ML20237H926

Annual Rept 1982

ML20237H926
Person / Time
Site:	Calvert Cliffs
Issue date:	12/31/1982
From:	Mcgowan G, Trueschler B BALTIMORE GAS & ELECTRIC CO.
To:
Shared Package
ML20237H898	List: ML20237H895 ML20237H908 ML20237H912 ML20237H919 ML20237H923 ML20237H926
References
NUDOCS 8708170418
Download: ML20237H926 (51)

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FINANCIAL HIGHLIGHTS l.o i

1982 1981 1972-

.. / $4.07

$3.70

..$2.83 l!

Earnings Per Share of Common Stock.

36,090,000 33,353,000

'2,133,000.. 1 LAverage Shares of Common Stock Outstanding Dividends Declared Per Share

$2.80

$2.65 l

$1.90% -

Revenues Electric

. $1,035,606,000

$ 934,160,000?

'$ ' 302,635,000:.

Gas 539,438,000-467,949,000 E118,439,000 Net Income Applicable to Common Stock.

$1146,936,000 '

.$ i 123,243,000 c ($1'.l 62,589,000 t Dividends-Common Stock.

'101,507,000 88,499,000/

"42,571,000; Earnings Reinvested in the Busiriess --

$ '45,429,000

$ '34,744.000 ? $- l 20,018,0001, L

. Electric Sales-thousands of kilowatthours '

27,292,000 :

17,584,000.

, j 12,991,000;

~ 05,582,000m

.. 98,873,000s Gas Sales-dekatherms* '

98,630,000 :

1 Investment in Utillt'y Plant :

$3,739,345,000 ;. $3,437,089,000

$1,790,340,000 -

• One dekatherm (Dth) equals 1,000,000 British thermal units, or 1.000 cubic feet (Mcf) of gas with a heating value of 1,000 Btti per cubid foot.

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Dividends Paid on _the Cornmon Stock Continuously Since 19102-Always Earned-Never Reduced

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l Baltimom Gas and Electric Company, the

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l o! dest ga s '.itihty and one of the oldest

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l clectric utilities in tne nation, serves k

l 513,000 gas and 859,000 electric cus--

' % shy tomers in Central Mary!and. BO&E serves the City of Baltimore and an uea

.c,iven cas which covers 2,300 square m;1cs in parts kL of nine counties, A

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Pictured are members of the Baltimore W

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'a Symphony Orchestra, playing in their 1

new home, the Joseph Meyerhoff Sym-

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Contents Chairman's letter 2

President's Report 4

Financial Review 6

Characteristics of the Business 21 J Common Stock Data -

21 l

Operating Statistics 22 l

. Selected Financial Data 23 Management's Discussion l

and Analysis 24 Financial Statements 27 l

Notes to Financial Statements 33 i

Officeni 44 l

Directom inside Back Cover 1

J

BALTIMORE GAS AND ELECTRIC COMPANY ANNUAL REPORT 1982 l

Erme*====wrammmmarmwcmnwarmmmstems RHYTHMS Each region has a distinctive heartbeat, a OFTHE rhythm of its own created by the blend ofits REGION commercial, industrial, cultural, social, and recreational lives. Every day lights are flicked on, toasters pop, computers hum, factories start up-alljust a little differently in every city.

l Baltimore is the heart of Central Maryland, a port city -

l whose rhythm is keyed to the flow ofinternational trade. It is a hardworking city. It is alive with new ideas. The area's outstanding colleges, universities and medical centers, including the University of Maryland and Johns Hopkins University and Hospital, set the pace for a stimulating i

intellectual life. The creative energy sparked by the partnership of private business and community leaders and municipal government has made Baltimore and its suburbs a national model for the handling of urban problems. And yet as a true-harbor town, Baltimore retains the relaxed style of a city on the water.

Rescued from the urban decay of the Fifties, Baltimore l

has reasserted its historical prominence as a business and cultural center. As Baltimore's renaissance flourishes, the l

l rhythms of the region become richer and more complex, the demands for energy more varied and sophisticated.

To power this vital region, BG&E must orchestrate creatively all the resources at its command. In the growing, changing i

rhythms of Central Maryland, we take our cue.

rammewamramramneanumam=4metemsmaa l

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15HiramEmmmmmmmmmerimmssiItersmarmamma THE CHAIRMAN'S LETTER TO CUR STOCKHOLDERS Adapting mpidly to a changing environment has never all levels within the organization. We are striving to been more critical to success than it is today. Not only is meet customers needs at the lowest possible cost con-the utility industry in tmnsition, but our Country is still sistent with a fair return for our shareholders.

in the midst ofits struggle to regain economic vitality.

The Company's current rate filing is but one of our Your Company is coping well. Despite reduced sales continuous efforts to improve our earnings. Yet while stemming from the Nation's continuing economic diffi-we are adamant about providing our shareholders with culties, carnings per share increased by ten percent in an adequate return, we are sensitive to the interests of 1982. Our policy of aggressively pursuing rate relief our ratepayers. In the current mte request we are ask.ing when necessary combined with stringent cost control the Commission to mitigate the impact of the rate in-measures helped the Company achieve this level of crease on customers by promptly passing on the fuel j

performance.

cost savings to be generated by the conversion of our Other accomplishments this past year involved all Charles P. Crane Power Plant from oil to coal.

aspects of our opemtions: increased dividends, the rais-We are also reducing the need for rate increases by ing of our bond mting, the continued highly efficient, vigorously controlling costs. In the economic climate low-cost operation of our nuclear power plant, as well such as the one we are presently enduring, it's vital that as another year of offering our customers rates lower the Nation as a whole increase productivity. Your Com-than those available in most other major East Coast pany is no exception-we tightened our belts in 1982 cities from Norfolk to Boston.

and are compounding our efforts in 1983. During the This mccrd speaks for our strong, on-going commit-past year we pared our operating budget, rescheduled ment to our shareholders, customers and service terri-our constmetion program and delayed maintenance tory-a commitment demanding dedication, flexibility wherever possible without jeopardizing service reliabil-in all facets of our business, as well as creativity from ity. These actions taken to minimize costs enabled us to defer requesting increased mtes for almost eighteen months.

On the legislative front, we are actively working to m,c.

more forcefully shape the industry and the Company's 1

destiny. In this way we can assure adequate and reliable

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Bernard C. Trueschler I

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energy in the yeans ahead. This year was marked by the Your Company believes the future offers potential for l

passage of the Tax Equity and Fiscal Responsibility Act those who are able to adapt to today's changing environ-of 1982 which repealed some of the more advantageous ment. To be prepared to deal with all possibilities of the capital formation aspects of 1981's Economic Recovery 80's, we are pursuing the formation of a holding com-4 Tax Act. On the positive side, however, the provision pany. Such a corporate structure will enable us to en-permitting tax defemil on dividends reinvested in public gage in those business opportunities which will enhance I

utility stock was retained. Our Company's shareholders our long-term growth potential. The process to obtain are still entitled to defer tax payments each year through regulatory approvals is currently under way.

l 1985 on $750 ($1,500 on a joint return) of dividends re-Positioning the Company to take advantage of the invested in our common stock.

most favorable alternatives will ensure continued The utility industry is in the process of rapid growth and profitability. Looking beyond 1982, recent 1

change-a transition which began in the 70's and con-events at the national level have been encouraging. In-tinues today. The industry is experiencing increasing flation appears to be coming under control and interest price elasticity. Competition is intensifying in the form rates am approaching reasonable levels. Your Company of alternative primary fuels and demand management.

has strong fundamentals-high internal generation of The electric utility industry, to remain competitive, funds, a diversified fuel mix, and a well-balanced capi-I must review all options including decentralized genem-talization. Given reasonable regulation, we can look for j

tion, conservation and load management. As one re-continued growth in earnings in the years to come.

sponse, we are acting now to promote more efficient Most importantly, your Company has capable em-use of our generating capacity by encouraging off-peak playees dedicated to performance and service. Your di-consumption of energy.

rectors, officers and employees will continue to serve Other possible paths of transition may be even more the Company with the enthusiasm and commitment dramatic-restructuring the industry into generation and shown in the past. We thenk you-our shareholders-distribution en:ities has been pmposed, and the Public for the support you have given us this past year and in-Utility Holding Company Act of 1935 could very well vite ycu to learn more of our plans and achievements, be repealed. The possibilities are numerous indeed.

outlined in the remainder of this report.

N Bernard C. Trueschler Chairman of the Board February 11,1983 3

Em"WMMJE2RMEZEEMETTEMMMMEnmmm.EEMES THE PRESIDENT'S REPORT CN SPERATIONS As we assess our operations for 1982 one thought rate of approximately 3 % for the remainder of this stands out: our achievements this year confirm more decade.

strongly than ever the pivotal role flexibility plays in This is manageable growth. Our goal is to provide the success of our operations. Given the troubled eco-for it in the most cost-effective manner feasible. This nomic climate both nationally and regionally,1982 requires a policy of long-term cost management encom-could have been a year of adversity for BG&E. In-passing interrelated strategies for construction, load stead, because we were prepared for change,1982 was management and energy conservation. Effectively a year of accomplishments and creativity, sparked applied, load management techniques and energy con-by a renewed commitment to addressing the problems servation should reduce the need for new plant con-faced by all of us in Central Maryland.

struction which, in turn, will allow us to minimize Our electric sales are linked to the general level of financing when costs are high. The end result should economic activity in our service territory. The de-be reduced rate increases in the future.

pressed state of the steel industry coupled with the ef-After evaluating the pattern oflower load growth fects of conservation and mild weather resulted in a both in Maryland and industry-wide, we shifted the in-1.7% decline in electric sales from the previous year.

service date of the second of the two 620 megawatt Sales to residential and commercial customers showed units at Brandon Shores from January,1988 to Decem-moderate increases while those to certain large indus-ber of that year. The flexibility inherent in our plan-trial customers declined substantially.

ning process allowed us to make that adjustment at We do not expect this downward trend to continue.

essentially no increase in the overall project cost of Our service territory is vital and growing, and we are

$1.2 billion.

forecasting that our electric sales will grow at an annual By converting both Brandon Shores and the Charles P. Crane Power Plants to coal we further insured BG&E's ability to maintain its competitive advantage.

The expansion of the Safe Harbor Water Power Corpo-ration, a hydroelectric facility of which BG&E is two-thirds owner, is another means to this end. Safe Harbor is in the process of adding 190 megawatts to itc capac-ity. The work will be completed by January,1.

The key to future success remains our Calvert Lliffs Nuclear Power Plant, our most economical generating Y

unit. It provided more than 55 % of our customers' elec-v A.

tnc needs in 1982. Fuel savings from using nuclear I

power instead of oil now total over $2.4 billion.

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.4 George v. McGow an

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In 1980 and 1981, Calvert Cliffs received Awards of Recently a Federal Energy Regulatory Commission l

Excellence for achieving the best operating record of Administrative Law Judge issued a decision strongly any multi-unit commercial nuclear power plant in the supporting our position. If the decision is allowed to I

nation. The plant continued its superior performance in stand, pipeline accountability will have been reaffirmed i

1982, although two planned outages during the year re-in the natural gas industry. Once again, we feel that sulted in lower production than in 1981. These outages having made the correct move in 1982, we have im-involved not only refueling, but modifications designed proved our position for the future. Notwithstanding l

to improve the plants performance and reliability.

some continued loss of sales in 1983, we see some very l

We replaced the condenser tubes in both units. The positive signs that the natuml gas market is beginning to I

original copper-nickel alloy tubing, which was the state correct itself. The Company remains firmly committed of the art at the time of installation, was beginning to to the principle of eventual deregulation of natural gas, i

suffer from the corrosive effects of the Chesapeake Bay We believe that, given the proper chance, the market I

water. To eliminate any potential problems, we replaced can solve gas pricing problems. All indications point

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the mbes with more durable materials. We also com-to prices that will eventually be lower under decontrol

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pleted a major modification of the plant's auxiliary than under the artificial situation created by partial feedwater system and took additional steps to protect regulation.

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the steam genemtors against corrosion. We are always BG&E has developed a reputation in our industry and

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reviewing operations at Calvert Cliffs to insure its con-our community as a problem solver. We are proud of tinued outstanding performance.

that reputation and determined to maintain it. By adapt-In the 1960's, BG&E was a leader in the development ing to our rapidly changing environment and focusing of commercial nuclear power. We intend to maintain our on those strategies which will best enable us to attain competitive advantage in the future by choosing appro-our objectives, we will assure BG&E's future success.

priate technologies for the 90's. Fluidized bed combus-l tion, coal gasification and tne coal slurry pipeline can J

all contribute to solving this country's energy problems if attention is focused on their development today. The r

same holds true for fuel cells, solar devices and a vari-

,/

ety of other approaches. On its own and in conjunction with Edison Electric Institute and Electric Power Re-George V. McGowan We*"t search Institute, BG&E is actively involved in the research and development of these technologies.

Febmary 11,1983 l

Focusing on the gas segment of our business, sales declined 6.6% principally as a result of the depressed steel industry and substantially higher natural gas prices. In spite of a natural gas surplus, gas prices have increased dmmatically this year. The increases stem in part from natural gas pipeline suppliers' commitments to "take or pay" contracts and their increased purchases of expensive deep well gas. We estimate that higher prices will continue to affect gas sales in 1983 as indus-trial customers switch to lower cost fuel oil. To protect the Company and our customers from this loss, we challenged our supplier's pricing policies, i

5

IE7EEERiemsEEWLESSEZEIEMEREEGf2217EfEM2MEECfEFAL'3 l

FINANCIAL CEVIEW i

I l

l Earnings The new rates are designed to increase total electric rev-l Earnings per share of common stock were $4.07 in enues by $66.7 million ($113.2 million increase in base I

1982, representing a 10.0% increase over the $3.70 per revenues less a $46.5 million reduction in fuel rate rev-i share carned in 1981. The $99.2 million of rate miief enues) or 6.4 %; total gas revenues by $28.8 million, or granted by the Public Service Commission of Maryland 5.2%; and steam revenues by $600,000, or 2.6%.

in February 1982 was the primary factor contributing to The Company's request for higher rates was initiated the 1982 increase.

essentially to offset higher operating costs due to infla-tion, to increase the mte of mturn to reflect high capital Common Dividends Increased cost and to achieve a mturn on additional investment in The quarterly dividend rate on the common stock was utility plant.

increased to 71c from 67c per share, effective with the July 1,1982 payment. The new rate is equivalent to an Construction Expenditures annual rate of $2.84 per share.

Construction expenditures amounted to $323 million in 1982 of which $44 million represented Allowance for Rate Relief Requested Funds Used During Constmetion (AFUDC). Of the to-On December 6,1982, the Company filed an applica-tal, $289 million was spent on electric facilities and $13 tion with the Public Service Commission for higher million on gas facilities. The largest outlay, $87 mil-electric, gas and steam base mtes designed to produce a lion, was for the construction of the Brandon Shores I

net increase of $96.1 million in annual revenue. The Power Plant. Nuclear fuel required additional outlays of processing of this application is expected to take until

$42 million. Current estimates indicate that the Compa-early July 1983. The Company seeks the Commission's ny's 1983 constmetion expenditures will be approxi-permission to increase base rate revenues by $142.6 mately $310 million, of which $57 million is AFUDC, i

million and to promptly pass on to consumers a $46.5 with an additional $75 million being spent for nuclear million annual reduction in the cost of fuels used to fuel.

genemte electricity, also beginning in July 1983. This reduction in fuel costs results from switching to lower-Security Transactions cost coal from oil at our Charles P. Crane Power Plant.

The Company issued the following securities in 1982:

O 2,00(),000 shares of common stock were sold in April resulting in net proceeds to the Company of

$50,360,000.

Earnings and Disidends Declared Construction bpenditures Ye_r Nhare of Comunm Stock (Millions ofthilars) sow h gMB% -,

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2 200 I

i E I.armnps Per Wre 100 E lhnicinis Decl. ired 9

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O '$75,000,000 of 14 % % Series due July 15,1992 directly from the Company in a convenient and eco-First Refunding Mortgage Bonds were sold in July.

nomical manner. Shams of common stock may be pur-O $20,000,000 of 9% Series due July 1,1984 First chased through the reinvestment of cash dividends Refunding Mortgage Bonds were issued to secure the.

and/or by making cash payments not exceeding $6,000.

withdrawal of funds held by the Trustee in connection quarterly. Purchases with reinvested dividends are made -

with the sale of pollution control bonds in a prior year.

at a 5 % discount from the average market price while purchases with cash payments are made at market price.

O 1,514,096 shares of common stock were issued t Common stockholders incur no brokerage commission cover conversions of convertible preference stock prior or service charges on their purchases.

to their redemption m December and to provide shares Beginning with the April 1,1982 dividend payment, purchased under the Dividend Reinvestment and Stock the plan was amended to allow participants to reinvest.

Purchase Plan and the Investment Tax Credit Employee dividends on a portion of their shares of common stock-Stock Ownership Plan.

and to receive cash dividends on the remaining shares.

O During the year, commercial paper was sold at inter-This change permits more stockholders to take advan-est rates ranging from 8.10% and.15.875%. Such tage of the " Economic Recovery Tax Act of 1981" short-term debt is issued on an interim basis to provide which allows deferral of Federal income taxes on up to funds for construction and other corporate purposes.

$750 of reinvested dividends, $1,500 if filing ajoint return.

During 1982, $90,138,000 of 10% Series due July 1, 1982 First Refunding Mortgage Bonds were redeemed.

The tax deferral provisions of the above Act were.

at maturity and $12,362,000 principal amount of bonds effective with dividends rem, vested on/or after January and debentums were retired for sinking funds. On De_

1,1982 and had a favorable impact on the Company's cember 3,1982,19,777 shares of 6% % Convertible plan. During 1982, over 30% of the common stock--

Cumulative Preference Stock-representing all out-holders reinvested $17 million representing 25% of.

standing shares of that Series-were redeemed.

common dividends in additional shares under the plan.

This compares to 20% of stockholders and 19% of total Dividend Reinvestment and Stock Purchase Plan dividends reinvested during 1981.

The Company's Dividend Reinvestment and Stock Purchase Plan provides common stockholders an up-portunity to acquire additional shares of common stock l

Average Rate Per Kilowatthour of Electricity Average Rate Per Therm of Gas All Customer Categories AllCustomer Categories 70c Fullleur 1982 Full hear 1982 L

12e 8-city Average 60 10 50 8

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RHYTHMS OF THE REGION lMMM2BZMMMMIMMW3M3EEM2DZ%Dmmaux5:CamawMEEM!i SERVING Energy planning may The key to the Company's flexibility is the Calvert b

" exact s e Cliffs Nuclear Power Plant. The plant's prodigious out-THE DYNAMICS "nc"e' Even if regional put oflow cost electricity has helped BG&E to accom-I I

e OF GROWTH growth patterns we e to modate the new customers in the city of Baltimore and remain constant, our forecasters would still have to con-surrounding area without adding new facilities. During tend with the vagaries of weather, shifts in the economy, 1982, the new 279,000 square foot Federal Reserve political, social, and regulatory attitudes, and unfore-Building and the Social Security Computer Center, with i

seen technological advances. But, under present regula-a daily use of 165,000 kilowatt-hours, were both easily tions it can take many years to design, build, and absorbed into the BG&E system. Constmetion will license a power plant, BG&E must plan and act today soon begin on a new downtown retail district called if Central Maryland is to have the power it needs in Market Center and planning is underway for the Market the 90's.

Place Complex of offices and retail stores. The new The completion of two coal fired units at the Brandon subway. too, will soon start to transport an expected Shores Power Plant will provide the energy our area 83,000 commuters a day. To do this, it will draw 21,500 will need in the 80's and the early part of the next de-kilowatts of power during periods of peak use and con-cade. Hewever. our forecasts now indicate that, even sume 125,400 kilowett-hours per day. BG&E stands when the effects of conservation are considered, Central ready to supply the energy all these facilities will need.

Maryland will outgrow this new capacity sometime in As we plan for Central Maryland's future energy the mid 90's. To help sustain this region's growth into gmwth, BG&E will continue to rely on its current fuel the 21st century, BG&E continued to move ahead in mix of nuclear and coal, supplemented by oil, hydro, 1982 with the planning process tur a new coal-fueled and gas, while adding some promising developing tech-plant that could be built on our Perryman site in Harford nologies. By advocating energy management and con-County. As always, we'll keep the schedules flexible to servation, together with the use of heat recovery, passive allow us to take our cues from the needs of the region.

solar, and heat pump technologies, BG&E expects to BG&E's planning process is designed to keep us re-moderate on-peak demands even as the region grows.

sponsive to the changing environment. Flexibility is one New rate schedules, keyed to the time of use of energy, of our greatest strengths. As the economy slowed down will encourage our customers to shift some of their usage in the early 80's we ere able to delay construction at the to off-peak times. This will help BG&E to utilize exist-Brandon Shores Power Plant without any adverse im-ing electric generators more efficiently and lower costs pact on the cost of the plant. In aii actions, our consis-to customers.

tent goal is to meet peak demand at the lowest possible Central Maryland's energy picture is becoming more cost.

complex. BG&E will expand its role in response to the emerging rhythms of our region.

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9

RHYTHMS OF THE REGION

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gggg Once again in 1982, allow us to offer gas customers a fuel savings beginning B &E's electric rates were in 1983. This armngement isjust one of the Company's AFFORDABLE among the lowest in major projects to conserve resources and money by mcycling ENERGY East Coast cities from Nor-waste.

folk to Boston. With over 55 percent of the Company's Rates themselves can be an effective tool to keep electric power generated by Calvert Cliffs and the rest energy prices reasonable. This year BG&E began testing primarily from low cost coal, BG&E has the ability to

" Time of Day" rates for 480 of our largest commercial

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offer consistently reasonable rates.

and industrial customens. Reduced off-peak rates make Our enviable situation directly reflects the Company's it cost effective for companies to redesign their energy commitment to long-range planning. When world events use. If customers can shift electric use to off-peak peri-and the national economy indicated a need to look criti-ods, it will help BG&E hold down peak demand while cally at fuel sources, we were able to adapt quickly. The accommodating increased growth. This, in turn, will original plans for the Brandon Shores Power Plant in-help BG&E delay the need for additional construction cluded the option to burn either oil or coal and we were and lead to long-term savings on the cost of borrowed able casily to exercise the coal option. We also began funds.

the conversion of the Charles P Crane Power Plant For residential customers, we're now testing a new from oil to coal. Our customers will reap the benefit of Economy Service schedule. The new tariff offers lower substantial fuel savings beginning in 1983.

mtes to those customers who agree to have a demand No amount of planning, however, can keep basic costs limiter installed in their homes. With this device the from increasing in the current economy. At BG&E, we customer can use no more than 25 amperes of electricity hope that by finding ways to do our work better, we can at any given moment. Coupled with Company spon-keep the rate ofincrease down. Cost control is a prime sored energy education and weatherization programs, objective in every aspect of operations, from our Work-Economy Service represents a way that low-income ing Smarter program, which rewards BG&E employees families may receive the needed power at affordable for cost saving ideas, to an even more stringent control

costs, on this year's budget. To improve productivity, BG&E Technology is increasingly providing the means for all two years ago pioneered the Quality Circles program in BG&E customers to use energy more efficiently. The l the utility industry. The pilot program of five Circles Company recently received a National Energy Watch I pmduced an eight to one, benefit to cost ratio. At the Award fmm the Edison Electric Institute for outstanding end of 1982, the Company had 26 Circles in 18 of our energy conservation in our Headquarters Building. This 35 departments.

same award has been earned by approximately 20 of our The fuel cost savings from our genemtion mix is al-largest customers. BG&E's non-utility subsidiary-Re-mady substantial. To maximize those savings, we make source & Property Management, Inc. (RPM)-is now daily adjustments to our fuel mix in cooperation with the Aveloping a new park, Brandon Woods Business Park, PJM Interconnection and on a weekly basis, contract for which will be a showcase for state-of-the-art conserva-power from the power systems to the west. We are nego-tion techniques.

tiating to purchase raw gas from a municipally owned By working together, BG&E and Central Maryland sewage treatment plant. Separating the methane will can ensure that our region will always have the plentiful energy it needs at rates it can afford.

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RHYTHMS OF THE REGION lWSTSM3MMGi2%"humWAMV"W%.a1 % = M a m w a m d2 M M" % w ' m REACHING Responding to the puise of level 4. Economy Service is a big step in that direction, INTO THE thuegion meanntaying but energy educanon is of prinw imponance. Ounun involved in the community. veys show that some customers have difficulty deter-COMUNITY BG&E is more than a sun-mining why and where they are using too much energy.

plier and producer of energy. We are a creative resource To help them understand their needs. BG&E makes free for the mgion. If there is an area where we can help, energy audits available through the Baltimore Energy either individually or comorately, we will try to do so.

Alliance Program. For qualified customers, we follow Symbolizing the commitment of BG&E and its 9,000 up those audits with home insulation or weatherization.

plus employees to the United Way of Central Maryland, This is part of the Company's contribution to Mayor President George V. McGowan served as the genem!

Schaefer's " Blue Chip-In" program, which offers the chairman of the 1982 campaign. The campaign netted additional benefit of providing jobs for ex-CETA the United Way over $23 million, underscoring the gen-workers.

erosity and compassion of the community.

Following on the success of the customer service When BG&E's Customer Relations staff realized the centers in the western city and suburbs, we will open number of ciderly, sick, and disabled customers who a similar center in east Baitimore in 1983. Customers were " invisible" to the community except when their in this area will be able to pay bills, shop, and make utility bills were overdue, they developed the Customer other service arrangements without leaving their own Assistance and Referral Evaluation System (CARES).

neighborhood.

Initiated in 1982, this program is designed to put these BG&E is also playing a leadership role in Baltimore customers in touch with the private and governmental City's campaign to stop vandalism. As a result of van-l agencies available to assist them.

dalism, the City's public and private sectors sustain l

in May,1979 BG&E became a founding force behind losses of $30 million each yea r. BG&E alone estimates i

the creation of the Baltimore Fuel Fund, a private corpo-its loss at $1 million annually. The campaign, initiated ration designed to help low-income families manage in 1982 by Baltimore City's Mayor Schaefer, goes their energy bills. The fund has since become a model hand-in-hand with our drive to improve productivity.

for other utilities across the country. BG&E has commit-An investment in public education and security is far ted nearly $900,000 to the Fund in matching bill credits, less expensive than recovering the damage done by helping over 8,000 customers to pay their bills and, most pranksters.

important, to retain their dignity.

BG&E can oniy be as strong as the community it Helping the poor avoid delinquent energy payments is serves. By sharing the Company's expertise and creativ-essential, but we believe the community has a broader ity with our neighbors BG&E ensures the vitality of responsibili'y to meet the energy needs of the poor the region.

BG&E is determined to assist its cuMomers in using en-crgy more efficiently to keep their bills at manageable MMM2Md2MM2GETFWMMEi7&MMMEG"s?MMP.W&MBEMZ1TEMM l

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RHYTHMS OF THE REGION gggg For BG&E, making sure that Solar energy promises to be an important factor for the M NN ur c mmunity g ts the most future, but solar panels perhaps economical in Arizona from its energy dollars means may not be cost effective in Maryland. We are looking N

staying in the forefront of at thermal uses of solar, and the use of photovoltaic for energy research. On our own, and in conjunction with direct conversion of sunlight to electricity. To learn how the Electric Power Research Institute and the Gas Re-we can best use solar energy, BG&E is monitoring the scarch Institute, we are investigating new technologies available sunlight in our area and testing a wide range that can lower the cost of reliably producing, delivering of devices to determine which ones make sense for our and using energy in an environmentally acceptable way, customers. We're hopeful that some families will be Burning coal had raised concern over air pollution.

able to benefit from solar-assisted water heating and The new filtration systems at our plants, however, now even more from the designs we'ra studying for passive make the process much cleaner. The coal that will fuel solar homes.

our future Perryman Plant may utilize one of the new, Solar, however, is just one among many promising still cleaner coal technologies: either fluidized-bed technologies. The heat pump water heater, advanced gas combustion or one of the coal gasification methods.

heating systems and a variety of thermal storage and Increasingly, technology is focusing on ways to turn control systems should help the broad range of our cus-wasta or by-pmducts into resources. 'Rirning waste or m.ners improve their energy management.

by-products into resources is the heart of BG&E's con-Over the long-term, the fuel cell holds great potential servation effort. Our Crane Plant will soon be burning for environmentally sound generation oflow-cost elec-360 tons a day of Refuse Derived Fuel or processed tricity. Large enough for commercial use, a fuel cell tmsh, supplied by the Maryland Environmental Ser-works like a storage battery, combining hydrogen and vices. We are test burning sewage sludge at our Wagner oxygen electrochemically to produce DC electricity, Plant and expect to buy power produced by burning which is then converted to useable AC. BG&E will be solid waste at a regional incinerator now under construc-testing a 40 kilowatt cell starting in late 1983. The Com-tion. All of these measures will contribute to the solution pany is also working with the Electric Power Research of our community's solid waste dilemma.

Institute and United Technologies to develop a ten mega-BG&E's subsidiary, RPM, has as a basic objective the watt fuel cell. Too big for on-site applications, this cell utilization of waste products as resources in an environ-will, in effect, bring power generation closer to a user mentally sound and economically beneficial manner.

center. It's quiet, clean, efficient, and so environmen-The initial project is cmation of Brandon Woods Busi-tally benign it could be located in a residential area.

ness Park using clean flyash from the existing Herbert The thread uniting all of BG&E's tesearch is our com-A. Wagner Power Plant and later from the Brandon mitment to find, notjust the best technology, but the best Shores Power Plant now under construction.

technology for Central Maryland.

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RHYTHMS OF THE REGION

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PROVIDING Attmetive neighbor-In today's economy, the purchase of a new house is i

hoods with available difficult for many families. More and more owners have PRESIDENTIAL housing are key cle-instead turned to modifying and upgrading their existing i

ENERGY NEEDS ments in the economic homes. That in part has resulted in a tripling of requests

)

development of the region. When companies consider ta BG&E for home energy audits. In 1982, we com-relocating in Central Maryland, managers want to know pleted almost 13,000 of these audits. Owner follow-up l

that their employees will find affordable housing. A has been impressive. Ninety-nine percent of audited l

planned community like Columbia, now 15 years old, homes have been modified in some manner for energy j

helps to answer their needs.

savings based on the recommendations made by our l

All over Central Maryland, BG&E works with archi-inspectors during the audit.

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tects and builders to find ways to lower the energy cost We are encouraging customers to become more j

of running a home. In 1977, BG&E founded the Energy selective in their energy usage, to use electricity where i

. Alliance to develop a communications network between it's most effective, to choose appliances that are the right i the Company and local architects, engineers, builders size for their needs, furnaces that are not too big for their l and contractors. In addition to sponsoring seminars, en-homes and whenever possible, to utilize the most effi-ergy expositions and refresher courses for these profes-cient energy equipment available. For example, we are i

sionals, the Company publishes a series of newsletters.

urging families to use high intensity, off-peak outdoor j

One of them, the Home Builders Alliance directly ad-lighting for safety. We formed the Heat Pump Associa-dresses issues of residential energy management.

tion to inform home building professionals and the pub-The National Energy Watch, a program developed by lie about the conservation potential of this heating the Edison Electric Institute, helps homeowners and device.

their contractors build energy efficient houses by provid-Efficiency measures like these will not only lower the ing a set of thermal guidelines. As homes are built or re-customers immediate cost of using energy, but by con-stored they are fitted with multiple glazed windows, serving fuel and reducing the Company's need for new ample insulation, and state-of-the-art heating and cool-generating capacity, they will help keep down the cost of ing systems. When the work is completed, the National future home energy consumption.

Energy Watch Program certifies the houses as energy efficient.

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l Columbia, a nationally known example of a suc-s.

cessful planned commu-W...

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nity, celebrated its 15th t,

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year in 1982 with a growing Z l4DJ y" ;

population of 60,000.lts growth,like other residen-Y

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tial areas in central Mary.

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land, depends on BGarE to s

,i ?y provide power to keep that Q;

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shows Columbia's original

',ib size, and today's growth, 17

RHYTHMS Of THE REGION

,s SUPPORTING As a region, Central pated in the Company sponsored Mid Atlantic Energy l ggg Maryland is ideally Conference and Exposition. They attended workshops, suited to the develop-viewed exhibits and shared ideas on energy efficiency DEVELOPMENT ment of high technol-in the work place.

ogy and medically oriented industries. We have the port, Beyond our traditional role, the Company is trying to mil, and air facilities they need, the universities and hos-improve the business climate by creating the very oppor-pitals, and a highly skilled work force. The state of tunities our area needs. The first thirty acre section of Maryland is actively pursuing these highly sought after Resource & Property Management's 201 acre Brandon companics, and BG&E stands ready to work with them:

Woods Business Park is now ready for sale. RPM is ac-ready with generating capacity, exceptional reliability, tively seeking national firms as tenants. Ultimately, the and long-term rate stability.

Park will bring 15 to 25 businesses to the region.

Central Maryland needs new blood. Where BG&E RPM is already planning to develop other sites as did experience growth, we found that eighty percent of business communities, making Central Maryland even it, in 1982, was generated by companies almady in more attmetive to new firms in the years to come. To in-BG&E's service territory. While pmjected new business crease energy efficiency in these parks, businesses will growth for 1983 is encouraging, we need to expand be located according to energy compatibility. One com-business opportunities in the area, if economic recovery pany's waste heat might contribute to another firm's is to be complete.

heating or process needs, making an energy park far As a utility we're working to attract new business, gmater than the sum ofits parts.

first, by providing reliable service at reasonable rates, BG&E sees in the concept of the energy park a new and second, by offering a variety of services to business market place opportunity for the coming decade, people aimed at helping them maximize their energy Through it, we can strengthen the Company's future fi-dollars. Through the Energy Alliance, the Company nancial performance and at the same time attract new publishes the Open Line, a newsletter designed to keep business growth for the region. As BG&E widens its ho-industrial and commercial customers current on the rizons, we can apply our expertise to the solution of latest in energy management devices.

more far reaching community problems. Growing with The Company also sponsors seminars and exposi-the community, we improve our ability to follow and en-4 tions. More than 1,900 business people recently partici-hance the rhythm of the region, j

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MD, chose this region for its importont information cen-N M^i l

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o Beltsville, a key resource N

for Crop Genetics as it de-Mf velops disease resistant k

strains of sugar cone. Reli-5 oble power supply is Im-portant for their climate b

controlled lobs. Baltimore iV offers a wide range of in-d$

qk dustrial and commerclol centerslocated around

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BALTIMORE GAS AND ELECTRIC COMPANY f?KMm?mMMMMEBMMMEMMMM5MLM.mummM CHARACTERISTICS CF THE EUSINESS AND THE AREA SERVED Baltimore Gas and Electric Company supplies electric, gas and Balance likewise is a dominant characteristic of the Company's steam utility service to a major metropolitan region that is noted for electric generating capability, comprising 5,025,000 kilowatts an economic stability founded on diversification of industry, ofinstalled capacity and firm purchases. Of this total,33% (sup-

)

growth in population, privately-financed mtan renewal, and civic plying 56% of 1982 customer requirements)is nuclear; 33 % is and cultural advancement.

residual fuel oil; 17 % is coal; 12% is light distillate oil; 3 % is hy-At year-end 1982, the Company served 859,139 electric cus-dmelectric; and 2 % is gas-fueled. The Company owns nine operat-tomers and 513,006 gas customers. Total revenues amounted to ing Centml Maryland power plants, with additional generating

)

$1.6 billion. Our 10 largest electric customers accounted for only capacity provided by shared ownership of two mine-mouth plants l

9% of total 1982 electric revenues, and the 10 largest gas cus-and a small hydroelectric station, all m Pennsylvania, plus mem-f tomers provided 19 % of total 1982 gas revenues. The 20 largest bership in the Pennsylvania-New Jersey-Maryland Interconnect-l l

customers overall were the source of 15% of corporate revenues tion, which affords access to pooled capacity on advantageous i

for the year.

economic terms.

The diversity inherent in this broad revenue base is reinforced, Facilities for the production and s.orage ofliquefied natural gas, moreover, by the area's exceptional economic balance ofindustry synthetic natural gas, and propane gas are maintained at three i

. commerce.. educational, medical, and other service facili-Company plants in Central Maryland, which supplement pipeline ties.. and government installations. This balance is reflected in supplies of natural gas as the need arises.

the customer distribution of 1982 unit sales: on the electric side.

An increasing population, desirable living conditions and excep- '1 35% residential,18% commercial,47% industrial; for gas,40%

tional cultural and recreational advantages, assures an abundant residential. 6% commercial,54 % industrial. In 1982,70 % of elec-labor supply, especially noteworthy in the professional and skilled i

tric revenues and 59% of gas revenues were derived from sales categories, outside the City of Baltimore.

The total area served, which includes the City of Baltimore and extends into nine counties, approximates, for electricity,2,300 square miles, with some 2,324,000 residents; for gas,600 square miles, with a population estimated at 1,804,000. Steam is pro-duced for sale to 612 customers located in downtown Baltimore.

j l

EmmrmemmssmRessmammImammmmmmossa <

CEMMON STOCK DATA The Company's Common Stock is listed on the New York, Mid-to receive when due the applicable preference stock redemption west and Pacific stock exchanges and has unlisted trading privi-payments, before any dividend on the Common Stock shall be paid leges on the Boston, Cincinnati and Philadelphia exchanges.

or set apart.

Dividends have been paid on the Common Stock continuously Dividend Poh.ey s nee 1910. Quarterly dividends were paid on the Common Stock The Common Stock.is entitled to dividends when and as declared during 1982 and 1981 in the amounts set forth in the accompanying by the Board of Directors. There are no limitations in any inden-table.

ture or other agreements on payment of dividends; however, hold-Futum dividends depend upon future carnings, the financial con-ers of Pn ferred Stock (first) and holders of Preference Stock (next) dition of the Company and other factors.

are entitled to receive, when and as declared, from the surplus or net profits, cumulative yearly dividends at the fixed preferential rate specified for each Series and no more, payable quarterly, and Common Stock Dividends 1982 1981 and Price Ranges (From Composite Transactions as Dividend Price Dividend Price reported by The Wall Street Journa4 Paid

,fligh Low Paid High Low First Quarter

$.67

$26%

$22%

$.64

$22%

$19%

Second Quarter

.67 27 %

24 %

.64 24 %

21 %

Third Quarter.

.71 29 %

24 %

.67 24 %

21 Fourth Quarter.

,71 30 %

26 %

.67 25 %

21%

Number of Common Stockholders of record as of December 31,1982.. 87,026.

21

BALTIMORE GAS AND ELECTRIC COMPANY REEEEETGMETMTEFNUEEM12iTRSE2ifM?2I2EIl&MZh"EMIENZU22EE OPERATIN3 STATISTICS Electric Operating Statistles 1981_ _

_ 1980 1979 1978 1972 1982 Revenues (Dollar Amounts in Thousands)

Residential..

413,139 366,903

$ 342,796

$ 274,079 5 270,536

$ 116,692 Commercial.

230,628 211,889 198,936 174,157 171,363 81,333 Industrial.,

386,237 350,553 311,182 263,319 251,966 102,820 Other 5,602 4.815 4,350 3,401 3,308 1,790 Total.,.

$ 1,035,606 5

934,160

$ 857,264

$ 714,956

$ 697,173

$ 302,635 Sales-MWH Residential,

6,101,831 6,006.255 6,005,110 5,496,737 5,434,958 4,101,517 Commercial 3,012,927 3,005.G48 3,063,119 3,052,081 3,019,633 2,541,624 Industrial..,,

_ 8,177,421

_ 8,573,161, 8,159,691

_ 8,274,4_2_2_

_ 7,71,5,633 6,347,497 Total.

_ 17,292 179 17,584,4_64

_I7,227,920 16,823,240 16,170,224 12,990,638 Customers Residential.

780,119 770,281 760;203 747,699 734,186 653,208 Commercial 77,144 76,171 75,144 74,575 74,626 68,M9 Industrial

_ _l,876

_ _ 1,801 1,642 1,416 1,355 1,114 Tcnal.

Average use per Residential

_ 859d39

_.848,2_53

_ 836,9_8_9

_ 823,690 810,167 722,971 Customer-KWH.

7.,872 7,848 7,956 7,413 7,465 6,375 Cas Operating Statistics Revenues Residential 234,000 195,784 165,006

$ 146,598

$ 146,675 67,265 Commercial 39,561 31,946 24,522 21.097 20,315 9,577 Industrial 176,649 125,749 69,689 54,767 54,315 23,128-Intermptible Services-Industrial and Other 85,987 109,845 92,478 61,816 40,569 16,429 Other 3,241 4,625 3,041 2,796 2,712 2,040 7btal.

$_ 539,438

$__467,949

$_ _ 354,736

$_287_,07_4

$_ 2M,586 118,439 Sales-DTH Residential.

39,160,048 40,018,167 38,462,204 39,282,741 40,576,498 40,437,294 i Commercial 6,551,424 6,359,071 5,490,367 5,320,010 5,417,140 5,416,386

) Industrial.

34,341,145 30,237,352 19,501,190 17,671,851 18,055,404 18,944,394

' Interruptible Services-Industrial and Other

_18,576,8_87

__28,967,441

_31,656fo8 31,175,05;

_20,439,595 3_4,075,276 T(dal.

98 629,.$04 105,582,031 Customers 95,1_l,0,3_29 93,449 654 84,488,637 98.,873,350 1

Residential 478,213 477,654 476,318 473,761 472,414 457,418 Commercial 29,928 29,972 29,625 28,569 28,790 29,418 Industrial 4,705 4,606 4,315 4,941 4,969 4,583 Interruptible Scryices-Industrial and Other 160 157 103 185 184 163 Total.

513,006 512,389 510,451 507,456 506,357 491,582 Average use per Residential Customer-DTH 82,0 83.9 81.I 83.I 85.9 89.6 22

's MMMMM5MMEDMftMiEMBE6EEMMEREBE )l BALTIMORE GAS AND ELECTRIC COMPANY EMEBB7 SELECTED FINANCIAL CATA Summary of Operations 1982 1981 1980

.1979 1978' 1972

]

. Operating Re venues:

(Dollar Amounts in Thousands) i Electric.

$1,035,606 $ 934,160 $ 857,264 $ 714,956 $ 697,173. $ 302,635 Gas............

539,438 467,949 354,736 287,074 264,586 118,439 Steam.....

20,427 18,947 14.442 12,378 12,727 3,723 Total Operating Revenues 3 595,471 1,421,056 1,226.442

_l,014,408 974,486 424,797 '

Operating Expenses:

Purchased Fuel and Energy..

688,942 596,089 478,836 -

338,4M 321,266 135,120 Operations 283,141 248,020 217,009 182,055 161,981 75,986 1

Maintenance..,

90,005 87,442 75,827 M,913 55,083 -

25,3M

'1 Depreciation..,

93,342 88,398 83,181 80,338 78,063-34,440 Income Taxes:

Current..

45,208-55,742 39,604 8,987 43,619

.16,406 Deferred.

22,678 8,M3 23,352 44,149 15,818 Investment Tax Credit Adjustments 28,306 22,581 13,852 16,593 17,882 4,762 i

t Other Taxes 103,881 87,712 88,482 85,455 83,330 46,117 Total Operating Expenses.

1,355,503 1,194,627 1,020,143 820,954 777,(M2.

338,195 Operating Income 239,968 226,429 206,299 193,454 197,444 86,602 Allowance for Other Funds Used During Construction.....,,

24,282 12,162 12,053 9,545 4,006 19,475 Net Other Income and Deductions

_ _ 2 224 2,884 2,851 1,698 739.

.356 Income Before Interest Charges 266,474 241,475 221,203 2N,697 202,189 106,433 Interest Charges 111,028 106.162 93,828 86,159 83,228 42,759 Allowance for Borrowed Funds Used During Construction.

_ (19,359)

(14,346)

(12,024)

(7.778)

(3,580)

(11,194)

Net Interest Charges 91,669 91,816 81,804 78,381 79,M8 31,565 Net income 174,805

!49,659 139,399 126,316 122,541 74,868 Dividends-Preferred & Preference Stock,

27,869 26,416 22,099 19,784 18,177 12,279 Net income Applicable to Common Stock 146,936 123,243 117,300 106,532 104,3M 62,589 t

Dividends-Common Stock

_ 101,507 88,499 _ 80,754 75,373 69,467 42,571 Earnings Reinvested in the Business

$ 45,429 $ 34,744 36,546 $ ] l.159

_$__34,897

$_2_0,018 Average Shares of Common Stock Outstanding (Umusamis) 36,090 33,353 32,258 31,356 30,847 22.133 Earnings Per Average Share

$4.07

$3.70

$3.M

$3.40

$3.38 -

$2.83 Dividends Declared Per Share.

$2.80

$2.65

$2.50

$2.40

$2.25

$1.90%

Ratio of Earnings to Fixed Charges...

3.41 3.21 3.25 3.17 3.26 3.21 Ratio of Earnings to Fixed Charges and Adjusted Preferred and Preference Stock Dividends Combined.

2.47 2.31 2.40 2.37 2.45 2,36 Other l'inancial Statistics at Year End Coalization:

Common Stock. Premium, Installments

$1,204,008 $1,070,0M $1,010,941 $ 953,161 $ 906,421 $ 565,376 and Retained Earnings.

Preferred and Preference Stock Not Subject to Mandatory Redemption 234,185 240.108 241,806 242,753 245,484 208,977 Redeemable Preference Stock.

100,000 100,000 50,000 50,000 Long 'lerm Debt.

1,333,166 1,340,666 1,304,970 1,250,132 1,207,896 766,744 Total....

$2,871,359 $2,750,838 $2.607,717 $2,496,046 $2,359,801 $1,541,097 Shares of Common Stock (Umusands).

37,350 33,836 32,690 31,692 31,039 22,690 Ikiok Value Per Share,

$32.24

$31.63

$30.93

$30.08

$29.20

$24,92 Common Stockholders...

87,026 88,373 89,579 89,698 89,249 64,581 Total Utility Plant

$3,739,345 $3,437,089 $3,184,059 $2,974,653 $2,831,219 $1,790,340 Accumulated Depreciation 834,986 756,292 678,819 608,293 541,618 258,669

'Ibtal Assets..

3,513,136 3,266,403 3,073,013 2,855,984 2,673,754 1,665,722 Expenditures for AddMons to Plant.

322,700 266,956 225,003 160,917 172,402 247,895 Employees,

9,118 8,915 8,672 8,485 8,459 8,017 -

23

BALTIMORE GAS AND ELECTRIC COMPANY 12ms m mas:m= N e m2/m mGse rszassm smarmmmm MANA2EMENT'S EISCUSSISN AN3 ANALYSIS CF FINANCIAL CONIITION AND RESULTS OF OPERATION (All Note references hereunder are references to Notes to Financial Statements.)

Results of Operation Total electric sales decreased 1.7 % ic '.982 primarily due to lower Earnings sales to Bethlehem Steel Sparrows Point Plant, the Company's Earnings per share of common stock, on the increasing average largest customer. Excluding the effect of decreased sales to Bethle-number of shares outstanding in each period, were $4.07 in 1982 hem Steel, total electric sales would have increased 1.1 % and sales compared with $3.70 earned in 1981 and $3.64 in 1980. Annual to industrial customers 1.0% during 1982. Reduced levels of busi-base rate increases of $99.2 million in February 1982, $93.6 mil-ness a, a t 'so served to adversely affect 1982 sales volumes.

lion in June 1980 and $24.9 million in December 1980 authorized Residet.

.es in 1982 increased primarily due to growth in cus-by the Public Service Commission of Maryland contributed to the tomers wit: electrically-heated dwelling units. In 1981, residential increases in earnings. Also in 1982, earnings reflected a higher ac-sales remained essentially the same and commercial sales de-crual rate for Allowance for Funds Used During Constmetion as creased primarily because of milder weather during the summer authorized by the Maryland Commission in its Febmary 1982 rate cooling period versus the abnormally hot weather experienced in Order (see Note 4). Earnings were decreased in 1982 and 1981 by 1980. Industrial sales increased in 1981 because of higher produc-50 and a net 6C per share of common stock, respectively, as the tion levels, particularly in steel related industries, as compared result of certain generally nonrecurring accounting adjunments to 1980.

(see Notes 3,4,7 and 8).

Future electric sales will continue to be affected by the overall The impact of inflation on operating and capital costs, along economic situation and level of business activity in the Company's with regulatory lag, continues to have a depressing effect upon the service territory, as well as by weather conditions, additional heat-Company's carnings. In order to offset higher operat.ng costs due ing installations and customer conservation efforts, to inflation, to increase the rate of return on investment, and to re-Electria operating revenues increased each year as follows:

flect the costs of additional investment in utility plant made in the Increase (Decrease) 17 months subsequent to the test period used in the last rate pro-Fmm Prior Year cceding, the Company filed on December 6,1982 for an increase 1982 1981 in service rates. The Maryland Commission will rule on this re-(In Minions of Donars) l quest in early July 1983.

Attributable to:

Base Rate Adjustments

$ 76.1

$55.7 Electric Sales (Mwh) and Operating Revenues Fuel Rate Adjustments 25.9 14.3 The pen'ent increase (decrease) from the prior year in electric sales Maryland Electric Environmental Surcharge.

0.7 0.8 by class of customer was as follows.

S les Volumes (1.3) 6.1 1932 1981 Net increases

$101.4

$76.9

'= =

Residential I.6%

~%

Commercial 0.3 (1.9)

I"d"f,

Gas Sales (Dth) and Operating Revenues The percent increase (decrease) from the prior year in gas sales by class of customer was as follows:

1982 1981 Residential (2.1)%

4.0 %

Commercial 3.0 15.8 Industrial.

13.6 55.1 Interruptible Service.

(35.9)

(8.5)

Total.

(6.6) 11.0 Sales of Electricity Sales of Gas (Ehllioru of Kilowatts)

(Milli <ms ofDeLatherrra) 90 80 16 ja 70 60 12 s

50 10 40 8

6 30 4

20 C Industrial U Industrial 10 2 3 Commercial E Commercial G Residential O E Residential O

'72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82

'72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 24

1 gpmerGMEMJ.EEEEMEMEFAYHGEEEMNmmmmmuaGMPum wrar4E l Total gas sales decreased 6.6% in 1982 primarily due to the reduced Operanons andMaintenance level of business activity, particularly in the steel industry. Ex-Total purchased fuel and energy expense increased in both 1982 cluding the effect of decreased sales to Bethlehem Steel, gas sales and 1981 as a result of higher fuel and natum! gas prices. These in- )

would have decreased 1.0% during 1982. Total gas sales increased creases were lower by $8,883,000 in 1982 and $4,545,000 in 1981 ;

in 1981 due primarily to higher usage by and the addition of firm as a result of the deferral of over-and under-recovered fuel costs industrial customers. Decreased sales to residential customers in associated with the Company's electric fuel rate and purchased gas 1982 were attributable to milder weather, whereas increased sales adjustment clauses.

in 1981 were the result of colder weather and more gas heating Increases in opemtions and maintenance expenses mflect the customers. Gmwth in space heating customers contributed to in.

higher cost, due in large part to inflation, of paymll, employee creased sales to commercial customers during 1982 and 1981.

benefits and materials in 1982, the increases also reflect higher Sales to industrial customers rose in both periods as a result of con-uncollectible accounts and additional costs at the Calvert Cliffs versions from oil to gas and from interruptible service to firm sup Nuclear Power Plant due to refueling and maintenance activities ply. However, if gas prices continue to rise in relation to alternative and the cost of additional insurance, partially offset by lower fuels, conversions from gas by industrial customers are anticipated pension costs resulting fmm a change in actuarial assumptions l

in future periods. Lower sales to interruptible service customers (see Note 1). In 1981, such expenses included increased costs reflect the changeover to firm supply and the adverse impact of at Calvert Cliffs, greater scheduled maintenance at various fossil-higher gas prices in both periods, as well as the effects of the re.

fuel generating plants, more repair work related to major storms duced level of business activity in 1982.

and higher uncollectible accounts.

Future sales will be affected by the price and availability of gas, See Notes 6 and 7 for a discussion of deferred expenses and Note in addition to the ongoing impact of such factors as weather condi.

14 for a discussion of Contested Deferred Fuel Costs.

tions, gas conversions and conservation efforts by our customers.

I Gas operating revenues increased each year as follows:

Tates j

The Tax Equity and Fiscal Responsibility Act of 1982 made nu-l

'"["' $r$j )

merous tevisions to existing tax law which generally are effective j

nP r ax years ending after 1982. Most significant for the Company 1982 1981 are revisions to depreciation and investment tax credit rules for on Minions or Douan,)

Attributable to:

newly acquired or constructed property. These revisions do nct ira-Base Rate Adjustments

$11.9

$ 15.0 pact earnings for '1982 and are not expected to have a significant Gas Cost Adjustments.

69.2 77.7 impact on earnings in future years, although as a result of these re-Sales Volumes (9.6) 20.5 visions, the Company will realize cash flow losses in later years.

Net Inen ases

$71.5

$113.2 Federal Income Taxes-Current decreased in 1982 due to a lower level of taxable income, an increase in the investment tax credits Effective in October 1980, the Maryland Commission authorized and the effect in 1981 of recording a net tax deficiency resulting the Company to implement an Actual Cost Adjustment provision to the Purchased Gas Adjustment Clause contained in the Com-pany's gas tariff. This change has provided a better matching of gas expenses and associated revenues and will continue to pmtect against future erosion of earnings due to the anticipated continued v

l increases in natural gas prices (see Note 6).

j l

1 l

Total Utility Plant i

Willions ofDollars)

I l

l i

$3.500 t

g' d

B k g!l,_,,4J;;jy

--j#

N 2.000

{

X

+

N y.

l.500 l

7""*

W R % 4 UMb a

1 p

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' m / Q l**"

5%

y y Q y W q I

I} l Q.& h Q W kf

'72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 f

I 25 1

BALTIMORE GAS AND ELECTRIC COMPANY M551EETXEMMMTiSMMMMMEELMBIMMLW22METEMM!LT.MBLWMDME from settlement of the Internal Revenue Service audit for the years Liquidity and Capital Resources 1974-1976. The increase in 1981 was also due to a higher level of Expenditures for construction, along with the related Allowance 4

taxable income, offset in part by higher investment tax credits.

for Funds Used During Construction (AFC), and nuclear fuel for

{

Fedend Income Taxes-Deferred are the result of normalization 1980 through 1982 and estimated amounts for 1983 and 1984 are accounting for the tax benefits arising from liberalized depreciation set forth below:

Construction Al:C Nuclear Fuel T,,otal on property additions in 1976 and subsequent years and for certain other timing differences between tax and book income. The in-On Miuions of Douaro crease during 1982 was primarily due to greater liberalized depre-1980

$201

$24

$57

$282 1981 240 27 40 307 ciation related to normalized property resulting from changes made 1982 279 44 42 365 under the Ikonomic Recovery Tax Act of 1981 and the increase in the deferral of under-reuvered natural gas expenses under the hf h7 h

h85 8

Company's gas adjustment clause. This increase was partially off-set by a reduction in the deferral of fuel expenses associated with Actual constmction and nuclear fuel expenditures may vary from the Company's electric fuel clause. In 1981, the decrease was due the estimates set forth above because of a number of factors such as primarily to the repeal of the Pere :ntage Repair Allowance and the inflation and economic conditions, regulation and legislation, rates deferral of Internal Revenue Serv cc adjustments of certain timing of load growth, and environmental protection standards, as well as differences associated with nuclear facilities at Calvert Cliffs in the the cost and availability of capital.

settlement of the audit for the years 1974-1976.

During the period 1980 through 1982, the Company's internal Investment Tax Credits vary from period to period as construc-generation of cash approximated 60% of expenditures for construc-tion expenditures become eligible for the credit. A significant por-tion and nuclear fuel. Assuming timely and adequate rate relief, the tion of the increase in 1982 and 1981 was due to additional credits Company anticipates that about two-thirds of these funds required related to nuclear fuelirsuhing from the Economic Recovery Tax for 1983 and 1984 will be provided from internal sources. The re-Act of 1981.

mainder will be pmvided through the capital market, the Compa-Taxes other than income taxes increased in 1982 due to higher ny's Dividend Reinvestment and Stock Purchase Plan, and the property and capital stock taxes, paymil taxes and the Maryland Employee Stock Ownership Plan, as well as short-term commer-Gross Receipts Tax. The 1981 decn ase was due to the settlement cial paper on an interim basis (see Note 13).

of the contested Pennsylvania Gross Receipts Tax largely offset in addition, the Company estimates that appmximately $131 by higher property and capital stock taxes, payroll taxes and the million will be required for bond maturities and sinking fund pay-Maryland Gross Receipts Tax.

nwnts during the period 1983-1984 (see Note 12).

See Notes 3 and 8 for a discussion of taxes.

During the three year period ending 1982, the Company issued approximately $276 million of new first refunding mortgage Other1ncome and Income Deductions bonds, $50 million of redeemable preference stock and $128 mil-The increases in the Allowance for Funds Used During Construc-tion of new common stock of which approximately $50 tr.illion tion ( AFC) in 1982 and 1981 are attributable to continued con-was attributable to an offering of 2 million shares in April 1982 and struction at the Brandon Shores Power Plant and to an increase in the balance issued principally thmugh the Dividend Reinvestment the annual AFC rate fmm 8.13% without compounding 10 9.13%

and Stock Purchase Plan and the Investment Tax Credit Employee compounded annually, effective February 15,1982. The 1981 in-Stock Ownership Plan. During the same period, $193 million of crease was partially offset by a $1,578,000 reduction applicable to long-term debt was retired thmugh bond maturities and sinking prior year adjustments (see Note 4).

fund opemtions. The outstanding shares of the Company's Con-Wet Other Income and Deductions includes $898,000 after tax vertible Cumulatise Preference Stock,6% % Series, were re-loss in 1982 and $1,190,000 after tax gain in 1981 on debt reac-deemed in December 1982 to facilitate formation of a holding quired through sinking fund operations. Also, see Note 3 for a dis-company.

i cussion of purchased tax benefits.

The Company's capital structure as of December 31 is presented Interest charges increased due to s: des of additional securities below:

and to charges arising from settlement of the 1977-1979 and 1974-1982 1981 1976 Federal Income Tax audits (see Note 3). The issuance of Common Equity 42.0 %

39.0 %

500,000 shares of redeemable preference stock in April 1981 re.

Preferred and Preference Stock sulted in the increase in preference dividends.

(not subject to mandatory redemption)..

8.2 8.8 Redeemable Preference Stock 3.5 3.6 I.ong-Term Debt.

46.3 48.6 Inflation continues to be the major cause of attrition for cost of service regulated entities such as the Company. For more informa-tion about the impact of inflation on the Company, see Note 18.

1 l

26

BALTIMORE GAS AND ELECTmC COMPANY '

gggggggm]lglggwuMgwamwjge3EmaemggyRMg MycMmmWg[mgm[jg STATEMENTS OF INCOME Year Ended December 31 1982 1981 1980 Operating Revenues (in Thousands of Dollars)

Electric..

$1,035,606

$ 934,160

$ 857,264 Gas 539,438 467,949 354,736 l

Steam 20,427 18,947 14,442 j

Tbtal Operating Revenues 1,595,471 1,421,056 1,226,442 l

Operating Expenses 688,942

$96,089 478,836 Purchased Fuel and Energy l

Op rations 283,141 248,020 217,009 1

Maintenance.

90,005 87,442 75,827 Depreciation.

93,342 88,398 83,181 Income Taxes-Note 3...

%,192 86,966 76,808 l

Other Taxes 103,881 87.712 88,482 -

'Ib'al Operating Expenses 1,355,503 1,194,627 1,020,143 Operating income 239, % 8 226.429 206,299 l Allowance for Other Funds Used During Construction-Note 4 24,282 12,162 12,053 Net Other Income and Deductions 2,224 2,884 2,851 income Before Interest Charges 266,474 241,475 221,203 111,028 106,162 93,828 Interest Charges...

Allowance for Borrowed Funds Used During Construction-Note 4.

(19,359)

(14,346)

(12,024) l Net Interest Charges 91,669 91,816 81,804 174,805 149,659 139,399 Net income

_ 27,869 26,416 22,099 Dividends-Preferred and Preference Stock.

Net income Applicable to Common Stock

$ 146,936

$._123,243

$_117,300 Earnings Per Share of Common Stock (Based on average shares outstanding)

$4.07

$3.70

$3,64 3.41 3.21 3.25 Ratio of Earnings to Fixed Charges Ratio of Earnings to Fixed Charges and Adjusted Preferred and Preference Stock Dividends Combined 2.47 2.31 2.40 I

MMMLMMMMW,MMEMMMM2EW2MWMMWBWGTZi2MM3 '

STATEMENTS OF RETAINED EARNINGS Year Ended December 31 1982 1981 1980 i

(in Thousands of Dollars)

Balance at Beginning of Perim!.

$406,125

$371,613

$335,136 Net income...

174,805 149,659 139,399 lbtal 580,930 521,302 474,535 Cash Dividends Declared Prefened Stock (Cumulative)

Series B (at the rate of 4 % % per annum).

1,003 1,003 1,003 Series C (at the rute of 4 % per annum) 276 276 276 l Series D (at the rate of 5.40% per annum).

1,620 1,620 1,620 l Preference Stock (Cumulative)

Convertible (at the rate of 6% % per annum),

289 452

$19 1970 Series (at the rate of 8.75% per annum)..

2,625 2,625 2,625 q

1971 Series (at the rate of 7.88% per annum),,

3,940 3,940 3,940 1 1972 Series (at the rate of 7."'5% per annum).

3,100 3,100 3,100 l 1973 Series (at the rate of 7.78% per annum).

1,556 1,556 1,556 l 1974 Series (at the rate of 9.35 % per annum) 3,273 3.273 3,273 6 1979 Series (at the rate of 8.375% per annum).

4,187 4,187 4,187 l 1981 Series (at the rate of 12 % per annum)..

6,000 4,384

- 1 Common Stock (at annual rates per share, $2.44 thmugh July 1,1980, $2.56 5

thmugh April 1,1981, $2.68 through April 1,1982, and $2.84 thereafter)....

101,507 88,499 80,754 Other Charges-Expenses in connection with issuance of stock.

81 262 39 Total Charges 129,457 115,177 102,892 Balance at End of Period

$451,473

$406125

$371,643 0

= = = = = -

See notes and schedules-pagca 31 thmugh 43.

)

27

BALTIMORE GAS AND ELECTRIC COMPANY EEZ7EdM"dMEEEH3 MELI.EEM?fMZ" LEG 1GEUI?J""/f,ERM&lIfMiMENns DALANCE SHEETS December 31 Assets 1982 1981 Utility Plant On Thousands of Dollars)

Plant in service Electric-at original cost

$2,450,991

$2,353,687 Gas-at original cost 357,753 345,537 Steam-at cost.......

20,653 19,899 Common-at original cost.

134,775 119,583 Total plant in service.,

2,964,172 2,838,706 Construction work in progress-at cost 766,050

$92,574 Plant held for future use-at cost 9,123 5.809 Total utility plant.

3,739,345 3.437,089 Accumulated provision for depreciation.

_ 834,986)

(756,292)

(

Net utility plant 2,904,359 2,680,797 Nuclear fuel-at cost (net of amonization of

$292,882.000 and $238,630,000, respectively.

_ 138,326 150,98_6

. _3,04 _2,68_5

_2, _83_1,7_83 Other investments.

_ 29_ 098

_ _ l1,122 Current Assets Cash...

2,100 3,085 Special deposits and working funds 3,734 4,120 Accounts receivable:

Customers' (net of pmvision for uncollectibles of

$5.130,000 and $3,720,000, respectively) 145.341 139,090 Miscellaneous 3,774 4.456 Puel stocks-at average cost.

63,564 86,232 Materials and supplies-generally at average cost 71,694 62,602 Prepayments 65,620 48,380 Other.

4,786 5,032 360,613 352,997

! Deferred Debits Deferred fuel costs 58,365 41,135 Other 22,375 29,366

~

80,740 70,501 l Total Assets.

$3,513,136

$3,266,403

=

= = = = _

See notes and schedules-pages 31 through 43.

28

i BALTIMORE GAS AND ELECTRIC COMPANY ~

N EIMMNNE timiliarNN I

CALANCE SHEETS

-)

' December 31 -

o

. Capital and Liabilities ~

1982:

1981' j

j (in Thousands of Dollars) 1

j l-

' Common Stock and Retained Earnings j

$. 752,026 663,425 - -l Comnion stock-Schedule, page 31.

l Installments received on capital stock--common.

352' 357 Premium on preferred stock.......

'157

- 157;i{

l Retained carnings.

451,473 406,125 l-1,204,008

1,070,064..l i

~ Preferred and Preference Stock Not Subject to Mandatory Redemption Preferred stock-Schedule, page 31.................

59,185.

'59,185' i Pn ference stock-Schedule, page 31 175,000.

175,000 Convertible prefer.:nce stock-Schedule, page 31 5,923

')

234,185

- 240,108,. j Redeemable Preference Stock-Schedule, page 31 100,000-100,000' 1 Long-Term Debt L)

Mortgage bonds-Schedule, page 32..

1,302,598

.1,309,145; 1 Debentures-Schedule, page 32.....

30,668

- 31,521: i Unamortized discount und premium....

...c..

(5,394)-

(5,027) j Long-term debt estimated to be retired within one year (54,929)

(103,393) 1 1,272,843 '

1,232,246 Current Liabilities

' Notes payable....

72,900 20,850- d Accounts payable 128,525 100,126 -

Vacation costs accrued 17,721

'4,657 g

Pension costs acemed...

11,923 17,643 Taxes accrued

- 28,818

- 40,951 _l l

Interest acemed 38,531-40,875 1

Dividends declared..

33,413 27,114. i l

Long-term debt estimateti to be retired within one year 54,929 103,393-Other.

16,902 14.961 403,662 380,570 Deferred Credits Accumulated deferred investment tax credits 164,995

'134,667 Deferred income taxes 124,680 101,986 1

Other.

8,763

6,762 298,438 243,415 Commitments and Contingencies-Note 14

]

l Total Capital and Liabilities

...........$3,513,136 '

$ 3,266,403 j

See notes and schedules-pages 31 thmugh 43.

I I

i l

I I

]

'l i

l l

29 i

t

BALTIMORE GAS AND ELECTRIC COMPANY

! mammmmmmmmmmmsesmEmammemenE7mmfs STATEMENTS C F CHANGES IN FINANCIAL POSITIZN t

Year Ended December 31 1982 1981 1980' Sources of Funds On Thousands of Dollars)

Funds fmm Operations:

Net income.,

$ 174,805

$ 149.659

$ 139,399 Depreciation and amortization...

152,603 149,437 119,647 Investment tax credit adjustments 30,363 19,277 11,450 Deferred income taxes 26,482 8,643 23,352

_ 12,162)

(12,053)

_ 24 28_2)

(

(

Allowance for other funds used during construction.

Subtotal.

359,971 314,854 281,795 Funds from Outside Sources:

leng-term debt 93,632 89,424 88,883 Common stock.

88,515 24,588 21,234 i

Preference stock (net of conversions)

(3,945)

.48,092 (947) l Short-term debt-net.

52,050 20,850 l

Other-net

__ _ 5

_ 345 336 Total

$590,228

$498,153

$ 391,301

=

==

= _

Applications of Funds Construction expenditures..

$322,700

$266,956

$225,003 Allowance for other funds used during construction.

(24,282)

(12,162)

(12.053)

Purchase of nuclear fuel materials.

41,592 40,073 57,135 Deferred nuclear maintenance.

46 (49) 1,697 Common stock dividends 101,507 88,499 80,754 Preferred stock dividends 2,899 2,899 2,899 Preference stock dividends 24,970 23.517 19,200 Retirement oflong-term debt 102,500 55,304 35,162 Redemption of preference stock 1,978

)

Materials and supplies.

(13,576) 2,545 23,351 Deferred fuel costs.

17,230 8,432 3,910 Federal income taxes payable 13,656 10.537 (34,438)

Purchase of tax benefits.

16,582 Investment in subsidiary 2,718 2,649 Other-principally net change in other working capital items

_ 20,292)

_ 8 953

_ 11,319)

(

(

'Ibtal

$590,228

$498.153

$391.301 See notes and schedules-pages 31 through 43.

M M MmmTmAna mw::M m m m m mpmmm M MuwmmB A 311 TOR'S REPORT Coopers & Lybrand accepted accounting principles applied on a consistent basis.

'Ib the Stockholders of We have also previously examined, in accordance with genemlly Baltimore Gas and Electric Company accepted auditing standards, the balance sheets at December 31, 1980,1979 and 1978, and the related statements ofincome, re-We have examined the balance sheets, including the schedules of tained earnings and changes in financial position for the years outstanding stocks, bonds and debentures, of Baltimore Gas and ended December 31,1979 and 1978 (none of which are presented Electric Company at December 31,1982 and 1981, and the related herein); and we expressed unqualified opinions on those financial statements cfincome, retained earnings and changes in financial statements. In our opinion, the Summary of Operations included in position for the years ended December 31,1982,1981 and 1980.

the Selected Financial Data for each of the five years in the period Our examinations were made in accordance with generally ac.

ended December 31,1982, appearing on page 23, is fairly stated in cepted auditing standants and, accordingly, included such tests of all material respects in relation to the financial statements from the accounting records and such other auditing procedures as we which it has been derived, considered necessary in the circumstances.

In our opinion, the financial statements referred to above (page

[

d-27 through the notes to financial statements on page 43), present fairly the financial position of Bahimore Gas and Electric Com-2100 Mercantile Bank & Trust Building pany at December 31,1982 and 1981, and the n:sults ofits opera-Baltimore, Maryland 21201 tions and changes in its financial position for the years ended

,lanuary 25,1983 December 31,1982,1981 and 1980, in conformity with generally l

30

BALTIMORE GAS AND ELECTRIC COMPANY smessammmmmansanmsmemmmmmmunusemanamummmemramrasmesusammmunnemuressammmammamanummamminiumme SCHEDULES OF OUTSTANDING STOCKS December 31 1982 1981 On Thousands of Dollars) l Common Stock-without par value-45,000,000 shares authorized:

37,349,601 and 33,835,505 shares, respectively, outstanding...,

$752,026

$663,425 l

(At the end of 1982,508,594 shares were reserved for the Investment Tax Credit Employee Stock Ownership Plan, and 1,764,731 shares for the Dividend Reinvestment and Stock Purchase Plan.)

Preferred and Preference Stock Not Subject to Mandatory Redemption Preferred Stock (Cumulative)-$100 par value-1,000,000 shares authorized:

Series B 4 % %-222,921 shares outstanding.......

$ 22,292

$ 22,292 (Callable at $110 per share.)

Series C 4%-68,928 shares outstanding 6,893 6,893 l

(Callable at $105 per share.)

Series D 5.40%-300,000 shares outstanding..

30,000

' 30,000 (Callable at $101 per share.)

'Ibtal Preferred Stock S 59,185

$ 59,185 Preference Stock (Cumulative)-$100 par value-5,000,000 shares authorized:

Convertible,6% % Series-59,230 shares outstanding in 1981

$ 5,923 i (Called at $100 per share as of December 3,1982.)

30,000 30,000 8.75%,1970 Series-300,000 shares outstanding (Callable at $107 per share prior to October 1,1983 and at lesser amounts thereafter.)

7.88%,197i Series-500,000 shares outstanding 50,000 50,000 (Callable at $104 per share prior to October 1,1986 and at a lesser amount thereafter.)

7.75 %,1972 Series-400,000 shares outstanding 40,000 40,000 (Callable at $103 per share prior to October 1,1987 and at

$101 per share thereafter.)

7.78% 1973 Series-200,000 shares outstanding 20,000 20,000,

(Callable at $105.50 per share prior to December 1,1983 and at

)

lesser amounts thereafter.)

9.35%,1974 Series-350,000 shares outstanding 35,000 35,000 4

(Callable at $110 per share prior to April 1,1984 and at lesser amounts thereafter.)

Tbtal Preference Stock.

$175,000

$180,923 Redeemable Preference Stock (Cumulative)-

$100 par value-1,000,000 shares authorized:

8.375 %,1979 Series-500,000 shares outstar. ding

$ 50,000

$ 50,000 12 %, 1981 Series A-340,000 shares outstanding 34,000 34,000 12 %, 1981 Series B-160,000 shares outstanding 16,000 16,000 Total Redeemable Preference Stock...

$100,000

$100,000 See notes 10 and 11.

'31

BALTIMORE GAS AND ELECTRIC COMPANY MBEREMFmBIMwamommmagiLWEEmata.mMERnemEQammem-aT&T3 SCHEDULES GF C3TSTANZIN3 C'? NZS AN D CE2ENTUZES December 31 1982 1981 First Refunding Mortgage Bonds On Thousands of Dollars) 10% Series, due July 1,1982.

90,138 3

10% % Series, due September l5,1983..

41,677 41,677 l

9% Series, due July 1,1984..

31,000 11,000 Series V 2 % %, due December 21,1984 19,123 19,123 Series X 2 % %, due january l5,1986 24,317 24,317 i

Series Z 3 %, due July 15,1989 36,754 36,754

.(

12 % % Series, due September l5,1990 60,703 60,703

.l 3 % % Series, due December 1,1990.

29,682 29,682 16% % Series, due October 1,1991...

63,591 75,000 4% % Series, due July 15,1992..

25,000 25,000 14 % % Series, due July 15,1992

.75,000 4% Series, due March 1,1993 24,095 24,095 4 % % Series, due July 15,1994.

29,989 29,989 5%% Series,due April 15,1996.

26,680 26,680 6% % Series, due August 1,1997.

24,967 24,967 5% % installment Series, due August 15,1998 67,000 67,000 7% Series, due December 15.1998 28,705 28,705 8 % % Series, due September 15,1999 22,198 22,198 8% % Series, due September l5,2000 11,433 11,433 7 % % Series, due April 15,2001 60,000 60,000 7% % Series, due September 1,2001 60,000 60,000 7% % Series, duc January 1,2002,....

50,000 50,000 7 % % Series, duc July 1,2002 50,000 50,000 5 % % Installment Series, duc July 15,2002.

12,500 12,500 7 % % Series, due September 15,2002 50,000 50,000 8% % Series, due February 1,20N 74,986 74,986 j

6.80% Series, due September 15,2004 20,000 20,000 9% % Series, due August 1,2005 15,638 15,638

)

8 % % Series, due September 15,2006 75,000 75,000

(

8 % % Series, due September l5. 2007 75,000 75,000 i

J 9% % Series, duc July 1,2008 62,560 62,560 6.90% installment Series, due September 15,2009.

_ 55,0,00 55,000 j

Total First Refunding Mortgage Bonds.

$ 1,302,598

$ 1109,145 i

Debentures 4% % Sinking Fund Debentures, due June 15,1986 11,177 11,706 4%% Sinking Fund Debentures,due August 1,1990 19,391 19,815 Total Debentures 30,5E 31,521 l

See note 12.

1 1

i l

32

I l

. BALTIMORE GAS AND ELECTRIC COMPANY MMSEMfEMEMJiDLME!NEWMfELWMPEEMAMMUhemiadM EESPONSIZILITY FO]

FINANCIAL STATEMENTS I

Management is responsible for the information and representations Coopers & Lybrand, independent certified public accountants, contained in the Company's financial statements. The financial are engaged to examine the financial statements and express their statements are prepared in accordance with generally accepted ac-opinion thereon. Their examination is made in accordance with counting principles based upon currently available facts and cir-generally accepted auditing standards which ine!ude a review ofin-cumstances and Management's best estimates and judgments of ternal contmls. Their report appears on page 30.

k mwn conditions.

The Audit Committee of the Board of Directors, which consists The Company maintains an accounting system and related sys-of three outside Directors, meets periodically with Management, tem of internal controls which are designed to provide reasonable internal auditors and Coopers & Lybrand to review the activities of assurance that the financial records are accurate and that the Com-each in discharging their responsibilities. The internal audit staff pany's assets are protected. The Company's staff of internal audi-and Coopers & Lybrand have free access to the Audit Committee tors, which reports dimetly to the Chairman of the Board, conducts at any time.

periodic reviews to maintain the effectiveness of internal control procedures.

LTM5MMMMmmMBMMMMM"2EMMMMM35M NSTES TO FINANCIAL STATEMENTS Accounting Policies I

The accounting records of the Company are maintained in accord-Commission of Maryland. The Company's principal accounting

)

ance with the Uniform Systems of Accounts prescribed by the Fed-policies are described in Notes I through 7.

1 eral Energy Regulatory Commission and the Public Service Note 1. Pension Plan The Company maintains a noncontributory pension plan covering higher paymils. A comparison of accumulated plan benefits and its regnlar employees. The funding of the Company's pension plan plan net assets for the Company's defined benefit plan, as of 1

is thugt a deposit administration medium with an immediate par-January 1, is presented below:

ticpation Fuarantee feature, employing the aggregate cost method.

1982 1981 In 1982, IS81, and 1980, the Company's cost for pensions totaled On Thousands of Dollars)

$12,072,0(X), $17,915,(X)0, and $16,167,000, respectively, of Actu nal present value of accumul ted plan benefits:

which $9,823,00(), $l4,594,000, and $13,114,000, respectively, s

were included in expenses. The remainders were charged to con' ested 77 struction. The decrease,m 1982 was primarily the msult of a l

change in actuarial assumptions, partially offset by an inen:ase re-

$187,604

$157,187 q

sulting fmm changes in plan benefits effective June 1,1982, and Net assets available for benefits.

$257,873

$241,9% j higher payrolls. The changes in actuarial assumptions increased

~ ~~

4 1982 carnings by $4,115,0(X), equivalent to 11 c per common share The assumed investment mte of return used in determining the ac-j based on the average number of shares outstanding. The change in tuarial present value of accumulated plan benefits was 9% for 1982 j plan benefits during 1982 decreased earnings by $771,000 or 2 e and 7 % for 1981. Based on the latest available actuarial report, as per common share. The increase in 1981 was principally due to of January 1,1982 there were no unfunded vested liabilities.

Note 2. Depreciation and Maintenance The amounts set aside on the Company's books for depreciation missioning of the pmperties at the end of their usefullife. Such are genemlly based on composite straight-line rates, determined provision is subject to periodic review for future changes in eco-and revised periodically by means ofindependent engineering nomic conditiens and advances in technology.

g studies, appi;cd to the average investment in depreciable utility plant in service. The composite depreciation rate for nuclear elec-i tric properties includes a $36,000,000 provision for the decom-3 I

i l

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33

BALTIMORE GAS AND ELECTRIC COMPANY Expenditures for maintenance and repairs, including renewals of The investment in depreciable utility plant as of December 31 J minor items of property (as distinguished fmm units of property),'.

and the depreciation rates applied to each category are as follows:

are charged to operating expenses and/or clearing accounts, unless

. Composite 1982 1981f the replacement of a minor item of property effects a substantial Rate' t betterment, in which event the excess cost of the replacement over Electric

' (In Thousands of Dollars)

! ~ the estimated current cost of replacement without betterment is

-Other than Nuclear.,

3.26 %

$1,565,811

~ $1,501,938 charged to the appropriate property account, Replacements of

-Nuclear.

3.45

. 849,913 818,065 items designated as units of property are accounted for as Plant Gas.......

-(a)'

354,493.

342,247 q

Additions and Retirements. When depreciable pmperty is retired or - Steam..

2.75 20,448 19,694-i otherwise disposed of, the Accumulated Provision for Depreciation Common (a)(b).

129,315 114.059-l is charged with the " original cost" of such property, together with Total

$2,919,980

$2,796,003 the cost of removal, and is credited with the salvage value or sale i

(a) EffectiveIebniary 15.1982, as ordered by the Public Service Commission of i

. price and any other amounts recovered, such as insurance.

Maryland, the rate for gas was increased from 2.60% to 2.74 % and common -

fmm 3.00% to 3.39%.

(b) Except for transportation vehicles, which are generally depreciated on a usage basis.

..h e:

Note 3. IncomoTaxes 1982 1981-

'1980 income tax expens; is composed of the following:

(In Thousands of Dollars)

Included m O crating Expenses:

Incomt %xercurrent..

$ 45,208

$55,742

$39,604 income Taxes-Deferred.,.,.....

22.678 8,M3 23,352 investment Tax Credit Adjustments,

28,306 22,581 13,852 Tbtal Charged to Operating income..

%,192 86,966 76,808 included in Net Other income and Deductions:

Income Taxes-Cunrnt..

(10,152) 1,923.

2,049 -

Income Taxes-Deferred..

3,804 Investment Tax Credit Adjustments 6,908 Tbtal Charged to Net Other income and Deductions..

560 1,923 2.049

.$ %._,7. 5.,_2

$88,889

.$_7_8,8._57 lbtalIncome Tax Expense Ibtal income taxes cuntntly payable consist of the following:

Federat income Tax:

l Included in Operating Expenses......

$ 44,%9

$55,476

$39,552 i

Included in Net Other Income and Deductions (10,242) 1,806 1,904 State income Tax:

included in Operating Expenses......

239 266 52 included in Net Other Income and Deductions 90 117 145

~'35,05_6

$57,665 541,653

)

'Ibtal Income Taxes Cunrntly Payable The provision for deferred Federal Income Taxes consists of the following tax l

cffects of timing differences:

Included in Operating Expenses:

Liberalized Depreciation..

$ 21,444 -

$15,316

$17,796 7,926 3.879 1,798

)

Deferred Fuct Costs.

(6,699)

(7,222)

(3,352) l Spent Nuclear Fuel Storage Costs-Note 7.

Pennsylvania Gmss Receipts Tax-Note 8.

1.639 Percentage Repair Allowance..........

(440)

(559) 6.329 Maintenance Expenditures-Calvert Cliffs....

21 (23) 781 Settlement ofI.R.S. Audit for Years 1974-1976 426 (4,387)

Tbtal Charged to Operating income,

22,678 8.643 23,352 included in Net Other income and Deductions 3,804 Total Federalincome Taxes Deferred

$ 26,482

$ 8,M3

$23,352

,=

The Investment Tax Credit Adjustments are derived as follows:

Included in Operating Expenses:

Reduction in Federal income Taxes due to credits arising from:

Eligibic Pmperty.............

$ 30,573

$25.180 '

$15.639 Employee Stock Ownership Plan..

4,299 3,3M 2,403

'Ibtal...

34,872 28,484 18,042 (6,566)

(5,903)

- (4 ;190)

Credits allocated to income..

Net Total Charged to Operating income.

28,306 22,581 13.852 -

1 Included in Net Other Income and Deductions:

Reduction in Federal income Taxes due to credits arising from:

6,356 Eligible Pmpcrty.

Employee Stock Ownership Plan.

552

'Ibtal.

6,908 34

$13,852 Net Total....

$ 35,214

. $22,581

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Investment tax cadits accruing to the benefit of employees result ject pmperty with respect to the credits pmvided under the Reve-from the additional 1 % % credit allowed by the Internal Revenue nue Act of 1971 and subsequent years, and over thirty-year periods Code to provide stock for employees under the Investment Tax with respect to the credits provided under prior Revenue Acts.

Credit Employee Stock Ownership Plan (ESOP).

Total income tax exper.se was less than the amount computed by Investment tax credits, except those related to ESOP, are being applying the Federal income tax statutory rate to book income bec l

deferred and alkicated to income ratably over the lives of the sub-fore tax. The reasons for this difference are as follows:

l l

j 1982 1981 1980 On Thousands of DollarO Tax computed at 46% statutory rate on book income before tax.

$124,916

$109,732

$100,398 i

Increases (Decreases) in tax from:

(

Excess of tax over bn4 depreciation-not normalized.

396 (2,647)

(4,807)

Allowance for Funds Used During Construction-Borrowed Funds and Other Funds.

(20,075)

(12,l94)

(11,076)

I Investment Tax Credit alkicated to income.

(6,566)

(5,903)

(4,190)

Net other items.

(1,919)

_99)

(1,468) j

(

Ltal Incone Tax Expense

$ 96,752

$ 88.889

$ 78,857 The tax reductions resulting from the difference between depre-ment of these audits, including the related interest charges, ciation recorded on the Company's books and the depreciation decreased earnings after Federal income taxes by 50 and 7c per taken for Federal income tax purposes amounted to $21,M8,000 in common share, based on the average number of shares outstanding 1982, $17,962,000 in 1981, and $22,603,000 in 1980 of which tax in 1982 and 1981, respectively.

benefits arising fmm liberalized depreciation on property additions The purchase of tax benefits in 1982 resulted in a decrease in in 1976 and subsequent years totalling $21,444,000 in 1982, current taxes of $10,712,000, an incicase in deferred taxes of 4

$ 15,316,000 in 1981, and $17,796,000 in 1980 have been

$3,8M,000, and an increase in investment tax credit adjustments nonnalized.

of $6,908,000. These effects on income taxes are included in Net In March 1982 and in September 1981, the Comptmy entered Other Income and Deductions.

into settlement agreements with the Internal Revenue Service cov-cring audits for the years 1977-1979 and 1974-1976. The settle-i Note 4. Allowance for Funds Used During Construction The. Allowance for Funds Used During Construction, a non-cash which increased 1982 carnings by $9,538,000 equivalent to 26c item, is an accounting procedure by which there are accrued allow-per common share based on the average number of shares ances for the costs of bormwed funds and other funds used to fi-outstanding, nance construction, segregated between other income and interest For ratemaking purposes, the Maryland Commission, in its Or-charges in conformance with an Order of the Federal Energy Regu-der dated June 1980, eliminated $1,578,000 from the Company's latory Commission, Such a!lowances are transferred from the rate base pertaining to retroactive accruals of Allowance for Funds Statement of Income to Construction Work in Progress in the Bal-Used During Construction stemming from rate case findings occur-ance Sheet. These allowances are not taxable income, ring between November 1972 and December 1978. Furthennore, In 1980 and 1981, the allowance was computed at a rate of as a result of a Federal Energy Regulatory Commission audit finc.

8.13% without compounding applied to the total construction ex-ing in October 1981, the Company reduced the Allowance for penditures for the Brandon Shores Power Plant. In February 1982, Funds Used During Construction capitalized as a cost of the Bran-pursuant to an Order of the Public Service Commission of Mary-don Shores project and decreased the Allowances for Bormwed land, the rute was increased to 9.13% compounded annually, Funds and Other Funds Used During Construction by $788,000 and $790,000, respectively. The total reduction of $1,578,000 rep-resented a decrease in 1981 earnings of Sc per common share based on the average number of shares outstanding.

Note 5. Otherinvestments Investment in Safe Harbor Water Power Corporation represents Management, Inc. This subsidiary was formed on December 31, two-thirds of the capital stock of that corporation, including one-1981 primarily to develop land used in the Company's fly ash man-half of the voting stock, and the Company's twerthirds interest in agement program. The investment in Resource & Pmperty Man-Safe liarbor's retained earnings, pursuant to the equity method of agement, Inc. was $5,369,000 at December 31,1982 and accounting for this investment. The investment in Safe Harbor was

$2,649,000 at December 31,1981.

$9,064,000 at December 31,1982 and $7,949,000 at December The capital stoc k of Safe liarbor and Resource & Pmperty 31,1981.

Management, Inc. owned by the Company is pledged under the The Company also uses the equity method to account for the in-Mortgage under which the Company's Mortgage Bonds are issued.

vestment in its wholly-owned subsidiary, Resource & Pmperty The Company's investment in purchased tax benefits amounted to $12,755,000 at December 31,1982.

35

BALTIMORE GAS AND ELECTRIC COMPANY EIM 7N N ElMIEEEGMSBNENN TG M E N NN M M E MI Note 6, Deferred Fuel Costs Since October 1978, the Company, by statute, has had in effect a due primarily to the difference between tk actual generation mix zero-based elect.ric fuel rate clause designed to recover the actual compared with the latest eighteen-month geocration mix used in cost of fuel used in generating electricity. Actual fuel costs are re-the formula. The balance defer ed as of December 31,1982 and coverable so long as the Company continues to demonstrate that it 1981 was $48,989,000 and $38,555,000 ($26,516,000 and has used the mon economical mix of all types of generation and

$20,881,000 net after income taxes), mspectively. See Note 14 for purchase, made every reasonable effort to minimize fuel costs and a discussion of contingencies related to Contested Deferred Fuel maintained the prodytive capacity ofits generating plants at a rea-Costs.

sonable ! /e!, As implemented by the Public Service Commission in October 1980, pdrsuant to an Order of the Maryland Conruie of MarylarJ, effective September 1,1981, the idel rate formula is sion, the Company began to defer the net over-or under-mcoveries based upa the latest eighteen-month generation mix (prior to Sep-of purchased gas costs resulting from the operation of the Pur-tember 1,1981, it was based on the latest twelve-month genevation chased Gas Adjustment Clause. The Commission's Order further mix) and the' latest three-month average cost for each type of fuel.

provided that any over sor under-recoveries of purchased gas costs The fuel rate will not change unless the calculated fuel rate is more for the twelve months ended November 30 each year shall be cred-than 5 % above or below the fuel rate then in effect. To the extent ited or charged to customers over the ensuing calendar year. The that actual accumulated fuel costs are not recovered through the deferrals as of December 31,1982 and 1981 were $9,507,000 and fuel rate then in effect, they are deferred. In actual operation, the

$2,603,000 ($5,134,000 and $1,406.000 net after income taxes),

fuel rate clause will result in under-recoveries and over-recoveties respectively.

t Note 7. Other Deferred Debits Prior to May 1977, the cost of nuclear fuel reflected an assumed

' In 1979 through 1982 the Company incurred a total of value for residual uranium less estimated shipping and reprocess-

$10,615,000 in maintenace expenditures for inspecting and re-ing costs. However, starting with the monthly fuel rate in May pairing seismic pipe surpas to meet Nuclear Regulatory Commis-1977, the Company began billing as a cost of nuclea ] fuel the cost sion requirements at the Calvert Cliffs Nuclear Poker Plant. These to provide for tnu, portation and long-term off-site spent fuel stor-costs were deferred and pursuant to the June 1980 Order of the age, with no credit for either residuel uranium or plutomom.

Maryland Comtr.ission are being amortized over twenty The amount deferred as of December 31,1982 and 19%;s

Beginning in October 1978, post-reactor shipping and dispmal was costs were deferred pursuant to an Order by the Public Service

$8,985,000 and $8,923,000 ($4,852,000 and $4,M&f)00 net after Ommission of Maryland whic't neluded these costs f.vn4 the fuel income taxes), mspectively.

rate computati n. hiits June 193() Oroer gmnting the Cempany an Dunng 1978, the Company entered into a joint venture with 9

inemase in electric base rates, the Maryland Commissior inclusd Intercontinental Energy Corporation for the purpose of mining ura-La provision for the recovery of pos' reactor shipping and disposa; nium. In light of the depressed market price of uranium, the ven-costs currently chargeable to opemtions as well as the amortiza-ture was no longer economically feasible. Accordingly, the tion, over a three-year pniod, of the costs defermd since ' tctober

$2,048,000 ($1,106,000 net after income taxes) w hich had been 1978. The unamortized balance of these deferred costs as of De-accumulated in Other Deferred Debits as a result of the joint cember 31,1982 and 1981 was $2,469J)00 and $7,399,000 venture was charged to Operations Expense in 1981. This charge

($1,332,000 and $3,995,000 net after income taxes), respectively.

resulted in a decmase in 1981 earnings after Federal income taxes Future fuel costs will be further adjuted as chnges in spent fuel of 3c per common share, based on the average number of shares i

storage costs ard reprocessing costs (if any) tdcome known.

outstanding.

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- Note 8. Other Taxes Taxes, other than taxes on income, were as follows:

. (a) In December 1981, the Company and the Commonwealth of 1982 1981 1980 Pennsylvania agreed to a settlement of the contested liability -

(In Thousands of Dollars) related to the 1977-1979 Gmss Receipts Tax applied to elec-Property......

' $ 25,323 $24,021- $22,874 tricity produced in Pennsylvania and sold outside of that State. -

Capital Stock.....

28,260 27,894 27,357 which tax was repealed effective January 1,' 1980, The settle-' '

Maryland Gross Receipts,,.

31,333 27,891 24,117 ment whereby Pennsylvania conceded appmximately 90% of

' Pennsylvania Gross Receipts (a)

(9,267).

the tax improved 1981 earnings after Federal income taxes

Maryland Electric by 90 per common share, based on the average number of Envimnmental Surcharge

'3,386 2,776 1,939 L shares outstanding.

Social Security.

16,641 15,382 13.182 Miscellaneous,.

2,463 2,242 '

I,830 107,406 90,939' 91,299 Amount included above charged principally to accounts otherthan taxes '

(3,525) (3,227). ' (2,817)

Total Other Taxes

__ $87,712 $88,482

$103,881 Note 9. Accounts Receivable l

The balance in Customers' Accounts Receivable includes approxi-though in part they do not mature within one year. It is not practi-mately $22,762,000 and $20,500,000 at December 31,1982 and cable to determine the amount of such installments which do not 1981, respectively, receivable from unmatured merchandise install-mature within one year. An annual interest mte of I8% is currently ment accounts which, in accordance with the generally recognized being applied to installment sales.

practice of utility companies, are classified as current assets al-1

.j Note 10. Changes in Common Stock and Preference Stock Not Subject to Mandatory Redemption l

Cumulative Common Stock Preference Stock r

Shares Amount Shares Amount (Dollar Amounts in Thour, ands) l-Balance at December 31,1979.

31,692.176 $617,630 - 1,835,677 $183,568

' Year 1980 -

I l

Common Stock issued under:

Dividend Reinvestment Plan.

809.228 16,752 ESOP.

156,164 3,494 I

Conversions of Convertible Preference Stock, 6% % Series, into Common Stock (decrease).

32,525 944 (9,470)_

(947)

Balance at December 31,1980.

32,690,093 638.820 1,826,207 182,621 Year 1981 l

Common Stock issued under:

1 Dividend Reinvestment Plan,

948,350 19,887 ESOP..

138,291 3,033 Conversions of Convertible Preference Stock,.

6% % Series, into Common Stock (decrease).

58,771 1.685 3 16,977) :

(1,698)

Balance at December 3!,'1981..

33,835.505.

663,425 1,809,230 180,923 -.

Yerr 1982 l

Common Stock issued under; l

Dividend Reinvestment Plan,.

1,175,854 29,103 ESOP,,

200,613 5,222 Common Stock Issue..

2,000,000 50,360 Conversions of Convertible Preference Stock, 6% % Series, into Common Stock (decrease).

. 137,629 3,916 (39,453)

- (3,945) l Redemption of Convertible Preference Stock, 6% % Series (decrease) '

(19,777)

' (1,978)'

i-Balance at December 31,1982.,

37,349,601 ' $75_2,026 1,750,000 $175,000 :

a 37

BALTIMORE GAS AND ELECTRIC COMPANY IFErrry'muggemmgggswe wggggggyp,gg;ggg=mm%m m;ma-remm!!gggggg 1

Note 11. Redeemable Preference Stock

)'

In 1981, the Company issued 340,000 shares of 12% Cumulative In July 1979, the Company issued 500,000 shares of 8.375 %

l Preference Stock,1981 Series A ($100 par value) and 160,000 Cumulative Preference Stock,1979 Series ($100 par value). The shares of 12% Cumulative Preference Stock,1981 Series B ($100 Company will redeem at par 100,000 shares ($10,000,000) of this l

par value). The Company will redeem a t par 68,000 shares series of Preference Stock in each of the years 1985 through 1989.

($6,800,000) of Series A in each of the years 1987 through 1991.

The Redeemable Preference Stock isjunior to Preferred Stock, The Company will redeem at par all shares ($16,000,000) of the ranks on a parity with Preference Stock Not Subject to Mandatory i Series B on July 1,1991.

Redempoon and prior to Common Stock as to payment of divi-dends or assets available in the event ofliquidation.

Note 12. Long-Term Debt Substantially all of the principal properties and franchises owned The Installment Series Mortgage Bonds, due September 15, by the Company are subject to a lien under the Mortgage under 2009 are payable as to principal on the fifteenth day of September which the Company's First Refunding Mortgage Bonds are issued.

in the years and the amounts as follows:

On August ist of each year, the Company is required to pay to Principal Amount Years Each Year the Mortgage Trustee an annual sinking fund payment equal to I %

of the largest amount of Mortgage Bonds outstanding under the on Thousands of Dollars)

Mortgage during the preceding 12 months. Such funds are to be 2005 through 2008,

$ 3,250 used, as provided in the Mortgage, for the purrhase of Mortgage 2009 42,000 Bonds by the Trustee in the open market and through responses t The Company is also required to make annual sinking fund pay-mvitations for scaled tender offers or for redemption (if Mortgage ments (in cash and/or Sinking Rmd Debentures) to the Trustees Bonds cannot be purchased at or bek w the applicable redemption under the Sinking Fund Debenture Indentures. The 4% % Deben-pnces) excluding the Installment Senes Mortgage Bonds of 1998, ture sinking fund payment, to be made on or before June 14 of each 2002 and 2009, the 6.80% Series Mortgage Bonds of 2004 and the year to and including 1985, requires annual payment of $400,000 9% Series Mortgage Bonds of 1984. The Company may purehase in cash, in principal amount of 4 % % Sinking Fund Debentures, or outstanding Mortgage Bonds from time to time and may submit its in a combination thereof; and the 4% % Debenture sinking fund scaled proposal for the sale of such Mortgage Bonds to the Trustee payment, to be made on or before July 31 of each year to and in-for the nnking fund, cluding 1989, requires annual payment of $600,000 in cash, in The listallment Series Mortgagc Sonds, due August 15,1998 principal amount of 4% % Sinking Fund Debentures, or in combi-are payable as to principal on the fifteenth day of August in the nation thereof. In any year, at the Ccmpany's election, an addi-years and amounts as follows:

tional sinking fund payment of up to 1600,000 (noncumulative)

Principal Amount may be made under the 4% % Smk: - Fund Debenture Indenture.

Ye:rs Each Year The combined aggregate requirements for bond maturities and On Thousands of Dollars) estimated sinking fund paymer.ls for each of the next five years are 1984 though 1986

$ 1,000 as follows:

1987 through 1990 2,000 Year Requirement 1991 through 1995 3,000 1996 and 1997 4,000 On Millions of Dollars) 1983

$55 1998 33,000 1984 76 The Installment Series Mortgage Bonds, due July 15,2002 are 1985 17 payable as to principal on the fifteenth day of July in the years and 1986 52 the amounts as follows:

1987 19 Principal Amount Yerrs

_ Each Year _

j Un Thousands of Dollars) 1993 5 420 1994 430 1995 through 1997 605 1998 and 1999 690 2000 and 2001 865 2002 6,725 1

3 38

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Note 13. Short-Term Borrowings The Company maintains bank lines of credit to provide backup fi,

. lines are at the banks' prime or base interest rates or under certain nancing capacity for commercial paper notes issued to satisfy in-credit line arrangements at a fixed percentage over the London In-

. terim financing requiremeutiand to permit short-term borrowing -

terbank Offered Rate; Information concerning short-term bormw-i flexibility. In support of such lines, the Company either pays com-ings outstanding at December 31,1982 and December 31,1981 mitment fees at a fixed rate or maintains compensating balances

' and during each of the years then ended is set forth below:

1

. (which are not restricted as to withdrawal). Borrowings under the 1982 1981.

1 (Dollar Amnuntsin Thousands)

At December 31

'3 l

Short-Term ikrTowings Outstanding; i

Commercial Paper Notes (maturing in 90 days or less).

' $ 72,900.

$ 20,850 '. -!

Weighted Average Interest Rate

. 8.79% '

12.54 % ' ~;

- Unused Lines of Credit.

$163,175

. $163,000

$ 1,879

$',1,960 Compensating Balances During the Year Ended December 31 Maximum Aggn gate Short-Term Bonowings

$ 81,150 ;

. $101,865

)

Average Daily Short-Term Borrowings (a)

$ 19,931.

$ 33,890.

Weighted Averagelntettst Rate (b)-

10.74 % '

16.27 0 (a) The sum of dollar days of outstanding bomswings divided by actual days in the period.

(b) Actual accrued interest during the perimi divided by average daily honowings.

]

i Note 14. Commitments and Contingencies a

The Company has made substantial commitments in connection Contested Deferred fuel Costs.

with its construction pmgrams for 1983 and subsequent years.

In November 1982, the Public Service Commission of Maryland J issued orders in two sepamte fuel rate proceedings denying the full -

Price-Anderson Act:

FCC0Very Ir P acement energy costs meurred by the Company i

l The Price-Anderson Act (Act) currently limits the liability of an during two unplanned maintenance outages at the Calvert Cliffs owner of a nuclear power plant to $560,000,000 for a single nu-Nuclear Power Plant. Maryland law provides that actual fuel costs clear meident. 'I he Company is protected against this potential are recovemble if the Company maintains the productive capacity'.

liability by a combination of private insurance carried by the Com-of all of its generating plants at a reasonable level. The Commis-pany (currently hmited to $160,000,000 through the nuclear insur-sion held that management bears scme responsibility for the two ance pools) and Federal governmental indemnity agreements. In outages at Calvert Cliffs because it did not show that its mainte-i the event of a nuclear meldent, as defm, ed by the Act, causing dam-nance control procedures were, ir all respects, reasonable and ap-I age to the public in excess of the limits of primary financial pro:cc-propriate for preventing the outages. The Company believes that l

tion, the Company could be assessed up to the limit of $5,000,000 the operating record of Calvert Cliffs demonstrates compliance l

per reactor at the Company's Calvert Cliffs Nuclear Power Plant, with Maryland law and, therefore, on November 29,1982, the j

For one nuclear mcident, therefore, the Company's maximum con-Company appealed the two Commission Orders in the Circuit i

tingent liability (retmspective assessment) would be $10,000,000' Court for Calvert County, Maryland. If the decisions were to be i

Under regulations issued pursuant to the Act, the Company's maxi-upheld on appeal, the Deferred Fuct costs would be decreased and mum contmgent liability in any one calendar year for payment Purchased Fuel and Energy costs increased at the time such deci-i arising from more than one nuclear meident is limited to twice the 3;, n is made by $5,697,000, representing a reduction in earnings l

retmspective assessment per reactor, or $20,000,000.

after Federal income taxes of 8.5c per common share, based on the.

i l

Nuclear Electric Insurance Limited; average number of shares outstanding. People's Counsel has also l.. The Company is a member of Nuclear Electric Insurance Limited appealed these decisions arguing that the full amount of replace-l (NEIL), an industry mutual insorance company. NEIL provides ment energy costs of approximately $12 million should be borne j

l both nuclear excess property damage insurance and insurance cos.

by the Company.

j erage for a portion of the extra costs incurred in obtaining replace-i ment power during a prolonged outage at a nuclear generating 1l facility. The Company's maximum contingent liability for a ret-1 t

rospective assessment in any one policy year which can arise from an outage at any member's nuclear facility, under the terms of the excess property damage and replacement power policies is

$9,277,000 and $15,417,000, respectively.

l Ji 39 1

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i BALTIMORE GAS AND ELECTRIC COMPANY t.

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Note 15. Segment Information -

1982-1981

'1980' Electric -

. tin Thousands of Dollars) '

Operating Revenues....

c,.

- $1,035,606

'$:934.160

$ 857,264 3 Operating Income before Income Taxes 299,854 268,891 249,510 214,021 196,159 182,149 -

Operating Incon e.,

Depreciation......

81,859 78,052 73,743' Construction Expend;tuws (a)....

303,266 239,225-W8,034',

Identifiable Assets at December 31 (a)(b)-

2,533,382 2,645,331 2,507,909.

Gm.

Operating Revenues.......

$ 539,438

$ 467,949.

$ 354,730 2i' Operating Income before income Taxes

'34,331.

42,230

'33 747' Operating income.

24,683

, ' 28,880 23,937 Depreciation,,,....

10,871' 9,766 8,886 Construction Expenditures (a).

19,018 '

'26.988 -

26.029 Identifiable Assets at December 31 (a)(b) 324,928 -

315,564 -

292,491 Stram Operating Revenues,

$ 20,427 18,947

$ 14,442 Operating Income before Income Taxes 1,975 2,274 (149) '

Operating income..

1,264 1,390 213 Depreciation.,.

612 580 552; Construction Expenditures (a),

. ' ' 416 743

'940 Identifiable Assets ar December 31 (a)(b),

- 15,439; 15,818

..15,030 '

Totti Operating Revenues..

$1,595,471

$1,421,056 ~

$ 1,226,442 Operating Income before Income Taxes

-336,160

-313,395 283.108 Operating income.

239,968 226,429

?O6,299 Depreciation...

93,342 '

88,398

-83,181 Construction Expenditures.

322,700 266,956 225,003 '

Identifiable Assets at December 31 (b) 3,173,749 2,976.713

'2,815,430 Other Assets.

339,387 289,690 257,583 Total Assets 3,513,136 3,266,403 3,073,013' (a) includes allocation of Common Utility Pmperty.

(b) Represents Utility Plant and Materials and Supplies, excluding merchandise inventory of 54.193,000,53,901.000, and $3,054,(xx) at December 31.1982.1981, and 1980, respectively; merchandising activities are reported in Other income.

Note 16. Jointly-Owned Electric Utility Plant The Company's ownership as a tenant in common of undivided The following data as of December 31 -1982 represent the Com-interests its the Keystone and Conemaugh mine-mouth electric pany's proportionate share:

generating plants, located in western Pennsylvania, entitles the Se~ '

Keystone conemaugh Company to 536 megawatts of rated capactty.

(Dollar Amounts in Thousands)

Financing and accounting for these properties are the same as Ownership interest.

20.99 % -

10.56 %

7.00 %

those for any other wholly-owned property. The Company's share Utility Plant in of the direct expenses of thejoint property is included in the corre-Service

$44,986

. 530,315

$1,486 sponding operating expenses in the Statement of Income.

Accumulated Provision for Depreciation.

15,152 8,573 391-i Construction Work in Progress 3,691; 494'

[

'h 40

MEESSENW@ENTdZMTE8M3fEEEEETGlWSMNM2ilsREMiG7NNflGE i

l Note 17. Quarterly Financial Data (Unaudited)

The following data are unaudited but, in the opinion of the Com-pany, include all adjustments (comprising only normal recurring i

accruals) necessary for a fair statement of the operating.results for the periods presented.

l The business of the Company is seasonal in nature, and it is Management's opinion that compar: sons tx: tween quarters of a l

year do not give a true indication of overall tiends and changes in operations.

Operatmg Net Income Earnings Total income Apphcable Per Share l

Operating Plus Net to Comman of Common

(

Quarter Ended Revenues AFC (a)

. Income Stock Stock j

fin Thousands of Dollars) i March 31,1982.,,,

$ 463,192

$ 73,721

$ 45,863

$ 38,876

$1.14 l

June 30,1982 366,055 63,637 38,046 31,062 0.86 September 30,1982 397,319 89,491 62,029 55,049 1.49 December 31,1982.

368,905 56,760 28,J67 21.949 0.59 Total Year 1982

$1,595,471

$283,609

$174,805

$146,936

$4.07 I

l March 31,1981

$ 384,440

$ 67,862

$ 43,482 5 37,966

$1.15 l

June 30,1981 314,152 55,999 31,442 24,545 0.74 September 30,1981 366,404 76,985 50,530 43,520 1.30 i

December 31,1981.

356,060 52J)91 24,205 17,212 0.51 l

Total Year 1981

$1,421,056

$252,937

$149,659 5123,243

$3.70 l

(a) Allowance for Fun,k Used Dunny Construction (for Borrowed Funds and Other Funds) is added to Opemtmg income in determining operating inco,ne for ratemaking purposes Note 18. Supplementary Information to Disclose the Effects of Changing Prices (Unaudited) l The following supplementary infcermation is supplied in accord-plant was acquired to the present, and differ from constant dollar i

ance with the requirements of FinanciA Accounting Standards amounts to the extent that specific prices have increased more or Board Statement No. 33, Financial Repmting and Changing less rapidly than prices in general.

Prices, for the purpose of providing certain information about The current cost of utility plant, comprising all plant in service, the effects of changing prices. It should be viewed as an estimate construction work in progress, and plant held for future use, repre-of the approximate effect of inflation, rather than as a precise sents the estimated cost of replacing existing plant assets and was measure.

determined by indexing the surviving plant by the Handy-Whitman Constant dollar amounts represent historical costs stated in terms Index of Public Utility Construction Costs. The current year's pro-of dollars of equal purchasing power, as measured by the Con-vision for depreciation on the constant dollar and current cost sumer Price Index for All Urban Consumers. Current cost amounts amounts of utility plant was determined by applying the Com-refket the changes in specific prices of plant from the date the pany's depreciation rates m the indexed plant amounts.

41

l 1

, BANIMORE GAS AND ELECTRIC COMPANY.

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Stctement of Income From Continuing Operations Adjusted for Changing Prices For the Year Ended December 31,1982 Conventional Constant Dollar Cunent Cost j

Historical Average

,. Average Cost _ _

1982 Dollars 1982 Dollars (in Thousands of Dollars) -

Oprating Revenues,

$1,595,471

$M95,471

$1.595,471.

Purchased Fuel and Energy..

688,942 700,401

' 698,714' Oprations and Maintenance..,

373,146 373,146

-373,1467

. Depreciation 93,342 215,655 237.096 Taxes...

200.073.

200,073 200 073 Total Openting Expenses 1.355.503

-1,489,275 1,509,029 Opratingincome.

239,968-106,196 86,442 c OtherIncome(including AFC)..

26.506 26,506 26.506 l Income Before interest Charges'..

266,474 132.702 112,948 j ;. Interes Charges (net o AFC).

r

- 91,669 91,669 91,669-

! Income From Continuing Operations (excluding adjustment to net recoverable cost)..

$ -174,805

$ 41,033(a) -

$; 21,279 -

Increace in Specific Prices (Current Cost) of Utility Plant and Nuclear Fuel Held During the Year (b)

$ 385,293 Adjustment to Net Recoverable Cost 8.007 (106 513)

Effect of increase in General Price Level.

-(251,319)

Excess ofIncrease in Specific Prices Aller Adjustment to Net Recoverable Cost Over Increase in General Price Level 27,461 Gain from Decline in Purchasing Power of Net Amounts Owed.

68,381 68,381 Net

$ 76,388

$_ 95,842 j

l (a) Including the adjustment to net recoverable cost, the income from continuing operations on a constant dollar basis would have been $49.(MO.000.

]

(b) At December 31,1982, current cost of utility plant and nuclear fuel, net of accumulated depreciation and amortization, was $6,03),880,000, while historical cost or net j

cost recoverable thruugh depreciation and amortization was $3,047.6F5,000.

q Nuclear fuel material and its related effect on purchased fuel and cost of plant stated in terms of constant dollars or current cost over energy expense has been adjusted in a manner similar to utility the historical cost of plant is not presently recoverable in rates, and plant for constant dollar amounts and at current market prices for is reflected as a reduction to net recoverable cost. While the rate-l current cost.

making pmcess gives no recognMon to the current cost of replac-l Fuel inventories (other than nuclear fuel), the cost of fuel used in ing utility plant and nuclear fuel, based on past pmetices, the

' generation and gas purchased for resale generally represent recent Company believes it will be allowed to earn on the increased cost acquisitions and have not been restated fmm their historical cost in ofits net investment when replacement of facilities actually occutt

.I nominal dollars. The ratemaking process limits the recovery of fuel To properly reflect the economics of rate regulation in the State and purchased gas costs to historical cost. For these reasons, fuel ment ofIncome fmm Continuing Operations, the adjustment to net

]

inventories (other than nuclear fuel) have been classified es mone-utility plant and nuclear fuel should be combined with the gain l tary assets.

from the decline in purchasing power of net amounts oweo. During As prescribed in Statement No. 33, income taxes were not a period ofinflation holders of monetary assets suffer a loss of adjusted.

general purchasing power while holders of moneta y liabilities ex-l

Under the ratemaking prescribed by the Publ;c Service Commis-perience a gain. The gain from the decline in purchasiag power of sion of Maryland, the Company is generally limited to the recovery net amounts owed is primarily attributable to the substantial l

l. of historical cost of plant in service and nuclear fuel in revenues as amount oflong-term debt outstanding which will be repaid with

~

depreciation and amortization. During periods of inflation, such dollars that are worth less than the dollars received when such se-amounts will be recovered in dollars having less purchasing power curities were issued.

j than the historical dollars invested. Therefore, any excess of the l

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'l Five-Year Comparison of Selected Supplementary Financial Data Adjusted for Changing Prices 1982 1981' 1980-1979 1978 (In Thousands of Dollars).

Operating Revenues Historical,... m.

51,595,471

$1,421,056

.$1,226,442

$1,014,408

$ 974,486 In Average 1982 Dollars.

$1,595,471

$1,509,220

$1,437,640

$1,349,900 ' $1,442,778 Historical Cost Information Adjusted for General Inflation (in average 1982 dollars) -

Income from Continuing Operations (excluding adjustment to net recoverable cost).

$ 41,033

$ 33,750

$ 47,337 5 66,425 income Per Common Share (after dividend requirements on

- preferred and preference stock and excluding adjustment to net.

. $ 1.28 '.

1 recoverable cost).

.37 5

17

.66 Net Assets at Year End at Net Recoverable Cost

$1,415.203

$1,346,476

$1,402,553

$1,5N,906 1

-l Current Cost Information (in average 1982 dollars)

Income from Continuing Operations (excluding adjustment to net recoverable cost).

$21,279

$16,931 527,208

. $27,7N Income Per Common Share (after dividend requirements on preferred and preference stock)

$ ' (.18) -

l $ ' (.33)

.04 5

.04 1

Excess ofincrease in Specific Prices After Adjustment to Net j

Recoverable Cost Over Increase in General Price Level.

$ 27,461

$ (107,231)

$ (224,823)

.$ (266,523)

Net Assets at Year-End at Net Recoverable Cost

$1,415,203

$1,346,476

$1,402,553

$1,5M,906' General Information j

Gain from Decline in Purchasing Power of Net Amounts Owed

]

$ 68,381

$ 134,241

$ 191,873

$ 214,153 (in average 1982 dollars)

Cash Divider.ds Declared Per Common Share Historical..

$ 2.80

$ 2.65

$ 2.50

$ 2.40

$ 2.25 I

in Average 1982 Dollars.

$ 2.80

$ 2.81

-$ 2.93

$ 3.19

$ 3.33 Market Price Per Common Share at Year End

$ 28.75

$ 23.13

$ 19.75

$ 22.13

$ 24.38 -

4 Historical..

In Average 1982 Dollars.

$ 28.29

$ 23.77

$ 22.11 -

$ 27.85

. $ 34.76 Average Consumer Price Index 289.3*

272.4 246.8 217.4 195.4

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Year-End Consumer Price Index.

294.0*

281.5 258.4 229.9 202.9

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? BALTIMORE GAS NND ELECTRIC COMPANY "

EdHEUMTEW"" ***N"EMEENWT"*" *WGh23 '

BOARD OF DIRECTORS '

W

? Bernard C. Thicschler -

George G. Radcliffe

' Executive Omces,.

Chairman ofthe BoardoftheI Chairman ofthe Boardand *

' Gas and Electric Building Charles Company, Baltimore i President, lhe Baltimore Life L '

. Center, PO. Box 1475,' Baltimore, -'

InsuranM amPany, Baldmore c

" Maryland 21203 ;

Geo e V. McGowan.

President ofthe Comt.hany, ;

II"'"'""") '

• Baltimore '

Charles S. Sanford, Jr.'.

. The annual meeting of.

~ AnnualMeeting

President, Bankers Trust '

. J Owen Cole.-...

. New York Corporadon, stockholders will be held at 10:00 ~.

" "b

= New York (Bank Holding '

A..M. on April 22,1983,in thej Ia o

t re

- a

-;(Ba$h Holding Company)

Company);

- Constellation Ballroom oithe '

John R Sip 1

- Hyatt Regency Baltimore,300.

Leslie B.Disharoon L..

Retired. ( rmer Vice

' Light Street, Baltimore, -

"5 j,'h' 'uf;,'al

' Chairman ofthe Board, The :

iMaryland.

,,lg

' Corporation, Baltimore.

Citizens NanonalBank), ;

g (Insurance) '

I'"I MD (Banking) t

. g,g,,,,7, Henry E Snyder,Jr.

Preferred and Preference Stock'

. Sister Kathleen Feeley,.

, GeneralManager, ProduciLine. -

The Chase Manhattan Bank,.

e d'e, College ofNotre

. Planning and Management, y.A., New yorg Kestern Electric Company, Union

• Dust Company of-

' Dame ofMaryland, Baltimore (Education)

.; A'Iol#'09"' NI -

= Maryland, Baltimore -

.q (Commumcations Equipment)

, Jerome W. Geckle '

L Common Stocki.....

.jj C. Edward Utermohle, Jr. '.

Chal man ofthe Board and f

Presudent, PHH Group, Inc.

Chairman ofthe Etecutive Morgan Guaranty Trust y

Baltimore (Vehicle and

. commiggee of the goard ofthe i Compary of New York !.

d' s

R PersonnelServices)

- Company, Baltimore

. Union Trust Company af; l-t Paul G. Miller.

George W. Velenovsky

Maryland, Baltimore'~

, Chicirman ofthe Board

• Retired. (Former Chairman of wommercial Credit Company, the Board, The Annapolis :.'

Transfer Agent

. '.O

, Banking and I'ust Company),'

Pruferted, Pteference and.

=!

r Baltimore (Financtng, Annapolis, MD (Banking)

. Common Stock :

. Insurance, etc.)

. Chemical Bank, New York i Chairman ofthe Board, Maryland National Bank,,

q McCormkk & Company, Inc.,

Baltsmore.

4 Baltimore iFood Processing, t

Spices, etc.) '

1

i New Director

. Upon written request toy 1

1 At the Annual Meeting held on Alfred H. Inners, Treasurer,.

j April 23,1982, George G. Rad-P.0, Box 1475, Baltimore,'.

j cliffe, Chairman of the Board Md. 21203, the Company will

- l and President of The Baltimore

' furnish without charge a copy :

4 Life Insurance Company, was

' ofits Form 10-K annual re- -

elected to membership on the port, including financial state,

.s Company's Board of Directors.

ments, after it is filed with the.

'i l Luetkemeyer reached the age of

. mission in March,1983.

.j Ralph G. Hoffman and John A.

Securities and Exchange Com- -

Board retirement and did not

.i stand for reelection.

It is with deep regret that we re-d port the sudden death on May 4, 1982, of J. H. Pearlstone, Jr.,

who was also elected to the t

iloard at the Annual Meeting.

I l

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l erhaps once in every century a com. contents P. munity creates a unique facility, one R j[a*"".','l$'lr', 2 with power to change a region. The new Financial Ruiew 6 i Energy Outlook 8 National Aquan.um is just such a facility, a creative waste Management 10 symbol of Baltimore's return to the water's ,'j,'ly",,$"ii ln. 8 2 edge. It completes Baltimore's transforma- . Finding Future Answers 16 tion from an old industrial city to a major $r"a"tsisM1 usiness , tourist attraction. It fuels the momentum ig. and Area Served 21 z Common Stock Data 21 1

nited by the addition of Harborplace, Charles operating statistics 22 l

Center, the Science Center and the World %""*dfj;."ll;ys { ta 23 ion Trade Center. and ^naiysis 24 ) In an era of energy consciousness, this So""'s'io"'is"anc5"s'tatements E-noteworthy facility is but one of ma7y that ,jlgr'r nirectors inside nack cover are bemg carer.,. y engmeered to be energy , efficient as well as spectacular. BG&E is proud to salute these achievements. Even as we applaud current conservation efforts, however, we are investigating sensi-I ble ways to meet the future energy needs of ' our service area-for the next year, the next l

decade, the next century. Such planning l takes time. It is not simply a matter of apply-

, ing the latest in energy technology to har-1 i ness the most available of natural resources. 4 i Flexibility must be built in to accommodate

political, social and economic uncertainties.

Planning for the future also takes people-l people with broad vision, sharp technical ex-lpertise and steadfast commitment. l We're taking the time. We have the peo-l ple. We're confident that BG&E can meet lthe energy needs of this dynamic service l area in the future. 1

The Chairmais Letter To Our Stockholders 2, the authorized return on common equity to 15.5% Wan're pleased to report that 1981 represented e other period of positive growth for BG&E. from 13.6% The amount of rate relief granted was Earnings per share were up modestly over last year. disappointing. The evidence submitted by the Com-Our common stock dividend was increased; our con-pany fully supported a higher return on common struction program continued on schedule; and we equity and a more adequate allowance for future at-were successfulin pursuit of additional rate relief trition on the Company earnings resulting from cer-which will benefit operations during 1982. tain plant and equipment expenditures and the higher projected cost of capital. However, we be-BG&E,s average rate per kilowatt hour of electricity lieve that the authorized rate relief will protect the and per therm of gas m, 1981, as shown on page 7 of Company's financial integrity for the short run but this report, continues to be the lowest among major additional rate relief will be required sooner than East Coast cities from Norfolk to Boston. Although otherwise planned. the rates have risen over the past decade, our cus-tomers are still receiving these services at bargain On the national scene, we are encouraged by many prices. We believe the Company can maintain these of the developments which have taken place during favorable price comparisons even with the additional the past year. Especially promising is the long-rate increases we need to achieve proper financial awaited recognition that the industrial spirit of this performance for ourinvestors. country is being smothered by excessive regulation. Relief in this area has obvious long-term benefits for That is why we felt confident in petitioning the Pub-is the }jty industry. Of more immediate im pm uti lic Service Commission of Maryland in July for a rate Economic Recovery 'I ax Act of 1981 which increase totalling $186 million. The Commission re-mpms n s m nge m fiscal poky oW W6 sponded by authorizing higher rates designed to pro-eral government. It demonstrates a strong shift away duce an increase of $99.2 million annually. These from a tax structure designed to further the social re-new rates became effective in February 1982. The snubon oHnconw to one mat cmaqs meenms Commission's order increased the Company's over-f r savings and investment. The utihty industry ap-all rate of return to 10.96%, reflecting an increase in plauds these poh,cy changes because they improve our prospects for finding the capital we so greatly need. Of particular interest in the Tax Act is the pro-vision which allows special tax treatment beginning in 1082, for up to $1,500 of qualified public utility dividends reinvested in new issue common stock. This allowance will make it more advantageous for many individuals to invest in public utilities. BG&E's dividend remvestment plan is a qualified plan under the Act. 1 gy-ihmm/C Inuschler

3 i . We believe that 1981 may one day be viewed as a The " safety-net" concept is not new to BG&E. We year of transition. There is a new mood in the coun-are proud of our long standing record in this area. In try, a mood which is fostered by strong National May 1979, BG&E helped pioneer a " Fuel Fund" in leadership. This leadership offers new hope, but it is Baltimore. This private, nonprofit organization is de-not without controversy. The new approach to signed to help low-income customers pay their out-changing the economic climate of the country has standing utility bills through their own funds, private only begun, and stamina for the long nm is essential. charity contributions and matching BG&E bill High inflationary pressures, which have been built credits. Since then this fund has spread to three ad-into the general economy for well over a decade, will joining counties. We have developed comprehensive not be easily reversed. The psychology of depen-programs to protect customers from utility termina-dence upon the Federal government is deeply in-tions coupled with equitable bill payment arrange-grained but, as you know, the current administration ments that have benefited both our customers and is committed to shift responsibility from the Federal the Company. These are but a few of many activities level to local governments and from the public sector that demonstrate BG&E's commitment in support of l to the private sector, the new directions being initiated by the Reagan i Administration. ) This shift is spawning some creative examples of lo-cal government and industry voluntarily working to-1982 will be a critical year in gauging the success of ) gether to meet the needs of people, especially those the Administration. Its programs and goals over the with low income and the elderly. A prime example is long term will be heavily influenced by the results of the " Baltimore Blue Chip-In Program," an alliance the 1982 elections. We urge you to exercise your l between Baltimore business leaders and the City of right to elect congressional representatives who will l Baltimore. Within this program, BG&E is working provide the leadership for continued progress in re-with the City and State of Maryland on a weatheriza-solving the vital issues that lay before us. tion and energy education project that will initially encompass 1,000 low-income homes in the City over

• U., w know that successful achievements on i a twelve month period.

the national, local or corporate level ultimately de-pend on the support and commitment of people. In recognition of this, we sincerely thank all of our em-ployees for their considerable efforts and achieve-ments in 1981. p &k l Bernard C. Trueschler Chairmanof theik>ard February 10,1982 2 L______ _ _J

The President's Report On Operations 4 To Our Stockholders During 1981, all major projects included in our con-I n reviewing BG&E's operations for the year 1981, it should be noted that no report could ade-struction program proceeded on schedule. The re-quately describe all the activities pursued by our em-conversion of Charles P. Crane Power Plant from oil ployees on behalf of our customers and our stock-to coal should be completed by the summer of 1983. holders. It was a very busy year and, as the following The cost of modifying this 400 megawatt plant is es-highlights indicate, it was a year of significant timated at $44 million, and the net savings from the achievement in fulfilling our commitment to meet use of lower-cost fuel will be a substantial benefit to the energy requirements of Central Maryland. our customers. Total sales of electricity in 1981 increased by 2.1% The construction of two new coal-fired 620 mega-over last year due to a 5.1% increase in industrial watt units at our Brandon Shores Power Plant is now sales. Cooler weather this summer was partially over one-half completed, with one unit scheduled for responsible for residential sales remaining at approx-service in 1984 and the second in 1988. The total imately the same level as last year and for commer-cost of the plant is expected to be $1.1 billion, equiv-cial sales decreasing 1.9%. Total sales of gas alent to an average cost of $900 per kilowatt of gen-increased 11.0% primarily as a result of a 15.7% in-erating capacity-a relatively low cost for units crease in sales to large commercial and industrial completed in this decade. customers; sales to residential and small commercial In terms of hydrogeneration, we're beginning to ex-customers were up 4.0% and 15.8%, respectively. pand the capacity of the Safe Harbor Water Power 'I he higher gas sales are largely attributable to Corporation-a facility m Pennsylvania of w,hich conversions from oil to gas for heating and the addi-BG&E is a two-thirds owner. The expansion plans tion oflarge boiler fuelloads. provide for five umts increasing the total capacity by In 1981, our Calvert Cliffs Nuclear Power Plant es-about 190 megawatts. All units are scheduled for tablished a new perfom1ance record by generating service by the end of 1985. 5% more electricity than in its previous record year ,l'he completion of these projects should enable of 1980. Total fuel savings from the plant have BG&E to meet the electric energy needs of Central reached the rather staggering sum of over $1.8 bil-Maryland through the 80,s. Our projectwns indicate lion-an amount equivalent to more than two times addit,onal generating capacity will not be needed be-i the total cost of the plant. These savings have been f re the early 90 s. When that need becomes a real-passed on to our customers since the first unit was ity, we will be prepared. placed in service in 1975. In September, we announced preliminary plans to build a future generating plant on a Company-owned site in Harford County, Maryland. We hope to incor-porate new coal-derived fuel technology at this plant. Depending on actual growth in peak demand and the 3 r o w ww

l l 5 l possibility of purchasing generating capacity from will be fully operational in late 1983. In December, i other utilities, the tentative completion date for the we opened an extremely modern and fully equipped l plant will be sometime during the mid 90's. We are shop complex at Brandon Shores which includes spe-l therefore incorporating maximum flexibility in the cialized labs and shops to support our operations. planning process for this new plant. And, organizationally, we restructured the Engineer-While we recognize the importance of and actively ing nd Construction Division to expand the project encourage energy conservation, we know that real management approach to more projects m order to economic growth cannot be sustamed without ex-improve our control of schedules and resources. panding our energy production capabilities. This is Our gas business continues to improve with mini-especially true for electric utilities since they are best mum additional capital requirements. The increase suited to employ our most abundant energy re-in the availability of gas from our supplier and the sources. The oppositionto new central power plants addition of new customers have been very beneficial. espoused directly by a few activist groups and indi-Partial deregulation of natural gas was initiated by rectly by others is naive at best and most certainly the Natural Gas Policy Act of 1978. The cost of gas l damaging to the future of our country. As you can has increased and will continue to increase under its see from the projects described in previous para-provisions. However, recent contracts negotiated be- , graphs, BG&E finnly rejects the no-growth agenda. tween producers and pipeline suppliers contain gas This does not mean that in building for the future, prices which, in some cases, exceed the market we are not actively investigating a variety of alterna-v lue f n tural gas. We am concend wMa hs tive energy sources. We're working with local mu-trend and these pricing provisions. Consequently, nicipalities to use solid trash to produce steam for the during a period of transition from a regulated to a de-generation of electricity; we're heavily involved in r gul ted or competitive market environment, it ap-

fuel-cell research and hope to have our own test cells pears that further modifications of the Federal i in operation within the next few years; and we're regulatory procedures are necessary in order to currently testing solar water heating systems. The avoid an adverse impact on gas distributors and ult,i-m te customers.

common goal of all our research is finding the most cost-effective way of producing and using energy. We can look back on 1981 with pride in our accom-plishments and forward to the future with cautious We made excellent progress during the year on projects designed to improve our internal operating optimism and confidence. Our projected construc-efficiency. In October, we completed construction of tion and financing requirements are moderate and our unified control center which will house our entire manageable. And we're fortunate to be serving a re-electnc system operations function. The new center vitalized territory which is now one of the most dy-namic in this country. In sum,1981 was a good year, and we expect 1982 to be even better. I l i e 1 i George V. McGowan i President February 10,1982 I

Financial Review 6 EGmings and Dividends the impact on the Company and its customers of the Earnings per share were $3.70 in 1981 compared extraordinary cost of generating or purchasing re- ) with $3.64 per. share in 1980. The quarterly divi-placement powerin the event of a prolonged outage ] dend on common stock was increased to $.67 from at Calvert Cliffs. All proceeds recovered under this $.64 per share effective with the July 1,1981 pay-insurance would be used to offset the cost of pur-ment. The new rate is equivalent to an annual divi-chased electricity provided to BG&E's customers. dend of $2.68 per share. Revised rates to cover the initial premium of about $4.1 million became effective in February 1982. Rate Relief On February 8,1982, the Public Service Commis-Construction Program l sion of Maryland granted the Company $99.2 million During 1981, $267 million was spent on construction i of rate relief on an annual basis. The new rates are of which $224 million was expended on electric facil-I designed to increase electric revenues by $84.8 mil-ities, including the Brandon Shores Power Plant, and. i lion or 9.2%; gas revenues by $13.1 million, or 3.0%; $21 million on gas projects. In addition, $40 million and steam revenues by $1.3 million, or 7.0%. In its was spent on nuclear fuel. The Company estimates i Order, the Commission increased the Company's that 1982 construction expenditures will approxi-overall rate of return to 10.96% from 9.55% mate $380 million with an additional $47 million be-reflecting an increase in the return on common eq-ing expended for nuclear fuel. l uity to 15.5% from the previous authorized level of Security Transactions 13.6%. The rate for capitahzmg the Allowance for During the year 1981, the following securities were Funds Used During Construction for expenditures issued or retired' on the Brandon Shores Plant was increased to 9.13% 500,000 shares of 12% Cumulative Preference Stock ($100 par compounded annually compared with a rate of value) were sold in April. The new stock was issued in two se-8.13% without compounding. ries-340,000 shares of Series A redeemable at par in equal amounts in each year 1987-1991 and 160,000 shares of Series NuclearInsurance The Company has received approval from the Com- $75,000,000 of 16%% Series due 1991 First Refunding Mort-mission to include in operating expenses which the gage Bonds were sold in September. Company recovers from its customers, insurance premiums associated with Nuclear Electric Insur-ance Limited. This insurance is designed to reduce $4 5400 1 3 300 2 200 1 100 D v den s ea d Earnings and Dividends E$ 0sclared Per Share l Construction Expenditures e ot Common Stock 0 (Millions oflMlars) o

• (Estimakd)

7 $11,000,000 of 9% Series due 1984 First Refunding Mortgage Dividend Reinvestment and Stock Purchase Pian Bonds were issued to the Trustee to secure withdrawal of Common stockholders of the Company are provided funds made available to the Company from the sale of $40,000,000 of 9% Pollution Control Revenue Bonds by Balti. the opportunity to acquire additional shares of com-more County, Maryland in June. The proceeds of this sale are mon stock under the Plan by reinvesting their cash 6 held by a Trustee subject to withdrawal by the Company to fi-dividends and/or by making quarterly cash pay-l-nance pollution control facilities at the Charles P. Crane ments. Reinvestment purchases are made at a 5% discount from the average market price while cash l $5,000,000 of 6.80% First Refunding Mortgage Bonds were is-sued to the Trustee to secure the withdrawal of funds remam-payment purchases are made at market price. There ing from the $20,000,000 of 6.80% Pollution Control Revenue are no brokerage or service fees m. curred on

Bonds sold by Anne Arundel County, Maryland in 1979, to fi-such purchases.

l nance pollution control facilities at the Brandon Shores t Power Plant. The Plan's attractiveness has been enhanced by en- $39,063,000 of Series U 2%% due April 1,1981 First Refund, actment of the " Economic Recovery Tax Act of ing Mortgage Bonds were redeemed at maturity, and 1981." This Act allows a stockholder participating in $16,241,000 principal amount of bonds and debentures were a qualified dividend reinvestment plan of a public retired for sinking fund operations. utility dtuing the period 1982-1985 to elect to defer 1,145,412 shares of common stock were issued to cover con-taxes on dividends reinvested in new shares of com-versions of the convertible preference stock and to provide shares purchased under the Dividend Reinvestment and Stock mon stocks with an annu 1 limit of $750 for a single Purchase Plan and the Investment Tax Credit Employee taxpayer and $1,500 for ; j.. t return. BG&E,s Plan oin l Stock Ownership Plan. is qualified under the Act. Because tax consequences l Short-term capital needs were financed during 1981 through will vary, participants should discuss specific tax the sale of commercial paper and a bank loan at interest rates questions with their own tax advisors. i ranging from 11%% to 20%%. Short-term debt is issued on an interim basis to provide funds for construction and other corpo-During 1981, over 20% of the common stockholders rate pumoses. reinvested $16.2 million representing 18.6% of com-mon dividends in additional shares under the Plan. Participation had increased to 25% of stockholders l and 20% of total common dividends paid on January 2,1982. l Av:rrgi Rite Per Average Rate Per Kil:watth urof Electricity Therm of Gas All Cust:mer Categories All Customer Categories (Full Year 198U (Full Year 1981) Baltimor3 5.30c Baltimore 43.89C Norfolk, Va. 5.32 Norfolk, Va. 47.13 Washington, D.C. 6.08 Wilmington, Del. 50.00 Wilmington. Del. 6.55 Philadelphia, Pa. 51.19 Philadelphia, Pa. 7.14 Washington, D.C. 51.88 Newark, N.J. 7.75 Atlantic City, N.J. 62.64 Atlantic City, N.J. 8.17 Newark, N.J. 55.17 Boston Mass. 9.16 Boston, Mass. 58.34 New York, N.Y. 12.69 New York, N.Y. 62.94 6-City Av: rage 7.86 8-City Average 53.66

Energy Outlook 8 To cope with the complex and unpredictable nature W hat will the U.S. Energy picture look like in the year 2000? Will central station solar power of public attitudes and legislative behavior, BG&E is be a reality? Nuclear Power a publicly accepted en-committed to a highly flexible long-range planning ergy source? Oil power but a distad memory? strategy. This strategy has produced: the coal con-version project at the Charles P. Crane Power Plant; If technological, economic and environmental coc-the planned coal-fired capability of our Brandon j siderations were the only ones at hand, then we,re Shores Power Plant; the expansion of our hydroelec-convinced that nuclear power would emerge as the tric generating capacity at Safe Harbor; and the pre-nation s primary energy source by the year 2000, liminary plans for building a coal-pow-d plant in with coal as the secondary source. But the utility in-Harford County, Maryland. dustry is subject to public attitudes and legislative constraints which inevitably affect the direction indi-A flexible approach to planning is important, but it vidual companies may take. is not enough. We believe that the public and those who affect public attitudes must be presented rational solutions to energy problems-not emo-tional rhetoric. New construction-to take full Baltimore's grand new Conven-advantage of modern energy tion Center is 400,000 square conserving technology-is feet of prime meeting space blended with the traditional ranging from small rooms to grace of old Baltimore in the new massive exhibit halls offering townhouses of Harbor Walk. The more than 115,000 square feet of use of double glazing, thick insu-floor space. tation and heat pumps for space conditioning assures maximurn efficiency in energy use. L. \\ ,e f I r m.[e- _ nm m ~ ~ ~ y

9 In 1981, BG&E continued its solid support of pro-sored or co-sponsored an energy symposium for the grams designed to communicate with the public, in-news media and a conference on the outlook for Nu-cluding legislators and regulators. Our public affairs clear Energy, distributed a booklet entitled, "Calvert staff in Washington works full time informing Con-Cliffs-Nuclear Power for Central Maryland," and gressmen and Federal regulatory agencies of the greatly increased the number of tours of the Ca' vert Company's and the industry's positions with respect Cliffs Nuclear Power Plant. to energy and other matters. This information pro-gram is also extended to state and local government. Energv education is not an easy process. A'.atudes }I'hrough the Edison Electric Institute and the Amer-e sidw to change, and opponents of sensible energy ican Gas Association, we support other efforts at courses are quick to criticize. Moreover, legislators pubhc education on energy. 'I hrough our Speakers understandably tend to view energy problems with a Bureau, we discuss energy pohcies with civic and short-term perspective, while tough energy decisions community groups. In addition, BG&E has spon-are-and must be-long-term. We shall continue the pursuit of rational energy policies for the sake of our Company and our customers. s The Lyric Theater,long a land. markin Baltimore, has received a More than 4 million people pass long overdue f acelift. For years through the passenger gates of this focus of Baltimore's per-the Baltimore-Washington International Airport each forming arts was the City a sole house for the Baltimore Sym-year. Truly a regional gateway, phony, the Baltimore Opera BWI offers daily flights to every Company, and the ballet. The corner of the nation and to many parts of the world, and has new Symphony Hall, now under construction, will herald a new grown into the area's largest air freight terminal, age in the performing arts by adding substantially to the num-ber and diversity of performances. h' h. a

Creative Waste Management 10 T he public's view of waste disposalis all too often As part of its Ash Management Program, th$ Com-charged with emotion and distorted by misun-pany purchased in 1981 a 268-acre parcel of land ad-derstanding. In 1981, BG&E assumed an active role jacent to Brandon Shores. We worked with Anne j in solving waste disposalproblems. Arundel County officials to change landfill regula-tions to permit the use of fly ash as a structural fill. Consider fly ash, a by-product of coal combustion. Our new subsidiary-Resource & Property Manage-By 1988, when both Brandon Shores units are on ment, Inc.-will develop this tract into a prime site h.ne, the Company will be generating about 500,000 for the development of a beautiful, modern business tons of fly ash a year. What once was considered. and residential community. The subsidiary will also waste is really a resource and presents exciting busi-be developing p ans for a future site for the utiliza-i ness opportunities for BG&E, not vexing disposal tion of fly ash fr om our Charles P. Crane plant. problems. Fly ash has several possible uses: as a par-tial substitute for cement in concrete production; as a Due to the shortage of landfill space, the disposal of lightweight aggregate in block and other masonry commercial and domestic solid waste, commonly products; as a road base material; and, most notably, known as " trash", has become a major problem in as an excellent structural fill and architectural land-scape material. E i The retailing core of White New Metro West is the Social Marsh, a new town center in Security Administration's northeastern Baltimore main claims processing cen-County,is the largest en. ter. Operated and maintained closed shopping mallin the by the General Serviceo Ad-region it has been designed ministration, the building is to maximize efficient use of an example of good energy energy used to heat and cool, planning and conservation Glazing of clerestories and and provides year round com-skylights is varied to accom-fort for the 5,200 people work-modate seasonalvariations in Ing there. the Sun, and major depart-ment storesinclude demand control systems to fit electric use to actual need. 4 a a a. ?l a n

11 large urban and metropolitan areas across the Coun-With respect to nuclear waste, BG&E has adequate try. BG&E is working with local jurisdictions to com- ' on-site storage capacity for spent nuclear fuel into bat this problem. In 1980, test burns of Refuse the 90's, and low-level nuclear waste is currently be-Derived Fuel or processed trash at our Charles P. ing handled at a site in South Carolina. But the fact Crane plant were very encouraging and after the remains that long-term solutions for the storage of plant is converted to burn coal, we will be conducting such material are essential. Consequently we are h further tests to determine its potential as a cheap working with the State of Maryland and other states fuel. This testing is tentatively scheduled to start in the region to solve the low-level nuclear waste early in 1984. We are also engaged with local mu-problem and with the Federal government to de-nicipalities in a project of theirs to build a central velop plans for the ultimate disposition of spent fuel. wz ste disposal plant which will prod uce enough steam to generate'approximately 40 megawatts of We plan to increase our efforts to find creative solu-electricity. BG&E would purchase all of the electnc-tions to the problems of waste disposal, solutions

p, produced' that are not just passively acceptable but clearly ben-eficial to the Company, our country, and to the towns and cities they willaffect.

\\ \\ Bethlehem Steel's massive "L" blast furnace at the Spar-Homewood House, an historic rows Point steel plant is an landmark and symbol of fa-example of the sut:stantial mous Johns Hopkins Univer-savings that accrue from in-sity,is near the site of the new dustrial use of gas ;nstead of Space Telescope Science in-oil. The furnace, one of the stltute, now under construc-largest in the world, recently tion on the University's set a new record for iron pro-campus. When completed, duced in one day, the institute will house film re-cording and data processing equipment to record and reg-ulateimages received from an orbiting telescope. Due to the i? sensitivityof theequipment, k this facility must be free from / 'V vibrations and will require carefully filterad, dust free air and precisely regulated tem-peratures. s -4d s a_,._ I i Ih . i j u y

Keeping Costs Down 12 As in past years, a major factor in our ability to main-M inimizing energy costs, maximizing energy efficiency, and maintaining an adequate level of tain low energy costs was the Calvert Cliffs Nuclear earnings-these are the goals we have established for Power Plant which supplied 61 percent of our cus-the benefit of our customers and our stockholders. tomers' total electric requirements in 1981. At the same time the plant, established another milestone Despite aggressively seekm.g rate relief as needed, by reaching a new level of electric generation. We're } tre haz e succeeded in keeping energ costs dozen; m-proud of Calvert Cliffs' reputation-backed by per-deed, gas and electric prices in the Central Maryland formance-as one of the nation,s most efficient nu-area, as shown on page 7, remain the lowest of all clear facilities. major East Coast cities from Norfolk to Boston. We plan to maintain this favorable comparison by contin-BG&E's efficiency, however, extends well beyond ually stressing efficiency in operations to our em Calvert Cliffs into all areas of the Company's op-ployees and energy conservation to our customers. erations: minimizing outages of other electric gener-ating facilities; streamlining operating procedures; b Baltimore's ne west hotel, the Full electric service, including Hyatt, located 60 the inner Har-cooking and individual heat bor, offers 502 luxurious rooms. pumps for economical space Constructed with reflective glaz. co.1itioning, are hallmarks of ing on all wall surfaces, the hotel this new 110-apartment building is heated by electric fan coils that for elderly residents. Hot water provide economical heating pre-needs will be served by a gas-cisely where and when it fired boiler. is needed. h eqi

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13 developing sound contingency plans for adequate various weatherization and conservation programs; and reliable service; and, above all, ensuring that conducting in-home energy audits; participating in all Company employees are well tmined to perfonn the National Energy Watch Program by certifying their assigned tasks in the most efficient possible new homes and businesses as energy efficient; dis-manner. tributing energy tips via bill inserts to residential cus- } Keeping energy costs down also requires sensible tomers; making available our conservation exhibits use of available energy. In 1981, we took a number at locations throughout the State; and providing of steps to help our customers conserve energy. A Company representatives to speak on energy-related few examples: offering educational programs to topics to scores of community organizations. meet the needs of specific industrial and commercial We shall continue in 1982 to do our share-and customers; participating on advisory committees for more-to ensure that our customers can continue to meet their energy requirements at the lowest possible cost. \\ 3 The manufacture of aerospace components is defannding; All-electric Provident Hospital, failures that occur outside the at-oneof thefirstsoconstructedin mosphere, even in seemingly in-the nadon, has proven so effi-significant parts, can result in cient in energy use that it quali. losses of millions of dollars. New fled for a National Energy Watch electric autoclaves for adhesive Award. The National Energy bonding, and a new drop-bottom Watch Program, sponsored by electric furnace for heat treating the Edison Electric institute,is aluminum parts are saving time, the nation's first nationally orga-Increasing production and assur-nized energy conservation effort. Ing quality. (; @ak q. 2 4 %m _ gM Mg gd M %m A p p u - s Sg Wes w w P nW Mn ? 1y n y v. nf N yy llr;' >> w ,j... f f i, }i 'Q ' i.ed, ' f} ' j.

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', Tfrofiles In Dedication, y V~7 D, ? 14 1 ,/ \\ / s f \\ 4 i a> r - amuurneramrmamimummmmmmmmman + appliance stores. MoAh(wcVet,' work in less visible s B G&E3 corporate puse beat depends in hrge measure on the economic life blood of the re-positiotis-as engirieers.,6ccountants, computer spe-gion we serve. But it takes more than a favcrable lo-cialists, plant operstors, secretaries and maintenance, cation to be successful-more even than a sound people, to name only a few. fhancial base or efficient machinery or the latest in .s M7h' ther workm.g out front or behind thesctmes, cur. / e 6nergy technology. employees do more than j.ust get thej. b u..om There,,' o It trkes peoph, dedicated employets, forming a dy / are many day-to-day problems facing both the indus) namic team committed to the gcal of helping BG&E, try and our Company in supplying sarvice. Thrcugh ! meet the nea'vsnergy neeas. As one of the State's, the efforts of our employees, we ar e aying to selve largest pyivate employers, we're proud to count our. some of them. Employees are working to rneet the 9,000 eniployees as part of dur Corporate " team." uroblems of productivity and changing technology by shari ening their skills and enhancing their knowl-1 Many of our employees have jobs that bring them in edge throu. h participation in the Cop <pany. E.duca-i g 's contact with the pu'olic-meter readers, h.ne mechan-and c,l Assistance Plan. In 1981,80Me~ nd t.iena Ics=, cta tcmer, representath'es and personnel in our v olleges. Hundr.eds of others parh.eipated m. Company sponsored training programs in both tech-nical and inanagerdent skills. i 1: 'q . l g'%7 .L glt!j4tga ~ ; j 7 ,,; l i q' a e ;. L

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4 - ;.4 jLi Engineering is the foundation =gg: y,' j. . I,. upon which all of BG&E's ser-ir ? . -- f $ g ' a .: llinic,g, vices are built. Power genera-i .t g..e, ~ ,,_ d; tion, gas or electric distribution, e,. energy use and conservation all _, a. -; -...p m ' focus upon the work of the engl. neer. Larry Noll, Project Engi-A major service organization like neer for the Company's BG&E could not function for very expansion of the Safe Harbor hy-fong without a continuous and droelectric facility,is working on 3 rapid supply of parts and equip-the design and engineering ment to replace worn or dam-phases of the expansion, which aged elements of our systems, will add five 37.5 megawatt tur-Glenn Daughton, a Materials bines to the plant. Handler at the Company's Ruth-erford stores facility,is one of the men who work the front linet, ' l' of supply by locating and retriev-ing any of the thousands of items kept eady for shipment to our crews within hours.

15 BG&E men and women have always been known as and State laws, the funds thus donated are used ex-active, informed citizens. Somc 1,500 employees clusively to help finance the election campaigns of participate voluntarily in the year-round, educational legislative candidates-for the U.S. Congress, the activities conducted by the Company's Government Maryland General Assembly, and City and County Affairs Program. Through this program they meet Councils within Central Maryland-whose public regularly with Federal, State, and local officeholders records attest to their wholehearted belief in Ameri-and candidates of both palitical parties to discuss ma-ca's private enterprise system, including investor jor public problems and governmental concerns. Ad-ownership of public utilities. ditionally, two registered, non-partisan political action committees, BG&E PAC and BG&E State BG&E people contribute generously to the United PAL,, are supported by voluntary monetary contribu-Way campaign, setting a record in 1981, giving over tions from 200 eligible executive and admuu,strative 10% more than in 1980. Clearly, they make a differ-employees. In accordance with applicable Federal ence to the communities m which they h.ve es wellas to the Company for which they work. We salute not just the 5 people shown below but every employee on the BG&E team. Electricity is quiet, dependable power, and we have often taken it for granted. But, when the power falls,it is inconvenient at best-at worst,it can be a trag-ag edy. BG&E's service operators, y' men like Steve Gahm, stand ready to restore power as rapidly as possible. Often working 14 or more hours daity during storms, <e s., )M A@Wg4 BG&E's " trouble-men" and dis-i,, u 4%

]M '> n tribution service crews are the Q visible part of the overallef' ort 4 as the Company moves into J

sction. T Financial planning is vital to the During June 1981, Nature went health of any business, but to a h - N "' on a rampage. In a few short _ i ' public utility it is an especially hours,tensof thousandsof g*f 'g] timates,short andlong term power as thuriderstorms ripped important function. Earnings es. BG&E customers were without i Tf a projections and forecasts keep a up utility poles and sent trees finger to the pulse to ensure that crashing through linos.To as- ~ earnings, rate structures and sure that we can restore service i service are kept in balance. quickly, each of BG&E's r'istricts A-Joyce Peltz, Financial Planning operates a Storm Centerin which w ' Nem Analyst, evaluates financial per-all of the district's activities are formance for Manager.ient. coordinated. JoAnn Bell, an Ex-pediter for the Northern District, assists service crews by analyz-ing incoming data to pinpoint the trouble.

Finding Future Answers 16 C cal and oil have formed the mainstays of the' The ways we consume energy in the production of utility industry since its founding in the waning electric power today may vary radically from the years of the last century. But oil, though relatively ways in which we will use it in the future. Our next clean and straightforward in use, has ballooned planned electric generating plant is not scheduled to faster in price than any other energy resource. And begin operation until the mid 90's, but the fuelit will coal, though the most abundant fossil fuel, is difficult burn, and the ways it will use that fuel, must be de-to burn cleanly and efficiently. cided upon long before the plant can be constructed. If we are to meet the future energy needs of our cus-Because of its abundance, economy and case of sup-tomers, we must find answers to the complex ques-ply, coal is the logical choice for this plant. But cur-tions of energy supply, maximum efficiency and rent coal technology means relatively low thermal miniatum environmental impact. Finding these an-efficiency and demands the installation of costly pol-swers requires research, and BG&E is underwriting lution control equipment to minimize the environ-energy research on several fronts. mentalimpact of the plant's emissions. Finding new ways to use coal, in an environmentally acceptable manner, is the focal point of a major research effort in which BG&E is participating. The Sun's rays are the subject of The $135 million KILnGAS dem-a %' ~... j. the advantages of using a rotat-ongoing research at BG&E. The p ~ onstration project will explore Company monitors two major ac. tive-solar energy installations, is ing klin to extract clean, burnabic ./' ~ T monitoring 30 residentialinstal-gases from coal. The system will lations, and is planning con. be able to use a variety of coal struction of a commercial / light types, eliminate the need fo'r industrial park on property ad-joining the Brandon Shores kx.<M costly pollution control equip-ment on smoke stacks and plant Preliminary studies are un- \\ s' derway for this development to \\ significantly reduce the environ-mentalimpact of electric genera-utilize waste he at from the gener. 7

1. tion plants. Shown is a view of ating plant and to contain build-iss N, what a rotating kiln willlook like.

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17 In the joint KILnGAS program with Allis Chalmers, During 1981, BG&E invested nearly $6 million in the State of Illinois and several other utiiMes, BG&E these and other research projects. Some we've un-is looking into ways in which coal can be turned into dertaken on our own, others we're supporting a clean burnable gas. Since the pollu.tants are re-through the Electric Power Research Institute, the moved in the gasification process, this gas burns Gas Research Institute or joint projects with other with no need for emissions control. utilities or private industry. Some of these projects Another new coal technology being investigated by re highlighted on these pages. BG&E is the fluidized-bed combustor. In this proc-Where this research willlead in the coming years is ess, crushed coal is burned in a loose bed of lime-not yet clear. There are many problems and many stone. Sulfur, the principal pollutant in coal, is ab-paths. But, in the meantime, our commitment to re-sorbed by the limestone for convenient disposal search-to finding future answers and sound, sensi-or recovery, ble ways of meeting the energy needs of our customers-remains steadfast. l .. gW' The Onsite Fuel Cell Energy Sys-

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tems Project, a joint effort of the Gas Research Institute, the De-partment of Energy and United ' q) P ~ 's Technologies,is designed to test ~ ^ i.i +g y j the commercial potential of fuel cells in applications at the power m q'. # user's site.The 40 kilowatt units ri- ~ convert chemical energy direct!y into electricity. Where both the electricity and the process heat can be used, the fuel efficiency Increases dramatically. BG&E, a member of GRI,is participating i hm.,, - in this project and willinstall a fuel cell at a selected location in 1983. As part of the Fuel Cell Users Group of electric utilities, BG&E is also funding a portion of the Electric Power Research Insti-tute's research into the applica-tions of multi-megawatt fuel cells forlarge-scale power generation. A test plant of about 5 megawatts Over the last five years BG&E has and procedures which are help-capacity is now under construc-invested nearly $8 million in a ing to preserve the Chesapeake lion in New York City. Data devel-program to monitor the quality of Bay and its tributaries. Anna oped by this pilot plant will assist water used in the operation of Klein, a consultant benthic ecol-in defining sytttem requirements generating plants to ensure that ogist,is working with the Com-for use throughout the industry, the water is returned to the envi-pany in these studies. Shown is a typical fuel cell stack ronment with the least impact in the manuf acturing process. possible. These studies have led to the development of standards

1 i Partners In Progress 18 BG&E personnel provide active leadership for State T he grand opening of the Aquarium, the irresist-ible magnetism of Harborplace, the unqualified and local chambers of commerce and'other organiza-1 success of the Convention Cente:-all combined to tions directing their efforts to the overall economic I thrust Baltimore squarely into the national spotlight development of the area. We also help individual in 1981, to showcase the City as an example of what businesses wishing to expand and State, county and ) can happen when the public and private sectors city officials seeking to attract new industry to Cen-work together toward a common goal. tral Maryland. BG&E further provides financial as-sistance to the Economic Development Council of BG&E believes we are now in an era in which all Greater Baltimore, a privaie/pubh.c partnership for U.S,. corporations must demonstrate good citizen-rea development. ship and recognize their obligations to further the well-being of the communities in which they conduct Through our new subsidiary-Resource & Property their business. We also believe we must do our full Management, Inc.-BG&E will become directly in-share since the economic health of our Company de-volved in developing land to broaden the industrial pends upon the social and financial health of the Cen-basis of the area's economy. We kok forward to this tral Maryland area we serve. venture and believe the results will benefit the Com-pany and the community. ? The annual Special Olympics is qty Wg~GES [FgMgMg%g[W[W N3 N the kind of event that swells the AN.. y hsd& i m gg zqh, j~" g f, $;L l .g[M o chest with pride-both for the 1 participants in the events and the j " huggers" and helpers who, by volunteering their time, love and effort, give handicapped people a chance to accomplish some-thing otherwise out of reach. I Thomas Mostyn, Auditorin Au-dits and Methods,is shown as a typical BG&E " Hugger" l t< I .i ,,., y m kmkw BG&E employees donate count-t: y less hours to voluntary commu-

1. 9 nity activities. Their reward: the c

![ C sheer pleasure of lending a help-1 h, 5 ing hand, the warm smile of a j Iu ~ A happy child, or the sure knowl-j ,;i, i t i l edge that their contribution mat- [- fl ,j: 4 t 'l j ters. Myrna Wollenweber, o ~) Secretary in Customer Service, helps to increase the supply of vitally needed blood, a small act f in itself, but it can bring large t results in the fives of those who l need help. I s

19 BG&E's responsibility as a corporate citizen was People, of course, are the mainstay of any commu-manifested in other important though sometimes nity. BG&E employees and their families exemplify less publicized ways. A prime example: the estab- " Partners in Progress" by actively enhancing the so-lishment of the Baltimore Energy Alliance Program,. cial welfare of the community. They contribute their an offshoot of Mayor Schaefer's innovative Blu'- time and talents in countless ways by coaching little Chip-In Program. Briefly stated, the Baltimore En-league teams, tutoring kids, bringing cheer to senior ergy Alliance Program entails our support of nine citizens and hope to the handicapped. They volun-ex-CETA workers who are insulating the attics of teer for schools, hospitals, churches, fire companies some 1,000 low-income customers. Customers se-and other activities which make Central Maryland a lected for this program receive a free in-home energy good place to live. audit from the Company as well as the weatheriza-Br 're proud of the success of these cooperative ven-e tmn/ utilization sevices. tures and corwinced that 1982 will bring even more opportunities for as to participate in developing our total community-both socially and economically. Baltimore's annual Walk a-Thon for the March of Dimes is the largest in the nation, and this event raises more money to com-bat birth defects than any other ,j y ; comparable event anywhere. .,y a Every year, BG&E employees turn out by the hundreds to as-w ' 4 j-sure the continued success of l 4 ' wr [s 4., this annual tradition. .. ~ 'y ^ ..a l ' 1 .c.. 1, o j 4 The warm smile that comes from shared happiness is a large re. ward to many BG&E employees as they give cf themselvesin ' g. l3 hospitals, nursing homes and S* community centers. Clarence 'y)' ployees is demonstrated by beard have brought many smiles The volunteer spirit of BG&E em. Shelley's red suit and white 4 Althea Breeden, Service Record to the faces of aged or chroni-Clerk in Customer Records, serv-cally llipatients at the Company's rD ing as a checker for the 1981 annual Christmas parties, as Walk-a-Thon. Thia same spirit is have the myriad cookies, flowers . seen in employee participation in or small gifts made and distrib-marathon volley ballgames to uted by BG&E people. Mr. raise funds for the Kidney Foun-Shelley is a Job Analyst in Cor-dation,in Christmas parties porate Staff Services. staged in area nursing homes, and in individual efforts with Meals-on-Wheels, neighborhood sports' leagues and in commu-nity ce nters.

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l Characteristics of the Business 21 and the Area Served i i Bal 'more Gas and Electric Company supplies electric, gas 1,801,000. Steam is produced for sale to 652 customers lo-and steam utility service to a major metropolitan region that cated in downtown Ba!timore. is noted for an economic stability founded on diversification Balance likewise is a dominant characteristic of the Com-of industry, growth in population, privately-financed urban pany's elactric generating capability, comprising 5,025,000 renewal, and civic and cultural advancement. kilowatts of installed capacity and firm purchases. Of this At year-end 1981, the Company served 848,253 electric total,33% (supplying 61% of 1981 customer requirements) customers and 512,389 gas customers. Total revenues is nuclear; 33% is residual fuel oil: 17% is coal: 12% is light amounted to $1.4 billion. Our 10 largest electric customers distillate oil; 2% is gas-fueled; and 3% is hydroelectric. The accounted for only 11% of total 1981 electric revenues, and Company owns nine operating Central Maryland power the 10 largest gas customers provided 24% of total 1981 gas plants, with additional generating capacity provided by revenues. The 20 largest customers overall were the source shared ownership of two mine mouth plants and a small hy-l of 17% of corporate revenues for the year. droelectric station, all in Pennsylvania, plus membership in The diversity inherent in this broad revenue base is rein-the Pennsylvania-New Jersey-Maryland Interconnection, forced, moreover, by the area's exceptional economic bal-which affords access to pooled capacity on advantageous ance of industry.. commerce.. educational, medical, and economic terms. 'l other service facilities.. and government installations. Facilities for the production and storage ofliquefied This balance is reflected in the customer distribution of natural gas, synthetic natural gas, and propane gas are 1981 unit sales: on the electric side,34 % residential,17% maintained at three Company plants in Central Maryland, l commercial,49% industrial: for gas,38% residential,6% which supplement pipeline supplies of natural gas as the commercial,56% industrial. In 1981,70% of electric reve-need arises. nues and 60% of gas revenues were derived frem sales out-A steadily increasing population, attracted by desirable side the City of Baltimore. living cond:tions coupled with exceptional cultural and rec-The total area served, which includes the City of Balti-reational advantages, assures an abundant manpower sup-more and extends into nine counties, approximates, for elec-ply, especially noteworthy in the professional and skilled i I tricity,2,300 square miles, with some 2,316,000 residents; categories, availability of which is a crucial factor in indus- ) l for gas,600 square miles, with a population estimated at trial expansion. t Common Stock Data t i The Company's Common Stock is listed on the New York, declared, from the surplus or net profits, cumulative yearly { Midwest and Pacific stock exchanges and has unlisted dividends at the fixed preferential rate specified for each Se-trading privileges on the Boston, Cincinnati and Philadel-ries and no more, payable quarterly, before any dividend on phia exchanges. the Common Stock shall be paid or set apart. 3 Dividends have been paid on the Common Stock continu. l Dividynd Policy ously since 1910. Quarterly dividends were paid on the i The Common Stock is entitled to dividends when and as de-clared by the Board of Directors. There are no limitations m Common Stock during 1981 and 1980 in the amounts set fr . the accompanying table. m any indenture or other agreements on payment of dividends; however, holders of Preferred Stock (first) and holders of Future disidends depend upon future earnings, the finan-1 i P. reference Stock (next) are entitled to receive, when and as cial condition of the C,ompany and other factors. 1 l Common Stock Dividends end Price Ranges 1981 1980 i i (Fnnn Composite Transactions as Dividend Price Dividend Pn.ce trported by The WaH Street JournaD: Paid High Low Paid High Low j First Quarter $.64 $22% $19% S.61 $22% $18% Second Quarter .64 24 % 21 % .61 24 % 19 Third Quarter .67 24 % 21 .61 24 % 21 % Fourth Quarter .67 25 % 21 % .64 22 % 18 % i Number of Common Stockholders of record as of December 31,1981.. 88,373. Oppwite: Ikdtimarr 's Inner Harbor seen fnnn the air. In thet reground is one of thc Ilarhurplair par itions and !he USF Const< llation-commissioned by the h US Naty in 17!G. Just bryond theparition arr the Wurid Trade Center. National Acytarium in ikdtinunr. A tarine Aluscum and the ikdtinnne Symphony 's i une outda<n rona rt tent. l J

Operating Statistics 22 Bahimore Gas and Electric Company. l . El:ctric Operating Statistics 1981 1980 1979 1978 1977 1971 l Revenues (Ddlar Amounts in Tiwusands) l Residential.... 366,903 $ 342,796 $ 274,079 $ 270,536 $ 220,904 105,243 l l Commercial... 211,889 198,936 174,157 171,363 140,323 74,578 l Industrial..,.. 350,553 311,182 263,319 251,966 194,811 92,735 i Other.. 4,815 4,350 3,401 3,308 2,520 2,031 l Total 934,160 $ 857,264 714,956 $ 697,173 $ 558,558 $ 274,587 Sales-MWii Residential.. 6,006,255 6,005,110 5,496,737 5,434,958 5,231,317 3,864,160 i Commercial. 3,005,048 3,063,119 3,052,081 3,019,633 2,910,532 2,437,477 Industrial.. 8,573,161 8,159.691 8,274,422 7,715,633 7,319,862 6.182,922 Total 17,584,464 17,227,920 16,823,24_0 16,170,224 15,461,711 12.484,559 Customers Residential.. 770,281 760,203 747,699 734,186 722,080 633,211 l Commercial, 76,171 75,144 74,575 74,626 73,345 68,075 1 Industrial. 1,801 1,642 1,416 1,355 1,306 1,060 Total. 848,253 836,989 823.690 810,167-796,731 702,346 l Average use per Residential Customer-KWH., 7,848 7,956 7,413 7,465 7,320 6,186 G:s Operating Statistics Revenues Residential.. 195,784 $ 165,006 $ 146,598 $ 146,675 $ 124,357 $ 61,532 Commercial. 31,946 24,522 21,097 20,315 17,184 8,713 Industrial,..... 125,749 69,689 54,767 54,315 44,497 19,840 Interruptible Services-l Industrial and Other 109,845 92,478 61,816 40,569 31,502 13,824 Other. 4,625 3.041 2,796 2,712 4,119 1,713 Total. 467,949 $ 354,736 $ 287,074 $ 264,586 $ 221,659 $ 105,622 Sales-DTH i l Residential. 40,018,167 38,462,204 39,282,741 40,576,498 39,777,652 39,646,242 I l Commercial. 6,359,071 5,490,367 5,320,010 5,417,140 5,335,081 5,249,537 Industrial. 30,237,352 19,501,190 17,671,851 18,055,404 17,406,677 17,569,715 Interntntible Services-l Industrial and Other 28,967,441 31,656.568 31,175,052 20,439.595 17.543,597 29,304,002 1 Total 105,582,031 95,110.329 93,449.654 84,488.637 80,063,007 91,769,496 Customers Residential.. 477,654 476,318 473,761 472,414 474,361 447,480 Commercial. 29,972 29.625 28,569 28,790 29,049 28,730 Industrial...... 4,606 4,315 4,941 4,969 5,012 4,275 Interruptible Services-Industrial and Other 157 193 185 184 188 145 Total 512,389 510.451 507,456 506357 508,610 480,630 i Average use per Residential Customer-DTH. 83.9 81.1 83.1 85.9 83.8 89.7

helected Financial Data 23 Baltimore Gas and Electric Company Summiry of Operations 1981 1980 1979 1978 1977 1971 ? Operating Revenues: (in Tiwusands ollMlars) Electric... S 934,160 $ 857,264 $ 714,956 $ 697,173 $ 558,558 $ 274,587 Gas., 467,949 354,736 287,074 264,586 221,659 105,622 l Steam. 18,947 14,442 12,378 12,727 12,305 3,461 Total Operating Revenues. 1,421,056 1,226,442 1,014,408 974,486 792,522 383,670 l Operating Expenses: Purchased Fuei and Energy. 596,089 478,836 338,464 321,266 245,469 113,487 Operations. 248,020 217,009 182,055 161,981 140,774 69,558 Maintenance. 87,442 75,827 64,913 55,083 49,892 23,948 Depreciation. 88,398 83,181 80,338 78,063 68,449 30,489 Income Taxes: Current.. 55,742 39,604 8,987 43,619 19,649 26,497 Deferred.......... 8,643 23,352 44,149 15,818 10,024 Investment Tax Credit Adjustments. 22,581 13,852 16,593 17,882 13,613 1,140 Other Taxes 87,712 88,482 M5,455 83,330 72,427 42,359 Total Opersing Expenses. 1,194,627 1,020,143 820,954 777,042 620,297 307,478 Operating Income.......... 226,429 206,299 193,454 197,444 172,225 76,192 Allowance for Other Funds Used During Construction.... 12,162 12,053 9,545 4,006 2,553 11,254 Net Other Income and Deductions 2,884 2,851 1,ti98 739 2.228 1,285 Income Before Interest Charges. 241,475 221.203 204,697 202,189 177,006 88,731 Interest Charges. 106,162 93,828 86,159 83,228 76,230 32,816 Allowance for Borrowed Funds Used During Construction. (14,346) (12,024) (7,778) (3,580) (2.318) (7,950) Net Interest Charges. 91,816 81,804 78,381 79,648 73,912 24,866 Net Income.. Dividcads-Preferred &. 149,659 139,399 126,316 122,541 103,094 63,865 Preference Stock.. 26,416 22.099 19,784 18,177 18,381 8,475 i Net income Applicable to Common Stock.. 123,243 117,300 106,532 104,364 84,713 55,390 Dividends-Common Stock,. 88,499 80,754 75,373 69.467 63,743 36.550 Earnings Reinvested in the Business. $ 34,744 $ 36,546 $ 31,159 $ 34,897 $ 20,976 $ 18,840 Average Shares of Common Stock Outstanding (77amsands). Earnings Per Average Share of. 33,353 32,258 31,356 30,847 29,666 _19,885 Common Stock.. Dividends Declared Per Share of.. $3.70 $3.64 $3.40 $3.38 $2.86 $2.79 Common Stock.. $2.65 $2.50 $2.40 $2.25 $2.14 $1.83% OthIr Financial Statistics Capitalization: Common Stock, Premium, Install-ments and Retained Earnings.... $1,070,064 $1,010,941 $ 953,161 $ 906,421 $ 861,463 $ 503,596 Preferred and Preference Stock (Not Subject to Mandatory Redemption) 240,108 241,806 242,753 245,484 247,518 168,998 Redeemable Preference Stock, 100,000 50,000 50,000 Long Term Debt. 1,340,666 1,304,970 1,250,132 1,207,896 1,145,656 633,342 Total $2,750,838 $2,607,717 $2,496,046 $2,359,801 $2,254,637 $1,305,936 Shares of Common Stock at end of year (77musands)..... 33,836 32,690 31,692 31,039 30,658 21,186 Book Value Per Share of Common Stock at end of year. $31.63 $30.93 $30.08 $29.20 $28.10 $23.77 Common Stockholders at end of year.. 88,373 89,579 89,698 89,249 88,795 60,394 Total Utility Plant $3,437,089 $3,184,059 $2,974,653 $2,831,219 $2,669,927 $1,565,781 Accumulated Provision for.. Depreciation. 756,292 678,819 608,293 541,618 470,969 246,206 Total Assets.. 3,266,403 3,073,013 2,855,984 2,673,754 2,528,972 1,453.966 Expenditures for Additions to Plant. 266,956 225,003 160,917 172,402 '182,205 323,109 Employees at December 31. 8,915 8,672 8,485 8,459 8,306 7,897

Management's Discussion and Analysis of 24 Financial Condition RESULTS OF OPERATIONS Electric operating ret enues increased each year as j Ecrnings follows: l Earnings per share of common stock, on the increasing av. Increase (Decrease) erage number of shares outstandmg, each penod, were From Prior Year m $3.70 in 1981 compared with $3.64 earned in 1980 and $3.40 1981 1980 in 1979. Annual base rate increases < ' $93.6 million in June. (In Atillions orthilarsr 1980 and $24.9 million in December 1980 authorized by the Attributable to: Public Service Commission of Maryland contributed to 1981 Base Rate Adjustments.. $55.7 $ 38.3 14.3 81.2 earnings along with increased electric and gas sales. Earn. Iue]{atjgc stmgts n-mgs were decreased in 1981 by a net 6c per share of com' mental Surcharge.. 0.8 (0.2) mon stock as the result of certain generally nonrecurrmg Sales Volumes. 6.1 23.0 accounting adjustments which are discussed in Nctes 3,4, Net Increases. 'S76.9 $142.3 7, and 8. The impact of inflation on operating and capital costs, along with regulatory lag, continues to have a de-Gas Sales (Dth) and Operating Revenues' pressing effect upon the Company's earnings. For a discus-The percent increase (decrease) from the prior year in gas ] sion of the recent Order received from the Maryland sales by class of customer was as follows: -l Commission which authorized increases in the Company,s j base rates, see the Financial Review on page 6. 1981 1980 { Residential.... 4.0% (2.1)% rcial .8 Electric Sales (Mwh) and Operating Revenues h"j"*ri The percent increase (decrease) from the prior year in elec-Interruptible Service. (8.5) 1.5 tric sales by class of customer was as follows: Total.. 11.0 1.8 1981 1980 Total gas sales increased in 1981 and 1980 due primarily to Residential.. 9.2% higher usage by and the addition of firm industrial cus-J tomers. The increases were made possible by the climina-r S ria. (.) Total. 2.1 2.4 tion of both delivery curtailments and the Maryland Commission'c imposed moratorium on new uses and cus-Residential sales in 1981 remained essentially the same and tomers existing prior to the end of 1979. In 1980 sales to res-commercial sales decreased primarily because of the milder idential customers were adversely affected by lower usage weather during the summer cooling period versus the abnor-resulting primarily from conservation. mally hot weather experienced in 1980. Industrial sales, Future sales will be affected by the availability of gas and particularly in steel related industries, increased in 1981 be-the scheduled deregulation of gas prices, in addition to the cause of higher production levels whereas a reduced level of ongoing iripact of such factors as weather conditions, gas business activity resulted in the IP80 decrease. conversions and conservation efforts by our customers. Future electric sales will continue to be affected by the overall economic situation and level of business activity in the Company's service territory, as well as by weatha con-l ditions, additional heatine installations and customer con-servation efforts. s 120 20 ',.f 90 15 ~ 60 'I 10 M Industnal EIndustnet a' M Commercial M commercial M Rosadontral M Residential - 5E 5($ ( l 3 Salesof Electricity

&$$$h&

Safes of Gas (Stillions ofikkatherms) ' ' ' (BillionsofKilmeatts) 0 r 0

25 Gas operating revenues increased each year as follows: Taxes The Economic Recovery Tax Act of 1981 (Act), signed into "$nh law by the President on August 13,1981, made revisions to I 1981 1980 the existing tax law. Among tlye changes affecting the Com-r7n 3tillions v/IMlars pany were revisions to depreciation rules for newly acquired Attributable to: ' property, liberalization ofinvestment tax credit rules and re-Ilase Rate Adjustments. $ 15.0 S 8.8 peal of the Percentage Repair Allowance in addition, a pro-GasCost Adjustments. 77.7 56.6 vision of the Act allows for a more favorable tax treatment Sales Volumes 20.5 2.3 of reinvested conunon stock dividends beginning in 1982. Net increases. $113.2 $67.7 Overall, the revisions did not have a significant impact on Effective ia October 1980, the Maryland Cammission autho-1981 earnings, nor is one anticipated in future years. Ilow-rized the Company toimplement an Actual Cost Adjustment ever, as a result of these changes the Company will realize provision to the Purchased Gas Adjustment Clause con-additional cash flow particularly in later years with the com-pletion of the Brandon Shores Power Plant. tained in the Company's gas tariff. This change has pro-Federal Income Taxes-Current increased in 1981 due to vided a better matching of gas expenses and associated revenues and w, l contmue to protect agamst future erosion a higher level of taxable income partially of fset by an in-l d of earnings due to the anticipated ce.tinued mereases m crease in investment tax credits and the recording of the net tax deficiency resuhing from settlement of the Internal Rev-i natural gas prices stemming from phased-m deregulanon (see Note 6). enue Service audit for the years 1974-1976 (see Note 3). The increase in 1980 was due to a higher level of taxable in-come and a decrease in investment tax credits. Operations and Maintenance Federal Income Taxes-Deferred are the result of normal-Total purchased fuel and energy expense increased in both ization accounting for the tax tunefits arising from liberab 1981 and 1980 as a result of higher fuel and natural gas ized depreciation on property additions in 1976 and prices, coupled with increased sales. These increases were subsequent years and for certain other timing differences affected by the deferral of over-or under-recovered fuel between tax and book income. The majority of the decrease costs associated with the Company's electric fuel rate and during 1981 was due to the repeal of the Percentage Repair purchased gas adjustment clauses resulting in a S4,545.000 Allowance and the deferral of Internal Revenue Service ad- { decrease in 1981 and an increase of $33.287,000 in 1980. justments of certain timing differences associated with nu-l Increases in operations and maintenance expenses reflect clear facilities at Calvert Cliffs in the settlement of the audit the higher cost, due in large part to inflation, of payroll, em-for the years 1974-1976. In 1980, the decrease was due pri-ployee benefits and materials. In 1981 such expenses in-marily to the reduction of fuel expense deferrals associated clude increased costs at the Calvert Cliffs Nuclear Power with the Company's electric fuel clause partially offset by Plant, greater scheduled maintenance at various fossil-fuel deferrals of unrecevered natural gas expenses under the l generating plants, more repair work related to major storms Company's gas adjustment clause. and higher uncollectible accounts. In 1980, the increases re-Investment hx Credits vary from period to period as flected additional costs at Calvert Cliffs due in part to re-construction expenditures become eligible for the credit. A

quired modifications stemming from the Three Mile Island significant portion of the increase in 1981 was due to addi-incident. and increased maintenance costs at the fossil tional credits related to nuclear fuel resulting from the Eco-powered generating plants.

nomic Recovery Tax Act of 1981. I See Notes 6 and 7 for a discussion of deferred expenses. { Hv" oHar fos _.,as opern Purchased Fuel & Energy 42c Operahans 17e Maintenance 64 Deprecation 6$ Taxes 124 interest & Preferred & Preference Dmdunds 104 l Cornrnon Dwidends 64 hetained in Business -It Revenun Dollar $100 ' i I 1 1C

26 man Taxes other than income taxes decreased in 1981 due to These construction expenditures include an Allowance for the settlement of the contested Pennsylvania Gross Re-Funds Used During Construction (see Note 4). Actual con-ceipts Tax largely offset by higher property and capital struction and nuclear fuel expenditures may vary from the stock taxes, payroll taxes and the Maryland Gross Receipts estimates set forth above because of a number of factors Tax (see Note 8.) The 1980 increase was partially offset by a such as inflation and economic conditions, regulation and reduction in the Maryland Electric Environmental Sur-legislation, rates of load growth, and environmental protec-charge and the repeal of the Pennsylvania Gross Receipts tion standards, as well as the cost and availability of capital. Tax on the sale of electricity to out-of-state customers, ef-During the period 1979 through 1981, the Company's in-fective January 1,1980. ternal generation of cash approximated 60% of expendi-ures fononstrudon and nuckar fud Assi.iming timely Otherincome and income Deductione and adequate rate relief, the Company ant,c, pates that about ii The increases in the Allowance for Funds Used During hese funds required for 1982 and 1983 will be pro-Construction (AFC)in 1981 and 1980 are attributable to "I* '* " aw, propd continued construction at the Brandon Shores Power Plant. through the capital market, the Company Dividend Rem-s i 1981 increase was partially offset by a $1,578,000 re-wstment nd ck Purchase I lan, and the Employee Stock duction applicable to prior year adjustments (see Note 4). In 1981 and 1980, Net Other Income and Deductions in- . p Man, as wd as short4&m mnmudal papa on cludes $1,190,000 and $1,146,000, respectively, after tax " " " " " ". sMsm h E ' "' he Company estimates that approximately gains on debt reacquired through sinking fund operations. $146 milhon w.ll be required for bond maturities and sink, g i m In 1979, such gains were not significant. '"",d payments during the period 1982-1983. Interest charges increased due to sales of additional secu-I he Company s capital structure as of December 31 is rities and to charges arising from settlement of the 1974-presented Mow: 1976 Federal Income Tax audit (see Note 3). The issuance of 500,000 shares of Redeemable Preference Stock in 1981 1980 Preferred and Preference Stock... 39.0 % 38.8 % April 1981 resulted in the increase in preference dividends Common Equity... in 1981. (not subject to mandatory 8.8 9.3 LIQUIDITY AND CAPITAL RESOURCES redemption).... Redeemable Preference Stock 3.6 1.9 Expenditures for construction and nuclear fuel for 1979 ne I am De 48.6 50.0 through 1981 and estimated expenditures for 1982 and 1983 are set forth below: The high rate of inflation continues to be the major cause Nuclear of attrition for cost of service regulated entities such as the Construct. ion Fuel Total Company. The Company has specifically addressed this is-Nh $219 sue in recent rate proceedings and will continue to actively 1979 S161 pursue alleviatmg the effects of attrition m the future. For 1980 225 57 282 1981 267 40 307 more information about the impact of inflation on the Com-l 1982 380 47 427 pany, see Note 18. 1983 377 83 460 1 t $4.000 f l 3 000 2,000 t,000 j, i Total Utility Plant O IMilli'ms efikik:rs)

Statements of Income 27 Baltimore Gas and Electric Company (In T)wusandsofIMiars) Year Ended December 31 1981 1980 1979 Operating Revenues Electric....... S 934,160 $ 857,264 $ 714,956 Gas.. 467,949 354,736 287,074 Steam. 18,947 14,442 12,378 Total Operating Revenues 1,421,056 .1,226,442 1,014,408 Operating Expenses Purchased Fuel and Energy. 596,089 478,836 338,464 Operations. 248,020 217,009 182,055 Maintenance. 87,442 75,827 64,913 Depreciation. 88,398-83,181 80,338 Income Taxes-Note 3...., 86,966-76.808 69,729 Other Taxes. 87,712 88,482 85,455 TotalOperating Expenses, 1,194,627 1,020,143 820.954 Operating Income..................... 226,429 206,299 193,454 Allowance For Other Ft. ads Used During Construction-Note 4. 12,162 12,053 9,545 Net Other Income and Deductions 2,884 2,851 1,698 Income Before interest Charges... 241,475 221,203 204,697 Interest Charges. 106,162 93,828 86.159 Allowance for Borrowed Funds Used During Construction-Note 4... (14,346) (12.024) (7,778) Net Interest Charges.... 91,816 81,804 76,331 Net i ncome............... 149,659 139,399 126,316 Dividenda-Preferred and Preference Stock. 26,416 22,099 19.784 Net Income Applicable to Common Stock $ 123,243 $ 117,300 ' $ 106,532 l Earnings Per Share of Common Stock... $3.70 $3.64 $3.40 (Based on average shares outstanding) Ratio of Earnings to Fixed Charges............. 3.21 3.25 3.17 1 l Ratio of Earnings to Fixed Charges and Adjusted Preferred.. and Preference Stock Dividends Combined 2.31 2.40 2.37 i l l Statements of Retained Farnings Baltimore Gas and Electric Company (In T)wusands nfIMlars) Year Ended December 31 1981 1980 1979 Balance at Beginning of Per!od. $371,643 $335,136 $304,261 Net income 149,659 139,399 126.316 Total 521,302 474,535 430,577 l Cash Dividends Declared Preferred Stock (Cumulative) Series B(at the rate of 4 W% per annum).. 1,003 1,003 1,003 Series C (at the rate of 4% per annum)... 276 276 276 Series D (at the rate of 5.40% per annum) 1,620 1,620 1,620 Preference 2tock (Cumulative) Convertible (at the rate of 6W% per annum). 452 519 635 1970 Series (at the rate of 8.75% per annum). 2,625 2,625 2,625 1971 Series (at the rate of 7.88% perannum).. 3,940 3,940 3,940 ' 1972 Series (at the rate of 7.75% per annum). 3,100 3,100 3,100 1973 Series (at the rate of 7.78% per annum).. 1,556 1,556 1,556 1974 Series (at the rate of 9.35% per annum).... 3,273 3,273 3,273 1979 Series (at the rate of 8.375% per annum). 4,187 4,187 1,756 1981 Series (at the rate of 12% per annum)..... 4,384 Common Stock (at annual rates per share. $2.28 through... April 1,1979. $2.44 through J uly 1.1980, $2.56 through April 1,1981, and $2.68 thereafter). 88,499 80,754 75,373 Other Charges-Expenses in cer nection with issuance of stock. 262 39 284-i Total Charges. 115,177 102,892 95,441 l Balance at End of Period..... $406,125 $371,643 $335.136 1 l See notes and schedules-pages 31 through 43.

Balance Sheets 28 Baltimore Gas and Electric Company I s December 31 1981 1980 (In TiwusandsollMlars) 7 A r ts l Utility Plant Plant in service Electric-at originalcost $2,353,687 $2,250,921-Gas-at original cost. 345,537 327,526 Steam-at cost 19,899 19,291 Common-at original cost 119,583 101,325 l Total plant in service. 2,838,706 2,699,063 Construction work in progress-at cost.... 592,574 481,257 Plant held for future use-at cost 5,809 3,739 Total utility plant. 3,437,069 3,184,059 Accumulated provision for depreciation. (756,292) (678,819) Net utility plant... 2,680,797 2,505,240 Nuclear fuel-at cost (net of amortization of $238,630,000 and $154,759,000 respectively) 150,986 166,955 - 2,831,783 2,672,195 Other Investments....... 11,122 8,008 Current Assets Cash 3,085 2,660 10,400 Temporary cash investments-at cost. Special deposits and working funds... 4,120 1,415 Accounts receivable: Customers'(net of provision for uncollectibles of $3,720,000 and $3,060,000, respectively). 139,090 115,657 Miscellaneous...... 4,456 2,799 Fuel stocks-at average cost.... 86,232 90,909 Materials and supplies-generally at average cost... 62,602 55,380 Prepayments 48,380 40.301 Other. 5,032 4,056 352,997 323,577 Deferred Debits Deferred fuel costs. 41,135 32,703 Other. 29,366 36,530 70,501 69,233 Total Assets.. $3,266,403 $3,073,013 See notes and schedules-paves 31 through.13. l

l . Balance Sheets 29 L. Baltimore Gas and Electric Company December 31 1981 1980 i (in 7'housandsofLMlars) l Crpital and Liabilities l Common Stock and Retained Earnings Common stock-Schedule, page 31.. $ 663,425 $ 638,820 l Installments received on capital stock-common. 357 321 l Premium on preferred stock.. 157 157 i Retained earnings. 406,125 371,643 1,070,064 1,010.941 Preferred and Preference Stock Not Subject to Mandatory Redemption Preferred stock-Schedule, page 31...... 59,185 59,185 Preference stock-Schedule, page 31.... 175,000 175,000 Convertible preference stock-Schedule, page 31...... 5,923 7,621 Redeemable Preference Stock-Schedule, page 31........ , 240,108. 241.806 l 100,000 50.000 Long-Term Debt Mortgage bonds-Schedule, page 32 1,309,145 1,271,570 Debentures-Schedule, page 32 31,521 33,400 Unamortized discount and premium........ (5,027) (4,337) Long-term debt estimated to be retired within one year (103,393) (52,779) 1,232,246 1.247,854 Current Liabilities Notes payable..... 20,850 1 Accounts payable. 100,126 -108,875 Vacation costs accrued., 14,657 13,744 l Pension costs accrued.... 17,643 1,315 l l Taxes accrued..... 40,951 59,229 l Interest accrued..... 40,875 34,136 1 Dividends declared. 27,114 26,441 l Long-term debt estimated to be retired within one year 103,393 52,779 Other. 14,961 11.571 380,570 308,090 l Deferred Credits Accumulated deferred investment tax credits. 134,667 110,390 Deferred income taxes.. 101,986 93,344 Other. 6,762 5,588 243,415 214.322 i Conunitments and Contingencies-Note 14 I TotalCapital and Liabilities $3,266,403 $3,073,013 1 i See notes and schedules-pages 31 through 43. ] l l l J

Statements of Changes in Financial Position 30 IMtimore Gas and Electric Company Year Ended December 31. 1981 1980 1979* (in ThousandsofIMlars) Sources of Funds Funds from Operations: $126,316 Net income......... $149,659 $139,399 149,437 119,647 96,252 Depreciation and amortization.... Investment tax credit adjustments, 19,277 11,450 13,989 Deferred income taxes.......... 8,643 23,352 44,149 Allowance for other funds used during construction.... (12,162) (12,053) (9,545) 314,854 281,795 271,161 Subtotal.......... Funds from Outside Sources: Long-term debt... 89,424 88.883 53,789 Common stock... 24,588 21,234 15,796-Preference stock (net of conversions). 48,092 (947) 47,053 Short-term debt-net. 20,850 345 336 296 Other-net Total...... $498,153 $391,301 $388,095 Applications of Funds Construction expenditures $266,956 $225,003 $160,917 ) Allowance for other funds used during construction. (12,162) (12,053) (9,545) Purchase of nuclear fuel ma erials... 40,073 57,135 57,956 Deferred nuclear maintenance (49) 1,697 7,275 Common stock dividends. 88,499 80,754 75,373 Preferred stock dividends.. 2,899 2,899 2,899 Preference stock dividends.. 23,517 19,200 16,885 Retirement oflong-term debt. 55,304 35,162 12,764 Materials and supplies. 2,545 23,351 19,462 Deferred fuel costs. 8,432 3,910 37,197 Federalincome taxes payable. 10,537 (34,438) 26,758 2,649 Investment in subsidiary. Other-principally net change in other working capitalitems. 8,953 (11,319) (19,846) ) Total $498,153 $391,301 $388.095

• Restated to conform with 1980 presentation.

See notes and schedules-pages 31 through 43. Auditor's Report C:opers & Lybrand In our opinion, the financial statements referred to above To the Stockholders of (page 27 through the notes to financial statements on page Baltimore Gas and Electric Company 43), present fairly the financial position of Baltimore Gas and Electric Company at December 31,1981 and 1980, and We have examined the balance sheets of Baltimore Gas and the results of its operations and changes in its financial posi-Electric Company at December 31,1981 and 1980, and the tion for the years ended December 31,1981,1980 and 1979, related statements of income, retained earnings and in conformity with generally accepted accounting principles changes in financial position for the years ended December applied on a consistent basis. i 31,1981,1980 and 1979. Our examinations were made in p accordance w ith generally accepted auditing standards and, [ accordingly, meluded such tests of the accountmg records } and such other auditing procedures as 've considered neces-sary in the circumstances. Baltimore, Maryland January 20,1982 I l

Schedules of Outstanding Stocks 31 Baltimore Gas and Electric "ompany m December 31 1981 1980 (in Thouscuds ofIMlars) I Common Stock-without par value-45,000,000 shares authorized: 33,835.505 and 32,690,093 shares, respectively, outstanding... $663,425 $638,820 (At the end of 1981,208,617 shares were reserved for conversion of Convertible Preference Stock,709,207 shares for the Investment Tax Credit Employee Stock Ownership Plan, and 2,940,585 shares for the Dividend Reinvestment and Stock Purchase Plan.) Preferred and Preference Stock Not Subject to Mandatory Redemption Preferred Stock (Cumulative)-$100 par value-1,000,000 shares authorized-Series B 4 %%-222,921 shares outstanding. $ 22,292 $ 22,292 (Callable at $110 per share.) Series C 4%-68,928 shares outstanding.. 6,893 6,893 (Callable at $105 per share.) Series D 5.40%-300,000 shares outstanding........... 30,000 30,000 (Callable at $102.50 per share prior to April 1,1982 and at a lesser amount thereafter.) Total Preferred Stock.. S 59,185 $ 59,185 j Preference Stock (Cumulative)-$100 par value-l 2,500,000 shares authorized: I Convertible,6%% Series-59,230 and 76,207 shares. respectively, outstanding.. S 5,923 $ 7,621 1 (Callable at $100 per share; convertible into Common Stock of the Company at $28.45 per share.) .q 8.75%.1970 Series-300,000 shares outstanding.... 30,000 30,000 4 (Callable at $107 per share prior to October 1,1983 and at 1 lesser amounts thereafter.) l 7.88 %,1971 Series-500,000 shares outstanding.... 50,000 50.000 l (Callable at $104 per share prior to October 1,1986 and at a lesser amount thereafter.) 1 7.75%,1972 Series-400,000 shares outstanding....... 40,000 40,000 (Callable at $105.50 per share prior to October 1,1982 and at lesser amounts thereafter.) f 7.78 %,1973 Series-200,000 shares outstanding................ 20,000 20,000 (Callable at $105.50 per share prior to December 1,1983 and at lesser amounts thereafter.)

4 9.35%.1974 Series-350,000 shares outstanding.,...

35,000 35,000 l (Callable at $110 per share prior to April 1,1984 and at lesser amounts thereafter.) Total Preference Stock.. $180,923 $182.621 . Redeemable Preference Stock (Cumulative)- $100 par value-1,000,000 shares authorized: 8.375%,1979 Series-500,000 shares outstanding.. S 50,000 $ 50,000 12%,1981 Series A-340,000 shares outstanding 34,000 i 12%,1981 Series B-160,000 shares outstanding.... 16,000 l Total Redeemable Preference Stock... $100,000 $ 50,000 See notes 10 and 11. l t t .p L___________.________--_---

i I l Schedules'of Outstanding Bonds and Debentures 32 Baltimore Gas and Electric Company I sumummans < December 31 1981 1980 First Refunding Mortgage Bonds un Thousunds ortulan> Series U 2%%, due April l,1981............. 39,063 10% Series, due july 1,1982. 90,138 90,202 10%% Series, due September 15,1983 41,677 41,677 j 9% Series, due July 1,1984. 11,000 ~{ Series V 2%%, due December 21,1984. 19,123 19,123 Series X 2%%, due January 15,1986. 24,317 24,317 Series Z 3%, due July 15,1989..... 36,754 36,754 12 %% Series, due September 15,1990...... 60,703 75,000 3%% Series, due December 1,1990 29,682 29,682 16%% Series, due October 1,1991. 75,000 4%% Series, due July 15,1992.. 25,000 25,000 4% Series, due March i,1993 24,095 24,095 4 %% Series, due July 15,1994. 29,989 29,989 5%% Series,due April 15,1996. 26,680 26,680 6%% Series, due August 1,1997..... 24,967 24,967 5%% Installment Series, due August 15,1998. 67,000 67,000 l 7% Series, due December 15,1998.. 28,705 28,705 8%% Series, due September 15,1999. 22,198 22,198 8%% Series, due September 15,2000. 11,433 11,433 l 7%% Series,due April 15,2001.. 60,000 60,000 7%% Series, due September 1,2001. 60,000 60,000 7 W% Series, due January 1,2002 50,000 50,000 7%% Series, due July 1,2009 50,000 50,000 5%% Installment Series, due July 15,2002. 12,500 12,500 i 7%% Series. due September 15. 2002. 50,000 50,000 3%% Series, due February 1,2004. 74,986 74,986 o.80% Series, due September 15,2004. 20,000 15,000 9%% Series, due August 1,2005. 15,G38 15,639 8%% Series, due September 15,2006. 75,000 75,000 l 8 /Wo Series, due September 15,2007.... 75,000 75,000-9%% Series, due July 1,2008. 62,560 62,560-6.90% Installment Series, due September 15,2009 55,000 55,000 Total First Refunding Mortgage Bonds.. $1,309,145 $1.271,570 Debentures 4%% Sinking Fund Debentures, due. June 15,1986 11,706 12,400-4%% Sinking Fund Debentures, due August 1,1990. 19,815 21,000 Total Debentures. S 31,521 $ 33.400 See note 12. l f

Responsibility For Financial Statements 33 Management is responsible for the information and repre-Coopers & Lybrand, independent certified public accoun-l sentations contained in the Company's financial statements. tants, are engaged to examine the financial statements and The financial statements are prepared in accordance with express their opinion thereon. Their examination is made in generally accepted accounting principles based upon cur-accordance with generally accepted auditing standards rently available facts and circumstances and Management's which include a review of internal controls. Their report ap-j-best estimates and judgments of known conditions. pears on page 30. l The Company maintains an accounting system and re-The Audit Committee of the Board of Directors, which lated system of internal controls which are designed to pro-consists of three outside Directors, meets periodically with i vide reasonable assurance that the financial records are Management, internal auditors and Coopers & Lybrand to l accurate and that the Company's assets are protected. The review the activities of each in discharging their responsibil-Company's staff of internal auditors, which reports directly ities. The internal audit staff and Coopers & Lybrand have to the Chairman of the Board, conducts periodic reviews to free access to the Audit Committee at any time, maintain the effectiveness of internal control procedures. i i l I l l i Notes to Financial Statements l l Accounting Policies and the Public Service Commission of Maryland. The The accounting records of the Company are maintained in Company's principal accounting policies are described in accordance with the Uniform Systems of Accounts Notes 1 through 7. prescribed by the Federal Energy Regulatory Commission Nota 1. Pension Plan cumulated plan benetits end plan net assets for the Compa-The Company maintains a noncontributory pension plan ny's defined benefit plan, as of January 1, is presented covering its regular employees. The funding of the Compa-below: ny s pension plan is through a deposit administration me-g dium with an immediate participation guarantee feature, a n,,,,,syyas,t f3afy,,, f employing the aggregate cost method. In 1981,1980,and Actuarial preseu value of 1979, the Company's cost for pensions totaled $17,915,000, accunsulated plan benefits: Vested $149 465 $129.913 $16,167,000, and $13,563,000, respectively, of which i Nonvested 7,722 6.571 l $14,594,000, $13,114,000, and $ 11,081,000, respectively, s157,187 $136.484 were inchided in expenses. The remainders were charged to Net assets available for bendits 5241,338 8206.044 construction. The increase in 1981 was primarily the result of higher payrolls whereas the increase in 1980 was due t The assumed investment rate of return used in determining l higher payrolls and changes in benefits. A comparison of ac' the actuarial present value of accumulated plan benefits was ] seven percent for both 1981 and 1980. Based on the latmt j available actuarial report, at af January 1,1981 there were j no unfunded vested liabilities. 1 i

34 Note 2. Depreciat!Ln and Maintenance designated as units of property are accounted for as Plant The amounts set aside on the Company's books for depreci-Additions and Retirements. When depreciable property is ation are generally based on composite straight-line rates, retired or otherwise disposed of, the Accumulated Provision determined and revised periodically by means of indepen-for Depreciation is charged with the " original cost" of such dent engineering studies, applied to the average investment property, together with the cost of removal, and is credited in depreciable utility plant in service. The composite depre-with the salvage value or sale price and any other amounts ciation rate for nuclear e'iectric properties includes a recovered, such as i 4rance. $36,000,000 provision for the decommissioning of the prop-The investment in depreciable utility plant as of Decem-erties at the end of their usefullife. Such provision is subject her 31 and the depreciation rates applied to each category to periodic review for future changes in economic conditions are as follows: and advances in technology, Composite 1981 1980 Expenditures for maintenance and repairs, including re-Rate au neane /zonaro n Electri newals of minor items of property (as distinguished from (, l er than Nuclear 3.26 % $1,501,938 $1,428,472 units of property), are charged to operating expenses and/or Nuclear 3.45 818,065 788,842 Clearing ae 'nts, unless the replacement of a minor item of Gas 2.60 342,247 324,235 Steam 2 75 19,694 19,086 property effects a substantial betterment, in which event (_,ommon 3.00(a) 114,059 93,711 the excess cost of the replacement over the estimated cur-Total $2,796,003 $2,654,34F rent cost of ranlacement without betterment is charged to the appropric e property account. Replacements cf items (a) Except for transportation vehicles, w hich are generally depreciated on a usage basis. Note 3. IncomeTaxo ; 1981 1984 1979 dn T)wnsanh pilhllars) Income tax expense is conymed of the following: Included in Operating Expenses: Income Taxes-Current $55,742 $39,604 $ 8,987 Inccme Taxes-Deferred 8,643 23,352 44,149 investment Tax Credit Adjustments. 22,581 13.852 16.593 Total Char /ed ta Operating income..... 86,966 76,808 69,729 Includen in Net Other Income and I? eductions-Current. 1,923 2,049 1,047 l Totalincome Tax Expense $88,889 $78,837 $70,776 Total mcome taxes currently payable consist of the following: Federal lncome Tax: Included in Operating Expenses.... S55,476 $39,532 $ 8,939 included in Net Other Income and beductions 1,806 1,904 934 State Incoine Tax: Included in Operatmg Expenses.. 266 52 28 included iri Net Other Income and lieductions 117 145 113 Totalincome Taxes Currently Payable. $57,665 T41,633 $10,034 The provision for d ferred FederalIncome Taxes consists of the following tax effects of timing differences: 1.iberalized Depreciation. $15,316 $ 17,796 $20,717 Deferred Fuel Costs. 3,879 1,798 17,281 Spent Nuclear Fuel Storage Costs-Note 7. (7,222) (3,332) Pennsylvimia Gross Receipts Tax-Note 8. 1,639 Percentage Repair Allowence... (559) 6,329 2,PO4 Maintenance Expenditures-Calvert Clif fs.. (23) 781 3,347 Settlement of 1.R.S. Audit for Years 1974-1976. (4,387) Total Federal lncome Taxes Deferred. $ 8,643 $23,332 $44,149 The Investment Tax Credit Adjustirants are derived as follows: Redaction in Federal Income Taxes due to credits arising from: Eligible Property $25,180 $15,639 $17,776 Employee Stock Ownership Plan. 3,304 ?.403 2,604 Total,.. 28,484 18.012 20,380 Credits allocated to income (5.903) (4,190) (3,787) .s'er Total. $22,581 $13.832 $16,593

35 l t immur Investment tax credits accruing to the benefit of employ-under the Revenue Act of 1971 and subsequent years, and ees result from the additional 1 %% credit allowed by the In-over thirty-year periods with respect to the credits provided ternal Revenue Code to provide stock for employees under under prior Revenue Acts. the Investment Tax Credit Employee Stock Ownership Total income tax expense was less than the amount com-l l Plan (ESOP). p ited by applying the Federalincome tax statutory rate to Investment tax credits, except those related to ESOP, are book income before tax. The reasons for this difference are being deferred and allocated to income ratably over the lives as follows: of the subject property with respect to the credits provided 1983 1930 3979 an Thousands ofMlars) Tax computed at 46% statutory rate on book income before tax. $109,732 $100,398 $90,662 Increases (Decreases)in tax from: Excess of tax over book depreciation-not normalized. (2,647) (4.807) (7,478) Allowance for Funds Used During Construction-Borrowed Funds and [ Other Funds......... (12,194) (11,076) (7,969) Investment Tax Credit allocated to income. (5,903) (4,190) (3,787) Net other items. (99) (1.468) (652) Totallncome Tax Expense. $ 88.889 $ 78.857 $70,776 The tax reductions resulting from the difference between ment agreement with the Internal Revenue Service for the depreciation recorded on the Company's books and the de-1974-1976 income tax audit which resulted in an increase in j preciation taken for Federal income tax purposes amounted current taxes partially offset by deferred taxes attributable to $17,962,000 in 1981, $22,603,000 in 1980, and to the deferral of certain timing differences associated with l $28,195,000 in 1979 of which tax benefits arising from liber-the placed-in-service date for Unit No.1 at the Calvert Cliffs alized depreciation on property additions in 1976 and subse-Nuclear Power Plant. The settlement of this audit, including quent years totalling $15,315,000 in 1981, $17,796,000 in the related interest charges, decreased 1981 earnings after j 1980, and $20,717,000 in 1979 have been normalized. Federalincome taxes by 7c per common share, based on the l In September 1981, the Company entered into a settle-average number of shares outstanding. ] l 1 N:ta 4. Allowance for Funds Used During Construction For ratemaking purposes, the Public Service Commission 1

The Allowance for Funds Used During Construction, a non-of Maryland, in its Order dated June 1980, eliminated l cash item, is an accounting procedure by which there are ac-

$1,578,000 from the Company's rate base pertaining to j crued allowances for the costs of borrowed funds and other retroactive accruals of Allowance for Funds Used During i funds used to finance construction, segregated between Construction stemming from rate case findings occurring i i other income and interest charges in conformance with an between November 1972 and December 1978. Further-Order of the Federal Energy Regulatory Commission. Such more, as a result of a Federal Energy Regulatory Commis-i allowances are transferred from the Statement of Income to sion audit finding in October 1981, the Company reduced l Construction Work in Progress in the Balance Sheet. These the Allowance for Funds Used During Construction capitat-allowances are not taxable income, ized as a cost of the Brandon Shores project and decreased In 1978, the allowance was computed at an 8.13% rate ap-the Allowances for Borrowed Funds and Other Funds Used plied to one-half of the construction expenditures for the During Construction by $788,000 and $790,000, respec-Company's Brandon Shores Power Plant. Since Apd 1979, tively. The total reduction of $1,578,000 represents a de-the allowance has been computed at an 8.13% rate applied crease in 1981 earnings of Sc per common share based on to the total construction expenditures for the Brandon the average number of shares outstanding. Shores Plant. l Ntta 5. Otherinvestments Property Management, Inc. This subsidiary was formed on l Investment in Safe Harbor Water Power Corporation repre-December 31,1981 primarily to develop land used in the sents two-thirds of the capital stock of that corporation, in-Company's fly ash management program. The investment ! cluding one-half of the voting stock, and the Company's in Resource & Property Management, Inc. was $2,649,000 l two-thirds interest in Safe Harbor's retained earnings, pur-at December 31,1981. l suant to the equity method of accounting for this invest. The capital stock of Safe Harber and Resource & Prop-

ment. The investment ir Safe Harbor was $7,949,000 at erty Management, Inc. owned by the Company is pledged l December 31,1981 and b/,567,000 at December 31,1980.

under the Mortgage under which the Company's Mortgage The Company also uses the equity method to account for Bonds are issued. the investment in its fully-owned subsidiary, Resource & 1 ___ -

36 l l Nots 6. Deferred Fuel Costs ferred. In actual operation, the fuel rate clause will result in Since October 1978, the Company, by statute, has had in ef-under recoveries and over-recoveries due primarily to the feet a zero-based electric fuel rate clause designed to re-dif ference between the actual generation mix compared cover the actual cost of fuel used in generating electricity, with the latest eighteen-month generation mix used in the Actual fuel costs are recoverable so long as the Company formula. The balance deferred as of December 31,1981 and continues to demonstrate that it has used the most economi-1980 was $38,555,000 and $20,060,000 ($20,881,000 and cal mix of all types of generation and purchase, made every $10,894,000 net after income taxes), respectively. reasonable effort to minimize fuel costs and maintained the In October 1980, pursuant to an Order of the Maryland productive capacity of its generating plants at a reasonable Commission, the Company began to defer the net over-or level. As implemented by the Public Service Commission of under-recoveries of purchased gas costs resulting from the Maryland, effective September 1,1981, the fuel rate for-operation of the Purchased Gas Adjustment Clause.The mula is based upon the latest eighteen-month generation Commission's Order further provided that any over-or un-mix (prior to September 1,1981, it was based on the latest der-recoveries of purchased gas costs for the twelve months twelve-month generation mix) and the latest three-month ended November 30 each year shall be credited or charged average cost for each type of fuel. The fuel rate will not to customers over the ensuing calendar year. The deferrals change unless the calculated fuel rate is more than 5% as of December 31,1981 and 1980 were $2,603,000 and above or below the fuel rate then in effect. To the extent $12,643,000 ($1,406,000 and $6,827,000 net after income that actual accumulated fuel costs are not recovered taxes), respectively. j through the fuel rate charge then in effect, they are de-Note 7. Other Deferred Debhs in spent fuel storage costs and reprocessing costs (if any) be-Prior to May 1977, the cost of nuclear fuel reflected an as-come known. sumed value for residual uranium less estin ated shipping in 1979 through 1981 the Company incurred a total of and reprocessing costs. However, starting with the monthly $10,146,000 in maintenance expenditures for inspecting and fuel rate in May 1977, the Company began billing as a cost repairing seismic pipa supports to meet Nuclear Regulatory of nuclear fuel the cost to provide for transportation and Commission requiremer ts at the Calvert Cliffs Nuclear long-term off-site spent fuel storage, with no credit for Power Plant. These costs were deferred and pursuant to the either residual uranium or plutonium. June 1980 Order of the Maryland Commission are being am-Beginning in October 1978, post-reactor shipping and dis-ortized over twenty-six years. The amount deferred as of i posal costs were deferred pursuant to an Order by the Pub-December 31,1981 and W80 was $8,023,000 and lic Service Commission of Maryland which excluded these $8,973,000 ($4,818,000 and $4,845,000 net after income costs from the fuel rate computation. In its June 1980 Order _ taxes), respectively. granting the Company an increase in electric base rates, the During 1978, the Ccmpany entered into a joint venture Maryland Commission included a provision for the recovery with Intercontinenue :nergy Corporation for the purpose of of post-reactor shipping and disposal costs currently charge-mining uranium. In light of the currently depressed market able to operations as well as the amortization, over a three-price of uranium, the venture is no longer economically fea-year period, of the costs deferred since October 1978. The sine. Accordingly, the $2,048,000 ($1,106,000 net after in-unamortized balance of these deferred costs as of December come taxes) which had been accumulated in Other Deferred 31,1981 and 1980 was $7,399,000 and $12,331,000 Debits as a result of the joint venture was charged to Opera-($3,995.000 and $6,659,000 net after income taxes), respec-tions Expense in 1981. This charge resulted in a decrease in tively. Future fuel costs will be further adjusted as changes 1981 earnings after Federal income taxes of 3c per common share, based on the average number of shares outstanding.

37 N;tr 8. Other Taxes (a) In December 1981, the Company and the Common-Taxes, other than taxes on income, were as follows: wealth of Pennsylvania agreed to a settlement of the con-l 1981 1980 1979 tested liability related to the 1977-1979 Gross Receipts l au nousandsonw/ars> Tax applied to electricity produced in Pennsylvania and -

Property,

$24,021 $22,874 $22,015 sold outside of that State, which tax was repealed effec-l. Capital Stock.... 27,894 27,357 27,05? tive January 1,1980. The settlement whereby Pennsyl-Maryland Grosr, Receipts. Pennsylvania Gross Receipts (a)...... 27,891 24,117 19,91a (9,267) 3,728 vania conceded approximately 90% of the tax improved Maryland Electric 1981 earnings after Federal income taxes by 9c per com-Environmental Surcharge. 2,776 1,939 2,199 mon share, based on the average number of shares Social Security. 15,382 13,182 11,473 Miscellaneous. 2,242 1,830 1,479 outstanding. l 90,939 91,299 87,866 Amount included above charged principally to accounts i other than taxes. (3,227) (2,817) (2,411) Total other Taxes. $97,712 $88,482 $85,455 N t3 9. Accounts Receivable are classified as current assets although in part they do not The balance in Customers' Accounts Receivable includes mature within one year, it is not practicable to determine l approximately $20,500,000 and $18,300,000 at December the amount of such installments which do not mature within 31,1981 and 1980, respectively, receivable from unmatured one year. An annual interest rate of 18% is currently being merchandise installment accounts which, in accordance applied to installment sales. with the generally recognized practice of utility companies, N:ta 10. Changes in Common Stock and Preference Stock Not Subject to Mandatory Redemption Cumulative Common Stock Preference Stock Shares Amount Shares Amount l (EMlar Arnountsin Tiwusands) flalance at December 31,1978. 31,039,302 $601.948 1,862,989 $186,299 Year 1979 Common Stock issued under: L)ividend Reinvestment Plan. 403,691 9,454 l ESOP. Conversions of Convertible Preference Stock........ 156,002 3,509 I I 6W% Series, jnto Common Stock (decrease), 93,181 2,719 (27,312) (2,731) l Balance at December 31,1979. 31,692,176 617,630 1,835,677 183,568 Year 1980 Common Stock issued under* I Dividend Reinvestment Plan. 809,228 16,752 l ESOP. Conversions of Convertible Preference Stock,........ 156,164 3,494 l i 6W% Series, into Common Stock (decrease). 32,525 944 (9.470) (947) Italance at December 31,1980. 32,690,093 638,820 1,826,207 182,621 Ycar 1981 Common Stock issued under: Dividend Reinvestment Plan. 948,350 19,887 ESOP. 138,291 3,033 Conversions of Convertible Preference Stock, 6 W% Series, into Common Stock (decrease). 58,771 1,685 (16,977) (1,698) Balance at December 31,1981. 33,835,505 $663,425 1,809,230 $180,923 'l l ll ____..___j

38 Ncte 11. Redeemable Preference Stock value). The Company will redeem at par 100,000 shares In 1981, the Company issued 340,000 shares of 12% Cumu-($10,000.000) of this series of Preference Stock in each of lative Preference Stock,1x. Series A ($100 par value) and the years 1985 through 1989, 160,000 shares of 12% Cumulative Preference Stock,1981 The Redeemable Preference Stock is junior to Preferred Series B ($100 par value). The Company will redeem at par Stock, ranks on a parity with Preference Stock Not Subject 68,000 shares ($6,800,000) of Series A in each of the years to Mandatory Redemption and prior to Common Stock as to - 1987 through 1991. The Company will redeem at par all payment of dividends or assets available in the event of shares ($16,000,000) of the Series B on July 1,1991, liquidation. In July 1979, the Company issued 500,000 shares of 8.375% Cumulative Preference Stock,1979 Series ($100 par l Note 12. Long-Term Debt The Installment Series Mortgage Bonds, due September The Mortgage Bonds are secured ( A)by a valid and direct 15,2009 are payable as to principal on the fifteenth day of l first mortgage lien on substantially all of the principal prop-September in the years and the amounts as follows: crties and franchises owned by the Company, (B) by a p g pledge of 100,000 shares of Class A stock and 100,000 Amount shares of Class B stock of Safe Harbor Water Power Corpo-Years Each Year ration, and (C) by a pledge of 10,000 shares of common (In rhousands o/adlars> stock of Resource & Property Management,Inc., the Com. 2005 through 2008. $ 3,250 200m 42,000 l l pany's fully-owned subsidiary. l The Company is required to make an annual sinking fund The Company is also required to make annual sinking payment to the Trustee under the First Refunding Mort-fund payments (in cash and/or Sinking Fund Debentures) to gage at the end of each period of one year, accounting from the Trustees under the Sinking Fund Debenture Inden-the first day of August, equal to 1% of the largest amount of tures. The 4%% Debenture sinking fund payment, to be Mortgage Bonds at any time during such yearly period out-made on or before June 14 of each year to and including standing under the Mortgage. Such funds are to be used for 1985, is calculated to retire $400,000 principal amount of j the purchase or redemption of an indeterminate principal 4%% Sinking Fund Debentures per year; and the 4%% De-j amount of Mortgage Bonds, excluding the Installment Se-benture sinking fund payment, to be made on or before July 1 f l ries Mortgage Bonds of 1998,2002 and 2009, the 6.80% Se-31 of each year to and including 1989, is calculated to retire l ries Mortgage Bonds of 2004 and the 9% Series Mortgage $600,000 principalamount of 4%% Sinking Fund Deben-Bonds of 1984, as provided in the Mortgage, at not exceed-tures per year. In any year, at the Company's election, an ing the applicable redemption prices, additional sinking fund payment of up to $600,000 (noncu-l The Installment Series Mortgage Bonds, due August 15, mulative) may be made under the 4%% Sinking Fund De-l 1998 are payable as to principal on the fifteenth day of Au-benture Indenture. gust in the years and amounts as follows: The combined aggregate requ.rements for bond maturi-Principal ties and estimated sinking fund payments for each of the l ^* " next five years are as follows: Yms E h Ye (In ThousandnfDdlars) Year Requirement 1984 through 1986. $ 1,000 ggyy, q.ggg,g 1987 through 1990. 2,000 1982' $103 1991 through 1995. 3.000 1983 43 39gf 1996 and 1997. 4,000 77 1998. 33.000 1985 28 s 86. 63 The Installment Series Mortgage Bonds, due July 15, 2002 are payable as to principal on the fifteenth day of July in the years and the amounts as follows: Principal Amount Ynts Each Year (In Thousands ofudlard 1993. $ 420 430 1994........ 1995 through 1997. 605 1998 and 1999. 690 2000 and 2001. 865 2002. 6.725 9

L 39 I ! Nots 13. Short-Term Borrowings as to withdrawal). Borrowings under the lines are at the ( The Company maintains bank lines of credit to provide banks' prime or base interest rates or under certain credit j backup financing capacity for commercial paper notes is-line arrangements at a fixed percentage over the London In-sued to satisfy interim financing requirements and to permit terbank Offered Rate. Information concerning short-term I l short term borrowing flexibility. In support of such lines, borrowings outstanding at December 31,1981 and Decem-1 the Company either pays commitment fees at a fixed rate or ber 31,1980 and during each of the years then ended is set .) i maintains compensating balances (which are not restricted forth below: ) 1981 1980 At D:ctmber 31 tin Towenawhqfikitars). Short Term Horrowings Outstanding: Commercial Paper Notes (maturing in 90 days or less). $ 20,850 Weighted Average interest Rate 12.54 % Unused Lines of Credit. $163,000 $140,000 Compensating Halances. $ 1,960 $ 2,040 During tha Year Ended December 31 Maximum Aggregate Short Term Horrowings. $101,865 $ 75.450 Average Daily Short Tenn Ikarrowings (a). $ 33,890 $ 30,922 i. i Weighted Average Interest Rate (b).. 16.27 % 12.64 % (a) The sum of dollar days of outstanding borrowings divided by actual days in the period. (b) Actual accrued interest during the period divided by average daily borrowings. Ncte 14. Commitments and Contingencies mum contingent liability (retrospective assessment) would The Company has made substantial commitments in con-be $10,000,000. Under regulations issued pursuant to the nection with its construction programs for 1982 and Act, the Company's maximum contingent liability in any subsequent years. one calendar year for payment arising from more than one Price-Anderson Act: nuclear incident is limited to twice the retrospective assess-The Price-Anderson Act ( Act) currently limits the liability ment pemador, or $20,000,001 of an owner of a nuclear power plant to $560,000,000 for a Nuclear Electric Insurance Limited: single nuclear incident. The Company is protected against The Company is a member of Nuclear Electric Insurance this potentialliability by a combination of private insurance Limited (NEIL), an industry mutual insurance company. carried by the Company (currently limited to $160,000,000 NEIL provides both nuclear property damage insurance and through the nuclear insurance pools) and Federal govern-insurance coverage for a portion of the extra costs incurred mentalindemnity agreements. In the event of a nuclear inci-in obtaining replacement power during a prolonged outage i dent, as defined by the Act, causing damage to the public in at a nuclear generating facility. The Company's maximum excess of the limits of primary financial protection, the Com-contingent liability for a retrospective assessment in any i pany could be assessed up to the limit of $5,000,000 per re-one policy year which can arise from an outage at any mem-actor at the Company's Calvert Cliffs Nuclear Power Plant. ber's nuclear facility, under the terms of the property dam-l For one nuclear incident, therefore, the Company's maxi-age and replacement power policies is $8,510,000 and l $16,600,000, respectively. 1 l l

40 i N:t315. SegmentInformation l 1981 1980 1979 I Un ThousandsofIkdlars) Electric Operating Revenues...... S 934,160 $ 857,264 $ 714,956 Operating Income before Income Taxes, 268,891 249,510 236,024 l Operating income, 196,159 182,149 173,160 Depreciation........ 78,052 73,743 71,355 239,225 198,034 143,780 Construction ExpenditureHa) identifiable Assets at December 31 (a)(b),, 2,645,331 2,507,909 2,350,211 Gas Operating Revenues..... $ 467,949 $ 354,736 $ 287,074 Operating Income before income Taxes., 42,230 33,747 27,091 Operating income. 28,880 23,937 19,973 Depreciation....... 9,766 8,886 8,463 Construction Expenditures (a),,....... 26,988 26,029 15,858 identifiable Assets at December 31(a)(b). 315,564 292,491 269,634 St: m S 18,947 $ 14.442 $ 12,378 Operating Revenues..... Operating Income before income Taxes. 2,274 (119) 68 Operating Income. 1,390 213 321 580 552 520 Depreciation........ 743 -940 1,279 Construction Expenditures (a)........ 1 Identifiable Assets at December 31 (a)(b). 15,818 15,030 14,808 Tctal Operating Revenues..... $1,421,056 $ 1,226,442 $ 1,014,408 Operating income before income Taxes. 313,395 283,108 263,183 Operating income. 226,429 206,299 193,454 Depreciation...... 88,398 83,181 80.338 i 266,956 225,003 160,917 - ! Construction Expenditures........ Identifiable Assets at December 31 (b). 2,976,713 2.815,430 2,634,653 Other Assets, 289,690 257,583' 221,331.! Total Assets,,. 3,266,403 3,073,013 2,855,984 (a) Includes allocation of Common Utility Property. (b) Represents Utility Plcnt and Materials and Supplies, excluding merchandise inventory of $3,904,000,53,054,000, and $3,272,000 at December 31, 1981,1980, and 1979, respectively; merchandising activities are reported in Other income. Nata 16. Jointly-Owned Electric Utility Plant The following data as of December 31,1981 represent the The Company's ownership as a tenant in common of undi-Company's proportionate share: vided interests in the Keystone and Conemaugh mine-Trans. mouth electric generating plants, located in western Key. Cone. mission 8"me 'nawh Line Pennsylvania, entitles the Company to 536 megawatts of

1. • '#"r A""'unis in Thousando rated capacity, Financing and accounting for these properties are the Ownership Interest 20.99 %

10.56 % 7.00 % same as those for any other fully-owned property The Com-Utility Plant in pany's share of the direct expenses of the joint property is service $44,359 $29.655 $1,486 included in the corresponding operat!ng expenses in the ^$"*"fr[ cia'ti5 n""" 13,908 7,745 358 Statement of Income, Construction work in Progress 1,235 382 i l.

l i 41 N 2t317. Quarterly Financial Data (Unaudited) The business of the Company is seasonalin nature, and it The following data are unaudited but, in the opinion of the is Management's opinion that comparisons between quar-Company, include all adjustments (comprising only normal ters of a year do not give a true indication of overall trends recurring accruals) necessary for a fair statement of the op-and changes in operations. l erating results for the periods presented, Operating Net income Earnings Total Income Applicable Per Share Operating Plus Net to Common of Common Quarter Ended Revenun AFC (a) Income Stock Stock (In 11wusands qtIMlan) l March 31,1981. S 384,440 $ 67,862 $ 43,482 8 37,066 $1.15 June 30,1981.... 314,152 55,999 - 31,442 24,545 0,74 l September 30,1981. 366,404 76,985 50.530 43,520 1.30 December 31,1981, 356,060 52,091 24,205 17,212 0 G1 l Total Year 1981. $1,421,056 $252,937 $149,659 $123,243 $3.70 1 March 31,1980. $ 316,017 $ 51,694 $ 29,348 $ 23,818 $ 0.75 ) l June 30,1980. 264,973 51,025 27,905 22,377 0.70 .] September 30,1980. 341,898 77,844 55,997 50,474 1,56 y December 31,1980. 303,554 49.813 26,149 20.631 0.63 { i l TotalYear 1980., $ 1,226,442 $ 230,376 $ 139,399 $ 117.300 $ 3.64 l (a) Allowance for Funds Used During Construction (for Borrowed Funds and Other Fundslis added to Operating income in determining operating income for rateinaking purposes. I l N:;ta 18. Supplementary Information to Disclose the of plant from the date the plant was acquired to the present, .j EffIcts cf Changing Prices (Unaudited) and differ from constant dollar amounts to the extent that ] The following supplementary information is supplied in ac-specific prices have increased more or less rapidly than cordance with the requirements of Financial Accounting prices in general. Standards Board Statement No. 33, Financial Reporting and The current cost of utility plant, comprising all plant in Changing Prices, for the purpose of providing certain infor-service, construction work in progress, and plant held for fu, mation about the effects of changing prices. It should be ture use, represents the estimated cost of replacing existing viewed as an estimate of the approximate effect of inflation, plant assets and was determined by indexing the surviving rather than as a precise measure. plant by the Handy Whitman Index of Public Utility Con-Constant dollar amounts represent historical costs stated struction Costs, The current year's provision for deprecia-in terms of dollars of equal purchasing power, as measured tion on the constant dollar and current cost amounts of by the Consumer Price Index for All Urban Consumers. utility plant was determined by applying the Company's de-Current cost amounts reflect the changes in specific prices preciation rates to the indexed plant amounts. l ) i 1 ]

v M t 4 a 42 4 s a d T f' C' . m aammmmmmer - Statement of Mome From CurfJnuing Operations Adjusted for Changirg Prices For the Y;or Ended Decenh31,1931 fin Thousands orIwlars) / Conventional Constant Dallar Current Cost llistorical Average Average ? Cost 1981 Dollars 1981 Dollars 7 Operating l<ever%, g , l. $ 1,421,056 $ 1.421,056 $ 1.421.056 Purchased Fuelard F < ry.. !.. 596,089 604,656 601,491 Operations and Mainte'hanc A. . /; 335,462 335,462 335,462 j, 7 88,398 197,723 216,719 Depreciation.

1. f.,

Taxes. P-s 174.678 174,678 174,678 ,r TotalO tating Expenses. 4.

f. (

t t 1,19s,627 1,312,519 1,328,350 226,429 108,537 92,706 Operating Income......., u Other income (induding AFC). 15,046 15,046 15,046 Income Before Interest Charges. 241,475 123,583 107,752 91.816 91,816 91,816 Interest Charges (net of AFC). ,p. Income Fror i Continuing Operations (excluding 1 $ 14! % 9 7 31,767(a) 15,936 reduction to net recoverable cost). ,( -/. - + ~

n=

Increase in Specific Pricer (Current Cost) of Utility Plant i g and Nuclear Fuel SUd Di ring the Year (b). c.f ',( ( $ 447,680 + lb.Ethh Net Feioverable Cost..... S (,1 i,615) (92,562) N Effect ol Increase in General Price Qvpl. j (456,048) , c. Exce (of Increau in General Pric[Iwel Over increase in Speci/ic Prices A'fr ik:lucti,n to Net Feverable C&L,. ( y,' 0 00,930)

Gain from Dec"/g m Purchasing P.er of Net Amounts 0,ved f

j 126,353 126,353 t 9,718 $ 25,423 Net. s / (a lueluding thaeduction to net recoverable cost, the loss from contyu' ierations on a canstant dollar basis would in,e seen $84,868,000. (b) At Decembeg.) 1981, current cost of utility plant and nuclear f pt net on accumulated depreciation and amortization, was $5,590,245,000, while his-torical ce g re coot recoverable through depreciation and awpintion was $2,831J83,000. g Nuclejr fuel material and its related effect on prehased stated in terms of constant dollars oc current cost over the fuel av' energy expense has been adjuste 3 in a manner simi-historical cost of plant is not presently reco ferable in rates, lar t dtility plantJoMnstant dollar amounts add at current and is reflected as a reduction to net recoverable cost, While market prices for current cost - the ratemaking process gives no recognition to the current Fgl inventories (other than suelear fuel), the cost of fuel cost of replacing utility plant and nuclear fuel, based on past used in generation mit gas purchased for resale generally practices, the Company bel' eves it will he allowed to earn on I rep esent recent acqdsitk,ns epd have not been restated the increased cost of its net investment when replacement of fr.o their byt'trical cost m nominal dollars. The ratemaking facilities actually occurs, process !,irdts the recovery of fut 1 and purchasul gaLasts To properly reflect the economics of rate regulation in the to hista: cal cm,t. For these reas ms, fuel invent, ries (other Statement of Income from Continuing Operations, the ad-than nuclear fuel have teen clansified as monetary assets. justment to net utility plant and nuclear fuel should be com-As prer;ibed id Statement No. 33, income taxes were bined with the gain from the decline in purchasing power of not adjusted net amounts owed, During a period of inflation, holders of Under the ratemaking prescribed by the Public Service monetary assets suffer a loss of general purchasing power Commission of Maryland, the Company is generally limited while holders of monetary liabilities experience a gain. The to the recovery of historical cost of plant in service and nu-gain from the decline in purchasing power of nei amounts clear fuelin revenues as depreciat'on and amortization. Dur-owed is primarily attributable to the substantial amount of ing periods of inflation, such amounts will be recovered in long-term debt outstanding which will be repaid with dollars dollars having less purchasing power than the historical dol-that are worth less than the dollars received when such se-lars invested. Therefore, the excess of the cost of plant curities were issued,

43 Five Vear Comparison of Selected Supplementary Financial Data Adjusted for Changing Prices (In 7'huissana o//wlsrs) 1981 1980 1979 1978 1977 Operating Revenues ilistorical.......... $ 1,421,056 $ 1,226,442 $ 1,014,408 $ 974,486 $ 792,522 In Average 1981 Dollars. $ 1,421,056 $ 1,353,16i $ 1.270,576 $ 1,357,997 $ 1,189,001 Historical Cost information Adjusted for Conerallnflation (in average 1981 dollar s) Income from Continuing Operations (excluding reduction to net recoverable cost).... 31,767 $ 44,555 $ 65,521 Income Per Common Share (after dividend requirements on preferred and preference stock and excluding reduction to net recoverable cost)......... $.16 $.63 $1.20 Net Assets at Year End at Net Recoverable Cost. $ 1,267,804 $ 1,320,135 $ 1,416,474 Current Cost information (in average 1981 dollars) i. Income from Continuing Operations (excludmg reduction to net recoverr ble cost)... 15,936 $ 25,608 $ 26,076 income ).r Common Share (after dividend requirements on preferred ;md preference stock).......... $ (.32) $.04 $.04 Excess of lacrease in General Price Level Over increase in Specific Prices After Reduction to Net Recoverable Cost. $ 100,930 $ 211,612 $ 250,861 ( Net Assets at Year End at Net Recoverable Cost. $ 1,267,804 $ 1,320,135 $ 1,416,474 GenerallnformaJon Gain from Decline in Purchasing Power of Net Amounts Owed (in average 1981 dollars)... $ 126,353 $ 11 ],597 $ 201,569 Cash Dividends Declared Pt r Common Share llistorical. $ 2.S2 $ 2.50 $ 2.40 $ 2.25 $ 2.14 In Average 1981 Dollars. $ 2.62 $ 2.76 $ 3.01 $ 3.14 $ 3.zl l Market Price Per Common Share at Year End l Ilistorical. $23.13 $19.75 $22.13 $24.38 $26.63 In Average 1981 Dol:ars. $22.38 $20.81 $26.21 $32.72 $38.96 Average Consumer Price Index. 272.3* 2'6.8 217.4 195.4 181.5 Year-End Consumer Price Index. 281.4* 258.4 229.9 202.9 186.1 i ' 8Stimated

Officers 44 Bernard C. Trueschler John W. Gore, Ji. Upon written request to Chairman of the Board and Chief Vice President, Electric Alfred II. Inners, Treasurer. Executive Officer interconnection and Operations P.O. Box 1475, Baltimore Md. o )y lif it 212 George V. McGowan. Arthur E. Lundvall, Jr. rh t ag l rn Pres &nt and Chief Operatmg Vice President. Supply jo.K annual report after it is filed U** with the Securities and Exchange Henry H. Miller Commission in March 1982. Norman J. Bowmaker Vice President, nicribution Vice President, General Services Chris H. Poindexter Raymond C. Bryant Vice President, Engineering and Vice President, Consumer Services Construction Edward A.Crooke Alfred H. Inners Vice President Finance and Treasurer and Assistant Secretary Accounting, and Secretary g g, Jon M. Files Assistant Seentary and Assist 2mt Vice President, Management and Treasurer Staff Services les W. S$'m Assistant Treasurer Executive Offices New Director i C At the Annual Meeting held in April 1981, stockholders $8""d $'B< "$51 i i r l elected Paul G. Miller to membership on the Company's Maryland 21203 Board of Directors. Mr. Miller is the Chairman of the Board Annual Meeting and Chief Executive Officer of Commercial Credit Company The annual meeting of stockholders will be held at 2:00 P.M.on April and a member of the Board of Directors of its parent corpo. l ration, Control Data Corporation. He succeeds Walter Sond-fiecs:e"$;*c[s"$$o"re, I l heim, Jr., who had attained the age of Board retirement Maryland. after 17 years of dedicated service to the Company. Conversion Agents Convertible Preference Stock New Officers Chemical Bank, New York The Board elected Jon M. Files, Vice President, Manage. Marvland National Bank, B^"I'"" ment and Staff Services, succeeding Norman J. Bowmaker Registrars who assumed the responsibilities of Vice President, General Services, Both officers assumed their new duties as of Preferred and P'.nhattan Bank, eference Stock The Chase Ma June 1,1981. N.A., New York Union Trust Company of Vernon R. Evans Maryland. Baltimore Common and Convertible It is with profound sorrow that we report the sudden death 8 of Vernon R. Evans, Vice President, General Services, in "N7y"GuNnty Trust April 1981. Mr. Evana served the Company with outstand-Company of New York Union Trust Company of ing abilitv for more than 40 years. Maryland. Baltimore Transfer Agent Preferred, Preference, Convertible Preference and Common Stock Chemical Bank, New York Maryland National Bank. Baltimore

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o The bright lights of Baltimore's new Harborplace foreshadow a dynamic future for the city. They also l signal a growing need for energy in action. This expanding energy requirement is typical of the picture throughout BG&E's service area in Central Maryland. The Baltimore Gas and Electric Company is committed to meet those requirements with appropriate actions in energy Research and development continues to be emphasized; the latest in nuclear technology and the most efficient of 1 coal-fired power production help BG&E meet its commitments. BG&E offers a bright energy outlook for home, office, factory and institution. l l i I B A LTIM ORE GAS AND j ELECTRIC 1 l

I HIGH. LIGHTS l l l 1980 1979 1970 Earnings Per Share of Common Stock $3.64 $3.40 $2.77 Average Shares of Common Stock Outstanding 32,258,000 31,356,000 16,645,000 Dividends Declared Per Share $2.50 $2.40 $1.82 l Revenues l Electric $ 857,264,000 $ 714,956,000 $ 229,063,000 Gas 354,736,000 287,074,000 95,920,000 Net Income Applicable to Common Stock $ 117,300,000 $ 106,532,000 $ 46,082,000 Dividends-Common Stock 80,754,000 75,373,000 30,148,000 l Earnings Reinvested in the Business 36,546,000 $ 31,159,000 15,934,000 l l Electric Sales-thousands of kilowatthours 17,228,000 16,823,000 11,971,000 l Gas Sales-dekatherms* 95,110,000 93,450,000 85,820,000 Investment in Utility Plant $3,184,059,000 $2,974,653,000 $1,257,479,000 l 'Cne dekatherrn (Lrtn) equals 1.000.000 Bntish thermal units, or 1.000 cubic feet (Mcf) of gas with a heating value of 1.000 ctu per cubic foot. l l DIVIDENDS PAID ON THE COMMON STOCK CONTINUOUSLY SINCE 1910-ALWAYS EARNED-NEVER REDUCED Earnings and Dividends Declared Per Share of Common Stock $4.00 l l $3.50 l contents $3.00 Highhghts.1 The Chairman's Letter. 2 The President's Report,4 $2.50 Financial Performance,6 -ggj i : Eneigy for the 80 s.12 $2.00 g 4g{ Energy at Bargarn Pnces.10 r, .y. _f <;.{ i f Q 7' ){ Conservation and Research (: for Today...and Tomorrow,16 N

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$1.50 te sse $100 EEE ME MBBEMiB See h h h ib h "hf( Selected Financial Data. 25 ,,4 f'[ fh,. [h Nkg -- [h}nk Managements Discussion /, -fj[ [ j and Analysis,26 0 Financial Statements. 28 1970 '71 '72 73 '74 '75 '76 '77 '78 '79 '80 Notes to Financial Statements. 33 L I Eamings Per Share D Jd Dividends Declared Directors and Officers 44 1

THE CHAIRMAN'S LETTER l TO OUR STOCKHOLDERS I BG&E opened the <iecade on Fi note of progress and strength. We improved earnings, increased our common stock dividend and won approval of much l needed rate relief. These are no mean accomplishments in an economy as troubled as ours, yet I feel confident that our Company can sustain such l achievements in the years ahead. We have always prided ourselves on providing responsible leadership in the utility industry and, most importantly, in our community. That leadership will be more vital than ever in the 80's. Our country is in the throes of adjusting to new energy realities. Hampered by inflation, confused about the real nature of our energy problems, many Americans are fearful that eur energy future must be bleak and costly. I know that need not be true. Existing and promising new technologies can provide plentiful energy at a price that will permit continued improvement in our standard of living. With wise management, nuclear power, coal and domestically produced natural gas can easily resolve our short term difficulties, reduce the need for imported oil ar,d bridge the gap to the technology of the 21st century. As a provider of energy, the Company is committed to helping our ( customers unders'and that this country need not sacrifice growth because of a scarcity of resources. The Company has prospered in these difficult times because we have instilled a tradition of leadership in our management team. BG&E has long recognized that for a utility to succeed, it must assert a measure of control over its destiny. We are unwithng simply to react to events that affect us. We seek instead to influence them. Yet in this increasingly volatile world we must be prepared for the unexpected. We need to remain flexible, keeping our minds and options open to change. We must be able to alter our plans quickly when political, economic or regulatory events so dictate.1980 was a year marked by economic uncer-tainties. We faced a volatile ' .d market, unprecedented short-term interest rates, and, of course, inflai . Yet because of the flexibility built into our financial planning, past decisions with respect to scheduling expansion of electric generating capacity, maintaining a sound capital structure and aggressively seeking rate relief, we have strengthened our financial position. For the pact few years this report has been describing the effects of inflation on the Company's expenses and earnings. In order to meet mount-ing costs and produce the level of earnings required to attract necessary new capital on reasonable terms, we have been forced to make repeated applications to the Public Service Commission of Maryland for higher rates. The Nation's hi hly inflated economy drains each of us, business and 0 individual alike. While the Company's operating incomo is being affected adversely by continually higher opercting costs, it is the capital intensive nature of electric utilities that makes our industry especially vulnerable to inflation. The need to rneet increasing demand for our services requires the addition of new facilities at costs that are dramatically higher than the average cost of previously constructed facilities. This situation is further aggravated by the unprecedented high financing costs demanded in today's capital markets. 2 L

The Public Service Commission of Maryland recognizes that present rate proceedings do not provide an adequate remedy for the serious prob- ,. 1 lem of earnings attrition. In response to our application filed in November g-[ 1979, the Commission last June granted the Company $94 milhon in W. increased rates, the largest dollar figure it has ever awarded. But even this (,. amount represented only 64% of our actual reqt.est. Missing from the Order ~ was a mechanism to offset inflation. As a partial solution, however, the L Commission suggested in its Opinion that the Company f:le for additional g relief under the make-whole provision of the Maryland statutes. We did so in September and on December 22, the Commission granted the Company g $25 million of rate relief effective December 30,1980. a Unfortunately, the make-whole proceeding is based upon the same flawed assumptions as the regular rate case. It utilizes past costs to deter-mine new rates, making it mathematically certain that the Company's earn-ings will not be sufficient to make up for continually rising costs. We believe that the Commission appreciates our need for a more realistic mechanism to a cope with inflation, and we are hopeful that such an approach will be developed. Until then, it will remain our policy to pursue rate increases + actively whenever we deem them necessary. We could not claim truly to influence our destiny if we did rat participate ( activuly in the political arena. Decisions made at the Federal, state and local levels greatly affect our Company, our shareholders, our employees, and our customers. BG&E works with community organizations, as well as legislative groups and regulatory agencies throughout the government, to protect these interests. Through our offices in Washington and in Annapolis, we are able to help develop the legislation that will affect the utility industry in general, and the Company in particular. BG&E intends that its voice and yours will be heard as the critical energy decisions of our time are made. Tho nu ten years wil'. e demanding. They will require that we continue to be flexible in response to change, efficient in managing our economic resources and creative in developing and utilizing new technologies to serve our customers' needs. BG&E is prepared to grow with those challenges. Our greatest strength lies neither in our facilities nor our management philosophy. Our success rests on the efforts of the talented, motivated and loyal people who work for BG&E. The vast majority of them play a dual role for the Company as stockholders and employees. Thanks to all of them, we have achieved many of our past goals and look forward to the future with confidence. It is to the employees of BG&E that this report is dedicated. / f Ac6Wfdv Chairman of the Board February 4,1981

THE PRESIDENT'S l REPORT ON OPERATIONS TO OUR STOCKHOLDERS Our goals at BG&E have been and always will be to furnish a reliable supply of electricity and gas at rates that are fair to both our customers and our investors. I am pleased to report that within the restrictions placed upon us by economic events beyond our Sntrol, we have met those goals dur ng 1980. Our strength this year came from many sources. Our Calvert Cliffs Nucleac Power Plant is ranked near the top in performance among the Nation's nuclear facilitiec. I cannot overstate the importance of this ranking to the Company and to Central Maryland. Calvert Cliffs supplied 59% of our customers' total electric requirements in 1980, producing fuel-cost savings of many millions of ds ' ars for our customers. This is one of the major ways the Company is helping its customers to fight inflation. BG&E is committed to achieving the highest level of efficiency et Calvert Cliffs. The Company is also strongly committed to maintain:ng the safest possible operating conditions at our nuclear plant. Over the past year, v,e have improved safeguards and refined operating procedures, all as part of our ongoing process of review and modification at Calvert Cliffs. i Total sales of electricity in 1980 were up 2.4% over last year. On July 21, we recorded a new one-hour peak electric had of 3,969 mega-watts. The new record, a direct result of Central Mayand's unusually hot summer weather, represents a 9.6% increase over the previous peak record set in 1979. Overall, the weather helped to produce a 9% increase in our residential sales. This partially compensated for the 1 % drop i:, commercial and industrial sales which reflected the slow down in business activity in our service area. Calvert Cliffs gives a sufficient reserve margin so that we do not have l an urgent need to increase our electric generating capacity. Consequently, l we have been able to deve'op a manageable construction program to meet our customers' growth needs over this next decade. We expect the two units at our Brandon Shores Power Plant, which will begin operating in 1984 and 1988, to meet our projected 3% annual peak-load growth for the next l ten years. During that time, BG&E will have substantially reduced the use of oil in our generation mix. These efforts are already well under way. Both Brandon Shores units are being equipped to burn coal as their primary fuel, and the test burn of both higher sulfur coal and refuse-derived fuelin the Com-pany's Charles P. Crane Power Plant has been successfully completed. This latter accomplishment is particularly gratifying since it means that we will be able both to use lower-cost coal at Crane and assist Baltimore County witil its waste disposal poblem. As a complement to our strategy to replace oil, we are planning to expand our hydroelectric generating capacity at Safe Harbor over the next few years. The Safe Harbor Water Power Corporation, which is two-thirds owned by BG&E, has received a 50-year renewal of its Federal license to operate a hydro power plant on the Susquehanna River in Pennsylvania. The license renewal also contains approval for Safe Harbor to expand its generat-ing capacity by 150,000 kilowatts and our customers will benefit from our two-thirds share of the added hydro power. .4

i Our ealistic construction program will allow us to hold our expenditures for con action and nuclear fuel to reasonable levels. The Company expects to be

to generate internal'y over 50% of the funds we will need, giving us excellent flexibility to develop financing arrangements for the remainder

[; -L y through the capital market, the Company's Dividend Reinvestment and 3 4 gv Stock Purchase Plan and the Employec Stock Ownership Plan. The outlook for our gas business improved significantly in 1980. Since restrictions on our gas supply were lifted in 1979, we have been able to connect new residential customers for the first time in nearly five years. Thus, although unit gas sales increased only 1.8% this year, reflecting 3 customer conservation efforts and the general business conditions in our j area, we expect sales to improve in the future. ~ Although gas supplies are more plentiful, the cost of gas itself continues to increase. In past years, the Company's earnings have had to absorb the impact of frequent price increases charged by our pipeline supplier since, under the terms of the Purchased Gas Adjustment Clause of the Company's Ser. 7 Tariff, we weren't able to collect the extra costs from our customers immediately. Effective October 1,1980, the Company adopted a revised Purchased Gas Adjustment Clause which allowed us to defer those costs. g As a result, we were able to defer $12.6 million of gas costs, improving \\ our carnings per share by 21c in 1980. ~ To help our customers hold down their utility bills, we are working with them in a number of conservation and research programs. BG&E was among the first utilities in the Nation to impement a home energy audit service. By the end of 1980, we had performed a total of 4,350 audits on Central Mary-land homes, all at no or nominal cost tc the customer. The Company is currently trying to determine whether solar hot water heating can be a cost-q effective alternative in our area. Later secticos of this report will di:,uss our j I other activities in energy conservation, reseatch and development. I invite you to read in the pages that follow e more detailed discussion of BG&E's financial and corporate achievements in 1980 and our plans to meet the energy needs of the future. Based on the Company's perforrnance during the past year, I believe we can look forward with confidence to the j fulfillment of our goals for the 80's. i President j i February 6,1981 ) i i 5

FINANCIAL l PERFORMANCE l 1980 FINANCIAL year, with no change in the rate of adopting this revised clause effec-ACHIEVEMENTS return and accounting practices tive October 1,1980, deferred { previously authorized by the Com- $12.6 million of gas costs at year-i I EARNINGS PER SHARE of common mission. After hearings, the Com-end, improving 1980 earnings per stock increased 7.1% over last mission authorized the Company to share by 21c. year to $3.64. increase its rates to produce $24.9 million of added revenue. The Construction Program THE QUARTERLY DIVIDEND on reduction from the Company's in 1980, we spent $225 million common stock was increased from request resulted primarily from for construction and $57.1 million 61c to 64c per share with the the Commission's decision to for nuclear fuel. Electric projects l October payment, equating to an disallow prospective increases in accounted for $185.8 million of the [ annual dividend rate of $2.56 per wages, employee beness and total amount and $21.3 mi:iion was

share, payroll taxes. The new rates expended for gas construction. The became effective December 30, 1981 construction budget is esti-RATE RELIEF of $93.6 million in 1980 and are designed to increase mated at $270 million and ex-additional revenues was received annual electric revenues by $19.0 penditures for nuclear fuel in 1981 in June.

million or 2.2%, gas revenues by are expected to total $44 million. l $4.8 million or 1.4%, and steam FURTHER RATE RELIEF of $24.9 revenues by $1.1 million or 7.6%. Construction Expenditures

• *' D " 'S million was granted to the Com-pany in December.

Purchased Gas Adjustment With the advent of a series of gov-R:ts Relief ernment-instituted increases in the a As a result of an application for price of natural gas, the price of higher base service rates, filed in gas to the Company has been M9 y j November 1979, the Public Service steadily increasing. The lag in col-gq p, ; f g %M 'g Commission of Maryland awarded lecting such price increases

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M ? 1 l the Company $93.6 million of addi-through our Purchased Gas Adjust- ) fu, EfF M Y f jp" l tional annual revenue. Of this ment has depressed the Company's 4 amount, $74.0 million applied to eainings to a greater degree each 0 W6 77 '78 79 '80 81 electric, a 10.4% increase, $18.2 year. The Public Service Commis. million was allocated to gas, a sion, recognizing that gas distribu-1 6.3% increase, and $1.4 million, an tion companies have little or no 11.2% increase, pertained to our control over the cost of gas, issued steam business. The new rates an Order in September 1980 author-became effective with service izing such companies to elect a i rendered on June 13,1980. revised Purchased Gas Adjustment l The Order, however, f ailed to Clause. The revised clause adopted provide a mechanism to nffset our by the Company permits uncol-most serious financial problem, lected gas costs to be deferred for a earnings attrition. To meet this 12-month period ending November problem, the Company filed a 30 and recovered over the subse-make-whole application in Septem. quent calendar year by adding an ber 1980 to further increase base actual cost adjustment to the com-rates to produce an additional puted Purchased Gas Adjustment $38.4 million of annual revenue. In for each month of the year. This a make-whole rate proceeding, the procedure matches the cost of gas l Maryland law permits the Company with gas revenues reported within i to update its operating results by the period covered by the State-l using a more recent historical test ment of Income. The Company, in [I7CO$$ QQQQ o acra: umn 7m ne a w,q mw f www m,numa 1 l r 1

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1 l l l ) 1 l I Sccurity Transactions Short-Term Borrowings Employee Stock Ownership Plan in September, the Company sold The Company, on an interim basis, The investment Tax Credit Em- $75 million of 12%% First issues short-term debt to provide ployee Stock Ownership Plan Refunding Mortgage Bonds due financing for its construction pro-enables eligible Company em-September 15,1990. Also during gram and other corporate pur-ployees to acquire shares of the the year, the Company issued poses. Short-term capital needs Company's common stock. The $15 million of 6.80% First were financed during the year program is designed to give em-Refunding Mortgage Bonds due through the sale of comrnercial oloyees a stronger interest in the September 15,2004. This issuance paper at interest rates ranging successful operation of the Com-j covers a $15 million withdrawal from 8.23% to 18.10%. pany. In 1980, the Plan accounted from the Trustee and represents f r an additional $3.5 million in Dividend Reinvestment Plan part of the proceeds from the sale common equdy. j BG&E's Dividend Reinvestment and of $20 million of 6.80% Follution Stock Purchase Plan provides com-Control Revenue Bonds by Anne mon stockholders the opportunity Total Utility Plant Arundel County m September e,nons a oaars> to purchase additional shares of 1979. The remainder of the pro-common stock directly from the ceeds will be available to the Company without brokerage fees. Company In 1981. The Plan offers common stock-During 1980,997,917 shares of holders the chance to reinvest their ~ ~ common stock were issued to cover cash dividends in additional shares conversions of Convertible Cumula-of common stock at a 5% discount live Preference Stock and to pro-on the average market price. 20 vide for new sheres purchased Participants in the Plan may also under the Dividend Reinvestment make quarterly cash investments to and Stock Purchase Plan and the purchase additional shares of u investment Tax Credit E.mployee common stock at market price. l Stock Ownership Plan. Presently, about 19.6% of common Also during the year, bonds and stockholders are participating in the c debentures amounting to $15.1 Plan and are reinvesting dividends a7 vi 72 73 74 vs 7s 77 78 79 so million were retired through sinking on 18.8% of the outstanding funds and $20.1 million of bonds shares. This Plan generated a total were redeemed at maturity, of $16.8 million in 1980. How the Revenue Dollar for 1980 Was Spent Costs Per Dollar ) N '7 Purchased Fuel & Energy 38.8C o{a operatons 17.6c w to $1.00 Mair.tenance 6.2C l Depreciation 6.7C l The i.1stallation of underground hnes by BG&E -~ crews will supply the power needs of heat pumo $$end 9 se sy tems and at er home energy requirements. As ete nce homes go vo, BGSE will be ready with serwce Common Dimdends and energy guodance for new homeowners ' RetameQMF 8 U ..w

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ENERGY AT BARGAIN PRICES -1 l l l l Electricity 111%. On an average basis for the about 76% higher than the cost Although its price has risen over the eight cities, the cost of electricity of heating with gas. past decade, electricity for residen-was 36% more than in Baltimore. Our eight-city comparison for tial use remains a bayain in if New York were excluded, the natural gas shows that except for i Central Maryland. This is true seven-city average would be 26% W Imington, Delaware, which is despite the rate increases BG&E higher than Baltimore's average slightly lower, the average cost of has received to combat the eifects rate. gas for all uses is 5% to 48% of inflation on the Company's higher elsewhere on the East Coast operating, construction and capital Average Rate Per Kilowatthour than in Baltimore. The seven-city costs.- All Customer Categories average price excluding New York Until the economic difficuhies of Full Year 1980 was 14% above the pricein the 70's, the cost of electricity had BALTIMORE 4.96g Baltimore been going down. For the period Washington, D.C. 5.27 Norfolk, Va. 5.43 Average Rate Per Therm of Gas 1960 through 1970, the average Wilrnington, Del. 5.9 All Customer Categories i unit price of electricity decreased Atlantic City, N.J. 6.30 Full Year 1980 I 23% while the cost of living index Philadelphia, Pa. 6.35 Newark, N.J. 6.66 Wiltnington, Del. 36.89 W for the Baltimore Metropo'itan Area Boston, Mass. 7.70 BALTIMORE 37.04 rose 31 %. Not until 1971 did the New York, N.Y. 10.48 Norfolk, Va. 39.03 average unit price first turn upward. Philadelphia, Pa. 40.64 8-CITY AVERAGE 6.76 By 1975, it had increased by little Atlantic City, N.J. 41.52 Washington, D.C. 42.14 more than one-third over the 1960 Newark, N.J. 45.01 I l price. Di ng the sanie time, the Boston, Mass. 50.48 l Gas cost of I ng index jumped by 85%. BG&E has no control over the price New York, N.Y. 54.87 As the 70's progressed, the gap of natural gas received from its 8-CITY AVERAGE 43.82 between the average price of pipeline supplier. Price controls in-1 electricity and the cost of living stalled by the Federal government Residential Unit Price i indices continued to widen. By in 1954 have held the pnce of Compared With Cost-of Uving i 1980, the price of electricity was natural gas far below its true market Baltimore Area up 82% over the 1960 figure while value, creating a serious gas short-Index 1960 equais 100 the cost of living index had soared age for the Nation. This shortage QRcENT l 178 %. prevailed through the 70's and ulti-j m tely forced a series of Govern- // Thanks largely to the efficient 3 operation of the Cortpany's Calvert [ eases in h en n price of gas, resulting in the adop-Cliffs Nuclear Power Plant, BG&E's y y tion of a phased-in price deregula-M 1 price for electricity over the past j / 1 n plan as a part of the National isc 20 years has increeced less than Energy Act of 1978. By 1980, the b i i half as much as the cost of h..ving c continuing annual increases under too : --- in the Baltimore area. ~ the law forced the price of gas BG&E's average rate per kilo-delivered by BG&E to its residential 50 watthour of electricity sold to all customers to increase by 182% customer categories for the year over the average price paid in 1960, l goo y 7o.7,.n 73 74 7s 7e 77 78 79 '80 1980 was the lowest among major approximating'r the period. hal$oIekr a Alli e s the rise in cost-of-East Coast cities from Norfolk to living index fo - Boston. The average rates else-Yet when compared to fuel oil for Residential Unit Costs-i where exceeded BG&E s by per- --- Electric househeating purposes, BG&E's centages ranging from 6% to average residential price of gas [ remains a bargain. Househeating l oil has increased over 600% since u m w com m onsnu t o r w r. j 1960. Based on current prices, the N **

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l 1 l ENERGY FOR THE 80's 1 I l Most corporations need not plan We are looking primarily to coal Sales of Electricity decades ahead but an electric to fill the gap. The two-unit Charles (8" "" ' k" *ah "'*) q l utikty must. We need from 10 to 15 P. Crane Power Plant, with a total lllllllllll l years to build a power plant. There-capacity of 400 MW, is expected ta,,, ,,,,, I > l ' 1, fore, we must have some idea of to be converted to operate on ,I I I I I I l l "ll l l l l:l [ p p'H l what the service needs of our coalin 1983 and the first of the two territory will be like 20 years in the Brandon Shores units will come on g..

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" l.; "; p, y g ;iq g g1gg customers with our help have been $55 million investment in new finding ways to conserve. As a dust collection equipment. The net result, growth in sales of electricity savings, after providing for an j gi@pQM 6 has slowed from a 7% growth increase in operating costs and 91 ppm M - rate in the late 60's and early 70's proper compensation to the Com-4 to an annual growth rate of 4% % pany for the additional plant invest- ~ ' since 1975. This year, while sales ment, will be passed on to our to residential customers rose 9%, customers. We an{icipate no prob-0 reflecting the hot summer weather, lems in obtaining ' long-term a indust i i industrial sales dropped 1% supply of coal adequate to comply I commercial influenced primarily by reduced with the changes in air quality steel production. Our current regulations approved by the Envi- . Residential I forecasts indicate an annual ronmental Protection Agency. growth rate of about 3.4%in total As important as coal is becom-electric sales through 1990 and ing, we believe that nuclear power that electric peak loads will grow offers the best solution to the at a 3% annual rate during the Nation's current energy problem. same period. BG&E's experience at Calvert Cliffs Fugl Sources substantiates this position.1980 To serve this expected growth and marks the sixth year of outstanding still remain flexible will require a performance for Calvert Cliffs. The varied generation mix. The Com. two nuclear units, with a total j pany firmly believes, however, that generating capacity of 1,635,000 the backbone of our Nation's fuel kilowatts-about % of the Com-supply for electric generation must pany's total generating capacity-be nuclear power and coal. These produced 59% of our customers' two fuels are the only viable alter, total electric requirer ents for the natives to expensive and unteliable year. Since 1975, when our first foreign oil for the mass production nuclear unit was placed in com-of electricity. BG&E has been a mercial operation, the fuel savings j Jtility industry leader in moving have totaled $1.2 bijlion, substan-away from oil. By 1990, we intend tially exceeding the initial plant to cut our consumption well in investment of $778 million. excess of the 50% initiative an-Economy and efficiency are not nounced by former President the only reasons the Company Carter in 1979. supports nuclear power. It is not a i perfect technology, but we believe it is the safest and most environ-mentally sound way available now s w,,,n m,,m, u,,,w,,, to produce large quantities of ..w a nemnm umnau gwm l electricity. %^' '" " ' ' om! ca eri aws un:t r I m ? w m a me oemaat am; me t fewf'l fo!Whn[] 1? l

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becomes available. Durin01980' l the Company spent $21 million on territory until 1984 when we expect lL ' $' 'f Q]l ~ ~ l'spj L j!] modifications to the plant s op-o e@ me &st of me Mo ^ l ersting and safety equipment, El' 620,000-kilowatt coal-fired units at including upgrading the plant's Brandon Shores. When the second $ f' '"l(' h ! h f' g ['] firo protection systam. Many of the 50 begins operations in 1988, we will additional safeguards were ordered I s&iem patig gciy e by the Nuclear Re0ulatory Com-to see us into the next decade. mission; some we designed and We estMe Me W W of N 30 implemented on our own. Addi-Brandon Shores Power Plant to be 20 tional costs were irmurred for more $1.1 billion. Of that figure, approxi-intensified training of nuclear per-mately $250 raillion will be spent on sonnel and working with state equipping the plant to burn coal. (g.n72 agencies to develop emergency 73 n n 7s v7 'm 79 80 That amount would have been evacuation prncedures. i. 1 Industrial considerably higher had we not A plant simdator has also been originally designed the plant in ordered for Calvert Cliffs. 1972 with the capability of burning l Scheduled to begin operation either oil or ccal. in late 1983, it will be an exact replica of the Calvert Cliffs control Gas room. We will be able to test new With the phased-in deregulation of operating procedures, provide natural gas prices instituted by the initial operator training and develop Federal government, the outlook refresher courses for experienced for gas supply, and therefore i personnel, all under actual plant BG&E's gas business, has signifi-j conditions. Perhaps most im-cantly improved. Our pipeline portantly, the simulator will allow supplier, Columbia Gas Transmis-us to prepare plant personnel sion Corporation, has assured us j to function effectively under that it foresees no problem in emergency conditions. We know meeting its contract commitments that the human factor can play a for at least the next decade. l large role in the consequences of Although our therm sales of gas l an unusual occurrence in a nuclear in 1980 increased only 1.8% over l plant. Through the use of a digital 1979, preliminary indications point i computer, the simulator will allow to a higher growth potential over our people to practice emergency the next five years, coming from l procedures in "real" situations. conversions to gas from other The trainee will learn not only which heating fuels. Conservation efforts procedures provide the most effec-reduced residential sales this year, tive response but also how t' but the greater availability of gas respond to the pressures of an prompted a 4.7% rise in large emergency. The chances of any commercial and industrial sales. In significant accident occurring at order to minimize Company invest-Calvert Cliffs are already extremely ment in gas,3quipment, we are m gm sf.,n pm, p, ant umf ua, low, and we believe that the simu-requiring all new customers to pay c mo*d a too creanon m Ni a tad i lator will be a vital tool in helping the full cost of any gas main ""$n7$$$Nr$Nn7 extension. I i l 14 ] f

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l I CONSERVATION AND RESEARCH FOR TODAY... AND TOMORROW CONSERVATION BG&E's Consumer Awareness RESEARCH AND I Although we are confident that Program DEVELOPMENT l nuclear power and coal can provide This comprises a myriad of activi-Another part of BG&E's responsi-an adequate and reliable supply of ties designed to inform customers bility as an energy provider is to electric energy and we seerr. at about the wny and how of energy ensure that the energy supplies of present to have plenty of natural conservation. It includes our the future will be available when gas, this country must expend more Speakers' Bureau, which should our customers need them. Inde-effort to use its energy supply most reach more than 60,000 people pendently and in collaboration with l efficiently. To help our customers during the next few years, a Mobile the Electric Power Research Insti-use energy wisely, the Company Conservation Exhibit displaying tute and the Gas Research Institute, has implemented a comprehensive materials consumers can purchase the Company is working on a l five-year conservation plan.1980 and install on their own-we plan number of projects to identify and was the first year. The plan features to show the exhibit at 125 locations develop potential energy sources live components: to an estimated audience of i for commercial applications. In customers-and bHI 1980, our research and develop-The Residential Conservation inserts and media advertisements l Smin Pmp ment expenditures exceeded $5 detaihng fuel costs and ways to

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i The main feature of this program use energy wisely. is a thorough, in-home energy Solar Energy i audit. We expect to perform up to Customer Education Programs Can solar power be a cost-effective j 72,000 audits by 1985. These special programs are de-alternative in Central Maryland? To i signed to fit the needs of specific answer that question, BG&E has I industrial and commercial cus-p established a solar monitoring net-in tmchonal work to measure the amount of Deve oped for the electric utihty utses to local officials to explain solar radiation available at various j industry by the Edison Electric the ramifications of the Department locations within the Baltimore area nstitute, this w,as the country,s first of Energy's Buuding Energy Per-We are testing a solar water-heating nationally organized conservation formance Standards as they evolve. I effort. The program uses Company We are planning over 18 different supplement to an oil-fired water irspectors to certify new homes programs during the nut four and businesses as energy efficient heater and have installed another l Y S' if they meet a set of strict thermal larger test system in one of our dv sory Services service centers to furnish hot water guidelines. By 1985, we hope that over 25,000 homes and busi'.sses Company representatives partici-for work crews. The Company has will have qualified. pate on advisory committees for started a program of monitoring various official weatherization and customsr-owned residential solar conservation programs in Maryland water heaters of various designs to and serve as energy consultants to determine what portion of the heat a number of commercial and is provided by solar means. Mainte-industrial associations. nance records will provide a com- ) Over the next few years, the parison of reliability of performance Company will be performing market j surveys to determine the effective-l ness of conservation efforts. From BG&E's perspective, helping our customers to conserve is a big part of meeting the energy needs of the 80's. l m

of the systems, and periodic inter-Converting Coal to Liquid and Gas Nuclear Research views with users will assess con-Though it may be our most plentiful in keeping with our commitment to sumer acceptability. Ultimately, we resource, coal does have environ-nuclear energy, the Company has expect to monitor 30 installations mental drawbacks. It is not a clean also participated in the Clinch River for about two years. The findings fuel. It can, however, provide the Fast Breeder Reactor Project at from these studies will help base for clean synthetic fuels. Oak Ridge, Tennessee. Successful the Company-and our customers BG&E is currently investigating a completion of this project would -determine the role solar energy number of these synfuel develop the technology for con-water heating should play in our technologies. struction of commercial breeder future. In conjunction with the Electric reactors, which would serve as Ambient Heat Power Research Institute, the Com. long-term sources of nuclear fuel l In terms of space and water heat-pany will be participating in a pro. and provide a major opportunity ing, the Cornpany's mission is to gram to develop a successful toward attainment of national energy offer our customers the right energy means of converting coalinto a independence. This project has source and technology to fit their liquid fuel. The process has been delayed over the past few needs. Preliminary results of our been operating on a small scale at years due to lack of support and l solar studies indicate that for at Fort Lewis, Washington, with en_ funding by the Federal government. I least some residents in our terri-couraging results. The next stage it now appears that the new tory, solar hot water heating may of development will be a demon-Administration in Washington may not be economically feasible. To stration plant to be built at Morgan-take a more enlightened approach assist them, the Company is cur-town, West Virginia, capable of to this project and, with Federal rently testing the heat pump hot processing 6,000 tons of coal per government support and funding, water heater utilizing the ambient day. BG&E has agreed to purchase the Company plans to cont,nue its i heat in the area in which the heater and test a portion of the plant's participation along with other electric utilities. is located. Our researchers are product liquid over a five-year hopeful that this device will be a period beginning in 1983. Our Future Commitment cost-effective alternative for many The Company is one of approxi_ We do not yet know which research of our customers, mately a dozen utilities to partici-projects will eventually perfect the The Fuel Cell pate in a five-year, $135 million technologies to give this country At the nationallevel, the Company demonstration plant project for the energy independence in ways that is participating in a three-year pro _ conversion of coal to a low-energy will mmimize harmful effects on I gram sponsored by the United gas which can be used as a fuel to our environment. We do know that l States Department of Energy and generate electricity. Developed by BG&E will continue to play an J the Gas Research Institute to test Allis-Chalmers, the process known active role in the development of and evaluate fuel cells for commer-as Kilngas uses a rotating kiln to clean, safe and economical energy cial use. Fueled by natural gas, convert the coal to gas. The technology, these cells can effectively provide demonstration system will be ca-electric power and heat which can pable of processing about 600 tons be utilized at the cell location and of coal per day. Funding will be interconnected with an electric provided by Allis-Chalmers, the utility grid. The interconnection will State of Illinois and the participat-allow the fuel cell both to take ing utility companies, including energy from the grid when its BG&E. production falls short and to sell it back when excess fuel cell power is available. 17

PUBLIC LEADERSHIP l l The Company's role in Central Effective Community Relations Speaking Out l Maryland extends far beyond sup-The Company has long been But the Company is not involved plying energy. BG&E and its per-aware of the importance of effec-in politics simply to protect its own sonnel are leaders in the business tive communications in identifying interest. We are concerned about I and civic life of Baltimore. and solving problems. BG&E has the economic health of our Nation Ours is a city in renaissance, and experienced excellent results with and our service area. In the past, we are proud to be involved in its its personalized, neighborhood-we criticized the lack of manage-progress. lo the traditional areas of based approach to Customer Rela-ment of our energy problems on j economic development and urban tions and applies the same concept the Federal level. We spoke out revitalization, BG&E is helping indi_ to civic involvement. Company sharply against the apparent efforts vidual businesses to expand and personnel at all levels meet regu-of the Carter Administration to de-state, county and city officials to larly with leaders of citizens' orga-centralize energy production and to attract new industry-and new nizations to talk with them about rely on as yet unproven technol-jobs-to Maryland. how they perceive the Company ogies. Central station power plants and what BG&E can do to help fueled by nuclear power and coal Tha Energy Coalition them address needs they encounter are, and will continue to be for the The Company has also taken in the community. foreseeable future, essential ele-some nontraditional approaches Realizing that Company em, ments for this country's industrial to community problems. As the ployees are leaders in a broad growth. BG&E knows that many energy crisis deepened, literally range of community affairs, BG&E jobs would be lost in Central dozens of groups in the Baltimor saw the opportunity to help them Maryland alone if the Company dic' area were trying to do something aid their fellow citizens. Our Com-not have the generating plants to munity Volunteer Program assists produce a reliable supply of power. BG& ated th etrop i employees in recruiting other vol-As we move into the 80's, Baltimore Energy Coalition. Today, unteers from the Company to par-BG&E and its employees are pre-more than 40 government, busi-ticipate in community organizations pared to continue the tradition of ness. institutional and civic organi-and provides any publicity the providing creative, dynamic leader-zations are working together to group might need. As usual, BG&E ship to the utility industry and to the develop conservation and energy people have been eager to share community, education programs and policies. their time and talent. Turning Waste into Energy An involved Company Like many areas, Baltimore has a Being a community leader today shortage of landfill space. Working means involvement in the political with the Maryland Environmental arena. The Company works with Services and Baltimore County, the state legislators in Annapolis during Company developed a project t the General Assembly sessions. It turn some of the community's has expanded its Public Affairs waste into energy. During 1980, we office in Washington, D.C. Through test burned over 2,300 tons of ts work on the state and Federal refuse-derived fuel-processed levels, BG&E is contributing to the trash-at our Charles P. Crane develor' ment of legislation and Power Plant. The in:tial results were po cies that will greatly influence encouraging and BG&E is hopeful the entire energy industry, that further tests will establish RDF's potential not only as a our nat,an couia never tuncnon wmout energy cheap, renewable source of fuel, j p g *;'f y g 'f 8 y o g 8j but as an important solutior: to the cmcrano, em me Mayand leasature. and a// solid waste problem.

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BG&E J EMPLOYEES...

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VALUABLE ASSET u As a public utility, ours is essentially . The employee stock ownership But at BG&E, career development a business of people serving peo-and savings plans encourage em-is not just for future managers. The ple. It takes many professions, ployees to invest in the Company's Company offers programs to allow j skills and talents, all directed to a future and provide a stimulus for its people to identify the level and ll common goal, to ensure that our increased individual productivity. kind of work right for them. In order community has the energy it needs We aie proud that more than 80% for them to be able to reach their to grow and prosper. The 8,000 of our employees are BG&E share-goals and potential, BG&E provides employees who work for BG&E are holders. counseling, training programs and - our most valuable asset. Unlike BG&E has always emphasized career p!anning. Further, the Job machinery or capital, this asset education and career development. Opportunities Plan, known as job doesn't show up on the balance Our employees recognize that the posting, keeps employees informed sheet, but it's there nonetheless. complexities of the modern energy of opportunities throughout the - Credit for our achievements in 1980 industry require increasingly higher Company for advancement or. and every year goes to the efforts levels of knowledge, training and changes of career paths. During _ of the people of BG&E. competence. Over the years, thou, the year,1,580 employees were We're proud that the community sands of our men and women have promoted or moved to other assign-recognizes the dedication and - made use of the Company's Educa, ments, resulting in improved pro-ability of our employees. Each year, tional Assistance Plan to improve ductivity, higher morale, and greater - thousands of customers contact the job-related skills, and to prepare self-development. Company to praise the performance themselves for advancement. Dur-BG&E employees contribute i and attitude of BG&E workers, ing 1980,620 employees attended significantly to our community, as l whether they are restoring service schools and colleges under the well as to our corporate goals. Their j l af ter a storm or some other plan and 29 received degrees. In leadership and services benefit disaster, or just providing normal addition, hundreds of others par-many volunteer organizations in services. ticipated in training programs Central Maryland such as chambers in an era when productivity in provided within the Company, of commerce, schools, hospitals, l America is being criticized, BG&E These programs provide special-churches, local fire companies, and employees continue to demonstrate ized training for plant operators, other civic and cultural endeavors. their characteristic ingenuity and linemen, welders, customer contact in 1980, they eamed both the Honor dedication. In addition to substan. and service personnel and on the-and Achievement awards for gen- ) tial untold savings which have job training for a host of other erous giving to the United Way, ( resulted from prudent managerial occupations. Broad job-related increasing their contribution by i and supervisory decisions made in educational courses in supervision, more than 14% over the previous the normal course of business, economics, safety and public year. They donated nearly 2,750 - work smarter suggestions f rom speaking are also conducted by pints of blood to the Red Cross j individual employees, through the the Company. Blood Assurance Program, raising their total donations to rnore than Company's Employee Proposal The Company has comprehen-l Plan, produced a record annual sive programs to recognize and 39,000 pints. savings of $200,000 in 1980. develop future managers. BG&E in countless ways, we are grateful i BG&E employees distinguished identifies its ablest people and pro-to our people for their service to themselves also in practicing safe vides them with a variety of experi-the Company, its customers and 1 l work procedures. Three major ences throughout the Company. the community. l departments each earned the They are also given responsibility, Edison Electric Institute-American both to help them grow and to Gas Association Safety Award in allow our top management to y 4 1980 for working 1,000,000 man. evaluate their potential. Making hours without a lost-time accident. sure that the Company will always Ou'gg gggeg-ll; have a cadre of talented and experi-onwaren onmeg tw o new nousing poing. n enced managers is a responsibility

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MEETING THE GROWING DEMANDS OF A DIVERSIFIED ECONOMY Baltimore Gas and Electric Company supplies electric, population estimated at 1,778,000. Steam is produced gas and steam utility service to a major metropolitan for sal. :o 68: customers located in downtown region that is noted for an economic stability founded Baltimore. l on diversification of industry, growth in population. Balance likewise is a dominant characteristic of j privately-financed urban renewal, and civic and cultural the Company's electric generating capability, advancement. comprising 5,010,000 kilowatts of installed capacity At year-end 1980, the Company served 836,989 and firm purchases. Of this total,33% (supplying 59% electric customers and 510,451 gas customers. of 1980 customer requirements) is nuclear; 33% is Total revenues amounted to $1.2 billion. Our residual fuel oil; 17% is coal; 11 % is light distillate l 10 largest electric customers accounted ior only 10% oil; 3% is gas-fueled; and 3% is hydroelectric. The of total 1980 electric revenues, and the 10 largest gas Company owns nine operating Centra! Maryland power customers provided 21% of total 1980 gas revenues. plants, with additional generating capacity provided The 20 largest custcmers overail were the source of by shared ownership of two mir.e-mouth plants and a i l 16% of corporate revenues for the year. small hydroelectric station, all in Pennsylvania, plus The diversity inherent in this broad revenue base is membership in the Pennsylvania-New Jersey-Maryland reinforced, moreover, by the area's exceptional Interconnection, which affords access to pooled economic balance of industry.. commerce... capacity on advantageous eccnomic terms. educational, medical, and other service facilities.. Facilities for the production and storage of liquefied and government installations. This balance is reflected natural gas, synthetic natural gas, and propana gas are in the customer distribution of 1980 unit sales: on the maintained at thcee Company plants in Central Mary-electric side,35% residential,18% commercial, land, which supplement pipeline supplies of natural 47% industrial; for gas,40% residential,6% gas as the need arises. commercial,54% industrial. In 1980,70 % of electric A steadily increasing population, attracted by desir-revenues and 60% of gas revenues were derived able living conditions coupled with exceptional cultural from sales outside the City of Baltimore. and recreational advantages, assures an abundant The total area served, which includes the City of manpower supply, especially noteworthy in the profes-Baltimore and extends into nine counties, approxi-sional and skilled categories, availability of which is a mates, for electricity,2,300 square miles, with same crucial f actor in industrial expansion. 2,271,000 residents; for gas,600 square m!ies, with a j COMMON STOCK DATA The Company's Common Stock is listed on the New entitled to receive, when and as declared, from the York, Midwest and Pacific stock exchanges and has surplus or net profits, cumulative yearly dividends at the unlisted trading privileges on the Boston, Cincinnati fixed preferential rate specified for each Series and no and Philadelphia exchanges. more payable quarterly, before any dividend on the Common Stock shall be paid or set apart. Dividend Policy Dividends have been paid on the Common Stock The Common Stock is entitled to dividends when and continuously since 1910. Quarterly dividends were paid as declared by the Board of Directors. There are no on the Common Stock during 1980 and 1979 in the limitations in any indenture or other agreements on amounts set forth in the accompanying table. payment of dividends; however, holders of Preferred Future dividends depend upon future earnings, the Stock (first) and holders of Preference Stock (next) are financial condition of the Company and other factors. ll Common Stock Dividends and Price Ranges -l 1980 1979 Price Price j Dividend Div!dend Paid Hioh Low Paid High Loty First Quarter $.61 $22% $18% $.57 $26 $24% Second Quarter .61 24 % 19 .57 25 % 21 % Third Quarter .61 24 % 21 % .61 25 % 22 % Fourth Quarter .64 22 % 18 % .61 24 % 21 % q Number of Common Stockholders of record as of December 31,1980..89,579. l 23 U

OPERATING STATISTICS BALTIMORE GAS AND ELECTRIC COMPANY l 1980 1979 1978 1977 1976 1970 "*'^"""'""""""*) ELECTRIC OPERATING STATISTICS Revenues Residential $ 342,796 $ 274,079 $ 270,536 $ 220,904 $ 205,188 $ 87,814 i Commercial 198,936 174,157 171,363 140,323 132,600 64,249 Industrial 311,182 263,319 251,966 194,811 191,920 74,547 Other 4,350 3,401 3,308 2,520 2,348 2,453 i Total $ 857,264 $ 714,956 $ 697,173 $ 558,558 $ 532,056 $ 229,063 q Sales - MWH Residential 6,305,110 5,496,737 5,434,958 5,231,317 4,887,793 3,664,564 Commercial 3,063,119 3,052,081 3,019,633 2,910,532 2,806,247 2,349,063 ) industrial 8,159,691 8,274,422 7,715,633 7,319,862 7,064,166 5,957,102 l Total 17,227,920 16,823,240 16,170,224 16,461,711 14,758,206 11,970,729 Customers Residential 760,203 747,699 734,186 722,060 708,135 618,381 Commercial 75,144 74,575 74,626 73,345 72,080 67,657 Industrial 1,642 1,416 1,355 1,306 1,297 1,000 l Total 836,989 823,690 810,167 796,731 781,512 687,038 { l Average use per Residential Customer-KWH 7,956 7,413 7,465 7,320 6,965 5,989 l GAS OPERATING STATISTICS Revenues Residential $ 105,006 $ 146,598 $ 146,675 $ 124,357 $ 105,900 $ 57,952 Commercial 24,522 21,097 20,315 17,184 14,780 8,282 Industrial 69,689 54,767 54,315 44,497 38,405 17,487 Interruptible Services-Industrial and Other, 92,478 61,816 40,569 31,502 25,817 10,313 Other 3,041 2,796 2,712 4,119 (588) 1,886 Total $ 354,736 S 287,074 $ 264,586 $ 22i,659 $ 184,314 $ 95,920 Sales - DTH Residential 38,462,204 39,282,741 40,576,498 39,777,652 41,197,620 39,488,932 Comniercial 5,490,367 5,320,010 5,417,140 5,335,081 5,514,194 5,260,243 Industrial 19,501,190 17,671,851 18,055,404 17,406,677 18,692,073 16,876,375 Interruptible Services - Industrial and Other 31,656,568 31,175,052 20,439,595 17,543.597 21,392s700 24,194,842 Total 95,110,329 93,449,654 84,488,637 80,063,007 86,796,593 85,820,392 Customers Residential 476,318 473,761 472,414 474,361 476,867 439,688 j Commercial 29,625 28,569 28,790 29.049 29,468 28,380 Industrial 4,315 4,941 4,969 5,012 5,026 3,923 Interruptible Seivices - Industrial and Other 193 185 184 188 189 108 Total 510,451 507,456 506,357 500,610 511,550 472,099 Average use per Residential C 'stomer - DTH 81,1 83.1 85.9 83.8 86.5 90.0 I j ~

__ r. SELECTED FINANCIAL DATA BALTIMORE GAS AND ELECTRIC COMPANY l 1980 1979 1978 1977 1976 1970 (In Thousands of Dollars)

SUMMARY

OF OPERATIONS i Operating Revenues: Electric.. $ 657,* 64 $ 714,956 $ 697,173 $ 558,5!8 $ 532,056 $ 229.063 Gas 2S4,736 287,074 264,586 221,659 184,314 95,920 Steam 14,442 12,378 12,727 12,305 9,447 3,121 Total Operating Revenues 1,226,442 1,014,408 974,486 792,522 725,817 328,104 Operating Expenses: Purchased Fuel and Energy. 478,836 338,464 321,266 24" 469 257,645 81,100 Operations, 217,009 182,055 161,981 140,774 124,896 62,936 Maintenance 75,827 64,913 55,083 49,892 35,587 19,686 Depreciation 83,181 80,338 78,063 68,449 59,448 27,941 income Taxes: Current 39,604 8,987 43,619 19,649 (1,603) 30,727 Deferred 23,352 44,149 15,818 10,024 Investment Tax Credit Adjustments 13,852 16,593 17,882 13,613 27,120 588 l Other Taxes 88,482 85,455 83,330 72,427 62,831 37,719 ( Total Operating Expenses _1,020,143 820,954 ~ 777,042 620,297 565,924 260,697 Operating income 206,299 193,454 197,444 172,225 159,893 67,407 Allowance for Other Funds Used During Construction 12,053 9,545 4,006 2,553 9,174 4,839 Net Other income and Deductions 2,851 1,698 739 2,228 624 363 income before Interect Charges. 221,203 204,697 202,189 177,006 169,691 72,609 Interest Charges 93,828 86,159 83,228 76,230 70,645 24.652 Allowance for Borrowed Funds Used During Construction (12,024) (7,778) (3,580) (2,318) (7,771) (3,690) l Net Interest Charges 81,804 78,38_1 79,648 73,912 62.874 20,962 Net income 139,399 126,316 122,541 103,094 106,817 51,647 Dividends-Preferred & Preference Stock 22,099 19,784 18,177 18.381 18,771 5.565 Not income Applicable to Ccmmon Stock 117,300 106,532 104,364 84,713 88,046 46,082 l Dividends - Common Stock 80,754 75,373 69,467 63,743 58.985 30,148 Earnings Reinvested in the Business $ 36,8i46 $ 31,159 $ 34,897 $ 20.970 $ 29,061 $ 15,934 Average Shares of Common Stock Outstanding (Thousands) 32,258 31,356 30,847 29,666 28,231 16,645 Earnings Per Average Share of Common Stock $3.64 $3.40 $3.38 $2.86 $3.12 $2.77 Dividends Declared Per Share of Common Stock $2.50 $2.40 $2.25 $2.14 $2.08 $1,82 OTHER FINANCIAL STATISTICS Capitalization: Common Stock, Premium, Install-ments and Retained Earnings.. $1,010,941 $ 953,161 $ 906,421 $ 861,463 $ 790,716 5 416,088 Preferred and Preference Stock (Not Subject to Mandatory Redemption) 241,806 242,753 245,48a 247,518 252,573 119,197 Redeemable Preference Stock 50,000 50,000 Long-Term Debt 1,304,970 1 250,132 1,207,896

1. j 45.656 1,069.527 518,744 Total

$2,607,717 $2,496,046 $2,359.801 $2.254,637 $2,112.816 $1,054,029 Shams of Common Stock at erf of year (Thousands) 32,690 31,692 31,039 30,658 28,839 16,567 Book Value Per Share of Cornmcn Stock at end of year, $30.93 $30.08 $29.20 $28.10 $27.42 $22.28 Commor Stockholders at end of year, 89,379 89,698 F 3,249 88,795 87,106 53,480 j Total Utihty Plant $3,184,059 $2,974,653 $2,831,019 $2,669,927 $2.499,035 $1,257,479 l Accumulated Provision for Depreciation 678,819 608,293 541,61B 470,969 410,836 228,945 ] Total Assets. 3,073,013 2,855,984 2,673,754 2,528,972 2,324,624 1,145,561 Expenditures for Additions to Plant 225,003 160,917 172,402 182,205 165,936 206,077 Employees at December 31 8,672 8.485 8,459 8,306 8,087 7,651 25 L

MANAGEMENTS DISCUSSION AND ANALYSIS ( OF FINANCIAL CONDITION RESULTS OF OPERATIONS Gas Sales (Dth) and Operating Revenues Earnings The percent change from the prior year in gas sales Earnings per share of common stock, on the increasing by class of customer was as follows: average number of shares outstanding in each period, 1980 1979 were $3.64 in 1980, up over the earnings of $3.40 Residential. (2.1)% (3.2)% experienced during 1979 and $3.38 in 1978. The Commercial 3.2 (1.8) "d" adoption of deferred accounting for natural gas costs te bie' 5rvice increased earnings per share in 1980 by 21c (see ] Note 6). An annual base rate increase of $93.6 million Total gas sales ;ncreased 1.8% in 1980 ana 10.6% authorized by the Public Service Commission of in 1979 due primarily to higher usage by firm industrial ( Maryland in June 1980, which ir. creased the allowed customers during 1980 and by large interruptible rate of return from 9.11% to 9.55%, also contributed industrial customers in 1979. The increases were to the improvement. The impact of inflation on made possible by the total removal of delivery operating and capital costs, along with regulatory lag, curtailments that had been imposed by the Company's continues to have a depressing effect upon the pipeline supplicr since the winter of 1972-1973, in Company's earnings. consequence, the Maryland Commission approved termination, as of May 4,1979, of the five-year mora-Electric Sales (Mwh) and Operating Revenues terium on new uses and customers that had been The percent change from the prior year in electric partially lifted in August 1978. In 1980, the increase sales by class of customer was as follows: was mitigated by !ower residential customer usage 1980 1979 resulting prirnarily from conservation. The 1979 Residential. 9.2 % 1.1 % increase was offset partially by decreased usage on nd s$r a (.) the part of residential and small commercial customers due to both conservation anc warmer weather during l The combined effect of these changes resulted in the heating season. increased total electric sales of 2.4% in 1980 and Future sales wi!! be affccted by the availability of i 4.0% in 1979. The substantial increase in residential gas and the scheduled deregulation of gas prices, in sales in 1980 resulted from abnormally hot weather addition to the ongoing impact of such factors as experienced during the summer cooling period and a weather conditions, gas conversions and conservation greater number of electrically heated dweih,ng units, effortF by our customers. while such sales in 1979 were adversely affected by GN operating revenues increased each year as I milder weather during both the cooling and heating fgg;g,3 seasons. Industrial sales, particularly in steel related industries, were down in 1980 due to the reduced level increase (Decrease) From Prior Year of business activity ir the Company's service territory, 1980 1979 whereas higher industrial activity resulted in the 1979 (In Millions of Dollars) increase. Attributable to: Future electric sales will continue to be affected by Base Rate Adjustments $ 8.8 $ (1.0) the overall economic situation and level of business hayes olumes activity in the Company's service territory, as well as by Net increases $67.7 $22.5 weather conditions, heating installations and customer -~ ~~- ~ conservation ett ts. Effective in Ocicber 1980, the Maryland Com-Electric operating revenues increased each war as mission authorized the Cnmpany to implement ar follows: Actual Cost Adjustme:it provision to the Purchased Gas increase (Decrease) Adjustment Clause contained in the Company's gas From Pnor Year tanff. This change, which provides a better matching l 1980 1979 of gas expenses and associated revenues, will prevent (in Millions of Dollars) future erosion of eamings due to the anticipated coMnuN Mcrease in natural gas prices stemming s a djustments $ 38.3 $11.6 Fuel Rate Adjustments 81.2 (8.4) from phased-in deregulation (see Note 6). Maryland Electric Environmental Surcharge (0.2) (0 9) Operations and Maintenance Sales Volumes 23,0 15.5 Total purchased fuel and energy expense increased in j Net increases $142.3 S17.8 both 1980 and 1979 as a result of higher fuel and See Note 6 for a discussion of the electric fuel rate clause which was implemented in October 1978. 1 I ( w

~ Increases in~ operations and maintenance expenses - Plant and to the change in the calculation ' method. leflect the higher cost, due in large part to inflation, effective mid-April 1979, whereby AFC is computed - of payroll, employee benefits and mete' rials. In 1980, on'the tota l, instead of one-half, of the Company's such expenses include $4.6 million in increased costs investment in that plant (see Note 4). at the Calvert Cliffs Nuclear Power P' ant; resulting The 1980 increase in Net Other !ncome and Deduc-in part from required modifications stemming from the. tions was due principally to a $1,146,000 after tax gain Three Mile Island incidnnt, and greater scheduled on debt reacquired through sinking fund operations. maintenar'co at various fossil-fuel generating plants, in Interest charges increased due to sales of additional 1979, the increases reflected additional costs at Calvert securities.The issuance of 500.000 shares of Redeem-Cliffs due to more extensive inspections, modifications able Preference Stock in July 1979 resulted in the - I' and equipmer.t repairs; more repair work related to increase in preferred and preference dividends in 1980 h major' storms; and higher uncollectible accounts. and 1979. I See Notes 6 and 7 for a discussion of deferred LIQUIDITY AND CAPITAL RESOURCES expenses. During the period 1978-1980, the Company's intemal : es generation of cash approximated 60% of expenditures Federal income Taxes-Current increased in 1980 due - for construction and nuclear fuel. [ to a higher levet of taxable income and a decrease in Expenditures for these three years and the'. l investment tax credits. The decrease in 1979 was estimated expenditures for construction and nuclear attributable to the lower level of taxable income and the fuel for 1981 and 1982 are set forth below; l reduction in tax rate from 48% to 46%, which became l . effective January 1,1979, partially offset by lower Construction Nuclear Fuel . Total investr"ent tax credits (see Ncte 3). A proposed (in Millions of Dollars) deficiency asserted by the Iniernal Revenue Service in 1978 $172 $57' $229 l connection with an audit of the years 1974 through h f8b 1976 is being protested by the Company (see Note 14). 1981 271 44 315 Federal income Taxes-Deferred are the result of 1982 364 53 417 changing in 1977 from flow-through to normalization These construction expenditures include an' Al'owance - accounHng for the tax benefits arising from liberalized for Funds Used During Construction (see Note 4). .t depreciation on 1976 and subsequent years property Actual construction and nuclear fuel expenditures-i additions and for certain other timing differences may vary from '.he estimates set forth above because between tax and book income. The majority of the of a number of factors such as inflation, regulation and decrease during 1980 is due to the reduction of fuel legislation, rates of load growth, and environmental l expense deferrals associated with the Company's protection standards, as well as the cost and avail-electric fuel clause partially offset by deferrals of ability of capital. Assuming timely and adequate i unrecovered natura! gas expenses under the Com-rate relief, the Company presently anticipates that I pany's gas adjustment clause. The 1979 amount about 60% of these funds required for the years 1981 { reflects tax deferrals applicable to maintenance and 1982 will be provided from internal sources. The l expenditures at the Calvert Cliffs Nuclear Power Plant remainder will be provided through the capital market, and deferred fuel expenses ur. der the Company's the Compan/s Dividend Reinvestment and Stock electric fuel clause (see Note 3). Purchase Plan and the Employee Stock Ownership investment tax credits vary from year to year as con-Plan as well as short-term commercial paper on an struction expenditures become eligible for the credit. interim basis. Taxes other than income taxes increased in 1980 in addition, the Company Ltimates that approxi-' due to higher property and capital stock taxes, payroll mately $158 raillion will be required for bond taxes and the Maryland Gross Receipts Tax, partially maturities and sinking fund payments during the period offsct by a reduction in the Maryland Electric Environ-1981-1982. mental Surcharge and the repeal of the Pennsylvania The Company's capital structure as of December 31 Gross Rece, pts Tax on the sa'e of electricity to out-of-i is PmeM h-state customers effective January 1,1980. The 1979 1980 M79 .j increase was primarily attributable to a higher taxable wage base for social security taxes (see Note 8). Redem$le idn'dd 'S'tEci[lllllll l . 1 T Other income and income Deductions efege Stock Pr erred nd The increases in the Allowance for Funds Used During Common Equity.................... 38.8 38.3 j Construction (AFC) in 1980 and 1979 are attributable The high rate of inflation continues to be the Com-to conhnued co 1struction at the Brandon Shores Power pany's and the Nation's major problem. Future rate increases will be required to cWer increasing operating - costs and ta obtain an adequate return on investment (see Note 18). 27

j STATEMENTS OF INCOME l BALTIMORE GAS AND ELECTRIC COMPANY Year Ended Decembe r 31 I 1980 1979 1978 (In Thousands of Dollars) i OPERATING REVENUES Electric.,... $ G57,264 $ 714,956 $697,173 Gas 354,736 287,074 264,586 Steam.,. 14.442 12.378 12,727 Total Operating Revenues. 1,226,442 1.014.408 974,486 I OPERATING EXPENSES Purchased Fuel and Energy 478,836 338.464 321,266 Operations. 217,009 182,055 161,981 Maintenance. 75,827 64,913 55.083 5 Depreciation.......... 83,181 80,338 78,063 income Taxes-Note 3 76,808 69,729 77,319 Other Taxes 88,482 85.455 83.330 Total Operating Expenses 1,020,143 820.954 777.042 OPERATING !NCOME 206,299 193,454 197,444 ALLOWANCE FOR OTHER FUNDS USED DURii4G CONSL.JCTION-Note 4 12,053 9.545 4,006 NET OTHER INCOME AND DEDUCTIONS.. 2,851 1,698-739 INCOME BEFORE ;NTEREST CHARGES ' 221.203 204.697 202,189 INTE3EST CHARGES 93,828 86,159 83,228 ALLOWANCE FOR 3ORROWED FUNDS USED DURING I l CONSTRUCTION-Note 4 (12,024) (7,778) (3.580) j NET MTEREST CHARGES 81,804 78.381 79.648 i NET IMCOME.... 139,399 126,316 122,541 DIVIDENDS-PREFERRED AND PREFERENCE STOCK 22,099 19.784 18,177 NET ;N30ME APPLICABLE TO COMMON STOCK $ 117,300 $ 106.532 $104,364 EARMNGS PER SHARE OF COMMON SiOCK $3.64 $3.40 $3.38 (Based on average shares outstanding) STATEMENTS OF RETAINED EARNINGS BALTIMORE GAS AND ELECTRIC COMPANY Year Ended December 31 1980 1979 1978 (in Thousands of Dollars) BALANCE AT BEGINNING OF PERIOD $335,136 $304,261 $269.414 i NET INCOME 139,399 126,316 122.541 i Total 474,535 430.577 391,955 CASH DIVIDENDS DECLARED I Preferred Stock (Cumulative) Series B (at the rate of 4%% per annum) 1,003 1.003 1,003 Sefes G (at the rate of 4% per annum) 276 276 276 Series D (at the rate of 5/D% per annum) 1,620 1,620 1,620 Preference Stock (Cumulative) i Convertibk (at the rate of 6W % per annurr'). 519 635 784 1970 Series (at the rate of 8.75% per annum) 2,625 2,625 2,625 1971 Series (at the rate of 7.88% per annum) 3,940 3,940 3.940 { 1972 Series (at the rate of 7.75% per annum) 3,100 3,100 3,100 j 1973 Series (at the rate of 7.78% per annum) 1,556 1,556 1.556 1974 Series (at the rate of 9.35% per annum). 3,273 3,273 3,273 1979 Series (at the rate of 8.375% per annum) 4,187 1,756 Common Stock (at annual rates per share, $2.16 through April 1,1978, $2.28 through April 1,1979, $2.44 through July 1,1980, and $2.56 thereafter). 80,754 75,373 69,467 OT'iER CHARGES-Expenses in connection with issuance of stock 39 284 50 Total Charges 102,892 95.441 87,694 BALANCE AT END OF PERIOD $371,643 $335,136 $304.261 Su noms and schecutes - paacs 31 througr,43 ~ ' i. j 2a E

BALANCE SHEETS BALTIMORE GAS AND ELECTRIC COMPANY ASSETS l December 31 1 UTILITY PLANT 1980 1979 ^ Plant in service (in Thousands of Dollars) Electric-at original cost $2,250,921 $2,165,107 Gas-at original cost 327,526 310,127 Steam - at cost 19,291 18,753 Common-at original cost 101,325 92,042 l l Total plant in service 2,699,063 2,586,029 l Construction work in progress-at cost 481,257 384.885 l Plant held for future use-at cost 3,739 3,739 l Total utility plani 3,184,059 2,974,653 i Accumulated provision for depreciation. (678,319) (608,293) l Net utility plant 2,505,240 2,366,360 j l Nuclear fuel-at cost (net of amortization of $154,759,000 and l $83.893,000, respectively) 166,955 148,626 2,672,195, 2,514,986 OTHER INVESTMENTS 8,008 7,775 i CURRENT ASSETS l Cash 2,660 4,281 Temporary cash investments-at cost 10,400 5,150 Special deposits and working funds 1,415 996 Accounts receivable: Customers' (net of provision for uncollectibles of $3.060,000 in both years) 115,657 90,964 Miscellaneous 2,799 6,776 Fuel stocks-at average cost.. 90,999 76,594 Materialt and supplies-generally at average cost.. 55,380 46,344 Prepayments 40,301 34,196 Other.. 4,056 3,672 323,577 268,973 DEFERRED DEBITS Deferred fuel costs 32,703 28,793 j Other. 36,530 35,457 j 69,233 64,250 1 TOTAL ASSETS. $3,073,013 $2.855,984 CAPITAL AND LIABILITIES COMMON STOCK AND RETAINED EARNINGS i Common stock-Schedule, page 31. $ 638,820 $ 617,630 Installments received on capital stock-common 3Y1 238 Premium on preferred stock 157 157 i Retained earnings 371,643 335,136 1,010,941 953,161 PREFERRED AND PREFERENCE STOCK NOT SUBJECT TO MANDATORf REDEMPTION Preferred stock-Schedule, page 31.. 59,185 59,185 Preference stock-Schedule, page 31 175,000 175,000 Convertible preference stock-Scheduie, page 31. 7,621 8,568 241,806 242,753 REDEEMABLE PREFERENCE STOCK-Schedule, page 31 50,000 50,000 LONG-TERM DEBT Mortgage bonds-Schedule, page 32 1,271,570 1,215,732 Debentures-Schedule, page 32 33.400 34,400 Unamortized discount and premium..... (4,337) (3.864) j Lor g-term debt estimated to be retired within one year... (52,779) __{33,214) i 1,247.854 1.213.054 j CURRENT L' ABILITIES ~ i Accounts payable 108,875 76,802 Vacation costs accrued 13,744 11,901 Taxes accrued.. 59,229 21,951 Interest accrued. 34,136 32,085 Dividends declareo 26,441 24,866 Long-term debt esumated to be retired within one year. 52,779 33,214 Other 12,886 17,152 308,090 217,971 DEFERRED CREDITS AccurrJiated deferred investment tax credits 115,390 103,941 Deferred income taxes 93,344 69,991 l' Other...... 5,588 5,113 I COMMITMENTS AND CONTINGENCIES-Note 14 - 214,322 179,045 TOTAL CAPITAL AND LIABil.lTIES $3,073,013 $2.855.984 See notes and scheduleri - pages m througt 43 29

STATEMENTS OF CHANGES IN l FINANCIAL POSITION l BALTIMORE GAS AND ELECTRIC COMPANY Year Er,ded December 31 1 1980 1979* 1978* (In Thousands of Dollars) SOURCE OF FUNDS Funds from Operations: Net income.. $139,399 $126,316 $122,541 Depreciation and amortization 119,647 96,252 87,144 investment tax credit adjustments 11,450 13,989 15,396 Deferred income taxes 23,352 44,149 15,818 Allowance for other funds used during construction (12,053) (9,545) (4,006) Subtotal.,. 281,795 271,161 236,893 Fur ds from Outside Sources: Long-term debt 38,883 53,789 74,193 Common stock 21,234 15,796 10,062 Preference stock (deduction-conversions) (947) 47,053 (2,035) Short-term debt - net (18,750) Other - net 336 296 414 Total $391,301 $388,095 $300,777 APPLICATION OF FUNDS Construction expenditures $225,003 $160,917 $172,402 Allowance for other funds used during construction (12,053) (5,545) (4,006) Purchase of nuclear fuel materials 57,135 57,956 57,253 Deferred nuclear maintenance 1,697 7,275 Common stock dividends, 80,754 75,373 69,467 Preferred stock dividends 2,899 2.899 2,899 Preference stock dividends 19,'200 16,885 15,278 Retirement of long-term debt 35,162 12,764 12,760 Materials and supples, principally fuel stock 23,351 19,462 (2,154) Deferred fuel costs 3,910 37,197 (4,578) Federal income taxes payable (34,438) 26,758 (6,561) Other-principally net change in other working capital items (11,319) (19,846) (11,983) Total $391,301 $388,095 $300,777

• Resta!cd to conform with 1980 presentation.

See nmes and sectes - r,a; s 31 wo AUDITORS' REPORT Ooopers & Lybrand To the Stockholders of Baltin ore Gas and Electric Company We have examined the balance sheets of Baltimore Gas in our opinion, the financial statements referred to above and Electric Company at December 31,1980 and 1979, and (pages 28 through the notes to financial statements on the related statements of income, retained earnings and page 43), present fairly the financial position of '3altimore changes in financial position for the years ended December Gas and Electric Company at December 31,1980 and 1979, 31,1980,1979 and 1971 Our examination,s were made in and the results of its operations and changes in its financial accordance with generally accepted auditing standards and, position for the years ended December 31,1930,1979 and accordingly, included such tests of the accounting records 1978, in conformity with generally accepted accounting and such other auditing procedures as we considered principles applied on a cor.sistent basis. necessary in the circumstances. W Baltimore, Maryland January 2L 1981 j 45 l

SCHEDULES OF OUTSTANDING STOCKS l BALTIMORE GAS AND ELECTRIC COMPANY l l December 31 1980 1979 (In Thousands of Dollars) COMMON STOCK - without par value - 45,000.000 shares authorized: 32,690,093 and 31,692,176 shares, respectively, outstanding $638,820 $617,630 (At the end of 1980, 263,548 shares were reserved for conversion of Convertible Preference Stock, 847,498 shares for the Inves: ment Tax Credit Employee Stock i Ownership Plan end 888,935 share.; y the Dividend Reinvestment and Stock Purchase Plan.) PREFER 1D AND PREFERENCE STOCK NOT SUBJECT TO MANDATORY REDEMPTION Preferred Stock (Cumulative)- $100 par value - 1,000,000 shares authorized. Series B 4W % - 222,921 shares outstanding $ 22,292 $ 22,292 (Callable at $110 per share.) Series C 4 -- 68.928 shares outstanding 6,893 6,893 o (Callable at $105 per share.) Series D 5.4 % - 300,000 shares outstanding 30,000 30,000 (Callable at $102.50 per share prior to April 1,1982 and at lesser amounts thereafter.) Total Preferred Stock $ 59,185 $ 59,185 Preterenta Stock (Cumulativs)- $100 par value - 3,000,000 shares authorized: Convertible,6W % Series - 76,207 and 85,677 shares, respectively, outstanding $ 7,621 $ 8,568 (Callable at $100 per share; convertible into Common l Stock of the Company at $28 98 per share.) ) 8.75% 1970 Series - 300,000 shares outaiiaing 30,000 30,000 (Callabic at $107 per share prior to October 1,1983 and at lesser amounts thereaf ter.) 7.88 % 1971 Series - 500.000 shares outstanding 50,000 50,000 j (Callable at $107 per share prior to October 1,1981 and j at lesser amounts thereafter.) ) 7.75 % 1972 Series - 400,000 shares outstanding 40,000 40,000 l (Callable at $105.50 per share prior to October 1,1982 and at lesser amounts thereafter.) 7.78 % 1973 Series - 200.000 shares outstar ding 20,000 20,000 l '(Callabic at $105.50 per share prior to December 1,1983 and at lesscr amounts thereafter.) 9 35 % 1974 Series - 350.000 shares outstanding 35,000 35.000 { (Callable at $110 per share prior to April 1,1984 and at lesser amounts thereafter.) Total Preference Stock $182,621 $183,568 REDEEMABLE PREFERENCE STOCK (Cumulative)- $100 par value - 500.000 shares authorized: 8.375 % 1979 Series - 500,000 shares outstanding $ 50,000 $ 50,000 1 see Nws io a,: il 31

i SCHEDULES OF OUTSTANDING BONDS & DEBENTURES BALT!MORE GAS AND ELECTRIC COMPANY Decembar 31 1980 1979 (in Thousands of Dollars) FIRST REFUNDING MORTGAGE BONDS 47/8 /o Series, due June 1,1980 9,361 o Series W 2%%, due June 15,1980 10,695 Series U 2%%, due Apol 1,1981 39,063 39,063 10% Series, due July 1,1982 90,202 90,202 10W% Series, due Sep' ember 15,1983 41,677 41.932 Series V 2%%, due December 21,1984 19,123 19,123 Series X 2%%, due January 15,1986 24,317 24,317 l Series Z 3%, due July 15,1989 36,754 36,754 12W% Series, due September 15,1990 75,000 3% % Serics, due December 1,1990 29,682 29,682 43/a% Senas, due July 15,1992 25,000 25,000 l 4% Series, due March 1,1993 24,095 24,095 4%% Series, due July 15,1994 29,989 29,989 5%% Series, due April 15,1996 26,680 26,68G 6% % Series, due August 1,1997 24,967 24,967 5%% Installment Series, due August 15,1998 67,000 67,000 7% Series, due December 15,1998 28,705 28,705 8% % Series, due September 15,1999 22,198 22,198 8%% Series, due September 15,2000 11,433 11,423 7% % Series, due April 15, 2001 60,000 60,000 7%% Series, d e September 1, 2001 60,000 60,000 7W % Seriet., due January 1,2002 50,000 50,000 7W % Series, due July 1,2002 50,000 50,000 SW% Installment Series, due July 15,2002 12,500 12,500 7W % Series, due September 15,2002 50,000 50,000 8W % Series, due February 1,2004 74,986 75,000 6.80% Series, due September 15,2004 15,000 9% % Series, due August 1,2005 15,639 17,036 8%% Series, due September 15,2006 75,000 75,000 8% % Series, due September 15,2007 75,000 75,000 9%% Series, duc July 1,2008 62,560 75,000 6.90% installment Series, due September 15,2009 55,000 55,000 Total First Refunding Mortgage Bonds $1,271,570 S1,215,732 DEBENTURES 4%% Sinking Fund Debentures, due June 15,1986 $ 12,400 $ 12,800 4%% Sinking Fund Debentures, due August 1,1990 21,000 21,600 Total Debentures $ 33,400 S 34,400 See Note 12 s 32

RESPONSIBILITY FOR FINANCIAL STATEMENTS 1 I Management is responsible for the integrity and objectivity Coopers & Lybrand, independent certified public of the Company s financial statements. The financial state-accountants, are engaged to examine the financial state-l ments are prepared in accordance with generally accepted ments and express their opinion thereon. Their examination l accounting principles based upon currently available facts is made in accordance with generally accepted auditing i and circurtstances and Management's best estimates and standards which include a review of internal controls. Their judgments of known conditions. report appears on page 30. l The Company maintains an accounting system and The Audit Committee of the Board of Directors, which I related system of internal controls which are designed to cont.ists of three outside Directors, meets periodically with provide reasonable assurance that the financial records are Management, internal auditors and Coopers & Lybrand to accurate and that the Company's assets are protected. The review the activities of each in discharging their responsi-Company's staff of internal euditors, which reports directly bilities. The interna! audit staff and Coopers & Lybrand to the Chairman of the Board, conducts periodic reviews to have free access to the Audit Committee at any time. maintain the effectiveness of internal control procedures. I i NOTES TO FINANCIAL STKIEMENTS Accounting Policies: The accounting records of the Company are maintained in accordance with the Uniform Systems of Accounts l prescribed by the Federal Energy Regulatory Commis-sion and the Public Service Commission of Maryland. The Company's principal accounting policies are described in Notes 1 through 7. NOTE 1 - Pension Plan: plan benefits and plan net assets for the Company's The Company maintains a noncontributory pension defined benefit plan, as of January 1, is presented plan covering its regular employees. The funding of the below: Company's pension plan is through a deposit adminis-1980 1970 tration medium with an immediate participation guaran-(In Thousands of Dollars) tee feature, employing the aggregate cost method. In Actuaria r n value o 1980,1979 and 1978, the Company's cost for pensions Vested $129,913 $111,066 ) totaled $16,167,000, $13,563,000 and $13,412,000, Nonvested 6,571 5,367 ) respectively, of which $13,114,000, $11,081,000 and $136,484 $116.433 $10,720,000, respectively, were included in expenses. Net assets available for benefits $206,044 $181.256 The remainders were charged to conct;uction. The increase in 1980 is the result of changes in benefits and The assumed investment rate of return used in deter-higher payrolls, while the increase in 1979 is the net mining the actuarial present value of accumulated plan j result of changes in benefits effective July 1,1979 and benefits was seven percent for both 1980 and 1979. higher payrolls, substantially offset by a decrease Based on the latest available actuarial report, as of resulting from changes in actuarial assumptions effec-January 1,1980 there were no unfunded vested live January 1,1979. A comparison of accumulated liabilities. 33

7 f NOTE 2 - D5precistion and Maintan:nce: as units of property are accounted for as Plant Additions The amounts set aside on the Company's books for and Retirements. When depreciable property is retired depreciation are generally based on composite or otherwise disposed of, the Accumulated Provision-straight-line rates, determined and revised periodically for Depreciation is charged with the " original cost" of by means of independent engineering studies, applied such property, together with the cost of removal, and is to the average investment in depreciable utility plant in credited with the salvage value or sale price and any service. The composite depreciation rate for nuclear other amounts recovered, such as insurance. electric properties includes a $36,000,000 provision for The investment in depreciable utility plant as of the decommissioning of the properties at the end of December 31 and the depreciation rates applied to their useful life. Such provision is subject to periodic each category are as follows: i review for future changes in economic conditions and advances in technology. Composite 1980 1979 Expenditures for maintenance and repairs, includin9 Rate (in Thousands of Dollars) renewals of minor items of property (as distinguished Eier tric from units of property), are charged to operating -Other than Nuclear 3.26 % $1.428,472 $1,353.555 expenses and/or clearing accounts, unless the replace. - - Nuclear 3.45 788,842 777.949 l ment of a minor item of property effects a substantial [,a h. 9' i em betterment,in which event the excess cost of the Common 3.00 (a) 93.711 84.605 replacement over the estimated current cost of replace-Total $2,654,346 $2.541.488 ment without betterment is charged to the appropriate (a)cxcept tot transportation vehicles, which are generatty depreciated property account. Replacements of items designated on a usage basis. NOTE 3 -Income Taxes: 1980 1979 1978 (in Thousands of Dollars) income Tax expense is composed of the fo!!owing: l Included in Operating Expenses: l Income Taxes-Current $39,604 $ 8,987 $43,619 l Income Taxes-Deferred 23,352 44,149 15,818 l Investment Tax Credit Adjustments. 13,852 16,593 17,882 i Total Charged to Operating income 76,808 69,729 77,319 Included in Net Other Income and Deductions-Current 2,049 1,047 453 Total Income Tax Expense,,.. $78,857 $70.776 $77,772 Total income taxes currently payable consist of the following components: Federal Income Tax:

ncluded in Operating Expenses

$39,552 $ 8.959 $43,540 included in Net Other Income and Deductions 1,904 934 380 State Income Tax: Included in Operating Expenses 52 28 79 Included in Net Other Income and Deductions 145 113 73 Total Income Taxes Currently Payable $41,653 $10,034 $44.072 The provision for deferred Federalincome taxes consists of the following tax effects of timing differences between tax and book income: ) Liberalized Depreciati)n $17,796 "'17 $18,770 l Deferred Fuel Costs 1,798 (2,197) Spent Nuclear Fuel Storage Costs-Note 7 (3,352) (2,850) ) (1,638) } Pennsylvania Gross Receipts Tax-Note 8 Percentage Repair Allowance. 6,329 2,804 3,733 Malmenance Expenditures-Calvert Cliffs 781 3.347 Total $23,352 $44,1:19 $15,818 The Investment Tax Credit Adjustments, which substantially offset the reduction in Fed-eral incorne taxes resulting from the investment Tax Credits, are derived as follows: Reduction in Federalincome Taxes due to credits arising from: Eligible property $15,639 $17,776 $18,554 Employee Stock Ownership Plan 2,403 2.604 2,486 Total... 18,042 20.380 21,040 Credits allocated to incon e. ' (4,190) (3.787) (3,158) ct Total $13,852 $16.593 $17.882 i 34 E

Investment tax credits accruing to the benefit of respect'to the credits provided under'he' Revenue Act : employees result from the additional 1% % credit. of 1971 and subsequent years, and over thirty-year allowed by the Internal Revenue Code to provide stock periods with respect to the credits provided under prior - for employees under the investment Tax Credit' Revenue Acts. Employee Stock Ownership Plan (ESOP). Total income tax expense was less than the amount ' All investment tax credits, except those related to ' computed by applying the Federalincome tax statutory ESOP, are being deferred and' allocated to income rate to book income before tax. The reasons for this ratably over the lives of tt.e subject property with difference are as follows: 1980

1979,

'1978 -(in Thousands of Dollars)' l Tax computed at statutory rate c, book income before, tax (46% in 1980 and - i 1979 and 48% in 1978).. $100,398 $90.662. - $96,150 - 4 ' increases (Decreases) in tax from: (4,807). . (7,478) (10,990): j 1 Excess of tax over book depreciation - not normalized................... Allowance for Funds Used During Construction-Borrowed Funds and i Other Funds (11,076) (7,969) . (3.641) j Investment Tax Credit allocated to. income (4,190) - (3,787) (3,158). Net other items - (1,468) (652) (589) ' Total income Tax Expense.. $ 78,b67 $70,776 - ' $77,772 The tax reductions resulting from the difference - tax benefits arising from liberalized depreciatlon on between depreciation recorded on the Company's ' property additions in 1976 and subsequent years books and the depreciation taken for Federal income ' totalling $17,796,000 in 1980, $20,717,000 in 1979. tax purposes amounted to $22,603,000 in 1980, - and $18,770,000 in 1978 have been normalized. I $28,195,000 in 1979 and $29,760,000 in 1978 of which See also Note 14. NOTE 4 - Allowance for Funds Used During - ferred from the Statement of Income to Construction i Construction: Work in Propress in the Balance Sheet, Ti ase The Allowance for Funde Used During Construction, a al_lowances are not taxable income. 3 non-cash item, is an accounting procedure by which in 1978, the allowance was computed at an 8.13%. I there are accrued allowances for the costs of borrowed rate applied to one-half of the construction expendi-funds and other funds used to finance' construction, tures for the Company's Brandon Shores Power Plant. segregated between other income and interest charges Since April 1979, the allowance has been computed. in conformance with an Order of the Federal Energy at an 8.13% ' rate applied to the total conciruction j Regulatory Commission. Such allowances ere trans-expenditures for the Brandon Shores Plant. l l NOTE 5 - Safe Harbor Water Power Corporation: accounting for this investment. The investmerd in Investment in Safe Harbor Water Power Corporation Safe Harbor was $7,567,000 at December 31,1980 - represents two-thirds of the capital stock of that corporation, including one-half of the voting stock,. and $7,351,000 at December 31,1979.' The capital stock of Safe Harbor owned by the Com-and the Company's two-thirds interest in Safe Harbor's pany is pledged under the Mortgage under which the retained earnings, pursuant to the equity method of Company's Mortgage Bonds are issued, i .- l I .35 . l j

NOTE 6 - DIferred Fuzi Ccsts: recoveries due primari!y to the difference between the Since October 1978, the Company, by statt,te, has actual generation mix compared with the latest twelve-had in effect a zero-based e:ectric fuel rate month generation mix used in the formula. During the ( clause designed to recover the actual cost of fuel first nine months of 1978, the full cost of electric fuel used in generating electricity. Actua' fuel costs are based on estimates was recovered in the month in recoverable so long as the Company continues to which such costs were charged to operations. The demonstrate that it has used the most economical mix balance deferred as of December 31,1980 and 1979 i of all types of generation and purchase, made every was $20,060,000 and $28,793,000 ($10,894,000 and reasonable effort to minimize fuel costs and maintained $15,610,000 net after income taxes), respectively. l' the productive capacity of its genera ing plants at a in October 1980, pursuant to an Order of the reasonable level. As implemented by the Public Maryland Commission, the Company began to defer Service Commission of Maryland, the fuel rate the net over-or under-recoveries of purchased formula is based upon the latest twelve-month genera-gas costs resulting from the operation of the tion mix and the latest three-month average cost for Purchased Gas Adjustment Clause. 'lhe Commissicn's each type of fuel. The fuel rate will not change unless Order further provided that any over-or under-the calculated fuel rate is more than 5% above or recoveries of purchased gas costs for the twelve below the fuel rate then in effect. To the extent that months ended November 30 each year shall be credited actual accumulated fuel costs are not recovered or charged to customers over the ensuing calendar through the fuel rate charge then in effect, they are year. The deferral as of December 31,1980 was deferred. In actual operation, the fuel rate $12,643,000 ($6,827,0C0 net after income taxes), A clause will result in under-recoveries and over-NOTE 7 - Other Deferred Debits: 1978. The unamortized balance of these deferred costs Prior to May 1977 the cost of nuclear fuel refiected an as of December 31,1980 and 1979 was $12,331,000 assumed value for residual uranium less estimated and $9,934,000 ($6,659,000 and $5,324,000 net after shipping and reprocessing costs. However, starting income taxes), respectively. Future fuel costs will be with the monthly fuel rate in May 1977, the Company adjusted as spent fuel storage costs and reprocessing began billing as a cost of nuclear fuel the cost to pro-costs (if any) become known. vide for transportation and long-term off-site spent fuel In 1979 and 1980 the Company incurred a total of storage, with no credit for either residual uranium or $9,738,000 in maintenance expenditures for inspecting plutonium. and repairing seismic pipe supports to meet Nuclear Beginning in October 1978, post-reactor shipping Regulatory Commission requirements at the Calvert j and disposal costs were deferred pursuant to an Order Cliffs Nuclear Power Plant. These costs were deferred l by the Public Service Commission of Maryland which and pursuant to the June 10,1980 Order of the excluded these costs from the fuel rate computation. Maryland Commission are being amortized over I In its June 10,1980 Order granting the Company an twenty-six years. The amourt deferred as of December increase in electric base rates, the Maryland Commis-31,1980 and 1979 was $8,973,000 and $7,275,000 sion included a provision for the recovery of post-($4,845,000 and $3,929,000 net after income taxes), reactor shipping and disposal costs currently charge-respectively. abic to operations as well as the amortization, over a three-year period, of the costs deferred since October 1 l 1 1 l ) l ) x i

i i l NOTE 8 - Oth:r Taxis: (a) In December 1977, the Pennsy'vania Gross Receipts ) Taxes, other than taxes on income, were as follows: Tax law was amended, effective retroactively to January 1,1977, to apply to electricity produced in i t 1980 1979 1978 1 (In Thousands of Dollars) Pennsylvania and sold outside of that State. Counsei for the Company is of the opinion that this legisla-Property $22,874 $22,015 $21,504 Capital stock.... 27,357 27,057 26.896 tion is Invalid and unconstitutional, and the matter and ceipts 24,117 19,915 19,170 is being contested in the courts. Legislation was $arp3yyan b$js n Receipts (a) 3,728 3,413 enacted in the Commonwealth of Pennsylvania M $ r"on ntj Surcharge which repealed the tax on a prospective basis, d 1,939 2,199 3.442 social Security 13,182 11,473 9,882 effective Jar'uary 1,1980. Miscellaneous 1,830 1,479 1.281 91,299 87,866 85,588 In 1978, the amount of the tax was equivalent after Federal income taxes to 6c per common snare, Amount included above charged principally to based on the average number of shares outstand-ta[es (2,817) (2.411) (2.258) ing. Pursuant to an Order from the Pubuc Service Commission of Maryland, the Company began, in Total Other Taxes $88,482 $85.455 $83.330 1979, to defer the tax until such time as its ultimate disposition has been determined. As a result, there was no effect on 1979 earnings. NOTE 9-Accounts Receivable: recognized practice of utility companies, are classified j The balance in Customers' Accounts Receivable as current assets although in part they do not mature j includes approximately $18,300,000 and $15,400,000 within one year. It is not practicable to determiae the at December 31,1980 and 1979, respectively, amount of such installments which do not mature receivable from unmatured merchandise installment within one year, An annual interest rate of 18% is accounts which, in accordance with the generally currently being applied to installment sales. 1 NOTE 10 - Changes in Common Stock and Preference Stock Not Subject to Mandatory Redemption: Cumulative 1 Common Stock Preference Stock l Shares Amount Shares Amount (vollar Amounts in Thousands) i Balance at December 31, 1977 30,657,775 $591,772 1,883,335 $188,333 l Year 1978 Common Stock issued under: Dividend Reinvestment Plan 206,272 5,338 ESOP 106,354 2,806 l Conversions of Convertible Prefere:ce Stock, l 6W % Series, into Common Stock (decrease) 68,901 2,032 (20,346) (2,034) Balance at December 31,1978 31,039,302 601,948 1,862,989 186,299 Year 1979 Common Stock issued under: l Dividend Reinvestment Plan 403,691 0,454 l ESOP 156,002 3,509 Conversions of Converuble Preference Stock, l 6W% Series, into Common Stock (decrease) 93,181 2,719 (27,312) (2,731) Balance at December 31,1979 31,692,176 617,630 1,835.677 183,568 Year 1980 Common Stock issued under: Dividend Reinvestment Plan 809.228 16,752 ESOP 156,164 3,494 Conversions of Convertible Preference Stock, 6W% Series, into Common Stock (decrease) 32,525 044 (9,470) (947) Balance at December 31,1980 32.690,093 $638,820 1,826,207 $182,621 37

l NOTE 11 -Redum bls Przf:rance St::ck: 1989. This series is junior to Preferred Stock, renks on d in July 1979, the Company issued 500,000 shares of a parity with Preference Stock Not Subject to Manda-8.375% Cumulative Preference Stock,1979 Series tory Redemption and prior to Common Stock as to ($100 par value). The Company will redeem at par payment of dividends or assets available in the event 100,000 shares ($10,000,000) of this series of of liquidation. Preference Stock in each of the years 1985 through i NOTE 12 - Long Term Debt: The Installment Series Mortgage Bonds, due July 15, The Mortgage Ucnds are secured (A) by a valid and 2002 are payable as to principal on the fifteenth day of direct first mortgage lien on substantially all of the July in the years and the amounts as follows: ( principal properties and franchises owned by the Principal Amount f Company and (B) by a pledge of 100,000 shares of Years Each Year Class A stock and 100,000 shares of Class B stock (In Thousands of Dollars) of Safe Harbor Water Power Corporation. 1993 $ 420 The Company is required to make an annual sinking 1994.. 430 throu h 1997 fund payment to the Trustee under the First Refunding Mortgage at the end of each period of one year, 2000 and 2001 865 accounting from the first day of August, equal to 1% of 2002 6,725 the largest amount of Mortgage Bonds at any time during such yearly period outstanding under the The installment Series Mortgage Bonds, due l Mortgage. Such funds are to be used for the purchase September 15,2009 are pa,yable as to principal on the

• e or redemption of an indeterminate principal amount of gu s as folio Mortgage Bonds, excluding the Installment Series Mortgage Bonds of 1998,2002 and 2009 and the Principal Amount Years Each Year 6.80% Series Mortgage Bonds of 2004 as provided in the Mortgage, at not exceeding the applicable (in Thousards of Dollars) l redemption prices. The payment to be made on 2005 through 2008.

$ 3,250 2009. 42.000 l August 1,1061 is presently estimated at $13,000,000. The Installment Series Mortgage Bonds, due August The Company is also required to make annual sink-15,1998 are payable as to principal on the fifteenth day ing fund payments (in cash and/or Sinking Fund of August in the years and the amounts as follows: Debentures) to the Trustees under the Sinking Fund Principal Amount a % Mehe shg Years Each Year fund payment, to be made on or before June 14 of each (in Thousands of Dollars) year to and including 1985, is calculated to retire 1984 through 1986 $ I.000 $400,000 principal amount of 4%% Sinking Fund 1987 through 1990.. 2,000 Debentures per year; and the 45/s% Debenture sinking 1991 through 1995. 3,000 fund payment, to be made on or before July 31 of each and 1997... year to and including 1989, is calculated to retire 3, $600,000 principal amount of 4%% Sinking Fund Debentures per year. In any year, at the Company's election, an additional sinking fund payment of up to $600,000 (noncumulative) may be made under the 45/e% Sinking Fund Debenture Indenture, j i l l l I i j 38

NOTE 13 - Shsrt Term Barrswings: (which are not restricted'as to withdrawal). Borrowings The Company maintains bank lines of credit 6 provide' -under the lines are at the bank's prime interest rate or: backup financing capacity for commercial paper notes . under certain credit line arrangements at a fixed - Issued to satisfy interim financing requirements and to percentage over the London Interbank Offered Rate. permit short-term borrowing flexibility. In support of ' info'rmation concerning short-term borrowings outstand-such lines, the Company either pays commitment fees ing at December 31,1980 and December 31,197_9 and - at a fixed rate or maintains compensating balances during each of the years then ended is set forth below: 1080 1979' At December 31 (in Thousands of Dollars) Short-Term Borrowings Outstanding: -l Commercial Paper Notes (maturing in 90 days or less)............ Weighted Average Interest Rate Unused Lines of Credit.......... $140,000 $138,000 Compensating Balances $ 2,040 $ = 3,355 - During the Year Ended December 31 Maximum Aggregate Short-Term Borrowings...... $ 75,450 $ 20,250 Average Daily Short-Term Borrowings (a).. $ 30,922 $. 3,109l q Weighted Average Interest Rate (b) 12.64 % - 10.19 % I (a) The sum of dollar days of outstanding borrowings divided by actual days in the period. (b) Actual accrued interest during the period divided by average daily borrowings, e ,n NOTE 14 - Commitments and Contingencies: Service is taking the position that the Plant initially The Company has made substantial commitments in qualified for tax depreciation in 1975, and not 1974 l connection with its construction programs for 1981 and as claimed in the tax return. A protest to this item,.. -l subsequent years, which is strictly a timing difference, and other disputed q Price-Anderson Act: adjustments has been filed and the ultimate disposition The Price-Anderson Act (Act) currently limits the is not expected to have a material effect on earnings, j liability of an owner of a nuclear power plant to Leases: $560,000,000 for a single nuclear incident. The The Company has a lease agreement for a portion of Company is protected against this potential liability by the nuclear fuel presently installed in Units No.1 and 2 i a combination of private insurance carried by the at the Calvert Cliffs Plant. Under the lease agreement, Company (currently limited to $160,000,000 through lease payments for nuclear fuel commenced upon - the nuclear insurance pools) and Federal governmental consumption of the fuelin the operation of the Calvert '] indemnity agreements. In the event of a nuclear Cliffs Plant and are designed to return to the lessor the j incident, as defined by the Act, causing damage to the - accumulated investment in the nuclear fuel prior to 1 public in excess of the limits of primary financial pro-commencement of burn up (including original pur.. -l tection, the Company could be assessed up to the chase price, all subsequent processing payments made limit of $5,000,000 per reactor at the Company's Calvert and a financing charge) and a monthly carrying or Cliffs Nuclear Power Plant. For one nuclear incident, financing charge on the unamortized accumulated therefore, the Company's maximum contingent liability investment. Lease payments for 1980,1979 ano 1978 q (retrospective assessment) would be $10,000,000. totaled $13,624,000, $20,369,000 and $28,020,000, a Under regulations issued pursuant to the Act, the respectively. The Company is responsible for taxes, I Company's maximum contingent liability in any one insurance and other operating costs relating to the fuel, calendar year for payment arising from more than one - As of December 31; 1980, the estimated future pay-nuclear incident is limited to twice the retrospective ments under the nuclear fuel lease are not material. l assessment per reactor, or $20,000,000. If the Company had accounted for the nuclear fuel Income Tax Audit: lease as a capital lease, both net assets and liabilities l' The Internal Revenue Service completed an audit of would have been increased by $2,080,000 and the years 1974 through 1976 and has asserted a $14,901,000 at December 31,11980 and 1979, deficiency of $16,546,000. The major issue pertains to respectively. However, no additional expenses would the placed-in-service date for Unit No.1 at the Calvert have been incurred. Cliffs Nuclear Power Plant resulting in a proposed ' Rental expense under other leases currently in '. deficiency of $15,906,000. The Internal Revenue effect is not material. 39

i l ) NOTE 15-SzgmInt infermatian: 1 1980. 1979-1978 (in Thousands of Dollars) j l5 EIIctric ' Operating Revenues $ 857,264' $ 714,956: $ 697,173' Operating income before Income Taxes... 249,510 236,024' 240,661 1 Operating income '.. 182,149 173,160' 173.639-Depreciation. 73,743 71,355 69,415' Construction Expenditures (a) 198,034 143.780 155,781 Identifiable Assets at December 31 (a) (b). 2,507,909 2.350,211 .2,229,415 Gas Operating Revenues. $ 354,736 $ 287,074 $ 264,586 Operating income before income Taxes. '33,747 27,091s 34,321 Operating income 23,937 19,973 23,570 Depreciation.. 8,886 8,463 8,156 Construction Expenditures (a). 26,029 15,858 14,875 Identifiable Assets at December 31 (a) (b). 292,491 269,634 261,500 Steam Operating Revenues........ 14,442 12,378 12,727. Operating Income before Income Taxes (149) 68 (219) Operating Income 213 321 235 l Depreciation... 552 520 492 Construction Expenditures (a) 940 1,279 1,746 i identifiable Assets at December 31 (a) (b).. 15,030 14.808 14,042 Tctal Operating Revenues ..... $1,226,442 $1,014,408 $ 974,486 ' Operating inconie before income Taxes 283,108 263,183 -274,763 ^ i Operating income 206,299 193.454 197,444 Depreciation. 83,181-80,338 78,063 j Construction Expend;tures 225,003 160,917 y 172,402 ) Identifiable Assets at December 31 (b). 2,815,430 2,634.653 3 2,504,957 Other Assets 257,583 221,331 168,797 Total Assets.... 3,073,013 2,855,984 2,673,754 (a) Includes allocation of Common Utility Property. (b) Represents Utility Plant and Materials and Supplies, excluding merchandise inventory of $3.054.000, $3.272,000 and $2,582,000 at December 31,1980,1979 and 1978, respectively; merchandising activities are reported in Other income. NOTE 16 -Jointly-Owned Electric Utility Plant: Trans-The Company's ownership as a tenant in common of Key-Cone-mission undivided interests in the Keystone and Conemaugh stone maugh Line mine-mouth electric generating plants, located in (In Thousands of Dollars) western Pennsylvania, entitles the Company to 536 Ownership Interest 20.99 % 10.56 % 7.00 % megawatts of rated capacity. Utility Plant in Financing and accounting for these properties are the Service $43.514 $29,106 $1,486 same as those for any other fully-owned property. The Accumulated Company's share of the direct expenses of the joint Provision for ] property is included in the corresponding operating Depreciation 12,739 6,913 324 expenses in the Statement of Income. Construction Work 1 The following data as of December 31,1980 n Progress 558 490 represent the Company's proportionate share: 1 J l 40 s

NOTE 17 -- Quartirly Fin:ncial D:ta (Un2uditId): . The business of the Company is seasonalin nature, The following data are unaudited but, in the opinion of - and it.is Management's opinion that comparisons the Company, include all adjustments -(comprising only. between quarters of a year do not give a true indication - normal recurring accruals) necessary for a fair state-of ovorall trends and changes in operations. . ment of the operating results for the periods presented. Operating Net income Earnings. Total income Applicable. Per Share Operating plus Net . to Common of Common Quarter Er.ded Revenues AFC(a) Income Stock Stock - (In Thousands of Dollars)_ March 31, 1980................. $ 316,017 $ 51,694 $ 29,348. $ 23,818 . $0.75 J une 30, 1980.........,... 264,973 51,025: 27,905 22,377. 0 70 September 30.~1980 341,898 77,844 55,997. 50,474 1.56 December 31, 1980... '303,554 49,813 26,149 20,631 0.63 Total Year 1980 $1,226,442 $230,376. $139,399 $117,300 $3.64 - March 31,1979. $ 292,919 $ 59,929 $ 39,085 ' S 34,558- $1.11 -

i June 30,1979...

232,443 50,796 29,897-25,378 0.81. September 30,1979. 245,377 60,445 39,284 34,082 1.08 December 31, 1979 243,669 39,607 18,050 12,514 .0.40 Total Year 1979 $1,014,408 $210,777 $126,316 $106,532 $3.40 ^ q j (a) Allowance for Funds Used During Construction (for Borrowed Funds and Other Funds) is added to Operating. j l Income in determining operating income for ratemaking purposes in the State of Maryland. l i NOTE 18 - Su'pplementary Information to Disclose plant was acquired to the present, and differ from ths Effects of Changing Prices (Unaudited): constant dollar amounts to the extent that specific - The following supplementary information is supplied in prices have increased more or less rapidly than prices accordance with the requirements of Financial Account-in general.- ing Standards Board Statement No. 33, Financial The current cost of utility plant, comprising all plant Reporting and Changing Prices, for the purpose of in service, construction work in progress, and plant providing certain information about the effects of held for future use, represents the estimated cost of changing prices. It should be viewed as an estimate of replacing existing plant assets and was determined by the approximate effect of inflation, rather than as a indexing the surviving plant by the Handy-Whitman precise measure. Index of Public Utility Construction Costs. The current Constant dollar amounts represent historical costs year's provision for depreciation on the constant dollar stated in terms of dollars of equal purchasing power, and current cost amounts of utility plant was determined as measured by the Consumer Price index for All by applying the Company's depreciation rates to the. Urban Consumers. Current cost amounts reflect the indexed plant amounts. changes in specific prices of plant from the date the l

St.t m:nt if inc me Fr:m C ntinuing Op rati:ns Adjust d f;r Changing PricIs For the Year Ended December 31,1980 (In Thousands of Dollars) l Conventional Constant Dollar Current Cost l Historical Average Average Cost 1980 Dollars 1980 Dollars Operating Revenues $1,226.442 $1,226,442 $1.226,442 Purchased Fuel and Energy.. 478,836 484,569 479,469 Operations and Maintenance. 292,836 292,836 292,836 j Depreciation 83,181 176,448 198,727 l Taxes. 165,290 165,290 165,290 Total Operating Expenses 1,020,143 1,119.143 1,136,322 I Operating Income 206,299 107.299 90,120 Other income (including AFC) 14,904 14,904 14,904 income Before Interest 221,203 122,203 105,024 Interest Expense (net of AFC) 81,804 81,804 81,804 Income From Continuing Operations (excluding adjustment to net recoverable cost) $ 139,399 $ 40,399(a) $ 23,220 Increase in Specific Prices (Current Cost) of Utility Plant and Nuclear Fuel Held During the Year (b) $ 363,130 Adjustment to Net Recoverab'3 Cost $ (208,976) 28,874 Effect of increase in General Price Level (583,877) Excess of increase in General Price Level Over Increase in Specific Prices After Adjustment to Net Recoverable Cost (191,873) Gain from Decline in Purchasing Power of Net Amounts Owed 163,751 163,751 Net $ (45.225) $ (28,122) ( Including the adjustment to net recoverable cost, the loss from continuing operations on a constant dcllar basis would have been $168.577,000. (b) At Decernber 31,1980, current cost of utility plant and nuclear fuel, net of accumulated depreciation and amortization, was $5,117,360,000, while historical cost or not cost recoverable through depreciation and amortization was $2.672,195,000. Nuclear fuel material and its related effect on terms of constant dollars or current cost over the purchased fuel and energy expense has been adjusted historical cost of plant is not presently recoverable in in a manner similar to utility plant for constant dollar rates, and is reflected as an adjustment to net recover-amounts and at current market prices for current cost, able cost. While the ratemaking process gives no Fuel inventories (other than nuclear fuel), the cost recognition to the current cost of replacing utility plant of fuel used in generation and gas purchased for and nuclear fuel, based on past piectices, the Company resale generally represent recent acquisitions and believes it will be allowed to earn on the increased cost have not been restated from their historical cost in of its net investment when replacement of facilities nominal dollars. The ratemaking process limits the actually occurs. recovery of fuel and purchased gas costs to historical To properly reflect the economics of raie regulation cost. For these reasons, fuel inventories (other than in the Statement of Income from Continuing Operations, nuclear fuel) have been classified as monetary assets. the adjustment to net utility plant and nuclear fuel As prescribed in Statement No. 33, income taxes should be combined with the gain from the decline in were not adjusted, purchasing power of net amounts owed. During a Under the ratemaking prescribed by the Public period of inflation, holders of monetary assets suffer a Service Commission of Maryland, the Company is loss of general purchasing power while holders of generally limited to the recovery of historical cot: of monetary liabilities exp erience a gain. The gain from plant in service and nuclear fuel in revenues as depre-the decline in purchas.ng power of net amounts owed is ciation and amortization. During periods of inflation, primarily attributable to the substantial amount of long-such amounts will be recovered in dollars having less term debt outstanding which will be repaid with dollars purchasing power than the historical dollars invested. that are worth less than the dollars received when quch Therefore, the excess of the cost of plant stated in securities were issued.

Fivi-Ysgr Crmparisen cf Solicted Suppl: mint:ry Fin nci:1 Dita Adjusted for Changing Prices (In Thousands of Dollars) { 1980 1979 1978 1977 1976 Operating Revenues . $ 974,486 $ J 792,522 $ 725,817 Historical................................... $ 1.226,442 $1,014.408 in Average 1980 Dollars..................,.......... $1,226,442 ' $1,152.058 $1,231,323 $1,078.092. $1,051,051 Hist rical cost information adjusted for general inflation (in average 1980 dollars) Income from Continuing Operations (excluding adjustment to net recoverable cost)........ 40,399 $ 56,689 locome Per Common Share (after dividend requirements on preferred and preference stock and excluding - adjustment to not recoverable cost)... $ '.57 $1.09 Net Assets at Year-End at Net Recoverable Cost......... 81,195,144 $1,284,346 Current cost information (in average 1980 dollars) Income from Continuing Operations (excluding adjustment to net recoverable cost)............. 23,220 $ 23,644 Income Per Common Share (after dividend requirements on preferred and preference stock)................. $.03 $.04 Excess of increase in General Price Level Over increase in Specific Prices After Adjustment to Net Recoverable Cost..$ 191,873 $ 227,461 Net Assets at Year-End at Net Recoverable Cost.......... $1,195,144 $1,284,346 Gantral information Gain from Decline in Purchasing Power of Net Amounts i Owed (in average 1980 dollars) .$ 163,751 $ 182,767 I Cash Dividends Declared Per Common Share Historical..dO Dollars $ 2.50 $ 2.40 $ 2.25 $ 2.14 $ 2.08 In Average 19 $ 2.50 $ 2.73 $ 2.84 $ 2.91 $ 3.01 Market Price PerjCommon Share at Year-End l Historical $19.75 $22.13 $24.38 $26.63 $26.75 in Average 1980 Dollars.... $18.84 $23.76 $29.66 $35.32 $37.89 Average Consumer Price Index.... 246.9* 217.4 195.4 1 81.5 170.5 ) Year-End Consumer Price Index 258.B

• 229.9 202.9 186.1 174.3 1

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DIRECTORS ' OFFICERS J. OWEN COLE BERNARD C. TRUESCHLER Chairman of the Board, First Maryland Bancorp, Baltimore Chairman of the Board and Chief Executive Officer (Bank Holding Company) GEORGE V. McGOWAN LESLIE B. DISHAROON President and Chief Operating Officer Chairman of the Board and President, Monumental Corporation, Baltimore (Insurance) NORMAN J. BOWMAKER

• "*9 SISTER KATHLEEN FEELEY, S.S.N.D.

President, College of Notre Dame of Maryland, Baltimore RAYMOND C. BRYANT (Education) Vice President. Consumer Services JEROME W. GECKLE EDWARD A. CROOKE Chairman of the Board and President, PHH Group, Inc., Baltimore Vice President. Finance and Accounting. and Secretary (vehicle and Personnel Services) VERNON R. EVANS I RALPH G. HOFFMAN Vice President, General Services Attorney-at-Law, Westminster JOHN A. LUETKEMEYER Vice President, Electric interconnection and Operations Director, Equitable Trust Company (former Chairman of the Board, Equitable Bancorporation), Baltimore (Banking) ARTHUR E. LUNDVALL, JR. Vi e President, Supply GEORGE V, McGOWAN President of the Company, Baltimore HENRY H. MILLER j CHARLES S. SANFORD, JR. l Executive Vice President, Bankers Trust Company, New York CHRIS H. POINDEXTER i (Banking) Vice President, Engineering and Construction JOHN P. SIPPEL ALFRED H. INNERS Vice Chairman of the Board, The Citizens National Bank, Laurel Treasurer and Assistant Secretary (Banking) y HENRY E. LENTZ HENRY F. SNYDER, JR. Assistant Secretary and Assistant Treasurer General Manager, Product Line Planning and Management, Western Electric Company, Morristown, N.J. (Communications CHARLES W. SHIVERY Equipment) Assistant Treasurer WALTER SONDHEIM, JR. Chairman of the Board, Charles Center-Inner Harbor Management, Inc., Baltimore (Downtown Renewal Projects) BERNARD C. TRUESCHLER Chairman of the Board of the Company, Baltimore C. EDWARD UTERMOHLE, JR. Chairman of the Executive Committee of the Board, Baltimore GEORGE W. VELENOVSKY Chairman of the Board, The Annapolis Banking and Trust Company, Annapolis (Banking) HARRY K. WELLS Chairman of the Board, McCormick & Company, Inc., Baltimore (Food Proces.eing, Spices, etc.) NEVI DIRECTOR NEW OFFICERS At N November meeting, the Board of Directors elected Effective September 1, Alfred H. Inners was elected Jerome W. Geckle, Chairman of the Board and Treasurer and Assistant Secretary and effective President of PHH Group, Inc., to fill the vacancy created November 1, Charles W. Shivery was eiected by the death of Julian S. Neal. Mr. Neal was an out-Assistant Treasurer, standing director of our Company for 15 years. 44

m m p, .1 l, I Executive Offices .i . Gas and Electric Building. Charles Center, P.O Box 1475, 1 Baltimore, Maryland 21203 Annual Meeting The annual meeting of stockholders will be held at 2:00 P.M. on April 24,1981, at the Company's Executive Offices, Baltimore, Maryland. C nversion Agents Convertible Preference Stock Chemical Bank, New York Maryland National Bank, Baltimore RTgistrars Preferred and Preference Stock The Chase Manhattan Bank, N.A., New York Union Trust Company of Maryland, Baltimore Common and Convertible Preference Stock Morgan Guaranty Trust Company of New York Union Trust Company of Maryland, Baltimore TrInsfer Agents Preferred, Preference, Convertible l Preference and Common Stock Chemical Bank, New York Maryland National Bank. Baltimore I i a i s I Upon written request to c l Alfred H, inners, Treasurer, P.O. Box 1475, Baltimore, Md. 21203, the Company will furnish without charge a copy of its Form 10-K annual report after it is filed with the Securities and Exchange Commission in March,1981,

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