnc,gy business and, as the real estate maiket icuners. we plan to irdiac Constellation's real I: cd >//'Mr m estarc holdings. <b m r,,'l m < a d< The impmvement in Constellarion's 1992 resuhs was primarily due to higher carnings la a 6 a r" a jb n from projcas and Anancial investmems induding capital g.uns. (, o/. ,J Reviewing some of the year's highlights: In its energy hosinen, Constcllation played a m nz-th:!sr/ J lead powa-plant-Jevelopment wie for the first time in developing rhe 83 megawatt Panther uu n r/ CietL waste-coal pmjeu in Carbon County, Pennsvhania. Consiellation sold 25 pcuent ofits ' /<. /4 4 inscrest in its hi hly suuessful ACE pmieci in Trona. California. but remains managing /b < J g gencral panner and owner in ibis 96-megawau,(oal-fued plant. In 1992, Constellation signed I1 rwo operations and maintenance aprecments with solar proicas. We now have 21 tonnacts e serving plants with combincd capacity of rnoic than 1,100 mcpawans, 4 o J.< r/ m C#nstellation a!so improved occupancy rates in its currenf scal eslJfc boldings, indrasing [r i </J overall wnnnercial and raail occupancy from 58 pcucm to 88 percent. We leased.'50,000 square fici in the National Business Park tower building to the federal govanmcni, and Comiellation Centre dosed two leases intaling 100.000 square fect. Consie!!ation's scal estate arm. The KMS Group, changed its name to Constellation Itcal Esiaic, Inc. In the investments area, Constellation had a good year that included a significant recovery in its Gnanciallimited partnership in the banting scooi and suor g perfiirmance ofits l markerable securitics portfolio. l i l 9 a NEW lDEAS F0R A NEW TIME a ' ' company's mmmitment to quality can be symlulim! in ruany ways. f At our C. P. Crane power plant, that svmbol comes in the form of a ' V giant "Q' carmi in the inJustrial carpeting underfoot in the plant's control room. When asked, "What's that forP a chorus responds: q ~ 6 "Qualityr ,6

• 5-The operators on this shift take that "Q" seriously.

The shift is made up of 10 operators: Chuck Kranu, Charlie s.:ckr Locke, Steve I andau, Mike 1.undsgaard, Patrick Pfarr, Dave / > 4 <./-se_. Ar ny r F w.: - icn, merc! rce Pennington, Al Rocks, Marty Pokrvwka, Ken Buuchalski, and Rick F - Bransby. As a team, they believe they have something special. They have "The Fire " , mi "And we want to see it spread to the rest of the wnpany," says shift supervisor, Charlie Locke. > H M rsi.:w 4 A > on J lt all began when they had Quality Work Group train. w in the fall of '92 as pan of Fossil Energ's O &c 1,.A m.r i aid c impanement program. "We aH took it to hean." says Rick. "We ?:h there was a ned for change." imJp.mi. h eI..-w/u. Along with the 13 other work groups at the Crane 31am, this shift took the opportunity Arrd /p-ila mg provided by the training to improve teamwork, communication, quality, pride, and personal ?d y:Ja. /M I rm4 responsibility. We knew we needed to improve, and we staned discussing what we could do as a 4:e L: /w A.Lh 1 Auv shift,says Mike. Par agwes: Tou can get in a rut where you do evervthing the same way all the h p uimJ&c time. But we took chances and said,'Let's uy this and see what happens?" Thev found out what could happen with a linie innovation and extra efTort. One night, for w w r a erja:. cur !4 example, the plant couldn't produce full power because burning test coal caused the Oy ash collec-jb ilem.: > r3 r4 tion bags to clog. Fly ash is a by-product of coal-burning plants. Steve asked the shift who would w Lu/e nin 0.ms/ n & be willing to do some extra work, manually shaking the fly ash out of the bags. a ~ 7:, ;# riuo/camn wait it wasn't an easr job. It was uncomfonable, grittv, dirty bull work. "But everylody on the q,1). a zi. r site 6ca mi shift was willing to do whatever it took to get the job done? says Steve. "The resuhs were wonh it. Without ovenime expense, we gave the load dispatcher what he wamed: full load the next day? j e s 4 wik This is just one example of the resuhs obtained by this shift as well as others at Crane and / Coa ? "mayr. O u A:.nm out other plants. The teamwork has paid otT: In 1992, Unit 2 ser records for the longest run and highest electrical generation since returning to coal-Gring in the early '80s. "The kud dispatcher h our customer," Steve points outfif the electricity is aat available when he needs it, he has to go elsewhere m get it. We do what we have to to get it out on the line." 4 s Steve Parks, manager of Fossil Operations, is understandably proud of the operators. "The a.. work on this shift at Crane represents many of the resuhs from the division's quality improvement b process," he says. "They've taken initiathe and had excellent resuhs. They set a great example for the rest of our division." u-And Rick sums it up: 'We love our jobs. Not all of us love shift work, but we can tolerate it a lot mme because we really do love our jobs. These people are great to work with." y v v 4 i ID .a a.- a l k l 1 1 4 q... l g N..s. f ~ qqs,,- e A V I sp 1.-.4 y f jwn ,( p ppy,A,- ~ o .. -s a m I ,*y l .%j _._ 2.- v m C p? [ ' Y; ' .,S gag ' + l .) l 9 la; * .m 9, f h, PE. k (^q. Y 5 f '. f ,.s, 'f.h t ~ i ,l m, g [m., b- >. }. h ky h-9 .g m' y !M %;y i

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g; m k" Q { $ lN b $h b b b b d d ) d i.. y*.',,n .r. q , a *: ~.l: %. " 3.- b dNhk hb. .., h . hshbN E Quality senice is a key to the success of any company. At 15GNE, outstanding customer service p is our top goak And IlG&l"s front line consists of 115 professional customer representatives "M, _ _ armed with the latest equipment and information systems. "We've had a customer focus since day one," says Ted Berzinski, directm of the Custnmcr Communications Center. "We're the front door of the company and the main L'*" amiact with customers." N g amme-Ahhough BGNE has always prided itscifin providing good customer senice. Ted and + his supervisors and customer representatives knew they could do even bener. So, when OPIP bepn, thcy took management at its word and made extensive changes in their workplace and how they did their jobs-all to bener serve the customet. "B(/c'll im alwap /ud They formed task finces and studied stafiing levels to find out how many reps were pd. me!! meiwdpuple m l necessary to serve the 3.5 million customer calls cath year. ranging fiom routine billing muerr idnium. Aid concerns and appliance repair requests,1o electromagnetic fields and conservation program >mm mere em;" imu d.*m inquiries. They also took responsibility for the workplace environment, representatives' in u n er "mu q/ d.rir training, and employee cmpowerment. The resuhs arc a case study in the way OPIP works.

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"We created a vision of where we wamed to go with a customer focus," says Ted. "And ci). wievpenou r ty icm management supponed us all the way." de ou"mer at;y/cui~ial More than 50 employees participated in the team etTort. Maureen Tomcala sennf on the 74crh no j a m # uten efliciencv task finte facilitated by Rose Darone. Ron Hokemeyer facilitated the workshop dgir duie" ".ain " } comminee on training needs. Tom Pelkgrini coordinated the statiing study, while Carol Weber AN /* /m:m was part of a task force to examine the ekctromagnetic fickt issue and how it wouki athrt the Lap number of customer calls. Kimberly Rosenberg and Helen Handy senul on the development and L+vo !m om communic.uions task force, and Marguerire Horne worked on the renovations committee. "While we were studying the way we did business," says Rose, "uc asked Cu "ccr herrocuramn ourwives, 'How can we change to help the customer bencrf" I$i.mr Tau!! awl /W l The most noticeable change at the Customer Communica-Hasd: work uw A4 rv 4 tions Center is the physical transformation of the work space. An r~!waemmc6psvu I unusual office design for BG&E, it's the direct resuh of employces working m get everything they need to do their jobs. Iheryone umynoniq d>e na"n agrees they were right. "Aficr the renovation." Marguerite notes, sA ira.u w iiAr C w m mer " morale, and even production, went up." Rows of desks, harsh ( ' u:uum.ume (%aa a r e s lighting, and k>ts of noise hwe been replaced by modern office tru) 7ym /c!!miei. Su m Hve ngr. o cincr n-r) pods, theerfid colors, and noisenbsorbing carper and walk 'a r The most far-reaching change, however, is one you can't see-the renewed enthusiasm /U"./>rdi Labeg Gmd f of the employcts ihemselves. u i!, 3/amren rmmala. "OPIP works, Maureen points out. "This was a gnusroots movement. Being empowered Mamerne Heru, Rm helps us resolve more customer problems on the spot." She continues, *The reps generate so 16 we. H<lm H.mdnaw/ many ideas. OPIP allows us m put those ideas into eficrt quickly." pma; 7ea #mmfi "I think we're all doing our jobs right the first time " Helen says. "That's our goal, and OPlP is allowing us to do that." 1 Y Y Y r 13 1 7 i ~~ s

• in r,da !!m u w u lu hiany companies talk a good game of employee e

e 1,Jm // naal :fme-empowerment. At BGNE, we'd rather put talk into + pon di and h /w d action. Take Richard Condello of. Nuclear Engi-4 G,ndd!,.,m c/ccr-im i m a neering at Calvert ClitTs. He believed he could get a A d,e !2au lbinun ; better deal on engineering work from outside vendors f ru; with a change in the purchasing process. The existing g. bidding system worked well, but he ihought applying S Mk ' ' pg t it in a differem way could save money and time at Calvert Clifts. But Richard didn't stop there. Q 'em lie feh he had the freedom to act on his bdief. 7 i Richard got together with A1artin Proctor, Afark Sade, and Brenda Barrick of Nuclear Support Services, and hiike JetTreys of Purchasing and hiaterials hianagement. Through team-7M work and innovation, they devised a new application of the blanket contract process. A limited .U - l / f number of contractors with blanket contracts are pre-approved for a specific type of work. Bids from each of them assure that we get the best deal, and the advance approval of the blankets g saves time. ~ }f

• Richard can now choose among four companies with competitive rates," says hiark.

I- "One may be able to do it with the best people in 50 hours versus a so-so team that may take 100 hours. That's where the savings are." "D/'/P ruvarayes enr j.r ep / in t/iul m ncn-The results have been tangible and impressive. Instead of 12 weeks for the bidding ic>zuzim;/ way Tim process, the first jobs each took three weeks-and, with further refinements, Richard and his me efn 'g cc. m o '. group believe they can reduce that. The first three jobs saved an astonishing 25 percent, with potential yearly savings of 5200.000. It's become a model for other areas of the plant. ) arja rw c ay u, llow this gmup collaborated to accomplish its goal restifies to OPIP at work. "I think l 7rn on n: aun w nc i

msii gy r d > c A y what started it was a questioning attitude," Brenda points out. "We all challenge ourselves by o

ur:np #:-rA o> ;9 asking. 'llow can we do it betterf We're very open to change." i her E. A spirit of cooperation and communication among departments helped make change l easy "I think group dynamics played an important role here " says Mike. "Some people might E-feel their part of the process is precious. It's their turf and can't be questioned. Here, all team 'oJ.m / o wr q ~ members opened themsch>cs up to doing the job better."

• * / /v u ae if lei. /m Management support helped, too. As Richard points out, *Each of us has difTerent Cmida !Wt a !4 roa management, yet we were able to implement this process. We had a good idea, and we lU.vi&!c. M' e homr.

were empowered." ml *.IJ2 j,5y fa b ie This group epitomizes so many of our corporate values. Taking responsibihty to get rIr main m, der.n r/- resuhs, they exemplified the effectiveness, teamwork, and innovation needed to fmd better ways Ca/mr (.!B N,-!w of do;ng business. They took advantage of existing systems and applied them in a new way. Pgulumq'icejh The outcome was an easier, more efficient process that got the desired resuhs. Martin says he sees the new values company-wide. "How we apply them may be different," he says, "but I see people taking great etTorts to improve quality, save money, and become more personally accountable for what they da" V V V - l i 14 ~ t \\ - '! n j ' pr 2u f[ l i p ?y i A f 44 J. .y s y,, -; f f' y \\* l} I s 3., n;u :i f l \\, \\ j $(!( ' q[J J $smy::. P~e

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s j i l I l l l l l Envimnmental concem has become a popular bandwagon in Americ..' hat's good, because the "I veinm"onal Sonais f/ er l ala r.ce s J planet Eanh can use all the help it can get. Ilow that affects the bottom line, however, is a 6m L dilemma many corporations face. At BGNE, Greg Kappler and his co-workers in Environmental /wruen awdrunm rh/> i Programs balance care foi the em-ironment with profitability every day. rurhw nera! onu m. p - Greg may kok like a bearded " tree hugger," trudg ng through the Hr-at ma Rirmidept.mi. i di woods in flannd shin and jeans. But tomorrow he may wear a suit and /hene ed nshi lumms ( - tie while negotiating for the mmpany on an environmental nyulation. maIr thei-h"me in a i \\ i His job is a balancing act. he admits. But he bdieves company prof-30 na m4rrr der bu!!

i natulity and environmental concerns need not be at odds. While the on a"nfan; / won L;

4 -t .1 / mmpany has always worked io comply with all regulatiom, Greg believes we can respect the environment and the honom line at the same time. < Der 4 rad mer/ unio t wn ] i { OPIP and the accompanying corporate values have hdped this our di;,htaen orus a%r { environmental scientist with a background in business juggle his mies. Grrs m moving a m/my "I'm really glad to see that we have environmental responsibility as a "nr am/> a tad trfv/r. value," says Greg. "I can make my daisions and take pm.onal responsibility for them, knowing thev are justified by our corporate values? Greg's osprey nest relocation project is one example of the kind of creative thinking OPIP encourages. What started as an isolated nest on a utility pole has expanded to a project that wdl hdp mq the birds, keep customers in service, prevent costly fires and damage, and save the company monev. fd The project began in June '91, when an employee spied a four. foot diameter osprey nest on sf some electrical feeder lines in eastern Bahimore Countv. The potemial for fire was great, so the

ih -

? nest had to go. With a permit, the law allows for destruction of empty osprey nests, but Greg i thought it would be a better idea to move it. The osprey pmiect was born. He moved the nest to a specially designed extension on the utihty pole. The bird family returned a few hours later and raised three young in their new home that summer. Since that first nest reh> cation, Greg has found nine more osprey nests on BG&E pmpeny. ' tan d her" a r wei"I Many have been moved. The resuk of this environmental stewardship was the successful fledging realiauien in um wu net sar encimnwonal une of 17 osprey young in 1992. The osprey project began largely as a safety contern that needed to be handkd in compliance ad Air udp'rpiu'J/in air with the law. But Greg's vision, along with the enthusiastic help of many other departments and imermallc.Ai!fGc;L mr the backing of management, turned it into something more. Through publicity, he encourages wd uvi v"!r u mmp!r wn/' employees as wdl as customers to repon nest sightings on BG&E propeny. "As the Chesapeake se /nur cf de law we Bay gets heahhier, we're going to have more osprey and they're going to continue to nest on our se m lemndit1/wrcan structures. I can't be everywhere, but I need to know about nests on our propeny. If we lose le@ die r aim" mon m/J!r customers due io a pole fire, then w c've got problems." /*riahr m meien, we u. 97 m 4 m ' Greg has other responsibilities, induding all facets ofland-use management. In a state <erti-I fied sediment and erosion control training course, he teaches BG&E designers. engineers. and Ir I bzaba/r !?aseiro, construction personnel how to do their jobs with minimal effeci en the environment. Ibravr of The ospreys are one of his favorite programs, though. Moving the nests. he says. "makes the Enviummenta!19w i ospnys happy, makes the community happy, keeps us from having an outage, and it costs very littlef i 6 17 3 ..,z l' L li UT1LITY 0 P E R A T'l N G-S.T A T I S T I C S 'l 1992 1991 1990 1989 1988 E L E CT RIC O P E R ATIN G S T ATISTICS -

Revenues (In nousands)

Residential - 5 839,954 5 882.591 5 718.032 5-648,883. 5 620,660 : - Small Commercial. 242345 246,669 220,687 _ - 194,573 '178,727.. large Commercial and Industrial - 802,299 816.233 732,837-666.042-626300 System Sales 1,884,598 1,945A93 ' 1,671,556 - 1,509A98 1,425,687.L -i Interchange Sales 64,323 23,845 - 26,629. 17,802" -43,919 Other.. 19,002 25,187. 14.268 19,867 22,528 { Total 51,967,923 51,994.525 51,712,453 51,547,167 51 A92.134, Sales (in Thousands) - urn Residential - 9.735 10,097 9,283 9A51 9,196 i Small Commercial 2,666 2,673 2,561 2,461 -2,293 Large Commercial and Industrial 12,906 12,742 12,534 12,879 "12,491 System Sales. 25,307 25,512 24378 24,791 23,980 ~ I Interchange Sales 3,180 1,166 1,088 595 2,052. Total - 28A87 26.678 25A66

25,386 26.032-Customers Residential 956,570 939,734 930,880 913,910 895,881 Small Commercial -

95,684 93.808 92,102 90,647 87,049

l.

Large Commercial and Industrial - 7,750 8,030 7,991 7,587 8,175 Total..... 1,060,004 1,041,572 1,030,973 1,012,144 991,105-I Average use per Residential Customer - wwn 10,256 10,799 10.064 10A38 -

10362, Average Rate per INH (System Sales) - c -

7.45 7.63 6.86 6.09 5.95 l Peak Load (One-hour)- ww 5.558 5,910 5A77 5,304 5381 Capability at Summer Peak - uw._ 6,687 6,608 6.159 6,164 5,930 ' GAS O P E R ATIN G S T ATIS TIC S l Revenues (In Thousands) Residential - 5 242,737 5 220,653 5 218,967 .5 242389 5 225,035 - Small Commercial. 37,121 33,538 34,622 40,011 36394-1.arge Commercial and Industrial Excluding Delivery Senice.. 96,150 77,506 87,389'. 90,983 92,637.- Delivery Senice 17,880 17,319 21,156 27,069 19,364 Other 9,049 9,179 11.285 11349 8.106.- Total 5 402.937 5 358,195 5 373A19 5 411,801 $ 381,536i Sales (In Thousands)- mu Residential. 39,042 36,519 35,026 39,806_ 40,140 : Small Commercial 6,622 6.154 -6.144. ' 6.889. 6,792 d large Commercial and Industrial Excluding Delivery Senice-- 22,169 18,138 19,324' E 18,772 L 21,770: j Delivery Senice 40,741 '40.673 40,593 45,230 '40,827 { Total. 108,574 101,484 101,087 110,697 109,529 j l Customers Residential - 486,863-482,085 ' '482,680 482,538 482,011 Small Commercial - 32,596 32336 31,981 31,881 31.582 Large Commercial and Industrial.- 5,816 - 5.610 5373-- '5307-5,160 Total 525.275 520.031 520,034 519,726 518,753 Average use pet Residential Customer - Therms. 806 757 726 826 833 -. Average Rate per Therm (Excluding Delivery Service) - 5.. .55 .55 - .56 - .57. - .52 - Peak Day Sendout - mu 609,200 - 610,200: 653,900 663,200-669,500 - Peak Day Capability - trrn - 847,000 817,000 853,000 761,000 793,000 - 18 Bahimmr claiandArric GnnpanyandSuinidiaria. l i ~ sj l SELECTED F1NANCIAL DATA -f i 1992 1991 1990 1989 lt !8. 'i Mir amounn in ammands. w;porr.Jwr amounn

SUMMARY

OF D PE R ATIONS $1.921.241 - Total Revenues.. 52,491,343 52,448.853 -52,178,112 ' 52,032,009 Expenses Other Than Interest and Income Taxes 1,955,998 1,959.665 1.854.183 1.555,424 1,424.291 Income From Operations $35345 489,188 323.929 476.585 - 496.950 Other Insome .i Allowance for equiry funds I used during construction 13,892 23.596 27,086 18.,564 - 16,056. Other income 8,204 3.032 9,588 12364 7,498 Total other income -- 22,096 26.628 36,674 30,928 23,554 income Before Interest and Income Taxes. 5574441 515.816 - 360,603 5074513-520,504 Interest Expense Interest charges.. 197,912 210,458 191,471 164369 136,071 .i Allowance for borrowed funds l used during construction _ (8,165) (13.870) (26.266) (14.776) (12.075) Net interest expense - 189,747 196.588 -165.205 149,593 -123.996 Income Befurt income Taxes.. 367,694 319,228 195,398 - 357,920 396,508 Income Taxes 103347 85547 19.952 81.629 - 93.096 J income Before Cumulative Effcci of Changes in Accounting Methods-- 264,347 233.681 175,446 276.291 303,412 i Cumulative Effect of Change in the Method of

j Accounting for income Taxes--

19.745 w. Cumulative Effect of Change in the Method of Accounting for Unbilled Revenues, Nc ofTaxes. 37,754 Nn income 264,347 253A26 213.200 276.291 303,412 I abred and Preference Stock Dhidends.. 42,247 42,746 40.261 32381 29375 Earnings Applicahic to Common Stock -- 5 222.100 5 210.680 5.172.939 5 243,910 5 274,037 Earninp Per Share of Common Stock - q Before Cumu'ative Effect of Changes in Accounting Methods--- 51.63 51.51 51.09 52.03 5231 Cumulative Effect of Change in the Method 1 ofAccounting for income Taxes .16 Cumulative Effect of Change in the Method of Accounting for Unbilled Revenues 31

i Total Earnings Per Share of Common Stock.

51.63 51.67 51A0' 52.03' 5231 Dividends Declared Per ShareofCommon Stock-51A3- $1A0 51 A0. 5138 $132-Ratio of Eamings to Fixed Charges - 2.65 2.27 1.78 3 02 - 3.71 j Ratio of Earning to Fixed Charges and Preferred _ 2.08 .1.82 1.47' 2.44 . 2.94 : a . and Preference Stock Dhidends Combined f1N A N CI A L S T ATISTIC S AT YEAR E N D. . 55.985.679 55.126362 L Total Assein 57374.957 - 57,137.989 56.710375 Capitalization Long-term debt 52,376,950 ' 52390,115 52,193,844 52,076,620_.$1,769.066 : 1 Preferred stock - 59,185 59,185 59,185 59,185. 59,185- ~l Redeemable preference stock.- .395.500 398500'. - 365,000 322,800 J J 229,600. _i 110,000 '_110,000 Preference stock not subject to mandatory redemption. 110,000 110,000 110,000 _ 2,001.188 1 885,245 ll Common shareholders' equiry 2,534.639 2.153306 2,073,158 ' Total capitalization. - 55A76,274 5s.111.106 54.801.1 R7 543r>9.793 54.053.096 ~ )i l ' Book Value Per Share of Common Stock. 517.63 - ' 517.00 516.58- $16.60. $15.85 ' . Number of Common Shareholders - 80,371 71,131 73.049 75,762 79,808 - l i Certamprior-yaramounrs haw iwen rarated to confarm uurh de curreuryaripraemarin _ 'I ' Allper-sharr amounts hare brrn renatedto reflea theSfor-2 n>mmon sud spla to dureholdm ofrnardanfApril31992 [f . Baltimm Gm andwrir company andsulmdiarin 19-l i -o

, i .a MA~NAGEMENT*S 01SCUSSION. AND A-N - A L Y S I S 0F F i N A N C 1. A L C0NDiT. ION AND RESULTS 0F 0 P E il A T I O N S The financial condition and resuhs of operations of Bahimore - (Notes) Utility Operating Statistics, and Selected Financial Gas and Electric Company (BG&E) and Subsidiaries (colice-Data sections of this Annual Report. Factors significandy rively, the Company) are set forth in the Consolidated Financial a&cting resuhs of operations, liquiday, and capital resources are J. Statements, Notes to Consolidated Financial Statements ' discussed below. RESULTS OF O P E R ATIO N S Earning per Share of Common Stock by higher operations and maintenance expenses and higher : Consolidated earning per share for 1992 were $1.63, which fmancing costs, represents a decrease of 5.04 from the 1991 level of $1.67 based Earning from utility operations are affected by the regula-on the increased average numba of shares of common stock tion of BG&E's rates by the Maryland Commission and by the-outstanding as a resuh of the public issuance of 15 million cEct on sales of ectmomic and weather conditions. During common shares during 1992. All per-share amoums have been 1992 and 1991, unfavorable economic conditions in the. adjusted to reflect the three-for-two common stock split to Company's service tenitory have negathcly impacted sales, and shareholders of record as of April 23,1992. (See Nott 6.) The operations and maintenance expenses have inctrased above the caming per share are summarized as follows: levels prov;ded for in the December 1990 base rate increase. If. 1992 1991 1990 current economic conditions in the Company's service ictricory Utility business continue, electric and gas sales growth is expected to be low ~ Current-year operations 51.52 51.60 $1.16 in 1993. During 1992 BG&E fded an application for a Pmvisiori for possible $164 million increase in electric base rates and a 55 million. disallowance of replacement innease in gas base rates which is currently pending before the energy costs (see Note 14).. (.19) Maryland Commission. An order from the Maryland Commis- ~ Cumulative effect of change sion is expected in April 1993. Earninp will be impacted during in the method of accounting 1993 by the outcome of this case. In addition, there are - for unbilled revenues currently several fuel rate cases pending before the Maryland ' (see Note 1) .31 Commission, as discussed in Notes 1.and 14, which could also. 1 I*P* I"'" T** '^'"I"P Total utility business 1.52 1.60 1.28 Excludmg the impact of the char.ge m. the method of

i Diversified activities accounting for income taxes, earninp from divasified activi-Cuntnt-year operations.

.11 (.09) .12 ties, which primarily represent the operations of Constellation

i Cumulative cilect ofchange Holdinp, Inc. and'its subsidiaries (co!!cctively,'the Constella-

') m the method of accounung for income taxes (see Note 1)_. .16 tion Companies), increased during 1992 and ' ecreased during l d 1991. The reasons for the changes in diversified activities 9 Total diversified activities.. .11 .07 .12 carning are discussed on page 23. l Total. 51.63 51.67 51.40 Effect of Weather on Utility Sales Earninp Applicable to Common Stock cather condidons. affect.the level of BG&EYutility sales.' Earninp applicable to common nock increased in 1992 and Colder weather during the winter, as measured by greater - 1991. The increase in 1992 reflects mcreases in both utility cam ~ heating degree days, results in greater demand for electricity ar { mgs and earninp from diversified activities. The 1991 increase gas to operate heating systems. Cooler weather during ths I resuhed from highet utih_ty earmngs. pamally ofTset by a decrease summer, as measured bv fewer cmling degree days, resuhs in ~ m carnmp from divers fied acornn. less demand for electricity to operate cooling systems, . Utility earning increased in 1992 as a resuh ofincreased Conversely, warmer weather during the wimer, as measured by electric and gas sales during the 1992 winter due to colder fewa heating depe days, resuhs in less demand for electricityi weather as compared to 1991, lower operations espense, lower and gas to operate heating systems. Warmer wrather during the. . interest charges, and greater other mcome. This mcrease wa' summer, as measured by prater cooling degree days; resuks in ' I substantially offset by lower electric sales during the 1992 pata demand for decu-idry to coerate cooling systems. The - 'I depee days chart below illustrates changes in cooling 'and - summer due to cooler summer weather as compared to the prior heating degree days for the years 1992 and 1991. . year. ne effect of weather on utility earninp is discussed bekw. Utility camings increased'during 1991 primarily as a resuk of 1992- -1991 higher rnenues from the electric base rate increases authorized by Cooling degree days 707: 1,026 the Public Service Commission of Maryland -(Maryland % change compared to prior year. (31.1)% - 19.2% - Commission)in Dewmber 1990 and increased dectric saks due Heatingdegree days.. 4,975 ' 4343 j to warmer summer weather as compad to 1990, partially ofTset % change compared to prior year. _ 14.6% ' 9.5% i ,i I 20 klumrr GasadEienic Cmpey adMsblktries

'e BG&E Utility Revenues and Sales of Brandon Shores Unit 2. and 2) increased purchased capacity The changes in decnic tevenues during 1992 and 1991 as charges. In addition to the base rate increases discussed ahme, the M80 and Commission's December 1990 rate order also i compared to the rnpective prior year were a resuh of the authorized an immediate base rate increase of $77 million which following factors: increased revenues in 1991. Electric base rate revenues are j992 j99; expected to be impacted positively in 1993 by the Maryland j,,,my,y Changes in system sales volumes. 5 (32.0) 5 59.0 Commission's anticipated April 1993 order rdating to BG&E's increased base rates 84.9 176.4 pending application for a $164 million annual increase in elcaric base mn. Changes in fuel rues (113.8) 38.5 Changes in revenues from sysicm salo.. (60.9) 273.9 The changes in fuel rate revenues for both periods resuhed Changes in interchange sales. 40.5 (2.8) froni the opcmion of the electric fud rate formula. (See Notes 1 Changes in other revenues. (6.2) 11.0 and 14.) Changes in fuel rate revenues and interchange sales ""* I

• P'" **" "P' "N "" "'""" "re designed Tora! changes in electric revenues 5(26.6)

$282.1 to amver the actual cost of fuel, net of rtwenues from.mterchange sales. If the Maryland Commission were to disallow recmay of , nectric system sales represent volumes sold to customers any pan of these costs. eaming would be impaatd negath>eiy as withm the Companfs wrvice territory at rates derernuned by the dismssed in Note 14. Maryland Commission. These amounts exdude interchange sales. The dum in fud m uvenues during 1992 resuhed as discussed behiw. The changes m elecmc system sales mlumes as primarily fmm a lower fuel rate which reflects the remaining efTect compared to the respearve pnor year were as follows: of 1) a less-costiY twenty four-month encration mix comIvared to E 199~' 1991 1991 due to greater generation at the Calvert Cliffs Nudear Residemial (3.6)% 8.8% power Plant,2) 558 million of annual fuel cost saving resuhing Small commercial - (0.2) 4.4 from the commercial operation of Brandon Shores Unit 2, and large commercial and industrial. 1.3 1,7

3) the October 1991 npiration of a surcharge to the elcaric fud Total.

(0.8) 4.7 raie. Increased fuel rate revenues in 1991 remhed from higher sales volumes, partially offset by die fuel rate reduction to reflect Sales to the residential and small commercial dasses of the fuel cost saving 'esuking from the commercial operation of customers in 1992 reflect the negative efTects of cooler weather Brandon Shores Unit 2. Dectric fuel rate revenues are expected to during the 1992 summer, panially offset by the positive effms continue to decrease during 1993 as a resuh of a less-cosdy gener-of colder weather during the 1992 winter and growth in the ation mix expeacd to be redected in the fuel rate formula due to number of customas Sales to large commercial and industrial the mntinued operation of both units at Calvert Cliffs. customers in 1992 reflect modesdy impmved emnomic condi-Interchange sales increased during 1992 due primarily to tions in that sgment as compared to 1991 and increased sales BG&Es less cosdy generation mix 'in rdation to that of other volumes to Bethlehem Sted due to the start-up of Bethlehem Pennsylvania-New Jersey-Maryland lmerconnection utilities. Stecfs newly modernized hot stnp mill. The increases in sales The less cosdy generation mix during 1992 reflects the opera-during 199! m due to warmer weather during the 1991 tion of the Calvert Cliffs Nudear Power Plant and a ftdl year of summer as compared to 1990 and growth in the number of mmmercial operation at Brandon Shores Unit 2. cusmmets in each dass, partially offset by the effects ofless Gas revenues increased in 1992 and decreawd in 1991 as a favorable economic conditions as cumpared to 1990. In addi-resuh of the following factors-tion, sales to large commercial and industrial customers during 1992 1991 1991 reflect lower sales volumes to Bethlehern Steel compared to 1990 due to a lengthy planned outage at Bethlehem Steers increasesin sales volumes 58.6 5 5.6 hot strip mill. Increased base rates 3.3 1.3 The ncreased base rate twenues m 1992 and 1991 reflect Changes in gas cost adjustments.. 32.9 (20.1) the effects of the Maryland Commgsion s December 1990 rate Changes in other revenues.. (0.1) (2.0)- order which authonzed a 5124 mdlion base rate increase to provide rate recognition for BG&E's investment and operating Tmal changes in gas revenues. 544.7 $(15.2) expenses at Brandon Shores Unit 2 effective with that Unit's , The changes in gas sales volumes as mmpared m the respec-initial commercial operation in May 1991 and a $53 million surcharge to base rates effective in October 1991 to recover tive pnor year were asiollows: cenain purchasal capacity charges. Ahhough these base rate 1992 1991' increases have inarased BG&Es ekctric revenues during 1992 Residential 6.9% 4.3% and 1991, they have had little effect on net income because they Small commercial 7.6 0.2 have essentially been offset by 1) a decrease in the allowance for large commercia! and industrial _ 7.0 (1.8) funds usal during construction and higher depraiation expense Total 7.0 0.4 and otha taxes due to the completion and mmmercial operation 21 Bahmmr GasadElectric Gmpam addSubsidiaries. w.

Sales to all dasses of customers during 1992 reflect the posi-Purchased gas expense was as follows: tive etTects of colder weather during the wimer of 1992 and 1992 1991 1990 growth in the number of customers. Gas sales to large commer-f,,g,, cial and industrial customers for 1992 also renect increased sales Actual msts - 5213.6 $1811 518L1 volumes to Bethlehem Sted due to greater use of gas in Beth-lehem Steers production and processing businesses. The Net reantry (deferral) ofcosts increased sales w residential and small commercial customers under purchased gas adjustment 3 dause (see Note 1). 0.5 (3.6) 19.7 during 1991 were attributable to the colder weather during the 1991 winter as compared to 1990. The decrease in sales to large Total expense 5214.1 5181.5 $200.8 commercial and industrial customers in 1991 was attributable primarily to less favorable economic conditions and, to a lesser The increases in actual purchased gas costs in 1992 and extent, to decreased sales to Bethlehem Steel iesulting from a 1991 reDect primarily increased output due to colder winter planned outage at that company's hot strip mill. weather as compared to the respective prior year. The increase in Gas base rate revenues increased during both years as a 1992 also reflects higher gas costs. The Federal Energy Regula-resuh of a 54 million gas base rate increase authorized by the tory Commission recently issued Order No. 636 which requires Maryland Commission ctTective October 1,1991. Gas base rate the unbundling of pipdine services, the elimination of pipeline revenues are expected to be impacted positively by the Maryland sales service, and greater competition at the wellhead. This Commission's anticipated April 1993 order relating to BG&E's Order, which is expected to significantly increase BG&E's pending application for 55 million ofincreased gas base rates. responsibility for ensuring that adequate transmission and The changes in gas cost adjustments in each year reflect the storage capacity is maintained and is aho expected to increase operation of the purchased gas adjustment dause (See Note 1). BG&E's transmission and storage costs, will become efTective Changes in gas cost adjustments normally do not impact earn. during 1993 on a pipeline-by-pipdine basis. ings. Gas cost adjustment revenues are designed to recower the Operations expense decreased in 1992 due to lower nudear-actual gas costs incurred. The increase in 1992 is anributable to contractor costs and lower payroll costs attributable to the a combination of higher salcs volumes and increased prices to Company's Voluntary Special Early Retirement Program recover higher costs of purchased gas. The decrease in 1991 (VSERP) and other cost control measures. These decreased costs reflects a settlement of certain take-or-pay issues with BGNE's were partially offset by the 59.8 million one-time cost of termina-principal gas pipdinc suppliers. Take-or-pay costs refunded to tion benefits associated with the VSERP and by higher fringe BG&E are passed on to customers through the purchased gas benefit costs. Operations expense increased in 1991 due primarily adjustment dause, to higher payroll and fringe benefit wsts. Operations expense is expected to increase in 1993 due to increased payroll costs and BG&E Utility Expenses due to the implementation of Statement of Financial Accounting i Dectric fuel and purchased energv expense was as follows: Standards No.106, Accounting fm Postretirement Benefits, 1992 1991 1990 which is cfTectiveJanuary 1,1993, a> discussed in Note 11. i /n md!3, Maintenance expense was essentially unchanged in 1992 - Actual costs. 5445.2 5492.6 5659.2 due to keer costs at certain fi>ssil-fud dectric generating plants, Net recovery (deferral) of costs substamially offset by higher costs at the Calvert Cliffs Nuclear j under electric fuel rate Power Plant due to an extended refueling outage at Unit 1. dause (see Nore l) 111.0 105.6 (107.8) Maintenance expense increased in 1991 due to the extended Total expeme 5556.2 5598.2 5551.4 maintenana and repair outage at Calven ClitTs Unit 2. Depreciation expense increased m both years as a result of The decrease in actual electric fuel and purchased energy higher levels of depreciable plant in service, induding Brandon i costs during both 1992 and 1991 was due primarily to a less Shores Unit 2 which began commercial operation in May 1991. P' " " C*P'"*# I" l99 f*". re0cas a M.2 mEm l increase in nudear decomm)issiorung accruals as a cosdy generation mix as a resuh of the accurn to operation of the ted by j Calven Chffs Nudear Power Plant fi>llowing the completion of extended maintenance and repair outages and the Mar 1991 the Maryland Commmion in its December 1990 rate order. 'j commercial operation of Brandon Shores Unit 2. The dheases Taxes other than income taxes increased m 1992 due in both years were partially offscr by purdiased capacin' d arges prim ray to Ngher pmpeny taxes attributable to mcreased prop-beginnit$g in October 1991 under the Pennsylvania Power & eny anenmems. The 1991 incn-ase reflects higher public service Light Company Energy and Capacity Purchase' Agreement. As mmpany franchise, payroll, and propeny taxes attributable to discussed in Note 14. during 1990 BG&E recorded a provision increased gas and electnc revenues, wages, and property assess-l of $35 million for the possible disa!!owance of certain replace- '"'"I '**P"'""'I T mem energy costs associated with the extended outages at the in0ation aEects the Company through increased operating Calven Cliffs plant during 198%1991. expenses and hipier replacement costs for utdity plant assets. Although the effects of inflation can be mitigated through -] l.l 22 1Mimwr Gre amlEba+ Compaur amikleidwm 1 l

t t 't i i i timely rate rclief, the regulatory protos imposes a time lag sale of selected assets to pmvide liquidity for ongoing activities during which increased costs may not be recovered 1his regu-of the Constellation Companies. During 1993, investment latory lag is attributable in pan to rate relief being based on past earnings are expected to continue to reflect the reallocation of l costs rather than projected costs.1r has been the Maryland the investment ponfolio to emphasize more liquid but lower-Commission's practice to permit recovery of the cost of yielding securities and a decline in the si7e of the investment replacing plant assets, together with the opponunity to earn a portfolio following the sale of cenain assets during 1992 and I fair return thereon, beginning at the time of replacement. 1991 to provide liquidity for other ongoing activities of the Constellation Companies. In addition, approximately l Dhcrsified Acdvities Earninp SS million of mvestments are expected to mature during 1993, Earninp per sharc from diversified acurities were as follows: ar.d the proceeds will be available for reinvestment or for other 1992 1991 1990 ."3,'*" Diversified activities h"** *""* C"*P"*#* '#*l #*'*** dCI"P*#"* I** nm indudes land under development; ofTice buildmp: Power generation systems.. 5.08 $.03 5.07 P*I"'* # ** d^I P *I" W "" #* *"'I" *C" d'*,"8 and retail complex." Orlando, Flon.da; and a m!' d-use Financial investments .09 .01 .08 m ixe Real estate and senior e pment in Anne Arundel County, Maryland. plhe majority of these pnyecu are m the Balumore-Wa anne -unn living facilities.. (.05) (.11) (.02) 'I Other (.01) (~02) <'01) corridct and have been adversely affected by the depressed real Current-year operations.. .11 (.09) .12 estate and economic markets, resuhing in reduced demand for Cumulative effect of change in the punhase or lease of availahie land, offu, and retail space, as the method of accountinS wdl as the inability to complete anticipated sales and leases of for income taxes (see Note 1) .16 real estare projects. Due to these conditions, in 1991 the Total diversified activities... 5.11 S.07 5.12 Constellation Companies recorded write-downs aggregating $10.0 million on cenain real estate projects and a 53.6 million The Constellation Companies' power generation systems reserve for toans where the value of the collateral was determined business includes the development, ownership, management, to be less than the outstanding loan balances. Additionally, the and operation of wholesale power generating pmjcn in which ConstcIlatio.1 Companies' real estate ponfolio has experienced the Cormellation Companies hold ownership interests, as well continuing carrying costs and depreciation and, during 1991, as the provision of services to power generation projects under the Constellation Ccmpanies began expensing rather than mpi-operation and maintenance contracts. Earning from the tali 7.ing imerest on certain undeveloped land where development C mstellation Companies' power generation systems business activities are at minimal levels. These factors have negativdy increased during 1992 primarily due to a gain on the sale of a impacted eaming in both 1992 and 1991 and are expected to - ponion of the Constellation Companies' ownership interest in a continue to do o until the current market conditions improve. power generation projecti Earning decreased during 1991, Cash flow from real estate operations has been insuflicient m reflecting the absence of tax credits from new pmver generation cover the debt service requirements of cenain of these projecn. pmiects, panially offset by income from energy projects in Resuking cash shonfalls have been satisfied through equity infu-which the Constellation Companies have an equity imerest, sions and loans from Omstellation' Holdings, Inc., which income from operating energy pmiects on a contractual basis, obtained the funds thmugh a mmbination ofcash flow generated and the sale of a limited pannership interest in one pmject. by other Constdlation Companies and its corporate bormwings. Earninp from the Constellation Companies' ponfolio of As long as the real tstate market and kwal economic conditions financial investments indude capital gains and losses, dn idends, remain soft, earning from real estate activities are expected to income from financial limited pannerships, and income from remain depresed. financial guaranty insurance companies. Investment earninp The Constellation Companies plan to hold real estate increased in 1992 due to an improvement in the perfonnance of projects until the mark et improves. This condition is a function certain financial limited partnerships and the effect on 1991 of market demand, interest rates, credit availability, and the' carninp of 1) a 510.5 million write-down to reflect the market strenph of the economy in general. The Constellation Compa-value of cenain of the Constellation Companies' marketable nies' Management believes that until the economy shows equity securities, substantially all of which were subsequently sustained growth and until excess inventory in the market in the sold, and 2) a 53.1 million write-down on two financial limited Baltimore-Washington curridor is reduced, real estate values are - partnerships (banking and financial services) that were adjusted not anticipated to improve. If the Constellation Companies - to reflect market value. Investment earnings in 1991 were were to sell their re 1 estrte projects in the current depressed funher reduced due to the reallocation of the investment pon-market, losses in amounts difficult to determine would occur, folio to emphasize more liquid but lower yielding securities and Depending upon market conditions, future sales abo could-a decline in the size of the investment portfolio fb!!owing the result in losses. In addition, were the Constellation Companies - Edumm G.uadElmric CompmyadSaddww 23

l' to change their intent about any project imm an iment to hold . Interest charges decreased in 1992 primarily as a resuh of. until market condidons improve to an iment to sell, applicable decreased levels of debt outstanding and lower imerest rates, accounting rules would require a write-down of the pmjea to partial!y o!Tset by the discontinuation ofimerest capitalization market salue at the time of such change in intent if market value on cenain of the Constellation Companies' real estate projects. is below book value. The decreased debt levels in 1992 are attributable to the Other Income and h, pense' issuance of additional shares of common stock and the recovery of previously deferred electric fuel costs. The increase in interest The allowance for funds used during qmstruction (AFC,) decreased m both years due to the complenon and commercial charges in 1991 primarily reflects. increased levels of debt operation of Brandon Shores Umt 2. In 1992, this dedease was outstanding, partially offset by lower interest rates. The 1991 pardally offset by the effects of the expansion of the AFL pohcy increased debt levels were primarily anributable to continuing as discussed in Note 1. The decrease m 1991 was panially offset utility construction expenditures. income tax expense increased during both periods as a resuh by thc; use of a pre-tax AlC rate of 9.94% effccuve January 1, of higher pre-tax carninp. In 1991, the increase was aho due to 1991 m connecnon wnh the adopnon of the liability n accounting for income taxes under Statement of Hlethod of the implementation of the liability method of accounting for nancial income taxes, which requires th'ai income taxes previously - Acmunting Standards ho.109. Hownu, net inmme was not atTected by this change m recording AFC. Under Statement recorded as a reduction of AFC be recorded as a mmponent of ' No.109, income taxes representing the difference between a income tax expense. pre-tax and net--of tax AFL rate are recorded as a component of Preferred and preference stock dividends decreased in 1992.- income tax expense rather than as a reduct on ofAFC. due m & Mgion of rhn preference stock during Net other income and deductions increased in 1992 primarily 1992 and 1991. Pseferred and preference stock dividends due to knver chantable donations and decreased m 1991 pnmanly increased in 1991 as a resuh of greatet amounts of preference due to lower earnings from merchandising operations. M outstanding. LIQUIDITY AND C A PIT A1 RESOURCES BG&E Capital Ramirements preference stock., and common stock were 51,066 million, BG&E's construction program is subjeu to continuous review 5100 million, and 5475 million, respectively. During the same and modifionion, and actual expendiimes may vary from the three-year period, BG&E's retiremems oflong-term debt and estimaies on page 25. Potentially, the most significant project in tedemptions of preferred and preference stock were the construction program is the new Perryman generating 5853 million and 532 million, respectively. The amount and facilitv. However, in linhr of the Man-land Commissioni intro _ timing of future issuances and redemptions will depend upon duction of a mmpetitive bidding prdess for the construction of market conditions and BG&E's needs. future churic generating capacity, BG&E's role in the construc. As disclosed on pages 24 and 25 in the section tided ' Diver tion of the facility is uncertain at this time. Other electric sified Activides Capital Requirenients---Debt and 1.iquidity," construction expenditures are attribuuble primariiv to improve _ cenain debt of the Constellation Companies is scheduled to ments to BG&Es existing generating plams and to its transmis. mature in 1993. Aho, as disdosed in the Company's Fonn 8-K sion and distribution facilities. The Company currently dated January 29,1993, the Constellation Companies will need estimates that expenditurcs for compliance with th'c Clean Air to provide significant funds to comp!cre the Puna projea, which Aa of 1990 wilhotal apprmimately 555 million through 1995. is scheduled for 1993. The Constellation Companies plan to During 1992,1991, and 1990, the internal generation of meet all such cash requirements with a combination of addi-cash from utility operations provided 81% 74% and 14% donal debt and cash fmm operations. If these plans are not respeaively, of the funds required for BGNE's capital require. ensely succenfuk BG&E may puide a portion of the neces-ments exclusive of debt retirements. The significant incicase in sary funds through loans to Constellation Holdings,1nc. the 1991 level is due to the recovery ofdeferred electric fuel costs, Diversified Activities Capital Requirements lower mnstruction expenditures and higher net inanne. During Debt andLiquidiy the three-year period 1993 through 1995, approximately 60% of As explained ni greater detail en pages 41 and 42 in Note 8. the funds required for BG&E's capital requirements exclusive of during 1992 Cmstellation Holdings, Inc. renegotiated its bank debt retirements and _ redemptions of preference stock are debt facilities and issued 5120 million of unsecured serial notes. cxpeacd to be provided through utility operations. Debt maturitics are disclosed in detail in the chart bdow. Aho, as - Utility capital requiremems not met through the internal disctmed in detail in the Company's Form 8.K dated January 29, generat on of cash are met thmugh the issuance ofdebt and equiry 1993, significant funds will be requir'ed to complete the i securines. During the three-yeat period ended December 31. Puna project, which is scheduled for 1993. Constellation Hold. 1992, BGNE's issaat.ces of long-term debt, preferred and ings. Inc. and its subsidiaries are negotiating the refinancing of 24 wiz,mm. ca, a,,Jnannc armm ar,J.s,6 diana.s

E alf indchtedness as it matures as well as the gutential issuance of down outstanding dcbi ihtough imernally generated cash wiiich additinual dcht in order m satisfy ongoing capital requiremems. includes cash that may be generated from operations, maturing No assurances can be pnwided that Ginstellation 11oldings financial limind partnenhips, sales from the wcuritin ponfoho. Inc. and its subsidiaries will be suucssfid in obtaining additional the sale of othei assets, and ash generated by in benern earned ' funds fmm lunks and other imtitutional lenders, As mentioned by Ginsicllation I loidings, Inc. and its sulwidiarics. In the event above in the section titial "BG&l: Capital Rniairement>J ilot the real estare ma:Let rebounds and the Constellation ' BGNE may provide a portion of the nacssary funds ihmugh Companics can obtain reasonable value thr the propenics, addi. loans to Consicllation lioklings Inc_ tional cash may become available through the sale of pniects The following chan sen fonh the wheduled maturities (for additional infonnation see ihe disamion of the real estate ; of the Constellation Companics' debt outstanding at businca and market on pagn 23 and 24 under the heading December 31.1992: Diversified Activities EarningO. The ability of the Constella-e m and rion Companies to sell or liquidate the assets described alxwe em m4 le b will depend on market conditions, and no assurances can be la =//eu gwen ihar 1.uch sales or liquidations can be made. Constellation iloldings, inc/> Bank Dcht.. . 5 56 556 5 40 I m 5"" *' Ral"i" * *f3 ConstcIlation lloldings, inc/s De invr5""c"! '"luiranenn shown Irlmv include the Conste!.. Privarch Placcd Debt.. 40 215 lation C<nnpanin' ponion of equity funding to commined Consicliation Gimpanics-pniens under dewtoprnent as well as nei loans made to project Pn,ieci Dcht.. 4 7 1s8 pannenhips. Investment requirements for the years 1993 1995 m6cc the GnsteHadon Conip.uy estimate of funing durjng - Total...... .5100 563 5413 such periods for ongoing and ann,cipamd pniccis and are subyct The amounts presemcd in the table abme are exdusive of to continuous review and modification. Actual investment unused capacity available under the bank debt fadlity, as requimmain may vary significandy fmm the amounts below duc - docrihtd in Note 8, which Constellation Holdings, Inc. expects to the type and number of pnicen sclected for development. the to utilire during 1993. impact of market conditions on those pmjects, the ability to Constc!!ation I toldings, Inc. will anempt to continue, obtain financing, and the availability ofinternally generated cash, through private placements and funhcr refinancing of csisting The Constellation Companies' investment wquirements have indebicJnew to restructure in indebwdness to acidcvc longer been mer in the past ihmugh the internal generation ofash and maioritin. Constellation lioldings. Inc. also imends so pay thmugh innowings from institution;d lenders. Capital Requirements The Company's capital requirements reihu the capitabinnensive 1990 through 1992, al,g with estirnated amoums for 1993 nature of the utility business. Anual capital requirements for through 1995, are shown below. 1990 1991 1992 1993 1994 1995 in,ullwm Utility Businew Construction cxpenditures (exduding Al C) Electric $362 5 328 5 292 5 371 5373 5 360 Gas.. 39 _ 43 36 69 70 92 - Comrnon. N1 48 39 60 57~ 48 Total construaion expendirma...... 482 419 367-500 500 500- - AIC.. - .-..... ~...... 53 37 '6 34 40 . Defened nudcar expenditurn.. 28 23 16= 20 12 y-Defennt energv ronsnvation cwendinues.. 3 20 48 . 67 69 ' Nuclear fud (uranhun purchaws and processing charges). 21 . 2 40 38 42 : 140 Retirement oflong inm debt and eniemption ofpreferemnutL. 60 339 486 191 74 291 '644 H23 957 N23 729 -940 Total mility business Divenified Activities Retirement oflong-wrm debt. S-167 118 -100 63; 143' < investment requirements 122 109 80 90 39 33 130 276 198 190 102 176 Total dwenifkd business auivitics. Tora!.. 5774 51.099 51.149 51.013 5831 51,116 niumm Gm and%w Compnn and %hadiario 25

r. l-REPQRT 0F M -A N A G E M E N T Management is responsible fm the information and representa-Coopers & Lybrand, independent auditors, are enraged io tions contained in the Company's fmancial statemems. The audit the financial statements and express their opinion thereon. financial statements are prepared in accordance with generally Their audit is made in accordance with generally accepted accepted accounting principles based upon currently available auditing standards. facts and circumstances and Management's best estimates and The Audit Committee of the Board of Directors, which judgments of known conditions. consists of four outside Directors, meets periodically with - The Company maintains an accounting system and related Managemem, internal audimrs, and Coopers & Lybrand to system ofinternal controls which are designed to provide review the activities of each in dix.harging their responsibilities. reasonable assurance that the fmancial records are accurate and The internal audit staff and Coopers & Lybrand have free access that the Company's assets are protected. The Company's staff of to the Audit Committee, intemal auditors, which reports directly to the Chairman of the Board. conducts periodic reviews to maintain the etTectiveness ofinternal control procedures. HEP 0RT 0F INDEPENDENT AUDIT 0RS To the Shareholdm of Bahimore Gts arrdEktric Company We have audited the accompanying conmlidated balance sheets dated resuhs of their operations and their cash flows for each of and statements of capitaliution of Baltimore Gas and Dectric the three years in the period ended December 31,1992 in j Cornpany and Subsidiaries at December 31,1992 and 1991, conformity with generally accepted accounting principles. .] and the related consolidated statements ofinco nc, cash flows, As discussed in Note 14 to the consolidated financial state-a common shareholders' equity, and income tam for each of the ments, the Public Service Commission of Maryland is currently I three years in the period ended December 31,1992. These reviewing the replacement energy costs resulting from the i ~ fmancial statements are the responsibility of the Company's 1989-1991 outages at the Company's nuclear power plant, and -l Management. Our responsibility is m express an opinion on the Company established in 1990 a reserve of 535 million for j these fmancial statements based on our audits. the possible disallowance of replacement energy costs. The ulti-We conducted our audits in accordance with generally mate outcome of the fuel raie proceedings, however, cannot be accepted auditing standards. Those standards require that we - determined but may resuh in a disallowance in excess of the I plan and perform the audit to obtain reasonable assurance about reserve provided, whether the fmancial statemems are free of material misstate. As discussed in Note 1 to the consolidated fmancial state-ment. An audit includes examining, on a test basis, evidence ments, the Company changed its method of accounting for a supporting the amoums and disclosures in the financial state-income taxes in 1991 and changed its method of accounting for ments. An audit also includes assessing the accounting principles unbilled resenues in 1990. used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. L@ 4 In our opinion, the financial statements referred to above present faidy, in all material respects. the consolidated financial. Coopers & Lybrand position of Baltimore Gas and Electric Company and Bahimore, Maryland .I Subsidia,. 4 at December 31,1992 and 1991, and the consoli-January 15,1993 .i l 1 I i 26 Mimm Gas ad&tra compny adsubwharin 4 l

C0NS0LIDATED S T A T E M E N-T S 0F 1NC0ME Year Emded December 31, 1992 1991 1990 in dmuands. exayri,erdarr anumnn Revenues Electric.. 51,967,923 $1,994,525 $1.712A53 Gas 402,937 358,195 373,419 Diversified activities.. 120,483 96,133 92,240 Total revenues.. 2,491,343 2,448,853 2.178,112 Expenses Other Than Interest and Income Taxes Electric fuel and purchased energv. 556,184 598.208 551,385 Provision for possible disallowance of replacement energy costs (See Note 14).. 35,000 Gas purchased for resale.. 214,103 181 A55 200,762-Operations.. 606,498 634.309 576,271 Maintenance. 172,726 173,648 163,457 Depreciation - 223A83 201,264 170,586 Taxes other than income taxes. 183,004 170.781 156.722 Total expenses other than interest and incon e taxes.. 1,955.998 1,959,665 1,854,183 Income from Operatiom. 535,345 489.188 323.929 Other income Allowance for equity funds used during construction. 13.892 -23,596 27,086 Equiry in earnings of Safe Harbor Water Power Corporation.. 4,267 4,388 4,900 Net other income and deductions. 3,937 (1,356) 4,688 Total other income.. 22.096 26,628 36.674 Income liefore Interest and Income Taxes.. 557,441 515,816 360,603 Interest Expense Imerest charges, net ofcapitali7ed interest. 197,912 210A58 191A71 Allowance for borrowed funds used during construction.. (8,165) (13,870) (26,266) Net interest expense. 189,747 196,588 165,205 ' Income Ilefore Income Taxes _ 367,694 319,228 195,398 Income Taxes...... 103,347 85,547 19,952 Income liefore Cumulathe Effect of Changes in Accounting Methods.... 264,347 233.681 175,446 Cumulative Effect of Change in the Method ofAccounting for Income Taxes (See Note 1). 19,745 Cumulative Effect of Change in the Method of Accounting for Unbilled Revenues, Net of Taxes (See Note 1).. 37,754 - Net locome - .. ~.. 264,347 253A26 213,200 Preferred and Preference Stock Dividends : 42,247 42,746 40.261 Earnings Applicable to Common Stock ' 5222.100 5210.680 5172.939 Average Shares of Common Stock Outstanding.. 136,248 126.093 123,550 - Earnings Per Share of Common Stack Pefore cumulative effect of changes in accounting methods.. 51.63 51.51 - $1.09 - . Cumulative effect of change in the method of accounting for income taxes.. .16 Cumulative effect ofchange in the method of accciunting for unbilled revenues - .31 Total carnings per share of common stock -- 51.63 51.67 ' 51.40 Ser &in m CumadidawdhnarnialSwremenix. Gnampriarr-year amourm la b.ru renaud w rumferm witis sloe curreuryear>yrnentarin hahmw>r Go and11erru Comparry andkbudamer. 21

- C 0 N S 0 1.1 D A T-E D BALANCE S H E E-T S At December 31, 1992 1991 in tinruunds A5$ETS Current Assets Cash and cash equivalents.. 5 27,122 5 17A17 Accounts receivable ! net of alh>wance for uncollectibles). 299,568 304,802 Accrued unbilled revenuca. 69,576 60,429-Fuel stocks. 85,063 83,182 Materials and supplies.. 141,611 128,892 Prepaid t.ncs other than income taxes... 54,510 46,121 Other prepayments-17,080 1S,506. Other _. 12,524 6,675 Total current assets.. 707.054 666,024 investmenu and Other Aescas Real estate projects-462,042 448,661 Power generation systems.. 259,996 215,757 Financial investments._. 207,011 248,258. Nuclear decommissioning trust fund.. 43,118.- 31,969 Safe Harbor Water Power Corporation. 34,176 34,229 Senior living facilities.. 24,538 25,857 Other.. 64,986 67.175 Total investments and other assets 1.095.867 1,071,906 Utility Plant Plant in setrice llecuic..- 5,474,590 5,215,399 Gas. 526,058 494,949 Common. 468,264 446,200-Total plant in service.-. 6,468,912 6,156.548 - Accumulated depreciation (1,980,361). -(1,822,380)- Net plant in senice. 4,488,551. 4,334,168 -j Construction work in progress.. 308,908 307,765 Nuclear fuel (net of amortization)- 147,374 152.881 Plant held for future use. 21,486 17,990 Net utility plant 4,966,319 4,812,804 - Defened Charges [ Income taxes recoverable through future rates - 216,939 -198,878 Deferred fuel costs (net of allowance for possible disallowance) 181,591 287,021 Deferred nuclear expenditures (net of amortization).- - 76,549. . 632 '4' l Deferred cost of deu>mmissioning of uranium enrichment facilities (See Note 14) - 55,000 s-Deferred energy conservation expenditures (net of amortization). 20,519 3,514 Other. 55,119 34,118 i Total deferred charges.. 605,717 = 587,255 Total Assets.. 57,374,957 57.137,989 ] i w nr:> w cam,idazednnandalwmnenu. Certam j amrar ammmn iair inrn wrused to wegform te she runentyeark prnew.rtwn. 2 28 - Balnmow Gas and11xtrh Compansand %Imdwrin i i

h e C0NS0LIDATED BALANCE SHEETS f f At December 31, t 1992 1991 In d,auwnb Ll A D tLITIE S AND C A PIT All2 ATl0 N Current 1 jabilities Short-icrm bornmings.. $ 11,900

5. 212,170 Current p,nions oflong-term deb: and preference sink..

291,270 294,507 Accounts payable. 175,495 'I85,782' Customer deposits.. 20,027 -14,573 Accrued taxcs.. 20,925 29.612 Act rued interest.. 55,537 . 49,173 3 Dividend 3 declared.. 62,282. 54,914 ~ Accrued vacation costs-- 28,908 30,142 i Other.. 3,167 11,619 I Total cunent liabilities.. 669,511 882,492 i Dcferrrd Credits and Other Uabilities Deferred income taxes. 983,534 938,559-Deferred imestment tax credits.. 165,697 174,442 Decommissioning of uranium enrichment facilities (See Nore 14)- 55,000 i Other-24,941 31.390 Total deferred credits and other liabilities.. 1,229,172 1.14 t391 ? t Capitalization long-icrm debt-2,376,950 2,390.115 Prcferred stock. 59,I85 59,185 Redeemable preference simk. 395,500 : 398,500 P cference stock not subjeci to mandatory redemption.. .m.. 110,000 110.000 Common sharchoiders' equiry.., 2.534,639 2,153.306' l Total capitalization.. 5,476,274-5,111 J106 ~ l t s Commitments. Guaranteca, and C<mtingencies-See Note 14 i L Total Uabilities and Capitalization.. $7.374,957 57,137.989 I her Mic w Comebdaurdfinarusd Sisteminn. i Gnain prwrparamnunn hm born or<tasedunenfirrm av derunrntparip,enwi,m. ii ) } . _ fldlurmtry {k, tttt$[$rcirn Orntydnt and5Hltsidinvia _ 29

f O C0NS0LiDATED STATEMENTS 0F CASH FL0WS Year Ended December 31, 5 1992 1991 1990 in thrwands -l Cash Flows From Operating Activities Net income $ 264,347 5 253A26 5 213,200 Adjustments to reconcile to net cash provided by operating activities i Cumulative effect ofchange in the method of accounting for income taxes.. (19,745) Cumulative effect of change in the method of accounting for unbilled revenues.. (37,754) Depreciation and amortization.. 273,549 244,017 179,793 Deferred income taxes 26,914 30,725 56,995 1mestment tax credit adjustments (8,854) (6,225) (4,450) : Def;;rred fuel costs.. 105,430 102,754 (79,671) ProvWnn for possible disallowance of replacement energy costs -- 35,000 Trite-down of financial im estments. 13,575 Write-down of real estate projects.. 9,988 Allowance ft,r equity funds used during construction (13,d92) (23.596) (27,056). 7.quiry in camings of affdiates and joint ventures (net). (11,525) 8,707 14,029 Changes in current assets.. (26,206) (6.563) 8388 Changes in current liabilities, other than shnn. term borrowings.. (9,61 ',) (6,027) (62,559) Other. (31,005) (5373) (10376) Net cash providal by operating activities 569,144 595.663 285,509 Cash Flows From Financing Activities i Proceeds from issuance of Shon-term borrowings (net).. (139,600) (15,530) 103,893 Long-term debt 603,400 1,015,950 1,987,426 Preference stock.... 34.801 64,342 ~ Common stock 355,759 32.263 86,881 Reacquisition oflong term debt.. (687,052) (959379) (1,595,463) Redemption of preference suick. (2,924) (22,800) (6,800) Common stock dividends paid.. (189,180) (176.007) (171,623) Preferred and preference stock dividends paid - (42,300) (42,743) (38A90) Other. (399) (442) (34) i Net cash (uwd in) provided by financing activities (102.296) (133,887) 430,132 -l Cash Flows From Imesting Activities Utility construction expenditures (389A16) (456,244) (535316) Alknvance for equity funds used during construction...... 13,892 23,596 27,086 i Nuclear fuel expenditures (39,486) (1,854) (20.519) Deferred nudear expenditures (15,809) (22,681) -(27,755) Defened energy conservation expenditures.- (19,918) (3A89) Nuclear decommissioning trust fund. (8,900) (8,900) (8,108) Financial investmems.. 52,616 67,282 (9,907) Real estate projects.. (23,385) (45322) (49,745) [ Power generation systems (31,483) ~ (33,204) (62A94) Senior living facilities. (95) '(737) (2A92) Other 4.841 (2.685) (5A12) j Net cash used in investing activities (457,143) (484,238) (694.662) { Net increase (Decrease) in Cash and Cash Equivalents...... 9,705 (22A62) 20,979 j Cash and Cash Equivalents ar lleginning of Year - 17A17 ~ 39.879 18.900- [ Cash and Cash Fquivalents at End of Year. 5 27.122 5 17A17 5-'39,879 Other Cash Flow Infonnation Cash paid during the year for: $ 157,273 t Interest (ner of amounts capitalized).. 5 183,209 5 189.271 income taxes 5 87,693 5 16.078 5 (56.937) { See Nose < to GmadulmdEm.nmal5sasemmes. { Certain yrwr-yar amew:ts im !>cen reiraord to am6m with rhr arreniyanp rwmation. [ I 3D Adt:mur Gas and1.larru Company andSulniddrier -

e C 0 N S 0 L I D A T. E D 'S T A T E M E N T S 0F C0MM0N SHAREH0LDERS* EQUlTY Years Ended December 31,1992,1991, and 1990 Net Untcalized Premium on loss an i Common Stock Preferred Retained Marketable Total Shares Amount Stock Earnings Securities Amount in dnmands j i Balance at December 31,1989.. 120.522 5860.767 5157 51,140,264 5 - 52,001,188 .l l Net income -- 213,200 213.200 Dividends dedared Preferred and preference stock.. (40,261) (40,261) Common stock (51.40 per share) - (173,204) (173,204) Common stock issued under Public offering. 3,000 57,062 57,062 Dividend Reinvestment and Stock Purchase Plan. 1,404 27,474 27,474 Employer Savings Plan-113 2,345 2,345 - Costs associated with issuance of redeemab!c preference stock (658) (658) Change in net umealized loss on marketable securities.. (13,988) (13.988) Balance at December 31,1990, 125,039 946,990 157 1,139,999 (13,988) 2,073,158 Deferred taxes on net unrealized loss -- 4,756 4,756 Net income. 253A26 253,426 l Dividends declared .i Preferred and preference stock.. (42,746) (42,746)' Common stock (51.40 per $ hare) - (176,584) (176,584) Common stock issued under Dividend Reinvesttnent and Stock Purchase Plan. 1,515 29,747 29,747 Employee Savings Plan 136 2,516 2,516 Costs associated with issuance of I redeemable preference stock _... (199) (199) Change in net unrealized loss on marketable securities.. 13,988 .13,988 Change in deferred taxes on net unrealized loss - (4,756) (4,756) Balance at December 31,1991. 126.690 979,054 157. 1,174,095 2,153,306 Net income 264,347 264,347 Dividends declared Preferred and preference stock.. (42,247) (42,247). Common stock (51 A3 per share) - '(196,601) I196,601) Common stock issued under Public offerings - 15,000 309,966 - 309,966 Dividend Reinvestment and Stock Purchase Plan - 1,798 39,924 39,924 Emphryce Savings Plan;- 300 6,340 6,340 Costs associated with common stock split (383) (383) Fractional shares in connection with stock split.. (4)- (88) ' (88) Retirement of redeemable preference stock - 32 43 75 Balance at December 31,1992 143.784 51,334.845 5157 51,199.637 5 - 52,534.639 Ser Nem to ComululaudfinanciadStatemen Cenainpior-par amount > h,a heen reaaudso knbrm wids the currentyaaymentarwn. Balninorr Gas and Gweric Company arid Subsidiarm 31,

C0NS0LiDATED STATEMENTS 0F CAP lTALiZATION At December 31, 1992 1991 h timwawis long-Term Debt first refunding mongage bonds 4% Series, due July 15,1992.- S 5 24,726 4% Series, due March 1,1993.. 24,061 24,061 4% Series, due July 15,1994.. 29,921 29,921 9% Series, due October 15,1995. 200,000 200,000 5% Series, due April 15,1996.. 26,585. 26,585 - 8% Series, duc June 15,1997. 99,500 6% Series, due August 1,199' 24,957 24,957 5% Installment Series, due August 15,1998. 50,000 53,000 7% Series, due December 15,1998 - 28,638 28,638. 8%% Series, due September 15,1999. 22.062 8.40% Series, due October 15,1999. 100,000 100,000 8% Series, due September 15,2000-11.338 7%% Series, due April 15.2001..... 59,911. 59,919 8% Series due August 15,2001. 125,000 125,000 7% Series, due September 1,2001. 59,975 59,985 7% Series, due January 1,2002.. 49,999 49,999 7% Series, due July 1,2002.. 125,000 7% Series, ducJuly 1,2002.. 49,985 49,985 5% Installment Seties, due July 15,2002 12,500 12,500 7% Series, due September 15,2002. 49,990 49,990 8% Scries, due February 1,2004. 74,983 74,983 6.80% Series, due September 15,2004.. 20,000 20,000 8% Series, due September 15.2006. 74,960 74,960 I 7%% Series, due January 15,2007 125,000 8% Series, due September 15,2007 75,000 75,000 9% Series, due July 1,2008. 12,718 29,995 6.90% 1nstallment Series. due September 15,2009.. 55,000 55,000 9% Series, due March 1,2016.. 98,000 98.000 l Total first refunding mangage bonds -- 1,552,186 1,480.104 Othet long-icrm debt j Ivan under unsecured credit facilities.. 175,000 i Medium-term notes, Series A. 69,500 100,000 ] l Medium-term notes Series li 100,000 63,100 l Medium-term notes, Series C.. 138,050 9% Notes, due May 1,1993. 100,000 100,000 Floating rate notes. duc October 15,1995 Series 11 - 100,000 Pollution control loan, due July 1,2011 36,000 36,000 Port facilities loan, due June 1,2013..... 48,000 48,000 Adjustable rate pollution controlloan, duc July 1,2014.. 20,000 - 20,000 Economic development loan, due December 1,2018. 35,000 35,000 Total other long-term debt. 546,550 677,100 long-tenn debt of Constellation Companies Mortgage and wnstruction loans and other collateralized notes 7.75%, due December 16,1995.. 5,575 Variable rates, due tbmugh 1998 160,572 181,532 10.31% due August 1,1997 18,877 8.5% due May 1,2001. 3,300 Industrial park facilities bonds.. 750 Imans under revobing credit agreements... 152,000 167,330 cmtinuedim page 33 32 Add,mnr Gu andLktr:: Cwgumy andSubndiaries

1 C0NS0LIDATED STATEMENTS 0F CAP lTALIZATION 'i At December 31 1992 1991 l hodenands Unwured notes 830% due April 12,1993.. 5 40,000 5 70,000 .{ .8,35% due August 28,1995 - 20,000 20,000 8.71% due August 28,1996.. 23,000 23,000 8.93% due August 28,1997 52,000 52,000 8.23% due October 15,1997-30,000. 8.48% duc October 15,1998.. 75,000 8.73% duc October 15,1999 15.000 Totallong.ierm debt of Consteli.aion Companies 576.447 533,489 Unamorti7ed discount and premium.. (8,463) (7,571) 'i Current portion oflong-term debt. (289.770)' (293.007) Total long-term debt. 2,376,950 2,390.115 Prcierred Stock Cumulative,5100 par value, 1,000.000 shares authorimi Series 13,4H% 222,921 shares outstanding, callable at $110 per share... 22,292 22,292 Series C,4% 68,928 shares outstanding, callable at $105 per share. 6,893 6,893 Series D, 5.40% 300,000 shares outstanding, callable at 5101 per share.. 30,000 30.000 Total preferred stock... 59,185 59,185 Preference Stock Cumulative. 5100 par value,6,500,000 shares authotlied Redeemable preference smck 7.50% 1986 Series. 485,000 and 500,000 shares outstanding, respectively. Callable 7i at 5105 per share prior to October 1,1996 and at lesser amounts thereafter..-., 48,500 50,000 6.75% 1987 Series,485.000 and 500,000 shares outstanding,inpectively. Callable 50,000 at 5104.50 per share prior to April 1,1997 and at lesser amounts thereafter.. 48,500 6.95% 1987 Series,500,000 shares outstanding 50,000 50.000 7.64% 1988 Series,500,000 shares outstanding, callable at $107.64 per share prior to July 1,1993 and at lesser amounts thereafter.. 50,000 50.000 7.80% 1989 Series, 500,000 shares out. standing., ,. ~.. 50,000 50.000 8.25% 1989 Series, 500,000 shares outstanding., 50,000 50,000 8.625% 1990 Series,650,000 shares outstanding 65,000 65,000 7.85 % 1991 Series. 350,000 shares outstanding. 35,000 35,000 Current portion ofredermable preference smck - 0,500) t 1,500) Total redeemable preference stock. 395,500 398,500 ..m. Preference stock not subject to mandatory redemption 7.88 % 1971 Series. 500,000 shares outstanding, callable at $101 per share.. _ 50,000_ 50,000-7 75% 1972 Series,400,000 shares outstanding, callable at 5101 per share

40.000 40,000 '

7.78% 1973 Series,200,000 shares outstanding, callable at $101 per share - 20,000 20,000 - l Total preference stock not subject to mandatory sedemption. 110,000 110.000 Common Shareholders' fx]uity 143,783,581 Common stock-without par value-175,000,000 shares authonzed; and 126,689,373 shares issued and outstanding at December 31,1992 and 1991, respectively. (At December 31,1992,166,893 shares were resermi for the Employer Savings Plan and 1,566.187 shares were ro,erved for the Dividend Reinvestment and Stock Purchase Plan _).' -1,334,845 979,054 Premium on preferred sun k - 157-157' Retained earnings. 1,199,637 1,174.095 'l Total common shareholderi equity 2,534,639 2,153,306-Total Capitalization,. 55,476.274 - 55,111,106' sa &n to Gmdiurd!wwialsaarminu I nainmoor Gas and&ar Gampo andsuladiaan 33

l ~ C0NS0LIDATED STATEMENTS 0F i N_C 0 M E T.A.X-E S Year Ended December 31, 1992 1991 1990 Dollaramounts in thousands Income Taxes Current $ 85,287 5 61,047 $ (33338) Deferred Tax effect of temporary differences 44,975 23,605-Income taxes secoverable through future rates (18,061) (12,625) Tax effect of normalized timing differences 77,189 Deferred taxes charged to expense-26,914 10,980 7 74189 Investment tax credit adjustments- - (8.854) ' (6,225) (4,450) Total income taxes 103347 65,802 39,401 Cumulative effect of change in the method of accounting for income taxes increase in deferred tax liability- - 286,787 Amounts recorded on the balance sheet (267,042) Amount recognized in income. 19,745. income taxes included in cumulative effect ofchange in the method of accounting for unbilled revenues (19,449)' Income taxes per Consolidated Statements ofIncome 5103 347 5 85.547 5 19.952 Reconciliation ofIncome Tares Computed at Statutory Federal Rate to Total Income Taxes Income before income taxes (including cumulative effect of accounting changes).. 5367,694 $319,228 5252,601 Statutory federal income tax rate 34 % 34 % 34 % income taxes computed at statutory federal rate 125,016 108,538 85,884 Increases (decreases) in income taxes due to Depreciation differences not normalized on regulaied activities 8,955 7,008 4301 Allowance for equity funds used during construction _ (4,723) (8,023) (18,140)- Amortization ofdeferred investment tax credits (8,854) (9344) (7,337) - Tax credits flowed through to income .(804) (1,335). (15.283): Dividends received deduction (1,635) - (2,108) (4352). Equity in earnings ofSafe Harbor Water Power Corporation (1,451) (1,492) (1,666). Loss on disposition of assets (3,726) (3,295) (1,892) Reversal of deferred taxes on nonregulated activities. (19,745) Amortization ofdeferred tax rate differential on regulated activities (7,365) (5,024) - (3,062) Other - (2,066) 622-948 Totalincome taxes - $103347 5 65802 -S 39 401-Effective federal income tax rate-28.1% 20.6% 15.6 % At December 31, I992 '1991-In tinmutes Deferred Income Taxes Deferred tax liabilities Accelerated depreciation-- $ 714,019 $ 653,713 - Allowance for funds used during construction - 199,577 197,118 income taxes recoverable through future rates. 73,759 67,618 Deferred fuel costs- = 61,741 97,587 Ineraged leases. 33,867. 35,005 Percentage repair allowance. 33,367 -- 32,031 L Other 95,963 ' 79.747 L Toral deferred tax liabilities-- 1,212,293 1,162,819 h' Deferred tax assets .Ahernative minimum tax - 72,189. 71,331 - Deferred irivestmeni tax credits 56,337 - . 59,310s Other 100,233 93.619 Total deferred tax assets. 228,759 '224,260 Deferred income taxes per Consolidated Balance Sheets - 5 983,534 $ 938,559 - See krs so CamelsdareJ FinandalStasementt Cmaiepriorpar amounts hate been m:ared to mfrem wisinhe cumwtyear5presensation. 34 Rdrimere Gas andDectric Chmpany andSubsidiarier. s ______________.m i.__._.....___ _ __.m..

NOTES T0 C0NS0LiDATED FINANCIAL STATEMENTS NOTE

1. SIG NIFIC A N T ACCOUNTING POLICIES Nature of the Business Revenues fmm interchange sales of dectricity are indaded Baltimore Gas and Electric Company (BG&E) and Subsidiaries in the electric fuel rate fonnula as a reduction of dectric fuel and (collectively, the Company) is primarily an electric and gas utility purchased energy costs and, accordingly, do not contribute to serving a territory which encompasses Baltimore City and all or income frorn operations, pan of nine Central Maryland countics. He Company is also engaged in diversified activities as funher descrhed in Note 3.

Sub. "iect to the approval of the Maryland Comm.ission, the Principles of Consolidation of fuel used in generating electricity and the cost of gas sold may The consolidated fmancial statemenu include the accounts of he recovered through zem-based electric fuel rate (see Note 14) BG&E and all subsidiaries in which BG&E owns direcdy or and purchased gas adjustment danses. To the extent actual fuel indirectly a majority of the voting stock. Imercompany balances costs ditTer from revenues under the dauses, BGRE defers the and transactions have been climinated in consolidation. Under fuel co,is and accumulates them on the balance sheet to be this policy, the accounts of Constdlation Holdings, Inc. and its recovered from or reftmded to customers in future periods. subsidiaries (collectively, the Constellation Companies) and As implemented by the Maryland Commission, the electric BNG, Inc. are consolidated in the fmancial statements, and Safe fuel rate formula is based upon the latest twenty-four-month Haibor Water Power Corporation is reponed under the equity generation mix and the latesi three-month average fuel cost for method. Corporate joint ventures, partnerships. and affdiatal each generating unit. Effective June 1,1990, the Maryland companies in which a 50% or less voting interest is held are Commission modified the dectric fuct rate formula and ordered accounted for under the equiry or cost methods. Investments in BG&E to indude a minimum levd of nudcar generation in its power generation systems and certain 6nancial investments twenty-four-month generation mix. The fuel rate does not generally represent ownership imerests of 20% to 50% and are change unless the calculated rate is more than 5% above or accounted for under the equity method. Diversified activities' below the rate then in efTect. In addition, BG&E recovered revenues and interest expense for 1991 and 1990 have been deferred electric fuel costs of 514,798.000 and $17,179,000 in restated to diminate certain intercompany transactions which 1991 and 1990, respectively, through a surcharge to the electric were not previously eliminated. fad rate which expired in October 1991. The purchased gas adjustment is based on recent annual Regulaimn of Utility Operan. ons volumes of gas and the related current prices charged by BG&E s utdity operations are subj.ect to regulan.on by the BG&E's pas suppliers. As authorized by the Maryland Commis-Public Service Commission of Maryland (Maryland Lomma-smn, any deferred underrecoven. -es or overrecoveries of won). The acwunting poh..cies and practices used m. the determi-dd p as fm & mde mmbs ended November 30 nation of service rates are also generally used for financial each year are charged or endited to cusmmers over the ensidng reporting purposes in accordance wah generally accepted adm accounting principles for regulated industries. Under these gc imderrecovered costs deferred under the fucl dauses accounting principles, certain utility expenses and credits ,, g;_ normally reflected in income are deferred on the balance sheet as At December 31, reguhaory assets and liabibnes and are recognized m mcome as 3997 j9g the related amounts are induded in service rates and reawcred g g. from or reft.nded to customers in utility uvenues' EM Utility Revenues Costs deferred = $210,483 5322,064 EITective January 1.1990, BC&E chanyd its revenue recognition Reserve for possible pohcy to provide for the accrual of revenue lot service rendenxi disallowance of replacement but unbilled as of the end of each month. Prior to 1990, wvenues energy costs (see Note 14).. (35,000) (35,000) were recognir.ed at the time customers' meters were read on a Net dectric-175,483 287,064 r monthly cyde basis. He new policy was adopted in order to Gas. 6,108 143) provide a better matching of revenues and expenses and i Tel - M8M91 5287.021 conform with the predominant practice within the utility industry. This change in policy rauhed in an incre se in 1990 net At December 31,1992 and 1991, the amourit of dectric inmme of 531,675,000, or 26c per common share. This increase deferred fuel costs included in rate bne by the Maryland consisted of an increase of $37,754,000, or 31c per common Commission for ratemaking purposes was $71795.000, shaic, attributable to the cumulanve effect of the change at January 1,1990, panially offset tw a decrease of 56.079,000, or 5c per common share,in the December 31,1990 accrual hdnmmr Gas and Hectric Gunpur andMudiaria 35

U

1. ]

] Income Taxes The investment tax credit (ITC) associated with 11G&E's The Company has adopted Statement of Financial Accounting regulated utility operations is deferred and amortized to income Standards No.109, "Anuunting for income Taxes," retroactive ratably over the live of the subject property. ITC and other tax to January 1,1991. Statement No.109 supersedes Statemem of credits associated with nonregulated divenifed business activi-Financial Accounting Standards No. 96, which the Company. ties other than leveraged leases are flowed through to income. As adopted in 1991. Both Statement No.109 and Statement of December 31,1992, the Company had energy a'nd other tax No. 96 require the use of the liability method of accounting for credit carryforwards of 53,473,000 which expire in the years income taxes. Under the liability method, the deferred tax 2005 through 2007. liability represents the tax effect of temporary differences between BG&E's utility revenue fmm system sales is subject to the the financial statement and tax bases of assets and liabilities and is Maniand public service company franchise tax in lieu of a state measured using presently enacted tax rates. The portion of income tax. The franchise tax is induded in taxes other than 13G&E's deferred tax liability applicable to utility operations income taxes in the Consolidated Statements ofincome.' which has not been reflected in current service rates represents Deferred income taxes base not been provided on the : income taxes recoverable through future rates and has been $ 17,256,000 ponion of the Company's investment in Safe recorded as a regulatory asset on the balance sheet. Deferred Harbor Water Power Corporation representing accumulated income tax expense represents the net change in the deferred tax undistributed earnings as of December 31,1992. In the future, liability and regulatory asset during the year. Income taxes recov-if such tmdistributed earnings were remitted, the Company-etable through future rates and a corresponding ponion of the would incur income taxes of $ 1,173,000. deferred income tax liability are excluded fmm rate base by the Inventory \\,aluau.on Maryland Commission for raremak.mg purposes. As a result of n.s effect on nonregulated acu...vmes, the cumu-Fuel stocks and materials and supplies are generally stated at lative effen of the change in the method of accounting for ""*E**' income taxes resulted in an increase in 1991 net income of Real Estate Projects $19,745,000, or 16c per common share, due to the reversal of Real estate projects consist of the Constellation Companies' deferred income taxes on nonregulated activities accrued in prior investment in rental and operating properties and propenies years at tax rates in excess of the presently enacted tax rate. As under development. Rental and operating properties are held for required by Statement No.109, effective January 1,1991, the investment. Properties under development are held for future Company restated its utility plant in service balance to reclassify development and sale. Costs incurred in the acquisition and the deferred taxes implicit in the allowance for funds used active development ofsuch propenies are capitalized Rental and during construction accrued prior to 1991 under the net-of-tax operating properties and properties under development are method to the pre-tax equivalent. The combined effect of stated at cost unless the amount imested exceeds the expected adopting Statement No.109 and refining certain portions of the amounts to be recovered through operations and sales. In 'th~ se e original quantification of the effect of the liability method of cases, the projects have been written down to the amount esti-accounting for income taxes resulted in an increase in utility mated to be recoverable. plant of $40,531,000, an increase in income taxes recoverable I"**'"""** through future rates of $10,724,000, and an increase in deferred taxes of $51,255,000. M rketable equity securities are stated at the lower of aggregate mt r market valun and other securities are stated at cost. Prior to 1991, defened income taxes were generally provided on all timing difTerences between revenues and There appropriate, cost reflects amonization of premium and - . expenses for financial statement and income tax purposes except dscount mmputed n a sumgb4ne bans. Gams and losses on for timing differences pertaining to accelerated depreciation on the sale of the Constellanon Compam,es, mvestment securities ' pre-1976 property additions. are included m revenues from diversified acuv,nes on the i The 1992 current tax expense consists solely of regular tax. I"*"#f'***"t and are recognized upon reahzauon on a. . The 1991 current tax expense consists of a regular tax of spMfic idenu.ficau.on basis. 546,844,000 and an alternative minimum tax fAMT) of Utility Plant Depreciation, and Decommissioning 514,203,000. The 1990 current tax refund consists of a regular Utility plant in service is stated at original cost, which includes tax refund of 565,130,000 reduced by an AMT of 531,792.000. material, labor, construction overhead costs, and, where applic-The regular tax refund represents principally the tax benefit of. able, an allowance for funds used during construction.- net operating losses incurred in 1990 which have been carried Cimstruction work in progress, plam held for future use, and back to recover taxes previously paid in 1987 at the federal tax nuclear fuel are stated at cost. rate of 40% ne AMT liabilities can be carried forward indefi-Additions to utility plant and replacemems of units ofprop-nitely as tax credits to future years in which the regular tax erry are capitalized to utility plant accounts. The original cost of liability exceeds the.AMT liability. As of December 31, 1992, pbnt retired is removed fmm utility plant, and such cost, plus this carryforward totaled 573.206,000. removal cost, less salvage value, is charged to the accumulated : 36 . BalnmowGas adElemcCompnpdkdnidiaria :

.e pmvision for depreciation. Maintenance and repairs of property by the difTerence between a pre-tax and ner-of-tax AFC race are s and replacements ofitems of property determined to be less recorded as a component ofincome tax expense rather than as a than a unit of pmpeny are charged to maimenance expense. In reduction of AFC. The pre-tax r.ae of 9.94% is equivalent to connection with the adoption of Statement No.109, the the 8.69% after-tax AFC rate. Thus, the use of a pre-tax AFC ~ Company restated its utility plant in service balances effective rate chies not affect net income.. January 1.1991 as described above. EfTective January 1.1992, the Maryland Commission Depreciation is generally computed using composite authorized the accrual of AFC on all electric, gas, and common straight-line rates applied to the average investment in dasses of utility construction pmjects with a construction period of more J depreciable property. The composite depreciation rates by class than one month. Prior to 1992. AFC was accrued on major. of depreciable pmpeny are 2.80% for the Calven ClitTs Nudcar dectric projects only. Power Plant,2.75% for the Brandon Shores Power Plant, The Constellation Companics capitalize interest on quali-3.26% for other electric plant 3.12% for gas plant, and 402% fying real estate development projects. Capitalized interest-for common plant other th.m vehides. Vehides are depreciated totaled $13,800,000,520.953.000, and $25,748.000 in 1992, based on their estimated useful lives. 1991, and 1990, respectivdy, and is induded as a reduction of Nudear decommissioning costs are accrued by and recov-imerest charges in the Consolidated Statements ofincome. ered through a sinking fund methodology. In its December d 1990 rate order, the Maryland Commission granted BG&E ear fue expend.nures am espaaM and anwnW as a u additional revenue to provide for an increase in its nudcar decommissioning accrual in order to' accumulare a reserve of mnponan f aaual fuel ma based on the energy produced - mut eo t fuel. Fees for the future disposal of spent fud. ' $275 million in 1989 dollars by the end of Calven Cliffs' service life, adjusted to reflect expected inflation. The reserve will are p id quarterly to the Depanment of Energy and are accrued - provide fmancial assurance that decommissioning funds in an bad on the kilowatt-hours or electncny generated. Nudear fud expenses am subea m mery mugh ae cleanc fuel rate. - amount at least equal to a Nudear Regulamry Commission (NRCbprescribed minimum level will be accumulated over the Deferred Nudear Expenditures remaining service life of the Calvert Cliffs plant. The total Deferred nuclear expenditures represent the net unamonized decommissioning reserve of 57/,808,000 and $64,310,000 at balance of certain operations and maintenance costs which, in December 31,1992 and 1991, respectivJy, is indaded in accu-accordance with orders of the Maryland Commission, have been mulated depreciation in the Consolidated Balance Sheets. In defened, indaded in rate base, and are being amonized over the accordance with NRC regulations, BG&E has established an remaining life of the Calvert Cliffs N_udear Power Plant. These. external decommissioning trust to which a portion of decom-expenditures consist of costs incuned from 1979 through 1982 - missioning costs accrued have been contributed. for inspecting and repairing seismic pipe supports, expenditums - incuned fmm 1989 thmugh 1992 associated with nonrecurring - Allowance for Funds Used During Construction and Capitaliwd Interest phases of cetain nudear sperations pmjects, and expendimres The allowance for funch used during construction (AFC) is an nicurred dun,ng 1990 for investigating leaks m the pressurizer heater sleeves. accounting procedure whereby the cost of funds used to fmance utility construaion projens is capitalized as pan of utility plant Deferred Fnergy Conservation Expenditures - on the balance sheet and is credited as a noncash item on the Deferred energy conservation expendi'mres represent the net income statement. The cost of hormwed and equity limds is unamonized balance of cenain operations costs which, in' accor- . segregated between interest expense and other income, respec-dance with orders of the Maryland Commission, have been tivdy. BG&E recovers the capitalized AFC and a return thereon - deferred, included in rate base, and are being amonized over five after the related utility plant is placed in service and induded in _ years. These expenditures consist oflabor, materials, and indi. Ldepreciable assets and rate base, AFC does not represent taxable rect costs associated with the conservation pmgrams approved - - income, and the depreciation of capitalized AFC is not a tax-by the Maryland Commission. deductible expense. During the period Januarv 1,1990 thmugh December 17, feng-Tenn Debt 1990 an after-tax'AFC rate of 8.80%, compounded annually, The discount or premium and expense of issuance assoc,ated _- i ~ was ap~olied to all major dectric projects. Effective December.17, with long-term debt are deferred and amortized over the lives of - 1990, a' rate order of the Maryland Commission reduced the the respective debt issues. Gams and losses on the reacqu,m, ton afier-tax AFC rate to 8.69%, compounded annually. of debt are amonized over the remanung on,gmal hves of the, I"*"*"'""* Effective January 1,1991, the Company began accruing. . AFC at a pre-tax rate of 9.94%in connection with the adoption Cash flows of the liability method of accounting for income taxes _urider For the purpose of reporting cash flows, highly liquid invest-Statement No.109, Under Statement No,109 which pmhibits mems purchased with a mamrity of three months or less are L net-of-tax accounting and reporting. income taxes represented ccmddered to be cash equhalents. - [Rdeimm Gu andDwic Gmgar omfSukidwin . 37 L i'

{. s f - 7 0 N O T E 2. S E G M E N T IN F O R M A110 N Year Ended December 31, i 1992

1991, 1990 in dwusaneh ii

' Electnc Revenues $1,967,923 51,994,525 $1,712A53 - Income from operations-441,784-444,530 1264,814 l Income from operations net ofincome taxes 350A29 352,385 233,863~ Depreciation 191,970 173,349, 146,188 g Cumulative effect of change in the method of accounting for unbilled revenues.. 30,173 ~~ Construction expenditures (including AFC) - 346,728 406,008 482,529 Identifiable assets at December 31 5,063,137 4,970,543: L 4,761,542 Gas Revenues 5 402,937 ' $ 358,195 5 373A19 Income fmm operations = 45,552 35,607 35,919 ~ Jncome from operations net ofincome taxes 37,514 30,945 30,654 Depreciation 21,364 18,896 17,243 Cumulative effect of change in the method of accounting for unbilled revenues 7,581' Construction expenditures (including AFC). 42,688 50,236 52,787 - Identifiable assets at December 31 - 476,579 453,578 438,809 Diversified Acthities Revenues 5 120A83 $ 96,133 $. 92.240 - Income from operations 48,009 9,051 23,196-Income from operations net ofincome taxes 44.055

20313 39A60 -

Depreciation - 10,149 . 9,019- '7,155 Cumulative effect of change in the method of accounting for income taxes ; 19,745 Identifiable assets at December 31 1,023315 1,001,313 '1,041 365 Total Revenues - $2A91343 $2A48,853 ' $2,178,112 J Income fmm operations. 535,345 489,188 323,929 Income from operations net ofincome taxes, 431,998 403,641 303,977 - Depreciation 223A83 201,264 170,586 ' Cumulative eficci of change in the method of accounting for income taxes 19.745-n Cumulative effect'of changein the method of accounting for unbilled revenues.. H' 37,754, Construction expenditures (including AFC) - 389A16 456,244 - 535316-Identifiable assets at December 31 6.563,031 6,425A34 - 6,241,716-Other assets at December 31 811,926

712,555 468,659 -

Total assets at December 31. 7,374,957-7.137,989 6,710,375 Certain paer-year ameuw imr been meatedu anform aid, rhe currentyeaaymensathm. - N O T E 3. SU B SIDI ARY IN FOR M ATION . Diversified activities consist of the operations of Constellation development, ownership, and operation of power generation Holdings, Inc. and its subsidiaries and BNG, Inc. - systems; and financial investments.. ' Constellation Holdings, Inc., a. wholly owned subsidiary, BNG, Inc. is a wholly owned subsidia:y which invests in? holds all of the stock of three other subsidiaries; Constellation natural gas reserves and obtains gas from nontraditional murces. - Real Estate Group, Inc., Constellation Energyiinc..' and BG&E's inver,tment in Safe Harbor Water Power Corpora- - Constellation investments. Inc. These companies are engaged in tion, a pmducer of hydroelectric power,is srported under the; i - real estate development and ' ownership ofsenior living facihnes: equny method. This investment represents two-thirds of Safe j '38 . Balumore Gas and1harie Company andSubidiaad L

r y ae j L Harbor's total capitalitock. induding one. half of the voting 55.9 million) and results of operations (contribution ofless dun. stock, and a two-thirds internt in its retained earninp. I e per-share to the Compan/s 1992 carninp) are inmnaterial to .The following is condensed fmancial information for the amsolidated financial staternems. The condensed financial Considlation Holding, Inc. and its subsidiarin and Safe Harbor information for the Omstellation Companics does not reflect the Water Power Corporation. Similar infonnation is not prnemed elirnination ofintercompany balances or transactions which are for BNG, Inc. as its financial podtion (sharrholder's equiry of eliminated in the Companyi consolidated financial statements. 1992 1991 1990-h rhuum4 naj,1jm/wr erauson Considiation liolding,Inc. and Subsidiaries Income Staicments Revenun Real estate projects 5 76,582 5 75.205 5 73,237 - Power generation systems a 28,084 17,732 3,328 Financial invntmenis.. 21.485 8.059 20,160 Total revenues.. 126,151 100,996 96,725 Expenws other than interest and intome taxes.. 77,872 91.848 73,537 lacome from operations. 48,279 9,148 23,188 Minority interest. 718 3,550 952 Interni cxpense... -.. 30,103 32,938 27,895 incorne tax expense (benefir).. 3.637 (9,005) - (17,859) - Cumulative etfcct of change in the method of accounting for inmme taxes. 19,745-Net income 5 15,257 5 8,510 5 14.104 Conuibution to the Companyi carning per share of common stock -- 5 .11 5 .07 5 .11 - Balance Sheets Current assets.. . 5 29,899 5 -20,463 5! 71,837 Noncurrent aswes.. 990,273 976.179 964,095 Total assets,- 51.020.172 5 996,642 51,035.932: Current liabilisin. 5 113,404 5 285,130 5 439.687 Noncurrent liabilities.. 611,370 431,370 343,602' Shareholderi equity. 295,398 280.142 252.643-Total liabilities and diarcholder's equity. 51,020J 72 5 996.642 51,035,932 Safe llarbor Water Power Corporation income Statemems Revenues -- 5 28,367 5-28.059 5 ' 28,793 Expenses other than interest and income taxes. 13.879 13.468 13,163 - Income from operations 14,488 14,591 15,630 Odict income.. '49 428 721 Interest expense.. 4,367 4,695 4,702 Income taxes..- 3.970 3.742 4,299 Net income - 5 6,400 5 -6,582 5 7.350 BG& E's equity in carning 5 4,267, 5 - 4,388 5 4.900 Dividends paid to BG&E by Safe Harbor Water Power Corporation.. 5 4,340-5 4.570 5-11,084 Ikdance Sheets Current assen. 5 12,188-5, 13.517-5 10,803 Noncurrent aucu.- 117,869' ' 120A72 122,044 Total assets... 5 130.057 5 '133.989 5 132.847 - Currem liabilities 5 - 3,260 5 3A09 .5-3,798 Noncurrem liabilities 75,532 79.235 '.77,686 Shairholders' equiry - 51.265 51,345 51,363 Total liabilitin and shareholdcrs' equiry 5 130,057 5 133,989 5 132.8471 BG&E's investment. 5 34,176 5 34.229 5 ' 34,241-

Mihwer Ge ordWrk Compairp adSul.whkin 39

p NOTE

4. RE AL EST ATE PROJECTS AND flN AN CI AL IN VEST M E NTS Real estate projects consist of the folk > wing investments held by Financial investments consist of the following investments held the Constellation Companies:

by the Considlation Companies: At December 31, At Deo-mber 31, 1992 1991 1992 1991 In shomand, . In dvawuh Rental and operating properties (net Marketable equiry securities.- 5 25.304 5 38,817 of accumulated depreciationL 5227,412 - 5232,154 Other securities. 8,142 16,767 Propenies under development.. 231,856 213A39 Financial limited pannenhips 41,076 _67,269 Other real estate ventures. 2.774 3.068 Insurance companies 93,048 85,307 Total.. . 5462,042 5448,661 Ieveraged leases 39,441 40.098 Total $207,011 5248.258 in 1991, a subsidiary of Constdlation Holdings, Inc. recog-nized a loss of 59.988.000 to write down the carrying value of in 1991, a subsidiary of Constellation Holdings, Inc. recng-cenain operating propenies and propenies under devdopment nimd a k>ss of $10,503,000 to write down the carrying value of to reflect the depressed real estate and economic markets. fmancial investments to reflect previously unrealized losses on in July 1990, a subsidiary of Constellation Holdings, Inc, cenain marketable equiry securities. Substantially all of the securities obtained control of several real estate pannerships which had written down wcw subsequendy sold. A subsidiary of Constellation previously been accounted for under the equity method. Holdings, Inc. aho recognized a loss of 53.071,000 on two financial Accordingly, the financial statements reflect assets totaling limited pannerships that were adjusted to mflect market value when 5155,635,000, induding $154,182,000 of real estate property, the pannerships were redassified as shon-term investments. and liabilities totaling 576,277.000, induding 574,734.000 of As of December 31,1992, gross unrealized gains and losses long-term debt, in place of the previous $79,358,000 equiry applicable to marketable equiry securities totaled 51,358,000 and investment. 5232.000, respectivdy. Net scalized gains (losses) from financial investments induded in net income totaled 59,829,000 in 1992, 5(11,593.000) in 1991, and $1.395,000 in 1990. NOTE

5. JOINTLY OWNED ELECTRIC UTILITY PLANT BGRE owns an undivided interest in the Keystone and Cone-owned properties at December 31,1992:

l maugh electric generating plants located in wntern Pennsyl-Tranunisson h" *"c C""cau"O line vania, as well as in the transrnission line which transpons the Dolid" d="a i" d=audi plants' output to the joint owners' servin terrimries. Financing and accounting for these properties are the same as for wholly ownership interest.. 20 99 % 10.56 % 7.00 % owned utility plant. BG&E's share of the direct expenso and Utility plant in service.. -._.. 584,104 544,677 51,486 assets and liabilities of the joint property is induded in the Accumulated depreciation.. 25.639 16.725 715 corresponding sections of the Consolidated Statements of Construction work in income and Consolidated Balance $hects, progress.. 2.230 12.801 The following data represent BG&E's share of the inintly 2 i NOTE 6. CHANGES IN COMMON STOCK j 1 On Jantury 17,1992, the lkiard of Directors approved a three-ment was approved at the annual shaicholders meetmg on - for-two split of the Company's common stock, subject to April 15,1992. The stock split was effected by the distribution of approval by the shareholders of an amendment to the chaner of one additional share for each two shares owned by shareholden j the Company to increase the authoriwd number of common of record on April 23,1992. All share and per-share amounts ' 1 shares fmm 100,000,000 to 175,000,000 shares. This amend-have been restated to give retroactive dTect to the stock split. I i i ti$11MMr 044 GNY f(MC (GM{WiiGHY.NfMEkidt$6 m

m ,m. . - ~.- y j J 7 t ?*[ q 1 'N'O 'T E ' 7. S H O R tit E R M B D R R O WIN G S-Information concerning commerrial paper notes and lines of comperaating balances which have no withdrawal restrictions. i Lcredit is set fonh below In support of the lines of credit, the Borrowing under the lines are at tlye banks' prime rates, base Company pays commitment fers and, in some cases, maintains interest rates, or at various money market rates. .l 't 1992 1991 '. 1990 l Dollar anwunrs on alvusands ,lj BG&E's Commercial Paper Notes $159.500 5163,700? Borrowing outstanding at December 31, 5 11,900 - Weighted average interest rate of notes outstanding at December 31 3.62 % 4.75 % _$225,000 : 7.91 % Unused lines of credit supponing commercial paper notes at December 31.. 5203,000 5303.000 3 Maximum borrowing during the year.-. 5393,650 5336,200 - $344,200 ? - Average daily borrowing during the year (a) 5 98,892 . 5210,883-5218.642. Weighted average interest rate for the year (b). 4.79 % 6.08 % 8.29 % Constellation Companies' Lines of Credit Borrowings outstanding at December 31 5 5 52,670 5 64,000 Weighted average interest rate of borrowings outstanding at December 31.. 5.94 % - 8.89% ; Unused lines ofcredit at December 31 5 5 8,000 5 10,000 .y Maximum borrowings during the yea. 5 60,670 5 75.000 5 64,000 L 't Average daily bormwinp during the year (a) = 5 31,773 5 61,860' 5 38,932 1; Weighted average interest rate fm the year (b)z 6.01 % 7.19 % 8.93 % j (a) The sum ofdadlar day afoumandmg borrowing; dividd br dx num/wr ofdars in dwpriod J Gu kalin:erca narurdd,aring dwprioddivided by average daih tw"un'ingx

f

' N O T E 8. L O N G-T E R M' D E B T First Refunding Mortgage Bonds of BG&E average of the unborrowed portion 'of the commitment.' At .{ Substantia!!y all of the principal pmpenics and franchises owned December 31,1992. BGNE had no bormwing u_nder these : by BG&E, as wil as the capital stock of C(mstellation Holdings, revoleing credit agreements and had available $175 million of L ' l inc, Safe Harbor Water Power Corporation, and BNG, Inc., are unused capacity under these agreements. subject to the lien of the monpge under which BG&E's - The Medium-term Notes Series A mature at various dates outstanding Fint Refunding Mortgage Ikmds have been issued. fmm January 1993 through February 19% The weighted average On August I of each year. BG&E is required m pay to the interest rate for notes outstanding at Decemla 31,1992 is 7.67% , monpge trustee an annual sinking Timd payment equal to 1% The Medium-term Notes Series B mature at various dates of the largest principal amoum of Mongage Bonds outstanding fmm July 1998 t'ucugh September 2006. The weighted average under the mortpge during the preceding twelve months. Such interest rate for notes outstanding at December 31,1992 is 8.43%1 funds are to be used, as provided in the mortyge, for the The Medium-term Notes Series C mature at various daies i purchase and retirement by the trustee of Mongage Bonds of fmm June 1996 through Jiine 2003. The weighted average any series other than the Installment Series of 1998,2002, and interest rate for notes outstanding at December 31,1992. .l 2009, the 9%% Series of 1995, the 8.40% Series of 1999, the is 7.31% 1 8%% Series of 2001, the 7%% Series of 2002, the 6.80% Series The principal amounts ofInstallment Series Monpge 1 of 2004, and the 7%% Series of 2007. Purchases may be made Bonds payable each year are as follows: - ] ' by the trustee in the open market and/or through responses r B s M )ue Bi.nM)ue' IWis liue invitations for sealed proposals if purchases are possible at or Year N 2me' 20n a bdow the applicable redemption price, or directly through the 1 swumnd3 redemption provisions m which the Mongage Bonds are subject 1993 . 5 3,000 '5 420 if purchases at a more favorable price are not possible. BG&E . 3994 3,ogo' 439. may purchase outstanding Monpge Bonds from time to time. 1995. 3,000 605 1 ' and may submit its sealed proposal for the sale of such Mortpge 1996 and 1997. 4,000 605 ' Bonds to the trustee for the sinking ftmd' 1998,.- 33,000 690 JOther long-Term Debt of BG&E 1999 '690 BG&E maintains, evolving credit apeements pmviding for 2000 and 2001. 865 borrowing ofup to a total of 5175 million. These agreements 2002= 6,725 - ~ expire at various times during 1994 and 1995. 'Under the serms 2005 through 2008 5 3,250 - of the agreements' BG&E may, at its option, obtain loans at 2009.. .,42,000.. j

various interest rates. A commitment fee is paid on the daily l

ikin oriGas andIlearir Compnp andSJ,sidmrg 41' I m ii !.]

l , c; -!q -3 l l long-Term Debt of Constellation Companies . In October 1992, the Constellation Companies ck> sed a prhare j The mortpge and construction kuns and other collateralized notes. placement of $120,000,000 of unsecured serial notes _ with several: l have varying terms. Of the 5160,572,000 of variable rate notes, insurance companies. The pmweds wen-used to pay down amounts =! . 568.028,000 rtquircs monthly interest only payments with vanous bormwed under the new wvolving bank debt fiacility discussed above - j maturities from September 1995 through February 1996, and and a 556,000,000 short-term bank k>an. The notes mature in 592,544,000 requires monthly payment of principal and interest accordance with the following schedule: 530,000,000 in 1997, 1 with varimis maturities fmm April 1993 through January 1998. The 575,000.000 in 1998, and 515,000,000 in 1999. ~ j 55.575,000, 7.75 % mortgage note and the 53,300,000, 8.5 % Weighted Average interest Rates for Variable' Rate Debt iI mortgage note require monthly principal and interest payments The weighted average interest rates for variable rate debt during ' .I duuugh Dewmber 1995 and May 2001, respectively. 1992 and 1991 were as follows: l Constellation Companies renegotiated its existing .1992- '1991 j 5261,000,000 of bank debt facilities effective May 29,1992. BG&E-A These facilines were combined into one new remiving bank debt loans under unsecured credit facilities.. - % !S.81% facility with an aggregate amount available of.5282,170.000. loans under revolving credit agreements 4.23 - 6.93 i This facility permits kuns at various interest rates. Commitment Floating rate notes - - ~. 8.00 - l fees are paid on the daily average of the unborrowed portion of Floating rate notes Series 11 7,90

7.92 the commitment. He amount available under this facility was Pollution control loan..

2.90. 4A2 1 decreased to $226,170,000 by a scheduled 556,000,000 reduc-Port facilities loan. 3.04 .4A3 I tion on September 1,1992. The ucility will be reduced again by Adjustable rate pollution control loan.. 4,13 5A8 j 556,000,000 each year on May 1 of 1993 through 1995 witin the Fronomic development loan - 3.11 4.69-i remaining 558,170,000 maturing on May 1,1996. The terms of Constellation Companies j the facility require that the Constellation Companies obtain Mortgage and construction loans additional capital of at least 5145,000,000 by issuing addidonal and other collateralized notes 6.74 8.95. - debt maturing after May 15.1996, issuing additional equity or loans under credit agreemems'. 6.15 7.65 ' f selling assets. He maiority of this requirement was met by the Aggregate Maturities 5120.000,000 private placement, described below, and the remaining 525.000,000 must be obtained by February 1,1995. The combined aggregate maturities and ' inking fund require. l s fod of-k Grpy's lo'ng-term borrowings for each1 I At Deamter 31,1992, 5152,000.000 is outstandmg under the "# I'*" " "' "** I revolving rmk debt facility. At December 31,1992, the Cmstel-Constellation - lation Companies total unsecured-indebtedness was Year BG&E - Companies S407.000,000, and is limited by other terms of the facility to j,,, jog s 1993 5189,520 $100,250 l 5435,000,000 during 1993..As 'such, akhough 574,170,000 of unustd capacity is available under the revohing bank debt facility 1994 61,468 62,936 l at December 31,1992, only $28,000,000 can be borrowed so j995 218,237- '142,531 long as the Constellation Companies total unsecured indebted-1996.. 73,140-61,612. ness remains at 5407,000,000. 1997. 81,565 -112,464 .J l N O T E 9. REDEEMABLE PREFERENCE STOCK The 6.95% 1987 Series and the 7.80% 1989 Series are subject The combined aggregate redemption requirements for all ' to mandatory redemption in their entirety at par on October 1, series of redeemable preference stock for each of the next five 1 1995 and July 1,1997, respectively. years are as follows: The following series are subject to an annual mandatory Year n demption of the number of shares shown below at par beginning f,,,f_,,g-in the year shown below. At BG&E's option., an additional number 3993_ g 1,500 ] 1 of shares, not to exceed the same number as are mandatory, may be 1994.. .13,000 ) redeemed at par in any year, commencing in the same year in j995 73,999 j which the mandatory redemption legins. He 8.25% 1989 Series. 19961 '36,000 'j the 8.625% 1990 Series, and the 7.85% 1991 Series listed below 1997-l 93.000 are not redecmable except thmugh operation ofa 6 inking fund. -1 Begmni"E With rega d to payment of dhidends or am availabic in the - ( , series - sham Year evem ofliquidation, preferred stock ranks prior to preferena and_ '

j 7.50% 1986 Series

15,000 1992 common stockt all issues of preference stock, whether abiect'to

)

6.75% 1987 Series : 15,000 1993 mandatory redemption ar not.- rank equally; and all preference ~ 7.64 % 1988 Series.. '100.000 1994 stock ranks prior to common stock. ' 8.25% 1989 Series 100.000 1995 A chaner amendment which increased 'the authorimd number 1 j 8.625% 1990 Series.- 130,000-1996 of shares ofpn ference stock fmm 6,000,000 to 6,500,000 shares was - .7.85 % 1991 Series. 70.000 1997 approval at the annual meeting ofsharehoklen un' April 15,1992. - -i 1 . 42 ihdtomer Gu md flutric Comtverry aulSulsidurrin i i 1 a- .is

.g NOTE 10. PENSION BENfflTS The Company 5,ponsors several noncontributory defined benclit securitics, group annuity <nntracts, and shon-tcrm investments pension plans, the largest of which (the Pcnsion Plan) covers BG&E offered a Voluntary Special Early Retirement r.ubstantially all BG&E cmployees and cenain employces of the Pmgram (the Pmgram) to cligible employees who retired during Comic!!ation Companics. The other plans, which ;ur not mate. the period February 1,1992 through April 1,1992. In actur-rial in anmuni, pmvide supplemental benefits to certain key dance with Statement of Financial Accounting Standards - cmployers, Benefits under the plans are generally based on age, No. 88, "Employcrs' Accounting for Seulemems and Cunail- . years of service. and compensation levcis. ments of Defined Benefi Pension Plans and for Termination Prior se:vice wst associatcJ with retroanive plan amend-Benefits," the one-time uni of termination benefits associated mems is amonized on a straight-line basis over the average with she Pmgram was recognized in 1992 and reduced net remaining uervice perial of active employees. income by 56.6 million, or 5e per common share. The cost of The Company'r, funding policy is to contribuic annually the termination benefits is not eflected in nei pension uwt. the mst of the Pcmion Plan as determincd under the projcard The following rahles set fonh the combined fimded status unit credit cost method. Plan aucts at De ember 31,1992 of the plans and the composition of total net pension cost. consisted primarily of marketable fixcJ income and equity At December 31. 1992 19C Ikilar smunr> rn demand [ Auuarial present value ol Vested benefit obliption.. 5 485,098 1 418,170 Nonvested henc6t obligation.. 9,814 11.372 Accumulated bene 6t obbgation.. 494,912 429,542 - Pmjected benefits relaicd to inacase in future compcmation levcis.. 86.882 94,176 l Proicani heacfit obligation - ... ~... 581,794 523.71H Plan aucts ai fair value. '(542,190) (516,967) ProjecicJ benc6 oblipnon less plan a. wen.. 39,604 6,751 Unrecognind prior servkr cost.. (17,671) (19,112) 4 Unnwgniwd nei gain (low)._ (28.017) 12.015 Unamoniwd net asset fmm adoption of 1:Asti Staicment No. 87 2.039 2,265 Accrued pension (auct) li.d ility.. $ f 4.045) 5 1,919 Assumptions Discount rate. 8.75%. 9.0% Average inacase in future mmpenution levch... 4.5% 4.5% Expened long-term rate of return on asvts.. 9.5% - 9.5% Year Ended December 31, l 1992 1991 1990 in demands Components of nel pension mst hervice mst benefin carned during the per6L 511,771 5 11,729 5 11,257-Intercs mst on pmicued henclit obliption.. ~ 47,355 43,143 40,455 Adual wturn on plan aswrs... 03,6H5) (56.737) (18,881) Net amonization and deferral.. (12,257) 12.810 (21066) ? Total net pcnsion u,st.. 13,184 10,945-9,765 Amounts <apit.dind as mnstruaion mst.. (1,H39) (1.500) (1.377) d Amounts charged m npense.. 511,345 5 9,445 5 H.388 i The company aho sponsors a defined comrihmion s.avings main mnuibutions on l< half of pankipamt Company mnuihm 1 plan awcring all chgible BG&E employm and cenain employm tions to this plan totaled $14.8 million,510.6 million, and '{ uf the Gumellatian Companiet Under this plan, the Company 510.0 million in 1992,1991, and 1990, respcuively, NOTE 11. POSTEMPLOYMENT BENEflTS DTHER THAN P E N SIO N S The Company provides.ccrtain heahh case and hfe insurance which will be adopted by the Company in January 1993, benefin for ' retired BG&E employces and cenain ret;ted wquires a change in the method of accounting for posuctire-cmployen of ihr Constellation Onnpanics. The u>si of these ment benefits other than pcmions from the presem pay-as-you. . benefits is generally rewgnized as the benclin are paid and go method to an ac'crual method. The accumulaird. ] intakd 515,887.000 for 1992, 514,054,000 for 1991, and postwrirement benefit obligation existing at the beginnhig of 511,464 000 for 1990. 1993 (transition obliption) is approximarcly $270 million and Stawment of Financial Accounting Standards No.106, will be rmyniwd on a delayed basis over the average remaining Mmmnr Go andikn Gm,w9 andNimsann 43. l

..i s service gwrimi of active plan panicipants. The adoption of State-impacax! negatively. r ment No.106 will increase operating expenses by approximately The Company also pmvides cenain guy arntinuation payments $20 million annually. In its pending application for increased elec-to empk>yces of14G&E and cenain of the Ginstellation Companies tric and ras base rates, the Company has requested the Maryland who are detem ined to be disabled under ilG&E's long-Term Commission to pmvide current rate reawery for the inarase in Disability Plan. He cost of these benefits is generally recogninxl as ~ nperating expen.scs as a resuh of adopting Statement No.106 and the benefits are paid. Statement of Financial Accounting Standards to authorize deferral of any increased expenses for which service No.112, which must bc mk>pted by 1994, requires a change in the rates are not provided cuntndy under the provisions of generally method of acmunting for these benefits from the present pay-as-accepted accounting principles for regulau d enterprises. nerefore, you-go methm! to an accrual method. He unrecogninxl liability for the adoption of Statement No.106 is not expected to have a these benclits must be raugnized at the time Statement No.112 is significant impact on the Company's financial statements. adopted. The inatase in the annual mst of these benefits subsequent i However, if the Maryland Commission were to recognize to the adoption of accrual accounting is not expected to have a postretirement benefit costs under a method different than material impact on the Company's financial statements. that prescribed by Statement No.106, earnings could be NOTE 12. LEASES The Company, as lessee, mntracts for cenain facihties and Certain of the Constellation Companies, as lessor, have equipment under lease agreements with various expiration dates cntered into operating leases for ofTicc and retail space. These and renewal options. Consistent with the regulatory treatment, Ic.tses expire over periods ranging from 1 to 25 years, with options lease payments for operating and capital leases fbr utility opera-to renew. The net book value of propeny under operating leases i tions are charyd to expense in the Consolidated Statements of was $175.523.000 at December 31,1992. The future minimum Inwme. Iraw expense was as follows for the three years ended rentals to be received under operating leases in effm at December Decemhec 31: 31,1992 are as follows: 1992 1991 1990 Year j,,,;,_g l in alwwands Operating leases. 513.697 512,365 513,240 1993.. $ 12,728 Capital leases.. 321-274 330 1994. 15,461 i Total lease expense.. 514,018 512,639 513.570 1995._ 13.330 1 1996. 11,670 The future minimum lease payments at December 31,

1997, 10,300 1992 fhr longaerm nnneancelable leases are as follows:

Hereafter 83,696 Operating Capital Total minimum rentals. 5147.185 Year Icases Irases in tlw.uand, 1993 5 4.071 5 392 1994......-.. 3,934 378 1995 3,811 368 1996.. 3,381 365 1997.. _.... 2.724 177 Thereafter.._ 4.332 397 Total minimum lease payments.. 522,253 52,077 Interest ponion. (618) i Present value of net minimum krase payments. 51 A59 NOTE 13. TAKES OTHER THAN INCOME TAXES Taxes other than income taxes are as follows-Year Ended December 31, 1992 1991 1990 in ihmuands .l Real and personal propeny. 5100,419 5 89.379 5 85.372 Public service company franchise 45.654 46,041 42,812 Social security - 34,911 33,121 30,344 Other.- 9,355 9.026 ' 6,770 Total taxe.s other than inmme taxes 190,339 177 567 165,298 Amounts included above charged to accounts mher than taxes.. (7,335) (6,786) (8.576) Taxes other than income taxes per Consolidated Statement. ofInwme-5183.004 5170.781 5156,722 44 Bahrma tim arulElearic Company andSulnidiarin

.i .e- 'l l *1 l l 1 '? r NOTE 14. C O M MIT M E N T S, G U A R A N T E E S. A N D CONTINGENCIES i I will n9 re additional NO controls for acid rain abatement at Commitments x BG&E has made substantial commitments in connection with BG&E 6 generating plants and omne nonattainment at all BG&E. its construction pmgram for 1993 and subsecpient years. In addi-facihties. He contmls will resuk in additional expenditurn that arr tion, BGRE has entered imo two long-term mntracts for the diffictdt to predict prior to the issuance of such regulations. Ittsed j purchase of electric generating capacity and energy. The on existing and pmpr,cd acid rain and owne nonartainment regu-mntracts expire in 2001 and 2013. Total payments under these lations, BGNE currendy estimates that the NO,40 million. comrols at. contracts were 555,051.000, 523,716,000, and 517,957,000 BG&E's generating plams will cost approximaiety $ during 1992,1991, and 1990, respectively. At December 31. BG&E is cunently unable to predict the mst of mmpliance with 1992, the estimated future payments for capacity and energy that the additional requirements at other BG&E facilities. BG&E is obligated to buy under these contracts are as follows: BG&E has been notified by the Emironmental Protection '1 ye, Agency (EPA) and several state agencies that it is being considered. ( mg, a potentially responsible pany with respect to the dean-up of l cenain emironmentally mntaminated sites owned and operated 1993 5 70258 by third panics.. Akhough the dean-up cost $ for certain environ-1994 71,735 inentally contaminated sites could be significant, BG&E believes 1995 72,119 diat the' resolution of these maners will not have a material effert 1996-71,243 on its financial positkm or resuhs of operations. 1997-73,769 Aho, BG&E is voluntarily coordinating investigation of Leafter 722.992 several fonnes mal gas manufacturing plant sites, induding exphw Total payments.. 51.081,916 r.uion of mrrective action options to remove coal tar. However, no formal kpl proceedings have been instituted. The acchnology Cenain of the Cmstdlation Companies have committed to for deaning up such sites is still developing, and potential reme-contribute additional capital and to make additional loans m dies for these sites have not been idemified. Consequendy, the ctitain affiliates, joint venturcs, and pannerships in which they dean-up costs for these sites, which could be significant in total, have an imetest. As of December 31,1992, the total amount of cannot presently be estimated. invatment requirements committed to by the Constcllation ne Energy Policy Act of1992 contains pmvisions requiring Companies is 554 million. domestic utilit es to contnbute to a fund for decommissioning and decontaminatin the Department of Energy's (DOE) Guaramees tnanium enrichment cihties. These contributions are generally BG&E has agreed to guaramee two. thirds of certain indebtedness abinwm fh n-year period with escalation for inflation anil mcurred by Safe Harbor %ter Power Lorporanon. 'Ine amount we based upon the amount of uranium enriched by DOE for of such mdebtedness totah,$45 mnlion, of which 530 milhon each utility. At December 31,1992, BG&E has recorded a . represents BG&E 5 share of the guaramec. BG&IJ assesses that liaihrv and a deferred charge equal to its estimated total mntribu-the nsk ofmatenal loss on the loans guaranteed is mmimal. tion o'f appmximately 555 million in 1992 dollars. The Act As of December 31,1992, the total outstanding loans and ik k h was ne mvmble through utility service b:ners of creda of certam power generanon and real estate gggg projects guaranteed by the Constellatmn Compames were 552 million. Aho, the Constellation Companies have agreed to NudearInsurance guarantee cenain other borrowings of various pmver generation An accident 'or an extended outage at either unit of the Calvert and real estate projects and to provide cenain performance guar-Cliffs Nudear Powrr Plant muld have a substantial adverse effect antees of p<mtr generation pmiects The Company assesses that on BG&E. He primary contingencies rauhing from an incidmt the risk of materialloss on the loans guarantecd and performance at the Cahrn Cliffs plant would involve the physical damage to guarantees is minimal. the plant, the recoverability of replacemem power costs. and BG&E's liability to ddrd panics for ro;wrn damage and Indily Imvironmental Matter

• injury. Ahhough BG&E maintains t ie various insurana policits The Clean Air Act of 1990 (the Act) contains provisions currently available to pmvide coverage for portions of these deugned to reduce stdfur dioude and mtmgen oude enussions mntingencies, BG&E does not consider the available insurance to from ekttric generating stations in two separarc phases. Under be adcquate to mvor the msts that muld result from a maior acci.

Phase I of the Act, which must he implemented by 1995, BG&E dent or an extended outage at either of the Cahrrt Chirs units., expcm to incur expenditure of appmumatdy 555 nulhon, most in addition, in the event of an incident at any mmmercial l of which is artubutable to us poman of the cost of msta!!ing a nudcar power planc in the coumry BG&E could be assessed for flue gas desulfurization system at the Conemaugh generanng a ponion of any third pany claims asmciated with the incident.. stauon, m which BG&L owns a 10.56% m, ierest BG&E, as Under the provisions of the Price Anderson Act, the limit for - ctmently examining what actions will be required m order m third party daims fmm a nudearincident is $7.8 billion, if third mmply wnh Phase 11 of the Act, which must be implemented by party daims relating m mch an incident exceed $200 million. 2000, However, BG&E annc arcs that comphance will be (the amount of primary insuranceh BG&E's share of the total anamed by yme mmbination o fuel switdung, ilue gas desulfu-liaility for third pany daims could be m 5132 million per nzauon, umr ret rements, or allowance trading. incident, that would be payable at a rate o 520 million per year. At this tunc, plans for complying with nnropen ou.de (NO contml requirements under the Act are less cenam because al)l BG&E and other operators of mmmercial nuclear power plants in the United States are required to purchaw insurance m implementauon;ter,ulations have not yet been finalized by the mver claims of nain nudear workers. Other non-pivernmental . government. It is expected that by the year 2000 these regulanons commerci.d nudear facilities may aho purchase such insurance. ' 1Winne Gm awmarrie Compnyad%idicin a5

o '4 f -i , i - i Coverare of up to 5400 million is pmvided for daims against management impmdence and diat the replamment energv costs BG&E or others imured by these policies for radiation injuries. associated with those outages should be disallowed by the ' If cenain claims were made under these policies, BG&E and au Commission. Total wplacement energy costs associated widi the ) policy holders could be assessed, with BG&Ei share being up to 1987 outages were appmximately $33 million. .l 56.3 million in any one year. In May 1989, BG&E filed its fuel rate case in which 1988 j For ohysical damage m Calvert GifR BGNE has 521i25 perfonnance will be examined. BG&E met the system-wide and : 1 billion of propeny insurance, induding $1.325 billion fmm an nudear plant performance targets in 1988. People's Counsel industry mutual insurance company. If accidems at any insmed alleges that BG&E imprudently managed several outages ai - l plants cause a shonfan of funds at the indastry mutual, BG&E Calven Giffs, and BGRE estimates that the total replacement. j and all policyholden could be assessed, with BG&E's share being energy costs associated with these 1988 outages were appmxi-up to $14.5 million. mately 12 million. On November 14,1991, a Hearing Examiner ,j If an outage at Calven Qiffs is caused by an insural physical at the Maryland Commission issued a pmposed Order, which damage loss and lasts more than 21 weeks. BG&E has up to 5426 hecame final on December 17.1991 and c mcluded that no disal-million per unit of insurance, pmvided by a different industry lowance was warranted: The llearing Examiner found that mutual insurance company for replacement power costs. This BG&E maintained the producthe capacity _of the Plant at a amount can he reducal by ufo 585 million per unit if an outage resonable level, noting that it pmduced a near record amount of ' to both units at Calven Oiffs is caused by a singular insural phyr power and exceeded the GUPP standard. Based on this record,' .{ ical damap low. If an outage at am w J plam causes a shon-the Order conduded there was sufficient cause to excuse any - t fall of funds at the industry mutual, >&E and au pohcyholders avoidable failures to maimain pmductive capacity at higher levds. .j could be assessed, with BG&E's share being up to 59.6 million. During 1989,1990, and 1991, BG&E experienced extended - outages at its Calven Giffs Nudcar Power Plant. In the. Spring of 8 Recoverabih.ty of Electric Fuel Costs 1989, a lhs diand amund the Unit 2 pressurizer heater By statute, actual electric fuel cosn are recoverable so kmg as the dreves during a refueling outage. BG&E shut down Unit I as a I Maryland Comnussmn finds that BG&E demonstrates that, among other thmp, a has maintained the productive capacny of. praautionary measure on May 6,1989 to inspect for dmihr leaks and none wEre found. lioweJer, Unit 1 Was out ofservice for the ns generatmg plants at a reasonable level. He Maryland Comma-remainder of1989 and 285 days of1990 to undergo mainte. sion and Maniand) highest appellate court have imerpreted th'* nance and modification work to enhance the rdiability of various i as permuttng a subjecnve evahtauon of each unplanned outage at safety systems, to repair equipman, and to perform required - BG&Es generatmg plants to dciernune whether or not BG&E periElic surveillance tests. Unit 2, widch returned to service on' i had tmplemented all reasonable and cost elfective maintenance May 4,1991, remained out of servia for the remainder of 1989, j and operaung control procedures appropnate for preventing the 1990, and the first pan of 1991 to repair the pressurizer, perfonn '. outage. Effccuve January 1,1987, the Magiand Commissmn maintenance and modification work, and complete the refueling.- I authonzed the establishment of the Generaung Unii Performana The replacemera energy costs associated with these extended Pngam (GUPP) to measure, annually, utdn.y comphana wnh ougs for hmh units at Calven Cliffs, conduding with the mamiammg the producuve capac ty of pneratmg plants at return to service of Unir 2, is estimated to be 5458 millinn. i reannable leveh by estah!ishmg a system-wide pneran.ng perfor-In a December 1990 order issued by the Maniand Commis-mance target and individual performance tarpts for each base sion in a BG&E hase rate proceeding, alw Man 4and Commis- ~ Joad generaung una,. In future fuel rate hearing, actual generating don found that certain operations and maintenance expenses l performance after adjustment for planned outages wdl be incurred at Calvert Giffs during the test year should not be compared to the system-wide targer and, if met, should s,igmfy recovered fmm ratepayers. The Maryland Dommission found ..l l that BG&L has complied with the requqements of Ma9 and law. that this work, which was performed during the 1989-1990 4 railure to meet the system-wide tarpt wdl resuh m revww ofeach Unit 1 oug and feH within the test year, was avoidable and I umt s adjusted actual pneranng performance versus ns perfor-caused by BG&E actions which were deficient. mance target in detemmung comphance wnh the law and the %iCommission noted in the order that in review and find-basis for possibly mynmg a penahy on BG&E. Panies to fuel iny on these issues penain to the reasonableness of BG&E's rest- 'j rate heannp may stdl quesuon the prudence of BG&L s actons year operations and maintenance expenses for purpmes of setting or macnons wnh respect to any given generanng plant outage' base rates and not to the responsibility for replacement power - l which could result m the disalkiwance ofreplacement energy costs awts associated with the outages at Calven Gifft Tlie Maniand - i by the Maryhind Commmon. Commision sd dm iddecision in the base rate case will have Sma the two units at BG&E,s Calven Cliffs Nudear Power no rdecMinding) effect in the fud rate procecding exam-Plant utilize BG&E s kwest a>st fud, replacement energy costs ining the 1989-1991 outages. The work characterized as avoid-awociated wnh outages at d ese umts can be sigmficant. BG&E able significamly' increased the duration of the Unit 1 outap. cannot estimate the amount of replacement energy cos:qthat Des ite the Maniand Commission's statement regarding no - could be challenged or disalkmed in future fud raw proceedings, bin ng effect, BG&E recognizes that the views expressed by the hm such amounts could be matenal. Maybnd Commission niake the full recovery of all of the in Octoryer 1988, BG&E fik d its first fud rate apph. canon for replacement energy. costs associated with the Unit 1 outage a diany m us dectnc fud rate under the GUPP program. The dohful. Tkwfore, in December 1990, BC&E recorded a resuhant ase before die Man 1and Commission coven I G&Es pmvidon of $35 m:11 ion against the possible disallowance ofsuch - operating performance m calendar year 1987, and BG&E's filing wsn which reduced 1990 earning by 19e per common share, demostrated that n met the system-wide and individual nudcar BG&E cannot determine whether replacement energv costs may. plant performance targen for 1987. In November 1989, testi-k disaHowed in the present fuel rate proceeding in excess of tN many was filed on behalf of Ma9 and People s Counsel allegmg provi,, ion, but such amounts could be mawrial 4 that seven outages at the Calvert Chffs pl.un m 1987 were due to 45 Mimwr GuadEkmic Cmpwradhiwhmn :

0 y e: i NOTE 15. FAth VALUEOf FIN AN CI A L INSTRUMENTS l ~ ..As required by Statement of financial Accounting Standards carrying amoum of 571 million are excluded from the amounts Na 107, the following table presents the carrying value and fair shown in invenments and other assets because it was not practi-value of financial instruments inchu.kd in the Consolidatal lla!ance cable to detennine their fair values. Rese invesunent$ indade Sheets. partnership invesonenis in public and private ajuity and debt At December 31,1992 securities, partnership investments in solar powered energy umng Iw production facilities, and imestments in snx.k tmsts. Annunt Wlue Financial instruments included in capitahration are long- /,, thm,mh term debt and redeemable preference unck. He fair value of 5 fixed-rate long-term del t and redeemable preference stock 7 Current assets.. . 5 408,790 5 408,790 Investments and other assets.. 93,834 97,135 gnet y maniand by dieunung the remanung mh Nwn - ,""'"'"'E"#'

• '**F' E#

IT'"8 ""*""' "I vanalife-r ufong-term debt approximates fa,"r value. Current liabilitics. 649,650 649,650 i Capitalization.. 2.772.450 2,871,291 BG&E and the Connellanon Compagnes have loan guaran. %c carrying amount of curnat assets and current liabihties approx-tecs totalling 530 million and $38 million, respectively, fi>r imates fair value bnause oithe shon maturity of these instmments. whidi it is not practicable to determine fair value. It is not antici- %c fair value ofinvestmems and other assets is based on pated that ihne loan guarante will need to be fundcd. quoted market prices where available. Certain investments with a i f NOTE 16, QUARTERLY FIN A N CI AL D AT A (U N A U DIT E D) The following data are unaudited but. in the opinion of Manage. periods generally occurring during the summer and winter ment indudc all aJiustments necesutry fiir a fair presentation. rnonths. Accordingly, comparisons ' mong quarters of a year may a UG&lis utility business is seasonal in nature with the peak saks not be indicative of overall trends and t.hanges in operations. Quaner Ended Year I.nded Manh 31 lune 30 kptende 40 twn.hcr 31 lbcndwr31. [ ? Jn ilwaund,, eveptper,Jwr anwunt< 1992 Revenues...._... % 69.253 $540,895 5677,059 5604,136 52A91,343 Income from operations... 127,121 91309 222,627 94,288 535.345 Nei income. 59,254 38,049 124,620 42,424 264347 Farning appliable to wmmon smek.: 48.680 27A75 114.047 31,898 -222.100 Earninp per sharc ofwmmon smck. 037 0.20 0.84 0.22 !.6 3 1991 Revenues.. 5592,364 5564,257 5699,149 5593.083 52,448.853 1ncome (min operations 85,916 11SA50-222.015 65,807 489,188 Imume before cumulative effect ofchange in accounting method.. 41,110 59,192' 116,671 16.708 233,681 Cumulative effect of thange in the method of accounting fiir income t.nes.. 19,745 19,745 Net income....... 60.855 59J 92 116,671 16,708 253A26 Earninp applicabic m contmon umk.... 50.285 48,164 106,097 6,134 210,680 Earninp pcr sbarc ofwnunon simk Udiire cumulative effect ofchange in accounting snerhal.. 0.24 038 0.84 0 05 1.51 Cumulative cfTect of chanre in acwunting for inu>me taxes.. 0.16 0.16 Total earninp per share ofcommrin stock.. CAO 038 0.84 - 0.05 1.67-Roultspr tiwfim andalurdquartro of1.M refini sig sons efteroriirunion benefits avariated wish the t'uluonm 'iperiallhrly Retirement Progvam her Note IW. ReuJttpr slw shirdandpunl qumm ut!1991 ufinnhe ware. dawn ufshr Gm>rcthusen Companin'irar,rmenn in arrisinfinamid une rmous and realniate. puin or wyertirrly her Mar 4L Tis nem of the quann(parnings per-dwr amuunn may wu njualslw totalpr thepar dw to dwign in the awrage nurrier of>harn ountanding shmughout sheyar. Crnain prior.yar amounn harr been oraaud av omform wub the curinaparkpraentatwn. ' ltdrinunr Gan andlirtru Comprn and.%huduaria 47

V f l -_4 .e. C O'R P Q R A T E' AND UTILITY 0 F F i C-E R S Christian H. Poindener. Jon M. Files. Chairman of the Board and Chief Executive Osccr . Vice President, Managemem Senices Age: 54, Yean of> mice 25 Age 57, Yean ofsmire 35 - 1&ard A. Crooke Ronald W,lowman President and Chief Operating OGcer Vice President, Fossil Energy Age:54. )'ean ofsmice 24 Age 48, Years afsmice 24 - George C. Creel G. Dowell Schwartz,Jr. Senior Vice President, Generation Vice President, General Services Age 58. Yean afsmice37 Age 56 Yeanofsmia:34 Thomas F. Brady Charles W. Shivery Vice President, Customer Service and Accounting Vice President, Corporate Finance, Age 43 Yeanofunice23 Treasurer, and Secretary "" #f'" # MichaelJ. Chesser VicePresident Marketing Joseph A.Tiernan Age 44, Yean afsmice 21 Vice President, Corporate Affa' i u ^##' - Herbert D. Coss,Jr.. Jeffrey L Davis Vice President, Electric Interconnection and Transmission Age 38, Years ofamice36 Assistant Secretary ^## - Robert E. Denton Vice President, Nuclear EnerU Thomas E. Ruszin, Jr. Age 49,1can ofsmne 22 gg,;s,,,,3,c,,u,e, Age 38. Ymn of> mix-16 George D. England - Via President, Distribution Age 61, Yean of>mia: 38 CH ANG ES IN D II G A N I Z A T I O N Effectise January 1,1993, Christian H. Poindexter, former Robert E. Demon, former Plant General Manager of the. Vice Chairman of the Board, was elected Chairman of the. , Cahert Cliffs Nuclear Power Plant, was elected Ykr President. Board and Chief Executive Officer. He succeeded George V. of Nuclear Energy, effective September 1,1992, replacing McGowan, who retired with more than 41 years of service. Mr. Creel. Edward A. Cnoke, former President of Utility Operations, was Ronald W.16wman, former Manager of Fossil. Engineering., named President and Chief Operating Officer, effective . was elected Vice President of Fossil Energy, effective January 1, September I;1992. 1993. He replaced J. Thomas Wellener; who retired with more. than 38 years of r.ervice. Effective January 1,1993. George C. Crect, former Vice Presi-dent of Nuckar Energy, was elected Senior Vice President of. Generation, assuming responsibility for the Nuclear Energy and Fossil Encigy Divisions. ~ 48 . Adrimore Gm andihrk Comp my andSubudurvies b

~ ~ .g-x r 8 '.

i

'b BDAHD O' F DIREC.T0RS <? .l 't 1 Y Christian i1. Poindexter Jerome W. Geckle I Chairman of the Board and Chief Esecutive Ofliatr, Chairman of the Board (retired) PHil Corporation' - 1; Mrst deardio de board 1933 (vehide, rek cation and management services), /j Balnimore, Fint datedto the board 1980

11. Furlong Baldw.m t

Chairman of the Board and Chief Executive OfIlcer, George V. McGowan Mercantile Bankshares Coqmration (bank holding Chairman of the Execmite Cmuminee, First deardto company), Bahimore, Fint dated to de board 1988 de baani:1980 } Beverly B. Byron Paul G. Miller Former Congresswoman, United States House Chairman'of the Board, Supercompunt Systems, Inc, of Representatives (government). Frederick, Md., (design, manufacture, and sale ofsupertumputers), Fint deardto the board 1993 Bahimore, First deardto the inwrd:1981-J. Owen Cole George G. RadclifTe Chairman of the Executhc Committee, First Maryland Former Chairman of the Board and C1 ief Executive. Bancorp (bank holding company) Bahimore. Fint ricard Oflicer,The Baltimore life Insurance Company to tie board 1977 (inuurance); Bahimore, Fint dated to the Imard: 1982 ' Dan A. Colussy George L Russell,Jr., Esq. . Chairman of the Board, President. and Chief Executive Partner, Piper & Marbury (law firm), Bahimore, Officer. UNC Incorporated (aviation services), First dectedav thehoard: 1988 t Annapala, Md., First dated to de i>oard: 1992 . Midiael D. Sullivan Edward A.Cmoke ric3ident and Chief Executive Officer : President and Chief Operating Otlicer, Enr deard to Merry-GwRound Enterprises,Inc. (speciahy retailing), = tiv board 1988 Joppa. Md., Rnt datedto de board 1992 lalie B. Disharoon - 11arry K. Wells Fortner Chairman of the Board and President, . Chairman of the Board (retired), McCormick & - Monumenal Corporation (insurance), Bahimore, Company, Inc. (food processing, spices, etc.), Fintdecedto she boand: 1978 Baltimore, First datedto de board 1975 CH A NGE IN DIRECTORS C O M M I T T E E S ' 0 F T H'E 'B O A R D Bernard C Trueschler retired from the board effective Audit Comminee L Committeeim Management Decunber31,1992. Mr. Raddiffe, Chainvan Mr. Geckle, Chairnum J Mr. Baldwin Mr. Cole Sist r Kathleen Feeley, S.S.N.D. retired from the board Mr. Cole Mr. Disharoon . effectiveJuly 1,1992. Mr. Russell Mr. Sulhvan : ' Beverly' IL Dyron, former Congresswoman, U 5.11ouse Executive Coinmitiec Committee of Representatives, was ciected to the board effective Mr. McGonn, Chairman ' on Nuclear Power r February 1,1993. Mr. Baklwin Mr. Wells. Chainnan Mr. Crookei Mrs. Byion. Mr. Dishamon Mr. Colussy, Mr. Poindexter Mr. McGwan Mr. RadditTe - ' Mr. Miller - Baltiner$e owlEintru GmjwnyandSukuharies. [49/

l + 9 g.' C0NSTELLATION SUBSID1 ARIES i O F F1C E R S Christian H. Poindexter 15ruce M. Ambler - Chaitman of the Board, Constellation Holdings,Inc. Acting President, Constellation Real Estate Group. Inc. Age: 54 Age:53 Ilruce M. Ambler J. Richard O'Connell President and Chief Executive Oflicer, President, Constellation Real Estate,Inc. + Constellation Holdings,1nc. Age: 5.7 Age:53 James W. Jeffcoat Douglas S. Perry President, Constellation Health Senices,Inc. Vice President and General Counsel, Age 39 Constellation Holdings,Inc. Robert E. Windham ^## President. Church Street Station. Inc. Terry L Ogletree Age 50 President, Constellation Energy, Inc. Age 49 Steven D. Kesler President, Constellation investments, Inc. Age 41 i C O N ST E L L ATIO N HOLDINGS CONSTELLATION-REAL ESTATE GROUP Consicilarion. Holdings provides direction to all of its This is the parent company of.,everal businesses, induding operating subsidiaries and furnishes them with kpl finan-Church Street Station in Orlando, Florida, that operate cial, tax, accounting, and personnel services. In addition, projects in several real estate categories. Constellation Real decisions on all new investments are controlled from Estate, Inc. (formerly the KMS Group) performs develop -. Ginstellation Iloidings. ment, construction and operational aethities, and Constella-tion Health Services, through joint ventures, owns C0NSTELLATiON ENERGY senior-living and retirement communities, as well as nursing facilities for the tiderly. .Th.is is the senior member of our Energy and Environmental Group Undet the auspices of ConsteLiion C 0 N S T E LL ATIO N INVESTMENTS Energy, the mmpany participates in a number of ahernative energy and co. generation projects producing electricity for Constellation lovesunents serves as the pri.n.try prmidct of sale to other utilities. The energy company is actively current income from its investments in various securities, involved with developing, arranging financing, building, investment partnerships, and fmancial-service mmpanies. and operating a number of wholesale power projects throughout the country, 50 hr!nmmy Gu awllharic Compny widkbddaria

.. ~ F y. .c so !? I i C 0. N S T E t. l. A T : 1 0 ' N - S U B S 1.D. I' A R I E S - .g 'I:: f E, t a ' [ DOARD O F DIR E CT O R$ ' }4 Christian i1. Poindexter lifward W. Kay. Chairman of.the iband. Former Co-Chairman and ChidOperating Ofiker, ' { 15ahimore Gas and Ehrtric Company, Fint cleted Ernst & Young. Fint clatedto ele be ard: 1988 ~ to the burd 1985 George V. McGowan... . Isruce M. Ambler Former Chainnan of the Ikund, Constellation Hohlings,Inc.;. 7 President and Chief Executive Omccr, Former Chairman of the Itoard and Chief becutive O$ctr. l{ Consrcllation I toldings, Inc.. Fint c4rtedto tie board-1989 liakimore Gas and Electric Comp.my, Fint rkardta ) tiv bwd:1983

11. Furlong flaldw.m Chairman of the iband and Chief hecutive Omccr.

Paul G. Miller Mercantile Itankshares Cor;uration, Fint ritard Chairman of the Itoard. Supercotoputer Syuems, Inc., to tle board 1987 Fint rintedto ile board I9M i Inlic II. Db.haroon 11ernard C. Truculder Former Chainnan of the Ibard and President,. Former Chairman of the Ibard and Chief Exnutive OMccr. Monumental Corporation, Fint clared to sie board 1987 Bahimore Gas and Electric G>misany, / int r/wtedto ] tie board: 1983 ' 1 Jerome W. Cec 1Je . Chairman of the lkurd (retirn!), Plili Corporation. Fint cletedIo the board: 1985 I l i C O M MIT T E E S Of THE BOARD CH AN GE S IN -j Audit G>mmince Gimmittee on Management Mr. Kay, Chairman ' Mr. Geckle. Chairman CM < m i1. Poindexter was chrted Chairmari of the Ibard of. Mr. Baldwin Mr. Disharnon Omm ii mon iloklings, Inc., effective j'anuary 1.1993. lie l Mr. Miller rep!ated Gange V, McGowan, who resigned as Chairman of ~-- 1 the Board of Constellation iloidings, Inc., at that time. Mr. McGowan will continue as a director. ll r .l 3 l l F l i n i .' ikhimwc Gat ediharic Gimjumy edsubddumes. - 51 l L a 4 + 9 4 1

p + 4 S H A'R E H 0-L D E R INF0RMATION q i .i COMMON STOCK DIVID E N D S AND PRICE R ANGE S P 1992 1991 Dividend _. _ Price _ Dividend _ _ Price Dech. red Iligh low Declared High Low First Quaner. 5.35 523 % $19% ' 5.35 ' $19% 517% Second Quaner .36 22 % 19 % .35 19% 18K Third Quarter .36 24 % 21 % .35 21 % - 19% - Founh Quaner.- .36 24 % 21 % .35~ 22% 21 %. ~ Tif ~ i30 Total 5 5 DIVID E N D P O LI C Y A N N U A L M E E TIN G The common stock is entided to dividends when and as declared The annual meeting of shareholders will be held at 10:00 a.m. by the Board of Directors. There are no limitations in any on Tuesday, April 13,1993, in the Hunt Valley Ballmom of indenture or other agreements on payment of dividends. Marriott's Hunt Valley Inn,245 Shawan Road (1-83 at Shawan Holders of prefened stock (first) and holders of preference stock Road), Hunt Valley, Maryland. t (next), however, are entitled m receive, when and as declared F0RM 1o-K from the surplus or net profits, cumulative yearly dividends at ""$"'*9"*'h"**P""T"' ~ ~ a copy ofits Form 10-Is annual report, mcluding financ! "'E*' the fixed preferential rate specified for each scries and no more. ial state-payable quanctly, and to receive when due the applicable prefer-ments, after it is filed with the Securities and Exchange Commis-ence stock redemption payments, before any dividend on the sion in March 1993. Requests should be addressed to Charles W. common stock shall be paid or set apart. Dividends have been Slu.very, Vice Preu. dent, Corporate Finance, Treasurer, and. paid on the common smck continuously since 1910. Future dividends depend upon ftnure carnings, the fmanc. l cond.. Secretary, P.O. Box 1475, Bahimore, Maryland 21203-1475. ia mon of the corupany, and other factors. Quarterly dividends were A U DiT D"S dedared on the common stock during 1992 and 1991 in the Coopers & Lybrand amounts set forth above. EXECUTIVE DFFlCES C0MM0N ST0CE DIVIDIND DATES Gas and Electric Building Record dates are normally on the 10th of March, June. Charles Center September, and December. Quartetty dividends Bahimore, Maryland 21201 are custon arily mailed to each shareholder on or about the Maih P.O. Box 1475 1st of April, July, October, and January. Baltimore, Maryland 21203-1475 DIVID E N D R EIN V E E T M E N T S H A R E H C LD E R S

• 1N QUIRIE S AND STOCK PURCHASE PLAN A ND ASSIST A N C E The company's Dividend Reinvestment and Stock Purchase Shareholders desiring assistance with lost or stolen stock certifi-Plan provides an opponunity for holders of the company'5 cares or dividend checks, name changes, address changes, stock

'i common stock to acquire additional shares of such stock in a transfen, or other matters should call the shareholder senices conveni.nt and economical manner. Participants in the plan represematives on our toll-free telephone numbers. ' inay reinvest cash dividends on all or a portion of their shares of The following toll-free telephone numbers are available ~ i common stock and/or make optional cash payments. during our business hours,8:00 a.m. to 4:45 p.m.: STDCK TRADING Bahimore Metropolitan Area 783-5920 The company's common stock, which is traded under the ticker Within Maryland 1-800-492-2861 symbol BGE, is listed on the New hk, Midwest, and Pacific Outside of Maryland 1-800-258-0499 stock exchanges, and has unlisted trading privileges on the letters should be addressed to: Boston, Cincinnati, and Philadelphia exchanges. As of Baltimore Gas and Electric Company December 31,1992, there were 80,371 common shareholders Shareholder Services ofrecord. P.O. Box 1642 THANSfER AGENY AND REG 15TRAR Balt more, Maryland 21203-1642 Maryland National Bank, Baltimore 52

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