ML20046B596

Baltimore Gas & Electric Co,Annual Rept 1992

ML20046B596
Person / Time
Site:	Calvert Cliffs
Issue date:	12/31/1992
From:	BALTIMORE GAS & ELECTRIC CO.
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NUDOCS 9308050203
Download: ML20046B596 (65)

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HIGHLIGHTS 1992 1991 % Clunge in v at:wns exaptper~. hare anwum> COMMON STOCK DATA Earnings per share Utility operations.. 5 1.52 5 1.60 (5.0) % Diversi6cd activitics. 0.11 0.07* 57.1 % Total. 5 1.63 5 1.67 (2.4)% ) Dividends declared per sharc.. 5 1.43 $ 1.40 2.1 % Average shares outstanding.. 136.2 126.1 8.0 % Return on average wnunon equity. 9.40% 9.90 % (5.1) % llook value per sbarc-year end. 517.63 517.00 3.7 "6 Market price per sharc-year end close.. 523.38 522.88 2.2 % iIN A N CI A L DATA Rctenues

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51,968 51,995 (1.3)% G as.. 403 358 12.6 % Dhcrsi6cd activitics. 120 96 25.0 % Total. 52,491 52.449 1.7 % Net inwme. 5 264 5 253 4.3 "o Earnings applicable to wnunon stock.. 5 222 $ 211 5.2 % Assets Utility.. 56,352 $6,137 3.5 % Diversi6cd.. 1,023 1.001 2.2 % Total. 57,375 57,138 3.3 % Utility wnstruction expenditures.. 5 389 5 456 (14.7) % llGNE investment in Constellati.in Companies.. 5 295 $ 280 5.4 % U TILIT Y SYSTEM DATA Electric sales-megawatthours. 25.3 25.5 (0.8)% Gas sales -dekatherms.. 108.6 101.5 7.0 % iw!nde, t e qica. of1:.< aa vunw:v harry for s,<.nrne t.ua h ( cc:a:n prwrycar a nwant: have been rniated to constrn wnh the s urerntyraripc.cntanan .1lIshart andper :barr a"wa r:n have been reaated w re,4rciihr 3 lvr-2 mmmen stoa epi:t in sbarch4 ten c_f rea >da> vfAprilli, Ive EARNINGS AND DIVIDENDS DECLARED RETURN ON l PER SHARE OF COMMON STOCK AVERAGE COMMON EQUfTY l he 1 l m p,, t i m - r-I I om p l t n3 j_ r_ 5 l { I .l. o_ _i_ _,_.L n m m w o w ma en rm s,n M '4 e Sllf a 1

i 1 0 0UR SHAREH0LDERS i !1 i i F l M,.?m.19w~'~~ - ( ) d[ am honored to address the owners of Baltimore Gas and Electric Company thr the a j %. i first time as Chairman and Chief Executise Officer. I have assumed leadership of a 1 M i / ej ] ,s 23 I ,y proud and distinguished company with a 177-year tradition of service. Thanks to my kk N[ friend and now-retired Chairman George AlcGowan and his predecessors, our compant a y,.j %gi g 4 enjoys a legacy of outstanding business success and community service. n [% 1

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Since the Board of I)irectors elected me Chairman of BGNE last summer. I have met h.f f'? face-to-face with hundreds of employees in virtually every department. I am very encouraged by ] M p %L ,,g their talents, enterprise, and energy. Indeed, I'm convinced that our employees are the wmpany's most important resource. l As your new Chairman, I wou1J like to share with you my plans and vision ihr Baltimore Gas and Electric for the decade of the '90s. It is undeniably true that the utility industry is facing more competition in power generation. more technological innovation and economic j i ,/. a volatility, and increased customer and gm ernment demands. o, r For this new era, we have launched a new way of doing business. More than two years ago, we initiated a proactive and forward-looking strategy called the Organizational Perfor- /s mance Improvement Process-OPIP fhr short-to prepare our company to meet the new chal-r. - r: lenges and emerging competition in aur industry and to identify opportunitics fbr growth and i renewal. With the cooperation and participation of employees at every level our entire organi-j t zation has evaluated its strengths. weaknesses, goals, and ideals. 4 n. y The OP]P strategy for continuous improvement has alTected virtually every aspect of our business, from management philosophy. staffing budgeting. and planning to employee wmpensation and attitude. We have defined our company's Vision to become a World Class energy company. estab- ~ j lished our company's Mi.oian to achieve complete customer 3"*# i-A. . satisfaction by providing superior energy products and 1 .'d. m_ servkes, and real[trmed critical compan.y l' /un as the ke.y to J our future success. BGNE is striving to become a premier energy c. r company to achieve better results and a higher level of performance for our key stakeholders. Our goal is ambi-to be rewgnized as one of a handitd of top utility \\ ' nous: W companies of distinctive investment quality and consistent earnings growth, and to be ranked among the best in customer sernce, value, and reliability.

• Q.y Pan of pufonning as Tmld Class energy wmpany s.

means conserving energy resources. I believe conservation is j g - x hidirwh.. L i 2

- _~.. _... - -. the right thing to do for our customers, community, country, and, indeed, the entire workl. Our Conserve 2000 initiative helps customers realize energy savings, boosts the competitive advantage of area industries, and protects the environment. It also serves shareholder interests by he! ping io contain power generation costs. Ccmservation means, however, that our company must develop all potential sources of revenue for future growth. I believe our gas business is a key area for fiiture growth, and I expect sales *. icrease as the public and government increasingly recognize the advantages of "BGdli is striving gas as a deamtiurning, abundant, and competitively priced fuel. We are making investments necessary to expand our gas service and promote natu: d-gas-powered vehides. to herome d premier Constellation I-loldings, our subsidiary, is also capitalizing on new energy opportunities. With seven years of esperience in developing, operating, and owning non-regulated power curlyy Company lo project % the Constellation Companies are positioned to benefit from the national trend toward competition in power generation. df/>ieve herrer results 1.asi October, the %tional Energy Act was adopted by Congress and signed into law by the President. This far-reaching Icgidation presents many opportunities and challenges. but 1 anda higher /ere/ of l believe it will have an overall positive impact on BG&E. The bill gives our company more flex-l ibility to purchase power from independent power producers and provides new freedom to our pnjormamc[or our Constellation subsidiary to develop economical power-generation proiccts in domestic markets. For 1992. Baltimore Gas and Electric earnings were $1.63 per share, down from S t.67 hey stahcholders." j per shue in 1991. The kiwcr per-share earnings resulted from an increase in the number of l shares outstanding and from the adverse efTect on utility operations of unfavorable weather and a duggish loc.d economy. Diversified business activities contributed Ile per share, up from 7e per share the previous year. The Board of Directors was able to increase the dividend to SI A4 ) I per share, a 2.9 percent pain over 1991, based on the company's long-term prospects for grov th in earnings. The mmpany has paid cash dividends every year since 1910, an 83-year rewrd of uninterrupt :d dividend payments. l 1 am pleased to lead our company in these changing and complex times. As inheritors of a proud tradition of excellence at BG&E, we strive to perform as World Class by balancing critic;d measures of succcss; achieving outstanding customer service, providing competitive rates for our services, offering a favorable return for our shareholders, providing a superior place for our employees to work. being a good steward of the environment, and demonstrating good corporate diizenship. These are the standards by w hich our company seeks to be judged. This is an exciting tirne for all of us at BG&E. We live in a world of perpetual change. I'm convinced that through OPIP and our other etTorts, our company has the power to capi-talize on change and achieve our vision of becoming a World Class energy company. b yi / C CmuSTIAN I1. l'OINist'X1rR Chairman ofthe Boardand ChiefEverurirr Officer February 15,1993 3 l

.I THE LEGACY 0F GEORGE V. McG0WAN d a .e, corge McGowan likes to describe himself as a born engineer. Maryland Governor 4 l j~ William Donald Schaefer prefers to think of him as a peerless civic leader. In reality, 7 gy George McGowan is both, and BGNE has been the greatest beneficiary of his enraordi-h nary qualities. The strong relationships he has built with government and civic leaders have j created for this company an unmatched fund of civic and political upital. i George rewgnized early the need to forge relationships among business, government, and the community. He was the driving force behind the creation of the Governor's Volunteer { Council, and, as the long-standing chairman of that W. $7ed group, he has involved the private sector in meeting S urgent civic needs. i W As diam and former Campaign Chairman of k% [lE. h '7 5 n000.k i_ 7 2. the United Way of Central Maryland and Chairman of w .y g e.;- s,g, ;

h. Maryland Economic Growth Associates, Inc, he has

%) k - - i..,f s' KN ;. created parmerships with the city and the state that have strengthened the regional economy. Ile chairs the board of a j , the Bahimore Symphony Orchestra and serves as a trustec 1 j -. of the Wahers Art Gallery-not, he claims, as a patron of l E( M institutions are vitally important to the life of the city. cither art or music, but because he believes that cuhural As a director of the Greater Baltimore Commince, he woiked to establish and now chairs ] she 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 of Maryland Board of Regents, George hkGowan directed the creation of the University of Maryland System, a fascaching reorganization of higher education. Always an engineer at n i heart, he serves as Chairman of the Board of Overseers of his ow n alma mater, the Bahimore r 1 Polytechnic Institute, the city's specialized science and pre-engineering high school. 4 I lie has been an equally tireless leader within the utility industry. In 1987, when George was President of the company, BGNE won the Edison Medal, the utility industry's highest r honor, for its wiJe-ranging connihutions to the community and particularly for its long-term ) conunitment to education. Throughout his wmmunity and industrv involvement, George McGowan remained a i forucful, handron executive. As Chairman, he guided BGNE through the difiicuh challenge of modernizing the Calvert Chffs nuclear plant, steered the company through a recessionary economy, and initiated an organiational imptosement plan that has enabled him to leave an organization that, in the words oi his successor. Chris Poindexter, is " stronger than any I've seen j in nyvears here.' j 4 4 I

r i C0RP0 RATE PR0F1LE l i l f; fd' t altimore Gas and Electric Company, with assets over 57 billion and f more than 9,100 employees, combines a core utility business with p if.4 [ diversified, non-utility operations. As the nation's oldest gas utility and g gf y one of its first electric atilities, we have a tradition of superior, low- [ a @;.p cost service and reliability. That uadition is the key to our future he unlity strategy and to the achievement of our corporate vision: perfor-mance as a World Class energy company. Our 2.3004quare-mile Central Maryland service area is economically diverse and offers a broad business base. Electric needs of our more than one million customers are met by BG&E's 10 k> cal power plants, including the Calvert Cliffs Nuclear Power Plant. Augmenting these are [ three Pennsyhania plants, of which we are part owners, and membership in the Pennsylvania-r New Jersey-Maryland Interconnection, a power pool atTording us additional operating relia-nv luid1: nu!.n,mia bility at favorable terms. tw twimir< h,iftiven f;'t r We supply our natural gas customers, numbering more than one-halfmillion in a ami a!! c e par <fninc Gwnal.'i! almd um nn 600-square-mile g.ts ~~~~ iir ava >umi v. 4 4 - '~~~~ servk e area, with ^ purchases from pipe-3 cQy indi.v apjmi-m JM I line companies and m.w mia.s me!.J.A rf m E producers. supple- . o.!<. < m/v!< i e.r><a l mented by out own <m ra w e. md d,6/6 < m.ve " en er/> a popu!.e liquefied gas and 4-propane facibucs. 7.L (lg - ru o (IMI ilm l BG&E's diver- ? b' d sified businesses. +M, + e Constellation 1loid- / ' - 4" 7 .I grouped under our p,,3yty,,, MA ings subsidiary, MONTGOMERY tiELAWARE l I COUNTY include power m7 vmanA \\ D generation, real j I estate development. ,A and financial invest-( \\ ments. These produce )., e,- meaningftd earnings WASHibTON, O C. KEY j support. while providing new M TERRITORY SERVED WITH ELECTRICITY f business opponunities that use our [M3 TERRITORY SERVED WITH ELECTRICITY AND GAS . cxpertise and experience. COUNTY j 5

UT1L1TY 0PERATIONS AND C D FJ S T E L L A T I O N C0MPANIES REVIEW h r wy a FW N T E R I N G A NEW ERA WITH OPIP J 3b. 9 ~ More than two years ago, we launched the Organizational Performance rP Improvement Prmess (OPIP) to establish 11GNE as Central Maryland's I energv tompany of choice. We believe that performing as a World Class n j energy company is not a fmal destination, but a lifelong journey of ^ ~~ continuous improvement and ever-higher standards of performance. 1 pg l Our company enjoys a strong foundation: customer satisfaction with l S ALES OF ELECTRICITY our (ompany is high and outpaces national utility averages. BGNE's latest residential customer favorability rating of Si percent is about six points higher than the national average for the utility industry. i l 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. I I 4 e i i I t I UTILITY O P E H A TIO N S l p p 1 l i, Dectric Sales j i l l Our electric sales are thnely tied to the growth of the Central Maryland economy and the I i weather. While milder summer weather than in 1991 and a slow-growing area economy caused l I l I 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 aticcted by the recession, increased at a moderate 1 percent rate. me Generation BGNE met generation needs in 1992 through a conunitment to environmentally sound, safe. SALES OF GAS rcliable, and competitively priced power production. Forty percent of our total power produc-tion was generated by nuclear units,54 percent by wal-burning facilities,3 pucent by hydro-clet nic plants. and 3 percent by oil, natural gas, and purchases. The company achicted substantial progress in safety and quality at its Calvert Cliffs l l Nuclear Power Plant as a result of an ongoing. comprehensive program ofimprovement and l l modernization. In February 1992, the Nuclear Regulatory Commission (NRC) removed f ( f Calven Chffs from its list of plants requiring close monitoring. On June 24,1992, the NRC I l I announced the resuhs ofits most recent Systematic Assessment of1.icensee Perfbrmance-its l l repon taring Calven Cliffs' performante in sesen categories from April 1,1991, to March 28, 3 j i 1992. In that report, the NRC gave Calven Cliffs ihree superior ratings and four good ratings. We continued the wmpetitive positioning of our fossil plants through retirement of high-wst units and a division-wide OPIP cffbrt that is increasing the productivity of our peopic. I ossil energy plants reduced operating expenses by $6 million in 1992. a 6

Pourr Traminiuion and Distritnerion Florida's liurricane Andrew reminded us how vulnerable trammission and distribution systems (an be to violent storrm. While our state was spared such uvere weather, a 1)cccmber 1992 storm ripped through Ccntral Maryland, knocking out service to nearly 100,000 customers. More ihan 1.800 IK,&E oewmen and support staff worked through the nigla in int!cment weather to restore senice. At IMINE, we never forget that restoring service quickly in emergen- ) cies is a uitic4d part of out (ommitment to provide superior cmtomer seni(c. ELECTRIC PE AK LOAD The company's strategy for continuous improvement is aho demonstrated through osmpicL nsive plans for upgrading and improsing our trammission and disuibution 3ystent Signifhant transmission linc upgrades already have been completed in the nonhern and nonh-casicrn ponions of the servic e ictritory, at a total mst of about $50 million. The mmpany is r also exicnding and upgrading i 15-kV trammission lines fnim Waugh Chapel to Cedar Park, a l [ $12.5 million pmica that should be mmplcied by 1994. Protecting Our Ent ironment Operation of our power plants will not be significantly ahcted by the requirements of Phase i i of the Clean Air Act, uhich heunnes cifcctive in 1995. Regulations for Phase 11, effective in the L j l year 2000, are yet to be mmpleted. We are working hard to ensure that our power-generation plants are among the mou environmentally sound in the muntry. In the last five years, we have speni mcr SP)O milhon on enviromnental impnnements, and Phase I wmpliance plans are estimated to unt about $55 million. Planningfhr Furmr Enngy Needs We project that our servite area will require additional generating capacity in the '90s. Last year we obtained permission to build a lau-megawatt peaking plant at our Perryman site. We also filed a cornpctitise bidding plan for purchasing future generating capatity to ftdfill a pan of our COMMON STOCK MARKET PRICE AND BOOK VALUE longer-trim needs. Cost Containment At the begimung of 1992, we believed it was necessary to impicment several cowontainment measures ha ause of flat icsenue proiutium. After ctaluating all wst-coning opponunitics, the y < ompany did not grani a gencral wage int rew, cliininated ovenime pay for most salaried employees, and offried a one-time, volumary early ictirement program auepied by 335 cmplovces. These auions reduced 1992 operating expenses by apprmimatcly 520 million. Our employce mmplemeni was reJuted by about 500 with no layofTs. I I i i D005 TING OUR FINANCIAL STRfNGTH The wmpany completed tuo public unsk o& rings m 1992, which intaled 15 million new se a*mnlon *.barcs. 'I'hc 5% tics raised $3}0 nullion to belp rnect capital retjuirentcrits and for otlict general urihty pmposes. These sm(L issues improved the utility companfs equity ratio to 45 percent in 1992, up from 38 percent in 1991. Over the past year, the utility has refinanced 7

approximately $230 million of debt, resulting in interest savings of 59.5 million over the life of the refunded securities. Constellation Holdings refinanced $400 million in debt m lengthen maturities and take advantage oflower interest rates. During 1992, the utility's construction expenditures were approximately 5367 million, or about 5.8 percent of total utility assets. These construction outlays mainly funded improve-ments to BG&E's existing generating plants and expansion of transmission and distribution UTILITY facihties to new and existing customers. We estimate construction expenditures for 1993 will CONSTRUCTION EXPENDITURES be approximately 5500 mdlion. ~ RATF ADJUSTMENTS l-Ahhough the company has adopted rigorous wst-control measures, a rate increase has been B f requested in order to achieve a return on equiry closer to the authorized level of 12.87 percent. l g } BG&E filed with the Maryland Public Service Commission (PSC) for its first base-rate increase e in nearly two and a half years on September 25,1992. The 5169 million increase (8.6 percent t F (i for electric customers and 1.5 percent for gas) would be effective in April 1993. f L L This action is largely due to the wst of improvements and investments in generation, t-h I transmission and distribution facilities, and higher operating costs due to inflation and plant imprmement requirements. Throughout 1992, the PSC has appmved four fuel-rate decreases, saving tustomers approximately 5114 million annually and significantly offsetting the as requested base-rate increase. These fuel-rate reductions are due to efficient operations at our ) plants, especially Brandon Shores and Calvert ClitTs. C O N S E R VlN G OUR RESOURCES l$ SMART BUSINESS All of BGNE's customcrs and sharehoklers benefit from conservation and wise management of our energs resources. Conserve 2000 is BG&E's comprehensise demand-side management (Dul) program. h includes traditional wnservation initiatives, encouraging energv efliciency, as well as load management aimed at reducine peak electricity demand. Both programs help 1992 0PERATING EXPENSES BGNE supply energ at more competitive rates by allowing our wmpany to defer building a major generating plant. BG&E shareholders also benefit. Effective July 1,1992, the Public Service Commission authoriwd recovery of costs associated with BG&Es wnservation efforts, /jl y pp5 including lost revenues, through the wnservation surcharge added to electric rates. V During the 1992 summer peak period, Conserve 2000 pmgrams reduced electric demand k [ :, ' [ by mer 350 megawatts. enough power capacity to supply more than 87,000 homes. By the year p, % p% 2000, demand-side management is expected to reduce by approximately 16 percent the peak electric load that would have occurred in the absence of the program. Between 1992 and the year 2000, DSM programs are projected to cut in half the peal-load gmwth fin electricity. E! - Et, N HEIGHTENED INTEREST IN NATURAL GAS H Clean Air Act requirements, which mandate a phase-in of ahernative fuels for flects of 10 or more vehicles beginning in 1998, offer us an unparalleled opportunity to increase sales of natural gas while improving air quality. Our natural-gas-fueled fleet, now more than 100 vehicles, serves B

1 d l il .I as a vidble reminder of IlGNI?s commitment to a clean and he.dthy environment. Three compressed natural gas fueling stationuvere buik on company properry and opened in 1992. j IlG&E has also undertaken a vigorous gas marketing effort focused on builders and ~ homeowners. The campaign has generated positive resuks. Our company's new home gas I market share esurded 24 per ent in 1992, with oscr.l.800 new homes connecting to gas mains. I j The company also paved the way for expansion of the area 1 j served by gas by securing commitments frorn a developer in Cet i! ( 'our:ty. ~ f I hough the nonoiny grew at a sluggish pace in j lW2. J new home sales grew only slightly, residential ~ j pas sales e in thclcss continued to flourish. Residential gas w j sales inc reased by 6.9 percent, and commercial and indus-1 trial gas sales rose by pertent, primardy due to colder

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{ weather during the IW2 heating season. Total gas sales c. g g, increawd by 7 percent oser 1991. . [ [ / + g.: i j CON 5iLLIATION HOLDINGS. ,, p g a i ~ X P t O fi l N G NIW D P P O R 10 N I T I E S T0R G fi 0 W T H The Constellation Companics are a major part of liGNE's strategv to provide additional nuU+' li l icvenue from non-traditional somces. Constellation continues to focus on its core energy eMo c" rs j business and, as the real estate market recmcrs, we plan to reduce Constellation's real // e j estate holdings. 's l l The improvement in Constellation's 1992 results was primarily due to higher carnings I Iloni pnhects and linancial investWcrits inLludilly cap!tal gain % ( - k I Reviewing some of the year's highlights: In its energy business, Constellation played a lead powcr. plani-Jevelopment role for the first time in developing the 8Lmegawan Panther l Crcck wastuoal proicci in Carbon Countv, Pennsylvania. Constellation sold 25 percent ofits a interest in its liigilly slluc%ful dCI'. project n Trona, Cali kHnia, but remains managing s s gencia pdftiler Jnd inwiler in 1}}is %-nicpaWatt, utal bircL1 hant. In ITM b$onstel!ation shnell l two operations and maintenan<c agirements with solar projects. We now have 21 contracts serving plants %ith combHicd capacity of rnoic tlian 1,100 triegawatts a f Consicilanon also improved ouupancy rates in its current real estate holdings, incteadng os c ra L(irnn1Crl al IH1 rctakl ot.cupallCy frorn bb percent to bb pCrcerlt. ke leased 250.000 I squaic tect in the National liusiness Park tower building to the federal govcinment, and i Conste!!aiion Cenue closed tuo leases totahng 100.000 square feet. Constellation's real estate l arm. The K\\ls Group, t hanged its name io Constellation Real Estate, Inc. In the imestments area. ConstcIlation had a good year that intluded a significant reuncry in its finan<ial limited partnership in the banking sector and strong performann ofits i l m.utetable sc< urities ponfolio. i l l i 4 q I i i t l 1 9 i i l i -.. - - - - - -.,.,, = -. -.,,

NEW lDEAS F0R A NEW TIME -[ company's commitment to quality can be symbolized in many ways. . /# At our C. P. Crane power plant, that symixil comes in the form of a 3f g~ giant "Q" carmi in the industrial carpeting underfbot in the plant's [ conuol mom. When asktd "What's that ihr?" a chorus responds: b "Qualityr i The operators on this shift iake that "Q' seriously. 'M /* i l The shift is made up of 10 operators: Chuck Kranu, Charlic 1 1 otke, $ics c Landau, Niike l undsgaard, Patrick Pfarr, Dave M4 q t Pennington. Al liocks, Many Pokrpvka, Ken Brruchahki, and Itick i liransby. As a team, they believe they have something special. They have "The Firc." i "And we want to see it spread to the test of the company," savs shift supervisor, Charlic lake. lt all began when ihn had Quahty Work Group training in the fall of '92 as pan of Fossil Energis improvement program. "We all took it to hean," sap Itick. "We feh there was a need for change." Along with the 13 other work groups at the Crane plant, this shift took the opponunity pnnided by the training to improse teamwork. conununication quality, pride, and personal responsibility. "We knew we needed to improve, and we started discussing what we could do as a shift," says Mike. Par agrees: "You can get in a rut where you do everything the same wav all the 1 time. But we took thanses and said,1.ct's try this and see what happens.~ They found out u hat could happen with a little innovation and extra etTon. One night, for example, the plant wukin't produce full power because burning icst toal caused the fly ash collec-tion hags to Jog. Ily ash is a by-product of coal-burning plants. Steve asked the shift who would be willing to do some extra work, manually shaking the fly ash out of the bags. h wasn't an easy job. h was uncomfortable, gritty. diny bull work. "But escrybody on the shift was wilbng to do whatever in took to get the job Jone," says Steve. *The resuhs wne wonh it. Wahout ovenime expense, we gave ihe load dispatcher w har he wanted: ftdl load the next day." This is just one example of the resuhs obtained by this shift as well as others at Crane and our other plants. The teamwork has paid otT: In 1992, Unit 2 set records for the longesi run and highest electrical generation since nturning to coal-fhing in the early '80s. "The load dispatcher is our customer," have points out. "If the electricity is not available when he needs it, he has to go elsewhere to get it. We do w hat we have to to get it out on the Unc." Steve Parks, managet of 1:ossil Operations, is understandably proud of the operators. "The work on this shiti at Crane represents many of the resuhs from the division's quality improvement process," he sap. "They've taken initiathe and had excellent results. They sci a great example for l C - ,.h. the rest of our division." And !kiLk sums it up: "We love our jobs. Not all of us love shift work, but we can tolerate it eg a lot more because we really do love our jobs. These people are great to work with." V V V I 10 l

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l Quahty service is a key m the success of any company. At IlGNE, outstanding customer senice CW m is our top goal. And BG&Fis front line consists of 115 pmfessional customer representatives y %E "" ~ armed with the latest equipment and information systems. "We've had a customer focus since day one," says Ted Berzinski, director of the g.., Customer Conununications Center. "We're the front door of the company and the main + contact with customersJ 3m en Although BGNE has alwan prided itselfin providing good customer senice. Ted and a his supervisors and customer representatives knew they touki do even better. So, when OPIP began, they took management at its word and made extensive changes in their workplace and how they did their jobs-all to beuer sene the customer. "!uidif /w a/way /..:e/ w/ gm, in ] They formed task forces and studied staffing levels to find out how many reps werc , or i r/om A,/ i ne essary to serve the 3.5 million (usmmer calls cach year, ranging fiom routine billing con <crns and appliante repair requests, to elettromagnetic fields and conservation program s c h r.js , o/r c/ :4 /r inquirics. They also took responsibility fbr the workplace ensironment, representatives' ou n > .o n /m training, and employee cmpowerment. The results are a case study in the way OPIP works. <a t < "We creaird a vision of w here we wanted to go with a customer focus," says Ted. "And ~ / ny.c >nr we a managt ment supported us all the way.' More than % employces panicipated in the team etTort. Maureen Tomcala sened on the li 4, " r.v efGciency task fonc facilitated by Rose Darone. Ron liokcmeyer facilitated the workshop 4o4 commiace on training needs. Tom Pellegrini coordmated the starting study, while Carol Weber ilm /t/H was part of a task force to examine the elettromagnetic field issue and how it would affect the 3 !.:. numhet of customer uus. Kimberly Rosenberg and I klen Ilandy sened on the development and o,, u /4 ;, 1 l tommunications task force, and Marguerite i forne worked on the renovations committec. "While 1 we were studying the way we did business," says Rose, "we asked

• e r ly on on ourselves. 'llow can we thanc,c m hcip the customer betterr 11

" ! ilt - s a i The most noticeabic (hange at the Cusmmer Communica. / /m 4 gs, tions Center is the physical transformation of the work space. An .., e o unusual ofGce design for BGNE, it's the direct resuh of employees wmking m get even,hing they necJ to do their jobs. Everyone

• * !o mim rbr n o" aprecs they were right. "Afier the renovation," Marguerite notes.

'J " morale, and es en production, went upJ Rows of desks, harsh r; ,.<a, j . J l lighting. and lots of noise have been replaced by modern office / ~, li ', la l I

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l po<haheerfuholors. and noiseabsorbing arpet and waHs. u+ o o mu,w i Am C "/ The most far.rcaching thange. howeser, is one you can't sce--the renewed enthusiasm of the employees themsthes. m /~ J % !m da "OPIP works? Maureen points out. "This was a grassmots movement. Being empowered lim >>u Hr- /w helps us resohe more tusmmer problems on the spor

• She continnes. "The reps generate so

/A,, H+. //m in many ideas. OPIP adows us to put those ideas inm c4' tt quicklyf 6 < /e/is e "I think we'rc all doing our jobs right the first timc7 licien says. "Thais our goal, and (iPIP is allowing us to do that? Y Y Y l 13

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!; d Many companies talk a good game of employcr A 4l 4 v i, / k empowument. At 14G&L we'd rather put talk into e' h i

oo la auion. Takc Richard Condello of Nucicar Engi-4 m

necring at Cabcrt CliHs. lic Islicted he could get a I r. bener deal on engineering work from outside vendors y m ' !a 4 I L, with a change in the purthasing process.1hc existing a y bidJing wstem worked welk but he thought applying d.a 1 ), a. pm ' "9 a in a 4Hi m way could uve nmnet and time at Calven Chffs. lint Richard didn't stop there. M;[ 1le felt he had the freedom to act on his belief. m f _ M'" Nf T.j Rith.ud got me.cthct with Manin prouor, Mark Sade and Brenda Barritk of Nudear ) Suppon $crvites, and Mike Jcifreys of purchasing anJ Materials Management. Through team- .a d we,t 2na innevation. thev acvi,ca a new appiic2tien of the biante, contract pmccs,. a iimitca y sj p,~ ' } numba of contraaois with blanket tontraas are pre-approved fi>r a speci6c type of work.14 ids yg (mm cath of acm assure ihai ne get the best deal, and the advante approval of the blankets ay " na s2ses nmc. N " Richard can now choose among four companies with competitise rates? says Mark. "Onc may be able 10 do it with the best people in 50 homs versus a so-so team that may take j m 100 hours. 'I hat's u here the savings are! ,e< ,> ~. The resuhs base been tangible and impressive. Instead of 12 weeks for the bidding 4 i process, the first jobs cach took three uctLs-and, with further rc6nements Richard and his a ' is group beliese they can reduce that. The nrst three jobs saved an astonishing 25 percent, with .o m, poicmial ye.uly sas ings of 5200.000. It's hetome a model for other areas of the plant. liow this group collabor.ned to aaomphsh its goal testiGes to OPIP at work. "I think w hat staned it was a questioning anitudef Brenda points out. "We all challenge ourselves by asking.110w can w e do ii bencrr we'ic s cry open m change? . /m A spirit of tooperation and tommunicaiion among departments helped make change casy. "I think group dynamia, play ed an importani role herc7 says Mike. "Some people might t fccl iheir pan of the protess is precious. It's their rurf and can't be questioned. Here, all team members opened themselves up to doing the job bencr? " />< vs n Managctncm suppon hdped. too. As hhard points out, "Each of us has different manap ment, yet ac ucre able to implemem this protess. We had a good idea. and we 4 u,' u o c cmpowered? i ?,6i This group cpitomizes so many of our corporate values. Taking responsibility to get resuhs. they c>.cmphtied the etTraircncss. ic.unw or k, and innovation needed to find bener ways i of doing business. They took advantage of existing systems and applieJ them in a new way. ~1 he ounome was an ca4ia, more cHicient process that got the desircd resuhs. Martin says he secs the new ulnes company-wide. "How ur apply them may be 4tferentf he says. ' but I see people taking great cHluts to improve quality, save money, and bcwmc rnore personally auountable foi uhar thes dof Y Y Y 14

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l Environmental concern has become a impular bandwagon in America. That's good, because the eld < - vm J s i,, planet Earth can use all the hcip it can get. How that affects the bottom hne, howescr, is a Gm !O//-!r r /v /m < dilemma many corporations fate. At 14GNE, Greg Kappler and his co-workers in Environmental /w 6 < m u!w 4 r" s oirmosc w ! m n,ero Pmgrams balance care for the environment with profitability every day. Greg may look like a bearJed " tree hugger," trudging through the !!or.m : r 16 osi'/c / aw l b woods in flannel shirt and icans. But tonorrow he may wear a suit and / !^ t - "i w r /* m l i tie while negotiating for the uimpany on an envimnmental tegulation. m.: 6 t/vir i+"z e i" a l 1 ilis job is a balancing act, he admits. But he believes company prof-D ~

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i ( company has always worked to comply with all regulations Greg believes N we can respect the environment and the honom line at the same time. < m had < do. 4Nm OPIP and the accompanying torporate values have helped this a" m m < < :a environmental sdentist with a background in business juggle his roles. G ' in m my u rvm ~ > w /vy / "/c "I'm really glad to see that wt have environmental responsibility as a value " uys Gng. "I can make my decisions and take personal repinsibility fbr them, knowing they are justified by our corporate values." Greg's osprev nest ulocation project is one example of the 1.ind of creative thinking OPIP r entourages. What staned as an isolated nest on a utility pole has expanded to a project that will help the bhds, kerjuustomers in servitc prevent untly fires and damage anJ save the company money. Yp The project began in June '91, when an employee spied a our-foot diameter esprev nest on '[! some cicetrical feedcr lines in eastern llahimore County. The pt tential fbr fire was great, so the nest had to go. With a pennit, the law allows (br destruction of empty osprey nests, but Greg thought it would be a bctter iJea to move it. The osprey pmica was ourn. Ile nmved the nest to a ~ 4 specially designed extension on the mility pole. The bird family returned a few hours later and raised three young in their new home that summer. Sin <c that first nest relocation Greg has fbunJ nine rnore osprey nests on BGNE property. " / / cre i ive n a y m e e n / Many hne been mmed. The result of this envimnmental stewardship was the successful fledging > " 1 :: wn <m < w n al : < of I, mprey young m IW2. w!r < 1/c The osprey projcet began largely as a safety concern that needed m be hand!cd in cornpliance rn< 4 /CI vr with the law. But Greg's vision, along with the enthusiastic help of many other depanrnents and >:/ S 4 the backing of management, turned it into something more. Tluough publicity, he encourages employees as well as customers to report nest sightings on BG&l. property. "As the Chesapeake " J :/ c c, l'< 1/ n // : Bay gets heahhier, we're going to have more osprey and they're going to continue to nest on our r structures. I un't be escrywhere, but I need to know about nesn on our propeny. If we lose

i r muo-cmiomers due to a pole lirc, then weic got problenn."

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Greg has other responsibihties, including all f.ucts of land-use management. In a state-ceni-tied sedimcm and erosion contml training uiurse, he teaches BG&E designers engineers, and /h irm !D e u,nstruction personnel how to do their jobs with mhumal effcci on the environment. !c:e s The ospreys arc one of his favorite pmgrams, though. Moving the nests, he says, "makes the <.m ospreys happy, makes the umanunity happy, keeps us from having an outage, and it u,sts very lin!c " 17

_.m..__ 4 UTILITY 0 P E fl A T I N G STATIST l C' S 1992 1991 1990 1989 1988 ] ' ELECTRIC O P E R A TIN G ST ATISTIC S i Res enues (In Thousand0 Residential _ $ 839,954 S 882,591 5 718.032 5 648.883 5 620.660-Small Cornmercial. 242,345 246,669 220,687 194,573 178,727 large Commercial and Industrial.. 802,299 816.233 732,837 666,042 626,300 System Sales.. 1,884,598 1,945,493 1,671,556 1,509,498 1,425,687 Interchange Sales.. 64,323 23,845 26,629 17,802 43,919 Other.. 19,002 25,187 14,268 19,867 22,528 Total. $1.967.923 51,994,525 51,712.453 51,547,167 $ 1,492.134 Sales (In Thousands). urn Residential. 9.735 10.097 9,283 9.451 9,196 Small Commercial. 2.666 2,673 2,561 2,461 2,293 1 arge Commercial and Industrial 12,906 12,742 12,534 12,879 12.491 System Sales.. 25.307 25,512 24,378 24,791 23,980 Interc hange Sales.. 3,180 1.166 1,088 595 2,052 Total. 28,487 26.678 25.466 25.386 26,032 Cu:srome n Residential. 956,570 939,734 930,880 913.910 895.881 Small Commercial. 95,684 93,808 92.102 90.647 87,049 1.arge Commercial and Industrial 7,750 8,030 7,991 7,587 8,175 Total. !,060,004 1.041,572 1.030,973 1.012,144 991,105 Average use per Residential Customer - Kwn.. 10.256 10,799 10,064 10.438 10,362 Average R.ne per KWH (System Sales)- c.. 7.45 7.63 6.86 6.09 5.95 Peak Inad (One-hour) - Mw. 5,558 5,910 5,477 - 5,304 5,381 Capabihty at Summer Peak - Mr. 6,687 6.608 6,159 6,164 5,930 GAS O P E 8 A TIN G S T Alls TIC S Revenues (In Thousando Rcudential. 5 242,737 $ 220.653 5 218,967 5 242,389 5 225,035 Small Commercial. 37,121 33,538 34,622 40,011 36,394 i 1.arge Commercial and Industrial l Excluding Delivery Sc: :ite.. 96,150 77,506 87,389 90.983 92.637 Delivery Servite.. 17,880 17,319 21,156 27,069 19,364 Ot her.. 9,019 9,179 11,285 11,349 8,106 Total.. $ 402,937 5 358,195 $ 373,419 5 411,801 5 381.536 Sales (in Thousando orn Residemial. 39,012 36,519 35,026 39,806 40,140 Small Commercial. 6,622 6,154 6,144 6,889 6,792 1.arge Commercial and Industrial Excluding Dehvery Service.. 22,169 18,138 19,324 18,772 21,770 Delhery Senice.. 40,741 40.673 40.593 45,230 40,827 Total. 108,574 101.484 101.087 110.697 109,529 Customcrs Residential. 486,863 482,085 482,680 482,538 482,011 Small Commercial. 32.596 32,336 31,981 31,881 31,582 I arge Commercial and industrial 5,816 5,610 5,373 5,307 .5,160 Tota!.... 525,275 520,031 520.034 519,726 518,753 Average use per Residential Customer - Therms.. 806 757 726 826 833 Average R.uc per Therm (Euluding Debserv Service) - 5.. .55 .55 .56 .57 - .52 Peak Day Sendour - nrn.. 609,200 610.200 653,900 663.200 b'9,500 Peak Day Capabihty - tvru. 847,000 817,000 853,000 761,000 793.900 18 Balnw,e Gu andElema Cmnpaoy and %hadiann

SELECTED FINANCIAL DATA I 4 1992 1991 1990 1989 1988 Dol:ar anwants an thousaruh. exceptper-share anwunn

SUMMARY

OF O P E R ATIO N S Total Revenues.. 52,491,343 52,448,853 52,178,112 52.032,009 51,921,241 Expc es Other Than Interest and income Taxes.. 1,955,998 1,959,665 1.854,183 1,555,424 1,424,291 Income l~mm Operations.. 535,345 489.188 323.929 476.585 496.950 Other income Ai!ow ance for equity funds used during construaion.. 13.892 23,596 27,086 18,564 16,056 Other income.. 8,204 3.032 9,588 12,364 7,498 Total other income.. 22,096 26,628 36,674 30,928 23,554 income Before Interest and Income Taxes.. 557,441 515,816 360,603 507,513 520,504 Interest Expense Interest charges.. 197,912 210.458 191,471 164,369 136,071 Allowante for borrowed funds used during construction.. (8.165) (13.870) (26.266) (14,776) 0 2,075) Nct interest expense.. 189,747 196,588 165,205 149,593 123,996 Income Before income Tases.. 367,694 319,228 195,398 357,920 396.508 income Tnes.. 103,347 85,547 19,952 81,629 93,096 Income Before Cumulative EtTect of Changes in Auouming Method 3.. 264,347 233,681 175.446 276.291 303,412 Cumulanve Lffect of Change in the Method of Accouming for Ncome Taxes.. 19,745 Cumulative Etfect of Change in the Method of Accouming for Unbilled Revenues Net of Taxes.. 37,754 Net inc ome. 264,347 253,426 213,200 276,291 303,412 Preferred and Preference $tock Dividends.. 42,247 42,746 40,261 32,381 29,375 Earninp Applicable m Common Smck.. 5 222,100 5 210.680 5 172,939 5 243,910 5 274.037 Earninp Per Share of Common Stock Before Cumulanvc EtTect of Changes in Accouming Mcthods.. 51.63 51.51 51.09 52.03 52.31 Cumulative I ticct of Change in the Method of Accounung for Inwmc Taxes.. .16 Cunmlatisc UTect ofChange in the Method of Accouming for Unbilled Revenues.. .31 'l otal Earninp Per Share of Common Su(L 51.63 51.67 51.40 52.03 52.31 Dnidends Dedared Per Share of Common Su.ek.. 51.43 51.40 $1.40 $1.38 51.32 Ratio ofI arninp to Fixed Charges.. 2.65 2.27 1.78 3.02 3.71 Ratio of Larnings to Fixed Charges and Preferred and Preference Stock Disidends Combined.. 2.08 1.82 1.47 2.44 2.94 flNANCIAL S T ATIS TIC S AT YEAR END Total Assets.. 57.374.957 57,137.989 5(n710.375 55.985.679 55.126.362 Capaahration long. term dcht.. 52,376,950 52,390.115 52,193,844 52,076,620 51,769.066 Prefen ed sank. 59,185 59,185 59,185 59,185 59,185 Redeemable preference stock.. 395,500 398,500 365,000 322,800 229,600 Prcference suick not subject to mandatory redemption. I10,000 110,000 110,000 110,000 110,000 Common shareholders' equity. 2,534,639 2,153.306 2.073.158 2,001,188 1,885,245 Total tapitahration. 55.476,274 55.111.106 54.80 L187 54.569.793 54.053.096 Book Value Per Share of Common Stock. 517.63 517.00 516.58 516.60 515.85 Number of Common $hareholders.. 80,371 71,131 73.049 75,762 79,808 Cenain prwrpar erwunt< have lwn rcrawd to as6rm wah riv amnnyariprnensation. Allpenhor arrwun.s fare been vorawd to refs1 t e 5for 2 mmnwn umk sphr tu sharehuk/m ofmordas ofApnlD. JW1 h Julame e Ga. andIkaw Gnnpany and%kuirann 19

MANAGEMENT'S D1SCUSSION AND ANALYSIS 0F F!NANCIAL C0NDiTl ON AND 11 E S U L T S 0F 0PERATIONS i The finandal condition and resuhs of operadons of lialtimore (Notes), Utdity Operating Statistics, and Scleacd Financial Gas and llcaric Company (11GNE) and Sub idiaries fadlev Data seeJons of ibis Annual Report. Facmrs significantly tivdy, the Company) are set fonh in the G>nsciidated Hnancial aflecting resuhs of operations, liquidity. :nd capital resources are i Staicments Notes to Consolidaicd l'inancial Staicments discussed below. I it E S U L T S OT U P E R A TIO N S l'arnings per Sharc of Gmunon Stock by higher operations and maintenance expenws and higher Consohdeed carnings per share for 1992 were 513 3, which fmancing uws. represems a decrease of 5.01 from the 1991 levd of $1.67 based Earnings from utility operations are affected by the regula-on the increased average number of shares of uinunon stock tion ofliGNIG rates by the Maryland G>mmission and by the outstanding as a resuk of the pubhc issuance of 15 mdlion efTect on sales of economic and weather conditions. During umunon shares during 1992. All per-share amounts have hten 1992 and 1991, unfavorable economic conditions in the adjusted to refica the ihree-lin-two common siosk split to Companyi service terrimry have negativdy impaaed sales, and shareholders of record a.s of April 23.1992. (Sce Note 6.) The operations and maintenance expenses have incrc, sed abmc ihe earnings per dure arc unnmarited as 6dlowx lesds provided for in the December 1990 base rate increase. If 1992 1991 1990 curreni cu>nomic ainditions in the Companyi service terrimry Utihtv business omrinue, dcaric and gas sales growth is expected m be low Cu'rrcni.vear operations.. 51.52 51.60 51.16 in 1993. During 1992,13G&E filed an application for a Provision fin possible 5164 nQion increaw in dearic base rates and a 55 million ina e in gas base rates which is currendy pending before the disanow ant e of replacemen, energy costs (sce Note 14).. C19) Maryland Commission. An order fmm the Maryland Gunmis-l Cumulaiive cflet t of change sion is expected in April 1993. Earnings will be impaaed dming m the method of accouming 1993 by the outcome of this caw. In addition, there are for unhilled revenues currendy several fuel raic cases pending before the Maryland (we Note 1 L. .31 Gnmnission, as discuswd in Notes 1 and 14, which could also Total utility business.. 1.52 1.60 1.28 i* P"" I"'"[# F " '"I"E Exdudmg the impact of the change m. the method of Dncrsified aa..wmes aaounting for income taxes, carnings from diversified activi. (}urrent q car operations.. .11 bow .12 tics, which primarily represent the operations of Constellation (aamulatne eflect ofchange iIWi Inc ed'in mbsidinin kohirdn N GmudL I m the method of acuiunting tion Gunp.mics), increased dming 1992 and ' cocawd during d for inuime taxes bec Note Ib. .16 199L The reasons for the changes in diversified activities Total diversificJ acthities.. .11 .07 .12 camings are discussed on page 23. Total 51.63 5L67 51 A0 g 7y g,g; cg I:arnings Applicable to Common Stock paher ainditions affea the level of BG&E's utility sales. Lolder weather during the wimer, as measured by greater 1.arnings appheable m common stotk.mcreased.m 1992 and heating degree days results in greater demand for ekctricity and 1991. The increase in 1992 ref!cas mcreases in loh utility carn ~ as m operate heating systems. Cooler weather during the ings and carnings fmm dauufied acuvmes. lhe 1991 increase summer, as measured by fewer cooling degree days, resuhs in resuhed from higher utihty catnings, partially ohset by a deuca.4c less demand for clea'ricity to operate coolitig systems. in carnings fmm dwcrs, died actn;mes. Omarsdv, warmer weather during the winter. as measured by , Unihry carnings macawd m 1992 as a resuh of increased fmer hdig depe days. resuhs in less demand for electricitv cicaric and gas saics during the 1992 winter due to colder and p operm bihg systems. Warmer weather during th'e weather as comparut to 199L lower operations expense, lower summer, as measured by ~ wr cooling degree days, resuhs in inicies: tharges. and greaier other muime. Ihis inacase was greater demand for cica,. wrate uioline, systems. The substantially oil,so by lower electric sales during the 1992 degree dan chart bdow s c.hanges in cooling and sunmyer due to cooler summer w;catha as wn7pued to the prior heating degree days for the, . 12 and 1991. vear. the efhci ut weather on uninv earnmgs n dncuswd below. Utihty carnings increased during $991 primardy as a resuh of 1992 19H ~ higher revenues fnnn the dcctric base raic increases authorized by Cooling degree days.. 707 1.026 the Pubik Service Commission of Maryland (Maryland % change compared to prior year.. (31.1 )% 19.2 % Commhsion) m Daember 1990 and inacawd dectric sales duc IIcating degree days 4,975 4,343 to warmer summa wember as mmpared to 1990, pani.dly olliet % change ownpared to prior year.. 14.6 % 9.5% 20 B.dumm Gm and uraw any,am ami wtiann

P J s BG&L Utility Revenues and Sales of Brandon Shmes Unit 2, and 2) increased purchased capacity The thanges in deuric rnenues during 1992 and 1991 a, charges. In addition to the base rate increases discussed abme, compared to the respenive prior vcar were a result of the the Maryland Commission's December 1990 rate order also folkming fauors: authori/cd an immediate base rate increase of 577 million which increased revenues in 1991. Electric base rate re enues are 1992 1991 expected to be impacted positively in 1993 by the Maryland f,,,,yf3,,,, Changn in sysicm sales volumes.. 5(32.0) 5 59.0 Coimniwion's anticipated April 1993 order relating to BG&Es increased base rates.. 84.9 176.4 pending application for a SIM million annualincrease in electric Changes in fuel rates.. U 13.8) 38.5 bac rara Changes in revenues f rom sntem sales.. (60.9) 273.9 The dianges in fud rate revenues for both perioth resulted Changes in iniachange sales.. 40.5 (2.8) froni the operation of the ckuric fud rate funnula. (Scv Notes 1 Changes in other revenues.. 16.2) 11.0 and 14J Changes in fuel rate revenues and interchange sales nonnally do not impact earnings. Fuel rate revenues are designed .Iotal changes in cleurit revenues _ 5(26.6) $282.1 to recover the actual mst of fuel', net of revenues fmm interchange sales. If the Marvland Commission were to disalkiw rewverv of Ucari l l ld to cosmmers anv p.ut of these wsts, earnings would be impacted negatively as ~ wiihm the {qsystem sa es represent vo umes soMaryland Lonummy s s omp dim in h R ssion. these amounts exdude interchange sales. The decrease in fud rate revenues during 1992 resulted as dacussed below. the t hanges m clearie system sales volumes as imri y fmm a lower fud rate wruch rc0 mis the remai ing cfTect n wmpared m the respecove prior year were as follows: of 1) a less<osd} rwent#-four-month :neration mi. comIured to E 199~' 1991 1991 due to greater generation at the Cahm Cliffs Nudcar I Residential (3.6)% 8.8% Power Plant,2) 558 million of annual fuel cost savings resuhing Small wmmercial (0.2) 4.4 fn,m the wmmercial operation of Brandon Shores Unit 2. and 1.arge commercial and industrial 1.3 1,7

3) the Oaoler 1991 expiration of a surcharge to the clearic fud Total..

(0.81 4.7 rate. Increased fuel rate revenues in 1991 resuhed from higher sales volumes, panially otTset by the fuel rate rechtcrion to reflect Sales to the residential and small wmmercial dasses of the fud wst swings rnulting fmm the commercial operation of casiome s in 1992 rc0cct the negative cHens of cooler weather Brandon Shores Unit 2. Uearic fuel rare revenues are expected to r during the 1W2 summer, parually offset by the positive efEcts wntinue m decrease during 1993 as a resuh of a less-msdy gener-of wider weather during the 1992 wimer anJ growth in the arion mix expected to be rcfhued in the fuel rate formula due to numba of cusmmers. Sales to large commercial and industrial the continued operation of both units at Calven Cliffs. msmmers in lW2 reflect modesdy imprc ed ewnomic wndi-Imcichange sales increased during 1992 due primarily to tions in that segment as compared to 1991 and increased sales BG&Es less wstly generation mix in rdation to that of other volumes to Bethlchem Steel due m the start-up of Bethlehem Pennsylvania-New Jersey-Maryland Intermnnection utilitics. Srecis newly modernized hot strip mill. The increases in sales The less msdy generation mix during 1992 rc0ects the opera-during 1991 were due to warmer weather during the 1991 tion of the Calvert ClitTs Nudear Power Plant and a full vcar of summer as wmpared to 1990 and gmwth in the number of ,mmercial operation at Brandon Shores Unit 2. customers in cath dass parnally offset by the dTects of less Gas revenues increased in 1992 and decreased in 1991 as a fawrable emnomic wnditions as wmpared to 1990. In addi-

uh of the folhiwing facmrs

tion, sales so large commenia! and industrial customers during ,997 j993 1991 reflect hmcr sales wlumes to Bethlehem Steel compared jy g, m 1990 due to a lengthy planned outage at Bethlehem $icel s increates m sales volumes.. 58.6 5 5.6 hot strip mill. Increased base rates.. 3.3 1.3 The mcreased base rate sevenues m 1992 and 1991 redcct Changes in gas wst adimtments.. 32.9 (20.1) ihe dkus of the Mardand (ommission s December 1990 rate Ch w' in other revenues.. (0.1) (2.0) orda which authonred a $124 nullion base taic increase to provide rate rewgnition for BGNEs inv stment and operating Total changes in gas revenues.. j44.7 5(15.2) e expenso at Brandon Shores Unit 2 c ective with that Unit's r initial wnunercial operation in Mn i991 and a $53 million The dianges in gas sales wiumes as wmpared m the respec-surcharge to base rates effecthe in Oaohcr 1991 m recover the prior year were as follows: certain purchawd capacity charges. Ahhough thee luse rate 1992 1991 inercases have inacard BGNEs electric rnenues during 1992 Rnidential 6.9os 43% anJ 1991, they have had hnle cfhu on net income because they SmaH wmmercial 7.6 0.2 hac cwentially been otTset by 1) a decrease in the allowance for 1,ge mmmercial and industrial 7.() (1.8) funds used during unstruction and higher depraiation npense 'l otai. 7.0 0.4 and other taws due to the wmpleuon and wmmercial operation Bahm W.mdIlan ( m,t m suikinidwm 21 i

3aie, m all dasses of customers during 1992 reflect the posi-Purchased gas expense was as follows: tive efTects of colder weather during the winter of 1992 and 1992 1991 1990 growth in the number of customers. Gas sales to large commer-jy maj,, cial and industrial customers for 1992 also reHect increased sales Mual c sts. $213.6 $185.1 $181.1 volumes to Bethlehem Steel due to greater use of gas in Beth-lehem Steefs production and processing businesses. The NC' *T Id'I'" Il I'" increased sales to residential and small commercial customers under purchased gas adjustment 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 (ommerci.d and industrial customers in 1991 was attributable primardy 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 resulting 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 resenues increased during both years as a 1992 also reDects higher gas costs. The Federal Energy Regula-result of a 54 million gas base rate incrcase authorized by the tory Commission recently issued Order No. 636 which rajuires Marvland Commission effective October 1,1991. Gas base rate the unbundling of pipeline services, the elimination of pipeline revenues are expected to be impatted positively by the Maryland sales service, and greater competition at the wellhead. This Commission's anticipated April 1993 order relating to BGNE's Order, which is expected to significantly increase BG&E's l pending application for 55 million ofincreawd gas base races. responsibility for ensuring that adequare transmission and The changes in gas wst adjustments in each year reDect the smrage capacity is maintained and is also expected to increase operation of the purchased gas adjustment clause (See Noie 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-pipeline basis. ings. Gas cost adiustment revenues are designed to recover the Operations expense decreased in 1992 due to lowcr nudcar actual gas costs inc urre. ' Se increase in 1992 is attributable to contractor costs and lower payroll costs attributable to the a mmbination of highu sales 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 reAcets a wtdement of certain take-or-pay issues with BG&E's were partially offset by the $9.8 million one-time cost of termina-principal gas pipeline suppliers. Take-or-pay costs refunded to tion benefits associated with the VSERP and by higher fringe BGNE are passed on to customers through the purchased gas benefit costs. Operations expense increased in 1991 due primarily adjusunent dause. to higher payroll and fringe benefit custs. 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 lectric fuel and purchased energy expense was as follows: Standards No.106, Accounting for Postretirement Benefits, 1992 1991 1990 which is rfTective January 1,1993, as discussed in Note 11. A majmm Maintenance expense was essentially unchanged in 1992 Actual wsts.. 5445.2 5492.6 5659.2 due to lower costs at certain fossil-fuel electric generating plants, Net reem ery (deferrab of wsts substantially offset by higher costs at the Calvert Cliffs Nudear under electric fuel rate Power Plant due to an extended refuehng outage at Unit 1. dause (see Note 1). I11.0 105.6 (107.8) Maintenance expense increased in 1991 due to the extended Total expense.. 5556.2 $598.2 555).4 maintenance and repair outage at Calvert Cliffs Unit 2. Depreciation expense increased in both years as a resuh of The decrease in actual dectric fuel and purchased energv h@n hels of depreciable plant in senice, induding Brandon costs during both 1992 and 1991 was due priniarily to a less Shores Unit 2 which began commercial operation in May 1991. cmtly generation mix as a result of the return to operation of the Depwdation expense for 1991 aho m0cas a $12 rnEon annual C,dvert Cliffs Nudear Power Plant following the completion of incre se in nudear decommissioning accruals as authorized by extended maintenance and repair outages and the May 1991 the Maniand Commission in its Dect.uber 1990 rate order. mmmercial operation of BranJon Shores Unit 2. The decreases laxes wha than income tax 4 increased in 1992 due in both vcars were partially offset by purchased capacity charges primarily t higher property taxes a.nbutable to mcreased prop-beginnirig in October 1991 under the Pennsvivania Power & crry ssessments. The 1991 increas re0wts higher public service Light Cornpany Energy and Capacity Purchase Agreement. As company fundiiw, payr U, and gpq te annbutaNe to discused in Note 14, during 1990 BG&E recorded a provision mercased gas and electnc revenu s, wages, and property assess-of $35 million for the possible disallowance of certain replace. "C""' '""P' I*'I - T InHan n frects the Company through increased operating ment energy costs associated with the extended outages at the Calvert Clitfs plant during 1989-1991. expenws nd h@a wplannent wsu fo. utiury plant assas. Although the effects of in0ation can be nitigated through 22 B.dumarr Gv andIlarru Gimpany and Sulmdkrm

l timely rate relief, the regulatory process imposes a time lag sale of selected assets to nrovide liquidity for ongoing activities during whid increased msts may not be recovered. This repe of the Constellation Companies. During 1993, investment larory lag is auributable in pan to rate relief being based on past earning are expected to continue to redect the realh> cation of msts rather than pmjected costs. It 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 size of the investment replacing plant assets together with the opponunity m carn a ponfolio following the sale of certain assets during 1992 and fair rerum thereon, beginning at the time of replacement. 1991 to pmvide liquidity for other ongoing activities of the Constellation Companies. In addition, approximately { Diversi6ed Activities Larnings 58 milhon ofimestments are expected to mature during 1993, l i Earninp per share from diversified activities were as follows: and the proceeds will be available for reinvestment or for other cash needs of the Constellation Companies. 1992 1991 1990 Diversi6ed activities The ponstellation Compame real estate development bus. mess meludes land under development; office buildinp; Power generation systems.. 5.08 5.03 S.07 reml pmjem mmmercul pmjects; an entertainment, d_mng i l'inancial investments.. .09 .01 .08 and retail complex m Orlando, Honda; and a mixed-use Real estate and senior el pment m Anne Arundel County, Maryland. livin (.05) (.11) LO2) .plannt4un. n Other.g facilities.. e m4orky of these projects are in the Baltimore-Washington (.01) (.02) (.01) corridor and have been adversely afTected by the depressed real Curreni-year operations.. .11 009) .12 estate and economic markets, resulting in reduced demand for Cumulative elTect of change in the purc hase or lease of available land, of! ice, and retail space, as the method of accountir.g weij as the inabibry to complete anticipated sales and leases of for income taxes (see Note 1). .16 real eswe pmjects. Due to these conditions, in 1991 the Total diversi6nt acuvities.. 5.11 S.07 $.12 Constellation Companies recorded write-downs aggregating $10.0 million on cenain real estate pmjects and a 53.6 million j The Constellation Companies' power generation systems reserve for loans where the value of the collateral was determined l 1 l business includes the development, ownership, management, to be less than the outstanding loan balances. Additionally, the and operation of wholesale power generating pmjects in which Connellation Companies' real estate ponfolio has experienced the Constellation Companies hold ownership interests, as well continuing carrying costs and depreciation and, during 1991, as the pmvision of services to pmer generation projects under the Constellation Companies began expensing rather than capi-operation and mamtenance contracts. Earninp fmm the talizing intercsr on certain undeveloped iand where development Constellaiion Companies' power generation systems business activities are at minimal levels. These factors have negatively increased during 1992 primarily due to a gain on the sale of a impacted earnings in both 1992 and 1991 and are expected to ponion of the Constellation Companies' ownership interest in a continue to do so until the current market condnions improve. power generation pmject. Earning decreased during 1991. Cash Anw from real estate operations has been insufficient to reDecting the abente of tax credits from new power generation cover the debt service requirements of cenain of these projects. projects, partially offset by income from energy projects in Resulting cash shortfalls have been satisfied through equity infu-which the Constellation Companies have an equiry interest, sions and loans imm Constellation 11oldinp Inc, which income fmm operating energv proiccts on a mntractual basis, obtained the funds through a combination of cash flow generatal and the sale of a hmited pannership intercsr in one project. by other Constellation Companies and its corporate bonowinp. Larnings from the Conve!!ation Companies' ponfolio of As long as the real estate market and kical economic conditions Gnanual investmems indude capital gains and losses, dividends, remain soft, earning from real estate activities are expected to inmme from financial hmited pannerships, and income from remain depressed. i financial guaranty insurance companies. Investment earning The Constellanon Companies plan to hold real estate increased in 1992 due to an improvement in the performance of proiccts until the market improves. This condition is a function certain financial limited partnerships and the effect on 1991 of market demand, interest rates, credit availability, and the caminp of 1) a 510.5 million write-down to reflect the market strenph of the economy in general. The Constellation Compa-value of certain of the Conste!!ation Companies' marketable nies' Management believes that until the economy shows equiry securiiics, substantially all of which were subsequently sustained gmwth and until excess inventory in the market in the i soki, and 2) a $3.1 million write-down on two financial limited Italtimore-Washington corridor is reduced, real estate values are panner hips (banking and financial services) that were adiusted not anticipated to impmve. If the Constellation Companies to reflect market value. Investment earninp in 1991 were were to sdl their real estate projects in the current depressed funhet reduced due to the realk> cation of the investment part-market, losses in amounts difficult to determine would occur. folio to emphasize more liquid but lower >ielding securities and Depending upon market conditions, ftaure sales also could a detline in the size of the investment ponfolio following the result in losses. In addition, were the Constellation Companies !GMm Ga.edi!n tru Gmy.any.w&hlurm 23 i

to change their intent about any pmico from an intent to hold intercsr charges decreased in 1992 primarily as a resuh of until market condaions impmve to an intent to sell, applicable deocased levels of debt outstanding and k>wer interest rates. accounting rules would require a wriie-down of the project to partially otTset by the dncontinuation ofinterest capitalization markct value at the dme of such thange in intent if market value on certain of the Constellation Companies' real estate projects. is below book value. The deucased debt levels in 1992 are attributable to the issuance of additional shares of wmmon stock and the recoverv Other Inwme and I.apenses of prnioudy dcferred electric fuel costs. The increase in interest ,I he allowance for fimds used during wnstruction (AlC) barges in 1991 primarily reflects increased levels of debt deucawd m both years due to tlye completion aryd wmmenial di i b i - The 1991 operation of Brandon Shores Unn 2. In 1992, thn deocase was d da M wcm F m@ mik& m wndQ i i partially offset by the effects of the npansion of the AlL pohcv uuhty wnstruction npenditures. ( as discuwed in Noie 1. The decrease.m 1991 was partially otiset inwme tax expense increased during both perimb as a resuh by the use of a pre-tax Al L rate of 9.96 cffecove January 1, of higher pre-tax earnings. In i,191. the increase was also due to 1991 in wnneuion with the adopn.on of the hability nyctnod' of &i W d & liaihn udd of -W fm acmunting for income taxes under Starcrnent of I manc,al i inwme iates, which requires that income taxes previously Acmunting Standa1ds No.109. liowner net mmme was not recorded as a reduction of AFC he rewrded as a wmponent of l-affected by thn change m recording AIL Under Statement income tax expense. l N.o.109, inwmc taxes rcpicscnting the difference between a Preferred and preference stock dividends decreasal in 1992 pre-tax and net-of-tax AFL raic are rewided as a wmponent of. due to the redempdon of redeemable preference unck during inwme tax opense rather than as a reducnon of AFL. i 19W d 199L Preferred and preference stock dividends l-Net other inwmc and deduaions inacased m 1992 primari!y mdgm k di 19H e a M d m due to lower charitable donations and deacased m i991 pnmanly md outstanding. due to lower carnings from merchandising operations. [10 0 l D I T Y AND C A PIT A L R E S 0 tl R C E S BG&E Capital Requirements preference stock, and common stock were 51,066 million. BG&l"s construction program is suhicci to wntinuous review 5100 million, and $475 million respeuively. During the same and modification, and actual cxpenditures may sary from the three-year period, BG&Es retirements of long-term debt and estimates on page 25. Potentially, the most significant proicci 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 facility. liowever,in light of the Manland Commission's intn>. timing of future iwuames and redemptions will depend upon du tion of a wmpetitive bidJing praew for the wnstruction of market conditions and BGNEs needs. tuture dutric generating tapacity. BG&Es role in the construe As disdosed on pages 24 and 25 in the section tided

• Diver-tion of the facility is uncertain at thk time. Other cicaric sified Activities Capital Requirements-Debt and I.iquidity,"

(onstruoion expenditures are attributable primarily to impmve-(criain debt of the Constellation Companies is scheduled to ments to BG&Es exhting generating plants and to in transmi, mature in 1993. Ala as disdosed in the Company's form 8-K sion and dhtabution facihtics. I he Company currentiv dain! January 29,1993. the C<mdlation Cmnpanies will need estimates that expenditures (br wmpliance with thc Clean Air to pmvide significant funds to complete the Puna project, which ~ Act of 1990 will total approximately 555 million thmugh 1995. is scheduled for 1993. The ConstcIladon Companies plan to 11 such cash requirements with a wmbination of addi-cet During 1992,1991, and 1990. the internal generation of cash fmm utility operations provided 81%. 74% and 14% donal debt and cash fmm operations. If these plans are not respeaivdy. of the funds required for BGNEs capital require-uninh Suumfid, BG&E rnay provide a portion of the neces-ments exduse of dcht retirements. The signi6 cam inacase in my funds through loans to Consicllation Holdings,Inc. the 1991 levd is due to the nuncry of deferred dcctric fuel wsrs. DiversiGed Activities Capital Rajuirements lower wnstruction openditures. and higher net income. During IMi andliquk/ity the thneycar period 1993 thmugh 1995, approximatdy w% of As explained in greatet detail on pages 41 and 42 in Note 8, the fimds requiral for BG&l"s caphal requirements exdusive of during 1992 Constellation iloidings, Inc, renegotiated in bank debt retisemenn and redemptions of picference stock are debt facilities and issued 5120 million of unsecured seri.d notes. npcucJ to be providal through utihty operadons. Debt maturitics are Jisdosed in detail in the chart below. Also, as Utility capital requirements not met through the internal discuval in detail in the Company's i onn 8-K dated January 29, gencration of cash are met through the issuance of debt and equity 1993 significant funds will be required to complete the seemide.. During the threoycar puiod endcd December 31 Puna proica, which is scheduled for 1993. Cwsrdlation liolJ-1992. BGNUs hsuantes of longarrm debt. preferred and ings, Inc. and in subsidiaries aie negotiating the refinandng of 24 nJw,wr & wid ww Gmip.ig w,J sJ,ugs.m,., L-

l all indebredness as it nutures as well as the potential issuance of down outstanding debt through internally generated cash which additional debt in order to satisfy ongoing capital requirements. indades cash that may be generated from operations, maturing No assu intes can be provided that Constellation Holdings, financial limited partnerships, sales fmm the securities portfolio, Inc. and Ls subsidiaiics will be successful in obtaining additional the sale ofother assets, and cash generated by tax benefits earned fimds from banks and other institutional lenders. As mcmional by Constellation Iloldings, inc-and its subsidiaries. In the event abme in the seuion tided "llGRE Capital Requirements," that the real estate market rebounds and the Constellation itGNE may provide a pornon of the necessarv funds thmugh Companies can obtain reasonable value fi>r the pmperties, addi-loans to ConstcIlation Iloklings, Inc. tional cash may become available thmugh the sale of projects The following chan sets forth the scheduled maturities (for additional infi>rmation see the discussion of the real estate of the Constellation Companies' debt outstanding at business and market on pages 23 and 24 under the heading Decemba 31,1992: " Diversified Activitics Earnings"). The ability of the Constella-t ws and tion Companics to sell or liquidate the assets described abme im I"N Le En will depend on market conditions, and no assurances can be la mi!!wm given that such sales or liquidations can be made. Constellation Iloldings. Inc/s flank Dcht.. . S 56 556 5 40 linonnent Requirrments Considlation i leidmgs, Inc/s Tlw investment requirements shown below indude the Constel-Privatelv Plated Dcht.. 40 215 Luion Companici portion of equity funding to committed Constellation Companics-pmjects under development as well as net loans made to project j 4 158 pannerships. Investment requirements fi,r the years 1993-1995 mja t Debt. D Total. .5100 563 5413 the Conwdatbn CompanW csnmate oUun&ng durjng re such periods for ongoing and anticipated projects and are sub ect l The amounts presented in the table above are exdusive of to continuous review and moditication. Actual investment unused capacity available under the bank debt facdity, as requirements may vary significantly from ihe amounts below due described in Note 8, which Constellation Iloldings. Inc. cxpects to the type and number of pmjects selected for development, the to utilin during 1993. impact of market conditions on those projects, the ability to Constellarion iloldings, Inc, will auempt to continue, obtain financing, and the availability ofinternally generated cash. thmugh prhate placements and further retinancing of exisiing The Constellation Companies' investment requirements base indebtedness, to restruuure its indebtedness to achieve longer been met in the past through the internal generation of cash and maturities. Constellation 11oldings, Inc. also intends to pay through honowings fmm institutional lenders. Capital Requirements Tbc Company's capital nquirements reiket the capital-imensive 1990 through 1992, along with estimated amounts for 1993 natme of the utility business. Actual capital requirements for through 1995. are shown below. 1990 1991 1992 1993 1994 1995 in rwilwm Utility lhisiness Construction expenditures (exduding Al C) ficciric. 5362 $ 328 5 292 5 371 5373 5 360 Gau 39 43 36 69 70 92 Common. 81 48 39 60 57 48 Tota' consuuction expenditures.. 482 419 367 500 500 500 AFC. 53 37 22 26 34 40 Drieneci nuclear expenditures.. 28 23 16 20 12 Defirred energy conservation expenditures.. 3 20 48 67 69 Nudcar fuel (uranium purchases and pnwessing charges). 21 2 40 38 42 40 Retiremcnt oflong-term debt and redemption of prefennoe smtL. 60 339 486 191 74 291 Total utility business. 644 823 951 823 729 940 Diversified Activitics Retirement of long-tenu debt. 8 16' 118 100 63 143 investment requirements. 122 109 80 90 39 33 ~l otal diversified business activities. 130 2-'6 198 190 102 176 Total $774 51.099 51.149 51.013 $831 51.116 Mimm Ga, and Tiarm Gmpy and %da m 2S

t it E P O R T 0F MANAGEMENT l, i t Management is responsible for the information and representa-Coopers & Lybrand, independent auditors, are engaged to [ tions contained in the Company's financial statements. The audit the financial statements and express their opinion thereon. l financial statements are prepared in accordance with generally Their audit is made in accordance with generally accepted accepted accounting principles based upon cunently available auditing standards. facts and circumstances and Management's best estimates and The Audit Committee of the Board of Directors, which judgments ofluunen conditions. consists of four outside Directors, meets periodically with The Company maintains an accounting system and related Management, imernal auditors, anc Coopers & Lybrand to system of internal controls which are designed to provide review the activitici. of each in discharging their responsibilities. reasonable assurance that the financial records are accurate and The internal aud;< staJanci Coopers & Lybrand have free accm that the Compan/s assets are protected. The Company's staff of to the Audit Com-We. internal auditors, which reports directly to the Chainnan of the r Board, conducts periodic reviews to maintain the etTectiveness ofinternal contml procedures. i HEP 0RT 0F INDEPENDENT AUDIT 0RS To the 5lurcholdm of l Baltimm Gn and Ekaric Company i We have audited the auompanying consolidated balance sheets dated results of their operations and their cash flows for each of and statements of capitalization of Baltimore Gas and Liectric. the three years in the period ended December 31,1992 in Company and Subsidiaries at December 31,1992 and 1991, conformity with generally accepted accounting principles. i and the related consolidated statements of income, cash flows, As discussed in Note 14 to the consolidated financial state-tommon shareholders' equitv, and income taxes for each of the ments. the Public Service Commission of Maryland is currently three years in the period ended December 31,1992. These reviewing the replacement energy costs resulting from the financial statements are the responsibility of the Company's 1989-1991 outages at the Companfs nuclear power plant, and Management. Our responsibility is to express an opinion on the Company established in 1990 a reserve of $3's million for these financial statements based on our audits. the possible disallowm.se of replacement energy costs. The ulti-We conducted our audits in accordance with generally mate outcome of 6e f sel rate proceedings, however, cannot be accepted auditing standards. Those standards require that we determined but ma,c sult in a disallowance in excess of the plan and perform the audit to obtain reasonable assurance about reserve provided. whether the financial statements are free of material misstate-As discussed in Note 1 m the consolidated fmancial state-ment. An audit includes examining, on a test basis, evidence ments, the Company changed its method of accounting for supponing the amounts and disclosures in the financial state-income taxes in 1991 and changed its methal of accounting for ments. An audit also indudes assessing the accounting principles unbilled revenues in 1990. used and significant estimates made by Management, as well as evaluating the overall financial statement presemation. We believe that our audits provide a reasonable basis for our opinion. ,M@ 4 in our opinion, the financial statements referred to abme present fairly, in all material respects, the wnsolidated financial Coopers & 1 ybrand position of Baltimore Gas and Electric Company and Bahimore, Maryland Subsidiaries at December 31,1992 and 1991, and the consoli-January 15,1993 i I 26 M:imm Gas andDamc Company and Sulmdaarm

C0NS0LiDATED STATEMENTS 0F iNC0ME Year Ended December 31, 1992 1991 1990 in shouanids, curpj,rrniure ammann Electric. 51,967,923 $1.994,525 51,712,453 Gas 402,937 358,195 373,419 Diversificd activities.. 120,483 96,133 92,240 Total tevenues.. 2,491,343 2.448.853 2.178.112 Espenses Other Than Interest and Income Tases Electric fuel and purchased energy. 556,184 598,208 551,385 Pnnision for possible disalk,wance of replacement energy cosis (See Note 14).. 35,000 Gas purchased fiir resale. 214.103 IS1 A55 200,762 Oper ations.. 606,498 634,309 576,271 Maintename. 172,726 173f48 163.457 Depreciation.. 223,483 201.264 170,586 Taxes other than income cases.. 183,004 170.781 156.722 = i Total expen es other than interest and income rases.. 1,955,998 1.959t>65 1.854.183 Income from Operations. 535,345 489.188 323,929 Other Income Allowante for couity fimds used during construction. 13,892 23,596 27,086 Equity in carninp of Safe Ilarbor Warcr 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 15efore Interest and income Taxes.. 557A41 515,816 360.603 Interest Espense Interest charges, net of capitalimi interest. 197,912 210,458 191,471 Allowance for honowed ftmds used during construction.. (8.165) (13.870) (26.266) Net interest expense.. 189.747 196.588 165,205 income liefore Inwme Taxes - 367,694 319.228 195,398 Imome Tases 103,347 85.347 19,952 Income liefore Cumulative IHect of Changes in Accounting Methods.. 264,347 233.681 175,446 Cumulative IHect of Change in the Method of Accounting for Income Tases (See Note 1). 19,745 Cunndative LfTect of Change in the Method of Accounting for Unbilled Resenues, Net of Tases (See Note 1).. 37.754 Net Imome.. 264.347 253,426 213,200 Preferred and Preference SimL Dividends. 42.247 42,746 40.261 Larnings Appliable to Common Stock.. 5222.100 5210.680 5172,939 Average Shares of Common Stock Outstanding... 136.248 126,093 123,550 larnings Per Share of Comme,n Stock Before cumulative effect of changes in acwunting methods.. 51.63 51.51 51.09 Cumulathe efTcrt of change in the methm! of auounting for income taxes.. .16 Cumulative etTea of change in the method of accounting for unbilkd resenues.. .31 Total earninp per share of wmmon semk.. 51.63 51.67 51A0 .% kn w GnscJul.wdFinan ulhusementt Cerum pruar par amount, tw r been rotan-d ruunform wah the, u ma yar i pornutwn. ILihrmmr G,e andiktruc Com;w,r and hadmdaarin 21 8

M C0NS0LiDATED BALANCE SHEETS At December 31, i 1992 1991 I in tiwu>dnde ASSfiS Current Assets Cash and cash equitalents.. 5 27,122 $ 17,417 { Accounts receivable (nct of allowante for uncollectibles). 299,568 304,802 Accrued unbilled resenues. 69,576 60,429 Fuel stocks, 85,063 83,182 Materials and supplies.. 141,611 128,892 Prepaid taus other than income taxes.. 54,510 46,121 Other prepayrnents.. 17,080 18,506 Ot her.. 12,524 6,675 Total current assets.. 707,054 666.024 t insestments and Other Assets Real estate projcus.. 462,042 448.661 I Power generation systems.. 259,996 215,757 3 linancial invest ments. 207,011 248.258 { Nudear desommissioning trust fund.. 43,118 31,969 Safe Harbor Water Power Corporation. 34,176 34,229 Senior living facilities.. 24,538 25,857 Oihcr.. 64,986 67,175 Toul ins estments and other assets., 1,095,867 1,071,906 Utility Plant Plant in service Elect ric.. 5,474,590 5.215,394 Gas. 526.058 494,94 ' Common.. 468.264 446,200 Total plant in senice.. 6,468,912 6.156,548 Auumulated depreciation. (1,980,361) (1,822,380) Net plant in service. 4,488,551 4,334.168 Construction work in progress.. 308,908 307,765 Nuticar fuel (net of amortiution).. 147,374 152,881 Plant held for future use. 21.486 17,990 Net utility plant.. 4,966,319 4.812.804 Deferred Charges income taxes recoverabic through fatore rates. 216,939 198.878 Deferred fuel costs (net of allowanse for possible disallou ance). 181,591 287,021 Defctred nuJear expcnditures (net of amortiution).. 76,549 63.724 Defened cost of dcwmmiwioning of uranium enrichment facilities (See Note 14). 55,000 Defened ency conservation expenditures (nct of amortiution). 20,519 3.514 Oiher. 55,119 34,118 Total dcfened charges.. 605.717 587.255 Total Assets.. 57,374.957 57,137,989 see nie se cwaa.idunt husnaa! siennm YildlH f*M6 )fs!! nl9Nt*tHl1, lWlT lrtr*I fDhiftk10 e vyfrNH 29 llY CNWni WJY NfrOMU HWH 18 Ilahinwar 6d. am/ flann Compaqy awl %h.tdStrict m --a m--

C0NS0LIDATED BALANCE SHEETS At December 31 1992 1991 ha sivuwab L t A l? ( L I T I E S AND C A P I T.A l l Z A T I O N I Current 1.iabilitics short-term borrowings.. $ 11,900 $ 212,170 Current portions of king-tcrm debt and picfcrence uutk. 291,270 294,507 ) Aaounts payabic. 175,495 185,-'82 Customer deposits. 20,027 14,573 Aurued taxes.. 20,925 29,612 AurucJ interest. 55.537 49,173 Dicidcnds detlared. 62,282 54,914 Aurued vatation costs.. 28,908 30,142 Or her.. 3,167 11,619 Total current liabilitiet. 669,511 882 92 I Deferred Credits and Other 1.iabilitics Dcterred income taxes. 983,534 938,559 Dcferred im estment tax nedits.. 165,697 174,442 Decommissioning of uranium enrithment facihtics tSec Note 14). 55,000 Ot her.. 24,941 31,390 Total delcrred credits and oth'er liabilities.. 1,229,172 1.144,391 Capitalization ) I ong-term dcht.. 2,376,950 2,390.115 l heferred stock.. 59,185 59,185 Redccmable preferent.e stock. 395,500 398,500 q Preferen(c stotl not subica to mandatory redemption.. 110,000 110,000 1 Common shareholders' cquiry. 2,534,639 2,153,306 I foral capiialization. 5A76,274 5,111,106 j l l Commitments, Guarantees, and Contingentics-See Note 14 1 l Total liabilitics and Capitalization. 57,374,957 57.137,989 i 1 i Wf.YHll'+ $0 (p,1,thhs' f:Yf fl9safet ta blal!*.3nt'hr1 Grum prw n.;< amm,ra, hwe im verased to :nnnem w tir rurant yarij mrnta:am l l l tu:: m,.n Gc. aJ Ha rw co,,yo and sad > a.ha,,n 2g l

i l l i C0NS0LIDATED STATEMENTS 0F CASH FL0WS Year Ended l'ecember 31, 1992 1991 1990 hr rivu, ands Cash f lows I rom Operating Acthities Nei income.. 5 264,347 5 253A26 $ 21(200 Adjustments to reconcile to net cash provided by operating activities Cumulative effect of change in the method of accounting fbr income taxes. (19,745) Cumulathe effect of change in the method of atcounting ihr unbilled revenues.. (37,754) Depreciation and amortization.. 273,549 244,017 179.793 Deferred income taxes.. 26,914 30,725 56,995 Investment tax aedit adimtments.. (8.854) (6,225) (4A50) Deferred fuel wsts. 105A30 102,754 (79,671) Pmvision for pmsible dhallowance of replacement energy costs.. 35,000 Trite-down of financial investments.. 13,575 Write-down of real estate proiccts. 9.988 Allowance ior equity fimds used during construction.. (13,892) (23,596) (27,086) Equity in earnings of affiliates and joint remures (nct).. (11,525) 8,707 14,029 Changes in current assets.. (26,206) (6,563) 8,388 Changes in current liabilities, other than short-term borrowings.. (9,614) (6.027) (62,559) Othet. (31,005) (5.373) (10.376) Nct cash ptmided by operating acinitics.. 569.144 595.663 285,509 l Cash Ilows from financing Activities Proceeds from issuance of Short icrm borrowings (net).. (139,600) (15,530) 103,893 Inng-term debt.. 603,400 1.015,950 1,987.426 ISeference smtk. 34,801 64,342 ) Common stock.. 355,759 32.263 86,881 Reacquisition of long-tenn debt.. (687,052) (959,379) (1,595A63) Redemption of picierence tock.. (2.924) (22,800) (6.800) Common stock dh idends paid.. (189.180) (176,007) (171,623) Preferred and preference stock dividends paiJ., (42,300) (42,743) (38A90) Other. (399) (442) (34) Net cash (used in) provided by financing auivitics.. (102,296) (133,887) 430,132 Cash flows Fmm Imessing Activities Utility mnstruction expenditures.. (389416) (456.244) (535,316) Allowance fbr equity funds used during construction.. 13,892 23,596 27,086 Nuclear fuel expenditures. (39A86) (1,854) (20,519) Deferred nuclear expenditures.. (15,809) (22.681) (27,755) Deferred energy conservation expenditures. (19,918) (3,489) j i Nuclear decommissioning trust fund. (8,900) (8,900) (8,108) hnancial invest ments.. 52,616 67,282 (9,907) Real estate proiccts.. (23,385) (45,322) (49,745) Powa generation sysicms.. (31 A83) (33,204) (62,494) Semor living facihties. (95) (737) (2A92) Other. 4,841 (2,685) (5A12) Nc cash uscJ in investing activities. (457,143) (484.238) (694.662) i Net increase (Decrease) in Cash and Cash li uivalents.. 9,705 (22.462) 20,979 l Cash and Cash F41uivalents at Beginning of Year.. 17A17 39,879 18.900 Cash and Cash 14juhalents at Fmd of Year.. 5 27,122 5 17A 17 5 39,879 Other Cash Ilow Information Cash paid during the year ihr-Interest (net of amounts capitalized).. 5 183,209 5 189,271 5 157,273 Income taxes.. 5 87,693 5 16.078 5 (56.937) Sa he w GnwM.md Em.mialSw mont Crnampewmar a,mmnn Ian jaren c<mard n mlmn wah duunonyear iperwru.uwn 30 Kdumm Gt, and Ikrm chmpany asad Sulmdiarrn

C0NS0LiDATED STATEMENTS 0F C0MM0N SHAREH0LDERS' EQUlTY Years Ended December 31,1992.1991, and 1990 Net Unrealized Premium on loss on Common Stock Preferred Retained Marketable Total Shares Amount Stock Earnings Securities Amount in z!wuund, llalance at December 31,1989. 120,522 $860,767 5157 51,140,264 5 - 52,001,188 Net intome. 213.200 213,200 Diddends dedated j Preferred and preference stock.. (40,261) (40.261) Common stmk ($1.40 per share).. (173,204) (173,204) Common stock i%ued under { Puh!ic offering.. 3.000 57,062 57,062 i j Dividend Reinvestment and imck Purchase Plan. 1,404 27,474 27.474 j Employer Savings Plan.. I13 2,345 2,345 Costs associated with issuance of redeemable preference stock - (658) (658) Change in net unrealized 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 i De ened taxes on net unrealized loss.. 4,756 4,756 Ne o..me.. 253,426 253,426 Dividends dedared l Prefened and preference stock.. (42,746) (42,746) Common stock (51.40 per share).. (176,584) (176,584) Common stock issued under Dividend Reinvestment and Stock Purchase Plan. 1,515 29,747 29,747 Employee Savings Plan 136 2,516 2,516 Costs assodated with issuance of redeemable preference stot k. (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) llalance 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 (51.43 per share).. (196.601) (196#)1) Common stock issued under Public offerings. 15,000 309,966 309,966 Dividend Reinvestment and Stock Purchase Plan. 1.98 39,924 39,924 Employee Savings Plan.. 300 6.340 6,340 Costs associated with common stock split (383) (383) I ractional shares in wnnection with stock split.. (4) (88) (88) Retirement of redeemable preference stock. 32 43 75 Italance at December 31,1992. 143.784 51,334.845 5157 51,199,637 52.534.639 sa Men so CnwinLicd mamuls:.nemerm Cota:np wryas arm unts have im rmatedto nm5 inn wid,i c cunenspar1procraarwn. t Rdnmer Gas arvilletnc CmparundSuMdunn 31

C0NS0LIDATED STATEMENTS 0F CAP l TALiZATION At December 31, 1992 1991 inz% ams long-Term Debt First refundmg mortgage bonds 4 %% Series, due July 15.1992.. 5 24,726 4% Series. Jue March 1,1993.. 24,061 24,061 4in Scrles, due July I 5,1994.. 29,921 29,921 9%"i, Series, duc October 15,1995.. 200,000 200,000 5% Series, duc April 15,1996.. 26,585 26,585 8b% Scrics, due June 15.1997. 99,500 6% Series. due August 1,1997. 24,95i 4,957 5% Installment Series, due August 15,1998. 50,000 53,000 7% Scrics, due December 15,1998.. 28,638 28,638 8%% Scrics, due September 15.1999 22.062 NAO"h Scrics due October 15,1999.. 100,000 100,000 8% 5crics, due September 15,2000.. I1,338 7% Series, duc April 15,200I. 59,914 59,919 8% Series, due August 15,2001. 125,000 125,000 7% Series, due September 1,2001. 59,975 59,985 ~%% Series, duc Januarv 1,2002. 49,999 49,999 7h% Scrics. due July 1,2002.. 125,000 7% Scrics, due July 1. 2002.. 49,985 49,985 5% Installment Scrics, due July 15,2002.. 12,500 12,500 7' 2% Series due September 15,2002. 49,990 49,990 8%% Series, due I chruary 1,2004.. 74,983 74,983 6.80% Series. duc $cptember 15,2004.. 20,000 20,000 8% Serics, duc September 15,2006 74,960 74,960 7%"6 Series, duc lanuary 15.2007 125,000 8% Scrics, due September 15,2007 75.000 75.000 9% Scrics, duc July 1,2008.. 12.718 29,995 6.90% installment Series. due September 15,2009.. 55,000 55,000 9% Series, due March I,2016.. 98,000 98,000 Total first rcftmding mortgage bonds. 1,552,186 1,480,104 Other long-icrm debt inan under unsecured credit facilitics.. 175,000 Mnlium-term notes, Scrin A. 69,500 100,000 Medium-tenn notes Series IL 100,000 63,100 Medium-term notes, Series C,. 138,050 90% Notm, duc May 1,1993 100,000 100,000 I loating rate notes, duc October 15,1995 Scrics ll. 100,000 Pollution control loan, due Julv 1,2011. 36,000 36.000 Port facilitics loan, due June 1,2013.. 4P,000 48,000 Adjustable rate pollution controlloan, ducJuly 1,2014.. 20,000 20.000 FA nnomic development loan, due December 1,2018.. 35,000 35,000 Total utber long-tcrm debt. 546,550 677,100 long-term debt of Conste!!ation Companics Mongage and construction loans and other collateralized notes 7,75"(., duc December 16,1995.. 5,575 Yanable rates, due through 1998.. 160,572 181,532 10.31%, due August I,1997 18,877 8.5%, due May 1,2001, 3,300 Industrial p.uk facihties bonds.. 750 Inans under remiving credit agreements.. 152,000 167,330 amwwdun page D 32 ILdmam Ga, and Hami Gmgam and %budarin

C0NS0LIDATED STATEMENTS 0F CAP l TALIZATION At I)urmher 31, 1992 109I in r%,v,4 Cnscturuirorcs H3n, duc Apo! I 2,1991.. 5 40.000 5 70.000 8.35% duc August 28.1995. 20.000 20.000 H.7IS, duc Augue 28.1996-23,000 23.000 H.9f',,. duc August 28.19C 52,000 52.000 8 23% duc ( ktohcr 15. IW 30.000 H 18% duc ( h t,iber 15.1998. 75,000 N 7"<,, dur ( A fi shcr 15,1999.. 15,000 l oial long-icim dt hr of ( boucIlanon Companics.. 576A47 533.489 Unamurtind 1stoont and pn nuum.. W,463) (7,571) (:uncm Fnion of lone tom Jehi. (289,770; (293.007 Total long-n r m dcht. 2,376,950 2,390.115 Preferred Stock Cumulainc,5100 par uluc. 1.000.000 shares amhonicd helics il 4' 2" i. 222 42 I shares outstanding, callahic at S I t o pei sharc. 22,292 22.292 serics C.1"r. 68.425 shares outstanding <allabic at 5105 per sharc 6,893 6.W)3 Series 1), i AUN 300.000 shau s outoandmg, tallable at 5101 per sharc.. 30.000 30.000 l I otal picfcucJ stot k. 59,185 59.185 Picfen nte Stock (:umulatiu, 5] OO par i aluc,6.s00 000 shares authorized ikdccmahk pretcrrnt e uot k 1 -'. sO9.1986 Scrks, 485,000 and 500.000 shares outst.mdmg. respectn cly. ( ailable l at 5105 per sharc prior to (1ctober 1.1996 and at lesscr amounts thercancr.. M500 50.000 6 ~%.198 Scrics. 485.000 and 500.000 shoes ountanding. respecouly. Callahlc at Slo t50 per sharc prior to Aprii 1. lor and at lesser arnoums thercafter.. 48,500 50.000 6.9;% 1957 % nes, s00.000 shares outstandmg.. 50.000 50.000 'h f o. } 9Kb $cIncs, 500.0(10 sliaics oUf Mandmg. ta!!a!*le al 51Ib.04 jict sb.tre prior to luh I. I993 and at lesscr arnounts thercatter. 50,000 50,000 ' ho"o. loM9 \\cors, 500.000 shares outstanding.. 50.000 50.000 x 25".1989 Ncr ies. 500.000 sh.u cs outstanding. 50,000 50.000 8 62 %,1990 Ncncs,6;0.000 shares outstandmg. 65,000 65.000 18%,1991 % ries,350,000 shares outstandmg. 35,000 35.000 ( Tura nt ponion of n decmahic prcicrentc uotk. (l.500) ( ),500) l'otal scdecmahlc pref ercns e stut k. 395,500 398,500 hch icnic stot L not subjet t to mandatory redemption ~.sW 1r i Scries. 500 000 shares ountandmg. tal!abic at 5101 per share. 50,000 50.000 5" i.19'2 heries and 000 sh 4.ountandmg, iallabic ai 5101 pt r sharc. 40.000 40.000 ' 7MN 197 Scncs. 200.000. hares outstanding t a!!able at 5101 pcr shan _ 20.000 20.000 l otal piricrcnic Hotk not sahjet t to mandatory redemption. 110.000 110,000 Common,4hatcholders' lijuiry C.o ,n siot L-w nhout par ulac -175 000,000 shaics aut horized, l ei 3.-'X 5.5x1 a6M9.37 shares nsurd and outstandmg at 1)cs emhcr 31,1992 arid 199], respn in ch. ( At t h emhcr 31.1992.166 S93 shares were rest rsed for the limplou c N.ninp Pbn and ].s061 s~ shares were icscrved for the 1Midend ikinvesunent and $iosk Pun hase 11an.).. 1,334.815 9~9.054 Picnuum on preferred umk 157 157 Retained c.uninp. 1,199,637 1.174,095 I otal common sharcholders' equin'. 2,531,639 2.153.306 Toul Capit,diation.- 55,r6.2'4 55.111.106 w u

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m s C0NS0LIDATED STATEMENTS 0F i NC0ME TAXES Year 1.nded December 31, 1992 1991 1990 Iniin aowww m ikwarub Income Taes Cun cnt. 5 85,287 S 61.017 5 B3,338) 1 )eicn ed Tax cffeci ofiemporary diffcrentes. 44,975 23,605 Inn.mc rnes retoverahie through future rares.. (18,061) (12,625) 'l as cfiht of normahied timmg ddfcrenecs.. 77,189 i A fared tnes < harged to cxpense. 26,914 10,980 77,189 Imcument in uedit adjustments.. (8.854) (6,225) (4,450) 'I oul ino,me tacs.. 103,347 65.802 39,401 ( 'umulache effet t of (hange in the incthod of auountmg for iraome taxes Inucase in dciencd ta liabihty. 286,787 Anu,ums ru orded on thc balance shcu. (267,042) Amoum reorgnbui in iruome. 19.-'45 income tnes included in cumulatne cdect of thange in the muhod of auouming for unhi!kd revenues. (19,449) Inu>mc tucs per Censohdated Suicments of Insome. 5103.347 5 85,547 5 19,t)52 Retontiharion ofInuime Tnes Computed at Statutory I ederal Rate to Total Income Taxes In<ome l(fore income taes finiludmg t umubticc roht of auouming thanges).. 536'.694 5319,228 5252.601 sotutory lederal inu>me tu rate.. 34 % 31 % 34 % Int omt tacs c omputed at statutory fcdaal rate.. 125,016 108,538 85.884 Inucces tdeucascsi in inmme taxet Juc io Depmiarion thtrerences not nomialiecd on repubted activities. 8.955 7,008 4.301 Abwant e for equity funds un d during umstruoion.. (4,723) (8,023) (18.140) Amorrization of deferred imcsoncnt tax credits (8.854) (9.344) (7.337) I n utdus flow ed thniugh io inunne. (801) (1,335) (15.283) Dn idends recch ed deduuion. (1.635) (2.108) (4,352) I qaity in earmngs of Nafe liarbor Water Power Corporation (1,451) (1,492) (1 666) I ou on drposition of assets. (3,726) (3,295) (1,892) Rescrsa! of Jefened tnes on nontcgulated auiviiics.. (19,745) Anu.rneation of defened tu rate ddTeremiJ on regubred auhiries.. (7,365) (5.024) 0.062) Ot her (2,066) 622 948 Tond ino.me tacs s103,317 5 65.802 5 M401 i tTe(th e icdcral na ome in rate. 28.1 % 20.6"o 15.6 % At December 31, 1992 1991 In r%md, Dcfericd Irnome Tucs I kicned in labihncs Au c! crated depret i.nion.. 5 714,019 5 653,713 A!!ow ante for f unds ust d during (onstruuion. 199,577 197,118 Insome ines ret os crabic through futurc rates.. 73.759 67,613 Defcncd fod mus 61.741 97,5 P 1 everap d h acs.. 33.867 35,015 Pru enta;.c icpair.diou ante. 33,367

32) 31

( hhet. 95.963 79.747 Total defencd tn liab;inics.. I,212,293 1.162,819 Defined in anos Ahcinathe minimum us. 72.189 71,3,c l I h fened im nunent ux utdas.. 56,337 59,310 ( h her. 100.233 93.619 Toul dderted in asscis. 228,759 224.2(io I tc!'ened inmme ines per ('onmbdatcd lialan,c $hects. 5 983,534 5 938.559 v, w n<.n iu;.miinam.d sw o. r <n u-e.u w r i ai ehe<: rouudw 1** v n uh rie a n ran n ', jn r n.i wn 34 Kdwm,e Ga and na crw Guy.nq and Ssadame

NOTES T0 C0NS0LIDATED FINANCIAL STATEMENTS NOtt 1. "i l G N I F I C A N T ACCOUNTING POLICtfS Nature of the Ilusiness Revenues imm interaunge sales of clectriciry are induded P,ahimore (,a3 and 1.hs tnc ( hmpany (lu ;&ll and subuduries m the cleurk fuel rate fonnula as a reduuion of clectric fucl and h o!1ccin ely. the Company ) is prinunly an clectrit and gas utilitv punbased energs una and, acundingly, Jo not wntribute to sening a scrutory winch enuenpasses Italunuire City and all or inwmc fmm opciations. I part of nine Central Manland wanties. 'I hc Company is aho I url and Purclused 1:ncrgh,ts engaged m m, vendicd a ris ities as funhcr des ribcd.m h.re i subicci to the approval of the Maryland (.ommnsion, the wst Principles of Consolidation of fucl used in generating electrkity and the wst of gas soki may The wnsohdated finamial stawmenn in.lude the acmunis of be recovertd through rcnwhased cleunc fucl rate (see Note M) IM;NI. and all subsidiaries m w hith lu;NI. ow ns directly or and punhased gas aJjustment dauws. To the extent actual fuel imbrealy a maioriiv of the voting stock intommpany balantes onn diffir f:om restnues under the tiauses, ItGNL dcfers the and iransations have hun diminated in wnsohdation. Under fuel wsts and auumulates them on the balame shea io be ibis pola y. the aa ounts of (:onucilation Holdmgs. Inm and in rewtoed from or refunded to customers in futute perimk sub.kharies im!!cuicch. the (:onsidlation Companics and As implememed by the Maryland Commission, the electric IWG. ha. arc ionsohdaicd in the financial staicmenn. and saic fud rate formula is based upon the latest twenty-four-month Harbor Tater Pown Corporation is reponed unJct the equiry generanon mix and the latest ihrec-nmnth average fuel wst for meihod. ('orporate soint s entmes, pannerships. and afiiliated cath gencrating unit.1.ficctisc June 1. Iwo. ihe Maryland wmpames in whkh a 50%. or ! css uiting imoest is hcid arc Commission moddied the clearis fucl rate formula and ordard auoumed for undo the niuitv or mst metinids. Invesunenn m lu ;&l; in indude a mimmum Icsel of nudcar gennation in in pow cr generation systems ami < cuain finant ial ins estmenn twcmy-four nmmh generation mix. The f act rate does noi genoa!!y represem owncnhip imcrests of 20% to 50N and au thange unicss the calculated rate is more than 5% above or l aaounted tbr anda the equity method.1)nutificJ auhirici below the rate then in clicct. In adJuion, ItGN E reuncred reccnues.md imercu espcnsc fhr 1*)) anJ 1990 h.nc been Jclened electrk fuel unn of SM,N.000 and $1-',179.000 in rcuaicJ to tinninate (criain imercompany transactions whith 1991 and }990, respeuhely, through a sun.harge to the cicuric wcre not predously chminau d. tuel rate whkh espiicd in ()ctober 1991. ~1 he punhased gas adjustment is based on teccm annual llegulan.on of. Utility Operations unumcs of gas and the related (mrent prices charecd bv lu.;N1..s u n h.tv opaanons.nc subietr to regulanon by the / / 10N I.s gas supph.ers. As authon. fed by the Man-land Comnus- _ Pub,. Scru.te Commission of Maryland (Maryland Conume sion, any deletred undcrruos crics or overrewstrics of ut sont Fhe ao ounting pohdes and prA tises uwd.m the detonu-puuhascJ cas wsts for the twche months endcJ M, sember 30 n.uion of wnite rarcs are also gennaHy used for imanual cath year arc shargcd or oub. tea io customen mer the ensuino" rcponing purposes in auordanic with gennaH3 aucpuJ t.dtndar year. ounnne ptindples for regulated m.dusuics. L,,ndct these ao .l.he undencunercJ msts dtferred under the fuel dauses aaounting prim iples < cnain utility expenses and t redits were as follow v nonnah,v reticutd in ina,mc arc d tctred on the b.Janie sheet as At December 31. regulatory assets anJ hab& tics and are remgmied in inwmc as g g the n!ated amounn arc inJuded m sense rates and newsacd h da hem or refunded to amomers m unh.ty resenues. Ucuric l'tility Revenues Cmn defericJ. 5210A83 S322,0M i rikth c lanuary 1,1990, ION E ( hangtJ in res enne ictogniuon Rewn c for pmsib!c pohcv to pnnide for the aurnal of ictenue for wnite rendered disaHowantc ot rep!Acment but unbdkJ 1s of the cod of cat h momh. Prior io PNo. icvenues energy wsn u e Note ML (35.000) 0 5,000) wcn rewgnierd at the time customeri meters woe read on a Nei cicurie. 175A83 287,0M nmnibly ode basis. ~1 he new pohey was adoptcJ in order m (;u raos g3) pnnide a bruct meidung of ies enues and expenses and to I.otal. 5181,591 5287.02I wnfonn with the predominant prauic e with.m the utiht) indovrv. This change in pohcy resuhed in an increase in lWo nct At Des ember 31,1992 and 1991, the amoum or,. decnic income of S \\1,6,V00 or 2M per wnunon shan. I his inucase deferred fuel wsts induded in rate base by the Maryland wnsisted of an.mucase or 53, _. n, oon. or 3Ie per wmmon ( ommission for ratemahing purposes was 5,2,.,95.000. share. antibutabic to ihe wmulan.vc clieu of the t h.mge at January 1,1990. panially o6ct by a da rease of Sho'9,ooo. or ' ' gr wmmon sharc, in the vmbt i U.1 WO awrual. w waaednn wpmni wlm 35

1 Income Taxes The investment tax credit (ITC) associated with liG&E's i The Company has adopted Statement of Financial Accounting regulated utility operations is deferred and amoni7ed to income ' i Standards No.109, " Accounting for Income Taxes.' retroactive ratably over the lives of the subject propeny. ITC and other tax is January 1,1991. Statement No.109 supersedes Statement of credits associated with nonregulated diversiGed 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 and other tax No. 96 require the use of the liability method of accounting for credit carryforwards of $3A73,000 which expire in the years income taxes. Under the liability method, the deferred tax 2005 through 2007 l habihry represents the tax effat of temporary differences between BG&E's utility revenue from system sales is subject to the the financial statement and tax bases of assets and liabilities and is Maryland public service company franchise tax in lieu of a state measured using presently enaaed tax rates. The ponin of income tax. The franchise tax is included in taxes other than IlG&E's deferred tax liability applicable to utility operations income taxes in the Consolidated Statements ofIncome. I which has not been reRected in current service rates represents Deferred income taxes have not been provided on the income taxes recoverable through future rates and has been $ 17,256,000 portion of the Company's investment in Safe recorded as a regulatory asset on the balance sheet. Deferred Harbor Water Power Corporation representing accumulated f inu>me tax expense represents the nei change in the deferred tax undistributed earnings as of December 31.1992. In the future, liability and regulatory aswt during the year. Income taxes recov-if such undistributed earnings were remitted, the Company erable through future rates and a corresponding ponion of the would incur income taxes of 51,173.000. deferred income tax liability are excluded from rate base by the Maryland Commission for ratemaking purposes. Inventory \\,aluation i i As a resuh of.ns effect on nonregulated aco...vmes, the cumu-Fuel stocks and materiak and supph.es are generally stated at - "'8# "" lathe effect of the change in the method of accounting for ( income taxes resuhed in an increase in 1991 net income of Real Estate Projects i 519,745.000, 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 propenies and properties years at tax rates in excess of the presendy enacted tax rate. As under development. Rental and operating properties are held for required by Starement No.109, etTective January 1,1991, the investment. Properties under developmem are held for future Company nstated its utility plant in service balance to reclassify development and sale. Costs incurred in the acquisition and i the deferred taxes implicit in ihe allowance for funds used active development of such properties are capitalized. Rental and i during construction accrued prior to 1991 under the net-of-tax operating properties and properties under development are i method to the pre-tax equivalent. The combined effect of stated at cost unless the amount invested exceeds the expected adopting Statement No.109 and refming cenain portions of the amounts to be recovend through operations and sales. In these original quantification of the etTeu of the liability method of cases, the projects have been written down to the amount esti-accounting for inwme ines resuhed in an increase in utility mand to be recoverable. l plant of $40,531,000, an increaw in income taes recoverable tiuough ftaure rates of $10,724,000, and an increaw in defernd taxes of S51,255,000. M AetaW equity secunnes are st ied at the kiwer of aggregate cou or rnarket value, and other securines are stated at cost. Prior to 1991, deferred income taxes were generallv provided on all timing differences between resenues and U"# 'PP*P'I 'C' ""' "0"'" """UI"2 of premium and openses for fmancial statement and income tax purposes ncept discount computed on a straigin-line basis. Gams and losses on for timing ditTerences pertaining to accelerated depreciation on the sale of the tonstellanon Compames mvestment secunnes are included m revenues from diversified activities on the pre.19 6 propeny additions. The 1992 cunent tax expense consists solcly of regular tax. mcmn7tatement and are recognized upon realization on a j The 1991 current tax espense consists of a regular tax of spah idennfication basis. 546,844,000 and an ahernative minimum tax (AMT) 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 j tax refund of $65,130,000 reduced by an AMT of 531,792MR material, labor, construction overhead costs, and, where applic-The regular tax refimd represents principally the tax benetit of able, an allowance for funds used during construction. net operating losses incuned in 1990 which have been carried Construction work in progress, plant held for future use, and + back to re uver taxes previously paid in 1987 at the federal tax nuclear fuct are stand at cost. rate of 40% The AMT liabilities can be carried forward indefi-Additions to utility plant and replacements of units of prop-l nitely as tax credits to future years in which the regular tax eny are capitalized to utility plant accuunts. The original cost of liability nceeds the AMT liability. As of December 31, 1992, plant retired is removed from utility plant, and such cost, phis this carn fonvard totakd 573.206,000 removal cost, less salvage value, is charged to the accumulated 36 WnGwedum Cwvened%kduries

pmusion for dcpreciation. Mainten.uxe and repairs of propeny by the difference between a pre-tax and net-of-ta Al C rare are and replaccments of items of propeny determined to be less recorded as a wmponent ofinwme tax expeme rather than as a than a unit of prope rty are charged to nuimenance expense. In reduuion of Al C. The pre-tax raie of 9.9h is equivalcnt to wnneuion with the adoption of 5tatement No.109, the the 849% after-tax AIC rate. Thus. the use of a pre-tax Al C Company restated its unlity pLnt in service balances effettive rate does not arkct net income. January 1,1991 as desnhed above. Effective January 1,1992. the Maryland Commission 1)cpreciation is generally mmputed using (omposite authorized the accrual of Al C on all electric, gas, and common straight-hne rarcs apphed to the ascrage investment in dasses of utility wnstruction proicus with a construaion luiod of more depreciab!c pn perty. The wmposite depreobtion rates by dass than one month. Prior to 1992, Al C was aurued on major of depruiabic property are 2.80% tin the Calven Chifs Nudcar deuric projects only. Power plant. 2.75"o for the Israndon Shores Power Pbnt, The Constcllation Companies capitalbe intercsr on quali-12m, thr other c!curit pbnt,312% far gas pLnt. and i.02"o fying real estate desclopment projects. Capitalbed interest ihr mmmon pbnt other than veh; des. VchiJes are depreciated rotaled 513.800.000, S20,953.000. and 525,748JKKI in 1992, bawd on their esonmul usefullives. lWl, and 1990, respcuively, and is induded as a reduaion of Nudcar dcwmnussioning u.sts are accrued by and recow interest charges in the Consolidated Statements ofincome. crcJ through a sinking fund methodology. In its December N. dcar I.ucl u two rare mdcr, tht Maryland Commission granted I!GNE. N. dear tuel expendnures are capitah. d and amonized as a u re add..amnal revenue to provide for an intrease in its nudeat deu,mmnsioning aa rual m. mdcr to auumubte a resent of component of auual tuel tosts based on the energy pmduced over the life of. he fuel. I.ces for the future disposal of spent fuel t 52h, nu.lh.on m 1989 dollars by the end of C,alvert C.lif ts sente are paid quancrly to the Depanment of Energv and are accrued life, adiuued to reibt expcued m.tlan.on. l'hc reserve w ill u provide h,nanu. l assur.uxe that decommimoning funds in an based on the kilowan-hours of electnary generated. N dear fuel a amount.a ! cast equal to a N,udear Regubtory C,ommissn n expenses are subject to rewvery through the cican.c fuel rate. (NRnpresinhed minimum Icwl will be accumubird o <ct the Deferred Nuclear Expenditures rcmaming sen he life of the Calven Clifh plam. Thc total Deferred nudear c>penditures represent the net unamonized deu,nunisdoning resen e of $7-'. sos,000 and $M 310.Doo at habn<e of certain operations and maintenance costs w hich. in Detcmber 31. IW2 and 1991, respeaively, is induded in aue auordance with orders of the Marvland Commission, hase been mulated depreciation in the Consolidated Babnte sheets. In dcferred. inJuded in rate base, and are being amonized over the auordan<c with NRC regulations. IMiNI has established an remaining life of the Cahen ClifR Nuticar Power Pbm. hese exa mal demmmimoning trust to w hith a portion of duom-expendnurcs consisi of costs incurred from 1979 through 1982 miuioning wsn accrued has c been comributed. fhr inspruing and repairing sciunic pipe suppons expenditures Allowance f.or i.unds L, sed During C~onstrucuon incuned fmm 1989 through 1992 asmciated with nonrecurring and C,ap.itah.ied Interest phases of cenain nudcar operanons proicas, and expendnures .t he a!!owan,c for funds used during wastruction (AI U, n. insurred during 1990 f.or mvesocanng leaks m. the pressuriier an heater decses. auouming pnwedure wherchy the w>t of. funds uscJ to finance unhn wnuruction proicus is capaahred as pan of utilitv pLnt Deferred Energy Conservation Expenditures onihr babnct sheu and is trcJacd as a noncash ittm on the Defened cncrgy conwnation expendames icpresent the net inmme staiement. The wu of bormwed and equity funds is unamonized balance of ccnain operations costs which, in auor-wpreg.ned benscen imcreu expense and other income, respce dance with mders of the Manland Commission, have been ik cly. IK;N1' icon ers the apitalizcd Al C and a return thereon deferred, induded in rate base, and are being amortized over th e afici the rebted utility pbm is pla<ed in seni<c and induded in years. These expenditures mnsist oflabor, materiah, and indi-depredable awns and r.nc basc. Al C does not represent taxah!c ieu msts ass.tiated with the wnservation pn. grams appmved inwme, and the depreciation of upitahwd Al C is not a tm by the Man-land Commimon. deductible expenw. During the paiod Januarv 1. lWo throuch Dcccmbcr 1,, Iong-Term Debt .I ne diswum or premium and expense of issuance assodated lWIO an 3%er ta\\ $l b rate (d 8 hIf o. Comp (Buihkd annud!!V. was appbed m a!! maior dcctric pmiccts.1.Heane Deconbcr 1; with lonn.tenn dcht arc deferred and amortized mer the lives of. ~. two. a rate orda of the gdanland C.omnuwon reduced the ihe respective debt iwucs. G..ams and losses on the rea;quisition aficr-tax AH : rate to 8h9,, u wmpounded annuah,y. of Jcht arc amortbed over the remaining originJ lives of the Ltfa the lanuary 1. lWl, the Company began auruing A} ($ at a pre-ta\\ rJte ob9.9[O in connection uith the aJoption Cash I' lows of thc habihty method of auounting for inwmc taxes unda i or the purpose of reponing tash flows, highly hquid invest-Sutoncm No 109. Unda statement No.10% whith pmhibin ments purchased with a maturin of three months or less are no-of ias auonming and reponing, inwme taws represented wnsidered to be ash equivalcms. iw:nr na..maiir n nop.sy and %haaoc 37

N O T E

2. SEGMENT INFO R M ATIO N Year Ended December 31, 1992 1991 1990 In thouwids flettric Revenues..

$1,967,923 $1,994,525 51,712.453 Income from operations.. 441,784 444,530 264,814 Income fiom operations net ofincome taxes.. 350,429 352,385 233,863 Depreciation. 191,970 173,349 146,188 Cumulative elTect of change in the method of accounting for unbilkd revenues.. 30,173 Construction expenditures (including AFC). 346,728 406.008 482,529 Identifiable assets a December 31..... 5,063,137 4,970,543 4,761,542 Gas Reven ues.. 5 402,937 $ 358,195 5 373,419 Iricome from operations 45,552 35,607 35,919 Income fmm 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 Activities Revenues. S 120,483 5 96,133 5 92,240 income from operations 48,009 9,051 23,196 Income from operations net ofincome taxes.. 44,055 20,313 39,460 Depreciation. 10,149 9,019 7,155 Cumulathe effect of change in the method of accounting for income taxes.. 19,745 Identifiable assets ai December 31, 1,023,315 1,001,313 1,041,365 Total Revenues. $2,491,343 52,448,853 $2.178,112 Income from operations.. 535,345 489,188 323,929 Income from operations net ofincome taxes.. 431,998 403,641 303,977 L)cpreciation.. 223.483 201,264 170,586 Cumulative effect of change in the method of accounting for income taxes. 19,745 Cumulative effect of change in the method of accounting for unbilled revenues.. 37,754 Construction expenditures (including Al C).. 389,416 456,244 535,316 ldentifuble assets at December 31... 6,563,031 6,425.434 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 6,710,37', Cerwn pner war amouno haw bnn nswedto amform svuh si,e currentyeariprrwruarim l NOTE 3. SUBSIDIARY IN F O R M A TIO N Diversified activitics consist of the operations of Constellation development, ownership, and operation of power generation iIoldings, Inc. and its subsidiaries and BNG. Inc. systems: and financial investments. Constellation Holdings, Inc., a wholly owned subsidiary, P.NG. Inc. is a wholly owned subsidiary which invests in holds all of the stock of three other subsidiaries, Constellation natural gas reserves and obtains gas from nontraditional sources. Real Estate Group, Inc., Constellation Energy, Inc., and BG&E's investment in Safe Harbor Water Power Corpora-Constellation Investments, Inc. These companies are engaged in tion, a producer of hydrockctric power, is reported under the real estate development and ownership of senior living facilities: ec}uity method. This investment represents two-thirds of Safe. ltdramne Gas ar d Herric Gmpany andSubudurin 38 a

liarbor's total capital stoc k, indudmg one-half of the mting 55.9 milhon) and resubs uf operations koninbution of less than sem L and a nm-thirds interest in its retained earnings. le per-share to the Company's 1992 carnings) are imnuterial to The following is mndensed finantial information for the mnsohdated financial statements. The condensed finantial Constellation Ilo!dmgs, Inc. and its subsidiaries and Sie ilarbor information for the Constellation Companies does not reflect the Warce Powei Corpuration. Similar infhnnation is not presemed climination of intercompany balances or transactions which are for !\\NG. Inc as its financial position (shareholder's equiry of climmatcd in the Company's consolidated financial statements. 1992 1991 l990 In rivw.u,4 na;tpcmher ammaa, Constdlation iloidings, Inc. and Subsidiaries in ome Siattments Rescnues Real estare pn.jec ts.. 5 76,582 5 75.205 5 73.237 Pow cr gencration systcms.. 28,084 17 732 3,328 Hnanc ial im est mcm s. 21 A85 8.050 20.160 Total reu nues. 126,151 100,996 96.725 I Apenses othcr than imerest and income taxes. ~7.872 91,848 73.537 Inmme f rom operations.. 48,279 9.148 23,188 .\\1monry imercsi. /18 3,550 952 Interest expensc. 30.103 32,938 2-' 895 Intome tax cxpense (bi.nclit). 3,63, (9.005) (17,859) ('umulanse ethir of thange in the method of aunuming for inmme t.ncs. 19,795 I Nei inmme. 5 15,257 5 8.510 5 14.104 l (;ontnhunon to the ( 'ompanis carnings ptr share of common stotk. 5 .11 5 .07 5 .11 llalantc Sheets ( 'm rent awers. 5 29.899 5 20463 5 71,837 Nonsurrent assets. 990.273 976,179 964.095 ( l'otal awets.. 51.020,172 5 996.642 51.035.932 l ( unent habihtics.. 5 ll3A04 5 285,130 5 439,687 l Nonwrrent liabihtics.. 611,370 431,370 343.602 shatcholdct's ujuin. 295,398 280.142 252,643 Total liabihncs and shareholder's n;uity. 51,020,172 5 996.642 51,035.932 Safe llarbor Water Powcr Corporation l Inmme Starcmont3 Res enues. 5 28,367 S 28.059 5 28,793 lapt nses other than interest and inmme taxes. 13,879 13 68 13.163 Inmme f rom opcrations. 14 A 88 14.591 15,630 ( hhcr income. 249 428 721 lotcrest cxpensc. 4,367 4 h95 4,702 Insome taxes.. 3,970 3,742 4,299 Net inmme. 5 6,400 5 6,582 5 "',3 50 IW;NI!s equity in carnings.. 5 4,267 5 1388 5 4,900 I hudends paid to itG&l by $4c liarbor Water Power Corporation.. 5 4.340 5 4,570 5 11.084 Italara Shtets Currcni assets.. 5 12,188 5 13,517 5 10,803 Noncurrent awets. I17,869 120,472 122.044 Total awett 5 130.057 5 133.989 5 132.847 l Current !iabihties 5 3,260 5 3A09 5 3,798 Nuntunrnt habihtia. 75,532 79,235 77.686 sh ucholderi equiry. 51,265 51,345 51,363 'l otal haluhties and shatchoidai cquitv. 5 130.057 5 133.989 5 132.847 ) iM i&l? im estment. 5 34,176 5 34,229 5 34.241 l l l ha.'? %nc ( w s >.1 }.1 nn ( or finn tud %!nt,LJ'w 3$ r

l 1 NOTE 4, REAL ESTATE PROJECTS AND FIN A N CI A L INVESTMENTS 1(cal estate pmjeen consist of the following investments held by Iinancial investments consist of the fiillowing investments beki the Constellation Companies: by the Constellation Companies: At December 31, At December 31, 1992 1991 1992 1991 h rimnarub h romraarub 1(ental and operating propenics (net Marketahic equity securities 5 25,304 $ 38,817 of accumulatut depreciation).. . 5227,412 $232.154 0.her securities 8,142 16,767 Properties under development.. 231,856 213.439 Financial limited partnerships. 41,076 67,269 Other real estate vemures. 2.774 3,068 Insurance companics.. 93,048 85.307 Total.. . 5462,042 $448.661 leveraged leases.. 39,441 40,098 1 otal. . $207,011 $248,258 in 1991, a subsidiary of Constellation Iloklings, Inc. recog-niud a loss of 59,988.000 to write down the carrying value of In 1991, a subsidiary of Constellation Holdings, Inc. recog-unain operating propenies and propenies under development nized a loss of $10,503 000 to write down the carrying value of to reflect the depressed real estate and economic markets. financial investments to reflect previously unrealized losses on In July 1990, a subsidiary of Constellation iloidings, Inc. certain marketable aguity securities. Substantially all of the securities obtained wntml of several real estate pannerships which had wrinen down were subsajuently sold. A subsidiary of Constellation prnioudy been acwunted for under the equity method. Holdings, Inc. also recognimi a loss of $3,071,000 0n two financial Auordingly, the hnancial statements reflect assets totaling limital partnerships that were adjusted to.cfIcct market value when 5155,635.000, including S154J 82,000 of real estate pmpeny, the pannerships were reclassified as shon-term investments. and liabilities totahng S76,277,000 including $74,734,000 of As of Decernher 31,1992, gross unrealiwd gains and losses long-term debt, in place of the pre ious $79,358,000 equity applicable to marketable equity securities totaled $1,358,000 and investment. 5232,000, respectively. Net realind gains (losses) from financial investments included in ner income totaled $9,829,000 in 1992, S(l 1,593,000) in 1991, and $1,395,000 in 1990. NOTE 5. JulNTLY OWNED ELECTRfC UTILITY PLANT llG&E owns an undivided imerest in the Keystone and Cone-owned properties at December 31,1992: maugh clearic generating plants located in western Pennsyl-1 ransmission L"""" C="a"ch U"c vania, as well as in the transmission line which transports the la'!b am"" " '/ ~ "ub plants' output to the joint owners' service tenitories. Financing and auounting for these propenin are the same as fi>r wholly Ownership interest.. 20.99 % 10.56 % 7.00 % owned utility plant. BG&Es share of the direct expenses and Utility plant in service.. 584,104 $44,677 51,486 assets and liabilities of the joint propeny is included in ihe Accumulated depreciation.. 25,639 16,725 715 corresponding sections of the Consolidated Statements of Construction work in inmme and Consolidated Balance Sheets. progress.. 2,230 12,801 The following data represent BG&Es share of the jointly NOTE 6. CHANGES IN COMMON STOCK On January 17,1992, the Board of Dircaors appmved a ihree-ment was approved at the annual shareholders meeting on for.two split of the Company's common stotk, subject m April 15,1992. The stock split was efficred by the distribution of approval by the shareholders of an amendment to the chaner of one additional share for each two shares owned by shareholders the Company to inurase the authoriecd number of common of record on April 23,1992. All share and per-share amounts sharn fmm 100mo.000 to 175,000,000 shares. This amend-have been restated to give retroactive effect to the suick split. 40 Mumm Gwuttha,ic compa yanJsubudwin

NOTE 7. 5HORT-TERM BORROWINGS Information contermng wmmercial papcr noin and lines of wmpenuting balances whic h have no withdrawal restrictions. t retht i', sct forth below. In support of the linn of uedit. the Borrowinp under the lmes are at the banks' prime rates. base Comp.my pays unmrninncnt ten and. in some cases. mainuins interest rates, or at various money market rates. I992 1991 1990 D,dLv amma m m Umwand, r BG&lA Commercial Paper Notes Bornminp outstanding at Dctcmber 31. 5 11,900 $ 159.500 5163,700 Teighted acrage internt rate of notn outstandmg at Det ember 3I. 3.62 % 4.75 % 7.91 % Unused linn of aedit supporting wmmercial paper notes at December 31. 5203,000 5303.000 5225,000 Masimum hotrowinp during the year.. 5393.650 5336,200 S344,200 Average daily bormwinp during the year (at. 5 98,892 5210,883 S218,642 Trighted nerage intercs: rate h>r the year thL 4.79"o 6.0SN 8.29 % t Constellation Companies' l ines of Credit t Ibrnminp ourstanding at Detembcr 31. 5 S 52.6'O $ 61000 Wrighird acrape interest raic of bonowing outstanding at Detember 31. 5.9e6 8.89% Unused imes of aeda at 1)ct emba 31.. 5 $ 8.000 5 10.000 Mnimum horr<minp during the year.. 5 60,670 5 75,000 5 64,000 l Average daily borrowinp dming the y car (ab 5 31,773 5 61,h60 5 38.932 Weightu! nerage interest r.uc for the ycar thL 6.01 N '.10% 8.93 % w Ik nam JJ,d:.v dm etma wi nr immne dwaviin :he w.dn o! dm m d,e pcmd ri > 1eaa! navr i mnlden e dr powd dmded br aa rup da:h hm mny l l l NOTE H LONG. TERM DEBT Fat Refunding Mortgece F.ds of BG&l. nerage of the unborrowed portion of the mmrnitment. At 5ubstantially a!! of the puntip,J properties and franchues owned Dctcmher 31,1992, BG&E had no horrowirp under these by BGE as wcll as tht tapital stutk of Constellation Hokhnp, revohing ucdir agreements and had a ailable 5175 million of Int, sate 1 Luhor Water Power Corporation. and BNG, Inc are unused capatity under thne agreements. subin t to the lien of the mortgage under w hic h BG&Ffs The Medmm-term Notes Series A mature at various dates l outstandmg First Refunding Mortgage Bonds have been nsued. from January 1993 through February 1996. The weighted average (in August 1 of eath year BGsE is required to pay io the internt rare for notes outstanding at December 31,1992 is ".67% mortgage trusice an annual sinking nmd payment equal to 1% The Medium-term Notes Senn B mature at various dates of the largnt prinsipal amount of Mortgage Bonds omstandmg from July 1998 through September 2006. The weighted average under the mongage dunng the p:ueding tucive months. Such imcrest rate for noin outstanding at Daember 31,1992 is 8A3% funds are to be used. as prosiJed in the mortgage. for the The Medium-icrm Notes Scric C mature at various dates purchec and retirement by the trusice of Mortgage Bonds of from June 1996 through June 2003. The weighted average any series other than the Instalhnent Scric of 1948,2002,and interest rate for notes outstanding at December 31,1992 2009. the 9%"o Scrics of 1995, the HAn% Nctics of 1949, the is ~.31"w SW Scrics of 2001, the %N Senes ot 2002, the 6.80"o scrics The printipal amounts of Instalhnent Series Mortgage of 200 b and the 'M series of 200~. Punhecs may be made Ibnds payable each ycar are as follows: by the trustcc in thc open market and/or through responws to g,n3 na, 3%3 nac iwa g g imitauons for scalcJ proposals if punhascs are possible at or u em 2002 20m bdow the apphuble redemption prite, or Jirculy thmugh the /y us,uoa rcdemption prmisions to whkh the Mortgage Bonds are suh ca 1993_ . 5 3 S00 5 420 i if pun hascs at a moic famrabic price are not possibic. BG&l. j ygg 3 fog 439 nuy punhec outstanding Mortpge Bonds from time to time 1995_ 3 S00 605 and rna submit its scalcd proposal for the sale of such Mortgage 1996 and 199' 4000 605 Bonds to the trustcc for the aking f und. 1998 33.000 690 Other iong-Term Dcht of BG& F. 1999.. 690 PG&l maintaim rnohing uedit agrecn ents proviJing for 2ono and 2001. 865 4 g hon <minp or up to a total of 51, nulhon. These aguements 2002.. 6,'25 expire at sarious timn during 19% and 19% l'ndcr the terms 2005 through 2008.. S 3,250 ) of the agrcements. BG&l may. at its option. ohuin loans at 2009.. 42S00 s arious mic rcsi ratn. A wrurnitment fcc is paid on the daily tun c t ~ n;1: arm t ;,, i nd ud-:iww 41 L

1 6 long-Term Debt of Constellation Companies. In October 1992, the Constellation Companies clowd a pricate The mongage and construction hians and other collateralbed notes plau ment of $120/>00,000 of unsaured serial notes with several have varying terms. Of the 5160,52,000 of variable rate notes, insurance comjunies. The proceeds were used m ;uy down amounts 568.028J100 m;uires monthly intenst only payments with various borrowed under the new revolving bank debt facility discussed alwwe maturities from September 1995 thmugh February 1996, and and a $56,000,000 short-term bank loan. The notes mature in 592,544J)00 requires monthly payment of principal and interest accordance with the following schedule: 530 000,000 in 1997, with various maturities from April 1993 through January 1998. The 575)o0.000 in 1998, and $15.000,000 in 1999. 55,575.00 L 7.75% mortgage note and the 53,300.000, 8.5 %, Weighted Average Interest Rates forVariable Rate Debt mortgage note require monthly principal and interest payments The weighted average interest rates for variable rare debt during i thmugh Decemlrr P>95 and hiay 2001, respectively. 1992 and 1991 were as follows: Constellation Companies renegotiated its existing 1992 1991 5261,000.000 of bank debt facilities effective hiay 29,1992. liGNE These facilities were combined into one new evolving bank debt loans under unsecured credit facilities. 8.81 % facility with an aggregate amount available of $282,170,000. Ivans under revohing credit agreements.. 4.23 6.93 This facility permits loam at various interest rates. Commitment Floating rate notes.. 8.00 fees are paid on the daily average of the unborrowed ponion of noating raic notes Series 11.. 7.90 7.9' the commitment. The amount available under this facility was Pollution contml loan._ 2.90 4A2 decreased to 5226.170.000 by a scheduled 556.000.000 reduc-Pon facilities loan.. 3.04 4A3 tion on Septcmber 1,1992. The facility will be reduced again by Adjustable rate pollution control loan. 4.13 5A8 556.000,000 each year on hiay 1 of 1993 through 1995 with the Economie development loan. 3.11 4.69 remaining 558.170.000 maturing on hlay 1,1996. The terms of Constellation Companies the facility require that the Constellation Companie.s obtain hiortgage and construction loans additional capital of at least 5145,000,000 by issuing addition.d and other collateralized notes., 6.74 8.95 debt maturing after hiay 15,1996. issuing additional equity or loans under credit agreements. 6.15 7.65 selling assets. He majority of this requirement was met by the Aggregate hiaturities 5120,000,000 private placement, described below, and the . emm.ned agregate matu es and s. km.g fund reqm. i m re-remaining 525,000,000 must be obtained bv February 1,1995. ~ At December 31, 1992. 5152,000,000 is ou'rstanding under the tnents for all of the Lompany s long-term lorrowings for each i "f'

1. I'"" *"' "' f" revolving bank debt facility. At December 31,1992, the Comtel-Constcilation lation Companies total unsecured indebtedness was Year BGNE Companies 5407,000.000, and is limited by other terms of the facility ("

1,, d-,4 ' 5435,000.000 during 1993. As such, although 574,170,000 of 1993-5189,520 5100,250 unused capacity is available under the revolving bank debt facility 1994.. 61,468 62.936 at Detember 31,1991 only 528.000.000 can be Imrrowed so 3995,,

j g,237 3 43,53 j long as the Conste!!ation Companies mtal unsecured indebted-1996..

73,140 61.612 1997. 81,565 112,464 new remains at 5407.000.000. i NOTE 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 entircry at par on October 1. series of redeemable preference stock for each of the next five 1995 and July 1,190, respeoitely, years are as follows: The following series are subject to an annual mandatory Year nilemption of the number of shares shown below at par beginning f,, gy,,,,3 in the year shown below. At ItG&ITs option, an additional number 1993,, ~ 3 j,500 _ of snares, not to exeml the same number as are mandatory, may be j 994,, 13,000 redeemed at par in any year, commencmg in the same year in 1995. 73,000 which the mandatory rakmption begins. The 8.25% 1989 Series. 1996.. 36,000 the 8.625% 1990 Series. and the 7.85% 1991 Series listed bek>w 1997 are not nsleemable except ihmugh operation of a sinking fimd. 93,000 lieginnins With regard to payment of dividends or assets available in the Series Shecs har event ofliquidation, preferred m(k ranks prior to preference and 7.50% 1986 Series.. 15,000 1992 common wxk; all issues of preference stock, whether subject to h75% 1987 Series.. 15.000 1993 mandatory redemption or not, rank equallyt and all preference '.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 authoriecd number 8.625% 1990 Series.. 130,000 1996 of shares of preference stock from 6.000.000 to 6,500JKKI shares was 7.85 % 1991 Series.. 70.000 1997 appmved at the annual ma ting of shareholden on April 15.1992. 42 ILdanwre Gm and Llurric Compy and kluiddin -l

i NOTE 10 PENSION B E N E flT S The Company sponwrs several noncontributory defined benefit securities, group annuity contracts, and short-term investments, pension plam, the largest of which (the Pension Plan) coven BG&E offered a Voluntary Special Early Retirement substantially all BG&l. employees and certain employees of the Program (the Program) to chgible employees wb <etired during Constellation Companin. The other plans, which are nm mate-the period February 1,1992 through April 1,1992. In accor. rial in amount, provide supplemental benefits to certain key dance with Statement of Financial Accounting Standards employees. Benefits under the plans are generally based on age, No. 88, "Emphiyers' Acwunting for Setdements and Curtail-years of senite, and compensation levels. ments of Defined Benefit Pension Plans and for Termination Prior senice cost associated with retroactive plan amend-Benc6ts " the one-time cost of termination benefits associated ments is amortiecd on a straight-line basis over the average with the Program was recognized in 1992 and reduced net remaining service period of active employees. income by 56.6 million. or 5c per common share. The cost of The Company's funding policy is to contribute annually the termination benefits is not reflected in net pension cost. the vist of the l'en ion Plan as determined under the projected The followin tables set forth the combined funded status unit credit cmt method. Plan assets at Decernber 31,1992 of the plans and t e mmposition of total net pension cost. consisted primarily of marketable fixed income and equity At December 31, 1992 1991 IMar amouw in dwuumb Actuarial prnent value of Vested benefit obbgation.. 5 485,098 5 418,170 Nonvnted benefit obligation-9,814 11,372 i Anumulated benefit obhgation. 494.912 429,542 [ Pmjceted bent fits related to intrease in future compensanon leveh.. 86,882 94,176 Projected benclit obligation. 581,794 523,718 Pian awets at fair value. (542,190) (516,967) Projcued bcncfit obligation ins plan assets.. 39,606 6,751 t.'niccognized prior servit c mst.. (17,671) (19,112) l'nremgnizcJ nei gain (loss).. (28.017) 12.015 Unamortired net asset fmm adoption of(%5B Statement No. 87 _ 2.(139 2.265 Au rued pension (asset) liability. 5 A045) 5 1.919 Assumptions Distount rate. 8.75 % 9.0% Average increa,e in future compensation inels.. 4.5% 4.5% 1:xputed long-term rate of return on awets.. 9.5% 9.5% Year I.nded 1 mber 31, I992 19 % i990 hsrhouw wb ( omponcnn of net pen ion wst Scrcice cost-bencfits earned during the period. 511,771 5 11.729 511,257 interest cost on proiccted benefit obbganon. 47,355 43.143 40,455 Actual vturn on plan assets.. (33,685) (56,737) (l8,881) Net amorti7ation and deferral.. (12,257) 12,810 (23,066) Total nei pension cost.. 13,184 10,945 9,765 i Amounts capitab7ed as mnstruction cost.. (1,839) (I,500) (1,377) i Amounn charged to expense. 511,345 5 9.445 5 8,388 j The Company also siunsors a defined contribution savings makes wntributions on behalf orpanicipants. Company contribu-i plan cocering all eligible BG&L employees and cenain employees tions to this plan totaled S14.8 million, 510.6 million, and of the Consic!!ation Companies. Under this plan, the Cmnpany $10.0 rnillion in 1992,1991, and 1990, respmively. i NOTE 11 POSTEMPLOYMENT B E N E FIT S OTHER THAN P E N SIO N S 1he Company prmides cenain heahh care and life insurance which will be adopted by the Company in January 1993, ) benefits for tetired BGNE employees and certain retired requites a change in the method of accounting for postretire-j employees of the Constelluion Companies. The wst of these ment benefits other than pensions from the present pay-as-you-benc6ts is generally recogni7ed as the benefits are paid and go method to an accrual method. The accumulated totaled 515.887.000 for 1992, 514.054,000 for 1991, and pmtretiremem benefit obligation existing at the beginning of $11,464,000 for 1990. 1993 (transition obligation) is approximately 5270 million and Statement of I-inancial Accounting Standards No.106, will be nwgnized on a delayed basis over the average remaining i Bairmm Gu and tha,x G,wpy awmhbam 43 l

i service perial of active plan participants. He adoption of State-impacted negatively. ment Na 106 will increase operating expenses by approximately He Company aho provides certain pay continuation pnments $20 million annually. In its pending appbcation for increased ekt-to emplovees ofIlG&E and cenain of the Constellation Companies tric and gas base rates, the Company has requested the Maryland who are detennined to be disabled under 11G&E's long-Term Commission to provide current rate recovery for the increase in Disability Plan. He cost of these benefits is generally rewgnized as operating expenses as a result of adopting Statement No.106 and the benefits are ptid. Statement of Financial Acwunring Standards to authorite deferral of any increased expenses ihr which service No. I 12, whidi must be adoptcd by 1994, requires a change in the rares are not provided currendy under the provisions of generally method of accounting fbr these benefits from the present pay-as-aucpted accounting principles for regulated enterprises. Herefore, you-go medad to an accrual method. %e unreugnizcd liability for j the adoption of Statement No.106 is not expected to have a these benefits must be recognind at the time Statement No. I12 is dgnificant impact on the Company's financial statements. adopted. The increase in the annual cost of these benefits sulminent Ih> wever, if the Maryland Commisdon were to recognize to the adoption of accrual accounting is not expcaed to have a postretirement benefit costs under a method different than material impaa on the Company's financial statements. that prescribed by Statement No.106. earnings could be i l NOTE 12. LEASES The Company, as lessee, wntracts for certain facilities and Certain of the Constellation Companies, as lessor, have equipment under lease agreements with various expiration dates entered into operating leases for office and retail space. These and tenewal options. Consistent with the regulatory treatment, leases expire over periods ranging from I to 25 years, with options lease payments for operating and capital leases Ihr utility opera-to renew. The net book value of properrv under operating leases tions are charged to expense in the Consolidated Statements of was $175,523,000 at December 31,1992. He future minimum income. Icase expense was as follows for the three years ended rentals to be received under operating leases in efk at December December 31: 31,1992 are as follows: 1992 1991 1990 Year in rk,,ma f, g,,_s Operating leases $13,697 512,365 513.240 1993.. 5 12,728 Capiial leases.. 321 274 330 1994. 15,461 I Total lease expense.. 514,018 512.639 513.570 1995.. 13.330 1996.. 11,670 The future minimum lease payments at December 31, 1997. 10,300 1992 for long-term nuncancelable leases are as fidlows: ucreafter.. 83.696 Operating Capital Toral minimum rentah.. $147,185 Year Icases I cases in dwand, 1993.. 5 9.071 5 392 1994.. 3.934 378 1995.. 3.811 368 1996.. 3,381 365 199; 4.724 17' Thereafier.. 4.332 397 Total minimum lease payments.. 522.253 52.07' Inttrest ponion. (618) Present value of net minimum lease payments.. 51,459 NOTE 13. TAXES OTHER THAN INCOME TAXES Taxes other than income taxes are as follows: Year Ended December 31, 1992 1991 1990 In thmuands Real and personal property _ 5100,419 5 89,379 5 85,372 Public wnse company franchise.. 45,654 46,041 42,812 Social security. 34,911 33,121 30.344 Ot her.. 9,355 9,026 6,770 ~1 otal taxes othe r than inwme taxes.. 190,339 177,56' 165,298 Amoams included above s barged to atcounts other than taxes.. (7.335) (6.786) (8.576) 'I ases other than income rases per Conmbdated Statements ofinwme.. 5183.004 5170.781 5156.722 44 Mtume (;,v andI:imac Comprq and %diaria

NOTE 14. COMMITMENTS, GUARANTEES, AND CONTINGENCIES Commitments will require additional NO contmh for acid rain abatement at x IlG&E has made substantial comnmmenn in connection with BG&E's generating plants and omne nonanainment at all BG&E its wnstruction program for 1993 and subsequent years. In addi-facilities. The controh will resuh in additional expenditures that are tion, BG&E has entered into two long-term contracts fbr the ditlicult to predict prior to the issuance of such regulations. Based purchase of ele tric generating capacity and energy The on existing and pmpmed acid rain and omne nonartainment regu-contracts expire in 2001 and 2011 Total payments under these lations BG&E currendy estimates that the NO controls at x I contracts were $55.051,000, 523.716.000, and 517.957,000 BG&E's generating plants wf.ost approximardy 540 million. during 1992,1991, and 1990, respectively. At December 31, BG&E is currently unable m predict the cost of compliance with 1992, the estimated future payments for capacity and energy that the additional nquirements at other BG&E facilities. BG&E is obligaud to buy undtr these wntracts are as follon: BG&E has been notified by the Envimnmental Protection ycy Ageng (EPA) and several state agencies that it is being con 3idered j,y%g a potentially responsible party with respect to the clean-up of cenain environmentally contaminated sites owned and operated 1993.. 5 70.058 bv third panies. Ahhough the dean-up msts fbr certain envimn-1994.. 71,735 mentalh contaminated sites could be significant, BG&E believes 1995.. 72,119 dw Abesohnion of these maners wdl not hase a material efTect 1996_ H,243 on its financial position or resuks of operations. 1997._, 73.769 Aho, BG&E is voluntarily coordinating investigation of Thereafter.. 722.992 several former coal gas manufacturing plant sites, induding expkw Total payments.. $1,081,916 ration of corrective action options to remove coal tar. However, no formal legal proceedings have tren instituted. The technology Certain of the Constdlation Companies have committed to for deaning up such sites is still devdoping, and potential reme-wnuibuie additional capital and to make additional loans to dies for these sites have not been identified. Consequently, the cenain affiliates, joint ventures, and partnerships in which they dean.up costs for these sites, which could be significant in total, have an interest. As of Daember 31,1992, the total amount of cannot pasendy be estimated. investment requirements annmined to by the Constdlation The Energy Policy Act of 1992 contains provisions ratuiring Companies is 554 million. domestic utilities to wntribute to a fund fbr decommissioning 1 and decontaminating the Department of Energy's (DOE) i b,""'"' ~ BG&E has agreed to guarantee twmthirds of.cenam mdebtedness uranium enrichment facilities. These contributions are generally ble over a fifteen-year period with escalation for inflation and myurred by Safe Harbor V ater Power Lorporanon.,1he amount are based upon the amount of uranium enriched by IX)E for of mch mdebtedness torals 545 nullion, of which 530 million each utility. At December 31,1992, BGNE has recorded a represents BG&E s share of the guarantee. BG&E assesses that liaility and a defened charge ajual to its estimated total contribu-the nsk of matenal loss on the loans guaranteed is nummal tin df appmximatdy $55 million in 1992 dollars. The Act As of December 31,1992, the total outstanding loans and provides that these costs are recoverable through utility se vice leners of credu of certain power generation and real estate ra m u d f d I pmjects guaranteed by the Lonstellanon t,empanies were 552 million. Aho, the Constellation Companies have agreed to Nudear Insurance 3 guaranwe cenain other lurrowings of various gewer generation An accident or an extended outage at either unit of the Calvert l and real estate pmiccts and to provide certain performance guar-ClitTs Nudear Power Plant could have a substantial adverse etTect antees of power generation projars. The Company assesses that on BG&E. The primary contingencies resuhing from an incident the risk of maierial Ims on the loans guaranteed and performance at the Calvert Clith plant would involve the physical damage to guaramees is minimal. the plant, the recoverability of replacement power costs, and BG&Es liability to third parties for ropeny damage and luJilv Emimmnental Mauers injury. Ahhoue.h BG&E maintains t e various insurance po!icie's The Llean Air Act of 1990 (the Act) contains provhions urrently available to provide coverage ihr ponions of these designed m redate sulfur choude and mtrogen oude em, mons i mntingencies, BG&E does not consider the available insurance to fmm elauic generating stations in two separate phases. Under b&- aw m cover the costs that could result fmm a major acci-Phase 1 of the Act, which must be implemented by 1995, BG&L dent or an cuended outage at either nfthe Calvert ChtTs units. expects to incur expenditutes of approumately $55 mdhon, most in addition, in the event of an incident at any commercial of which is annbutable to its ;urrion of the cost of mstalling a nudear power plant in the country, BG&E cuuld ik assessed for flue gas plesulfuriution system at the Conemaugh generanng ion of any third pany daims associated with the incident. a stanon, m which BG&E owm a 10.%% imerest. BG&E is currently exan ining what actions will be uuired m order to Under the pnwisions of the Price Anderson Act, the limit for comply wah I hase 11 of the Act. which must b: implemented by third pany daims from a nudear incident is 57.8 billion. If third ddms rdaring to such an incident exceed $200 million 2000. However, BG&E anuc,yates that comphance wdl be (the amount of primary insurance), BG&E's share of the total auained by some mmbination of fuel switchu,g, flue gas desulfu-liaili fm aird pnv'daims could be up to 51v million nrr - ruanon, tuut remements, or allowance tradi9 incident, that would be pavable at a rate of 520 million per year. At ilm nme, plans for compiving with numgen ou.de (NO ) BG&E and other operators of commercial nudear power wntml requiremems under the Act are leu terram be ause a 1 implementanon regulanons have not yei lxen finahzed by the piants in the Unital States are required to purchase insurance to govemment, it is eyecrui that by the year 2000 these regulan,ons daimfmain Medm Oh mpmnd commercial nudcar facilities may also purchase suth insurance. Mawr Ga< andIkrrru Cwspm vulSuM6arus 4S

Coverage of up to 5400 million is provided for daims against management imprudence and that the replaament energy costs BG&E or others insured by these policies for radiation injuries, associated with those outages should be disallowed by the if cenain daims were made under these poUcies, IlG&E and all Commission. Total replaament energy costs associated with the pohcy holders could be assessed, with BGNE's share being up to 1987 outages were approximately $33 miuion. 56.3 millidn in any one year. In May 1989. BC&E filed its fuel rate case in which 1988 Ior physical damage to Cahert ClitTs. BG&E has 52.625 performance will be examined. BG&E met the system-wide and billion of property insurance, including 51.325 billion from an nuclear plant performance targets in 1988. People's Counsel industry mutual insurance company. If accidents at any insured alleges that BG&E imprudently managed several outages at plants cause a shonfall of funds at the industry mutual, BG&E Calvert Clifts, and BG&E estimates that the total replacement and all policy holders couki be awessed, with BG& E*s share being energy costs associated with these 1988 outages were approxi-up to $14.5 million. ' mately $2 million. On November 14,1991, a Hearing Examiner if an outage at Calven Cbffs is caused by an insured physical at the Maryland Commission issued a proposed Order, which damage kns and lasts more than 21 weeks, BG&E has up to 5<i26 became final on December 17,1991 and conduded that no disal-million per unit ofimurance, prcnided by a different industry lowance was warranted. The Hearing Examiner found that mutual insurance company fi>r replacement power costs. This BGNE maintained the productive capacity of the Plant at a anmunt can be reduced bv up to 585 million per unit if an outage reasonable levd noting that it produced a near record amount of to Ivah units at Cahen Clifts is caused by a singular insurni phys-power and exceeded the GUPP standard. Based on this record, ical damage km. If an outage ai any insured plant causes a short. the Order condaded there was sufficient cause io excuse any fall of 6mds at the industry mutual, BG&E and all policyholders avoidable failures to maintain productive capacity at higher levels. wuld be assessed, with BG&E's share being up to 59.6 million. During 1989,1990, and 1991, BG&E experienced cuended outages at its Cabrrt Cliffs Nudear Power Plant. In the Spring of Recoverabih.ty of flectnc f. l Costs 1989, a leak was discovered around the Unit 2 pressuriier heater . ue By statute, actual glectric fud costs are recoverable so long as the deves during a refueling outage. BG&E shut down Unit I as a Maryland Comimsuon find that BG&E demonstrates that, precautionary measure on May 6,1989 to inspect fbr similar leaks 7 among other thinp, it has mamtamed the productnr capacny of and none were found. However, Unit 1 was out of service for the ns generaung plants at a reasonable level The Maryland Comm'! remainder of 1989 and 285 days of 1990 to undergo mainte-uon and Maryland's highest appdlare court haw mterpreted th nance and modification work to enhance the reliability of various as pernuttmg a subjeco,ve evahunon of each unplanned outage at safety systems, to repair equipment, and to perform required BG&Es generanng plants to deternune whether or not BG&E periodic suntillance tests. Unit 2, which remmed to service on had implemented all reasonable and cost effective maimenance May 4,1991, remained out of senice for the remainder of 1989, and operatmg control procedures appropriate ihr preventing the 1990, and de Hm pm of 1991 m n pair the prrssurizer, perform outage. EfTecove January 1,1987, the Maryland Comnussion niaintenance and modification work, and complete the refueling. auihonud the estabbshment of the Generating Unit Performance The replacement energy costs associated with these extended Program (GUPP) to measure, annually, unbrv comphance wnh outages for both units at Calvert Cliffs, concluding with the maintaining the producuve capacuy of generaong plants at return to service of Unit 2, is estimated to be 5458 million. reasonable levels by establishm, g a system-wide generatmg perfor-In a Decemlrr 1990 order issued by the Maryiand Commis-mante target and mdividual performance targets for each base sion in a BG&E base rate proceeding, the Maniand Commis-load generanng unn. In future tud rate beannp, actual generating sion found that certain operations and maimenance expenses performance after adjustment for planned outages will be incurred at Calvert Cliffs during the rest year should not be compared to the system-wide target and, if met, should ugm,ty awwrd fmm rapyers. TN Mayland Commission found that BGNE has complied wnh the requirements of Maryland law. that this work, which was performed during the 1989-1990. Faiklre to meet the syuem-wide target wd! result m renew of each Unit 1 outage and fell within the test year, was avoidable and umt s adjusted actual generaung performance versus its perfor-caused by BG&E actions which were deficient. mance target in determmmg comphante wah the law and the The' Commission noud in the order that its rniew and find-basis for powbly impoung a penalty on BG&E. Parues to fuel inp on these isi.ues pertain to the reasonableness ofBG&E's test-rate hearinp r;uv soll quesuon the prudence of BG&L s acuons year operations and maintenance expenses for purgmses of setting or macoons with respect to any pren generaung plant outage, base rates and not to the responsibility for replacement wwer which could result m the disallowance of replacement energv costs cmts meind with the outages at Calvert Cbffs. He Maniand - by the Maryland Comnuwon. Cummission stated that its decision in the base rate case will have Smce the two units at BGN E s L. dvert ChtTs Nudear Power no resjudicata (binding) cRect in the fuel rate proceeding exam-Plant utilize BG&E s lowest cost fud, replacemetit energy costs ining the 1989-1991 outages. The work characterized as avoid-aswiated wah outages at these unns can Iw sigmficant. BG&E able significantly increased the duration of the Unit 1 outage. cannot estimate the amount of replacement energy costs that Despite the Maryland Commission's statement regarding no could be challenged or disallowed in future fuel rate procecthnp, binding effect, BG& E recognizes that the views expressed by the ~ but such amounts could be matenal. Maryland Commission make the full recovery of all of the In October 1988; BG& E filed its fire fuel rate appb. canon for replacement energy costs assodated with the Unit 1 outage a change m us electnc fuel rate under the GUPP program. Ehe doubtful Therefore, in December 1990, BG&E recorded a resuhant case Idore the Maryland Comm.! won cmtrs BG&E,s py.ision of 535 million against the gmssible disallowance of such operating performance m calendar year 1987, and BG&E,s fdir g costs uhich reduced 1990 carninp by 19c per common share. dernonstrated that n met the system-wide and individual nudutr BG&E cannot determine whether replacement energy costs ma plant performance targets for 1987. In November 1989, resn-be dnalkmed in the present fuel rate proceedinp in excess of t e mony was fikd on behalf of Maryland People s Counsd alleging provision, but such amounts could be material that seven outages at the Calvert Chfis plant in 1987 were due to 46 Adwww Gu andikcn Compay and Sukulww

l NOTE 15. FAIR VALUE OF FIN A N CI A L IN S TR U M E N T S As required by Statement of financial Actounting Standards carrying amount of 571 million are exduded from the amounts No.107, the ibilowing table presents the carrying value and fair shown in investments and other assets because it was not practi-value of financial instruments induded in the Consolidated Balance cable to determine their fair values. These investments indude

Sheets, partnership investments in public and private equity and debt At Ibember 31,1992 wurities, pannership investments in solar powered energy t amm,g i mr pnsluction facilities, and invesunents in stock trusts.

Amount value Financial instrumems induded in capitalization are long-1 f,,,h a,g term debt and redeemable preference stock. The fair value of he rate long.tcnn debt and redeemable preference stock j Current assets.. . 5 408.790 5 408590 imestmems and other assets.. 93.834 97,135 generaHy esnmated by discounung the remammg cash flows at j Current liabilities.. 649,650 649,650 the current market rate to m tunty. The carrying amount of j variable-rate long-term debt approximates fair value. { Capitaliud,m.. 2,772A 50 2,871.291 BGNE and the Lonstellanon turnpanies have loan guaran-The carrymg amoum of current ams and current liabilities appn e tees totalling 530 million and 538 million, respectively, for imates fair value bmause of the shon maturity of rhne instruments, which it is not practicable to determine fair value. It is not antici-The fair value of imesonents and other assets is based on pated that these loan guarantees will need to be funded. quoted market prites where av.nlabic. Certain investments with a NOTE 16 0UARTERLY FIN A N CI A L DATA { 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 mem. indude all adjustments necewary for a fair presentation. mombs. Accordingly, comparisons among quarters of a year may BG&E's utility business is seasonal in nature with the peak sales not be indicative of overall trends and changes in operations. Quarter f.nded Ycar Ended MmbH lune 30 Scpicmhcr 30 Ihemhcr 31 thember 31 in rhou,ank exaptpernha.r amounts 1992 Revenuet $669.253 5510.895 5677,059 5604,136 52,491.343 1nemne from operatiom.. 12 I21 91,309 222,627 94,288 535,345 Net ins ome.. 59,.254 3 &O49 124.620 42,424 264,347 1 arnings apphuble to common stod.. 48.6HO 27A75 114.047 31.898 222,100 Lirnings per share of common sask.. 0.37 0.20 (1.84 0.22 1.63 1991 Revenuet. 5592,364 5564,257 5U19.149 5593,083 $2,448,853 Income fmm operatiom.. 85,916 115450 222.015 65,807 489,188 Insome befme <,umulative efTeu of change in accounting method.. 41,110 59.192 116.6'l 16,708 233,681 Cumularis e etTest of change in the method of accounting foi income raws.. 10.745 19.745 Net in( ome.. 60.855 59,192 116.671 16J08 253A26 Earninp applicable to common sn(k.. 50,285 48,164 106.097 6,134 210,680 Earnmgs lwr share of wmmon stod Before cumulative ctTect of change in accounting method.. 0.24 0.38 0.M 0.05 1.51 Cumulanve dh t of change in ascounting for inonne taxn.. 0.16 U.16 Total earninp per share of common saxk.. 0.40 0.38 0.84 0.05 1.67 Rendsfor defint aneidwdqwmm ufI9%l lea riv ont et irrminarwn Ivnefin amiated with de t blunim Spai.d Farh 1&rnement Pnvam ou be 10h kult, Sur she clurdand/wth quanm of 1@l y!Ic t t e wvne-dan ofdr Lomull.aum timpanm'inwtnuttiin sertamfinawsalinwrment< andrealraate h ymn n wyntwelv va Noir e Ibe n.m ofde qsmoli carning> pcr,i.aw ammam may not npaid,e ntallhr the war dur w change in de arrrage nu mber gf>harn out,tand:ng throughout theyear. Ccriaen;-rwyar amounti haw inn wtated w wquem wah av oirrentytr k jurventanos:. Hahaw e W andIki Campa9 andhuinhann 47 I ~

C0RP0 RATE AND UTILITY 0FFICERS Christian 11. Poindexter Jon M. Files j. Chairman of the Ibard and Chief Executive OtTicer Vice President, Management Senices Age 54. )>an ofsmice 25 Age 57, )>ars afsm? ice JS Llward A. Crooke Ronald W. lowman President and Chief Operating OGcer Vice President Fossil Energ .4gn 54, l'ran ofim ice 24 Age 48. )'can afsm? ice 24 George C. Creel G. Dowell Schwartz, Jr. Senior Vice President, Generation Vice President, General Services Age 58, l'ean ofsmix: 37 Age 56, l'ean ofsm ica 3-i Thomas F.11rady Charles W. Shivery Vice President, Customer Service and Accounting Vice President, Corporate Finance, Age 43, )kan <fsmiac.U Treasurer, and Secretary ^## Michael J. Chesser Vice President, Marketing Joseph A. Tiernan Age 44, IFan v[smice 21 Vice President, Corporate Affairs Age 54, ) Pan ofamia:24 Ilerbert D. C.oss, Jr. Vice President, Electric Interconnectiun and Transmission Jeffrey L Davis Age 58. Yean afsmice 36 . Assistant Secretary Robert I; Denton Vice President, Nudear Energ Thomas E. Ruszin, Jr. 1 Age 49. )?ars ofsmice22 Assistant Treasurer l Age 38, )*ean ofsm ice 16' George D. E.ngland Vice President. Distribution Age 61. )*can <fsmice 38 CHANDES IN O R G A NIZ A TIO N Effecthe January 1,1993 Christian 11. Poindexter, former Robert E. Denton, former Plant General Manager of the i Vice Chairman of the Board. was elected Chairman of the Calvert ClirTs Nudcar Power Plant, was dected Vice President Ibard and Chief Executive 05cer lie succeeded George V. of Nuclear Energy, effective Seprember 1,1992, replacing McGowan, who retired with more than 41 years of service. Mr. Creel. Llward A. Crooke, former President of Utility Operations, was Ronald W. Lowman, former Manager of Fossil Engineering. named President and Chief Operating Officer, effective was elected Vice President of Fossil Energ, etTective January 1, September 1,1992. 1993. He replaced J. Thomas Wellener, w bo retired with more than 38 years of service. FJlcuive January 1,1993. George C. Creel. former Vice Presi-dent of Nudcar Energv, was elected Senior Vice President of Generation, assuming responsibility for the Nuclear Energy and Fossil Energ Divisions. '48 Rd.mm Gas ard Mrx Comj>ay a dShuhanes

B0ARD 0f DIHECT0RS Christian i1. Poindcuer Jerome W. Geckle Chair man of the Board and Chicilacunive ( hlier. Chairman of the Board (retiredh Pilli Cor; oration Dra 14 ard to the bosu/: loss tvchide, relocation and management services), i1. I urlong flalJwin ( hairman of the Board and Chief 1:xconne ( hiicer, George V. hhGowan Mercantile Bankshares Corporation ihank holding Chairman of the frecutisc Comminee. /~ int ricardio company), Bahimore, not <!rardto ti.e board I988 the board 1Y80 Beverly It flyron Paul G. Miller l ormer Conga sswoman. United ' states Ilouse Chairman of the Board. Supertomputer Syucms, Inc. of Reprewntatives (gosernmeno, I redensk, Md.. (design, manuf.x ture, and ule of supen omputersh nnt cleard to tl>e bv.od: 1VD Bahimore, Fim cleardto the board 1981 J. Owtn Cole George G. RadclifTc Chaiinun of the 1 Accutisc Commitice. Iirst Marylrul I ormer Chairman of the Board and Chief f accutise Hano ip ihank holdinpompany). Baltimore. Fira e/racd Otlier, The Bahimore 1.ife insurance Company to the bad-14" (insuranech Bahimore, nnt cintedto tbc board 1982 l l Dan A. Colussy George L Russell,Jr., Esq l Chairman of the Bo.ud. President and ChiefI sautise Partner, hper & Marbury (law firmt Bahimore. 1 ( )tlict. VNC In orporated (avi.aion servitcM. Fint ricard ro the board: 1983 Annapohs. Md.. lint ricard to ibe board 1992 Michael D. Sullivan i lilw ard A. Crooke President and Chief becutive O$ccr. h, dent and Chicf( ipt ratine Otticr, Dra r/cacd to Merry -Go-Round Fnicrpriscs, Inc. bpeciahy retailingh rire boavi: 1983 loppa. Md. hm eleardtu rbe board 1992 i eslie B. Disharoon Ilarry K. Wells I ormer Chairrnan of the Board and Presidt ot, Chairman of the Board (ictiredL McCormick N Monumental Corporation (insurans ch Bahirnure. Company. Inc. (food protc.ssing, spkes, ctt.), hn: cin talto the board 19~M Ba!timore. Fint ricard to the board-193 CHANGt IN DIRECTORS C O M MIT T E E S OF THE DOARD Ber nard C. Trucschler retired f rom the board tifcoise Audit Committee Committee on Management I ict ernher 31,1992. Mr. RaJJifi', Guirman Mr. Geckle, Guirman c Mr. Baldwin M r. Cole sister Kath!cen I celey. S 5.RD, retired from the ho.ud M r. Cole Mr. Disharoon erfcaisc July 1.199.t Mr. Russell Mr. Sullivan Bescily B. By ron. formci Conpesswoman U.S. Flouse liecutive Committee Committee of Represcmatis cs, w as cic(ted to the hoard ef fn tisc Mr. McGowan, Guirman on Nuclear Power Ichruary 1,I M Mr. Baldw in Mr. Tclh. Outrman Mr. Cn oke Mrs. Byron Mr. Disharmn M r. Colussy Mr. Poindcuer Mr. McGowan Mr. RaJJdfe Mr. Miller /n m m..ns nam c,, 9,s 3,,/.,y/- 49

C0NSTELLATION SUBS 1Dl ARIES O f flC E R S Christian iI, Poindexter Bruce M. Ambler Chairman of the Ibard. Constelhtion Holdings, Inc. Acting President, Constellation Real Estate Group. Inc. Age 54 Age 53 Bruce M. Ambler J. Richard O'Connell Presidem and Chief Executhe of1ker, President, Constellation Real Estate, Inc. Constellation Holdings,Inc. Age 57 Agc:53 James W.JefTcoat Douglas S. Perry President, Constellation Health Services, Inc. Yke President and General Counsel, Age 39 Constellation Holdings,Inc. Robert L Windham Age 43 President, Church Street Station, Inc. Terry L Ogletree Age 50 President. Constelluion Energv. Inc. Age 40 Steven D. Kester President, Constellation Investments, Inc. Age il CONSTELLATION HOLDINGS C O N S T E L L ATIO N REALESTATE GROUP Constellation Holdings provides direction to all of its This is the parent company of several businesses, including operating subsidiaries and furnishes them with legal, finan-Church Street Station in Orlando, Morida, that operate cial, tax, accounting. and ptrsonnel senices. 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-Constellation Hoklings. ment, construction, and operational activities, and Constdla-tion Heahh Services, through joint ventures, owns C 0 N S T f L L A T1O N INERGY senior-living and retirement (ommunities, as well as nursing flicihties for the elderly. .T. h.is is the senior member of our i,nergy and Fnvironmental Group. Under the aespices of Constellation C 0 N ST E L L ATIO N INVESTMENTS Energy, the company participates.in a number of alternative energy and co-generation projects producing electricity for Constellation Investments serws as the primary provider of l 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 financial-service companies. and operating a number of wholesale power proiccts throughout the country. l 50 nhimr Ga, and&ru G,mpam ami%Iatia in e

C0NSTELLATI0N SUBSIDIARIES 1 BOARD OF DIRECTORS Christian 11. Poindexter Edward W. Kay Chairman of the Board, Former Co-Chairman and Chief Operating Officer, Baltimore Gas and Llearic Company, Fint dured Ernst & Young, Fint dured to de board-1983 to the board 1985 George V. McGowan Bruce M. Ambler Former Chairman of the Board, Constellation Iloldings, Inca ) President and Chief Eututive OEer, Former Chairman of the Board and Chief Executive OGcer. l Consiellation Holdings, Inc.. First deacdto de board 1989 Baltimore Gas and Electric Company, Fint datedto l de board 1983 i

11. Furlong Baldwm.

Chairman of the Board and Chief Encutive Omcer. Paul G. Miller j Mercantile Bankshares Corporation. Fint deard Chairman of the Board, Supercomputer Systems, Inc.. to eit board-l98^' Fint denedto the board 19M leslie B. Disharoon Bernard C. Trueschler i ormer Chainnan of the Board and President. Former Chairman of the Board and Chief Executive Omcer, Monumental Corporation. Fint durcd to de board 1987 Bahimore Gas and FJectric Company, Fint duredto Jerome W. GeclJe Chairman of the Board (retired), PHH Corporation. First <!aud to dw board: 1985 COMMITTEES OF THE BOARD CHANGES IN O R G A NIZ ATIO N AND DIRECTORS Audit Committee Committee on Management Mr. Kay, Chairman M r. Get kle, Chairman Christian IL Poindexter was elected Chairman of the Board of Mr. Baldwin Mr. Disharoon Constellation iloidings, Inc., effective January 1,1993. He Mr. Miller replaced George V, McGowan. who resigned as Chairman of the Board of Constellation Holdings, Inc., at that time. Mr. McGowan will continue as a director. ILunnm Gai avilhu-u Compmy amiklum'unn 51

SHAREH0LDER INF0RMATl ON COMMON STOCK DIVID E N D S AND PRfCE RANGES 1992 1991 Dhidend Price Dividend Price Declared Ifigh Low Declared High Inw first Quarter. $.35 523 % 519 % 5.35 519 % 517% Sewnd Quaner.. .36 22 % 19 % .35 19 % 18 % Third Quaner .36 24 % 21 % .35 21% 19 % Founh Quartet.. _51.43 51.40 .36 24 % 21 % . _ _.3 5 _ 22% 21 % - Total. DIVID E N D POLICY ANNUAL M E ETIN G The common stock is entitled to dividends when and as dedared The annual meeting of shareholders will be Leld at 10:00 a.m. by the Board of Directors. There are no limitations in any on Tuesday. April 13. 1993, in the llunt Valley Ballroom of indenture or other agreements on payment of dividends. Marriott's Hunt Valley Inn. 245 Shawan Road (1-83 at Shawan Holders of preferred stock (first) and holders of preference stock Roadh Hunt Valley, Maryland. (nexth honeser, are entitled to receive, when and as decland FDRM 10-K from the surplus or net pmhts, cumulative yearly dividends at Upon written request, the company will funu. h, wa. hout charge, s the h. d pteferenn. l rate specificd f.or each series and no more, se a a copy of.as Form 10-Is. annual report, including financial state-payabic quanerly, and to receive when due the applicable prefer-ments, after a is filed wn. h the Secun..nes and Exchange Comma.- ence stock redemption payments, before any dividend on the sion m March 1993. Requests should be addressed to Charles W. common stock shall be paid or set apart. Dividenda have been Shhery, \\,.ne Pres. dent, Corporate Finance, 'I.reasurer, and i paid on the wmmon stosk continuously since 1910.1-uture Secretarv, P.O. Box 1475, Bahimore, Maryland 21203-1475. dividends depend upon future earnings, the h.nanaal cond..iuon of the company, and other factors. Quarterly dividends were A U DIT 0 R S dctlared on the wmmon stock during 1992 and 1991 in the Coopers & l ybrand amounts set tiirth above. EXECUTIVE OFFICES C0MM0N Si0CK D I V 10 E N D DATES Gas and Electric Building Rewrd dates are normally on the 10th of March, June, Charles Center Se p t e m be r, and December. Quarterly dhidends Bahimore, Maryland 21201 are customarily mailed to each shareholder on or about the Maib P.O. Box 1475 i st of April July, October. and January. Baltimore, Maryland 21203-1475 0iViD E N D REINVESTMENT S H A R E H 0 L D E R S' INDUIRIES AND STOCK PURCHASE PLAN AND ASSISTANCE The (ompany's Dividend Rein estment and Stock Purchase Shareholders desiring assistance with lost or stolen stock certifi-Plan provides an opportunity for holders of the company's cates or dividend checks, name changes, address changes, stock wmmon stock to acquire additional shares of such stock in a transfers, or other matters should call the shareholder services convenient and economical manner. Participants in the plan representatives on our toll-free telephone numbers. tnay reinvest cash dividends on all or a portion of their shares of The following roll-free telephone numbers are available wmmon stock and/or make optional cash payments-during our business hours,8:00 a.m. to 4:4 5 p.m.: ST0CK TRADINC Bahimore Metropolitan Area 783-5920 The wmpany's common stock, which is traded under the ticker Within Maryland 1-800-492-2861 symbol BGE, is listed on the New York, Midwest, and Pacific Outside of Maryland 1-800-258-0499 stomk cubanges, and has unlisted trading privileges on the I eners should be addressed to: Boston, Cincinnati, and Philadelphia enhanges. As of Bahimore Gas and Electric Company December 31,1992, there were 80,371 common shareholders 3harehokier Services of record. P.O. Box 1642 Ba more. Ma@and 2 W-M iRANSFER AGLN1 AND REGISTRAR Manland National Bank. Bahimore 52

_ _ _ _. _ _ _... ~... _ -. _, _ _. _ _. - _ _ _ f t i i 2 l l GAN ANp C LLC ThtC l' O. Box Jg5 I~ Bahimore, A1aryLind21203-1475 i- 'I o W l' I i

Exhibit II l Quarterly Financial Summary i June 1993 r i l inquines concerning this summary should be directed to: Charles W. Shivery Baltimore Gas and Electric Company Vice President, Gas and Electric Building I Cnief Financial Officer, Charles Center and Secretary P.O. Box 1475 (410) 234-5511 Baltimore, Maryland 21203 Kevin J. Mi!!er

Director, Financial Planning (410) 234-5434 1

I I 4 i Consolidated Statements of income cunaue:ted) ) Three Months Ended Sir Months Ended Twelve Months Ended June 30. June 30. June 30, 1993 1992 1993 1992 1993 1992 (in Thousands, Except Per Share Amounts} Revenues Ele 0:nc. 5469.741 5446,831 5 945,170 S 934.098 S1,978,995 S2.019,248 Gas. 75.930 67.238 257,710 218.751 441.897 373.714 Diversified actmties. 19.C50 26 B26 45.666 57.299 108.849 109 418 T otal revenues. 564,721 540 89S 1.248.546 1,2:0,148 2.529 741 2.502.380 Expenses Otner Than Interes: and income Taxes E6e:!nc fuel and purenased energy. 109.677 125,996 244,04B 285.226 515,006 589,182 Gas purenased fr< resaie. 39.059 30.216 149.459 114.955 248.607 188.229 Opera:cns. 146.157 143.718 297,193 296,385 607.306 640.524 Maintenance. 58.897 52.877 100.793 94.373 179.146 164.327 Depre::aacn. 59.595 55.868 118.333 111.767 230.048 216.892 Taxes othe' than income taxes 43 949 40 909 95.239 89012 189.232 176.975 Total expenses c:her Inan in:ercti and ine.ume taxes 457.334 449 586 1.005.065 991.718 1.969.345 1.996.129 mcome From Opera!rors 107.387 91.309 243 481 218.430 560.396 506.251 Other income Allowance for eaurty funes used dunng construction. 3.621 3.205 7.157 6.362 14.6S7 10.433 E0uity in carnings of Safe Harbor Wa:er Power Corporaten. 1.068 1.084 2.136 2.16 B 4.235 4.349 Nc other income and cecu:Lons 709 1 172 984 1.377 3.544 600 i Total c:*'er ir.come. 5.398 5 461 10.277 9 907 22 466 15.382 Income Before Interes* and income Tayes. '12 785 96.770 253 75B 228.337 582.862 521.633 in:eres Exoense l interest enarges, nei cf cap:tahced r.:c'es: 47.601 45 817 96.270 91217 194.965 206.053 Atoaan e for borrowed fun::s useo cunng cons:ruc:;cn. (2.004) (1.7611 (4 083) (3.616) (5632) (6.006) Net interest expense 45 597 47 056 92.1E7 95 601 166.333 200.047 income Before locome Tares 67,165 49.714 161,571 132.736 396.529 321.5S6 income Taxes Current (8.573) 2.S27 21.108 31.260 75,137 91.484 i Deterrec. 21.974 10.964 23.044 8.702 41.255 B.240 investment :ar cred:t adjustmen:5. (2.089) (2.1261 (4 253) I4 52S) (8.579) (8.819) 7 otal inc ome taxes. 11.312 11665 39 E99 35 434 107.813 90 905 Net in:Ome 55 676 3a.049 121.672 97.302 2SB,716 230.681 Preferred and Preference Stc;x Div.cencs. 10 576 10.574 21 095 21.147 42.195 42.294 Eamings Acohtaote to Common S:0:r.. S 45 300 S 27 475 5 100 577 5 7f> 155 5 246 521 S 18B 387 Avera;e $ nares of C;mmon Stock Outs:ancag 144.'ia; i n.azi 144 471 132. coo M ai:o id.:J 4 Eamings Per Share of Common Stoa U:My coera:cns 50.28 50 18 50.65 50.52 51 63 S1.49 Dwers;fted setiv; ties. O C3 0 C2 0 04 0 05 0.10 (0 04) To:al camings per snare of common sto n 5021 SO 20 50 70 50.57 S1 73 S1 45 Constellation Companies Revenues S20.535 52S.193 548 621 S59.961 5114B10 5114,346 Net income 4,260 2.736 5.965 7.095 14.126 (4.637) Tota; Assets-End of Penod. 1.065.234 1.009.623 1.065.234 1.009,623 1.065.234 1,009.623 BG&E s hves: ment-End of Period 301.363 2B7.237 301,363 287,237 301.363 257.237 IntOrmalm lor Irae Consre:iahon Cor carues coes nc,. elect con.uokaating ehminahons for r:lercompany balan:es and transa:trons 7he Intenm in*DF"ul?Cn COntanned rtrein refic:!$ awort:Onments BPr0 estimales O! SOme stems Sub e:! 101176 a;hVSime*11at be CaienCar year-en0 5e5Ul!$ fOr inrG! t per@:S. w%:n Can be laqt'y influRnced DY weatr@r CDnathOnS. are HO! ne:e55anly In0Calwe O! re$U!!$ 10 De eKDe:ied ICr an enkte year. i k

I Consolidated Balance Sheets (unauditee) June 30, i 1993 1992 i ASSETS (in husanon Current Assets Cash and cash eaurvaients, S 37.951 5 42.007 1 Accounts receivable (net of allowance for uncolle0bbles). 302,017 268,841 A;0 rued unDilled revenues 95,440 74.285 i Fuel S100ks. 83.771 81.927 f/aterials and sucches. 145.337 133.975 Income taxes refun0cDie. B.590 i 4 Prepaid taxes o:ner : nan in: cme : axes. 3.040 1.742 0:ner prepaymen:s. 10.975 10.734 Other. 11 673 10 817 l j Total current assets. 690204 632.918 investments and Other Assets. Acal esta:e crojects. 473.308 457.036 '[ Power generation systems 266.901 215.649 Financal $nvestmmis 209.248 233.317 Nucear cecommss oning :ru;; Qnc. 49.310 37,352 l Safe Harbor Water Power Corporst:on. 34.172 34.237 Senior iivm; f acaces. 23.916 25.031 Otner. 67.131 72.945 i Tota! investments anc cther assets. 1.123.986 1.076.067 f U:My P! ant 7.108.143 6.749.836 Accumu:ated deprec;ation. f 2 066.7011 (1.890.785) Ne! utility p: ant. 5 C41442 4.e59 051 Delerrec Charges j i fncome taxes recoverable :hrough fc:ure rates. 221.780 203.374 Dcterred fuel cos:s (net of anowance for cossroie cisellowance; 140,041 210.998 Deferre: nuciear expendeures (net of amorLzanon) 80,216 70.042 Defe rec ces; of ce:cmm:ss:oning cf uranium ennchment fachtres. 52.250 i Deterred energy conservadon expenddures (net of amer:,:ahon). 29437 11.509 Ciner 76.719 35.680 I T :a! ceterrec charget LOO 443 532.809 i To:ar Assets 57 456 075 57.100145 1 4 LIA8!LITIES AND CAPiTALIZATiCN ri Curren: Liacihties I i Snon-term borrowinos 5 1.500 5 76.150 1 Current portions of long term ce;: an: preference stock 155.257 425 306 l j Accounts payaote 134.369 134,609 j Customers ceposes. 20.637 16.219 i Actrued taxes. 6.908 3.408 AO:rvec rierest 56.083 50.546 Dividenes cemare: 64.111 59.305 [ 1 Accrue:: vaca: ion ecsis. 31.936 33.321 Other 10.907 18.054 To:al current habikces 481.76s 687.518 Deferred Credds an0 0:ner L;abities j i Deferrec m ome taxes. 1.011.419 951.758 l Deferred investment tax creces. 161.513 169.963 Decomrruss.cning of uranium ennenment fa:Wt:es. 51.333 A ; rue; ocsuetnemem oeneht costs 10.02E i 4 Ciner 27 972 28 824 Tc:a! de' erred cred.ts and c:her hacees. i.262.265 ' 150 545 Lon;-Term Debt Fest rebod:ng mortgage Doncs. 1580.182 1.605.104 l j 0:ner long-term cott 430.550 497,850 i Long-term Oect of Cons:enanon Companies. 607.421 583,513 Unamomzed d:scount and prem:um. (12.570) (9.281) l Current oortion of long-term ccbi. (102.267) (492.3061 l T0ta! bng-term ceot. 2 603 316 2 184 880 Preferred Stock.. 59.185 59.165 ) Redeemabie Preference Stock. 397.000 400.000 Curren: pomon of redeemabie preference s:cck. f 53 000) f3 000) Tc;al receemab;e preference stock. 344 000 397 000 4 Preference Stock Not Subject to Mandatory RedempDon. 150 000 110 000 1 Common Snarehoicers' Ecuity l z Common stock. 1.360.628 1.157.252 ~ Premrum on preferred stock 157 157 r Retainec eamings. 1.194 756 1.154.308 l 1 Total common snareholders' ecuty. 2.555.541 2.3M 717 Totaf Labilibes and Capitahzation. 57 456 075 57.100E45 N I i .~.

Consolidated Statements of Cash Flows (unausee). Six Months Ended Twelve Months Ended June 30, June 30 1993 1992 1993 1992 (tn Thousands) i Cash Flows From Operat,ng A0Dvittes Not income. S 121.672 S 97.302 S 288,716 S 230.681 Acus:ments to reconcde to nel cash provioed Dy j coerstrng actmbes. l Den #ec ation and amo-ua::cn - 146.898 133.311 257.138 265.962 I Defe rec income tares 23.044 8.702 41,255 8.240 investment tax crec.t acjustments. (4.253) (4.525) (8.579) (8.819) Deterred fuet costs. 41.550 76.023 70.957 140.671 Wn:e-cown of financ:a; investments 13.575 Wnte-cown of real estate crosects. 9,988 Provision for foss en energy project. 6.061 6.061 A4cwance !ct eavity fun::s used cunng constru: Don (7.157) (6.362) (14.687) (10.433) E;uty in camings of aff aa:es and pint vemurcs (nou 5.300 769 (6.995) (11.972) Cnanges in current asse:S 27.639 62 436 (61,002) 15 + Changes in current habrimes, c:ner tnan snorMerm borrow:ngs. (41,290) (59.914) 8.904 6.762 Otner. (2.2201 (23.732) (9.487) (28 588) Ne! Cash provided by operahng actmties 317.u4 254.007 602.281 616 082 i Cash Flows From Financing ACDvities f Proceecs from issuance of Shotterm borrowings (net). (10 400) (75.350) .(74.650) (B4.080) L ong. term ceb: 702 794 325.B33 980.362 825.118 Preference s:ocr.. 39.650 39.650 (25) l Common stott 26.133 178.198 203.694 193 418 Reaccustion of long-term ceb: i680.366) (394.188) (973.231) (872.182) Recempton of preference stock (2.924) (22.800) i Common stock divicenes pa:c. (103.664) (91.552) (201.313) (179.849) i Preferre: and preference stock dmcenes pay. ,21.040; (21.147) (42.193) (42.748) 0:ner (261) (230) (429) (597) f Nel casn provr0cc Dy (ese in) financing a:7.@e s (47.174i (75 4361 (71.C34) (183.748) Cash Frows From invest:n; A :mbes UWty const utnon expenc4ures (202 864) (167.888) (424,392) (413.974) Aliowance for equity fun s usec cunn; constru Don. 7.157 6.302 14.687 10.433 Nuc' ear fue! expend tures (10 458) (9.425) (40.519) (10 834) Deferrec nuntear excenc::ures (5 408) (7,733) (13,464) (20.169) r Defe red energy conseNauon expenc: ures (12.063) (7.908) (24.073) (10.828) No ' ear cecommission:ng trus fun::. M 450) (4 450) (8.900) (8.900) Rnant;a! investments 2.665 21.814 33.468 35.251 Rea! es: ate projects (14 252) (12.688) (24.949) (29.224) l Power generabon systems. (16.738) (3.183) (47.038) (11.604) Seno Imng facmties. t61) 39 (196) (294) O!ner. 1669) 4 079 93 4395 Net cash prov cec cy f usec :o) !nves9ng a:!'vtes (259 uit (180 9S11 !535.303) 4455 448) Net increase (Decrease)in Cash and Cash Ecu:va'ents 10.S29 24.590 (4.056) (23.114) Cash anc Cash Ecuivaients at Beg:nning of Penoc. 27 122 17417 42.007 65.121 { Casn and Casn E;urvaients a: Enc of Penod. S 37 951 5 42.007 S 37,951 5 42 007 ( 0:ner Cash Fiow Informanon 5 t Cash card cunn; the year for j interest (net of amounts cap::alced). S 90,404 5 98.532 5 175 091 S 201.935 j M ome taxes. S 35.304 5 47.029 5 75.968 5 48.65' f t [ } l t ? l [ v

i I l Utility Operating Statistics Three Months Ended Sir Months Ended TweNe Months Ended June 30, June 30, June 30, ELECTRIC 1993 1992 1993 1992 1993 1992 Revenues (in Thousands) Resident.a!-househe ating. S 79.892 5 74,995 S 196.863 5187.B s4 5 369.795 5 366.750 J -other. 121.619 111.832 233.376 225 515 467.038-521.736 -total. 201.511 186.827 430,239 413.359 E 56.633 556456 Small comrnercial. 61.466 59.19E 119.511 116,709 245.147 247.657 Large commercial and in0ustna!. 193.528 186 341 3E3.952 364.062 802.189 811.477 System Saies. 456.505 432.366 913,702 894.130 1,904.169 1.947.630 in:ercnange sales. 8.770 10.566 20.005 32.504 51.824 48,967 Other. 4 466 3.899 11.463 7 464 23.002 22 E51 Total.. 5 469.741 5 446.531 5945 170 5 934.099 S1.978.995 52 0'9 248 Sates (in Thousancs)-MWH Ret'aenhai-houseneahng 9?6 673 2.564 2.372 4.668 4 434 -ciner.

• 253 1.174 2.597 2.457 5.36e 5621

-total C 79 2.047 5.161 4.259 10.036 10.055 Small comrnered. 639 606 1.384 1.305 2.746 2.667 Large commerc:af anc indusina! 3.202 3 020 6 4C5 6.215 13 156 12 746 Sys:em Sales. 6.020 5.673 11010 12,379 25.936 25468 Inte' change sa5es. ??3 488 963 1.615 2.527 2 456 Tota! 6 413 6 161 13.973 13.994 28 465 27 944 GAS Revenues (in Tnousands) Resioenta;-houseneat ng. 5 36.353 5 33 806 5 35.277 E 113.730 5 224.493 5 192.175 -otner. E270 7.753 24.609 21 446 42 955 38.315 -!O:al. 44.623 41,559 159,656 135.176 267.446 230490 Smali commercial S.744 6 030 24.897 20.647 41,370 34.931 Large commereta: an: incus:r ai -Exch> ding cebvery sernce 15.632 13.169 60.335 50 661 105.624 83.2E 7 -Denvery semice. 3 B40 4.575 B 482 9 085 17.279 17 551 -To:a: 22.525 ".744 66.617 59.946 122.902 100.i35 Other. 2 035 1.905 4 110 2.982 10.177 7 405 To:a: 5 75.930 $ 67.238 5257 710 5218.751 5 441.597 5 373.714 Sales (Tnousanes of DTH) Res:cenhai-househeahn;;. 5.183 5.493 21.251 20.211 34.352 32.2E2 -omer 1 040 109E 3 442 2.233 5.834 5.764 -tota!. 6224 6.5E9 24 693 23.549 40.156 39.046 Smal! commerc;af. ',060 1.074 4.213 3.972 6.863 6.599 Large commercial and : nous:r:a: i -Exc!umng cewerv so vice 4 279 3.166 12.865 12.417 22 618 21211 -Dehvenf servce. E E7E '1.012 19 706 21 450 38.996 41 C37 -To:a: '2 155 1417e 32571 33 857 61 614 6 *. 24 B Io!a! i42s 21 641 61 477 61.388 108 663 10EE93 i l 2 b 1 Electric Generation Statistics Twelve Months Ended June 30, Purchased Power Net of I Hydro interchange Nuclear Coal Oil & Gas Sales Total Generahon by Fuel Type (%) 1993 41 4 52.1 1.3 32 2.0 100.0 1992 40 2 49 4 2.5 2.7 49 1000 i Thousands of VWH j 1993 11.3S7 14.323 34E BBS 543 27,4S7 i 1992 10.829 13.312 756 737 1.327 26.951 I Average Cost of Fues (Cents per Mdhon B:u) 1993 45.43 152.48 264.35 111.70 1992 47.09 158.58 252.13 114.24 l i

Supplemental Financial Statistics Twelve Months Ended June 30, 1993 1992 Consohdated Capea!2ation Long-term dett. 46.1% 47.5% Shor1-term Dorromn;s. 9.4% Preferred and preference stock. 10.3% 10.1 % Common equity 43.6% 41.0 % Return on Average Common Eaudy. 99% 8.5% Ratio of Eamings (SEC Method) To faed cnaroes. 2.77 2.35 10 I: red charges anc preferred anc preferen;c c:vicenes comoined. 2 18 1.S7 AFC as a *4 of Eammgs AppacaD'e to Common Stock 9.5% B.7'c Efte;:rve Tar Rate 27.2% 28 3'. U:aty Cons:ruction Expenc:: ores rncluding AFC, Nuc! car Fue!, Deferrea Nuclear Expenouvres, and Deferrec Energy Conservation Expencuures (incesancs of Dohars). E502,468 S445.805 Cer:arn p or-yse amosnrs r\\ ave tver, resiated Ic conbem wah the curre rf yeafs presen: anon Common Stock Data Three Months Endeu Twelve Months Ended June 30, June 30, 1993 1992 1993 1992 Common Stock D!vicenes -Dec:arec. 5.37 5.36 51 45 51.41 -Paid. S 36 5 35 51 44 51 40 Market Value Per Sha s --Hrgh. 2 6 '.* 22M 25A 231 -Low 221 19% 21.4 194 -Close. 25% 22.: 254 22 a Shares Ou: standing-Ena of Penad on incusancs). 144,540 135.356 144.640 135.355 Book Vatue per Sha*e-End o' Penod. 517 64 517 08 S17.64 517.08 6163493

j l i Exhibit III~ Page 1 of 2 i Internal Cash Flow Projection - 1 For Calvert Cliffs Nuclear Power Plant 5 i Percentage Ownership in all Operating Calvert Cliffs Unit No. 1 100.00% Nuclear Units Calvert Cliffs Unit No. 2 100.00% Maximum Total Contingent Liability (000) per Nuclear Incident $132,000 Payable at Per Year (000) $20,000 Twelve Months Twelve Months Ended 6/30/93 Ended 7/31/94 j Non-Cash Exnenses ($0001 Depreciation and Amortization 276,843 319,738 l Deferred Income Taxes and Investment Tax Credits 17.022 13.555 I Total: 293,865 333,293' Percentage of Total to Maximum Total Contingent Liability Payable Per Year 1,469.3% 1,666.5% j Retained Earnings ($000) Net Income After Taxes 288,716 f Less Allowance for Funds Used During Construction 23,319 Less Dividends Paid 243.506 Total 21,891 i Total Internal Cash Flow 315.756 Percentage of Total Internal Cash Flow to Maximum Total Contingent Liability Payable Per Year 1,578.8% .l i 1 W-

i Exhibit III Page 2 of 2. i Baltimore Gas and Electric Company Underiving Assumotions for Projected Cash Flow I (1) Projected cash' flow does not include an estimate of retained earnings. However, internally generated funds without retained earnings are well in excess of the maximum possible retrospective premiums. (2) Depreciation accruals are based on composite straight line rates of 3.26% for electric property other than nuclear and Brandon Shores Power Plant, 2.80% for nuclear property, 2.75% for'Brandon Shores, 3.12% for gas, and 4.02% for common utility property, other than vehicles. Vehicles are i depreciated based on their estimated useful lives. ~i (3) Estimates cf Federal income taxes and other tax expense are based upon 5 existing tax laws and any known changes thereto. (4) Accounting policies are consistent with those in effect June 30, 1993. f f L ? 6 t k I t t i r I

g i Exhibit IV Baltimore Gas and Electric Company Curtailment of Canital Exnenditures 6 ',I Estimated construction expenditures including nuclear

fuel, deferred' nuclear expenditures, Allowance for Funds Used During Construction,-.and conservation expenditures for the twelve months ended July 31, 1994 are $630 million.

To insure-that retrospective premiums under the Price Anderson Act would be available during the aforementioned twelve month period without additional funds from external I sources, construction curtailments would affect all construction expenditures.rather than impacting a specific project. l 4 .i -A}}