ML20072F932

Forwards Listed Documents as Guarantee of Payment of Deferred Premiums for Ccnpp,In Accordance w/10CFR140.21

ML20072F932
Person / Time
Site:	Calvert Cliffs
Issue date:	08/17/1994
From:	Denton R BALTIMORE GAS & ELECTRIC CO.
To:	Office of Nuclear Reactor Regulation
References
NUDOCS 9408240129
Download: ML20072F932 (11)

Text

{{#Wiki_filter:, s 1 Rmsact E. De%Tos Baltimore Gas and Electric Company Vice President Calvert Ch)p Nuclear Power Plant Nuclear Energ~y 1650 Calvert Ch))s l'aricway Lusby, Ataryland 20657 410 586-2200 Ett. 4455. oral f 1Io 260-4455 Baltimore l l l August 17,1994 U. S. Nuclear Regulatory Commission Washington, DC 20555 ATTENTION: Director, Nuclear Reactor Regulation

SUBJECT:

Calvert Cliffs Nuclear Power Plant Unit Nos.1 & 2; Docket Nos. 50-317 & 50-318 Guarantee _qf Retrospective Premium In accordance with the requirements of 10 CFR 140.21, we are submitting our guarantee of payment of deferred premiums for our Calvert Clifts Nuclear Power Plant reactors. Accordingly, we are enclosing herewith: Exhibit I - A copy of the 1993 Annual Report to Shareholders of Baltimore Gas and Electric Company containing certified financial statements. Exhibit II A copy of quarterly financial statements as of June 30,1994. Exhibit III - A copy of Projected Cash Flow for the twelve months ended July 31,1995. Exhibit IV - Narrative statement on curtailment / deferment of capital expenditures (if any) to ensure that retrospective premiums up to $10 million per reactor per year for each nuclear incident would be available for payment. Should you have any questions regarding this matter, we will be pleased to discuss them with you. Very truly yours, l 6 l RED /DWM/bjd 9400240129 940817 PDR ADDCK O*5000317 t( I PDR l .N

1 Director, Nuclear Reactor Regulation i August 17,1994 Page 2 cc: (Without Enclosures) Document Control Desk, NRC D. A. Brune, Esquire J. E. Silberg, Esquire P. T. Kuo, NRC D. G. Mcdonald, Jr., NRC T. T. Martin, NRC P. R. Wilson, NRC R. I. McLean, DNR J. H. Walter, PSC i 1 i i l i

iA L T I M S R E C A S-A o ffXHIBIT I Success is neverfinal. 1 l l l

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i l'he coming of competition to our industry calls to mind the words of Winston Churchill on our cover: " Success is neverfinal." In the utility business, the definition of success is dramatically i changing. As a monopoly, our success was the natural consequence of I p.aviding safe, reliable service. In 1993 we left behind that enduring standard 1 for success. Today safe, reliable service is considered a minimum expectation. i We also left behind our familiar blue.ad-orange logo its design .4 S.., { commemorated the double-diamond anniversary celebrated nearly 28 years .s' l"{ h 'hi frI ~ ago. The green 13GE on our front cover takes its place.

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W Our new logo symbolizes a culture that welcomes competition-a culture pursuing success. Like contenders in a decathlon. we emplov our u_.m w_ +-,2,. a, riatural strengths to reach rigorous goals-goals that flex with change and, w hen achieved. ensure our success. CO*41 E N T E 1 itiyhli.chts For years wc* ve printed our annual reports on recycled 2 Corporate Yrofile PJPer. This year, however, we've put a new spin on 3 To Our Sharehoklers ^"lF##' a' recydedpapa n e used u as our on n. \\1 ith this annual report. we beeinfidt-circle recycling, an 7 Thei. car in Res tew innovative procen that allows us to reuse nnsch of the office trash \\ 10 Success is Nevei Final we generate. over 35.fM p.nmds of BGEs u hite waste paper 17 i:inancial Contents went into producing the paper our annual report is printed on. 52 Corporate and Utihty officers fra 19% ri to e and ow pdbct'rde recycling prograin using 53 floard af Directors the 50() tons of waste paper n e recycle each year. 54 Constellation Subsidi.tries INSIDE BACK COVER Shiireholder Inforniation 1

HlGHLlGHTS flaltmrare Ga.umd Electric company anJ Suh.sidwrin l In mations. e u eer perahare amounn i993 1992 % Changc COMMON STOCK DATA Earnings per share Utility operations $ 1,77 5 1.52 16.4 % Diversified activities 0.08 0.11 (27.3) % Total $ 1.85 $ 1.63 13.5 '7c Dividends declared per share 1.47 $ 1.43 2.8 % Average shares outstanding 145.1 136.2 6.5 % Return on average common equity 10.39 % 9.40% 10.5 % g Ilook value per share-year end $17.94 $17.63 1.8 % Market price per share-year-end close $25.38 $23.38 8.6 % FIN ANCI AL D AT A Revenues Electric $2,115 $ 1,968 7.5 4 Gas 436 403 8.2 % Diversified activities 1IN 120 (1.7) % Total S2,669 $2,491 7.1 % Net income $ 310 $ 264 17.4 % Earnings applicable to common stock $ 268 $ 222 20.7 % Assets Utility $6,891 $6.351 8.5 % Dis ersified 1,096 1,023 7.1 % Total $7,987 $7,374 8.3 % Utility construction expenditures $ 455 $ 367 24.0 9 HGE investment in Constellation Companies $ 307 $ 295 4.1 % UTILITY SYSTEM DATA Electric sales-megawatthours 26.8 25.3 5.9 % Gas sales---41ckatherms 108.0 108.6 (0.6) % EARNINGS AND DIVIDENDS DECLARED RETURN ON COMMON STOCK MARKET PRICE PER SHARE OF COMMON STOCK AVERAGE COMMON EQUITY AND BOOK VALUE pen ent f l -. j l e i 1 $2s l l .-.. 4 -.i. .l.- A U--. a A ..t-W ( l 3 F; l l i 8 l g l ? I } L_ L_, __.L___. -. l 1 l I i 0 Larmngs tComwhalawdh e Market Prk e t Year-endtime) e Danimis t)n iarrJ e lloe.a laiur t Year ensib

1 CORPORATE PROFILE Haltimore Gas and Electric Company, with assets of nearly $8 billion and approximately 8,000 employees, combines a core utility business with diversified, nonutility operations. As the nation's oldest gas utility and one ofits earliest electric utilities, we have a tradition ofsuperior, O low-cost service and reliability. That tradition is the key to our corporate strategic vision: To pelform as a world-class energy company. BGE serves an economically than one million customers. diverse territory with a broad Augmenting these plants are business base: 2.300 square three in Pennsylvania where c rco. l miles in Central Maryland. w e are part ow ners. We are With our 10 local power also memtwrs of the plants, including the Cah ert Pennsylvania-New Jersey-Clif fs Nuclear Power Plant. Maryland Interconnection, a we supply electricity to more pm-er [mol alfording us additional operating relia-bi!ity at favorable tenns. eENNs v t.vAm A Our territory includes \\/ DELAWARE nm than one-half million UliN!**"' x ,Est J vmG,mA,e f h natural-gas customers. We ,s y vmmmA s j 's r X contract with interstate s -t s s ) } ( / pipelines to transport 'e ' natural pas purchased from W ASHfNGTON DC KEY ., ' TEFrRf TORY SER4 E'O WITH EL ECTRICfiY P 1 aresuff CmCn(ed b[ oui i TERRITORY SERvFD WITH ELE'CTRICITY AND GA9 C OUN T Y i own liquefied gas and propane facilities. BGE's diversified BGE's service area includes Baltimore City and all orpart of nine Central Atarvland counties. businesses. grauped under lhe area served u ith electrwiry appratimates 2,300 square miles with 2.h million residents. Constellation Holdings. while the area served with yas imludes hli square mdes with a population of nearly 2 million. include rower generation, real estate des clopment, and financial investments.

To OUR SHAREHOLDERS Because tner beginning dates back 178 years, BGE can compare the present against a genemus past. Thefact that we consider 1993 one of j a hantl{lli of Watershell years in our conipany's history speaksfor the 1 year's significance. Q In our traditonal under- $3[47d '~. @~ qQ standing of the phrase. ?. - l.. 1993 was a pm! year. Consolidated camings were g.. ,g

==. $268 million, or 51.85 per k.;.- O share, an increase of 13.5

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t. percent over 1992. And the lloard of Directors increased 1 :'.. ' mk,v-E .. W,L.J.$. @. the disidend to $1.4M per .~ WN ~ share, a 2.8 percent gain com-pared to the previous year. [ ~ '. 4. - In April the Maryland .jm Public Service Commission 9 (PSC) granted us a base-rate increase of $86.5 million to cover the cost of system unchanged from 1992 Chairman and Chief Esecutive OJficer Christian H. Poindexter improvements and increased because of decreases in the and President and Chief Opercting Officer Edward A. Crooke operating expenses. Those fuel rate. at the company's Electric Operations Building. The advent of l imprmements contributed to he decline in fuel rates transminion open access is greatly changing the traditional the excellent performance of was brought about prin.arily Jbcus and structure of the electric utility industry. The need to our distribution and genera-by excellent plant perfor-accommodate such changes and define ourfkaure spurred an tion systems during last mance, bmh at the Calvert unprecedented companywide improvement c/ fort in l99.L summer's prolonged period Cliffs Nuclear Power Plant of record high temperatures, and at our fossil plants. Since Despite the increase in base returning to operation in rates, our customers' cost per 1991, Cahert Cliffs has kilowatthour w as essentially operated exceptionally well, I I

i i l logging its second-highest annual electricity output in We asked our become a critical issue for j 1993. This performance, staAcholders to help every group, ranking near the coupled with creative bulk-In actuahty, however, us define "world class." top of almost every BGE Q power arrangements, enabled last year was anything but in 1993 we identified our stakeholder survey. Now h the company to save about traditional. As a consequence major stakeholders' expecta-more than ever before, envi- $25 million through sales of the Energy Policy Act of tions of a world-class enyrgy ronmental responsibility goes and purchases in the 1992, regulatory agencies company. We define our right to the core of our com-To oWer our customers superior value, we must move beyondproviding.just tofind creative, sometimes nontraditional solutions to our customers' energy l w holesale power market. throughout the country began stakeholders as any group pany's identity. In 1993 we an increased savings of to make precedent-setting that significantly affects our strengthened our programs 35 percent over 1992. decisions that will reshape future: customers, investors, for preserving the environ-l Our aggressive mar-the energy industry in the employees, regulators, legis-ment through a policy that Leting of natural gas con. y ears ahead. Clearly. the old lators, community leaders, encompasses all aspects of' tinued to produce excellent industry standard of the and suppliers. Through environmental responsibility. results last year. We added electric utility supplying extensive surveys and inter-We learned, too, that - 6,500 new gas customers. customers without competi-views, our stakeholders some of our stakeholders We received approval to tion cannot be sustained. In its defined world-class perfor-misunderstood the use of establish a new natural-gas place is a new market driven mance from their perspective "world class" to define our i, franchise, our first since standanl that relies on innova-and compared BGE's perfor-vision. Some thought a j 1965,in the town of Mount tive pricing, products, and mance with that ideal. Our world-class vision meant we Airy, w hich lies in both services to satisfy the needs purpose was to identify the wanted to expand into the

Carroll and Frederick coun-of present and future cus-gaps between the two. This international energy marketc ties: And in partnership with tomers. The need to accom-information will guide our Others believed a world-Crown Central Petroleum, modate such changes and continuous improvement class vision meant we j

we opened Maryland's first define our future spurred an efforts in the years ahead. intended to pursue large-t l public natural-gas fueling unprecedented companywide We learned that concern scale growth strategies. station in Annapolis. improvement effort in 1993, for the environment had Neither is the case. Still 1 I F ,-.s ,.,_r

a a j i 1 ^ othen said they found BGl."s Board of Directors ) "w odd class" os crused and toured Bethlchem StecTs vague. Granted. we miyht Sparrows Point Plant. the have lwen more eleser, but to company's largest cauomer. us the meaning of~"woild At crei r lerc/ of the orcani-g claw" w as clear. At ilGli it ration. BGE is striving to s Am? hener undcruand the needs ineans we must always strne f A% %m.. ~4a. ttw ' (5Ykp[:\\ r g ~ i# 1 and c.tpectations fl[its to reali/c our full potential. 3;pfiff a 0%'6 h a ustomers. - My1 $i f[in I_ 1 ,6 p "p@Qj% % i f. k'clS tillcl l'l('Cll"It'llY n u m. 34n tts v 3 ? m /l( 't '(IX. -{ building on our expertise in our customers' energy needs United States a potential our appliance senice and the energy market. We reach our linergy Solutions cu stomer. merchandise operations, f or excellence in es ery thing Program establishes long-We also are of fering An organized group of we do. We aim to of fer our tenn relationships uith our customers added value by heating and coohng senice customers superior value f or largest customers by of f ering expanding our business in contractors has opposed the their energy dollars. them innos atise products. the appliance and home elec-expansion of our existing Ambitious? Yes. but we sen ices. and pncing. Our tronics sales and sen ice service business. We con-l beliese a s ision should be Partners for Prosperity pilot area. I ate last year we began sider this opposition both l that and more. program is testing new tech-oliering senice contracts on anti-consumer and anti-nologies f or large inclustnal electric heating and cooling competitis e. We expanded l

1. ccoming world clan customers to enable them to equipment. This progr:an is a our senice contract program requires innoratire control their energy use and logical expansion of the at our customers' request. In l!+d,ing.

costs through a two-w ay maintenance programs July 1993 alone, we tumed l To otler our customers teleconununications already in place for home aw ay more than 1.000 cus-l l supenor 4 a.he, w e must netwolk. And through our appliances, water heaters, tomers requesting air-condi-l nun e bey ono providmg just Constellation 12.nergy and gas fumaces. To empha-tioning service. We intend to gas and elet nicity in order subsidiary, an independent si/c this business, we are vigorously protect our right j to find crealis c. sometimes power producer, we can planning to establish a sepa-to expand into this and other nontradition.d solutions to consider es ery utility in the rate subsidiary to manage all energy-rclated businewes.

i We tooA decisire action to in the end, however, imprm e our competitire serve us w eli in the long run. our ability to succeed rests We also rededicate our-position and get ahead of We are pawing each strategy squarely on the shoulders of selves to preserving our industry changes, through a screen of future the men and women who investors' confidence in I in addition to seeking ways uncertainties, such as compe-work for BGE. We regret BGE as a stable, rewarding l l to increase our revenues, we tition f or electric and gas that preparing for competi-investment. That is the goal l also took decisive action to sales, national and regional tion means saying goodbye of our short-and long-term improse our competitis e economic conditions. and to some of our long-time initiatives-to heighten position by streamhning our technological advances. This employees. In coming financial perfonnance. We costs. We es aluated es ery ongoing process will drive years, we dedicate ourselves are determined that BGE will function in the company to our plans and allow us to to staying ahead of the remain among industry see if it contributed to our prepare for a range of changes in our industry so leaders in the future. We mission--to achieve com-powibihties, that we can continue to thank each of you for your plete customer satisfaction provide fulfilling careers support and look forward to by providing superior energy OPIP hasfundamentally and opponunities for sharing our success with you products and services. As a changed the way we operate, our employees. in the years ahead. resuh we reduced the 1994 We are well on our way to divisional operations and becoming a company adept maintenance budget well at making changes. We i below 1993 lesels. These began this process three 1 sas ings are, in part, being years ago w hen we created realized by eliminating about OPIP, our Organizational 1,000 pmitions. To help Performance Improvement ("h/ reduce our work force, w e Pmeess. Our logo change offered a soluntary retire-serves as an outward symbol Christian II. Poindexter ment program, an enhanced of the progress we hase Chairman of the Board and Chief &ccutive Officer sescrance package, and a made toward developing a placement program that resilient corporate culture helps displaced emplo)ees the encourages excellence r fmd jobs insi le and outside and rewards results. the company. Although w e still has e To respond to the uncer-ground to cover, OPIP has tain energy market, we base fundamentally changed the Edward A.Cmoke strengthened our strategic way we operate and posi. President and Chief Operating Of]Iccr planning and identified alter-tioned us to benefit from the natise stratecies that could changes ahead. Fchruary 14.1994 l l l l

THE YEAR IN REVlEW AND A PREVIEW OF THE FUTURE Oltr Electric airil Gas flitsitiesses . Cahern Cliffs suelear &y ' l Review: We took the third hottest July on record in stride Pow er Plant reconled its and increased our annual utility revenues more than $1M second highest scarly ' ~" ! ' g4 /n[l[/on, or 7.6 percent, orer /992. energy output: it received j [ \\ k high marks for continued SALES OF ELECTRICITY weather and an increase in the improvement f roin the . abed:g [II bh;u lidlwr > of k dvs anh, ur < number of gas customers. Nuclear Regulatory To promote the use of g Industrial and conunercial gas Commission in its Systematie ahemative-fuel vehicles, sales fell by 2.3 percent, pri-Assessment of Licensee Marylandi tirst public is marily because of lower gas Performance report. The PSC natural-gas fueling station ,o-- M use by out largest customer, opened hearings on purchased opened in Annapolis. a joint liethlehem Steel. fuel and energy costs incurred ellort Irtween llGE and during the 1959-199I outages. Crown Central Petroleum. s l + llGE was granted a base-w ith a decision expected in And the Chesapeake 1 ^ e9 '90 '91 92' ~ 93 73tg jggyggge pg3ljng $(73 l3lg [Qgj 437 p37ly jgg(), {gggggjgm de}jgered [g jg3 e um.h ""al inillion. or 3.8 percent. by memben 10 electric minivans. e InJu m hil m,I( i i un n tai the Maryland Public Senice

• IIGE broke ground to build Consisting of IlGli. Chr) ster.

. I!!ectric system sales rose by Conunission (PSC) effective a 140-megawatt natural-gas Westinghouse, and the state of 5 8 percent. Ilecause of late April 1993. unit at its Perry man site in Mary land, the Consortium extremely high summer heat liarford County, coordinates research and g, } expected to be in ser-resources to des elop electrie-and humidity compared w uh HGE added more than

vice June 1995.

vehicle technology. mild summer temperatures in 6,500 new gas customers w 1992. residential custom <:r through aggressive marketing sales increased 9 perecnt. of natural gas. Preview: Ourprimary goalis to grow our revenues by Sales to our offering customers the best of both gas and electric SALES OF GAS wIe S-industrial and " "" "I A " h" ~ technologies al competitive prices. A a j commercial so N BGE will select from rc w r 7o customers grew ~ by 3.8 percent. among 2x proposals to k AT AIRY r .,o supply the next phase of a 7 N . Oserall gas sales decreased capacity-140 megaw atts of-s m 3 Dr less than I percent compared electricity for a tenu of 25 p gi 74 n to the pres ious y ear, years beginning June '1997. (' A., ,o e p 1x g Ecsidential pas sales, how- - 90 ' 91 ' 92 93 89 m es er, increased 2.5 percent

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e lau m.anmm-ooa! pas senice to Mount Airy in f.s trcause of colder winter

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• The remote meter-reading customers' buildings.

Carroll and Frederak coun-will focus on buying and pilot will be extended in Eventually HGE hopes to ties. the first new municipal selling electric capacity and 1994. Energy use is recorded service 500,000 customers gas tranchise liGE has energy in the emerging using a radio-equipped meter, through remote meter-requested since 1965. wholesale bulk-power market, eliminating the need to enter tending systems. O ram pW*: v"'mmy w&~p n si L pwm w.n.?: a

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( _ L ' y': G M Q=J.':;;l Tlie Conuellation Contpanies p. sq sy m %s 4,2 y.; 1 ~f @ L M &L Review: Our ConstcIlation sulnidiaries, particularly ty 9? : t!' y k '. L J nv % Q~g.. Q@, %,,. '. 5 Constellation Energy. provide diversificationfrom N;y.

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growing competition in the utility industry. lc,. l l:.-y s ~j x l,. c J y Vt lfJ...- I Earnings from Constellation and was recognized f or .n c Holdings were 15.S percent energy innovation by the j "~ 0 abme 1992 hefore the 55.d Department of Energy in its g million charge to renect the national an ards. higher corporate income tar Bruce M. Ambler, President and ChiefExecutive ODicer of rate enacted by Congres last = ln the initial publie offering Constellation Holdings foresces eacellent growth opportunitics y ear. Heported earnings wcre of Capital Guaranty lne.. in the independent power market. "To meet customers' needs in N cents per share. Constellation Insestments sold the y cars ahead and remain competitive, energy companics must uhout 50 percent of its hold-take the ' build some. buy some, save some' approach to genera-a Constellation Energy now ings in the AA A/aaa-rated tion planning." 3ay3 Amh/cr. "That males every utility a poten. has ou nership interest in fmancial guaranty company. tial ConstcIlation customer.' 24 pow er projects. The + 25-megau att Puna Constellation Real Estate's Prcriew: Constellation's minion is to emphasi e energy and geothermal plant began des eloped properties are contribute significantly to #GE's profits and sharcholder ralue, operating in llaw aii. The 91 percent occupied, sur-l l Shneganatt Panther Creek passing the Baltimore area's Constellation iloldings plans continue to develop and plant in Penn9 vania is aserage of 85 percent for to reduce its investment in real operate wholesale power-1 operating well after retail and commercial occu-estate os er the next few years generation projects. The correcting fuel and turbine pancy. And Constellation w hen it can recognize reason-Constellation-developed problems discovered during llealth Services sold at a able s alue for its investments. 102-megawatt Colver Power start-up. The ACE plant in profit its ow nership in fis e Plant in Pennsylvania is sched-California had a recon!) ear nursing homes. . Constellation Energy will uled to come on-line in 1995.

In Olher News. Review: Refinancings save nwre than $IfI millinn, . BGE's partnership w ith 4 L minority business grew by 150 percent and our community Baltimore City in operating and conservation tJJorts drew praiw. the Mayor's Crisis Centers ~ f sMI earned the company the N '% . BGE issued about $1.062 Commerce and the Edison Electric Institute's million of long-tenn debt and U.S. Small Business Common Goals Award for SG&fMM%/ LK O A 'G /r preference stock,5693 million Administration, w hich recog-community responsibility, as of which was used to refi-nizes outstanding programs wcil as awards from the nance existing issues and take and perfonnance in support of American Gas Association community's economic advantage of low er interest minority business. and the Greater Bahimore health and the company's rates. 'lhe refinancings will Committee, an association of success. BGE employees save about 5111 million in The Cambridge Group, a Baltimore businesses. The continued to be models for interest and preference stock national consulting firm. Mayor's Crisis Centers assist the business community. dividends over the remaining reported that BGE's customer low-income customers with For example, our volunteers life of the redeemed securities. fas orability rating is 87 energy-related problems, collected almost $145,000 percent, versus the national i melessness, and food and for the 1993 brch of Dimes ..,,y average for utilities of clothing shortages. TeamWalk-a 70 percent 76 percent. increase over 1992. That 2 g . BGE continued to be the raised the company's team . The Maryland Chapter of largest corporate benefactor ranking within the utility g; the Nature Conservancy in Central Maryland, recog-industry from sixth a =. awarded its first Corporate nizing the link between the to second. BGE increased by 150 per-Consersation Award to BGE cent its business with minority for outstanding achievement Preriew: Two Acy goals willbe to continue cost control contractors, such as im estment in conservation. Last spring, and secure our right to expand into nonutility businesses. banker Nathan Chapman, Jr., BGE and the Conservancy President, The Chapman signed an . The PSC will hold hearings . In 1994 BGE will continue Company. In recognition of agreement jk. relating to BGE's participstion to look for ways to improve this accomplishment, the com-to manage in appliance salca and service efficiency and cost-effective- ~ l pany earned six awards from the habitat gr businesses. In these proceed-ness. Our efforts will include { industry groups. Most notable oftwo ' ings initiated by our potential refining the design of a new is the joint Corporate Award species of competitors, BGE will compensation system that f from the Minority Business globally rare vigorously defend its right offers excellent eaming Development Agency of tiger beetles at to increase res enues by opportunities to employees the U.S. Department of Calvert Cliffs. expanding into new businesses, w ho achieve desired results.

SUCCESS IS NEVER FINAL I "You cammt walk the middle of the road lwiding hands with tradition on one side and mod-t ernism on the other. You have to make a choice." This saying by political pundit Alvin Rolland describes the most important decision we made last year. In 1993 BGE chose to turn fidly g toward change, a choice that has proved both painfid and liberating. Painfid because we fell behind a 17h'-year tradition of unwavering. job securityfbr our employees. Liberating because with the probable hwsening of regulations comes greater Jiecdom to deline ourfitture success. We choose to define success nuich like a contender in a decathlon. 7b come out ahead, we must perfbrm well in all essential areas: expanding customer awareness, positioning to compete on price, balancing environmental concerns, and heightening ourfinancialperformance. hhhdhM O U R CU S T O M E R AW A R E N E S S hJ-

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n st% To remain our customers' tions. We then asked onr w e empou cred employees 1 Y. t v,, energy provider of choice. customers to define the with front-line customer we must first become acutely characteristics of a world-contact to soh e customers' aware of their needs and class energy company and to problems quickly, often on expectations. In 1993 ue measure HGE's performance the first contact. launched an intensive etfort against that ideal Nest. to The feedback we to get to know our customers improve customer communi-receised f rom these various better. Going beyond con-cations, w e paired key cus-customer contacts gave us a ventional customer input, w e tomers with company greater understanding of our first developed ongoing sur-representatives-from customers' needs and expec-1 sey s to get ahead of changes marketing speciahsts to the tations. For example, our in our customers' expecta-Chainnan of the Board. And customers need the right mis

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{- gg) their businesses competitis e. M* - _ L. e n ' t,l Last year we created an f:; 4, i o e y ambitious program called y.s E' t p 'F Energy Solutions, of f,ering e i; our largest customers profes-p y 4 sional consultation and inno-vatis e energy solutions at w, py competitive prices under long-tenn contracts. These y r contracts are subject to approval by the Maryland gp o m-w Public Service Commission. )kh As a combination utility, we can of fer new gas and Longevity is a characteristic IKiE shares with one ofits Ley customers, A1cDonogh School, a vener-electric technologies that able 120-3 car-oldprivate schoolfor Lindergarten through senior-high students. BGE's account play an increasingly impor-representatin e, Cherise Seals. above right, has worked c losely with John White, AlcDonogh's tant role in maximiting value Dir ector of Facilities, tofind energy solutions that offer the right blend ofcost and valueJhr the and profitability for our cus-school, which covers 810 acres and includes 44 buildings. Solutions such as efficient lighting and somers. Last year the air-conditioning energy-saver switches entitled AlcDonogh to conservation rebates and monthly University of Maryland savings on its energy bills. Medical System received Seals stayed particularly close to the customer during the replacement of an antiquated vil-fired $$3MM for installing an boiler last year.1he new clean-burning na: ural-gas boiler will save AlcDonogh roughly $20,000 energy-cfficient cooling annually in encrgy costs and will add about 30.000 cubicfeet ofload to BGE's gas system.

~. system-our large.t c onser. vation rebate to date. management technologies tion, perhaps the best indica-Huilding on our pilot efforts. to seseral of our large technologies to produce tion of our commitment to we will espand our Partners customers. And our energy for sale to the customer service is our cor-for Prosperity Program. Constellation Energy independent pmer market. porate mission: to achieve which uses a sophisticated subsidiary continues to Although we set mea-complete customer satisfac-telecommunications netw ork develop projects using surable yearly goals to tion by providing superior to bring an array of energy-the latest generation enhance customer satisfac-energy pnxtucts and services. hhkMh]T O CO M P E T E O N P R I C E Hecause price will be maintenance budget signifi-important continuous increasingly important in a cantly below 1993 lesels,in improvement tool we use to competitis e marketplace, in part because we eliminated control costs. Through PITS, 1993 we esamined pricing in about 1,tMX) pwitions. employees break down each area of our electric s In the years ahead, we organizational barriers to busmess-generation, trans-m w di continue to control costs. identify work-process ineffi-mission. and distribution. i" We have increased efforts to ciencies, recommend and Our studies showed that our keep our compensation levels implement improvements, transmission and distribution competitive through a com-and measure results. costs are generally in line prehensive study of our pay Tw o years into the PIT with those of neighboring rates and job-evaluation process, w e are beginning to utilities, but that there wcre sy stem. And we bas e imple-see significant sasings and areas u here we could reduce mented pay-for-perfomiance improved efficiency. Our espenditures. 4 compensation that offers Nuclear Procurement PIT To improve our os erall escellent eaming opponuni-streamlined the procedure for competitive price position, w e a ties to employees w ho receiving materials and sup-took decisive action to reduce achiese desired results, par-plies by reducing the number costs. We studied every func-ticularly resuhs that add of hand-offs from worker to tion within our company, value for our customers and worker As a result, the prm eliminating those that did not improve company earnings curement area increased pro-contribute to our mission. As and efficiency. ductisity by 71 percent while a result. we reduced our 1994 Process improvement reducing costs by 52(XUXK) dis isional operations and teams, or PITS. are an the first year with adJitional l 1

R. e ,E ,'Ve, } 's Nf. } ( @- pi. a %y ~ } 'y m; ' D ' M' 9 % W(if V" ML F: - s m .m eg).a g m,- g p e w 3 ._2 j Dn' x 4: o y 7 y g a . v m my m k ad dCi $$ i;- h ~ 1 sasines esju ted m the years equal s.n ings expected Nn/nt uir on stcp op c/( < tin al w/taer n iz< n n cun the pou < r ahead i )oi l ransportation m the luture. plant am/ m p i!m o i,.!! age u he n n irac ho </nn ibution lun P.uts Pi l' unptm ed the I'll, yn c both inanage- \\!n : th<! liG/. opciarn 2.N solntatu en in us 2..h t up,ar c- 'y stem of bus mg stonn;_ rnent.md ernpley ecs a mJc u n t., ai, a .ilhl sllsillbtilllip lUlls lsif out 1.hipibIC M a) tii llit asttre l [n eq<'s s pi fli eni c ir.q n t !c4 /t y r r p/ [~. u,ls /c o v!<'r/ ir!. l i/ // f Ik cl. sas m:* ShN U OU the iesulb of conunuous /W!, o 0 9 u,!n tanon n:a!"z< nan. c < < u s an./ in:pr m c liva h-annually. ()ur Sub tanon unpnn ement And PIi oc u of n pan t l'/1 s o c < avn of cmp!m cm that c ion or tam- \\l.ontenance Pil tommed p uth ip.uits repiin a benchl mnhm-,norr o r n,n i. p!"i c u n. / hc hhuan,in m.unicnans e wsts ntule ih.o exh nds bey ond cost and 3/acnte w P/I o,, m;"3 mi, / a, i o s e n aarvoj pio.giain t!<at nmniahuny echabihn and ciik iency unpica cments an en o m!nianon n <,i, i s s/ /Ils m 4/,- wu f al rad t 7hn aml unpun mg the tunchne s of maeased sense et selt n orth . ala i u> m i r menn sai c<! t!/ 2.noa lau ic,o n th cq:ial substanon n p.m s S.n ino and responob:hiy on the p.ui s.n.rs., e i j s i tc, / /. " /M lotaled k il 2.t H H1 m luo 4 w it h of employees

EN V 1 R O N M E N T A L CO N C E R N S To BGE, being a well-Throughout the past 24 spawned naturally. recosery systems would regarded corporate neighbor y ears, our sense of environ-Altogether BGE reared eventually become federally includes balancing our role mental responsibility has 75,(XW) pounds of rockfish mandated, llGE built six of energy provider with grown. We played an inte-before the facility was underground fuel storage preserving the envirorunent. gral part in replenishing the donated to Mary land's tanks with piping for vapor Although environmental Chesapeake Bay's dwindling Department of Agriculture. recovery already in place, responsibility is now an rockfish population for ses en We anticipated changing sasing significant money in essential utility attribute, it is years by operating an env ironmental expectations the long run. ~ not new to BGE. In 1970 we aquaculture facility that by addressing the issue of We took strong pollution established an environmental made marine biology history. vapor recovery when presention measures w hen group to monitor and help for the first time ever, rock-building fuel storage tanks. we became one of the first improve our performance. fish raised in captis ity Predicting that vapor utilities in the country to y - 3 gm. l e, &W". f (1 .1 - js W -g. ljn BGE's em ironmental scientist [ f < ;45 i l.) Tom Benassilessens the cHects j of our con struction crews on g ,q i_. g ecologically sensitive areas. tu

9

_ N .,f. A h ' s% First Benassi assesses the V \\y impact. then recommenJs ways r i ' r j- - to minimi:e the disturbemce. He $w was conducting such a study in /[, _ [i \\ }, preparationfor BGE's running a 500-kilovolt line throngh part 9 O - of the Pannent it'ildhfe 3 ,.q y 4%- Research Center when he dis. W bjhf(SG, &$$]M U %;, covercJ severalplant species ll m C ^ j. p q@; V:P that are threatened in Y* .f Afaryland. As a result. BGE cordoned off the area to protect the plantsfrom con struction i crews and equipment. x t W

i y ' t je cor)\\hiciallorl\\ in

• promote t]lIrient use loQding, des / ning, 49[our energy prthlucts.

Q built lin y, an<loperating

• Wol A With scientific,

?k3 u. ourfacilitics. hn siness, government, HiN

• Resp <md quirAly to andpublic representa-Did h s 0 our c u stomers, neigh-ris es to help ensurc screen for hatardous cherni.

Since the need for envi-hors. cmployces, regula- .wnndpublic environ-cals. Requiring review and ronmental responsibility is tors. and others when menta/ policy. 1 approval of any chemical increasing dramatically, we they have concer ns

• Support community j

prior to its use in the com-recast our existing corporate about the emironmental c/Firts that promote pany, this policy minimites philosophy as a commitment c//cets of our businen. environmental aware-hazardous waste and reduces in 1993 and created an eight-

• Support all cmployces ness and improve the the amount of toxic chemi-point policy that includes all in handling the enriron.

environment. cals we use And with the aspects of emironmental mental respon3ihilitics Our goal is to imtill in printing of this annual report, excellence. We pledge to: of their worA and every employee an instine-we begin full-circle recy-

• Continuously improre encourage enriron-tise sense of environmental cling, an innovatis e conccpl our enrironmental man.

mental awareness both responsibility, since suc-whereby we produce our accment sy3tems. Im and off the job cessful environmental man-printed materials directly

• Afale polhulon pre-
• Afcasure, audit, and agement rests heavily on from the 500 tons of waste i ention, environmental taAc roricetire action to knowledgeable, empowered white paper we recycle protection. and rewurce improve our environ-employees making respon-each year.

conserration important mental performance. sible decisions. Q[))Q]O U R F 1 N A N C I A L PE R F O R M A N C E To remain successful, we HGE's performance. must maintain investors' Our individual im estors i ~h confidence despite industry listed the top fi e qualities of ~ change. As with customers, a world-class utility as we began by asking our imti-healthy dividends, gel divi- ? 4 tutional and individual dend growth, quality manage-imestors to define a world-ment. market-value growth. class utility, then to compare and concem for the emiron-4 w w +

i ment. In all five categories, future; others are uncomfort-l our individual shareholders able when BGE ventures out-many components will be said BGE exceeds or comes in the "needs improve-side its core business area. used to measure our financial l close to meeting their defini-ment" category, institutional We are using this infor-success, our primary goal is tion of a wurid-class utility. ins estors placed communica-mation to improve the quality to produce an earnings stream Our institutional tions at the top of the list. of our investor communica-that will allow us to increase g investors cited several They viewed us as reluctant tions and guide our goals for our dividends. strengths. They s iew favor-to admit past mistakes and financial performance in the ably both our current yield lacking a clearly articulated years ahead. We believe we in closing.1993 was the year and potential for camings and vision, and they felt a major are aheady in an ens iable we let go of several closely dividend grow th. They credit business strategy should be position. Our cash dividends held traditions to fully embrace sound financial management cost containment. Our busi-have been uninterrupted for 83 change. In the year ahead we with keeping us competitively ness-diversification strategy years. Our stock price, earn-will continue our progress priced. And they believe we drew mixed reviews from ings per share, equity ratio, toward becoming a lean and operate in a good service both investor groups. Many and dividend growth have agile competitor. And we will l I territory with a reasonable consider Constellation improved steadily over the always remember that success regulatory ens ironment. Energy the wase of the past three years. Although is never final. q r ,.x

• ' ' ].?

e. g r y n 5

q;, a { 83 /j - - - _; 4 g ( ee ! .~ c,n um 7> hj <.I' f I" g} w l' ' i c; 'w' In 1993 we surveyed our f ^ ' ? Q ,,,,o,,,u g,s, 0 r,,,g,,, f+!n. Nm n.: ,. )' y - - . y. c perceptwns of a world-<. lass ..: n 4 ? t-g s- . '.%a utility, IVe learned that 'n t w. m .[ healthy dividends top our i individualinvestors' list of r. g Se ~ e tpectations, and that BGCs average investor depends on dividends to augment a 1 ~ ~ ' ' retirement income. \\Ve are ~ committed to producing .,.4 :aJ m.. carmngs that wd_ l allow us to ^ WW* } ~ increase our dividends in the w x-a. acuamaaa-~ u ,ca,, ahead. l

fin ANcmL CON TCN'f S UTiuTV CONSTRUCTION EXPENDifURES Ald/mn., o/D.,lla" 19 Management's Discussion and Analysis f. _.] _ L .. d 26 Report ofIndependent Auditors .$500 ' l l 'I I 27 Consolidated Statements of Income $400 t $'300' ~' ~ 28 Consolidated llalance Sheets 30 Consolidated Statements of Cash Flows 3,gg 31 Consolidated Staternents of Conunon Shareholderi Equity _.89 90 91._92. _. .. _ _.94 93 (EST,) 32 Consolidated Statements of Cap.italization m Corntrw tron c 34 Consolidated Statements of Income Taxes am Aus sam e p i un h med f ounnx onuru <,,, 35 Notes to Consolidated Financial Statements 52 Corporate and Utility Officers 53 lloard of Directors 54 ConstcIlation Subsidiaries t 993 OPERATING EXPENSES se Five-Year Statistical Summary W:9y'.]K INSIOC ib$h f, BACK COVER Shareholder information f.g Sys > --s h:p ' e.._ 7 N 'A Fi ;f). ? y; "' G 9; 2 Q,* t A ,y /.g ,i ~..s ,4 g$ Y. J .. 7ld s! ELECTRIC PEAK LOAD W*1l $l tpne flour-Alegawarn 'r; ?- p'/ s' ~7

[ ^wf pg

[ N}* :hNN.QQ zG e ooo 0A <> ~ gg-N 5.000 Q:.,A 4 000 i n Pun leaseJ f urt andl nny WCu , 999 g operanons $n 25 8 Alamtenaou e 50 07 2.000 E Depor<iation $tLOU 1,000 9 'la ws $o 12 O Inscrea andheferrcJ eg go g, g2 g3 and Prefercnce Donden<h 50 08 E Common % i l>nidends $!Hyi e Swnmer l'eal N Raamedur11mincu $il.02

• W d'r! I'run BGE achen! an all-thm: peak hat of fi,04 nwrawatts on lanuary 19.1*34.

B:Illimore Gas and Flectrw Comfun; and Sulnidianes

SELECTED FINANCIAL DATA 1993 1992 1991 1990 1989 1IMlar amounts un thouumds. entyt per share amount.a SUMM ARY OF O PER ATION S Total Res enues $2,668,714 $2,491,343 $2.448,853 $2,178,112 52,032,009 Expenses Other Than Interest and Income Taxes 2,047,714 1,955,998 1.959,665 1,854,183 1.555,424_ income From Operations 621,000 535,345 489.188 323.929 476.585 Other income 15,702 22.096 26.628 36.674 30,928 income lief ore Interest and Income Taxes 636,702 557,441 515.816 360,603 507,513 Interest Expense 188.764 189.747 196,588 165.205 149,593 income Before income Taxes 447,938 367,694 319.228 195,398 357.920 Q income Taxes 138.072 103.347 85.547 19.952 81.629 4 Income !!efore Cumulative Eff ect of Changes in Accounting Methmis 309.866 2M,347 233,681 175,446 276,291 Cumulative Effect of Change in the Methal of Accounting for income Taxes 19,745 Cumulative Effect of Change in the Method of Accounting for Unbilled Res enues. Net of Taxes 37.754 Net Income 309,866 2M,347 253,426 213.200 276.291 Preferred and Preference Stock Dividends 41,839 42.247 42.746 40.261 32.381 Earnings Applicable to Common Su>ck $ 268.027 $ 222.100 $ 210.680 $ 172.939 $ 243.910 Earnings Per Share of Common Suick Before Cumulative Effect of Changes in Accounting Methods $1.85 S t.63 51.51 $ 1.09 $2.03 Cumulative Effect of Change in the Method of Accounting for income Taxes .16 Cumulatise Effect of Change in the Methm! of Accounting for Unbilled Resenues .31 Total Earnings Per Share of Common Stock $1.85 $ 1.63 $1.67 $ 1.40 $2.03 Dividends Declared Per Share of Common Stock $1.47 $1.43 $ 1.40 $1.40 $1.38 Ratio of Eamings to Fixed Charges 3.00 2.65 2.27 1.78 3.02 Ratio of Earnings to Fixed Charges and Preferred and Preference Stock Dividends Combined 2.34 2.08 1.82 1.47 2.44 FIN ANCI AL ST ATISTICS AT YEAR END Total Assets $7,987.039 $7.374.357 $7.137,989 $6.710.375 $5.985.679 Capitalization Long-term debt $2.823,144 $2.376,950 $2.390,115 $2,193,844 $2.076,620 Preferred skick 59,185 59,185 59.185 59,185 59,185 i Redeemahle preference stock 342,5(H) 395.500 398.300 365J00 322,800 Preference stock not subject to mandatory redemption 150,000 110.(XX) 110fKX) 110,000 110JKK) i Common shareholders' equity 2,620,511 2.534,639 2.153,306 2,073,158 2.001.188 Total ca;,italization $5.995,340 55.476.274 $5.111.106 $4.801.187 $4.569.793 Ilook Value Per Share of Common Stock $17.94 $17.63 $17.00 $16.58 $ 16.60 1 Number of Common Shareholders 82.287 80,371 71.131 73J49 75.762 I Bahimare Gas and flarru Company andSubsidianes

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This annual report presents the financial condition and tesuhs of Consolidated Financial Statements (Notes), Utility Operating operations of lialtimore Gas and lilet tric Company (llGli) and its Statistics, and Selected I inancial Data. The following discussion subsidiaries f collectis ely, the Company). Anmng other mforma-explains factors that significantly af fect the Company's results of tion, il pro'. ides Consolidated Financial St itements. Notes to operations liquidity, and capital resources. RESULTS OF OPER ATlONS ( PSC), the etfect of weather and economic conditions on sales, and competition in the generation and sale of electricity. The base rate Earnings per Share of Common Stock increases authori/ed by the pSC in April 1993 will af fect 1994 g Consolidated earnings per share were 51.85 for 1993 and 51 A3 utihty earnings fas orably. Several clettric fuel rate cases now for 1992, an increase of $.22 and a decrease of SN f rom prior-pending before the PSC discuwed in Notes I and 13 could also y ear amounts. The thanges in earnings per share rellect a higher altect future years' earnings. During 1993 and 1992, unfasorable inel of earnings applicable to common stod of fset partially in economic conditions diminished electrie and gas sales growth in 1993 and completely in 1992 by the larger number of outstandmg 11GE's service terntory. Electric utikties presently face competition wmmon shares. 'lhe sununary below presents the earnings-per-in the construction of generating units to meet future load growth share amounts, and in the sale of electricity in the bulk pow er markets. Electric utili-1993 1992 1991 ties also face the f uture pnr.pect of competition for electric sales to Utihty business $1.77 51.52 51 # 1 retail customers. It is not powible to predict currently the ultimate Dn ersified busmewes eff ect competition will have on BG[i's camings in future years. Current year operations 08 .11 g)9) Earnings from diversified businesses, which primarily represent Cumulatise citect of th.mge the operations of Constellation iloidings, Inc. and its subsidiaries in the method of accounnng (collectively. the Constellation Companies), decreased during 1993 for intome taxes (see Note !) .16 and increased during 1992. The reasons for these changes are dis-e e Bu nw Sming sedon on pagn 73 and 24. Total dis ersified busmesses .08 .1 i .07 Total $1.M 51.63 SL67 FJJect of Weather on Utility Sales Earnings Applicable to Common StocA Weather conditions affect BGE's utility sales. BGE measures lianungs applicable to common stock increased M5.9 million in wcaiher conditions using degree days. A degice day is the dif fer-1993 and 511.4 million in 1992. The 1993 incmase tellects higher ence between the average daily temperature and the baseline ulihty camings, slightly offset by lower earnings of dn ersified temperature of 65 degrees. Ilotter wcather during the summer, businesses. The 1992 increase retlects increases in both utility and measured by more cooling degree day s, results in greater demand disersified businesses camings. for electricity to operate cooling sy stems. Conversely, cooler Utihty earnings increased in 1993 because BGE sold more weather during the summer, measured by fewer cooling degree electricity than in the pres ious 3 car and because of increased base day s, results in less demand for electricity to operate cooling rates. Three ptincipal f actors pnxtuced the increase in sales of elec-systems. Colder weather during the winter, as measured by greater tricity: the summer of 1993 was botter than 1992; commercial heating degree days. results in greater demand for electricity and customers used more electricity; and the number of residential gas to operate heating systems. Conversely, wanner weather customets increased. The ef fect of w cather on utility sales is during the w inter, measured by fewer heating degree day s, resuhs discussed below. The 1993 carnings increases wcre partially offset in less demand f or electricity and gas to operate heating systems. by higher oivrations and mamienance expenses, depreciation The degree-days chart below presents infunnation regarding expense, and property taxes, and the effect of the Ommbus Budget cooling and heating degree days. Reconciliation Act of 1993 (1993 las Act), w hich increased the 30-Year federal corporate income tax rate to 359 from 34'i. L'tihty earn ~ 1993 1992 Averace ings increased in 1992 oser 1991 because the colder winter m 1992 led to higher electric and gas sales Operations expenses and Coohng degrte dap 865 707 804 interest charges wcre also lower in 8992, w hile other income was Pementag change higher, llowes er. the summer of 1992 w as cooler than 1991, and as compud w pnm ye r 2m WM a result lower electric sales of het a substantial portion of the "#"U"E *E*# increase in lW2 utility caminn. ntag &ng '" I " }'"' N The following factors influence BGE's utility operations

1. "* P" earnings: regulation by the Public Service Commission of Mary land Llamm Gm and Umm Gmpm anahudwm

1. GE Utility Rerenues and Sales of operating expenses and a return on BGE's higher level of Electric revenues thanged during 1993 and 1992 because of the electric rate base. The order also reduced the authorized rate of following factors:

return to 9.409 from the presious rate of 9.944. Base rates increased in 1992 for similar reasons: the PSC's December 1990 1993 1992 rate order and, to a lesser extent. the recovery of eligible electric r/n memn System sales s olumes $112.4 $ (32.0; conservation program costs through the e,ergy conservation sur-liase rates 58.5 84.9 charge, which began in July 1992. The December 1990 rate order Fuel rates (55.0) (113.8, authorized a 5124 million base rate increase to provide rate recognition for BGE's investment and operating expenses at Resenues from system ules 115.9 (m9) Brandon Shores Unit 2, effective with that Unit's initial Interchange sales 27.2 40.5 commercial operation in May 1991. The order further authorized O otherrevenue, u e a s33 mmion,u,cnarge,o base raie, in oaobe, iyyi to recove, Total electric revenues $147.2 $ (26.6) certain purchased capacity charges. Although these base rate increases improved BGE's electric revenues during 1992, they had Electric system sales repre ent volumes sold to customers little effect on net income because they were essentially offset by within BGE's sersice territory at rates determined by the PSC. two things: a decrease in the allowance for funds used during con- 'Ihese amounts exclude inten.hange sales, discussed separately struction (AFC) and higher depreciation expense and other taxes later. In 1993. BGE chanced ils classification of commercial and because of the completion and commercial operation of Brandon industrial customers to present this information on a basis w hich Shores Unit 2; and increased purchased capacity charges. is more consistent with predominant industry practices. Prior. year The April 1993 rate order and a continued higher level of amounts have been reclassified to confonn to the current year's recoscry of electric conservation program costs under the energy presentation. Below is a comparison of the changes in electric conservation surcharge will favorably affect base rate revenues in system sales s olumes. 1994. Ilowever,if the PSC determines that BGE is caming in excess f its authorized rate of retum, BGE will have to refund a 1993 1992 ponion of energy conservation surcharge revenues to its cus-Residential 9.04 (3M tomers. The portion subject to refund is compensation for fore-Commercial 4.1 1.7 gone sales from conservation programs and incentises for Industrial 2.7 t 1.2) achieving conservation goals. BGE has been earning in excess of Total 5.8 10.8) ts authorized rate of return on electric operations since September 30,1993. As a result. BGE has deferred the portion of llotter sununer weather was the main reason for the increase electric energy conservation revenues subject to refund beginning in total sales for 1993. The sales increases to residential and in December 1993. The deferral of these billings is expected to conunercial customers reflect significamly houer summer average approximately $1.7 million each month these deferrals weather, and to a lesser extent. increased usage and customer continue in 1994. The deferral will continue as long as BGE growth. Sales to industrial customers reflect increased sales of exceeds its authorized rate of return on electiic operations, as electricity to Bethlehem Steel to support its increased steel pro-detennined by the PSC. duction during 1993. Sales to the residential customers decreased Changes in fuel rate revenues result from the operation of the in 1992 because of cooler weather in the summer of 1992. This electric fuel rate fonnula. The fuel rate fonnula is designed to decrease was partially of fset by higher sales because of colder recover the actual cost of fuel, net of revenues from interchange w inter weather in 1992 and growth in the total number of cus-sales (see Notes 1 and 13). Changes in fuel rate revenues and tomers. Improsed economic conditions among commercial cus-interchange sales normally do not affect camings. Ilowever, if the tomers in 1992 increased sales compared to 1991. Sales to PSC were to disallow reco"ery of any part of these costs, earnings industrial customers in 1992 reflect the negatise effect of eco-would be reduced as discussed in Note 13. nomic conditions on this segment despite higher sales of elec-Fuel rate revenues decreased during both 1993 and 1992 due tricity to Bethlehem Steel after the start-up of its newly to a lower fuel rate.The rate was lower in both years because of a modernized hot strip mill. less costly twenty-four month generation mix from greater gener-Base rates increased in 1993 for two principal reasons: the ation at the Calvert Cliffs Nuclear Power Plant compared to the PSC's April 1993 rate order and an increased recovery of eligible year before. The 1993 decrease was partially offset by increased electric conservation program costs through the energy conserva-electric system sales volumes. The 1992 decrease also reDects tion surcharge. The April 1993 rate order for an annualized elec- $58 million of annual fuel cost satings resulting from the tric base rate increase of $84.9 million provided for a higher level i Rahimm e Gas and Ik tr at Company ariJ SubuJoaries

commercial operation of Ilrandon Shores Unit 2 and the October of customers. Gas sales to industrial customers for 1992 reflect 1991 expiration of a surcharge to the electric fuel rate. HGE primarily increased sales s olumes to liethlehem Steel because of expects electric fuel rate revenues to decrease again in 1994 higher use of gas in its pnnluction and processing. because of a continued less-costly generation mit Base rates increased in 1993 for two principal reasons: the Interchange sales are sales of IlGI!'s energy to the PSC's April 1993 rate order and an increased recovery of eligible Pennsylvania-New Jersey-Maryland interconnection (PJM), a gas consen ation program costs through the energy conservation regional power pool of eight member companies indudmg HGE, surcharge. The April 1993 rate order for an annualized gas base Interchange sales occur alter flGE has satnfied the demand for rate increase of $1.6 million provided Ior a higher level of oper-system sales of cleuricity,if HGE's avadable generation is the ating expenses and a retum on HGE's higher les el of gas rate least costly as adable to PJM utdities. Interchange sales increased base. The increased base rates during 1992 represent the effects during 1993 and 1992.because HGE had a less costly generation of the PSC's Octotvr 1991 rate onler. That order authori/ed a g mix than other PJM utihties. The less costly mis during 1993 54 million annualized increase in gas base rate revenues. The reflects the higher generation leveh at the Cahert Clifis Nudear April 1993 gas base rate order and continued recovery of gas Power Plant. The lew costly mix during 1992 aho reflects the consen ation program costs under the energy conservation operation of the Cahert Chth Nuclear Power Plant and a full surcharge uill favorably affect base rate revenues in 1994. year of operation of Brandon Shores Unit 2. Changes in pas cost adjustment revenues resuh from the oper-Gas revenues increased durmg 1993 and 1992 because of the ation of the purchased gas adjustment (PG A klause, w hith is following factors: designed to recover actual gas costs incurred (See Note 1). 1993 gy92 Changes in pas cost adjustment resenues nonnally do not affect </n maim,o; camings. Gas cost adjustment revenues increased during both Sales solumes 50.6 58.6 > ears primarily because of increased prices to recover higher Hase rates 2.6 3.3 costs of purchased gas and higher sales solumes subject to the Gas cmt adjustment resenues 28.N 32.9 PGA clause. Delivery senice sales volumes are not subject to the Other revenues 0.9 t 0.1 ) PGA dause because these customers purchase their gas directly I** N" P" C' 'Ioral gas tes enues $32.9 544.7 HGE Utility Fuel and Energy Expenses in 1993, HGE thanged its dawification of conunercial and Electric fuel and purchased energy expenses were as follow s: industrial customers to present this infonnanon on a basis w hich 1993 1492 1991 is more consistent w ith predominant industry practices. Prior-y ear </n md/mno amounts have been reclawified to contorm to the current y ear's Actual costs $483.9 5445.2 5492.6 presentation. The changes in pas sales volumes compared to the Net recm ery of costs year before w ere: under electrie fuel rate 1993 1992 dause (see Note I) 50.7 I i 1.0 105.6 Residential 2.5 % 6.94 Total expense $534.6 5556.2 559R2 Commercial 2.2 12.8 Industrial (5.8) 2.9 Actual electric fuel and purchased energy costs during 1993 Total 10.M 7.0 increased for two principal reasons: a higher net output of elec-tricity generated to meet the demand of HGE's sy stem and the Total gas sales decreased durmg 1993 because of lower sales PJM system, and higher purchased capacity costs under the to industrial customers. partially offset by increased sales to the Pennsylvania Power & Light Company Energy and Capacity remainder of the gas-sy stem customers. Sales to industrial cus-Purchase Agreement. Actual electric fuel and purchased energy tomers decreased pnmarily because of lower use of delivery ser-costs decreased during 1992 because of a less costly generation vice pas by Bethlehem Steel and interrupoble service customers, mix. The cost of the generation mix decreased because of the 1 w ho increased their use of alternative fueh. Gas sales to Cah ert Chffs Nudear Power Plant's return to operation fol-Bethlehem Steel aho decreased because of a mamtenance outage lowing the completion of extended maintenance and repair out-at its L-illast Iurnace. The increases in sales to residential and ages and the May 1991 commercial operation of Bodon Shores commercial customers reflect the colder winter weather during Unit 2. This decrease was partially offset by purchased capacity the first quaner of 1993 and an increase in the number of cus-charges beginning in October 1991 under the Pennsylvania Power tomers. Sales to residential and commercial customers during & Light Company Energy and Capacity Purchase Agreement. 1992 reflect the colder winter of 1992 and growth in the number nanm,wr Gaumd Umm Gompany and MdwJiarm

~ Purchased gas expenses were as follows: programs charged to eyrnse; and the expected reduction in 1994 1993 1992 1991 opeiations expense resulting from the sale of a significant portion ammlb,mu of the Constellation Companies' investment in senior living i Actual costs $246.4 $2134 %185.1 facilities (see page 23 for a discussion of the sale of senior i Net (deferrah rec overy or costs living facilities). These decreases will be p;utially of fset by the nwrti ation of the deferred VSERP costs and other increases in f under purchased gas adjustment clause (see Note !) 13.7) 0.5 ( 3.6) operations expenses. Ntaintenance expense increased in 1993 because of higher labor Total eyense $242.7 $214.1 $181.5 cosh and higher costs at the Calvert Cliffs Nuclear Power Plant. Maintenance expense was essentially unchanged in 1992 because Actual purchased gas costs went up in both 1993 and 1992 for lower costs at certain f.ossd-fuel electric generating plants were a f) three principal reasons: higher gas prices caused by market t offset by hicher costs at Calvert Cliffs. conditions; higher reser ation charges: and higher output to meet Depreciation expense increased during 1993 and 1992 com-greater demand for BGE gas. Purchased gas costs exclude gas pared to the year before because of higher depreciable plant m purchased by deh.very serv ce customers, mcluding Bethlehem service. The' increase during 1993 resulted from the addition of Steel, who obtam gas directly from third parties. Future purchased electric transmission and distribution plant and certain capital gas costy are expected to increase due to transition costs incurred additions at the Calvert Clif fs Nuclear Power Plant. The 1992 by BGE gas pipeline supphers m implementing Federal Energy i IW from the addition of Brandon Shores Unit 2. Regulatory Commission t FERC) Order No. '336. These tranution which becan conunercial operation in May 1991. costs,if approved by FERC. w. l be passed on to BGE customers d Tues other than income taxes increased during both scars through the purchased gas adjustment clause. g g, N from the addition of Br[mdon Shores Unit 2 to the taxable base effective July 1,1992.The Other ope rating la.penws g 9 93 4 Q; Operations expense increased during 1993 by $50 6 milhon. of the increase in total electne and gas resenues and.mereased .The combm.ed effect of higher labor costs. employ ee reduction pay roll taxes. expenses (discuwed below n amortitation of energy conservation inflation affects the Company throuch increased operatine program costs, postretirement benefit cypenses resuhing from the d W m mim b M 'Wi%' 4 M implementanon of Statement of hnancial Accounting Standards gg i b k dfe M ihim No.106 (see Note 6) and nuclear operating costs was in total the regulatory process imposes a time lag which can delay BGirs $70.2 million higher compared to 1992. These increases were par-7 recovery of mereased costs. 'Ihere.is a regulatory lag primarily tially offset by the 1993 reversal of a 59.8 milhon charge origi-because rate increases are based on historical costs rather than nally recorded m. 1992 for termination benefits associated w. h the a projected costs. The PSC has historically allowed recovery ol. he t Company,s 1992 Voluntary S,pecial Early Retirement Program cost of replacing plant assets, together w. h the opportunity to n (1992 VSERP) to reflect the ratemaking treatment adopted by the carn a fair retum on BGE., m.sestment, beginning at the time of s PSL,.m its April 1993 rate order, in acconlance with that onfer. the replacement. C,ompany has deferTed th.is charge and is amortifing it over a fise-year period, beginning in May 1993. Operations expense OMer Income and Expenses decreased m 1992 because of lower nuclear contractor costs and AFC was essentially unchanged in 1993 because the accrual of r lower pa) roll costs attributable to labor savings from the AFC on a higher level of construction work in progress compared Company s 1992 VSERP and other cost. control measures. These m 1992 ofM by the lower AFC rate approved in the April decreased costs were partially offset by the original charge to oper. 1993 PSC rate order. AFC decreased during 1992 because of the ations for the 59.8 million cost of termination benents awociated M d emM pion of Brandon Shores Unit 2, with the 1992 VSERP and by higher fringe-benefit cmts. partially off. set by the effects of the expansion of the AFC poh.ey The Company announced several employee reduction pro-as discu4 sed in Note 1. grams during the third quarter of 1993 in conjunction with its Interest charges increased slightly in 1993 as a higher level of l ongomg cost control efforts.The cost of these programs totaled outstanding debt was partially offset by a decline in the level of $105.5 million bee Note 7}. Consistent with presious rate actions nterest rates and the redemption of higher coupon debt of BGE. of the PSC. BGE has deferred and will amortire the 588.3 million Interest charges decreased during 1992 primarily because of lower of 1993 \\ oluntary Special Early Retirement Program (1993 les els of debt outstanding and a decline in the level of interest VSERP) costs related to regulated activities over a lh e-year mCihe decreased debt levels in 1992 are attributable to the l period beginning in February 1994. lhe remaining $17.2 milhon additional shares of common stcd iwued and the recovery of pre-l of these program costs was charged to expense m 1993. s iousiv deferred electric fuel costs. Operations cy,ense is eyiected to be reduced in 1994 by three Capitalized interest increased dunng 1993 because BGE factois: cost sasings f rom the 1993 employee reduction programs began accruine carn ing charges on electric deferred fuel costs are cyiected to be reahied beginning in 1994; 1993 operations l egiense reflects the portion of the cost of employee reduction I l l 6 IkN N$(N, b h

cxcluded f rom rate base (see Note.h 1992 capitali/ed interest sents a utility's next lowest cost generation to senice the decreased because the Constellation Companies discontinued demands on its system. These power pencration projects are interest capnalization at certain real estate projech. scheduled to comcrt to supplying electricity at avoided cost rates locome tas e pense increased during both years because of in various years beginning in late 1996 through the end of 20t O. higher pre-tax eamings. The 1993 increase also reflects the ellect As a result of declines in purchasing utilities' avoided costs sub- ) of the 1993 Iax Act. w hich increased the federal corporate mtome sequent to the inception of these agreements. revenues at these ta rate to 35% imm 344. retroactis e to January 1.1993. As a pmjects based on current avoided cost les els would be substan-resuh. income tax expense related to 1993 operations increased by tially lower than revenues presently being reali/ed under the fixed $16 nullion, and the Company 's deterred income tax liability price tenns of the agreements If current avoided cost levels were increased by 520 I nullion. The Company deferred $12.8 million to continue into 1996 and beyond, the Constellation Companies of the increase in the delerred income tax liabdity applicable to could experience reduced earnings or incur losses associated with g utility operations for recovery through tuture rates and charged the these projects, w hich could be significant. The Constellation remaimng S7.3 nullion to meome tax expense. 01 this $7.3 million Companies are im estigatmg alternatives for certain of these charged to e pense. RX nulhon pert'uns to the Constellation power generation projects including, but not limited to, repow-Companies as discussed on pace 24 ering the projech to reduce operating costs, renegotiating the powcr purchase agreements, and selling its ownership interests in Dii mified Emincurs /larnings the projects. The Company cannot predict the impact these mat-Earning per share from diversilied businesses were: ters may has e on the Constellation Companies or the Company. 1993 1992 1991 but the impact could be material. Earnings f rom the Constellation Companies' portfolio of Power generation ssstems $.07 5.0h, 5.03 financial m. vestments melude capital pains and losses, d..dends, m Financial im estmenh .10 m .01 rom hnanc. l linuted partnerships, and income from income f. ia Real estaie des clopment and senior financial guaranty insurance companies.1993. h.nancial ins estment hsing f.ac dities LO4) LO5) L11) Ef fett of 19931ax Act LO41 earnings inercased slightly m er 1992.$6.1 million in income f. rom E"#" Other LUI) LOli LO2) stantially offset by lower imestment income compared to 1992. Current.y ear operanons 08 .I1 009) resuhing from the decline in the si/e of the investment portfolio Cumulative eilect of change m due to the sale of selected assets to pros ide liquidity for ongoing the method of accountinF businesses of the Constellation Companies. Financial investment for income taxes a sce Note I) .16 earnings increased in 1992 primarily because of u rite-downs taken Toial dis ersified businewes $.08 S.11 5.07 on certain investments in 1991 and because of an improvement in the performance of certain financial linuted partnerships lhe Constellation Companies' power generation systems The Constellation Companies' real estate development busi-business includes the des clopment. ow nershig management. and ness includes land under development; office buildinp; retail operation of wholesale power generating projects in which the projects; commercial projects; an emertainment, dinine and retail L onstellation Companies holJ ow nership interests. as well as complex in Orlando Horida; a mixed-use planned-unit-develop-the pros ision of sers ices to pow er eeneration projects under oper. ment; and senior living facilities. The majority of these projects ation and maintenance contrac ts. Power generatim sprems earn _ are in the HaltimoreMashington corridor.They have been affected adsersely by the depressed real estate $narket and eco-inn during 1993 were flat compared to 1992. The. cognition of $h mdlion of energy tas credits on the commercial operation of nomic conditions, resuking in reduced demand for the purchase the puna geothermal plam w as of fset by costs incurred at the or lease of available land, of fice. and retail space. Panther Creek waste-coal project in order to resohe fuel quality Earninp f rom real estate deselopment and senior hvine facili-lies were essentially unchanged in 1993 compared to 1992' and other start-up pmblems. Addnionally,1992 carnings reflect the gam on the partial sale of an ownership interest in a row er becauw a 52.1 million gain on the sale of the nursing home generation project. representing most of the increase in pow er poruon of the Constellation Companies' investment in senior lis ing facilities w as offset by greater operating losses at other real generatqn sptems earninp compared to 1991. lhe L onstellation Companies' im estment in w holesale pow er estate pmjects. The senior living facilities u hich were sold con-generatmg projects includes $IM million representing ow nership tributed real estate revenues and operating expenses of approxi. 1 mierests in 10 projects u hich sell electricity in California under mately 517 million and $16 million, respectively, in 1993. The ~ Interim Standard Offer No. 4 pow er purchase agreements. Under increase in earnings in 1992 reflects the 1991 write-dow ns these agreements, the projects supply electricity to purchasing recorded by the Constellation Companies aggrecatine unhties at a fised rate for the first ten years of the agreements and $10 million on certain real estate projects and a 53.6 million reserse for loans w here the s alue of the collateral was less than at sariable rates based on the utihties' asoided cost for the remaining term of the agreements. Asoided cost generally repre, the ouhtanding loan balances. Additionally, the Constellation it.dtsme tis alth< tw Gm;vny and %hmiraner

Companies' real estate portfolio has experienced continuing car-jects in the current depressed market. losses would occur in rying costs and depreciation and, during 1991, the Constellation amounts difficuit io deennine. Depending upon market condi-Companies began expensing rather than capitali/ing interest on tions, future sales could tuso result in losses. In addition, were the certain undeseloped land w here des ekipment activities were at Constellation Companies to change their intent about any project minimal levels. These factors base affected earnings negatisely from an intent to hold until market conditions improve to an during 1993 and 1992 and are expected to continue to do so until intent to sell, applicable accounting rules would require a write-current market conditions improve. Cash llow from real estate dow n of the project to market value at the ame of such change in operations has been insuf ficient to coser the debt service require. intent if market value is below book vdue. ments of certain of these projects. Resulting cash shortfalls have The Effect of the 1993 Tax Act represents a $5.8 million charge been satisfied through cash infusions from Constellation to income tax expense to reflect the increase in the Constellation g floldings, Inc. which obtained the funds through a combination Companies' deferred income iax liability because of the increase in of cash now generated by other Constellation Companies and its the federal corporate tax rate. corporate borrowings. Until the real estate market shows sus-tained improvement, earnings from real estate actisities are Enrironmental3fatters expected to remain depressed. The Company is subject to increasingly stringent federal, state, and The Constellation Companies continued investment in real kical law s and regulations relating to improving or maintaining the estate projects is a function of market demand. interest rates, quality of the emironment. These law s and regulations require the credit availabihty, and the strength of the economy in general. Company to remove or remedy the effect on the environment of the The Constellation Companies' Management believes that disposal or release of specilled substances at ongoing and former although the real estate market is beginning to show signs of operating sites,includmg Emironmental Protection Agency improvement, untd the economy reflects sustained growth and the Superfund sites. Details regarding these matters. including financial excess inventory in the market in the Bahimore-Washington cor-infomiation, are presented in Note 13 and in the Company's ridor goes dow n real estate values will not improve significantly. Annual Report on Form 10 K under item 1. Business-11 the Constellation Companies w ere to sell their real estate pro-Environmental Matters. LIQUlOITY AND C APITAL RESOURCES Capital Rec;uirements The Company 's capital requirements reflect the capital. intensive years 1991 through 1993, along with estimated amounts for the nature of the utility business. Actua! caphi requirements for the y ears 1994 through 1996, are reflected below. 1991 1992 1993 1994 1995 1996 (in millionM Unlity llusinen: Construction expenditures tescluding AFC) Electric $ 328 5 292 $ 360 $345 $319 $300 Gas 43 36 51 54 60 56 Common 48 39 44 51 46 44 Total construction eventhtures 419 367 455 450 425 400 AFC 37 22 23 34 35 25 Deferred nuclear expenditures 23 16 14 12 Deferred energy conservation expendnures 3 20 33 48 45 40 Nuclear fuel (uranium purchases and pnrewing (harges) 2 40 47 42 46 51 Retirement of long-tenn debt and redemption of pref erente stock 339 486 907 36 281 98 - Total utility business 823 951 1.474 622 832 614 Dnersified Businesses: Retirement of long. term debt 167 118 222 9 81 77 Insestment requirements 109 K0 78 M 60 20 Total dn ersified businewes 276 198 300 72 141 97 Total $1.099 $ 1.149 51.779 5694 S973 5711 Bahimm e Gas amt Ila roe Compans ami Subsidia,ics

llGE Utility Capital Requiremcnts Divenified flusineurs Capital Requirements ilGli's conuruction program is subject to contmuous resiew and Debt and Li<pridity modification, and actual eqvnditures may sary f rom the esto During 1993 Constellation iloidmps, Inc. (Cill) closed two pri-mates on page 24. Elet tric comtruction expenditures include the vate placements totaling $225 milhon of umecured serial notes installation of two 5.On0 kilowatt diesel generators at the Cahert with several institutional investors. Clll used pmceeds of the Chlis Nudear Power Plant, stheduled to be placed in sersice in prisare placements to pay of f its bank debt facility, w hich Clll 1995; the comouction of a 140-megawatt combusnon ambine at elected to tenninate, as well as for other general corporate uses. Perryman, se heduled to be placed in sersice in 1995. w hich the in addnion, Cill entered into a 520 million unsecured resolving PSC authorized m an ordei dated Marth 25,1993; and improve-credit facdity with a bank on September 30,1993.This facility ments in HGEN esisting generating plants and its trammission matures September 29,1994 and will be used to provide liquidity arni distribution facilities. Future electric construction expendi-for general corporate purposes. As of December 31.1993, Clll g tures do not int.lude addinonal generating units in light of the had no borrowings under this facility. competitive bidding process established by the PSC. The The Constellation Companies intend to meet capital require-Company estimates currently that eyienditures for comphance ments by refinancing debt as it comes due and through internally w nh the sulf ur dioxide pimisions of the Clean Air Act of 1990 generated cash. These sources include cash that may be generated will total appnnimately 555 million through 1995. from operations, the sale of assets, and cash generated by tas Durmg 1993,1992, and 199 L the intemal generation of cash benefits earned by the Constellation Companies, in the event the f rom unhty operations prosided 719. 814. and 741 respec-Constellation Companies can obtain reasonable value for real tively, of the f unds required for llGli's capital requirements estate properties, additional cash may become available through l culusise of retiremems and redempuons of debt and preference the sale of projects (for additional infonnation see the discussion stock. Dunng the thace-year period 1994 through 1990,!!GE of the real estate busmess and market on page 23 under the expects to provide through unhty operations approximately 700 headmg "Diversitied llusinesses Earnings"). The abihty of the of the f unds required for llGE's capital requirements, culmive Comtellation Companies to sell or liquidate assets described of retirements and redemptions. above will depentl on market conditions, and no assurances can tinhiy capital requiremenis not met through the internal gener-be gisen that such sales or liquidations can be made. Also, to j ation of cash are met through the issuante of debt and equity prm ide adthrional liquidity to meet interim financial needs, CHI secuoties. During the three.) ear penod ended December 31, may enter into additional credn f acilities. 199L HGE's issuances of long term debt, preference stock, and common slot k w ere 51,733 million,5165 milhon, and 5446 mil- /m cument krquiremenn hon respet tisely. During the same period, retirements and The imestment requirements of the Constellation Companies redemptions of HGE's long-lenn debt and preference stock totaled include its portion of equity funding to committed projects under $1,54h million and 5167 million, respe(tisely, esclusise of any des elopment, as w ell as net loans made to project partnerships, redemption premiums. The increase m issuances and reiirements imestment requirements for the years 1994 through 1996 reflect of long-tenu debt during 1993 refletis the refinancing of a signifi-the Comiellation Companies' estimate of funding for ongoing cant portion of HGEN debt in mder to take adsantage of the and anticipated projects and are subject to continuous resiew and I,n orable interest rate market. The amount and timing of future modincation. Actual imestment requirements may vary signifi-issuances and redemptions will depend upon market condnions cantly from the estimates on page 24 because of the type and and HGE's actual (apital requirements number of projects selected for des elopment, the impact of The Comtellation Companies' capital requirements are dis-market conditions on those projects. the ability to obtain cussed below in the section titled "Dnersified Businesses Capital financing, and the availability of internally generated cash. The Requirement-Debt and laquiddy." The Constellation Comtellation Companies have met their investment requirements Companies plan to meet their capital requirements with a in the past through the mternal generation of cash and through combination of debt and intemal generation of cash from their borrowmps from banks and imtitutional lenders. operations. Additional!), from time to time, HGE may make loam to Comtellation Iloidmgs, Inc., or contribute equity to Comiellation llokhngs, Inc. tunmm Gu anwo un comm amhnanh <

= REPORT OF MANAGEMENT The management of the Company is responsible for the informa-conducts periodic resiews to maintain the effectiveness of tion and representations in the Company's financial statements. internal control procedures. The Company prepares the financial statements in accordance Coopers & Ly brand. independent auditors, audit the financial with generally accepted accounting principles based upon asail-statements and express their opinion about them. They audit in able facts and circumstances and management's best estimates accordance with generally accepted auditing standards. and judgments of know n conditions. The Audit Committee of the lloard of Directors, which The Company maintains an accounting system and related consists of four outside Directors, meets periodically with system of internal controls designed to proside reasonable Management, intemal auditors, and Coopers & Ly brand to review Q assurance that the financial records are accurate and that the the activities of each in discharging their responsibilities. The Company's assets are protected. The Company 's staf f of internal internal audit staff and Coopers & Lybrand have free access to auditors, w ha h reports directly to the Chairman of the lloard, the Audit Committee. REPORT OF lNDEPENDENT AUDITORS To the Shareholders of Baltimot e Gas and Lic< tric Company We have audited the accompanying consolidated balance sheets In our opinion, the financial statements referred to above pre-and statements of capitalization of Italtimore Gas and Electric sent fairly, in all material respects, the consolidated financial Company and Subsidiaries at December 31.1993 and 1992, and position of Ilahimore Gas and Electric Company and Subsidiaries the related consolidated statements of income, cash now s. at December 31.1993 and 1992, and the consolidated results of common shareholders' equity, and income taxes for each of the their operations and their cash flows for each of the three years in three years in the perical ended December 31,1993. These finan-the period ended December 31,1993 in conformity with generally cial statements are the responsibility of the Company's accepted accounting principles. Nianagement. Our responsibility is to espress an opinion on these As discussed in Note 13 to the consolidated financial state-financial statements based on our audits. ments, the Public Service Commission of Maryland is currently We conducted our authis in accordance with generally resiewing the replacement energy costs resulting from the 1989-accepted auditing standards. Those standards require that we plan 1991 outages at the Company's nuclear pow er plant, and the and perform the audit to obtain reasonable assurance about Company established in 1990 a resers e of $35 million for the whether the financial statements are tree of material misstate-possible disallowance of replacement energy costs. The ultimate ment. An audit indudes examining, on a test basis, evidence sup-outcome of the fuel rate proceedings, howeser, cannot be deter-portmp the amounts and disclosures in the financial statements. mined but may result in a disallowance in excess of the reserve An audit also indudes assessing the accounting principles used provided. and signilicant estimates made by Management as well as es alu-As discussed in Note I to the consolidated financial state-ating the oserall financial statement presentation. We believe that ments, the Company changed its method of accounting for our audits proside a reasonable basis for our opinion. income taxes in 1991. a V2s V f / Coopers & Lybrand 11altimore, Mary land January 21,1994 Itainmore Gas and j Icanc Comf arn amt %hulancs

_~ _ _ _. -. _. _ _ ~ _. - - _. _. CONSOLIDATED STATEMENTS OF INCOME ' rear Ended Dec ember 31, 1993 1992 1991 (in thousands, eu cpt per share amounts) Itesenues filectric $2,115,155 $ 1,967,923 $1,994,525 Gas 435,849 402.937 358,195 Diversified businesses 117,710 120,483 96,133 Total revenues 2,668,714 2,491,343 2.448,853 Expenses Other 'I han Interest and Income Tases filectric fuel and purchased energy 534,628 556,184 598,208 Gas pun,hased for resale 242,685 214,103 181,455 Operations 657,110 606.498 634,309 Maintenance 181,685 172,726 173,MS - Depreciation 236,774 223,483 201,264 Tases other than income taxes 194,832 183JXM 170,781 Total expenses other than interest and income rases 2,047,714 1,955,998 1,959,665 income from Operations 621,(H)0 535.345 489,188 Other Income Allowance for equity funds used during construction 14,492 13,892 23,596 liquity in camings of Safe liarbor Water Power Corporation 4,243 4.267 4,388 Net other income arul deductions (3,033) 3,937 (1,356) Total other income 15,702 22,096 26,628 Income liefore Interest and income Tases 636,702 557.441 515,816 Interest Espense Interest charges 212,971 211,712 231,411 Capitalized interest (16,167) (13,800) (20,953) Allowance for borrowed funds used during construction (8,040) (8,165) (13,870) Net mterest expense 188,764 189,747 196,588 Income liefore Income Tases 447,938 ' 367,694 319,228 Income Tases 138,072 103,347 85,547 income liefore Cumulatise Effect of Change in Accounting Method 309,866 264,347 '233,681 Cumulatise Effect of Change in the Method of Accounting for Income Tases (See Note 1) 19,745 ' Net income 309j 66 264.347 253,426 - Preferred and Preference Stock 1)isidends 41,839 42,247 42,746 Earnings Applicable to Common Stock $ 268,027 $ 222,100 $ 210.680 Aserage Shares of Common Stock Outstanding 145,072 136,248 126,093 Earnings Per Share of Common Stock flefore cumulatis e effect of change in accounting methat $1.85 $ l.63 $1.51 Cumulatis e effect of change in the method of accounting for income taxes ,16 Total carnings per share of common stock $1,85 $ 1.63 $1.67 See Notes to CoruotidatedImancial Statemenn, Certain prior year anwunts have been reaated to un{am ta the current year'spresentation. Dahimore Gn and litectric company and 5ubsidiaries

CONSOLIDATED BALANCE SHEETS At Der emher 3/. 1993 l992 tin ilwaumdo ASSETS Current Assets Cash and cash equis alents S 84,236 5 27,122 Accounts recehable (net of allowance for uncollectibles) 401.853 369.144 Fuel stocks 70,233 85,063 Materials and supplies 145,130 141,611 Prepaid taxes other than. income taxes 54,237 54,510 0:her 38,971 29.604 Total current assets 794.660 707.054 Insestruents and Other Assets Real estate projects 487,397 462,042 Power generation sy stems 298,514 259,996 Financial im estments 213.315 207,011 Nuclear deconunissioning trust fund 56,207 43,118 Safe llarbor Water Power Corporation 34,138 34.176 Semor liviny f acilities 2,005 24,538 Other 65,355 64,986 Total investments and other assets 1,156,931 1.095,867 I tility I'lant Plant in service lilectric 5,713,259 5,474.590 Gas 557,942 526.058 Conunon 487,740 468,264 Total plant in service 6,758,941 6,468,912 Accumulated deprecution (2,161,984) (1,980,361) Net plant in service 4,596,957 4,488.551 Construction work in progress 436,440 308,W)8 Nuclear f uel(ne; af amortitation) 139,424 147,374 Plant held for fut 're use 24,066 21,486 Net utility plant 5,196,887 4.966,319 Deferred Charges Regulatory assets 768,125 568,563 Other 70.436 36,554 Total deterred charges 838,561 605.1!! Total Assets 57,987,039 5 7,374,35*. ser Min la con winuted i inam ial.st.nemenn Cenans pnor-war amoann has e bcen rcuated to e ontarm to the < urrent y car's praentation Buhanore Gas and ik inc Company and %dnidaann

CONSOLIDATED BALANCE SHEETS AI on emter 3/. 1993 1992 tin Iluotnands1 LI A BILITIES AND C A PITA LIZ ATION Current I.iabilities Short-term horrowings S 11,900 Current portions of long-term debt and preference stott 44,516 291,270 Accounts payable 195,534 175,495 Customer deposits 22,345 20,027 Accrued tases 20,623 20,925 Accrued interest 58,541 55,537 Dividends declared 63,966 62,282 Accrued vacation costs 35,546 28,908 Other 38,716 2.567 Total current habilities 479,787 668.911 Deferred Credits and Other 1.iabilities Deferred income taxes 1,067,611 983,534 Deferred insestment tax credits 157,426 165,697 Pension and postemployment benefits 183,043 5.352 Decommissioning of federal uranium enrichment f aci!;iics 46,858 55JXO Other 56,974 19,589 Total deferred credits and olhar habilities 1,511,912 1,229,172 Capitalitation Long-term debt 2,823,144 2,376,950 Preferred stock 59,185 59,185 Redeemable preference stock 342,500 395.500 Preference stock not subject to mandatory redemption 150,000 110.(K K) Common shartholders' equity 2,620,511 2.534,639 Total capitalintion 5,995,340 5,476,274 Commitments, Guaranten, and Contingencies - See Note 13 Total I.iabilities and Capitalisation $7,987,039 $7.374.357 hee %rn la ConsoMued fmancial Statemenn. Certain pr nor-year omounts have been iestated to ourf<n m to the rutrrent year's presentanon 4 Balnmore Gas and Flectiuc Company and Satuidraries

CONSOLIDATED STATEMENTS OF CASH FLOWS tras FndedIkcember 3/. 1993 1992 199I ein thousandu Cash Flows From Operating Actisities Net income $ 309.866 5 264,347 5 253.426 Adjustments to reconcile to net cash provided by operating activities Cumulathe ellect of change in the method of accounting for income taxes (19.745) Depreciation and amortization 314,027 273,549 244,017 Deferred income tases 53,057 26.914 30,725 Imestment tax creda adjustments 18,444) (8.854) (6.225) Deferred fuel costs 51,445 105,430 102,754 0

• ri'e-d""" "r fi""""' im eme" """ re"' e"te Pr"Jeet' 23 563 Allow ance ior equity funds used during construction (14,492)

(13,892) (23,596) Equity in earnings of af filiates and joint sentures inet) (4,655) (l1.525) 8,707 Changes in conent auets (37,252) (26,206) (6,563) Changes in cunent liabilities, other than short-term borrowings 71,153 (9.614) (6.027) Other 131.919) (31 005) (5.373) Net cash prmided by operating activities 702,786 569.144 595.663 Cash Flows From l'inancing Actisities Proceeds from issuance of Short-temi borrow ings (neo (l1,900) (139.600) (15,530) 1.ong-term debt 1,206,350 603.400 1,015,950 Preference stock 128,776 34,801 Common stock 57,379 355,759 32,263 Reacquisition of long-tenu den t 1,012.514) (687,052) (959,379) Redempnon of preterence stock (144,310) (2,924) (22,800) Common stock dividends paid (211,137) (189,180) (176,N7) Preferred and preference stock daidends paid (42,425) (42,300) (42,743) Other 17.094) (399) (442) l Net cash used in financing actnities (36,875) (102.296) (133.887) ( Cash Flows From Imesting Artisities Utility comtruction expenditures (477,878) (389.416) (456,244) Allowante for equity funds used during construction 14,492 13.892 23,596 l Nuclear f uel expenditures (47,329) (39,486) (1,854) Deterred nuclear expenditures (13,791) (15.809) (22.681) i Deterred energy conservation expenditures (32,909) (19,918) (3,489) Nuclear decomrnissioning trust fund (9,699) (8.900) (8,900) Financial im estments 6,523 52,616 67,282 Real estate projects (30,330) (23,385) (45,322) Pow cr generation sprems (26,841) 131,483) (33,204) Other 8,965 4,746 (3,422) Net cash used in im esting acth ities (608.797) (457.143) (484,238) Net increase (1)ecrease)in Cash and Cash Equisalents 57,114 9.705 (22,462) Cash and Cash ! quis alents at Ileginning of Year 27,122 17,417 39,879 Cash und Cash Equis alents at End of Year $ 84.236 5 27.122 5 17.417 Other Cash Flow Information Cash paid during the year for: Interest (net of amounts capitali/ed) $ 183,266 5 183,209 $ 189,271 Income tases $ 126,034 5 87.693 $ 16.078 % e htn to C..nwhd.urJ l num sal %tenwnu l'enam poaryrai am auas har c hern rotatrd to wnfurrn to th< curn rd trar's practuatwn Ilijnmoor Gm and I tectru Company and %dahharin

} CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUlTY Net Unreali/ed Pension loss on Common Stock Retained Liability Marketable Total rean / nJcJ /k< cmber fl. /w t /W2. and Iwl Shares Amount liarnings Adjustment Securities Amount tin th msandn llalance ut December 31,1990 125.039 5 947.147 51,139,999 5 5(13,988) 52,073,158 Deferred taxes on net unrealized loss 4,756 4,756 Net income 253,426 253,426 Dividends declared Preferred and preference stock (42,746) (42,746) Common stot k (51.40 per share 6 (l76.584) (176,584) Common stock issued 1,651 32.263 32.263 Other (199) (I49) Change in net unrealized loss on marketable secunties 13,988 13,988 Change in deferred taxes on net unreah/ed loss (4,756) (4,756) llalance at December 31,1991 126.690 979,211 1,174,095 2,153,306 Net income 264,347 2M.347 Dmdends detlared Prefened and preference stock (42,247) (42,247) Common stot k (51.43 per share) (196.601) (196,601) Common sto(k issued 17J N8 356,230 356,230 Other (4) (439) 43 (396) Italance at December 31,1992 143,784 1,335J102 1.199,637 2.534.639 Net income 309,866 309,866 Dis idends declared Preferred and preference stock (41,839) (41,839) Common stock (51.47 per share) (213,407) (213,407) Common stoc L issued 2,250 57,379 57,379 Other (917) (3,i17) (4,034) Pension hability adjustment (33,990) (33,990) Deterred taxes on pension liability adjusonent 11.897 11.897 Italance at December 31,1993 146,034 51.391,464 51.251,140 S (22,093) 5 - 52.620,5 I I bre %ws to CornnhJ.aelI mam sal Swemenn ( 'cerann poor year amosmn have tun ieuated to < onfarm to the e unent scar's prementation Itainmore Gas andI;ln om Com;>ans and%bu hancs

CONSOLIDATED STATEMENTS OF C A P I T A L I Z A T 10 N At Da ember 31. 1993 1992 tin tiumsanda lamg-Term Debt i First Refundmg Mortgage Bonds of BGE 49 Series,due March 1,1993 5 24,061 4X9 Series, due July.15,1994 29,921 9X9 Series, due October 15,1995 200,000 2(X).(K K) 5WG Series,due April 15,1996 26,585 26,585 6X9 Series,due August 1,1997 24,957 24,957 5X9 Installment Series, due August 15,1998 50,fM)0 Q 79 Series,due December 15,1998 28,638 28,638 8.409 Series,due October 15,1999 100,0(Mi llX),0(X) SX9 Series.due July 15,2(KX) 125,000 7M% Series, due April 15,2001 59,911 59.914 HX4 Series, due August 15,2(X)] 124,980 125,fXK) 7%9 Series, due September 1,2(K)1 59,975 7X9 Series, due January 1,2(W12 49,999 49,999 7W9 Series,duc July 1,2002 125,000 125JXX) 7MG Series,due July 1,2(X)2 49,985 5M9 Installment Series due July 15,3K)2 12.080 12,500 7W% Series, due September 15,2002 49,990 6M9 Series,due February 15,3K)3 125,000 6%9 Series.due July 1,2tK13 125,000 8X9 Series.due February 1,2(K4 74,983 5M9 Series,due April 15,20f4 125,000 6.809 Series, due September 15,2004 20,000 20fWX) 8XM Series,due September 15,2006 74,960 7M% Series, due January 15,2007 125,000 125,(X X) 8%Q Series,due September 15,2007 75JXX) 6W Series, due March 15,2008 125,000 9X9 Series,due July 1,2008 12,718 6.909 Installment Series,due September 15,2009 55,000 55JXX) 9#4 Series,due March I,2016 98JXX) 7M9 Series due March 1,2023 124,998 7MQ Series, due April 15,2023 100,000 Total First Refunding Mortgage Honds 1,802,148 1,552,186 Other long-tenu debt of HGE Medium-term notes, Series A 23,500 69.500 Medium-tenn notes, Series B 100JH)0 1(X)JKX) Medium-tenn notes, Series C 173,050 138,050 949 Notes, due May 1,1993 l(X),0fX) Pollution control loan, due July 1,2011 36,000 36,(XX) Port facilities loan, due June 1,2013 48,000 48JK)0 Adjustable rate pollution control loan, due July 1,2014 20,000 20JXX) 5.559 Pollution control revenue refunding loan, due July 15,2014 47,000 Economic development loan, due December I,2018 35,000 35,000 Total other long term debt 482,550 546,550 Long term debt of Constellation Companies Mortgage and construction loans and other colleralized notes 7.759,due December 16,1995 5,575 Variable rates, due through 2009 151,251 160,572 8.59, due May 1,2001 3,300 7.739, due March 15,2009 6,465 i oans under res olving erecht agreements 152,(XK) <vnt,mierim tuxe 3J %rc bres In Coruohdated Iinancit.I Statemoa.t Baltim,nr Gas and Liectric Company arid Subudianes

l CONSOLIDATED STATEMENTS OF CAPITALIZATION i I st Iseremher JI. I993 N91 1intiwnnando l!nsecured notes 5 440J)00 $ 255JXK') Total long-term debt of Constellation Companies 597,7!, 576,447 Unamortited discount and premium (17J54) (8,463) Current portion of long-term debt (41,516) (289,770) Total long-tenn debt 2,823,144 2.376,950 Preferred Stock Cumulatis e, S l(W) par s alue, ljX W)JW X) shares authorized h Series B,4M4,222.92I shares outstanding, callable at 5110 per share 22,292 22,292 Series C,4's,68.928 shares outstanding. callable at 5105 per share 6,893 6,893 Senes D,5.40'4,3(KUM Ni shares outstanding, callable at 5101 per share 30,000 30JXK) Total prelerred sin k 59,185 59,185_ Preference Stock Cumulative,5100 par value,6.5(WUNW) shares authori/ed Redeemable preference stock 7.509,1986 Series,470JWM) and 485JXX) shares outstanding, respectis ely. Callable at $105 per 5 hare prior to October I.1996 and at lesser amounts thereaf ter 47,000 48.500 f 759,1987 Series,485JX() shares outstanding. Callable at 51N.50 per share prior to April 1,1997 and at lesser amounts thereafter 48,500 48,5(W) 6.95G,1987 Series,500JW W) shares outstanding 50,000 50jWK) 7444,1988 Series,500JX X) shares outstanding, called at $103 82 per share on July 1,1993 50JKX) 7.804,1989 Series,5(W),lXK) shares outstandmg 50,000 50jXK) 8.25ti,1989 Series. 5(NUKX) shares outstanding 50,000 50JXK) 8.625%,1000 Series. 650JXXI shares outstanding 65,000 65.(N K) 7.85 %,1991 Series,350JK Ki shares oubtandmg 35,000 35JXh) Current portion of redeemable preference stock (3,000) ( I,5(WJ) Total redeemable preference stock 342,500 305.500 Preterence stock not subject to mandatory redemption 7.887,1971 Series,5(K)JKK) shares outstandmg. called at $101 per share on September 1,1993 50JXX) 7.759,1972 Series,400JXK) shares outstanding. called at $101 per share on November 8.1993 40fKx) 7.789.1973 Series 200jkW) shares outstanding. callabic at 5101 per share 20,000 20JXX) 7.1259,1993 Series,4(NUkW) shares outstanding, not callable prior to July 1,2003 40,000 6.97G,1993 Series,500JKW) shares outstanding, not callable prior to October I,2003 50JHX) 6.704.1993 Series,4(W)JXK) shares outstanding, not callable prior to January I. 2004 40,000 'lotal preference stot k not subject to mandatory redemption 150,000 1 IOJ KK) Common Shareholders' Equity Conunon stock without par value.175JKW)JWXI shares authorized; 146,034,014 and 143,783,581 shares iwued and outstanding at December 31.1993 and 1992. respectis cly. ( At December 31, 1993,166.893 shares were resersed for the Employee Sasings Plan and 4,770,773 shares wcre reserved for the Disidend Reinsestment and Stock Purchase Plan.) 1,391,46.1 1,335fl02 Retained earnings 1.251.140 1,199,637 Pension liability adjustment (22,093) 'Iotal common shareholders' equity 2,620,511 2.534,639 Total Capitalitation $5,995.340 55.476.274 See Mrs w Conwhdated I unam wl stawments Certam prior year amounts harr br en restarcJ to c onfhrm to the < urrent years prsentarwn llainmme Gas an,I1lectru Commmy amlSnhudsanes

CONSOLIDATED STATEMENTS OF lNCOME TAXES t ear t mled /h, ru:hcr 3 /. 1993 1992 1991 1Dnllar amourin m thousamin income Taxes Current 5 93,459 $ 85.287 5 61.(kt7 Deferred Change in tax clfect of temporary dif ferences 63,972 44.975 28.361 Change in income taxes recoserable through future rates (30,086) (18.061) (12.625) Deterred taxes credited (charged) to shareholders' equity 11,897 (4,756) Defened taxes charged to expense 45,783 26.914 10.980 lif fect on deferred taxes of enacted change in federal corporate income tax rate q Increase in deferred tax liabihty 20,105 V locome taxes recoverable through future rates (12,831) Deferred taxes charged to expense 7,274 Investment tax credit adjustments (8.444) (8.854) (6.225) Total income taxes 138,072 103.347 65.802 Cumulative ef fect of change in the method of accounting for income taxes increase in deferred tax liability 286,787 income taxes recoverable through f uture rates (267,042) Amount recogni/ed in income 19.745 Income taxes per Consolidated Statements of income $138.072 $ 103.347 $ 85.547 Reconciliation of Income Taxes Computed at Statutor3 l'e& ral Rate to Total income Taxes income before income taxes (includmg cumulative effect of accounting change) $447.938 $367.694 $319,228 Statutory federal income tax rate 33r4 34 4 34 4 locome taxes computed at statutory federal rate 156,778 125,016 108,538 increases (decreases) in income taxes due to Depreciation differences not nonnali/ed on regulated activities 9,253 8.955 7.008 Allow ance for equay funds used during construction (5,072) 14.723) (8,023) Amortization of deferred insestment tax credits (8.444) (8.854) (9.344) Tax credits flowed through to income (9,736) (8n4) (1.335) Change in federal corporate income tax rate charged to expense 7.274 Resersal of delerred taxes on nonregulated activities (19,745) Amortitation of deferred tax rate dilferential on regulated artisities (5,789) (7,365) (5,024) Other (6,192) 18.878) (6.273) Tot:0 income taxes $138,072 $ 103.347 $ 65.802 litfective federal income tax rate 30.8 % 28.1% 20.6% ai pn embr, 31. 1993 1992 Deferred income Taxes (thalar ammmn m thousando Deterred tax liabilities Accelerated depreciation $ 789,165 $714,019 Allow ance for funds used durmg construction 202,490 199,577 income taxes recoverable through future rates 90,950 73,759 Deterred termination and postempiay ment costs 55.890 Deferred fuel costs 45.518 61,709 In eraged leases 32,613 33,867 Percentage repair allowance 35,431 33.367 Other 129,130 95,995 Total deferred tax liabilities 1,381,187 1.212,293 1 Deferred tax assets Alternative mimmum tax 72,187 72.189 Accrued pension and postemployment benefit costs 67,016

.595 1

Defened investment tax credits 55,099 56,337 Other I19,274 98.638 Total deferred tax assets 313.576 228.759 Deferred income taxes per Consolidated Halance Sheets $1,067.611 $983.534 w %.r.,iotu n,tawairom m ai u nemenn \\ Cco ram poor var amowrn ha,e Iwn inrxnl to rmfwm iv the < vn erer wuf s su mmatwn llahimorr Gar aml Llrciru t'omismy and kobsul.ancs

i NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1., SIG NIFIC A NT A C C O U N TI N G PO Lt CI ES Nature of the Iltniness The purchased gas adjustment is based on recent annual vol-Ibitimore Gas and Electric Company (ilGE) and Subsidiaries umes of gas and the related current prices charged by HGE's gas i (collectively, the Company) is primarily an electric and gas utility suppliers. Any deferred underrecos eries or overrecm eries of sening a terntory w hich encompasses Baltimore City and all or purchased gas costs for the twelve months ended November 30 i part of nine Central Maryland counties. The Company is also each year are charged or credited to customers mer the ensuing engaged in diveniFed bu inesses as described further m Note 3. calendar year. I'rinciples of Conwlidation income Taxes The consolidated financial statements include the accounts of The Company adopted Statement of Financial Accounting HGE and all subsidiaries in w hich 11GE ow ns directly or indi-Standards No.109," Accounting for income Taxes," effective rectly a majority of the soting stock. Intercompany balances and January I,1991. Statement No.109 requires the use of the lia-transactions have been elinunated in consolidation. Under this bility method of accounting for income taxes. Under the liability policy, the accounts of Constellation Iloidings. Inc. and its sub-method, the deferred tax liabihty represents the tax effect of tempo-sidiaries (collectively, the Constellahon Companies) and HNG, rary ditlerences between the financial statement and tax bases of inc. are consohdated in the financial statements. Safe Harbor assets and liabilities. It is measured using presently enacted tax Water Power Corporation is reported under the equity method. rates. The portion of DGE's deterred tax liability applicable to Corporate jomt ventures, pannerships, and affiliated companies in utility operations u hich has not been reflected in current service which a 204 to 504 voting interest is held are accounted for rates represents income taxes recoverable through future rates. It under the equity method, unless control is evident, in w hich case has been recorded as a regulatory asset on the balance sheet. the enoty is consolidated. Imesunents in pow er generation sys-Deferred income tax expense represents the net change in the tems and certain financial investments in w hich less than a 209 deferred tax liability and regulatory asset during the year, exclusive voting interest is held are accounted for under the cost method. of amounts c harged or credited to common shareholders' equity, unless significant influence is exercised os er the entity, in w hich The 1993 and 1992 current tax expense consists solely of reg-case the im estment is accounted for under the equity method. ular tat The 1991 current tax expense consists of a regular tax of $46.8 million and an attemative minimum tax ( AMT) of $14.2 Regulation of Utility Operations million. The AMT liabilities generated in 1991 and prior years BGE's utihty operatium are subject to regulation by the Public can be carried forward indefinitely as tax credits to future years in Sen ice Commission of Maryland (PSCi. The accounting policies w hich the regular tax liability exceeds the AMT liability. As of and practices used in the detennination of senice rates are also December 31,1993, this carryforw ard totaled $73.2 million. gencially used for financial reporting purposes in accordance with As a result of its effect on nonregulated activities, the cumula-generally accepted accounting principles for regulated industries. tive effect of the change in the method of accounting for income See Note 5. taxes resulted in an increase in 1991 net income of $19.7 million, or the per common share, because of the reversal of deferred Utility Revenues income taxes on nonregulated actisities accrued in prior years at BGE, recogm./es utihty resenues as senice is rendered g7 g 3g g g to customers. investment tax credit (lTC) associated with BGE's regu-Furt and Purchased Energy Costs lated utility o;vrations has been deferred and is amortized to Subject to the apprm al of the PSC, the cost of f uel used in gener_ income ratably over the lives of the subject property. ITC and ating electraity, net of revenues from interchange sales. and the other tax credits associated with nonregulated diversi6ed business cost of gas sold may be recovered through /cro-based electric f uel activities other than leveraged leases are Howed through to rate (see Note 13) and purchased gas adjustment clauses. The dif, income. As of December 31,1993, the Company had energy and ference between actual fuel costs and fuel resenues is deferred on other tax credit carry fonvards of $4.8 million w hich expire in the the balance sheet to be recosered from or ref unded to customers years 2005 through 2008. in future periods. BGE's utility resenue from system sales is subject to the The electric f uel rate formula is based upon the latest twenty. Mary land public service company franchise tax in lieu of a state income tat The franchise tax is included in taxes other than four-month generation mix, subject to a minimum level of nuclear generation, and the latest threeInonth aserage fuel cost for each income taxes in the Consolidated Statements of locome. generating umt. The fuel rate thies not change unless the calcu-lated rate is more than 59 above or below the rate then in effect. Intentory Falnation i Fuel stocks and materials and supplies are generally stated at average cost. i Italamme GaumHlatn< Comiwo and %%h.nM i

l Real Estate Projects the plants' output to the joint owners'senice territories. BGE's Real estate pn>jects consist of the Constellation Companies' ow nership interest in these plants is 20.99% and 10.569, tespec-investment in rental and operating properties and properties under tisely, and represents a net im estment of $12X million as of development. Rental and operating properties are held for invest-December 31,1993. Financing and accounting for these proper-ment. Properties under deselopment are heht for future develop. ties are the same as for wholly owned utility plant. ment and sale. Costs incurred in the acquisition and active Nuclear fuel expenditures are amorti/ed as a component of deselopment of such properties are capitalized. Rental and oper-actual fuel costs based on the energy produced over the hie of the ating propedies and properties under deselopment are stated at fuel. Fees for the future disposal of spent fuel are paid quarterly to cost unless the amount invested exceeds the amounts expected to the Department of Energy and are accrued based on the kilowatt-he recos cred through operations and sales. In these cases, the pro-hours of electricity generated. Nuclear fuel expenses are subject g jects are w ritten dow n to the amount estimated to be recoverable. to recm ery through the electric fuel rate. Nuclear deconunissioning costs are accrued by and recovered Inrestments through a sinking fund methodology. In its April 1993 rate order, Marketable equity securities are stated at the lower of cost or the PSC granted ilGE revenue to accumulate a decommissioning nLuket value, and other securities are stated at cost. Where appro-resene of 5336 million in 1992 dollars by the end of Calvert priate, cost reflects amortization of premium and discount com-Clif fs' service life in 2016, adjusted to reflect expected inflation, puted on a straight line basis. Gains and lowes on the sale of the to decommission the radioactis e portion of the plant. The total Constellation Companies' investment securities are included in deconunissionine resene of $93.4 million and $77.8 million at revenues f rom dis ersified activities on the income statement and December 31,1943 and 1992, respectively. is included in accu-are recogni/ed upon realization on a specific identification basis. mulated depreciation in the Consolidated Balance Sheets. In Gains and losses on the sale of BGE's nuclear deconunissioninF accordance with Nuclear Regulatery Commission (NRC) regula-trust !und securities are included in net other income and deduc-tions. BGE has established an external decommissioning trust to tions on the income statement and are recognized upon reali/ation w hich a portion of accrued decommis sioning costs base been on a speedic identification basis. conuihuted. Statement of Financial Accounting Standards No.115, which The NRC requires u.iaties to proside financial assurance that must be adopted in 1994, requires that investments in equity secu-they will accumulate suf ficient funds to pay for the cost of nuclear rities having readily detenninable f air values and debt securities decommissioning baseo upon either a generic NRC fonnula or a other than those w hich the Company has the positise intent and facility-specific decommissioning cost estimate, prosided that the abihty to hold to maturity be recorded at fair salue rather than at raciliiy. specific estimate is equal to or greater than that of the amorti/ed cost. Changes in the fair value of these securities will NRC fonnula. Subsequent to the PSC's April 1993 rate onier, the be recorded in shareholders' equity except for trading securities, NRC updated its generic fonnula to reflect substantially higher for w hich such changes will be reconled in income. Adoption of waste burial charges. The revised NRC fonnula generates a this statement is not expected to have a material impact on the decommissioning cost estimate of 5703 million in 1992 dollars. Company's financial statements. Additionally, the Company initiated a facility 4pecific study w hich, w hen completed, is expected to generate an estimate of the I tility I'lant, Ikprwiation and A mortimtion, cost to decommission the radioactise portion of the plant w hich is and Ikrommluiomng less than the NRC formula estimate. The Company is currently Utility plant is stated at original cost, w hich includes material' ~ o I the facility-specific study and plans to request the labor, and, w here appheable, construction os erhead costs and an NRC to pennit the use of the facilitt pecific decommissioning allowance for f unds used during construction. Additium to utdity 4 nw m a bs of fedq b m ud pidim A-plant and replacements of units of property are capitalized to ii li neiA m m a utihty plant accounts. Maintenance and repairs of property and replacements of items of property detennined to be less than a umt of property are charged to mamtenance expense. gy g. ds Und During Construction and Depreciation is generally computed using composite strais.t. C bdh mt line rates applied to the average im estment in classes of depre- 'Ibe allow ance for funds used during construction (AFC)is an ciable property. The cony,osite depreciation rates by class of accounting procedure which capitali/es the cost of funds used to depreciable property are 2.809 for the Cahert Cliffs Nuclear fi mi nmion @m a p oNi%- @nt on h Power Plant,2.75% for the Brandon Shores Power Plant. 3.2Mi balance sheet, cred..itmg the cost as a noncash item on the income for other elettric plant. 3.129 for pas plant, and 4,029 f.or statement.1.he cost of. borrowed and equuv i.unds is segregated conunon plant other than s chicles. Vehicles are deprec.iated betw een interest expense and other income. respectis ely. BGE. based on their estimated useful lives. recos ers the capitah/ed AFC and a return thereon after the related BGE owns an undn ided interest in the ls.eystone and utility plant is placed in sen ice and.meluded m. depreciable assets (,onemaugh electrie generating plants hicated in western and rate base. Pennsylvania, as well as in the transnussion line w hich transports Batumm Gm andIlainc com;sm> amlhhu.hwin

During the perax! January I.1991 through April 23,1993, the Lemg-Term Debt Company accrued Al C at a pre-ias rate of 9.9V4, compounded The discount or premium and expense of issuance associated with annually, I.lfectis e Apul 24,1993, a rate older of the PSC long-term debt are deferred and amorti/ed oser the original lives reduced the pie-tax AFC rate to 9.40'4, compounded annually. of the respecthe debt issues. Gains and losses on the reacquisition Fllecthe January 1,1992, the PSC authorized the accrual of of debt are amorti/ed mer the remaining original lives of the AFC on all electric, gas, and common utility comtruction ptojects issuances. with a construction period of more than one month. Prior to 1992, Al C was accrued on major electric projects only. Cmh Flows The Constellation Companies capitali/e interest on qualitying For the purpose of reporting cash flows, highly liquid investments real estate and pow er generation des clopment projects. IMiE capi-purchased with a maturity of three months or less are considered tali /es interest on certam deferred f uel costs as discussed in Note 5, to be cash equis alents. g I l l N OTE 2. SE'G M EN T IN FO R M ATIO N Fou / ndrJ Dn embri J /. 1993 1992 1991 (In thoroumb) l l'.let-f ric l l Resenues $2,115,155 51,967,923 51,994,525 i Income from operanons 538,340 441,784 444,530 l locome from operations net of int ome tases 402,893 350,429 352,385 !)cpret sation 203,476 191,970 173,349 Comtrucnon espendiluies nucluihng Alf) 419,519 346,728 406,008 j Identifiable assets ai December 31 6,025,798 5,508J)08 5.374,940 ] Gas Revenues $ 435,849 5 402,937 $ 358,195 Int ome f rom operations 39,426 45,552 35,607 locome from operations net of income tases 33,188 37,514 30,945 I)cpreciation 22.995 21,364 18.896 Comtruction espenditures tincluding Al'C) 5M 359 42,688 50.236 ldentdiable awets al l)etember 31 694,977 579.386 555,609 Disersified llusinesses Resenues $ 117,710 $ 120,483 5 96,133 Income hom operations 43,234 48.009 9,051 l Income hom operatium net of income taxes 46,847 44,055 20.313 Ikpreuanon 10,303 10,149 9,019 ('umulatise cliect of (hange in the method of accountmp for income tases 19,745 identdiable assets at Detember 31 1.096,220 1.023,315 1,001,313 Iotal Res enues $2,66M,714 52,491,343 52,448,853 income hom operatiom 621,000 535,345 4k9,188 Income hom operanons net of mcome taxes 4M2,928 431.998 403MI I)cprecianon 236,774 223,483 201.264 Cumulatise ef fect of change in the method of accounting for income lases 19,745 Comtruenon espenditures uncluding AFC) 477,N78 389,416 456.244 l Idennliable awets at December 31 7,N16.995 7,110,709 6,931,862 l Other awets at ikcember 31 170,044 263/48 206.127 Total assets at Decender 31 7,987.039 7,374,357 7,137,989 Ita!nmorc Gn and Ilo v u umpwn smJ %bu.hann

NOTE 3. SUBSIDI ARY INFORM ATION Diversified businesses consist of the operations of Constellation liGE's investment in Safe liarbor Water Power Corporation, a lloidings, Inc and as subsidiaries and BNG,Inc. pnxlucer of hydroelectric power, represents two-thirds of Safe Constellation iloidings. Inc., a w holly owned subsidiary, hohls liarbor's total capital stock, including one-half of the voting all of the stoc L of three other subsidiaries, Constellation Real stock, and a two-thirds interest in its retained earnings. Estate Group. Inc., Constellation Energy, Inc., and Constellation The following is condensed financial information for Investments. Inc. These companies are engaged in real estate Constellation iloidings. Inc. and its subsidiaries. Similar informa. development and ow nership of senior living facihties; develop-tion is not presented for Safe liarbor Water Power Corporation ment, ow nership, and operation of power generation systems; and and ling, Inc. as the financial position and results of operations O financi i investments, respectively. of these entities are immaterial. The condensed financial informa-HNG. Inc. is a wholly ow ned subsidiary w hich invests in nat-tion for the Constellation Companies does not reflect the elimina-ural gas resers es. tion of intercompany balances or transactions w hich are eliminated in the Company's consolidated financial statements. I993 l992 1991 tin thoummJs. e tccpt per 5 hare anwws1 income Statements Resenues Real estate projects $ 77,598 $ 76,582 5 75.205 l Power generation systems 24,97I 28,084 17,732 Financial im estments 21,195 21.485 8.059 Total revenues 123,764 126,151 100,996 Expenses other than interest and income taxes 80.427 77.872 91.848 income from operations 43,337 48.279 9,148 Minonty interest (280) 718 3.550 Interest expense (33,143) (30.103) (32,938) Income tas benefit (expense) 1,984 (3,637) 9,005 Cumulative cHect of change in the method of accounting for income lases 19.745 Net income $ 11.898 $ 15.257 5 8.510 Contnbution to the Company 's camings per share of common stock 5 08 .11 .07 llalance Sheets Current assets $ 54,039 $ 29.899 $ 20,463 Noncurrent assets 1,036,507 990.273 976.179 Total assets $1,090,546 $1.020.172 $ M 642 Current liabihties 5 24,201 $ 113.4n4 $285,130 Noncurrent liabilities 759,048 611.370 431,370 Shareholder's equity 307,297 295.398 280.142 Total habilities and shareholder's equity $1,090,546 $ l.020.172 $996.642 Bakmote Gas and Licctric Company and Subulann

NOTE 4. RE AL EST ATE PROJECTS AND FIN ANCI AL INVESTMENTS Real estate projects consist of the following investments held by In 1991, a subsidiary of Constellauon Holdings, Inc. recog-the Constellation Companies: nited a loss of $10.5 million to w rite-dow n the carrying value of Ails. umber 31. 1993 1992 financial investments to reflect previously unrealized losses on Un thouwmdu certain marketable equity securities. The securities written dow n Properties under development 5249,473 5231,M56 were subsequently sold. A subsidiary of Constellation lloidings, Rental and operahng properties Inc. also recognized a loss of $3.1 million on two financial lim-(net of actumulated ited partnerships that were adjusted to refleet market value when depreciation) 237,194 227,412 the partnerships wcre reclassified as short term investments. l Other real estate sentures _ 730 2.774 As of December 31,1993, gross unrealized pains tmd losses g Total 54M7.397 5462N2 applicable to marketable equity securities totaled 51.8 and 50.5 In 1991. a subsidiary of Constellation Iloldings, Inc. recog-million, respectively. Net reali/ed pains (losses) from financial ni/cd a loss of $10 million to write down the carrying value of investments included in net income totaled $6.5 million in 1993, certain operating pmperties and properties under deselopment to 59.8 million in 1992, and $(11.6) million in 1991. reflect the depressed real estate and economic markets. Financial ins estments consist of the following investment, held by the Constellation Companies: ) At fin a mher 31. 1993 1992 Un ihmoando i l Insurance companies $ N3,275 $ 03,N8 f 1 inancial limited p.utnerships 44,903 41,076 1.es eraged leases 33,669 39,441 Marketable equity secunties 42Mi 25,304 Other securnies 3,7S7 8.142 Total $213,315 5207.011 NOTE 5. REGUL ATORY ASSETS Certain utihty expenses and credits normally reflected in income income taxes recoverable through future rates represent princi-are deferred on the balance sheet as regulatory assets and liabili-pally the tax etfect of depreciation differences not normalized and ties and are recogni/ed in income as the related amounts are the allowance for equity funds used during construction, of fset by ] included in sers ice rates and recovered from or refunded to cus-unamorti/cd deferred tax rate differentials and deferred taxes on j tomers in utility resenues. The following table sets forth IlGE's deferred ITC. These amounts are amorti/ed as the related tempo-regulatory assets. rary differences reverse. See Note 1 for a further discussion of income taxes. All)n ember 'I. 1993 1992 Deferred fuel costs represent the difference between actual on ihmoandu fuel costs and the fuel rate revenues under flGE's fuel clauses income tases recos erable (see Note 1). Defened fuel costs are amortized as they are col-l through future rates $259,856 5216,939 lected from customers. I Ikterred fuel costs 130,052 181,497 The underrecovered costs deferred under the fuel clauses were I Delened termiaation gj benefit wsts 96,793 Deferred nuclear espendnures 86,726 76.549 A ' I'" ""h" A 1993 1992 da'hmou"dd Deferred postemployment benefit costs 62,892 Electric Defened cost of Costs deferred $155,901 $210,483 deconunissioning federal Reserve for possible 1 uranium ennchment facilities 49,562 55J100 disallowanw of mplacement Deferred energy conservahon energy costs (see Note 13) (35.000) (35JMx0 espendnures 38,655 20.519 Net electne 120,901 175,483 Defened em ironmental costs 32,966 Gas 9.151 6.014 Other 10,623 18.059 Total 5130.052 51 x 1.497 Total $76N.125 $56R563 I Haltimarc Gas and I!n enc ("mparn and Subudwrin l l I

.~ Deferred termination benefit costs represent the net unamortized such contributions, w hich are generally payable over a fifteen-year ~ balance of the cost of certain tennination benefits (see period w ith escalation for inflation and are based upon the amount Note 7) applicable to BGEN regulated operations. These costs are of uranium enriched by IX)E for each utility. These costs are being amorti/cd over a five-> ear period in accordance with rate being amortized oser the contribution period as a cost of fuel. actions of the PSC. Deferred energy conservation expenditures represent the net Deferred nuclear expenditures represent the net unarnortized unamortized balance of certain operations costs which are being balance of certain operations and mainten.nce costs w hic h are amortized over five years in accordance with orders of the PSC. being amortized over the remaining life of the Cahert Clifh These expenditures consist of labor, materials, and indirect costs Nuclear Power Plant in accordance with orders of the PSC. These associated with the conservation programs approved by the PSC. expenditures consist of costs incurred from 1979 through 1982 for Deferred environmental costs represent the estimated costs of g inspecting and repairing seismic pipe supports, expenditures investigating contamination and performing certain remediation incurred from 1989 through 1993 associated with nonrecuning activities at contaminated Company-ow ned sites (see Note 13). phases of certain nu. lear operations projects and expenditures These costs are generally amortized over the estimated tenn of incurred during 1990 for investigating leaks in the pressurizer the remediation process. heater sleeves. Electric deferred fuel costs in excess of $72.8 million are Deferred postemployment benefit costs represent the excess of excluded from rate base by the PSC for ratemaking purposes. such costs recogni/ed in acconlance with Statements of Financial Effective April 24,1993. BGE has been authorized by the PSC Accounting Standards No.106 and No. I 12 over the amounts to accrue carrying charges on electrie deferred fuel costs excluded reflected in unhty rates. lhese costs will be amortized over a from rate base. These carrying charges are accrued prospectively 15-year period beginning no later than 1998 (see Note 6). at the 9.40% authorized rate of return. The income effect of the Deferred cosi of decommissioning federal uranium enrichment equity funds portion of the carrying charges is being deferred facilities represents the unamortved portion of HGE's required until such amounts are recovered in utility service rates subse-contributions to a fund for decommissioning and decontaminating quent to the completion of the fuel rate proceeding examining the Department of Energy's (DOE) uranium enrichment facilities. the 1989-1991 outages at Cahert Cliffs Nuclear Power Plant as The Energy Policy Act of 1992 requires domestic utilities to make discussed in Note 13. NOTE 6. PENSION AND POSTEM PLOY M ENT BENEFITS l'cnsion lienefits credit cost method. Pension Plan assets at December 31,1993 The Company sponsors several noncontributory defined benefit consisted primarily of marketable fixed income and equity pension plans, the largest of which uhe Pension Plan) covers securities, group annuity contracts, and short-tenn investments. substantially all HGE employ ees and certain employees of the The following tables set forth the combined funded status of Constellation Companies. The other plans, w hit h are not the plans and the composition of total net pension cost. Due to material in amount, proside supplemental benefits to certain dechning interest rates, the Company reduced the discount rate non-employee directors and key employees. Benefits under used to measure its liability for pension, postretirement, and the plans are generally based on age, years of service, and postemployment benefits to 7.5% as of December 31,1993. This compensation levek decrease in the discount rate, coupled with the increased pension Prior sen ice cost associated with retroactis e plan amendments liability resulting from the 1993 Voluntary Special Early is amortired on a straightline basis over the average remaining Retirement Program, produced an accumulated pension obliga. service period of active employees. tion greater than the fair value of the Pension Plan's assets. As a The Company's funding policy is to contribute annually the resuh, the Company recorded a pension liabdity adjustment, a cost of the Pension Plan as determined under the projected unit portion of w hich was charged to shareholders' equity. Batumore Gm and I:larne Compmy and %bnharies l I L.

A! />n emhcr 3/, 1993 1992 tin thousand.d Vested benefit obligation $677,069 $485,098 Nontested benefit obliption 11,359 9,814 Accumulated benefit obhgation 688,428 494,912 Projected benefits related to inc rease in f uture compensanon levels 109,161 86.x82 Projected lenefit obhgation 797,589 581,794 Plan assets at fair value (605.629) (542,100) Projected benefit obliga: ion less plan assets 191,960 39,604 Unrec ogni/ed prior sers ice cost (21,252) (17,671) Unrecognized net loss t 148,450) (28,017) Pension hability adjustment 58,553 Unamortized net asset from adoption of FASB Statement No. 87 1,812 2,039 Accrued pension liability (avet) $ 82,623 $ (4.N5) t^rar inded (in ember Al. 1493 1992 I99I thttIwusandsl Components of net pension cost Service cost-benefits earned during the period $11,645 $ I 1,77 i $ I 1,729 Interest cost on projected twnefit obligation 51,183 47,355 43,143 Actual return on plan assets (56,225) (33,685) (56,737) Net amortiration and defenal 6,591 f 12,257) 12.810 Total net pension cost 13,194 13,184 10,945 Amount capitah/cd as construction cost <1,800) ( t,S34) (1.500) Amount (harged io expense $11.394 511.345 5 4.445 Net pension cost shown above does not include the cost of Effective January 1.1993, the Company adopted Statement of termination benefits described in Note 7. Financial Accounting Standards No.106, which requires a change The Company also sponsors a defined contribution savings in the method of accounting for postretirement benefits other than plan covering all eligible llGE employees and certain employees pensions from the pay-as-you-go method used prior to 1993 to the of the Constellation Companies. Under this plan, the Company accrual method. The transition obligation existing at the begin-makes coninbutions on behalf of participants. Company contribu. ning of 1993 is being amortized over a twenty-year period. tions to this plan totaled $9 million,514.8 million, and $10.6 In April 1993, the PSC issued a rate order authorizing BGE to million in 1993,1992, and 1991, respectively, recognite in operating expense one-half of the annual increase in PRB costs applicable to regulated operations as a result of the Ntretirement #cnefits adoption of Statement No.106 and to defer the remainder of the The Company sponsors defined benefit postretirement health annual increase in these costs for inclusion in BGE's next base care and life insurance plans w hith cover substantially all rate proceeding. In accordance with the PSC's Order, the BUE employees and certain employees of the Constellation increase in annual PRB costs applicable to regulated operations Companiet Benefits under the plans are generally based on age, for the period January through April 1993, net of amounts years of service, and pension benefit levels. The postretirement capitali/ed as construction cost, has been deferred. This amount, benefit (PRil) plans are unfunded. Substantially all of the health which totaled $5.7 million, as well as all amounts to be deferred care plans are contributory, and participant contributions for prior to completion of BGE's' nest base rate proceeding, will be employees w ho retire aher hne 30,1992 are based on age and amortized over a 15-year period beginning no later than 1998 in years of service. Retiree contributions increase commensurate accordance with the PSC's Order. This phase-in approach meets with the expected increase in medical costs. The postretirement the guidelines established by the Emerging issues Task Force of life insurance plan is noncontributory, the Financial Accounting Standards Board for deferring post-l i llaltmun e Gas and i:!n tric Comjwry and Subsidiaries

retirement benefit costs as a regulamry asset. Accrual-basis lhe following table sets forth the components of the accumu-PRH costs applicable to nonregulated operations are charged lated postretirement benefit obligation and a reconciliation of to expense. these amounts to the accmed postretirement benefit liability. At I)n ember 3), I993 1992 1,ife 1 ife Ilealth Care Insurance IIcalth Care insurance tin thousands) Accumulated postretirement benefit obligation: Retirees $182,638 $45,461 $ 116,935 $34,600 1 ully eligible active employ ees 19,177 839 18.082 143 O otner active empio>ees 58.x32 15.377 54.208 i6.458 Total accumulated postretirement benefit obligation 260,647 61,677 189,225 51,201 Unrecogni/ed transition obligation (179,764 p (48,641) (189,225) (51,201) Unrecognized net loss (36,675) (9.072) Accrued postretirement benefit liabihty $ 44.208 $ 3.964 5 - % ~ l The follow mg table sets forth the composition of net which requires a change in the method of accounting for these I postretirement benefit cost. benefits from the pay-as-you-go method to an accrual method, as of December 31,1993. The liability for these benefits totaled rcar ended />enww 31. 1993 $52.1 million as of December 31,1993, and the portion of this (In thousandu liability attributable to regulated activities was deferred. The Components of nel postretirement benefit cost: amounts deferred will be amortized over a 15-year period begin-Ser ice cost--benefits earned during the period $ 4,373 ning no later than 1998. The adoption of Statement No. I12 did Imerest cost on accumulated postretirement not have a material impact on net income. The increase in the benefit obligation 20,451 annual cost of these benefits subsequent to the adoption of accrual Amortization of transition obligation 12,021 accounting is not expected to have a material impact on the Total net postretirement benefn cost 36,845 Company's financial statements. l Amount capitalized as construction cost (5,898) Amount deferred (l1,965) A mmptions Amount charged to expense $1N.982 The pension and postemployment benefit liabilities were deter-mined using the following assumptions. Net postretirement benefit costs shown above do not include Ar Derrmher 31. 1993 [992 the cost of tennination benefits described in Note 7. Assumptions: Postretirement benefit costs recognized under the pay-as-you-Discount rate 7.5% 8.75 % po method were as follows: Average increase in I rear rnded Det ember 31. I992 199I future compensation leveis 4.5% 4.5% fin thomando Expected long-term rate of Total postretirement benefit cost $11.676 59,741 return on assets 9.5% 9.54 Amount capitali/cd as construction cost ( I,91 D (l.573) Amount charged to expense 5 9.765 58.16g The heahh care inflation rates for 1993 are assumed to be 9.5% for Medicare-eligible retirees and 12% for retirees not covered by Medicare. Both rates are assumed to decrease by 0.5% Other Pmtemployment Ernefits annually to an ultimate rate of 5.5'7c in the years 2001 and 2006, The Company provides certain pay continuation payments and respectively. A one percentage point increase in the health care inflation rate from the assumed rates would increase the accumu-heahh and life insurance benefits to employees of BGE and cer. tain of the Constellation Companies who are determined to be lated postretirement benefit obligation by approximately $37.8 disabled under HGE's long-Term Disability Plan. The Company million as of December 31,1993 and would increase the aggre-l adopted Statement of Financial Accounting Standards No. I12, gate of the service cost and interest cost components of pmt-retirement benefit cost by approximately $3.8 million annually. 1 Bahrmor e Gas and IlertrW Cormany and SubsrJaaries 1

NOTE 7. TERMIN ATION BENEFITS The Company of fered a Voluntary Special Early Renrement The Company of fered a second Voluntary Special Early Program tthe 1992 VSERP)Io eligible emplo)ces u ho retired Retirement Program (the 1993 VSERP) to eligible emplo)ees during the period February 1.1992 through Apnl I,1992. In w ho retired as of February 1,1994. The one-time cost of the 1993 accordance with Statement of Financial Accounting Standards VSERP consisted of enhanced pension and postretirement bene-No. 88. "Employeri Accounting for Settlements and lits. In addition to the 1993 VSERP, further employee reductions Curtaihnents of Defined Benefit Pension Plans and for have been accomplished through the elimination of certain posi-Tennination Denefits," the cost of termination benefits associated tiom, and s arious programs have been of fered to employees with the 1992 VSI RP. which consisted principally of an impacted by the climinations. In accordance with Statement No. enhanced pension benefit, was recognized in 1992 and reduced

88. the cost of termination benefits associated w ith the 1993 g

net intome by $6 6 million, or 5e per common share. In April VSERP and various programs, w hich totaled $105.5 million, was 1993, the PSC authori/ed HGE to amortire this charge m er a recognized in 1993. The 588,3 million portion of 1993 VSERP lise-year period for ratemaking purposes. Accordmply BGE attributable to rcgulated actisities w as deferred and will be amor-established a regulatory asset and recorded a corresponding credit tired mer a fn e-year penod for ratemaking purposes, beginning to operating expense for this amount. The reversal of the 1992 in February 1994, consistent with previous rate actions of the VSERP in April 1993 increased net income by 56.6 milhon, or PSC. The $17.2 million remaining portion of the cost of Se per conunon share. tennination benefits was charged to expense in 1993. NOTE 8. SHORT TERM BORROWINGS infonnation concerning commercial paper notes and lines of compensating balances w hich have no wichdrawal resitislions. credit is set forth below, in support of the lines of credit, the Borrow ings under the lines are at the banks' prime rates. base Company pay s commitment fees and. in some cases, maintains interest rates, or at various money market rates. I993 l992 199l IlhRar amounn sn thousando HGE's Commercial Paper Notes llorrowings outstanthng at December 31 5 5 II,900 5159,500 Weighted aserage interest rate of notes outstanding at December 31 3.62G 4.75 4 l'nused knes of credit supporting commertial paper notes at December 31 f a) $208,fH)0 5203JNX) $303JXX) Madmum borrowings during the year 96,900 ^ 393,650 336,2(xi Ascrage daily borrowings dunny the year (b) 10,322 98.892 210.883 Weighted aserage interest rate for the Scar (c) 3.2M4 4.79%. 6.08% Comfellation Companies' l.ines of Credit Borrowings outstanthng at December 31 5 5 5 52,670 Weighted as crape interest rate of borrowings outstanding at December 31 - 9 - U 5.94 9 L nused lines of credit at l>ecember 31 5 20.000 5 5 83xx) Sladmum twrow mps during the year 60.670 75.00() Average daily borrowings during the year (b) 31,773 61,860 Weighted average interest rate for the ) car (c) 6.019 7.19G 60 llGE decreased us knes of credit supporting commercial paper notes to $143 milhon etfectn e January 1,1994. (b) The sum of dollar days of outstarnhng borrowings divided by the number of dan in the period. (c) Total mterest accrued dunny the period dnided by aserage daily borrowings. Painmme Gas and Un n Gampay and Submbarws

NOT E 9. LONG TERM DEST First Refunding.11ortgage llands ofitGE Long-Term Debt of Constellation Companies Substantially all of the poncipal properties and franchises ow ned The mortgage and construction loans and other collateralized notes by BGE, as well as the capital stot k of Constellation iloidings, have varying terms. Of the $151.2 million of variable rate notes, Inc., Safe 1 f arbor Water Pow er Corporation, and IING, Inc., are 551.1 rillion requires periodie interest only payments with var-subject to the lien of the mortgage under which IIGE's out-ious maturities from September 1995 through March 1996, and standmg First Refunding Mmtgage Bonds have been issued. Sl(X11 million requires periodic payment of principal and interest On August i of each year, BGE is required to pay to the mmt-with various maturities from January 1995 through January 2fXR page trustee an annual sinking tund payment equal to 14 of the The 56.5 million,7.739 mortgage note requires quarterly g largest principal amount of Mortgage Ilonds outstanding under principal and interest pay ments through March 15,2(K)9. the mortgage during the preceding twel e months Such funds are The unsecured rmies outstanding as of December 31,1993 to be used, as prosided in the mortgage, for the purchase and mature in accordance with the following schedule: reprement by the trustee of Mortgage llonds of any series other <fy rhy,oand.o than the Instalknent Series of 2002 and 2009. the 9%9 Series of N.35% due August 28,1995 $ 20JWX) 1995, the M.40G Series of 1909, the SM4 Series of 2(XH), the 8.71% due August 28.1996 23,(x() 8%% Series of 2(01, the 7%M Series of 2002, the 6Z9 Senes of 6.19% due September 9,1996 10JH) 2003, the 6%4 Series of 2003, the 5%4 Series of 3K4, the 8 439, due Aueust 28.1997 52J(X) 6.809 Series of 2004, the 7W4 Series of 2007, and the 6M 6.659, due September 9,1997 15J N O Series of 201IS. x.23% due October 15,1997 30J100 7 059, due April 22,1998 25JX0 Other Ismg Term Debt ofitGE 7.06% due September 9,1998 20JK 0 BGE maintams revoh mg credil agreements that expire at various 8 A8% due October 15,1998 75JNO times during 1995 and 1996. l*nder the tenns of the agicements, 7.304. due Aprd 22,1999 90JR) BGli may, at iS option, obtain loan, at various interest rates. A 8.734. due October 15,1999 15.000 comnutment fee is paid on the daily average of the unborrowed 1559, due April 22,2000 35JKX) portion or the commitment. At December 31,1993, BGE had no 7A3% due September 9,20m 30J4X) borrowings under these rewiving credit agreements and had gggg m ailable 5165 million of unused capacity under these agree-ments. Effecine Januan 1,1994. BGE decreased its revohing iglued herage interest Ratesfor Variable Rate Debt credit agreements to $l25 milhon. ne we@ted average interest rates for s riable rate debt during The Medium-tenn Notes Series A mature at various dates from 1993 and 1992 were as follows: February 1994 through February 1996. The weighted average 1993 1992 interest rate for notes outstanding at December 31,1993 is 7.93% The Medium-term Notes Series B mature at s arious dates BGE i from July 199S through September 2006. The weighted aserage Loans under revohing credit agreements 4,237c interest rate for notes outstanding at December 31,1993 is RA3% Floating rate notes Series 11 7.90 The Medium-term Noles Series C mature at various dates Pollution control loan 2,39 2,90 hum June 1996 through June 2003. The weighted as erage interest Port facilities loan 2.53 3J4 rate for notes outstanding at December 31,1993 is 7,16% Adjustable rate pollution control loan 3.00 4.13 The principal amounts of installment Series Mortgage Bonds Economic development loan 2.49 3.11 pay able each year are as follow s: Constellation Companies Bonds Duc Bonds Due Mortgage and construction loans Year 3 02 2009 and other collateralized notes 6.26 6.74 i/n ihmoamio Loans under credit agreements 5.94 6.15 1994 5 430 1995 through 1997 605 1998 anil 1999 600 3(O and 3Xl! 865 2002 6.725 20n$ through 200X 5 3,250 3109 42JM0 Italomm nias and I keine Cwyum ami %doancs

Aggregate Maturities Constellation The combined aggregate maturities and sinking fund require-rear flGE Companies ments for all of the CompanyN long-tenn borrowings hir each of </n rimusands) the nest five years are as follow s: 1994 5 32,728 $ 8.788 1995 218.429 81,260 1996 72.330 77.213 1997 80,754 112.359 199S 84,112 128,355 NOTE 10. REDEEM ABLE PREFERENCE STOCK The 6.95%,1987 Series and the 7.804.1989 Series are subject to The combined aggregate redemption requirements for all mandatory redemption in their entirety at par on October I,1995 series of redeemable preference stock for each of the next Ove and July 1,1997, respectively. years are as follows: i The following series are subject to an annual mandatory rear redemption of the number of shares show n below at par begin-un t/mu.wiridu l ning in the year show n below. At BGE's option, an additional gy 3 33g, l number of shares, not to exceed the same number as are manda-1995 63.(x10 tory, may be redeemed at par in any y ear, commencing in the 1996 26.0(X) same year in w hich the mandatory redemption begms. the .,997 g3,g ) 8.25%,1959 Series, the 8.625%,1990 Series, and the 7.859. ,993 '33,g g 1991 Series listed below are not redeemable except through oper-ation of a sinking fund. We pd m met of dividd ome mih in & lleginnin"o event of liquidation. preferred stock ranks prior to preference and Series Shares Year common stock; all issues of preference stock, w hether subject to 7.50%.1986 Series 15JN10 1992 mandatory redemption or not, rank equally; and all preference 6.759,1987 Series 153100 1993 stock tanks prior to common stock. 8.259,1989 Series 1003K0 1995 8.6259.1990 Series 130Jni 1946 7.854.1991 Series 70Jn) 1997 i i I Haltmmre Gas and Lin tnc r'ompany and Sutwharles

NOTE 11. LE ASES The Company, as lessee. contracts for certain facihties and equip-Cenain of the Constellation Companies, as lessor, has e ment under lease agreements with various expiration dates and entered into operating leases for office and retail space. These renewal options. Consistent with the regulatory treatment,IKiE leases expire over periods ranging from i to 23 years, with lease pay ments are tharged to expense. I. ease expense, w hich is options to renew.The net book value of property under operating comprised primanly of operating leases, totaled $13.8 million, leases was 5187 million at December 31,1993.The future mini-514 million. and 512.6 milhon for the years ended 1993,1992, mum rentals to be received under operating leases in effect at and 1991, respectis ely, December 31,1993 are as fol low s: The f uture minimum lease pay ments at Decemtwr 31.1993 for rear O '""8 'cr* """'""ce '"h'c "Pc'"'i"8 'c"'c' "re "' f"""" ': an tho,,-ndo 1994 5 16.685 Year (Inihonaando 1995 15.222 1994 S 4.439 I996 13.826 1995 4.185 1997 12,398 1996 3.627 1998 10.744 1997 2.755 Thereafter 62.888 1998 1.751 Total minimum rentals $131.763 Thereafter 2.770 Total minimum lease payments $ 19.527 NOTE 12. T AXES OTHER TH AN INCOME T AXES Taxes other than income taxes were as follow s: l' ear IhieJ l)c, ember 3I. 1493 l992 199I Illollar amou,nts in thousando $107,958 S RN),419 5 89.379 Real and personal property 48,693 45.654 46.041 public sersice company franchise 35,724 34,911 33,121 Social security 9,836 9.355 9,026 Other Total taxes other than income taxes 202,211 190,339 17'7,567 Amounts included atme charged to accounts other than taxes 17,379) (7.335) 16.786) Tases other than income taxes per Consolidated Statements of income 5194,832 5183.004 5170.781 NOTE 13. COMMITMENTS, GU AR ANTEES, AND CONTINGENCIES Commitments lear (In tho,ound.o IKiE has made snbstantial commitments in connection with its construction program for 1994 and subsequent years. In addition, 1994 5 63,675 llGE has entered into Iw o long. term contracts for the purchase of 1995 71,884 electric generating capacity and energy. The contracts expire in 1996 71,05l 2001 and 2013. Total pay ments under these contracts w ere 1997 67.496 $68.7 milhon,5tA6 nullion, and 530 million during 1993.1992, 1998 67,556 and 1991, respectisely. At December 31,1993, the estimated Thereaher 415.736 future payments for capacity and energy that IlGE is obligated to Total pay ments $757.398 buy under these contracts are as follow s: Ita:nmore Ga s and I la trw Comp.my anDuhudraru, l

Certain of the Convellation Companies hase committed to considered a potentially responsible party with respect to the coninbute additional capital and to make add tional loans to cer-cleanup of certain environmentally contaminated sites owned and tain affiliates, joint ventures, and partnerships in which they has e operated by third parties. Ahhough the cleanup costs for certain an interest. As of De(ember 31,1993, the total amount of imest-environmentally contaminated sites could be significant, BGE ment reymrements conunitted to by the Constellation Companies belieses that the resolution of these matters will not have a is $44 milhon. material effect on its financial position or resuhs of operations. Aho, BGE is coordinating investigation of several former Guaranters pas manufacturing plant sites, including exploration of corrective liGE has agreed to guarantec Iwo-thirds of certain indebtedness action options to remove coal tar. However, no formal legal pro-incurred by Safe liarbor Water Powet Corporation. The amount ceedings have been instituted. In 1993 BGE accrued a liability of of such indebtedness totals 540 million, of w hich 526.7 million approximately 525.4 million for estimated future environmental g represents BGE's share of the guarantee. BGE believes that the costs at these sites. Based on presious actions of the PSC, BGE risk of material loss on the loans guaranteed is minimal. has deferred these estimated future costs, as well as actual costs As of December 31,1993, the total outstandmg loans and which have been incurred to date, as a regulatory asset (see Note letters of credit of tertain power generation and real estate pro-5). The technology for cleaning up such sites is still developing, jects guaranteed by the Constellation Compames were $50 mil-and puential remedies for these sites have not been identified. lion. Aho. the Constellanon Companies have agreed to guarantee Cleanup costs in excess of the amounts recogni/ed w hich could certain other borrow 1ngs of s arious pow er generation and real be significant in total, cannot presently be estimated, estate projects. The Company belies es that the risk of material loss on the loans guaranteed and perfonnance Nuc/ car Insurance guarantees is minimal. An accident or an extended outage at either unit of the Cah crt Cliffs Nuclear Power Plant could have a substantial adverse effect Enrironmental 3fatters on BGE 'Ihe primary contingencies resulting from an incident at The Clean Air Act of 1990 (the Acn contains prosisions designed the Cahert Chfis plant would invohe the physical damage to the to reduce sultur dioxide and nitrogen oxide emissions from elec-plant, the recoverability of replacement power costs and BGE's tric gencratmg stations in two separate phases. Under Phase 1 of liability to third parties for property damage and Julily injury. the Act, w hkh must be implemented by 1995 BGE expects to Although BGE maintains the various insurance policies currently incur expenditures of approximately 555 million, most of w hich available to prm ide coverage for portions of these contingencies. is attributable to its portion of the cost of installing a flue gas BGE does not consider the available insurance to be adequate to desulfuri/ation system at the Conemaugh generating station, in cover the costs that could result from a major accident or an w hich BGE ou ns a 10.5y1 imerest. BGE is currently examining extended outage at either of the Calvert Cliffs units. w hat actions w di be required in order to comply with Phase 11 of in addition, in the event of an incident at any commercial the Act, wluch must be implemented by 2(Mn llowever, BGE nuclear power plant in the country, IlGE could be assessed for a anticipates that compliance will be attained by some combination portion of any third party claims associated with the incident. of fuel switching, flue pas desulfuri/ation, unit retirements.or Under the provisions of the Price Anderson Act, the limit for third allowance trading. party claims from a nuclear incident is 59.4 billion. If third party At this tune, plans for complying with miroyen oxide (NO ) claims relating to such an incident exceed 5200 million uhe 3 control requiremems under the Act are less certain because all amount of primary insurance), BGE's share of the total liability implementation regulitions have not yet been finalized by the for third party claims could be up to $159 million per incident, govemment. h is expected that by the year 2000 these regulations that w ould be payable at a rate of $20 million per year. will require adthnonal NO controls for ozone attamment at BGE and other operators of commercial nuclear power plants 3 BGE's generating plants and at other BGE facilities. The controls in the United States are required to purchase insurance to cos er w di result in additional expenthtures that are difficult to predict claims of certain nuclear uorkers. Other non-gmemmental com-prior to the issuance of such regulations. Based on existing and mercial nuclear facilities may aho purchase such insurance. proposed o/one nonattainment regulations, IRiE currently esti-Cmerage of up to 5400 million is provided for claims against mates that the NO controls at BGE's generating plants will cost BGE or others insured by these policies for radiation injmies. If x approsimately 570 million. BGE is currently unable to prechet certain claims were made under these policies, BGE and all poli-the cost of compliance with the additional requirements at other cyholdets could be assessed, with BGE's share being up to $6.2 BGE facihties, million in any one year. BGE has been notified by the I:mironmental Protection For physical damage to Calvert Clif f s, BGE has 52.7 billion Agency (El A) and ses eral state agencies that it is being of property insurance, including 51.4 billion from an industry llalomnic Gas an 1Ikruh Gmp.nn and %hsi.hann

mutualinsurance company. If accidents at any insured plants in October 19XX, liGE filed its first f uel rate application for a cause a shortfall of funds at the industry mutual, liGE and all change in its electric fuel rate under the GUPP program. The policyholders could be assessed. with HGE's share being up to resuhant case before the PSC covers llGE's operating perfor- $ 14.6 million. mance in calendar year 1987, and ilGE's filing demonstrated that if an outage at Calvert Cliffs is caused by an insured phy sica! it met the system-wide and indisidual nuclear plant performance damage loss and lasts more than 21 weeks llGE has up to $426 targets for 1987. In November 1989, testimony was filed on million per unit of insurance, provided by a dif ferent industry behalf of Maryland People's Counsel alleging that seven outages mutual insurance company for replacement power costs. This at the Calvert Chifs plant in 1987 were due to management amount can be reduced by up to SM5 milhon per unit if an outage imprudence and that the replacement energy costs associated with to both units at Calvert Clitts is caused by a singular insured those outages should be disallowed by the Commission. Total g phy sical damage loss. If an outage at any insured plant causes a replacement energy costs associated with the 1987 outages were short.faH of f unds at the industry rnutual. INiE and all pokey-approximately $33 million. holders could be assessed, with IlGE's share bemg up to in May 1989, ilGE filed its fuel rate case in w hith 1988 perfor-59.4 million. mance was to be examined. liGE met the system-wide and nuclear plant performance targets in 1988. People's Counsel alleges that Rrrornability of f lectric l'url Cmts IKiE imprudently managed ses eral outages at Calvert Clitfs. and fly statute, actual electric fuel cmts are recmcrable so long as the liGE estimates that the total replacement energy costs associated PSC finds that ilGE demonstrates that, among other things. n has w nh these 1988 outages were approximately $2 million. maintained the pnnluctise capacny of its pencrating plants at a re+ On Nos ember 14.1991, a llearing Examiner at the PSC issued sonable level. The PSC and Maryland's highest appellate court a propmed Order. w hich became final on December 17,1991 and have interpreted this as pennining a subjective es atuation of each concluded that no disallowance was warranted. The llearing unplanned outage at ilGE's gener uing plants to determine whether Examiner found that IlGli maintained the productive capacity of or not BGli had implcmented all reasonable and cost ellective the Plant at a reasonable level. noting that it pnsluced a near maintenance and operating control procedures appropriate for pre-record amount of power and exceeded the GUPP standard. Ilased venting the outage. Ellective January 1.1987, the PSC authorized on this record, the Order concluded there was sufficient cause to the estabbshment of the Generatmg Unit Perfonnance Program excuse any asoidable tailures to maintain pnxluctis e capacity at tGUPh to measure, annually, utility compliance with maintaining higher leveh. the pnx!uctive capatity of generating plants at reasonable les ch by During 1989,1990, and 1991, HGE experienced extended out-establishing a sy stem-w ide generating perf ormance target and indo ages at Cats ert Chtfs. In the Spring of 19M9. a leak was discov-vidual performante targets for eat h base load generatmp unit. In cred around the Unit 2 pressuri/cr heater sleeses during a future fuel rate hearings, actual generating performante after ref ueling outage. BGE shut down Unit I as a precautionary mea-adjnstment for planned outages will be compared to the system-sure on May 6.1959 to inspect for similar leaks and none were wide target and. if met. should sigmfy that ItGE has complied found. Ilowever. Unit I was out of service for the remainder of w nh the requirements of Mary land law. Failure to meet the 1989 and 285 days of 1990 to undergo maintenance and modifi-system-wide target will result in review of each umt's adjusted cation work to enhance the reliabihty of various safety systems to at tual generating performance versus its performance target in repair equipment, and to perform required periodic sur eillance desemuning compliance with the law and the basis for possibly tests. Unit 2, w hich returned to service on May -1.1991, remained imposing a penalty on BGE. Parties to fuel rate hearings may still out of senice for the remainder of 1989,1990. and the first part question the prudence of HGE's actions or inactions with respect ~of 1991 to repair the pressurizer, perform maintenance and naali-to any gnen pencrating plant outage w hich could result in the fication work, and complete the refueling. The replacement disallowana M replacement energy tosts by the PSC. energy emts associated w ith these extended outages for both units Smce the two units at BGE's Calsert Cliffs Nuclear Power at Calvert Chtts. concluding with the return to senice of Unit 2. Plant utili/c BGE's lowest cost iuel. replacement energy costs are estimated to be 545H million. associated u ith outages at these units tan be significant. HGE in a December 1990 order issued by the PSC in a BGE hase l cannot estimate the amount of replacement energy costs that rate proceeding, the PSC found that certain operations and main. could be challenged or disallow ed in tuture f uel rate proceedings. tenance expenses incurred at Calvert Clif f s during the test year but such amounts could be material. should not be recovered from ratepay ers. The PSC found that this t t ll,4!hmort GM alf (n Dic G qsun anf %hmliana L_

m work, w hich wm perfonned during the 1989-1990 Umt I outage 1991 outages. The work characterized as avoidable significantly and fell within the test year, was woidable and caused by 13GE increased the duration of the Unit i outage. Despite the PSC's actions which weie deficient. statement regarding no bmdmg effect, IIGE recognizes that the The Commission noted in the order that its review and find-5iew s expressed by the PSC make the full recovery of all of the ings on these issues pertain to the reasonableness of ilGE's test-replacement energy costs associated with the Unit I outage year operations and maintenance expenses for purposes of setting doubtful. Therefore, in December 1990, IIGE recorded a provi-base rates and not to the responybility for replacement power sion of $35 million against the possible disallow ance of such costs associated with the outages at Cah ert Clilfs. The PSC stated costs. BGE cannot detennine whether replacement energy costs that its decision in the base rate case will hase no resjudicata may be disallowed in the present fuel rate proceedings in exes.ss ibmding) ef fect in the fuel rate pniceeding examining the 19S9-of the provision, but such amounts could be material. C NOTE 14 F AIR V ALUE OF FIN ANCI AL INSTRUMENTS The following table presents the carrying amount and fair s alue of financial instruments included in the Consolidated Balance Sheets. At Derrmher 3/. 1993 1992 Carrying Fair Carrying Fair Amount Value Amount Value Iln themssmJs) Cmrent assets $ 496,919 5 496,919 5 408,790 5 408,790 Imestments and other assets 125,046 129,752 93,834 97.135 Current liabilities 443,968 443,968 M9,650 649.650 Capitahration 3,165,644 3.303,615 2,772,450 2.871,291 The carrying amount of current assets and current liabilities Financial instruments included in capitali/ation are long-tenn appnnimates fair s alue because of the short maturity of these debt and redeemable preference stock. The fair value of thed-rate instnnnents. long-tenn debt and redeemable preference stock is c' timated The fair value of investments and other assets is based on using quoted market prices where available, or by discounting quoted market prices w here available. Certain investments with a remaining cash flow s at the current market rate. The carrying carrying amount of $70 million at December 31,1993 and amount of sariable-rate long-tenn debt approximates fair value, $71 million at December 31.1992 are excluded frorn the amounts BGE and the Constellation Companies have loan guarantees show n in investments and other assets because it wm not practi-totalling $26.7 million and $36 million, respectively, at cable to determine their fair s alues. These investments include December 31,1993 and 530 and 538 million, respectively, at partnership investments in public and private equity and debt December 31,1992 for w hich it is not practicable to determine securities, partnership investments in solar powered energy pro-fair value. It is not unticipated that these loan guarantees will need duction f acihties, and im estments in stock trusts. to be f unded. II,dnmor e G,n and l'IriInc Compun an ) Sulmaancs

NOTE 15. QU ARTERLY FIN ANCI AL D ATA (UN AUDITED) He following data are unaudited but,in the opinion of Manage-periods generally occurring during the summer and winter ment, include all adjustments necessary for a fair presentation. months. Accordingly, comparisons among quarters of a year may flGE's utility business is seasonal in nature w ith the peak sales not be indicative of oserall trends and changes in operations. Quarter Ended Year Ended March 31 June 30 September 30 Ikcember 31 December 31 l993 tin thounands. e wcpr per 1har e amounts; l<ctenues $683.825 $564,721 $774,064 $646,104 $2,668,714 0 income uom yrasns 0 6,94 io7,3sv 2sv,46i 90,058 62i.000 Net income 65,796 55,876 157,05N 31,136 309,866 Eanungs applicable to common stocL 55,276 45,300 146.511 20,940 268,027 Earning per share of common stock 0.38 0,31 1.01 0,14 1.85 1992 Revenues % 69,253 $540,895 5677,059 5604,136 $2,491,343 Income from operations 127,121 91,309 222.627 94,288 535,345 Net income 59,254 38,049 124,620 42,424 264,347 Eaminp apphcable to common sn>ck 48,680 27,475 i14,047 31,898 222.100 Earnings per share of common stock O.37 0.20 0.84 0.22 1.63 ResulnJhr the second quarter of 199.1 reflect the reversal of the cost of the termination bemfits associated with the 1992 Voluntary SpecialEarly Retv emera Proxram (See Note 7). Results for the third quarter of 1993 itflect the cfjet ts <f the Ommbus Hudxct Reconciliation Act of1993. Resulnjbr theJourth quarter o f1993 reflect the cmt of certain termination benefits (See Note 7h Results for thefirst and third quarters af 1992 reflect the cmt of termination bentJits associated with the 1992 Vohmtary Special Early Retirement Progrom ISee Note 71. Ihe sum if the quarterly carnings per share amounts may not equal the totaf for the year due to a hanges in the average number of. shares out-stan&ng throughout the vcar. 1 i $tsitHMh 4 ( (t'sh suhk l it'l if H' (orHyallY ak$.N4thistoaf tr t i

UTILITY OPERATING STATISTICS l 1993 1992 1991 1990 1989 ELECTRIC OPER ATING ST ATISTICS Revenues (In Thousandsi Residential 5 931,643 5 839.954 $ 882.591 $ 718,032 5 648.883 Conunercial 869,829 842.694 850,038 758.573 668,819 Industrial 199.042 201.950 212,8M 194,951 191.796 Sptem Sales 2,000.514 1,884.598 1.945,493 l.671,556 1,509.498 Interchance Sales 91,543 64.323 23.845 26.629 17,802 Other 23.098 19.002 25,187 14.268 19.867 Total $2,115,155 $1,967.923 51,994.525 $ 1.712.453 $ 1.547,167 Sales (In ThousandsFMw n Residential 10,614 9,735 10J197 9.283 9,451 Commert ial 12,395 11.909 11,707 11.352 11.079 Industnal 3.763 3.663 3,708 3,743 4.261 System Sales 26,772 25,307 25,512 24.378 24,791 Intenhange Sales 4,149 3,180 1.166 1.088 595 Total 30,921 28,487 26,678 25.466 25.386 j Customers Residential 968.212 956,570 939,734 930.880 913,910 Commercial 100.820 99,673 98,254 96,567 95,102 Industrial 3,800 3,761 3,584 3.526 3.132 Total I.072,832 1,060JX4 IJ41,572 1.030.973 1.012.144 M erage I he per Residential Customer-Kw n 10,963 10,177 10.744 9,973 10,341 Average Rate per kwn 6ptem Sale +c Residennal 8.78 8.63 8,74 7.73 6.87 Commercial 7.02 7.08 7.26 6.68 614 Indusinal 5.29 5.51 5.74 5.21 4.50 Peak 1.oad (One hour)-Mw 5.876 5,558 5,910 5.477 5,304 Capability at Summer Peak-Mw 6,701 6,687 6.608 6.159 6,164 System 1.oad Factor 55.2 % 54.8 9 52.49 54.14 57.4% G As OPER ATING STATISTICS Revenues (In Thousanda Residential 5 265,601 $ 242,737 5 220.653 $ 218.967 5 242.389 Commercial thcluding Deinery Senice 121,832 112,147 96.189 89.573 112.630 Dehvery Service 3.i87 3.591 3.031 3.3N 4,409 Industnal thcludmp Deinery Senice 22,250 21.123 14.855 32.439 18.363 Deiner> Service 12,920 14,290 14.288 17,851 22.661 Other 9,959 9J49 9.179 11.285 l1.349 Total 5 435,849 5 402.937 % 358,195 5 373.419 5 411.801 Sales (in Thousands > an a Residential 40,029 39J)42 36.519 35.026 39.806 Commercial lheluding Delivery Service 23,830 23.478 20,687 18 lM 21,9M Deinery Senice 7,428 7.102 6.433 5.872 5.778 Industrial Euluding Delivery Sersiec 5.298 5,314 3,605 7,305 3,697 Dehvery Senice 31.390 33,638 34.240 34,720 39,452 Total 107.975 108,574 101.484 101.087 110.697 Customers Residential 491,165 486.863 482,085 482.680 482.538 Commercial 37,518 37.000 36,561 35.953 35,790 Industrial 1,353 1,412 1.385 1,401 1.398 Total 530,036 525.275 520,031 520.034 519.726 Average Use per Residenual CustomerJlherms 815 802 758 726 825 Aserage Rate per Therm-5 Residential .66 .62 .60 .63 .61 Commercial dhcluding Delivery Service) .51 .48 46 .49 .51 Industrial alheludmg Delivery Senice) .42 .40 .41 .44 .50 l Peak Day Sendout--in u 657,700 609,200 610,200 653MN) 663.200 Peak Day Capability-Ot u 847,000 847J100 8173M10 853J100 761,000 Ceriaar poor par amoimts hm c been ioratcJ to wnform to +e current yar's preuraatwn. Itainmarc Ga s and Fkr trw Compwn and huhudiarsn

CORPORATE AND UTILITY OFFICERS Christian II. Poindester Ronald W. Lowman i Chairman of the floarJ and Chief Etectaire Oph er Vice President, Fossd Fnergy Age: 55 Years nf ser vice: 26 Age: 49 Years ofservice: 25 Edward A.Crooke G. Dow ell Schw artz, Jr. President and Chitf Operating Offh er Vice President, General Services Aye:35 Years of service: 25 Age:57 Years of service:35 i George C. Creel Charles W. Shivert l O Senior vu e Presisent. Generation Vice Presiaent. hnance & Accouniing Age: 59 Years ofservice: 38 Chief Financial Officer and Secretary Age: 48 Years of service: 21 Thomas F. Ilrady Vice President Customer Service & Distribution Joseph A.Tiernan A ee: 44 Years of service: 24 Vice President, Cenporate Apairs Age:55 Years ofservice: 25 lierbert D. Coss..f r. Vice President, Marketing & Gas Operations Richard M. llange, Jr. Age:59 Years ofservice: 37 Controller and Assistant Secretary Age: 49 Years ofscryice: 22 l Robert E. Denton Vice President, Nuclear Energy I.y nne iI. Church Age: 50 Years <>f servi < c: 23 Treasurer and Assistant Secretary Aye: 50 Years of service:9 Carserlo Doyle Vice President, Electsic Interconnection & Transmission Thomas E. Rustin Jr. Age: 49 Years of service: 22 Assistant Treawrer Age:39 Years ofscarice: 17 Jon M. Files Vice President. Management Services Age:58 Ycars of service: Jh CHANGES IN OFFICERS AND DIRECTORS Effectise January 1.1991, the Board of Directors elected Carserlo Effective January 1 1994, the following members of the Board Doyle. former Manager of Telceummunications, to the position of w ere elected: Jame, R. Curtiss. Dr. Freeman A. lirabowski 111, Vice President. Electric interconnection & Transmission. lie and Nancy Lampicn. replaced llerhert D. Coss. Jr., who was named Vice President. The following members retired from the Board of Directors Marketing & Gas Operations. Mr. Coss replaced effective December 31,1993: Leslie H. Dishamon, George G. Michael J. Chesser, w ho left the company in January 1994. Radcliffe. and liarry K. Wells. Also during 1993, Charles W. Shivery became Vice President of Finante & Accounting and Chief Financial Officer. I ynne H. Church was elected Treasurer and Assistant Secretary, and Richard M. Bange, Jr., was elected Controller and Assistant Secretary. Effectise July 1.1993, George D. England retired from the company with more than 38 yeais of sersice. Balumore Gas and na truc Comparty and Sukitarws l

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CONSTELLATION SUBSIDIARIES l l r OFFICERS Christian 11. Poindexter Steven D. Kesler Chairman of the Board, Constellation ifoldingt ine. President, Constellatirm inrestments. Inc. Age: 55 Age: 42 liruce M. Ambler Randall M. Griflin President and Chief D ecutive OJ]icer, President, Constellation Real brate Group, Inc. Constellation iloidings,Inc. Age: 49 0 Acting President, Constellation Energy,Inc Age: 54 James W. Jeffcoat President, Constellation llealth Services. Inc. Douglas S. Perry Age: 40 l'h c President ahd General Counsel, Constellation iloidings. Inc. Robert E. Windham Age: 44 President. Church Street Station, Inc. Age: 51 l CON ST E LL ATIO N HOLDINGS CONSTELLATION REAL EST ATE GROUP Constellation I toldings provides direction to all of its operating This is the parent company of several businesses, including subsidiaries and fumishes them with legal, financial, tax, Church Street Station in Orlando, Florida, that operate projects accounting, and personnel services. In addition, decisions on in several real estate categories. Constellation Real Estate new investments are controlled from Constellation lloldings. performs development construction, and operational activities. Constellation llealth Services, through joint ventures. ou ns CON STELL ATION ENERGY senior.living and retirement communit10s, as well as assisted-This is the senior tnember of our Energy Group. Under the living facilities for the elderly. auspices of Constellation Energy, the company participates in a number of attemative energy and co generation projects producing CONSTELLATION lNVESTMENTS clectricity for sale to other utilities. The energy group develops. Constellation Investments serves as a significant provider of arranges financing for, builds, and operates a number of w holesale current income from its investments in securities, investment power projects throughout the country, partnerships, and financial-service companies. CHANGES IN O F FIC E R S Ilruce M. Ambler became Acting President of Constellation Energy w ben Terry L. Ogletree resigned from the company effectise March 31,1993. Randall M. Griftin became Pres dent of Constellation Real Estate Group on May 24,1993. L Richard O'Connell, who was President of Constellation Real Estate,Inc., resigned from the company on July 1,1993. Italtinwre G.;s and Eleanc Compans and Subudunn l 1

CONSTELLATlON SUBSIDIARIES BO ARD OF DIRECTORS ]k2 Christian il. Poindester L Q; Chairman <f the Board, Constellation lividinys: Chairman of the Board and Chief Erecutive Oj]h er, Baltimore clas and Electric Company; member since 1985. F liruce M. Ambler Alr. Poindenter President and Cidef Etecutive Of]h cr, ConstcHation floldings; member since 1989. R.:;. Haltimore; member sim e 1987; serves on audit committee. 'g y

11. Furlong flaldwin Chairman of the Board and Chief Etcentive OJJicer, Afercantile Bankshares Corporation thank hohhng company),

, q} e N Edward A. Crooke Afr. Ambler Air. Baldwin Alr.Crooke President and Chief Operatine Officer, Baltimore Gas and Electric Company; member since 1993. ? ,lerome W. Geckte Retired Chairman of the Board. Pilll Corporation (vehic le, t relocation, and management services), Baltimore; member lY ~& since 1985: chairman of comnnitee on management. Edward W. Kay ^ Retired Co-Chairman and Chi <f Operating Officer. Ernst & Afr. Geckle A fr. Kay Afr. AlcGowan Youn (certifiedpublic accountants), Washington, D C. - member since 1988; chairman of audit commince. .L k George V. McGowan 4 ti ~ q ^ rormer Chairman of the Hoard and Chief Etecutive Oljicer, 4 -[ Baltimore Gas and Electric Company; member since 19X3. 4 Paul G. Miller Chairman of the Board. Supercomputer Systems, Inc. (design, l Air. Afiller Alr. Shattuck Alr. To uesc hier mamofacture, and sale of supercomputers). and Chairman of l the Board and Treasurer, IRC, Inc. (computer data storage l systems), Baltimore; member sim e 1984; serves on auda committer. CHANGES IN DIRECTORS Mayo A.Shattuck Ill ElIcctive lune 18, I993. Edward A. Cnmke was elected to the Picsident and Chief 0;> crating 0]Jicer, Alex. Brown Inc. lioani of Constellation iloidings. (investment banking and securities broAerage). Baltimore; t l member since 1994. On Ikccmber 31,1993, i.eslie 11. Disharoon retired from l the lloard of Constellation iloidings. Ilernard C. Trueschler Former Chairman of the Board and Chief Etecutive Officer, Ef fective February 1,1994, Mayo A. Shattuck til v.as elected to Hahimore Gas and Eicctric Company; membcr since 1983. the lloard of Constellation iloidings. Raimnore Ga s and Un mc Comtuny and Suhmtiarin l

i i FIVE-YEAR STATISTICAL

SUMMARY

1993-1992 1991 1990 1989 COMMON STOCK DATA Quarterly Earnings Per Share First Quarter $.38 $ 37 $.40 $.54 5.53 ] Second Quarter .31 .20 .38 .23 .30 Third Quarter 1.01 .84 .84 .72 .91 I ourth Quarter .14 .22 .05 (.09) .29 Total $1.85 51.63 S t.67 $ 1.40 $2.03 Hiridends Dividends declared per share $1.47 51.43 S t.40 $ 1.40 $1.38 Dividenas pid per share 1.46 1.42 1.40 1.40 1.37 Dividend pay ut ratio 79.5 r/r 87.7'7c 83.84 100.0'7c 68.0% Market Prices liigh $27h $24% 522% $23% $23% 1.ow ?2% 19 % 17 % 16 % 19 Close 25 % 23 % 22% 18 % 23 C A PIT AL STRUCTURE Conwlidated 1.ong tenn debt 47.4 % 46.1% 47.89 47.9 % 44.9'7c Short-tenn debt 0.2 3.8 4.1 2.6 l' referred and preferen stod 9.2 9.8 10.1 10.2 10.5 Common shareholders'.quity 43.4 43.9 38.3 37.8 42.0 i Utility Only Long-term debt 44.5 C/c 42.9% 45.69 45.04 42.4 9 Short term debt 0.3 3.4 3.6 2.9 l' referred and preference stoi.k 10.9 11.6 12.1 12.3 12.4 Common shareholders' equity 44.6 45.2 38.9 39.1 423 The.uun of the quarterly earnings per share amounts may not cqual the totalfor the year due to changes in the average number of ahares outstanding throughout the year. l ( =-

SHAREHOLDER lNFORMATION COMMON STOCK DIVIDENDS AND P RIC E RANGES 1993 1992 i Disidend Price Dividend Price Dedared Ifigh I,ow Declared liigh Low First Quarter $.36 $ 26% $ 22% $.35 $23% S 19 % Second Quarter .37 26% 23% .36 22% 19 % Third Quarter .37 27% 25 % .36 24 % 21 % Fourth Quarter .37 26% 23 % .36 24 % 21 % Total $l.47 $ 1.43 l DIVIDEND POLICY ANNU AL MEETING The common stock is entitled to dividends w hen and as declared by The annual meeting of shareholders wih be held at 10:00 a.m. on the floard of Directors. There are no limitations in any indenture or Wednesday, April 20,1994, at the Sheraton Inner liarbor llotel, other agreements on payment of disidends. Iloiders of preferred 300 South Charles Street, Baltimore, Maryland. stock t firso and holders of preference stock (next h however, are entitled to receise, when and as declared from the surplus or net FORM 1 O-K profits, cumulative yearly dividends at the fixed preferential rate Upon written request, the company will furnish, without specified for each series and no more, payable quarterly, and to charge, a copy of its Form 10-K annual report, including receive w hen due the applicable preference stock rec'emption pay-financial statements, after it is filed with the Securities and ments, before any dividend on the common stock shall be paid or Exchange Commission in March 1994. Requests should be set apart. Dividends base been paid on the common stock continu-addressed to Charles W. Shigery, Chief Financial Officer - My since 1910. Future disidends depend upon future carnings, and Secretary. Vice President-Finance & Accounting, the financial condition of the company, and other factors. Quarterly P.O. Hot 1475,llattimore, Maryland 21203-1475. dividends were declared on the common stock during 1993 and 1992 in the amounts set forth abos e. AUD1 TORS Coopers & Lybrand COMMON STOCK DIVIDEND D ATES Record dates are normally on ihe 10th of March. June, September, EXECUTIVE OFFlCES and December. Quarterly dividends are customarily mailed to each Gas and Electric Building shareholder on or about the 1st of Aprik July, October, and January. Charles Center llattimore, Maryland 21201 DtvlDEND REf NVESTMENT Mail: P.O. Box 1475 AND STOCK PURCH ASE PLAN j3allimore, Maryland 21203-1475 The company's Disidend Reinsestment and Stock Purchase Plan provides an opportunity for holders of the company's common SHAREHOLDERS' lNOUIRIES AND ASStSTANCE stock to acquire additional shares of such stock in a convenient and Shareholders desiring assistance with lost or stolen stock certifi-economical manner. Participants in the plan may reins est cash cates or dividend checks, name changes, address changes, stock dividends on all or a portion of their shares of common stock and/or transfers, or other matters should call the shareholder senices make optional cash payments. representatives on our toll-free telephone numbers. The following toll-free telephone numbers are available STOCK TR AD1NG during our business hours. 8:(X) a.m. to 4:45 p.m.: The company's common stock, w hich is traded under the ticker Baltimore Metropolitan Area (410)783-5920 sy mbol BGE, is listed on the New York. Chicago, and Pacific stock Within Maryland 1-800-492-2861 exchanges, and has unlisted trading privileges on the Boston, Outside of Maryland 1-800-258-0499 Cincinnati, and Philadelphia exchanges. As of December 31,1993, 1TY/ITD llearing impaired 1-800-492-5539 there were 82,287 common shareholders of record. Letters should be addressed to: Baltimore Gas and Electric Company -TRANSFER AGENT AND REGISTR AR Shareholder Senices liartis Trust and Savings Bank P.O. Box 1642 Chicago, Illinois Baltimore. Maryland 21203-1642 i i

= /*.O. Dia 1175 lialnnwrc, Alaryland 21:031475 4

Q U A RT ERLY FIN A NCI A L S 'UMM A RY June 1994

_ - ~ - -- CONSOLID ATED ST ATEMENTS OF INCOME (UN AUDITED) 7hrer Months F:used Sir Months Ended Twelve Months Ended 3 June 30 June 30. June 30. /994 1993 19V4 1993 1994 1993 (In Thousands, Eacept Per Share Amounts) RinNuts l E!cctric. 5 500,177 $ 469.741 5 1.017,325 $ 945,170 $ 2.I87,310 $ l.97N,995 Gas. 67,885 75,930 273.071 257.710 451.210 441.897 Diversified buunesses. 62.289 19,050 88,230 45.666 160,274 108.849 Total revenues.. 630.351 564.721 1.378.626 1.248.546 2,798.794 2.529,741 Ewimi.s OrnLa THAN INTI WLS1 AND bcmm TA Al3 Electric fuel and purcha,ed energy.. 120,960 109.677 247,513 244.048 538,094 515.006 Gas purchased for resale.. 31.582 39.059 158,507 149.459 251,733 248,607 Operations.. 135.932 127,595 285.481 259,676 596,729 531,063 Diversi6ed buunewev-selling, general, and administrative.. 51,787 16.383 66,904 32,821 103.608 67,163 Maintenanc e. 43,544 58.778 88,991 100.555 169,644 178/>68 Depreciation and amortizanon. 67,934 61,893 137,713 123,267 268.358 239/>06 Taxes other than income tases. 43,734 43,949 96.529 95,239 196,121 189.232 Total expenses other than interest and mcome taxes.. _. 495,473 457.334 1.081.63X l.005.065 2.124,287 1,969,345 locome From Operahons. 134.878 107,387 296,988 243,481 674.507 560.396 QTHER INCOME Allowance for equity funds used during construction. 5.542 3.621 10.616 7,157 17,951 14,687 Equity in carnings of Safe liarbor Water Power Corporation. 1,088 1,068 2,178 2,136 4,284 4.235 Nei oiber income and deductions.. 1,495 709 2,551 984 (1,466) 3.544 Total other income. 8.125 5.398 15.345 10,277 20,769 22.466 income llefore Interest and Income Taxes.. 143.003 l 12.785 312.333 253,758 695,276 582.862 bTLRt n EurNst Interest charget. 53.569 52,633 105,769 105,367 213.373 211,216 Capitalized imerest.. (3.010) (5.032) (5,81I) (9.097) (12.881) (16.251) Allowance for borrowed funds used during construction. (2,998) (2.ON) (5,739) (4,083) (9,697) (8.632) Nel mierest expense. 47.561 45.597 94.219 92.187 190.795 186.333 income Before income Taxes., 95.442 67,188 218.114 161,571 504,481 396,529 brout TAsrs i Current. 10,742 (8,573) 23.886 21.108 96.237 75,137 Deferred. 20,033 21,974 49.456 23,044 79.468 41,255 l Insestment tax credit adjustments, f 2,04 !) (2.089) (4.081) (4.253) (8.271) (8.579) Total income tases. 28.734 11,312 69.261 39.899 167.434 107,813 Net income.. 66,708 55,876 148,853 121.672 337,047 288,716 Preferred and Preference Stock Dividends.. _ _ 10.021 10.576 20,052 21.095 40.795 42,195 Earnings Applicable to Common Stock. 5 56.687 5 45.300 $ 128.801 5 100.577 5 296.252 5 246.521 Average Shares of Common Stock Outstandmg 146,947 144,757 146.692 144,471 140,183 142,155 Ernsiws Pt R SHARE OF COMMON STOCK Uuhty operations. 5038 50.28 50 86 50.66 $1.97 51.63 Dnersified businesses. 0 01 0 03 0 02 0.04 0.06 0.10 Total carnings per t, hare of common siock 50.39 50.31 50.88 50.70 52.03 51.73 CONSTELL ATION C0MP ANIES Re s enues.. $ 64.282 5 20.538 5 92,070 5 48.621 $ 167.213 5 l14,810 Net income.. 1.099 4.260 2,283 5,965 8,216 14,126 Total AssetwEnd of Permd. 1.086,711 1.065.234 1.086,7 l l 1.065,234 1,086.711 1.065,234 f BGE's Investment-End of Permd. 305.737 301,363 305,737 301,363 305,737 301,363 Iqformationfor the Conssellatwn Companies does not re)7ect conwlidating chminationsfor intercompany balances and transactions. The mienm unformation contamed herein reflects apportionments and estimates of some trems subject tofinal adjustment at the calendaryear-end Resultsfor intenm periods, which can be largely influenced by weather conJawns, are not necessarily indicative of results to be espectedfor an entar year. Certain prior ycar amounts has e been restated to conform ss ith the current year's presentation. i Baltimore Gas and Electric Company and Subsidiaries l

CONSOLID ATED B AL ANCE SHEETS (UN AUDITED) June 30 1994 1993 (In Thousando ASSETS CtniNr Antis $ 49.672 5 37.951 Cash and cash equn alents.. Accounts receivable (net of alto.,ance for uncollectibleu. 427.585 397.457 fuel Stocks 66,060 83.77i 144.855 145.337 Materialr, and apphes.. Prepaid tases other than income lates.. 2,706 3.040 31.365 22f>48 Other. ~ 22.M 690.'264 7 lotal current awets. I-tysmw vt5 AND ChnLR Aulm 470.913 473.308 Real estate projects. 298JX)6 266.901 Power generation systems. I mancial msestments. 224,771 209,248 Nuclear deconnmsuonmp trust fund.. 62.806 49.310 Sale liarbor Water Power Corp < nation. 34.156 34.172 10.839 23.916 Senior living facihtics. 60f>43 67.131 Other. Total investments and other assets. 1.162.134 1.123.986 U riuTY l't.AN T 7.531.026 7,108.143 Utihty PI:mt.,. , 2.212.205) _ (2.066.701) (. 5.04 L442 Accumulated depreciahon.. 5.318.82i Nei utihiy plant. [)u ou o CHA9 cts 765.091 550325 Regulatory auch ~ 70.612 46.44(i Other. 835.703 69D71-Total deterred charges.. M.@ 8'.90 i~ $735230T T otal Assets.. LI ABILITiliS AND cal'ITAllZATION CUkklNT LiANLITits 94.800 1,500 j Short-term borrowings.. Cunent portions of long-term debt and pelcrence stock. 45.032 155.267 i Accounh payable.. 144.347 134.369 l 24.275 20.687 Customer depmh. Accrued taxes 3.317 6.908 l Acc rued interest 61.397 56.083 Dividends dcciared. 65.863 M.I11 j Accrued vacation cosh. 37,771 31.936 Other. 17,856 10.407 ) lotal cunent hahhties.. 494.688 481.768 j Di ti upt o Cklon s AND 01:u2 as.o er As Deferred iacome tases - 1,118.778 1.011.419 Deferred nvestment tax credin.. 153.419 161.513 1 Pension and postemployment heoefits. 134.215 15.829 Decommisuoning of federal uranium enrichment ficihties. 48.249 51,333 Other... 52.464 I8.499 Total defened credits and other liabihties.. 1.507.125 1.258.593 CAPITALIZATION LONG-l LR M D) H T I ust refunding mortgage tunds.. I,763.599 1.680.182 Other long-term debt. 544,550 430.550 j Long-term debt of Constellation Compames.. 579,409 607.421 l Unamortued dacount anJ premium. (18.698) (12.570) Cunent portion of long-term debt. (J2,032) (l02.267) Total long-term debt. 2.826.828 2fiO3.II6 59,185 $9.185 Preferred Stock 344JKK) .Mi7.ix6 Redeemable Preferente Stock... Cunent porton of redeemable preference stak. (3JHO (53.000j 341JNX) 344.000 Total redeemable preference stock. T3030) 150JXMJ Preference Stock Not Subject to Mandatory Redemption. CouvoN SHARFHOLDE.ks' EQUITY Common siot k.. 1,414.426 1.360.785 Retained earnings 1.269.882 1.194.756 Penuon habihty adjustment-(22.093) Net unreahred loss on available-formk securnies. (2.140) Total common shareholders' equoy T660.075 2.555.54i ~idO 7. ifs 8 ~3.712.042 Total Carnaluation. W.t#8.901 57T514fif Total Liabdaies and Capitahtation.. Ccriam prior 9 cur u.noams has e been rotated so conform mth the current year'.s presentarwn. l t i, Bahimore Gas and Decruc Compmy and Subsudwnes

CON 80Li@600@ 6060MC306"G0 66600 M@DO d@C16G@0M@D Su Morahs Ended TwuIvr Months Endcd June 30 June.40, /v94 /VW 1994 /993 1 (in Thouwnds) CANT h nws l WN Oct un% Arnynns Net inn ome.. 5148,853 5121.672 5337D17 $ 288.716 Adjustments to rec onole to net cash pun ided by operatmg actnitics i Depreaahon and amorts/ anon.. 161,641 146,898 328,770 287,138 Deletred income tnes.. 49,456 23J44 79,468 41,255 hvestment in uedit adjustmentt.. (4.08I) (4,2 H) (%.27 I ) (8,579) Deferred fuel cosh.. (2,972) 42,033 6.441 71,440 Acerued pension and postemployment benefitt (53,833) 4.866 (83.976) 4,866 Allowante for equity Iunds used dunnp omstruction.. ( 10fd 6) (7.157) (17,9511 (14.687) Eqmty in canun;m of aflibates and joint seniores (net L. (1.697) 5,3f 0 (lI,652) (63MS) Changes m current awets, 36.8k0 27.639 (28,012) (61JM)2) Changes m curreni habihues. Other than short-term borrowinp. (h0,522) (40,790) 31,421 9,504 Other.. 17,672 (2,108) 13 138 (9.375) Nei cash prouded by operaung actnance 260.781 117,144 646.423 fo2.281 CAsn Fi ows i FN 11wa m Arnvnn3 Pns ceds f rom issuanc e of Shor1 term honow mp (net).. 94.800 (10,400) 93,300 (74,650) 1.ong term debt.. 203,018 702.794 706,574 980,362 j Prefeiente sh>ck.. 39,650 59,126 39,650 l Common sha. 22,945 26,133 54,191 203.694 Reacqmsnion of long teun debt. (213,319; 4650.366) (545.467) (973,231) Redempf mn of preference si<d, (1,500) (145,810) (2,924) Conanon shd thvidends p.ud. IlOS.234) (103,684) 1215.686) (201,313) hefened and preference su(L dividends paid. (19,964) (21,(H0) (41,350) (42,193) Other.. (36) (261) (6,869) (429) Net cash used m 6nancing atthitiet. (22,290) 447.174) (I1,991) (71.034) CASH h OWs I MN lNVISHNG AFNs U nS Unioy construcnon expendoures.. (227f191) (202.864) (502.106) (424.392) Allowance for equity f unds used during construeuon., 10.616 7.157 17,951 14,687 Nutlear Ine cspernhtures. (35.078) (10,458) (71.948) (40,519) Defened nuclear expenditure.. (4.066) (5,408) (12.449) (l3,484) Delened energy conservahon expendourcs.. (l8.661) (12J)63) (39,507) (24,073) Coninbutions to nutlear decommiwiomng trust fund. (4,890) (4,450) (10,139) (8,900) l'uichases of mad etahic equity secunties., (31.076) (19.795) (58.101) (46.031) Sales of mad etable equay secunnes.. 20.140 20,778 33,122 49,873 Other financial investments. (676) I,682 17.231 29,626 Real estate projeeb.. 25.090 (14,252) 9,012 (24,949) Power generahan systems.. (5J)66) (18.738) (13,169) (47,038) Other.. (2,103) (730) 7,392 (l()3) Net cash used in insestmg actn ines.. (273.055) (259,14l) (622.71I) (535,303) Net incre,c.e (Decrease)in Cash and Cash Equivalents,. (34,564) 10.829 11,721 (4,056) Cash and Cash h mvalenn at Ileginmng of Penod.. 84,236 27.122 37.951 42fx)7 i Cash and Cash Equh alents at End of Penod.. 5 49.672 5 37.951 $ 49.672 % 37.951 OHil k CMH h oW IMMW UN C ash p nd dunny the year for. Interest ines of amounts capitahtedL 5 89.395 5 90.4(4 5182,258 5175.091 income tnes.. 5 41,025 5 35.3(u 5131,755 5 75,968 Cerrmn prwryear ar wunn has c been te.aared to conforra wah the < unent _ scar 's porsentatwn &dianore Gas and iIcanc Conywn and Subuhancs

GWLUNT/ TSPul.;JRVN UVQVUUVW3D 1hree Mmths Ended Sa Afonths I nded Turire Alonths Ended June 30 June 30. June 30. ELECTRIC 1991 1993-199J 1993 199J 1993. Rt w st1.s fin thousands) Residential--with houscheatmg.. $ 82.340 $ 79.892 $ 225.5N 5 196.863 $ 421.823 $ 369,795 -other... -.. 127.56x 121,619 247.279 233.376 552.3M 487.038 -total.. 209.908 201.511 472.783 430.239 974.!87 856,833 Conunercial.. 213.509 206.227 403.442 392,246 881.026 848.229 Industrial... _ 54,169 _4y,767 97.406 91.217 205.229 199.107 Syuern Sales... 477.586 456.505 973.631 913.702 2.0N).442 1.9N.169 Interchange sales.. I 8.N)7 8.770 33,594 20.005 105 I33 51.824 g Other.. 3.984 4.466 10,l00 11,463 21.735 23,002 Total.. 5 500.177 i 469.741 51.017.325 5 945.170

52. I N 7.310

$ 1.978.995 S4u.s (In 7housandsk--MWil Reudential-with houscheatmg.. 935 926 2,902 2,5M 5.179 4.668 -other. l.302 1.253 2.692 2.597 ' 5.869 5.368 -total... 2.237 2.179 5.594 5.161 11.048 10.036 Cominercial.. 2,991 2.906 6.106 6,007 12.494 12,176 indu, trial... 1.210 935 2,176 f.842 t096 3.726 System Sales. 6,438 6.020 13.876 13.010 27,638 25.938 Interchange sales.. 803 393 1.389 963 4.575 2.527 Total 7.241 6.413 15.265 13.973 32.213 28.465 GAS REvi NULs (in 7hou. sands } Rewdential-with househeatmg.. $ 38.156 5 36.353 $ 147,M 5 5 135.277 $ 235,314 $ 224,493 -oiber.. 8.382 M.270 25/e8 24.609 4.1.733 42.955 -lotal.. 46.538 44.623 173,333 159.886 279.047 267.448 Conwercial -ocludmg delivery service.. IS 701 20,936 80.637 73.272 129.196 123.342 -delivery service., 139 792 776 2.023 2.N1 3,806 - Industrial -excludmg delivery service.. 2.186 4.496 13.511 11.900 23,801 23.653 -deinery service (1,265) 3.N8 1.638 6,459 8.099 13,471 Other.. l.586 2.035 3.176 4.110 9.026 10.177 Total i 67.885 5 75.910 $ 273.071 5 257.710 $ 451.210 5 441.897 S alt.s (In Thousandsp.-DT11 Residemial-with houscheatmg. 5.235 5.183 22.701 21.251 35.695 34.352 --other.. 1.031 1,NO 3,561 3.442 5,903 5.834 - total.. 6.266 6.223 26,262 24.693 41,598 40,I86 Commercial - --ocludmg delivery service... 3.320 4.150 14.902 14.249 24.483 23.751 -delivery service.. 1,949 1.758 3,203 4.591 6,039 8.077 Industnal -ocluding dehvery senice.. _... 4N 1,189 2.596 2.830 5.064 5.730 -delivery service.. 8.292 7,118 14.350 15.I l4 30.626 30.919 Total.. 20.231 20 438 61.313 61.477 107.810 108.663 Certain prmr., car amounts have been restated to conform with the current year *.s pre.sentarinn. l ELECTRIC GE N E R ATION ST ATISTICS j Twelve Afonths Ended Jane 30. l'urcluased flydra l'ower Net of l Ma lear Co<d Oil & Gas interchange Sales 7'osal Generation by Fuel 'I ype (9 ) 1994.... 40.7 57.3 3.7 3.0 (4.7) 100 0 l 1993..-.. 39.1 51.4 1.6 36 4.3 100 0 Thousantis of MWil 1994.. I1,945 I6,789 1096 885 (l.392) 29.323 1993........ 10,735 14,128 430 986 1.194 27,473 As crage Cost of l'uct (Cems per %Ihon 11tu) 1994-..._. 54 N I49.31 247.87 1 IJ.96 1993.. 4543 152.48 264.35 l 11.70 llatumore Gas and Electric Company and Subudiaries

SUPPLEMENTAL FIN ANCI AL S T ATISTICS Turive Afonths EndrJ June 30, IW4 IW3 Cow n in A nD C4m Ai vAnos long term debt.. 4ft39 46 19 Sbort aerm borrow mys.. l.59 Prefened and preference stoc L.. 89% 10.3 % Common equity. 43.19 43.6 % 4 keturn on Average Common Equay. I 1.3% 9.99 R Ano or EAmiNos (SEC Methodi 'Io (ned charges.. 3.27 2.77 To fued (harpes and prefened and preference omdends combined. 2.55 2.18 Al'C as a 9 oIlbrnings Applicable to Common Stock. 9.3% 9.57 Ef fecin e 'Ias Raic.. 33.2 % 27.2 % Utihty Construction Eyrnduures int,ludmg Al C, Nuclear Fuel. Defened Nuclear Eyenditures and Deferred Energy Conservation Ex penduures (lhousandi of /b/ lard., $626.010 5502,468 COMMON STOCK D AT A Three Months Ended Twelve Months Ended June 30, June 30, 1994 1993 /994 1993 Cosmos Surx DwlDI.NDS Pik SHAFE -Declared.. $.3h $.37 $ 1.49 $ 1.45 - l' aid.. $.37 $.36 $ 1.48 $144 A1 Angra VAll'id P!:R SilARE -Ihgh. 24-3/8 26-5/8 27 I/2 26-5/8 - Low. 20-1/2 22-7/8 20-l/2 21 1/2 - Close. 21-I/4 25-5/8 21-I/4 25-5/8 Shares OuNanding-End of Period (In 7housands).. 146.995 I44.840 146,995 144.840 liuok Value per Share-End of PerioJ.. 518.10 $ 17.64 $ 18.10 $ 17.64 Inquiries c<nicerning this summary should he directalto: Charles W. Shivery Kevin J. MJier Halumore Gas and Electric Company % e l're.udent.

Director, l' O. Hon 1475 Clurf Fmancial Officer.

Financial l'ianmng Haitimore, Ataryland 2/203 and Sec retan H10) 234-5434 (410)234,551i O llalomarr Gas and Elecinc Company and Subsuharin Renant asma

Exhibit III Page 1 of 2 Internal Cash Flow Projection For Calvert Cliffs Nuclear Power Plant 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 $159,000 Payable at Per Year (000) $20,000 Twelve Months Twelve Months Ended 6/30/94 Ended 7/31/95 Non-Cash Expenses ($000) Depreciation and Amortization 318,129 343,949 Deferred Income Taxes and Investment Tax Credits 33.651 13.623 Total 351,780 357,572 Percentage of Total to Maximum Total Contingent Liability Payable Per Year 1,758.9% 1,787.9% Betained Earnings ($000) Net Income After Taxes 337,047 Less Allowance for Funds Used During Construction 27,648 Less Dividends Paid 258.788 l Total 50,611 Total Internal cash Flow 402.391 Percentage of Total Internal Cash Flow to Maximum Total Contingent Liability Payable Per Year 2,012.0% i

Exhibit III Page 2 of 2 l i Baltimore Gas and Electric Company Underlyinc Assumptions for Proiected Cash Flow (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 depreciated based on their estimated useful lives. (3)- Estimates of Federal income taxes and other tax expense are based upon existing tax laws and any known changes thereto. (4) Accounting policies are consistent with those in effect June 30, 1994. l i 1

[" Exhibit IV Baltimore Gas and Electric Company Curtailment of Capital Excenditures 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, 1995 are $523 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 sources, construction curtailments would affect all construction expenditures rather than impacting a specific project. t}}