ML18100A306

1992 Annual Rept Delmarva Power.

ML18100A306
Person / Time
Site:	Salem, Hope Creek
Issue date:	12/31/1992
From:	Cosgrove H DELMARVA POWER & LIGHT CO.
To:
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ML18100A302	List: ML18100A301 ML18100A304 ML18100A305 ML18100A306
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NUDOCS 9304190168
Download: ML18100A306 (56)

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9304190168 930414 PDR ADOCK 05000272 I PDR

I FINANCIAL HIGHLIGHTS I Percent Increase 1992 1991 (Decrease)

Revenues <11 $ 864.0 million $ 855.8 million 1.0 Net Income $ 98 .5 million $ 93 .2 million 5.7 Earnings Per Share of Common Srock $ 1.69 121 $ 1.69 (3!

Dividends Declared Per Share of Common Srock $ 1.54 $ 1.54 Average Shares of Common Srock Outstanding (000) 53,456 50 ,581 5.7 Common Srock Book Value Per Share $ 13.77 $ 13.42 2.6 Construction Expe nditures <<1 $ 207 .4 million $ 181 .8 mill ion 14. l Internally Generated Funds 111 $ 130.3 million $ 96.1 million 35.6 Electric Sales 11,520,811 mwh 11 ,460 ,280 mwh 0 .5 Interchange Deliveries 998,679 mwh 1, 113 ,423 mwh (10.3 )

Electric Customers (year end) 379,819 373,502 1.7 Average Annua l Resident ial Usage 9,680 kwh 9,843 kwh (1.7)

Gas Sales 17 .01 million met 15.57 million mcf 9.2 Gas Transported 3.16 million met 2.61 million mcf 20.9 Total Gas Sold and Transported 20 .17 million met 18 . 18 million mcf 10.9 Gas Customers (year end) 89,659 87,351 2.6 Average Annual Residential Usage 88 .71 met 80 .24 mcf 10.6

(!) Includes interchange delivery reven ues of$3 0. 6 million in 1992 and $33.5 mill io n in 1991.

(2) Includes $0.21 per share from secclement of rhe Peach Bonom lawsuir.

(3) Includes $0.25 per share for rhe Cumulative Effect of a C hange in Accounting for Unbilled Revenues.

(4) Excludes Allowance For Funds Used During Construction.

(5) Net cash provided by operanng acrivities less common and preferred dividends.

CONTENTS

• Mission Statement .................. . ............. .. . ... .... .. ......... 2 Service Territory ................ ................. ..... ................. 3 Chairman's Letter ............. .. ............... .. ............ ... ... . .. 4 Customer Satisfaction .............................. . ........ ....... 8 Energy Supply .............. .. ......................................... 12 Teamwork ... ...................................................... ...... 14 Outlook ..... .. ............................... ............ . .............. . 16 Board of Directors . ............ ... ........... ..... ...... .... ...... .. 18 Financials ....... ............ .. ... ........ ... .. .......... ........ ........ 19 Customer satisfaction rose to an all-time high .

Service reliability, reasonable rates, and customer service spurred customers ' favorable marks.

' *-* ..,- *.~*~

Energy supply activities helped the Company to meet climbing demand for energy while keeping - ---

prices at 1983 levels.

Teamwork continues to enable the Company to manage change and satisfy customers .

Outlook data projects that the service territory will continue to prosper. During the next 20 years, the Company will pursue options to grow earnings .

SERVICE TERRITORY The mission of Delmarva Power is to provide gas, electricity, and energy-related services to our customers in a safe, reliable, and customer-focused manner at competitive prices with an adequate return to investors.

The Delmarva Peninsula stands our as one of the most distinctive geographical features on the East Coast. Centrally located between major East Coast markers, the peninsula lies within overnight access to approximately l/3 of the nation's population and l/3 of the total U.S. effective buying income.

Delmarva Power provides electric service through-out most of the 5 ,700 square- mile Delmarva Peninsula, which includes Delaware, portions of nine Eastern Shore Counties of Maryland, and the

two Eastern Shore Counties of Virginia. In addi- of two coal plants and two nuclear plants outside tion , the Company distributes natural gas service the service territory.

in a 275 square-mile area of northern Delaware. Our 379,819 electric customers and 89,659 To serve this region, Delmarva Power maintains natural gas customers are served by 2,842 em-an electric system with 2,684 megawatts of gener- ployees working in 13 customer service locations ation capacity, 1,326 miles of transmission lines, on the peninsula. Division headquarters stand in 10,781 miles of distribution lines, and a natural Christiana, Delaware; Harrington , Delaware; and gas system with 1,339 miles of gas main. Salisbury, Maryland. Corporate headquarters are located in Wilmington, Delaware.

Delmarva Power owns four fossil fuel power plants

• within the service territory and shares ownership

CHAIRMAN'S LETTER

Dear Stockholder:

Thank you. The entire Delmarva Power team appreciates and respects your investment in our Company, your interest in our performance, and your trust in us. I also want to add my personal thanks for your confidence in me as chairman and chief executive officer.

As you read this year's report, please remember two important points:

• The pace of change in our business is accelerating, Delmarva Power directors elected and the uncertainties are increasing.

Howard E. Cosgrove chairman and chief executive officer on October 1,

• Delmarva Power is positioned to meet the challenges 1992. Cosgrove joined the Company and opportunities that come with this change.

in 1966 and has served as a board member since 1986. This letter will address the uncertainties developing in our industry and will discuss the principles guiding our success in the'90s. It will also highlight the strengths that position us to take advantage of the challenges ahead .

Industry Uncertainty Our industry is becoming less predictable for several reasons . These include regulatory change, an uncertain national economy, increasing environmental concern, and pending rate cases .

The recenrly enacted Nationa l Energy Policy Act has opened utility markets to increased competition. Under the law, utilities and other companies can more easi ly invest in power generation projects and gain access to transmission systems of other utilities. For example, one of our customers, Old Dominion Electric Cooperative, has announced it will buy part of its electric supply from another utility in about two years. In the narural gas business , Federal Energy Regulatory Comm ission Order 636 is altering the way Delmarva Power and other local distri-bution companies buy and manage their gas supplies.

The economy remains uncertain. Across the nation, interest rares have stayed low. This reduces the returns that regulators feel comfortable granting to utilities.

Large companies, such as General Motors Corporation, wh ich operate facilities

in the service territory, continue to restructure to compete better in national and international markers. However, despite the recession, the Delmarva Penisula's population and businesses continue to grow.

Concern for the environment is still on the rise. Often this concern results in leg-islation that affects the way we do business. The full effects of the Clean Air Act Amendments of 1990 are still unclear. And, legislators are debating proposals for broad energy taxes along with proposals to deal with global warming.

Finally, in setting prices, the regulatory process always carries some uncertainty.

This is especia lly true in 1993 because the Company will have rate cases pending in all of its jurisdictions. These decisions will be important to the financial health of the Company.

In facing these challenges, Delmarva Power will prosper because of our strengths:

• Diverse service territory

• High customer approval raring

• Low regional prices

• Productive and progressive employees. 0 Guiding Principles During the 1980s, Delmarva Power performed well because we focused strategies and actions on three well-defined principles:

1. Satisfy customers and gain their trust

2. Provide a reliable supply of energy at competitive prices

3. Develop people to form a dynamic Company ream.

Although some strategies and actions will be different in the '90s, we believe that keeping our efforts focused on these three principles will bring us financial and operating successes similar to those in the '80s.

Delmarva Power's energy supply plan includes saving energy, buying energy from other suppliers, and building and owning new power plants such as the Hay Road facility.

On October 1, 1992, Nevius M . Curtis retired from Delmarva Power &

Light Company. As chief executive officer since Customer Satisfaction . Customer confidence is crucial to our success. We need 1981 and chairman of the our customers to be able to say they trust us to charge fair prices, to locate plants board since 1983, Nev led properly, and to run them well. People at the Company work hard to understand efforts to strengthen the customers' changing needs through surveys and face-to-face contacts. With that Company and position it information, employees then work to balance improving service and controlling for the challenges ahead. cost. To respond to customers' concern about the environment and to maintain We will miss his wisdom, customer favorability, we strive to balance our obligation to serve customers with insight, and dedication to our responsibility to preserve the environment. Since 1982, the percentage of cus-the respect of individuals. tomers rating the Company favorably in the annual survey moved from 46 percent The board of directors and to 83 percent. This is the highest rating among 23 utilities polled by an independent the Delmarva Power team survey company.

thank Nev for his leader-Energy Supply. In 1987, to meet rising demand for electricity, Delmarva Power ship and wish him and his developed a flexible, balanced plan called Challenge 2000. We accelerate, slow, or family a happy future.

modify the plan to respond to changing energy demands, changing energy markets, fluctuating fuel prices, and emerging technologies. Challenge 2000's three-element approach includes saving energy, buying energy from other suppliers, and building and own ing power plants. This plan is critical to the Company's success and has been instrumental in keeping our electricity prices about 50 percent less than in neighboring Pennsylvania and New Jersey.

Teamwork. Employees are essential to managing change. Delmarva Power continues to build on a participative worksryle where people closest to the problems help solve the problems. We provide training and development programs that stress teamwork and the value of each individual's contribution to the team . And, we have worked hard to inform and educate employees abour the industry changes and the principles that will help us to succeed. As a result, more employees at all levels have had op-portunities to advance new ideas and to improve existing methods of performing their work . Teamwork has helped us to keep increases in operating and maintenance expenses per kilowatt-hour to about one percent per year since 1982 compared to the national average for utilities of about five percent per year. In addition, we believe the benefits carry over to our relationships with our customers .

The next section of this report will provide you with more details about how we have applied these three principles.

Financial Perspective Turning to our 1992 financial performance, earnings closed at $1.69 per share, compared to $1.69 per share in 1991. Both years contained one-time gains: 21 cents in 1992 and 25 cents in 1991. Core utility earnings were $1.47 versus $1.41 in 1991. The increase was primarily due to higher rates, which were offset by un-usually mild summer weather and increased operating costs. As we assess the uncertainties of industry changes and pending rate relief, we believe that holding the quarterly dividend at 38 112 cents is appropriate. You can find a more thorough financial review on pages 20 to 29.

We believe we can convert the Company's strengths into improved financial per-formance and profits for shareho lders. We foresee an improving economy and economic development on the Delmarva Peninsula, enhanced by very competitive energy prices. With the progress we have made in managing our prices and cus-tomer satisfaction, the Company should receive above-average returns from regulators and should benefit from the new and developing markets.

Around the Company, I see people preparing for change, people making an extra effort for customers, and people managing energy resources well. Delmarva Power's 2,800 team members thrive on challenges and can turn them into opportunities.

I thank them for their efforts and look forward to working with them.

Sincerely, Howard E. Cosgrove Chairman of the Board and Chief Executive Officer Employees work hard to limit customer outage time . In 1992, the Company exceeded its service reliability goal.

CUSTOMER SATISFACTION We try to anticipate customers' changing needs through surveys and face-to-face contacts.

Competitive prices help keep customers satisfied percent less than the City of Dover, and about 20 and stimulate economic growth in our service percent less than the Delaware Electric Cooperative.

area. Delmarva Power's prices for energy-both We have kept prices stable as well as competitive.

electricity and natural gas-are among the best Even with proposed rate increases anticipated for in the region.

mid-1993, the prices for typical Delaware and Here is how electric prices compare (for all cus- Maryland residential customers using about 750 tomer categories in cents per kilowatt-hour for 12 kilowatt-hours per month in the summer, for months ended September 30, 1992): *New York example, will be about two percent lower than in 10.83 *Philadelphia 9.09 *Newark, N.J. 9.07 the mid-1980s. When adjusted for inflation,

• Baltimore 7.06 *Norfolk, Va. 6.19 *Delmarva these residential prices remain about 30 percent Peninsula (Delmarva Power) 6.13. lower than prices in the mid-!980s.

Locally, Delmarva Power prices are low. For a typi- For natural gas, here is how prices compare (for cal 1,000-kilowatt commercial/industrial customer, all customer categories in cents per I 00 cubic-feet such as a mid-sized office building or small factory, for 12 months ended September 30, 1992):

the Company's prices are about 10 percent less *New York 69.75 *Philadelphia 64.32 *Norfolk, than the Choptank Electric Cooperative, about 15 Va. 56.20 *Baltimore, 55.38 *Newark, N.]. 52.99

• Wilmington, Del. (Delmarva Power) 47.42.

The efforts of this Ocean City lineman ensure that customers have electricity when they need it. Reliable service is a top reason customers rate us favorably.

ing, leading to increased productivity for the Company and increased sarisfacrion for customers.

Resource Management enables the Company to limit the time customers spend waiting for a service person to arrive. The system even calls customers to confirm appointments electronically.

Answer Line also makes our service more conve-nient for customers. In 1992, rhe Company introduced rhis new 24-hour telephone system to Northern Division customers. Previously, when customers reported outages during "off-hours,"

rhey often received a busy signal due to rhe large volume of calls and limited staff. Now, with Answer Line, more customers ger through on rhe first try. Answer Line provides ourage updates, Each year, Delmarva Power commissions a resi-records customer outage information, and auto-denrial customer opinion survey to see how the matically sends rhis information to employees community feels abour our performance. For 1992, trying to restore service. This dara improves our the survey found that 83 percent of the customers ability to pinpoint and dispatch help to problem surveyed gave the Company a favorable rating.

areas. In addition, Answer Line records up to This rating has improved conrinuously from 46 I 0,000 merer readings called in by customers percent in 1982. Customers list service reliability, each month. This saves customers rime, identifies reasonable rates, and customer service as the top inaccurate readings, and helps customers provide reasons for their favorable rating. The Company's correct information. These readings go directly mark was the highest among 23 electric and nat-into the Company's billing computer system, ural gas utilities surveyed by our pollster during which eliminates data entry and estimated bills the past year. The average favorability rating and saves us money. According to industry figures, among these urilities equaled 70 percent.

Delmarva Power customer-use rare for Answer The Company looks for ways to serve customers Line is rwice as high as customer-use rares for better. One example of rhis is the Resource similar programs offered by other utilities.

Management System. The computer-based system automates service order dispatching and schedul-The Resource Management System enables the Company to limit the time customers spend waiting for a service person to arrive.

The Delaware Department of Transportation used about 260,000 tons of recycled fly ash from Company power plants to construct part of the new highway to the Delaware beaches.

Employees at the Vienna power plant spend some of their spare time raising striped bass at the Company's hatchery. More than 150,000 fish raised at the Company's two hatcheries have been placed into the Chesapeake Bay and Delaware River.

Environmental efforrs improve the quality of life in The striped bass population in the Delaware the serv ice area. "Serving & Conserving Delmarva" River received a healthy boost from another is the Co mpany's environmental stewardship "Se rving & Conserv ing Delmarva" project.

program that seeks to balance the obligation to Federa l and state officials released 40,711 striped serve customers with the responsibility to protect bass, raised at the Company's Edge Moor hatchery, and preserve the environment of the Delmarva into the river. Including the Company's hatchery Peninsula. Delmarva Power received the 1992 ar the Vienna power plant, more than 150,000 Wildlife Habitat Enhancement Council award bass have been placed into the Chesapeake Bay for our efforts to maintain and enhance environ- and Delaware River.

mentally sensitive land near the Vienna power As part of the "Serving & Conserving Delmarva" plant in Maryland. On ly nine other U.S. companies program, the Company began using retreaded received this honor.

• More than 1,800 volunteers cleared 13 tons of litter from Delaware waterways during the Company-sponsored Coastal Cleanup Day.

tires on Company trucks. These tires cost about pany formed Green Teams. These reams represent 67 percent less than new tires; perform as well a cross section of employees at each Company as new tires, with no loss in safety or comfort; location. Green Teams plan recycling programs and and reduce the amount of old tires that end up other activities to improve the environment. So far, in landfills on the peninsula. projects at various Company locations recycled nearly 600 tons of paper while saving rhe Comp-

"Serving & Conserving Delmarva" also seeks to any more than $24,000 in trash disposal costs.

create greater customer awareness and use of energy-saving products, and to inform customers Employees rallied to cut Company electricity use of the association berween saving energy and pre- by 913,000 kilowatt-hours during the last half of serving the environment. For example, Delmarva 1992. Delmarva Power has set a goal to reduce Power offered 1,000 energy-efficient compact electricity use by 2.4 million kilowatt-hours per fluorescent bulbs, 1,000 refrigerator efficiency kits, year by 1996. This goal supports the Company's and 1,000 environmentally friendly travel mugs in energy supply plan that includes conservation in prize drawings. About 86,000 customers registered its balanced approach. Ir also demonstrates to cus-for rhe lottery for these products. From the pro- tomers that we are committed to saving energy.

ceeds of 1993 "Serving & Conserving Delmarva" In addition, for the second consecutive year, the calendar sales, rhe Company contributed $12,540 Company sponsored Delaware Coastal Cleanup to The Nature Conservancy.

Day. More than 1,800 volunteers cleared litter Employee involvement is part of our environmental from Delaware waterways during this year's event.

stewardship program's success. This year, the Com-

ENERGY SUPPLY Clean-burning natural gas supplied by this new pipeline will fuel electric generating units at Delmarva Power's Hay Road power plant.

As part of "Build Some," the Hay Road complex (below) will generate 496 megawatts when it is completed in mid-1993. Under "Buy Some," the Company began a 26-year purchase agreement for 48 megawatts with Star Enterprise of Delaware City, Delaware (near right). All these new townhomes (far right) include energy switches that help the Company to reduce demand for electricity during peak summer periods. "Save Some" programs such as this one should reduce load by 350 megawatts by the year 2003.

The Challenge 2000 plan continued to assure "Save Some," helps to delay the need for expen-

@ customers an adequate, reliable supply of electric- sive new power plants. This element of Challenge ity at competitive prices . Challenge 2000 uses 2000 consists of load management and conserva-a flexible approach that blends customer energy tion programs that the Company offers to all types conservation and load management programs of customers. Delmarva Power considers itself a

("Save Some"), power purchases ("Buy Some"), leader in this area with the ability to manage eight and new power plants ("Build Some"). This percent of its load during peak periods compared approach enables Delmarva Power to quickly to the regional average of four percent.

respond to changes in demand, markers, technolo-Load management programs offer bill credits and gy, and governmental regulations. Between 1984 pricing options to customers who lower their en-and 1992, electricity demand at peak periods ergy demand during peak use periods. For example, increased nearly 50 percent. "Save Some, Buy residential customers participating in Energy For Some, Build Some," has enabled the Company to Tomorrow receive bill credits for allowing the Com-keep up with the growing demand for electricity pany to cycle their air conditioners, heat pumps, and to keep prices at about 1983 levels.

and electric water heaters a few rimes during the summer. More than 53,500 customers participate in this program.

Recenrly approved conservarion programs will The Company selecred rwo projecrs. The firsr, promore energy efficiency srandards for new con- rhe Delaware Clean Energy Projecr, proposes ro strucrion of homes and commercial buildings. build a 165-megawarr power planr ar rhe Srar Some programs will enrice cusromers ro insrall Enrerprise Delaware Ci ry refinery for service in energy-efficienr equipmenr by offering rebares for 1996 or 1997, ar rhe Company's oprion. The pro-these insrallarions. Ocher conservarion programs jecr will gasify and burn perroleum coke, a refinery will make energy-efficienr producrs such as com- wasre producr, ro generare elecrriciry. The second pacr fluorescenr bulbs available ro residenrial projecr, proposed by Narional Energy Resources cusromers ar discounr prices. These programs are Corporarion ( ERC) of Avon, Connecricur, fea-rhe resulr of a joinr research and design process rures a 33-megawarr power planr rhar NERC will involving Delmarva Power and various srare agen- build near Wilmingron, Delaware, by 1997. NERC cies from Maryland and Delaware. will fuel rhis planr wirh waste paper and petroleum coke. The Company plans ro achieve abour half of By rhe year 2003, "Save Some" programs should the reserve margin rhrough power purchases. Thar reduce load by more rhan 350 megawarrs. This rotals abour 250 megawatts or abour nine percenr overall load reduction represenrs a savings of of the 2003 peak demand.

abour $188 million (1992 dollars), which approx-imarely equals rhe building coses for rhree small As parr of "Build Some," rhe Company plans ro power planes. complere a combined-cycle unir, called Hay Road 4, in 1993. The unir will use exhausr hear from Under "Buy Some," rhe Company began a 26-year rhree exisring combusrion rnrbines ar Hay Road purchase agreemenr for 48 megawarrs of peaking ro cleanly and efficienrly generare 160 megawarrs capaciry from Srar Enrerprise of Delaware Ciry, of elecrriciry. The planr is on schedule and budger.

Delaware. Srar's generaring unir, nexr ro irs oil Toward rhe rurn of rhe cenrury, Delmarva Power refinery, was selecred in 1989 from among 10 plans ro build and own a 300-megawarr pulverized proposals because ir provided rhe lowesr cosr ro coal power plane near Vienna, Maryland. We began Delmarva Power cusromers.

rhe licensing process for rhis planr in 1992. Also, Also in 1992, Delmarva Power evaluared 27 pro- rhe Company will upgrade exisring unirs ar rhe posals from power projecr developers ro supply Indian River power plane ro exrend rhe lives of rhe elecrriciry ro rhe Company in rhe mid-1990s. unirs and ro reduce emissions.

.i I

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t'1"T" - - 1 TEAMWORK Ninety-six percent of employees said that Delmarva Power is a good place to work.

The Company continues to develop a more partici- set high goals and suggest innovations that are pative workstyle where people closest to problems efficient and cost effective.

solve the problems. Delmarva Power has worked Employees achieved seven of the eight corporate to create an environmenr that appreciates and rec-goals in 1992. Through the achievement of the ognizes the value of teamwork while respecting wellness goal over the last five years, absenteeism the contribution of each individual member of has decreased by more than one day per employee the team. As the participative process has matured, per year. This accomplishmenr saved the Company more employees at all levels have had opportunities approximately $2 million since 1988. Employees to advance new ideas and to improve existing are also working together to continually improve methods of performing their work.

the health and safety of individuals. In 1992, lost For example, during the last 10 years, employees work days due to illness decreased by 20.8 percenr.

have controlled costs well. Delmarva Power's More than 96 percent of employees remained in-non-fuel operating and maintenance costs per jury-free. In addition, Delmarva Power's WellTrak kilowatt-hour have increased only 11 percent, employee wellness program received an award of while the industry average has increased more excellence from the Delaware Center for Wellness.

than 60 percent. Working in teams , employees The center selected WellTrak from among several

Teamwork, demonstrated by this Northern Division line crew, enabled the Company to hold expenses significantly below industry average.

communities they serve. As part of the highly successful Radio Watch program, employees continued to summon aid for people in the com-munity by using radios in Company vehicles .

Through the Gatekeeper program, trained em-ployee volunteers linked 200 older customers with community services since 1989. In one case, Delmarva Power employees helped a 105-year-old woman pay bills and arrange house cleaning.

The 1992 Employees United Way Campaign raised nearly $270,000 to help people in need, and the Good Neighbor Energy Fund contributed more than $2 million during the last 10 years to customers having trouble paying energy bills.

area corporate health promotion programs tO Delmarva Power received the Outstanding recognize its commitment to healthy lifestyles. Corporate Leadership Award for community phil-anthropic activities and involvement from the According to the 1992 Employee Survey, nearly National Society of Fund Raising Executives' all employees, 96 percent, agree that Delmarva Brandywine Chapter. In addition, the Company's Power is a "a good place to work" and nine out of finance & accounting group received the 1992 ten agree that Delmarva Power is becoming a more State of Delaware Governor's Outstanding Vol-customer-focused company. In addition, three unteer Award. This group, which plans a different quarters of employees feel the Company has a project quarterly, raised funds to assist the fami-commitment to:

lies of military personnel serving in Desert Srorm,

• Treat employees with respect cleaned a newly constructed Ronald McDonald

• Apply participative management House, donated clothes to the Adopt-A-Family

• Give serious consideration to employee ideas program, served meals for needy guests at the and suggestions. Emmanuel Dining Room, collected food ro bene-The Company strives to act as a good citizen fit the Southbridge Neighborhood House, and and encourages employees to participate in the performed many other volunteer activities .

• The Company's finance & accounting group received the State of Delaware Governor's Outstanding Volunteer Award for collecting food for the homeless and other efforts to help people in the community.

OUTLOOK Wilmington's St. Francis Hospital added natural gas service in 1992. For the next 20 years, firm gas sales are expected to grow by 1.5 percent per year.

Delmarva Power is well positioned to meet the The Company anticipates that the local economy challenges and opportunities of competition and will improve in '93 , but not return to the level of change in the industry. Our service territory is the late 1980s.

healthy, diverse, and growing. Our customers With the slow recovery from the recession and the view us favorably, and our prices continue to be restructuring of some local industries, the Com-nationally and regionally competitive.

pany expects electricity sales to grow 3.6 percent The economy of the Delmarva Peninsula showed and 2.2 percent in 1993 and 1994, respectively. For some strength in 1992 compared to other parts the next 20 years, Delmarva Power forecasts elec-of the country. The region's blend of industries tricity sales to grow at an average annual rate of (chemicals, food processing, agriculture, finance, 2.0 percent, with residential space heating sales plastics, and recreation) makes the demand for growing the fastest at 2.6 percent and industrial electricity and natural gas here less affected by sales at 1.6 percent. Growth of the summer and fluctuations in the national economy than in winter peak demands for electricity are expected to many other areas of the U.S. Delmarva Power's average 2 .5 percent per year through 2002.

low energy prices also help the economy. They help Similar sales growth is expected for natural gas. For to attract new customers and encourage increased the long term, firm sales are expected to grow at an production at local plants when managers of large average annual rate of 1.5 percent.

companies have options in other geographic areas.

The population of the Delmarva Peninsula continues to grow. This means more people will rely on the Company for service.

Boxwood Road assembly plant in 1996. This plant uses about one percent of rhe electricity and three percent of the natural gas sold by Delmarva Power.

Because of the lead time and the number of options available to us, we cannot, at this time ,

estimate the effect, if any, on earnings of these actions. Some of those options or potential miti-gating events include additional load growth, competitive sales of any excess capacity to other wholesale customers outside our service area, re-setting rates ro recover investments in plant and equipment, and modifications to the Company's Challenge 2000 plan, which may postpone capaci-ty additions and their attendant costs.

As part of the ongoing strategic planning process, Thus, for the short term, our ability to increase the Company reorganized ro focus talent on the earnings will continue ro be affected by rh e econo-opportunities developing in the changing energy my, regulation , and competition both inside and industry. The effort is led by Paul S. Gerritsen, outside our own terrirory. Over the long haul ,

former chief financial officer, and includes Louise earnings will depend more on our ability ro meet M. Morman, former general manager of marketing. capital requirements associated with meeting our It also includes the regularory department since this customers' energy needs and our environmental ream seeks ro develop and advocate strategic pric- responsibility, as well as continued supportive ing alternatives that respond to cusromers' needs. regulation in an increasingly changing and com-petitive environment.

The team and the Company have already been con-fronted by rwo challenging events. Old Dominion However, we approach rhe challenges of change Electric Cooperative has announced ir would pur- as a financially strong Company with a skilled and chase 150 megawatts of electricity from another effective team of employees. With your support utility in about two years. This is equivalent ro and our ream's continued strong performance, we about two years of load growth or approximately will build upon our record of excellence and face

$25 million in net annual electric revenues. Also, the future with confidence.

General Motors announced it would close its

• Natural gas-powered vehicles provide Delmarva Power with new business opportunities. This new Company fueling station will encourage other local companies to use natural gas vehicles .

BOARD OF DIRECTORS Directors as of December 31, 1992, pictured left to right Howard E. Cosgrove Chairman of the Board, President and Chief Executive Officer of the Company; member since 1986; serves on executive, investment, and nuclear oversight committees; term expires in 1995 .

John R. Cooper Former Director of Environmental Affairs of E. !. du Pont de emours & Company (a diversified chemical, energy, and specialty products company), Wilmington, Delaware; member since 1981; serves on audi t and nuclear oversight comm ittees; term expires in 1993.

Sarah I. Gore Human Resources Associate, W. L. Gore

& Associates Inc., (a hi gh technology manufacturing compa ny), Newark, Delaware; member sin ce 1990; serves on compensation committee; term expires in 1994.

David D. Wakefield Execmive Secretary Longwood Foundation, Inc., Wilmington, Delaware; former Cha irman and President of J. P. Morgan Delaware (a commercial banking subsidiary of J. P. Morgan and Co. Incorporated),

Wi lmi ngton, Delaware; member since 1984; serves on compensation, executive, and investment committees; term expires in 1993.

James T. McKinstry Partner and Director, Richards, Layton & Finger (a law firm), W ilmington, Delaware; member since 1987; serves on aud it, executi ve, and nucl ear oversight committees; term exp ires in 1995.

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Nevius M. Curtis Former Chairman of the Board and C hi ef Executive Officer of the Com pany; member since

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1979; serves on executive, investment, and nominating committees; term expires in 1993.

Audrey K. Doberstein Presidem of W ilmingto n Co ll ege, Wi lmin gton, Delaware; member since 1992; serves on nomin at in g committee; term expires in 1995.

Elwood P. Blanchard Jr. Former Vice C hairman of the Board of Directors and member of the Office of the Chairm an of E. I. du Pom de Nemours & Company (a diversified chemical, energy, and specialty products company), Wilmington, Delaware; and Chairm an of the Board of Du Pont Canada, Mississauga, Ontario, Ca nada; member si nce 1988; serves on compensation, executive, and in vestment commi ttees; term expires in 1994.

H. Ray Landon Executi ve Vice Presidem of the Company; member since 1988; term expires in 1994.

Donald W. Mabe Former Presidem and Chief Executive Officer of Perdue Farms Incorporated (an integrated poultry company), Salisbury, Mary land; member since 1986; serves on compensation, investment, and nomi-nating committees; term exp ires in 1993.

James C. Johnson III Presidem of Loyo la Cap ital Corporation and its primary subsid iary, Loyola Federal Savings Bank, Baltimore, Maryland; member since 1992; serves on audit committee; term expires in 1995.

• FINANCIALS Key Financial Data Graphs .... . ...... ...*.. .... ................... *.... ... ...*. . 20 Selected Financial Data .............. ... .............. ....... .. ...... ............ 21 Financial Review and Analysis ..................... ... ....................... 22 Reports of Management and Independent Accountants . ......... 30 Consolidated Financial Statements .......... .... ......... ................. 31 Notes to Consolidated Financial Statements ................. ........ 37 Consolidated Statistics ............... *.* ....... ........ ......... .... ........... 50 Committees, Officers, and Investment Information ................ 51 Stockholder Information .. .* ... ..... ... .... ..**... .... ................. ........ 52 Printed on recycled paper @

Millions rl UTILITY CONSTRUCTION EXPENDITURES

~ Millions UTILITY EXTERNAL FINANCINGS

$200 - $200 150 - 150 100

- 100 50 0

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993* 1994* 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993*1994*

• Forecast

• Forecast Delmarva Power expects construction expenditures to increase at a manageable rate to meet customer energy needs and stricter environmental regulations. The Company will finance these expenditures with a combination of internally generated cash and external financing .

Ii ~

EARNINGS PER SHARE RETURN ON AVERAGE COMMON EQUITY OF COMMON STOCK

$2.00 - 16%

1.50 - 12 1.00

- 8 0.50 0.00

- I 4

0 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Future earnings growth will depend on the Company's ability to raise prices to reflect increasing levels of construction expenditures and to provide investors with a fair return on their investment.

~

Ii ~ rl DIVIDENDS DECLARED PER SHARE AVERAGE COMMON STOCK MARKET PRICE OF COMMON STOCK

$2.00 - $25 -

1.50 >- 20 -

15 -

1.00 >-

10 -

0.50 0.00 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 5 -

0 I 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 During the past 10 years, investors have earned a 16.9% annual return through a combination of dividends and stock price appreciation. The January 1993 yield of 6.8% was above the average yield of "A" -rated utilities.

@ Delmarva Power & Light Company

SELECTED FINANCIAL DATA I I

(Dollars in Thousands, Except Per Share Amounts) Year Ended December 31, 1992 1991 1990 1989 1988 Operating Data Operating Revenues 0 > $864,044 $855,821 $812,217 $796,614 $786,501 Operating Income $143,711 $136,410 $144,473 $137,650 $127,577 Income Before Cumulative Effect of a Change in Accounting Principle $98,526 $80,506 $37,311 $91,308 $84,721 Cumulative Effect of a Change in Accounting for Unbilled Revenues $12,730 Net Income $98,526 $93,236 $37,311 $91,308 $84,721 Electric Sales (kWh 000) 11,520,811 11,460,280 11,081,211 10,828,839 10,225,043 Interchange Deliveries (kWh 000) 998,679 1,113,423 726,090 894,402 1,413,150 Gas Sales (mcf 000) 17,013 15,574 16,069 16,645 16,154 Gas Transported (mcf 000) 3,155 2,610 2,194 677 2 Common Stock Data Earnings Per Share of Common Stock Before Cumulative Effect of a Change in Accounting Principle $1.69 $1.44 $0.60 $1.80 $1.70 Cumulative Effect of a Change in Accounting for Unbilled Revenues $0.25 Total Earnings Per Share $1.69 $1.69 $0.60 $1.80 $1.70 Dividends Declared Per Share of Common Stock $1.54 $1.54 $1.54 $1.51 $1.47 Average Shares Outstanding (000) 53,456 50,581 47,534 46,687 45,892 Year-End Common Stock Price $23 % $21 }.j $18 )i $20 ~ $17 ~

ook Val~e Per Common Share $13.77 $13.42 $12.84 $13.67 $13.28 Return on Average Common Equity 12.2% 12.4% 4.3% 13.2% 12.7%

Capitalization Variable Rate Demand Bonds (VRDB) 2

<> $ 41,500 $ 41,500 $ 41,500 $ 41,500 $ 75,000 Long-Term Debt 787,387 770,146 741,032 662,544 609,687 P referre<l Stock <3> 176,365 136,365 136,365 136,442 104,983 Common Stockholders' Equity 745,789 706,583 614,692 642,641 613,177 Total Capitalization with VRDB $1,751,041 $1,654,594 $1,533,589 $1,483,127 $1,402,847 Other Information Total Assets $2,374,793 $2,263,718 $2,125,715 $2,028,661 $1,907,790 Long-Term Capital Lease Obligation $26,081 $29,337 $32,354 $2,071 $2,630 Construction Expenditures e<> $207,439 $181,820 $187,823 $175,843 $171,102 Internally Generated Funds (IGF) cs> $130,275 $96,081 $112,551 $106,698 $107,413 IGF as a Percent of Construction Expenditures 63% 53% 60% 61% 63 %

(!) As discussed in Note 1 to the Consolidated Financial Statements, operating revenues were restated to include interchange delivery revenues and exclude sream revenues. Amounrs included for interchange delivery revenues are $30.606 million in 1992, $33.523 million in 1991, $23.905 million in 1990,

$31.476 million in 1989, and $41.162 million in 1988.

(2) Alrhough Variable Rate Demand Bonds are classified as current liabilities, rhe Company intends to use rhe bonds as a source of long-rerm financing as discussed in Note 11 to rhe Consolidated Financial Statements.

(3) Includes preferred stock with mandatory redemprion in 1989 and 1988.

(4) Excludes Allowance for Funds Used During Consrruction.

(5) Ner cash provided by operaring activities less common and preferred dividends.

Delmarva Power & Light Company @

Earnings The earnings per share of common stock attributed to the core utility business and non utility subsidiaries are shown below.

1992 1991 1990 Core Urility Operations $1 .47 $1.41 $1.70 Peach Borrom lawsuir serdement 0 .21 Cumulative effect of a change in accounting for unbilled revenues 0.25 Nonurility Subsidiaries O.o1 0.03 (1.10)

Tora! $1.69 $1.69 $0.60 Dividends On December 29, 1992, the Board of Directors declared a com- common dividend constant while the Company assesses the mon stock dividend of $0.38 Yi per share for the fourth quarter. impact of changes raking place within the utility industry and the The common dividend remained unchanged from the prior decla- uncertainties associated with rate relief. For 1992, dividends ration. The Board believed it was appropriate to hold the quarterly declared per share of common stock were $1.54.

Core Utility Earnings Earnings per share from core utility operations increased by $0.06 financing and operating cost increases was partly offset by addi-in 1992 compared to 1991 primarily due to additional electric and tional electric revenue artributed to a 3.4% increase in 1991 gas revenues from higher customer base rates (which are discussed kilowatt-hour (kWh) sales.

in Note 2 to the Consolidated Financial Statements). By February Earnings of the Company's core utility operations over the past 1992, base rate increases had become effective in jurisdictions that several years reflect the cycle which typically occurs as new utility regulate 97% of the Company's utiliry operating revenues . The plant is added and customer rate increases are necessary to recover additional revenues from higher customer base rates were partly cost increases associated with the new plant. Growing energy offset by unfavorable effects of cooler summer weather on electric needs of the Company's customers and stricter environmental revenues, increased non-fuel expenses, and an increase in the aver-regulations have kept the construction program at a high bur age number of common shares outstanding.

manageable level. As plant is added and costs rise, rates must be Core utility earnings for 1992 and 1991 include earnings from increased on a timely basis. Resetting customer rares through the one-time, unusual items, not related to ongoing utility operations. regulatory process often results in a lag between the rime when As discussed in Note 4 to the Consolidated Financial Statements, costs rise and when prices can be adjusted, causing earnings to net income and earnings per share were increased in 1992 by temporarily decline.

$11 ,397 ,000 and $0.21, respectively, due to settlement of a law-On October 30, 1992, the Company filed applications with regu-suit filed by the Company concerning the 1987-1989 shutdown latory commissions for $61.8 million, in total, of proposed electric of the Peach Borrom Atomic Power Station by the Nuclear base rare increases. The rare increases are designed to recover Regulatory Commission. In 1991, as discussed in Nore 1 to the higher costs, including the cost of the new Hay Road Unit 4 com-Consolidated Financial Statements, a change in accounting for bined-cycle power plant, inflation, and costs associated with the unbilled revenues increased net income and earnings per share by accounting standard for postrerirement benefits other than pen -

$12,730,000 and $0.25, respectively.

sions. These new base rares are proposed to become effective In 1991 , earnings of core utility operations declined $0.29 per immediately following the planned May 31, 1993 in-service date share compared to 1990 mainly because customer rates had not of Hay Road Unit 4. Even with the planned rate increases, the yet been raised to recover financing and operating cost increases Company expects the price of electricity for its .customers to be associated with new utility plant added to the Company's electric comparable to 1983 levels and competitive with other utilities in and gas systems. The adverse effect on earnings per share of the the region.

@ Delmarva Power & Light Company

In October 1992, the Energy Policy Act of 1992 (the Energy Act) time before the termination, additional load growth, and the was enacted. The Energy Act is designed, among other things, to potential for mitigating action by the Company. In the interim, romote increased competition among utility and non-utility elec- the Company is pursuing additional off-system sales to offset any tric generators and contains provisions giving the Federal Energy loss of revenues and is considering the resetting of rates to recover Regulatory Commission (FERC) increased authority to order any investments related to servicing ODEC's requirements. The "wheeling" of electric power on the transmission systems of elec- Company also has the ability to modify its Challenge 2000 Plan to tric utilities. The transmission access provisions, which apply to postpone capacity commitments and their attendant costs (includ-wholesale (resale), but not retail, "wheeling" of power, allow a ing the postponement of a contract for the purchase of 165 MW utility to recover all costs of transmission services. of capacity).

As a result of the Energy Act, industry-wide resale markets are Economic trends in the Company's service territory during 1992 experiencing increased competition. In 1992, gross electric rev- were mixed. Positive developments included a drop in Delaware's enues from the Company's resale business were $96.5 million or unemployment rate to well below the national average. Also, the 13% of electric sales revenues. In December 1992, Old Dominion number of customers served by the Company grew by 1.7% in Electric Company (ODEC), a resale customer, advised the 1992 compared to 1.4% in 1991. On the downside, in December Company that it has decided to terminate contracts with the 1992, General Motors announced plans to close its Delaware Company for the purchase of up to 150 megawatts (MW) of elec- manufacturing plant by 1996. The plant's closing could increase tricity beginning December 1, 1994, and to purchase such elec- Delaware's unemployment rate by one or two percentage points.

tricity from another investor-owned utility. This load loss is The direct impact on the Company's revenues from the loss of equivalent to about two years of load growth, or up to approxi- General Motors as a utility customer would be a decrease of mately $25 million in non-fuel revenues. approximately $7 million in gross operating revenues, which includes about $4 million of non-fuel revenues. Efforts continue The effect, if any, of the loss of up to 150 MW of ODEC's load by the State, the Company and other major businesses to avert the on the Company's net income in 1995 and subsequent years is not planned closing of the plant in 1996.

determinable at this time, given the approximately two-year lead omponents of Utility Revenues Fuel and energy costs billed to customers (fuel revenues) are based until it is subsequently recovered from or returned to utility cus-on rates in effect in fuel adjustment claus.es which are adjusted tomers. As discussed under "Financial Statement Reclassifications" periodically to reflect cost changes and are subject to regulatory in Note 1 to the Consolidated Financial Statements, electric rev-approval. Rates for non-fuel costs billed to customers are depen- enues also include interchange delivery revenues, which result dent on rates determined in base rate proceedings before regula- from the sale of electric power to the Pennsylvania-New Jersey-tory commissions. Changes in non-fuel revenues can directly affect Maryland (PJM) Interconnection and certain utilities. Interchange the earnings of the Company. Fuel revenues, or fuel costs billed to delivery revenues are reflected in the calculation of rates charged customers, generally do not affect net income since the expense to customers under fuel adjustment clauses. Due to this rate-recognized as fuel costs is adjusted to match the fuel revenues. The making treatment, interchange delivery revenues do not affect amount of under- or over-recovered fuel costs is generally deferred net income.

Delmarva Power & Light Company @

• E lectric Revenues and Sales Derails of che changes in che various components of electric rev- account for less than 20% of electric sales revenues, remained rela-enues are shown below: tively unchanged from 1991 due co the slow economic recovery and energy conservation efforts by large customers.

Comparative Increase (Decrease) in Electric Revenues from Prior Year In 1991, non-fuel revenues increased $20.0 million from 1990 (Dollars in Millions) 1992 due to "Sales Volume and Ocher" variances. This increase resulted 1991 from a 3.4% rise in total 1991 kWh sales char was mainly due to a Non-fuel Revenue higher number of customers and greater usage by residential and Increased Base Races $27 .4 $ 0.4 Sales Volume and Ocher (5.1) commercial customers, parcly due to a hoc summer. Residential 20.0 Fuel Revenue (23.8) 22.2 and commercial sales grew in 1991 at races of5.0% and 4.0%,

Interchange Delivery Revenue (2.9) 9.6 respectively. Resale electric sales were also strong, up 6.7%. A Total 1.2% decrease in industrial sales, attributed to the economic

$(4.4) $52.2 downturn, was tempered by the diverse mix of industrial cus-tomers served by the Company.

The $27.4 million increase in 1992 non-fuel revenues over 1991 The $23.8 million decrease in 1992 electric fuel revenues from shown above as "Increased Base Races" resulced from the increases 1991 was due to lower races charged to customers under the fuel in 1992 electric customer base races discussed in Nore 2 co che adjustment clauses. In 1991, fuel revenues increased $22.2 million Consolidated Financial Statements.

from 1990 due co higher fuel adjustment clause races and higher The non-fuel revenue variances shown in the above cable as "Sales electric sales.

Volume and Ocher" are attributable co changes in sales volume, Interchange delivery revenues decreased $2.9 million in 1992 sales mix, and ocher factors. In 1992, non-fuel revenues decreased mainly due to extended maintenance outages at the Company's

$5.l million compared co 1991 due co "Sales Volume and Ocher" generating units which reduced potential sales to che PJM variances. Despite a 0.5% increase in coral kWh sold, non-fuel Interconnection. If there is demand for power within the PJM revenues were adversely impacted by cooler summer weather Interconnection and che Company has kWh outp ut available, which resulted in lower demand charges billed co resale and ocher then it will sell power to the PJM Interconnection if economically large customers, and lower average residential electric races.

beneficial to both parries. Interchange delivery revenues benefit Although 1992 coral residential electric sales were relatively flat customers by reducing the effective fuel cost billed co customers.

compared co 1991, a disproportionately lower volume of residen-In 1991, interchange delivery revenues increased $9.6 million due tial sales occurred during che summer months when che race per to additional energy sources chat enabled che Company to sell kWh is higher.

more power to che PJM Interconnection. Additional energy Electric sales co commercial and resale customers increased in sources in 1991 included a 200 MW power purchase from 1992 by 1.3% and 1.8%, respectively, mainly due co che growing Philadelphia Electric Company (PE) and che scare of commercial customer base. Sales co industrial customers in 1992, which operations by Hay Road Unit 3, a 112 MW combustion turbine.

Gas Revenues , Sales, and Transportation The Company earns gas revenues from the sale of gas co customers ing 1991 for previously over-collected fuel coses. These increases and also from transporting gas through the Company's system for in gas fuel revenues were parcly offset by che effect of lower 1992 some customers who purchase gas direccly from gas producers and fuel races charged co gas customers.

pipelines. In 1992, the non-fuel portion of gas revenues increased In 1991, gas revenues decreased by $8.6 million in comparison to

$7.0 million in comparison to 1991 due co $3.2 million of addi-1990 due co decreases in non-fuel revenues and fuel revenues of tional revenue from higher customer base races, as discussed in

$1.2 million and $7.4 million, respectively. T he decrease in non-Nore 2 to the Consolidated Financial Scacemencs, and due to $3.8 fuel revenues was attributed to mild winter weather and a sluggish million from higher sales volume. Total cubic feet of gas sold and 1991 economy which caused coral gas sold and transported to transported in 1992 increased 10.9% over 1991 due to colder decline 0.7%. Fuel revenues decreased because races charged to winter weather and new residential-space heating customers. The customers to recover gas fuel coses were reduced in 1991 to reflect fuel portion of gas revenues increased $5.6 million in 1992 pri-lower prices paid for purchased gas.

marily due to higher sales and bill-credits made to customers dur-

@ Delmarva Power & Light Company

Operation, Maintenance, and Depreciation Expenses Operation and maintenance expenses increased by $6.8 million in for Hay Road Unit 3, completed as of June 1, 1991, also con-

• 1992 in comparison to 1991 primarily due to higher maintenance tributed to the increase. Continued increases in depreciation outage costs for electric generating units and due to charges for the expense are expected as new electric plant is added.

purchase of 48 MW of capacity which began June l, 1992. These In 1991, operation and maintenance expenses increased by $21.3 increases were partially offset by decreases in administrative and million in comparison to 1990 mainly due to increased costs of general expenses, including pension cost, and lower costs of oper-operating and maintaining the electric transmission and distribu-ating and maintaining the electric transmission and distribution tion systems, higher expenses at the jointly-owned nuclear power systems. Future increases in operation and maintenance expenses plants, and higher administrative and general expenses. Depre-are expected due to additions of new utility plant, aging of existing ciation expense increased $6.5 million in 1991 primarily due to utility plant, and normal inflationary cost increases. Depreciation additions to electric utility plant which included the installation expense increased $6.7 million due to additions to the electric sys-of Hay Road Unit 3.

tem, including a new stack for the Indian River power plant that was completed in January 1992. A full year's depreciation expense Electric Fuel and Purchased Power Expenses The components of the changes in electric fuel and purchased The 1991 "Average Cost of Electric Fuel and Purchased Power" power expenses are shown in the table below. decreased $6.6 million from 1990 mainly due to lower oil and gas prices and a decrease in the cost of purchased power.

Comparative Increase (Decrease) from Prior Year in Electric Fuel and Purchased Power Expenses The $1.9 million decrease in 1992 shown above as "Increased (Decreased) kWh Output" was due to lower output from generat-(Dollars in Millions) 1992 1991 ing units attributed ro extended maintenance outages. In 1991, a Average Cost of Electric Fuel $19.6 million increase in "Increased (Decreased) kWh Output" and Purchased Power $ (9.9) $ (6.6) mainly resulted from higher kWh generated and purchased to Increased (Decreased) kWh Output (1 .9) 19.6 meet higher electric sales demand in the Company's service terri-Deferral of Energy Costs (12.0) 21.1 tory. The $19.6 million increase also reflects more kWh generated Total $(23.8) $ 34.l for sale to the PJM Interconnection.

The kWh output required to serve load within the Company's ser-The 1992 "Average Cost of Electric Fuel and Purchased Power" vice territory is equivalent to rota! output less interchange delivery decreased $9.9 million from 1991 mainly due to lower coal and kWh sold. In 1992, the Company's kWh output for load within oil prices and increased power purchases at lower prices. These its service territory was provided by 39% coal generation, 14%

favorable cost variances were partly offset by decreased low-cost nuclear generation, 14% oil generation, 4% gas generation, and nuclear generation and capacity deficiency charges under the 29% purchased power. Purchases under the Company's agreement Company's agreement with the PJM Interconnection which with PE for 200 MW of energy accounted for 22% of the requires the Company to plan for and provide a certain capacity Company's 1992 kWh output for load within the service territory.

level. The Company does not anticipate PJM Interconnection This agreement has been extended until December 31 , 1993.

capacity deficiency charges in 1993 due to the expected start of commercial operations at Hay Road Unit 4 in May 1993 and a The decrease of $12.0 million in the 1992 "Deferral of Energy trade of PJM Interconnection capacity credits with another utility. Costs" compared to 1991 was primarily due to lower over-collec-The trade is expected to provide the Company with a credit tions of fuel costs from customers which resulted in lower deferred towards current PJM Interconnection capacity requirements and energy expenses. The increase of $21.1 million in the 1991 in return, the Company will provide the same credit to the other "Deferral of Energy Costs" compared to 1990 was primarily due utility in a future period. to an over-collection of fuel costs in 1991 that was deferred through a corresponding charge to deferred energy costs.

Delmarva Power & Light Company @

U t ility Financing Costs In 1992, interest charges on debt of the core utility decreased $1.3 increase was moderated by lower interest rates on refinancing million in comparison to 1991 because lower interest rates enabled bonds and variable rare demand bonds and by a lower average the Company to reduce the average cost of its outstanding long- short-term debt balance.

term debt through refinancings. The Company refinanced $255.5 Allowance for equity and borrowed funds used during construc-million, $85.5 million, and $15.0 million of its long-term debt in tion (AFUDC) increased $2 .1 million in 1992 and $2.2 million in 1992, 1991, and 1990, respectively, resulting in annualized inter-1991. These increases were principally due to higher average con-est savings of $6.3 million in total. In 1992, lower interest charges struction work-in-progress (CWIP) balances. AFUDC represented due to lower rates on refinancing bonds and variable rate demand a relatively low 8.3% of 1992 net income.

bonds were partly offset by interest charges on additional long-term debt issued to finance the Company's investment in utility Due to increased common equity financing, the average number plant. The increase in preferred dividends from the issue of $40 of shares of common stock outstanding increased in 1992 and million of 7 %% preferred stock in August 1992 was largely offset 1991. The additional shares outstanding decreased earnings per by lower dividend payments on $61.1 million of the Company's share by $.09 in 1992 and $.10 in 1991. However, the new rates preferred stock which has market-based dividend rates. charged to the Company's customers in 1992 were intended to result in sufficient revenues to offset the adverse effect on earnings In 1991 , interest charges on debt of the core utility increased $4.2 per share of increased common equity financing.

million from 1990 due to higher average debt balances. The Challenge 2000 Plan The Challenge 2000 Plan is the Company's strategy for providing In 1992, the Company began purchasing 48 MW of capacity an adequate, reliable supply of electricity to customers at competi- supplied by the Delaware City Power Plant, which the Company tive rates. The Company's Plan, which is updated periodically, is sold in December 1991. Looking forward, the Company's current based on PJM Interconnection reserve requirements and forecasts plans for meeting the demand for energy during 1993-2003 of demand for electricity in the service territory. The Company's include the following:

Plan combines customer energy conservation and load manage-ment programs ("Save Some"), power purchases ("Buy Some"), (1) "Save Some"-140 MW of load reduction from various cus-and new power plants ("Build Some"). tomer-oriented energy management programs.

(2) "Buy Some"- 278 MW of capacity purchases, including (a)

As an electric utility, the Company must balance the potential 165 MW beginning, at the Company's option, in 1996 or 1997, risks of providing too much or not enough capacity. The main and (b) 33 MW beginning in 1997.

risk of excess capacity is that regulators would not allow the associ-(3) "Build Some"-464 MW of capacity from new power plants ated costs to be recovered from ratepayers. The principal risks of including (a) completion in May 1993 of Hay Road Unit 4, a 160 not having an adequate level of capacity are reliability of service MW combined cycle addition to the Hay Road combustion tur-and that capacity deficiency charges would be owed to the PJM bines, and (b) construction by the year 2000 of a 300 MW pulver-Interconnection. The flexibility of the Challenge 2000 Plan allows ized coal baseload unit near Vienna, Maryland, which is called the Company to balance these risks by more closely matching Dorchester Unit 1 and has an estimated construction cost of $725 capacity with load.

million, including AFUDC.

@ Delmarva Power & Light Company

Liquidity and Capital Resources The Company's primary capital resources are internally generated Capital requirements for rhe period 1993-1994 are estimated to funds (net cash provided by operating activities less common and be $426 million, including a $25 million long-rerm debt maturity preferred dividends) and external financings. These resources pro- in 1994 and $380 million for utility construction, excluding vide capital for the Company's uciliry construction program and AFUDC. The estimate of 1993-1994 utility construction require-ocher capital requirements, such as repayment of maturing debt ments includes $38 million of capital expenditures related co plans and capital lease obligations. for compliance with provisions of the Clean Air Act (CAA).

During 1995-1999, an additional $67 million of capital expendi-Utility construction expenditures, the Company's largest capital tures related to compliance wirh rhe CAA are planned. The requirement, were $207 .4 million in 1992, $181.8 million in Company's plans for compliance with major provisions of rhe 1991, and $187.8 million in 1990. The level of construction CAA are subject co approval by the stares in which the Company's expenditures is affected by many factors, including growth in generating units are located.

demand for electricity, compliance with environmental regula-tions, and the need for improvement and replacement of existing In 1990, rhe New Jersey Department of Environmental Protection facilities. Strategic planning and project prioritizing provide man- (NJDEP) issued Public Service Electric and Gas (PSE&G), the agement the means co match the level of construction expendi- Salem nuclear plane operator, a drafr permit which would require tures with available capital resources. During 1992, 1991, and construction of cooling rowers and a shutdown of the plane during 1990, internally generated funds provided 63%, 53%, and 60%, the construction period. PSE&G continues co oppose the draft respectively, of the cash required for construction. In 1992, the permit and is seeking a mutually acceptable resolution of this mat-payment received for secclement of the Peach Bottom lawsuit ter with the NJDEP. If the cooling rowers are constructed, the increased internally generated funds by $11.4 million (5% of con- Company, as a co-owner of Salem, would incur substantial struction expenditures). Over the past several years, internally gen- replacement power costs during the construction period and esti-erated funds have been constrained by slower electric sales growth, mated capital costs of $40 co $50 million . The Company's fore-increased expenses, and increased common dividend payments due casts of 1993-1994 capital expenditures do not include possible to more shares outstanding. In 1992, rhese factors were offset by additional costs for the construction of cooling rowers for Salem.

additional revenues from increased customer races.

The Company anticipates that $226 million will be generated Capital raised externally during 1990-1992, before considering internally during 1993-1994. This forecast reflects expected rate issuing and refinancing costs, consisted of $137 million of com- relief which is designed co recover increased investments and mon equity, $40 million of preferred stock, and $128 million of higher coses. Forecasted internally generated funds for 1993-long-term debt, ner of $356 million of refinancings. The coses 1994 represent 53% of estimated capital requirements and 59%

associated wirh issuing and refinancing debr and equity securities of estimated utility construction expenditures. The balance is during 1990-1992 were approximately $26 million. expected co be externally financed. Long-term external financings during 1993-1994 are presencly estimated at $246 million, In 1992, the Company issued $273.3 million oflong-rerm debt ar including $80 million of long-term debt, and $166 million (mar-an average race of7.8% and repurchased $257.2 million of long-ket value) of common stock. On January 29, 1993, the Company term debt which had an average race of 9 .1 %. As of December 31, registered 3,300,000 shares of common stock with the Securities 1992, the Company's embedded cost of long-rerm debr and vari-and Exchange Commission for a planned issue of approximately able rare demand bonds was 7.7%. Equity capital issued in 1992

$75 million (market value) of common stock in the first quarter included $40 million of7 %% preferred stock and $32.2 million of of 1993.

common stock. Book value per share of common stock increased from $13.42 as of December 31, 1991 to $13.77 as of December One of the Company's objectives is co maintain certain financial 31, 1992. Long-rerm debt and variable rare demand bonds measures within the ranges that warrant a strong "A" bond racing.

(VRDB), preferred stock, and common stockholders' equity as a Accordingly, rhe Company's long-rerm planning capital structure percent of total capitalization, including VRDB, as of December target ranges are 44-49% debt, 8-10% preferred stock, and 31, 1992 and 1991 were as follows: 42-46% common stockholders' equity. In 1992, the Company's ratio of pre-tax earnings co fixed interest charges (computed 1992 1991 according co SEC regulations) was 3.03, within rhe range of 2.5 co Long-rerm debt and VRDB 47.3% 49.1% 4 rhar is generally required for an A bond rating. However, in Preferred stock 10.1% 8.2% order for the Company co meer its objectives, it will need co meet Common Stockholders' Equity 42.6% 42.7% rhe challenges presented by rhe Energy Acr and co obtain timely and adequate rate relief from regulatory commissions.

Delmarva Power & Light Company @

Nonutility Subsidiaries Information on the Company's nonutility subsidiaries, in addition to the following discussion, can be found in Notes 1 and 18 to the Consolidated Financial Statements.

Nonutility subsidiaries earned $.01 per share in 1992 primarily due to earnings from leveraged leases, operating services, and other businesses, which were partly offset by operating losses at the Pine increase in landfill and waste hauling revenues was driven by a large increase in tonnage received by the Pine Grove Landfill.

Revenues from operating services (management and operation of power plants) were $3.0 million in 1992 compared to $2.9 mil-lion in 1991.

The subsidiaries funded their 1992 capital investments, primarily Grove Landfill and administrative and general expenses. In 1992, related to the Pine Grove Landfill, and the repayment of $11. l the subsidiaries continued to reduce administrative and general million of short-term debt mainly through the drawdown of cash expenses and lower the operating loss of the Pine Grove Landfill. balances, funds generated by the landfill's operations, insurance Despite the landfill's operating loss, which reflects non-cash proceeds for a casualty loss, and tax benefit payments. The sub-charges for amortization and depreciation, landfill operations con- sidiaries receive tax benefit payments resulting from inclusion tinue to generate positive cash flow. of their income or loss in the Company's consolidated tax return.

As of December 31, 1992, the subsidiaries could borrow up One of the nonutility subsidiaries leases five aircraft, in total, to to $7.8 million under a bank credit agreement that expires in three different airlines as part of its leveraged leasing business. The December 1995.

airline industry is facing increasing pressures due to intense fare competition, heavy capital expenditures, and reduced access to In 1991, the nonutility subsidiaries earned $0.03 per share. Gains capital due to the current global economic downturn. Certain from sales of purchase options on leveraged leases, which con-other airlines, which are not lessees of the Company's subsidiary, tributed $0.07 to 1991 earnings per share, were partly offset by have filed for protection under the bankruptcy laws. Northwest the operating loss of the Pine Grove Landfill and accruals for Airlines, to whom the subsidiary leases a Boeing 747, encountered potential settlements of litigation.

significant liquidity problems during 1992 and had its debt ratings In 1990, the non utility subsidiaries had reported a loss of $1. l 0 downgraded. However, Northwest is current on its lease payments per share principally due to a write-off of investments in joint to the Company's subsidiary, and the effect, if any, of its financial ventures and to operating losses from the projects that were difficulties on the lease remains uncertain.

written-off. As discussed in Note 18 to the Consolidated Financial Total subsidiary revenues, including gains, were $14.0 million in Statements, the Company wrote off $62,534,000 of investments 1992 compared to $16.4 million in 1991. The decrease occurred in three joint venture projects which reduced 1990 net income by mainly because 1991 revenues included a $4.4 million pre-tax $42,497,000 or $0.89 per share. The losses on the operations of gain on sales of purchase options on leveraged leases. An increase these projects during 1990 reduced earnings by an additional in landfill and waste hauling revenues from $6.2 million in 1991 $0.18 per share.

to $9.0 million in 1992 reduced the total revenue decrease. The

@ Delmarva Power & Light Company

Impact of Accounting Standards In rhe first quarter of 1993, the Company will adopt the new deferral over a five-year period.The Company has proposed to its accounting principles of Statement of Financial Accounting regulatory commissions, assuming recovery of the SFAS No. 106 Standards (SFAS) No. 106, "Employers' Accounting for expense in rates, to externally fund tax deductible contributions Posrretirement Benefits Other Than Pensions. " SFAS No. 106 and internally fund any balance ofSFAS No. 106 cost recovered requires employers, if obligated or committed to provide posr- in rates that exceeds the amount that can be funded on a tax retirement benefits other than pensions, to recognize their obliga- deductible basis. See Nore 13 to rhe Consolidated Financial tion on an accrual basis. In December 1992, in order to control Statements for additional information concerning SFAS No. 106.

posrretirement health-care costs, the Company implemented caps, In rhe first quarter of 1993, rhe Company will adopt the new or limits, on medical benefits for employees retiring after] uly l ,

accounting principles of SFAS No. 109, "Accounting for Income 1995, and also reduced certain other medical benefits. The Taxes," which requires use of rhe liability method of accounting Company estimates its obligation for posrrerirement benefits other for income taxes. The main impact ofSFAS No . 109 on the than pensions to be $72 million and will recognize this obligation Company's financial statements will be a $78 million net increase by accruing it over a 20-year period. The Company's current fil-in deferred tax liabilities and an offsetting regulatory asset repre-ings for rare increases include recovery of the SFAS No. 106 senting rhe probable future recovery of the liability through utility expense increase associated with the Company's utility business.

revenues. SFAS No. 109 will not have a material impact on the After considering amounts capitalized, SFAS No. 106 will result Company's results of operations. See Note 3 to the Consolidated in approximately a $5.5 million expense increase. Until the new Financial Statements for additional information concerning SFAS rares become effective, rhe expense increase will be deferred, due No . 109.

to probable rate recovery. The Company expects to amortize the Delmarva Power & Light Company @

Report of Management Report of Independent Accounta n ts Management is responsible for the information and representa- To the Board of Directors and Stockholders tions contained in the Company's financial statements. Our Delmarva Power & Light Company financial statements have been prepared in conformity with gener- Wilmington, Delaware ally accepted accounting principles, based upon currently available We have audited the accompanying consolidated balance sheets facts and circumstances and management's best estimates and and statements of capitalization of Delmarva Power & Light judgments of the expected effects of events and transactions.

Company and Subsidiary Companies as of December 31, 1992 Delmarva Power & Light Company maintains a system of inter- and 1991, and the related consolidated statements of income, nal controls designed to provide reasonable, bur not absolute, changes in common stockholders' equity, and cash flows for each assurance of the reliability of the financial records and the protec- of the three years in the period ended December 31, 1992. These tion of assets. The internal control system is supported by written financial statements are the responsibility of the Company's man-administrative policies, a program of internal audits, and proce- agement. Our responsibility is to express an opinion on these dures to assure the selection and training of qualified personnel. financial statements based on our audits.

Coopers & Lybrand, independent accountants, are engaged to We conducted our audits in accordance with generally accepted audit the financial statements and express their opinion thereon. auditing standards. Those standards require that we plan and per-Their audits are conducted in accordance with generally accepted form the audit to obtain reasonable assurance about whether the auditing standards which include a review of selected internal financial statements are free of material misstatement. An audit controls to determine the nature, timing, and extent of audit tests includes examining, on a test basis, evidence supporting the to be applied. amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant The Audit Committee of the Board of Directors, composed of estimates made by management, as well as evaluating the overall outside directors only, meets with management, internal auditors, financial statement presentation. We believe that our audits pro-and independent accountants to review accounting, auditing, and vide a reasonable basis for our opinion.

financial reporting matters. The independent accountants are appointed by the Board on recommendation of the Audit In our opinion, the financial statements referred to above present Committee, subject to stockholder approval. fairly, in all material respects, the consolidated financial position of Delmarva Power & Light Company and Subsidiary Companies as of December 31, 1992 and 1991, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1992 in conformity with gener-ally accepted accounting principles.

Howard E. Cosgrove Barbara S. Graham As discussed in Note 1 to the Consolidated Financial Statements, Chairman, President and Vice President and the Company changed its method of accounting for unbilled Chief Executive Officer Chief Financial Officer revenues in 1991.

2400 Eleven Penn Center Philadelphia, Pennsylvania February 5, 1993

@ Delmarva Power & Light Company

I CONSOLIDATED STATEMENTS OF INCOME I (Dollars in Thousands) Year Ended December 31,

- 1992 1991 1990 Operating Revenues Electric $780,175 $784,599 $732,381 Gas 83,869 7 1,222 79,836 864,044 855,821 812,217 Operating Expenses Electric fuel and purchased power 261,784 285,595 251,522 Gas purchased 43,797 38,140 46,576 Operation and maintenance 233,038 226,240 204,963 Depreciation 95,285 88,610 82,153 Taxes other than income taxes 37,037 34,918 34,447 Income taxes 49,392 45,908 48,083 720,333 719,411 667,744 Operating Income 143,711 136,410 144,473 Other Income Nonurility Subsidiaries Revenues and gains 14,040 16,388 17, 104 Expenses including interest and income taxes (13,551) (15,110) (6,856)

Write-off of joint venture investments - - (62,534)

Ner earnings of nonurility subsidiaries 489 1,278 (52,286)

Allowance for equity funds used during construction 5,631 4,199 2,845 Other income, ner of income taxes 12,855 4,042 4,600

• Income Before Utility Interest Charges Utility Interest Charges Debt Other 18,975 162,686 65,667 2,570 9,519 145,929 66,952 1,907 (44,841) 99,632 62,764 2,183 Allowance for borrowed funds used during construction (4,077) (3,436) (2,626) 64,160 65,423 62,321 Earnings Income before cumulative effect of a change in accounting principle 98,526 80,506 37,311 Cumulative effect of a change in accounting for unbilled revenues - 12,730 -

Net income 98,526 93,236 37,311 Dividends on preferred stock 8,349 7,977 8,784 Earnings applicable to common stock $ 90,177 $ 85,259 $ 28,527 Average Shares of Common Stock Outstanding (000 ) 53,456 50,581 47,534 Earnings Per Average Share of Common Stock Before cumulative effect of a change in accounting principle $1.69 $1.44 $0.60 Cum ulative effect of a change in accounting for unbilled revenues - 0.25 -

T oral earnings per share $1.69 $1.69 $0.60 Dividends Declared Per Share $1.54 $1.54 $1.54 Pro Forma Amounts Assuming Retroactive Application of New Accounting Method for Unbilled Revenues

• Ner income $ 98,526 $ 80,506 $ 35,152 Earnings per average share $1.69 $1.44 $0.55 See accompanying Notes to Consolidated Financial Statements.

Delmarva Power & Light Company @

I I CONSOLIDATED BALANCE SHEETS I (Dollars in Thousands) As of December 31, 1992 1991 Assets Utility Plant-At Original Cost Electric $2,345,869 $2,264,200 Gas 163, 139 146,264 Common 127,852 129,721 2,636,860 2,540,185 Less: Accumulated depreciation 929,869 849,852 Net utility plant in service 1,706,991 1,690,333 Construction work-in-progress 187,844 86,699 Leased nuclear fuel, at amortized cost 36,782 39,885 1,931,617 1,816,917 Other Property and Investments Investment in leveraged leases 72,858 78 ,77 1 Other investments 5,481 6,511 Other property, net 53,682 53,425 Funds held by trustee 15,274 17,800 147,295 156,507 Current Assets 1 Cash and cash equivalents 21,888 46,841 Accounts receivable Customers 65,929 62,407 Accrued unbilled revenues 22,570 21,371 Other 12,527 12,864 Inventories, at average cost Fuel (coal, oil, and gas) 32,624 44,425 Materials and supplies 39,055 36,435 Prepayments 7,907 7,290 Deferred income taxes, net 8,236 7,762 210,736 239,395 Deferred Charges and Other Assets Unamortized debt expense 11,219 9,954 Deferred debt refinancing costs 22,510 9,351 Deferred recoverable plant costs 15,019 10,225 Other 36,397 21,369 85,145 50,899 Total $2,374,793 $2,263,718 See accompanying Notes to Consolidated Financial Statements.

@ Delmarva Power & Light Company

I I CONSOLIDATED BALANCE SHEETS I (Dollars in Thousands) As of December 31, 1992 1991 Capitalization and Liabilities Capitalization (See Statements of Capitalization)

Common stock $ 121,824 $ 118,505 Additional paid-in capital 374,789 346,509 Retained earnings 249,176 241,569 Total common stockholders' equiry 745,789 706,583 Preferred stock 176,365 136,365 Long-term debt 787,387 770,146 1,709,541 1,613,094 Current Liabilities Short-term debt 17,000 11,050 Long-term debt due within one year 946 2,079 Variable rate demand bonds 41,500 41,500 Accounts payable 56,389 53,155 Taxes accrued 11,593 13,170 Interest accrued 15, 190 14,101 Dividends declared 20,900 20,459 Current capital lease obligation 12,709 12,747 Deferred energy costs 7,933 3,026 Other 25,265 31,324 209,425 202,611 Deferred Credits and Other Liabilities Deferred income taxes, net 352,474 341,276 Deferred investment tax credits 51,990 54,407 Long-term capital lease obligation 26,081 29,337 Other 25,282 22,993 455,827 448,013 Commitments and Contingencies (Notes 14, 15, and 16) - -

Total $2,374,793 $2,263,718 See accompanying Notes to Consolidated Financial Statements .

Delmarva Power & Light Company @

I I CONSOLIDATED STATEMENTS OF CASH FL 0 W S I

(Dollars in Thousands) Year Ended December 31, 1992 1991 1990 Cash Flows from Operating Activities Net income $98,526 $93,236 $37,311 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 105,624 99,313 93,118 Allowance for equity funds used during construction (5,631) (4,199) (2,845)

Investment tax credit adjustments, net (2,417) (2,844) (3, 199)

Deferred income taxes, net 10,749 12,870 (128)

Net change in Accrued unbilled revenues (1, 199) (21,371) -

Accounts receivable (3,185) (5, 157) (1,629)

Inventories 9,696 (171) (16,255)

Accounts payable 8,779 (12,428) 8,190 Other current assets & liabilities* (680) 22,338 6,449 Equity in losses of joint ventures - - 12,772 Write-off of joint venture investments - - 62,534 Other, net 491 (462) (1,862)

Net cash provided by operating activities 220,753 181 ,125 194,456 Cash Flows from Investing Activities Construction expenditures, excluding AFUDC (207,439) (181,820) (187,823)

Allowance for borrowed funds used during construction (4,077) (3,436) (2,626)

Change in working capital for construction (9,823) 14,538 389 Proceeds from sales of ownership interests in Utility plant and inventory - 4,733 -

Nuclear fuel-Salem - - 18,706 Cash flows from leveraged leases Insurance proceeds for casualty loss 4,115 - -

Sale of purchase options - 5,375 -

Other 1,858 4,750 (l,649)

Investment in subsidiary projects and operations (7,013) (4,504) (20,495)

Decrease in marketable securities - - 14,808 Net (increase)/decrease in bond proceeds held in trust funds 6,076 (205) (7,030)

Deposits to nuclear decommissioning trust funds (3,770) (1 ,831) (1,944)

Other, net (2,677) (1,332) 521 Net cash used by investing activities (222,750) (163,732) (187,143)

Cash Flows from Financing Activities Dividends: Common (81,986) (77,097) (72,881)

Preferred (8,492) (7,947) (9,024)

Issues: Long-term debt 273,335 117,000 94, 111 Common stock 32,200 87,900 16,792 Preferred stock 40,000 - -

Redemptions: Long-term debt (257,178) (86,794) (15,573)

Common stock (259) - -

Preferred stock - - (877)

Principal portion of capital lease payments (10,339) (10,593) (8,495)

Net change in short-term debt 5,950 (12,250) (6,200)

Other, net (16, 187) (7,900) (2,331)

Net cash provided/(used) by financing activities (22,956) 2,319 (4,478)

Net change in cash and cash equivalents Beginning of year cash and cash equivalents End of year cash and cash equivalents (24,953) 46,841

$21,888

• Other than debt classified as current, preferred stock redeemable within one year, and current deferred income taxes.

See accompanying Notes to Consolidated Financial Statements.

19,712 27,129

$46,841 2,835 24,294

$27,129

@ Delmarva Power & Light Company

I I CONSOLIDATED STATEMENTS 0 F CAPITALIZATION I

(Dollars in Thousands) As of December 31, 1992 1991 Common Stockholders' Equity Total Common Stockholders' Equity 0 > $ 745,789 $ 706,583 Cumulative Preferred Stock Par value $1 per share, 10,000,000 shares authorized, none issued Par value $25 per share, 3,000,000 shares authorized, 7 %% Series, 1,600,000 shares issued 40,000 -

Par value $100 per share, 1,800,000 shares authorized Series Shares outstanding Call price per share (1992 and 1991) 3.70%-4.56% 240,000 and 240,000 $103-$105 24,000 24,000 5.00%-7.88% 512,800 and 512,800 $103-$104 51,280 51,280 Adjustable-5.83%,c2>6.28% c2> 160,850 and 160,850 $103 16,085 16,085 Auction rate-3.05%,C2> 4.86% C2> 450,000 and 450,000 $100 45,000 45,000 176,365 136,365 Long-Term Debt First Mortgage Bonds:

1992 1991 Maturity Interest Rates Interest Rates 1994 4%% 4 %% 25,000 25,000 1997 6%% 6 %% 25,000 25,000 1998 7% 7% 25,000 25,000 2000 - 8 %%-8 %% - 60,000 2001-2002 6.95%-7 %% 7 Yio/o-7 %% 95,000 65,000 2003-2004 6.6%-8% 6.6%-8% 43,200 43,200 2008 - 9 %% - 50,000 2014-2015 7.30%-8.15% 7.30%-10 Yso/o 81,000 129,500 2018-2022 6.75%-10% 7. 15%-10% 240,000 144,000 534,200 566,700 Other Bonds, due 2011-2017, 7.15%-7.50% 54,500 54,500 Pollution Control Notes:

Series 1973, due 1993-1998, 5.60%-5.75% 6,650 6,800 Series 1976, due 1993-2006, 7 Y.%-7 )4% 3,400 34,500 Medium Term Notes, due 1999, 7 Y,o/o 30,000 -

Medium Term Notes, due 2002-2004, 8.40% 39,000 39,000 Medium Term Notes, due 2007, 8 Y.% 50,000 -

Medium Term Notes, due 2020-2021, 9.68% 61,000 61,000 First Mortgage Notes, 9.65% c3> 8,809 9,322 Other Obligations, due 1993-1999, 8.56% 1.497 971 Unamortized premium and discount, net (723) (568)

Current Maturities of Long-Term Debt (946) (2,079)

Total Long-Term Debt 787,387 770,146 Total Capitalization 1,709,541 1,613,094 Variable Rate Demand Bonds c*> 41.~00 41,500 Total Capitalization with Variable Rate Demand Bonds $1,751,041 $1,654,594 (I) Refer to Consolidated Staremencs of Changes in Common Stockholders' Equity for additional information.

(2) Average rate during 1992 and 1991 , respectively.

(3) Repaid through monthly payments of principal and interest over 15 years ending November 2002.

(4) Classified under current liabilities as discussed in Nore 11 to the Consolidated Financial Statements.

See accompanying Notes to Consolidated Financial Statements.

Delmarva Power & light Company @

CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY ~

(Dollars in Thousands)

Common Additional Shares Par cii Paid-in Retained Outstanding Value Capital Earnings Total Balance as of January 1, 1990 46,994,430 $105,737 $256,951 $279,953 $642,641 Nee income 37,311 37,311 Cash dividends declared Common stock ($1.54) (73,225) (73,225)

Preferred stock (8,784) (8,784)

Issuance of common stock DRIP '2i 891,328 2,006 14,723 16,729 Srock options 3,600 8 55 63 Expenses (29) (29)

Redemption of preferred stock (6) (8) (14)

Balance as of December 31 , 1990 47,889,358 107,751 271,694 235 ,247 614,692 Nee income 93,236 93,236 Cash dividends declared Common stock ($1.54) (78,937) (78,937)

Preferred stock (7,977) (7,977)

Issuance of common stock Public offering 3,500,000 7,875 56,000 63,875 DRIP '2i l, 126,802 2,535 18,640 21,175 Srock options 150,450 339 2,471 2,810 Ocher issuance 2,354 5 35 40 Expenses (2,331) (2,331)

Balance as of December 31, 1991 Nee income Cash dividends declared Common stock ($1.54)

Preferred stock Issuance of common stock DRIP '2i 52,668,964 1,336,871 118,505 3,008 346,509 26,471 241,569 98,526 (82,570)

(8,349) 706,583 98,526 (82,570)

(8,349) 29,479 Srock options 129,500 292 2,256 2,548 Ocher issuance 8,518 19 154 173 Expenses of common and preferred stock issuances (414) (414)

Ocher (187) (187)

Balance as of December 31 , 1992 54,143,853 $121,824 $374,789 $249,176 $745,789 (I) The Company's common stock has a par value of $2.25 per share and 90,000,000 shares are authorized.

(2) Dividend Reinvesrment and Common Share Purchase Plan (DRIP}-As of December 31, 1992, 4,064,916 shares were reserved for issuance through the DRIP.

See accompanying Nores ro Consolidared Financial Sraremenrs.

@ Delmarva Power & Light Company

1. SIGNIFICANT ACCOUNTING POLICIES Nature of Business Financial Statement Reclassifications J'he Company is predominantly a public utility that provides elec- The Company earns revenues from the sale of electric power to ric service on the Delmarva Peninsula in an area consisting of the Pennsylvania-New Jersey-Maryland (PJM) Interconnection about 5,700 square miles with a population of approximately one and certain utilities ("interchange delivery revenues"). The million. The Company also provides gas service in an area consist- Company has retroactively reclassified interchange delivery rev-ing of about 275 square miles with a population of approximately enues from operating expenses to electric operating revenues to 450,000 in northern Delaware, including the City of Wilmington. CO!Jlply with a change in the accounting policies of the FERC. In In addition, the Company has wholly-owned subsidiaries engaged addition, the revenues and expenses of the Company's steam busi-in nonutility activities. ness, which is not subject to rate regulation, have been retroac-tively reclassified from steam operating revenues and operating Regu lation of Utility Operations expenses to other income. These reclassifications did not affect net The Company is subject to regulation with respect to its retail income. Certain other reclassifications, which were immaterial and utility sales by the Delaware and Maryland Public Service did not affect net income, were made to amounts reported in prior Commissions (DPSC and MPSC, respectively) and the Virginia years to conform to the presentations used in 1992.

State Corporation Commission (VSCC), which have broad powers over rate matters, accounting, and terms of service. Gas Unbilled Revenues sales are subject to regulation by the DPSC. The Federal Energy Prior to 1991, the Company recorded revenues as billed to its cus-Regulatory Commission (FERC) exercises jurisdiction with tomers on a monthly cycle billing basis. At the end of each month, respect to the Company's accounting systems and policies, and there was an amount of unbilled electric and gas service that had the transmission and sale at wholesale (resale) of electric energy. been rendered from the last meter reading to the month-end.

FERC also regulates the price and other terms of transportation of Effective as of January I, 1991, the Company began recording natural gas purchased by the Company. The percentage of utility non-fuel revenues for services provided but not yet billed to more operating revenues regulated by each Commission for the year closely match revenues with expenses. The effect of the change on ended December 31, 1992 was as follows: DPSC 64%, MPSC 1991 income before the cumulative effect of a change in account-22%, VSCC 3%, and FERC 11 %. ing principle was not material . The cumulative effect of the one-time change in accounting for unbilled revenues increased 1991 conformity with generally accepted accounting principles, the net income by $12,730,000 ($0.25 per share).

ompany's accounting policies reflect the financial effects of rate regulation and decisions issued by regulatory commissions having Fuel Expense jurisdiction over the Company's utility business. In accordance with the provisions of Statement of Financial Accounting Fuel costs charged to the Company's results of operations are gen-Standards No. 71, "Accounting for the Effects of Certain Types of erally adjusted to-match fuel costs included in customer billings Regulation ," the Company defers expense recognition of certain (fuel revenues). The difference berween fuel revenues and actual costs ("deferred charges"). Deferred charges are subsequently fuel costs incurred is reported on the balance sheet as "deferred amortized to expense over the period that the cost is recovered energy costs." The deferred balance is subsequently recovered from through customer rates. or returned to utility customers.

The Company's share of nuclear fuel costs relating to jointly-Reporting of Subsi diaries owned nuclear generating stations is charged to fuel expense on a The consolidated financial statements include the accounts of the unit of production basis, which includes a factor for spent nuclear Company and its wholly-owned subsidiaries-Delmarva* Energy fuel disposal costs. Such estimated disposal costs are paid quarterly Company; Delmarva Industries, Inc.; Delmarva Services to the United States Department of Energy. The Company's share Company; and Delmarva Capital Investments, Inc. and its sub- of nuclear fuel at the Peach Bottom Atomic Power Station (Peach sidiaries. The results of operations of the Company's nonutiliry Bottom) and the Salem Nuclear Generating Station (Salem) is subsidiaries are reported in the Consolidated Statements of financed through a nuclear fuel energy contract which is Income as "Other income." Refer to Note 18 to the Consolidated accounted for as a capital lease.

Financial Statements for financial information about the Company's subsidiaries .

Delmarva Pow er & Light Company @

Depreciation Expense The annual provision for depreciation on utility property is charges. On a consolidated basis, total inrerest charges incurred computed on the straight-line basis using composite rates by were $70,156,000 in 1992, $72,456,000 in 1991, and classes of depreciable property. The relationship of the annual $68,542,000 in 1990.

provision for depreciation for financial accounting purposes to Allowance for Funds Used During Construction and average depreciable property was 3.6% for 1992, 3.7% for Capitalized Interest 1991, and 3.6% for 1990. The Company's share of the esti-Allowance for Funds Used During Construction (AFUDC) is mated cost of decommissioning (decontaminating and remov-included in the cost of utility planr and represents the cost of ing) nuclear plant is included in depreciation expense. Refer to borrowed and equity funds used to finance construction of new Note 6 to the Consolidated Financial Statements for informa-utility facilities. The amounr of AFUDC capitalized is also tion about nuclear decommissioning.

reported in the Consolidated Statemenrs of Income as a reduc-tion of inrerest charges for the borrowed funds componenr and Income Taxes as other income for the equity funds componenr. AFUDC was The Company and its wholly-owned subsidiaries file a consoli- capitalized on utility planr construction at the rates of9.7% in dated federal income tax return . Income taxes are allocated to 1992, 9.9% in 1991, and 9.8% in 1990.

the Company's utility business and subsidiaries based upon their respective taxable incomes, tax credits, and effects of the The Company's nonutility subsidiaries capitalize inrerest on alternative minimum tax, if any. Deferred income taxes are pro- qualifying projects under construction.

vided on timing differences berween the tax and financial accounting recognition of certain income and expenses. Leveraged Leases Investment tax credits from regulated operations utilized to The Company's investmenr in leveraged leases includes the reduce federal income taxes are deferred and generally amortized aggregate of renrals receivable (net of principal and inrerest on over the useful lives of the related utility plant. Investment tax nonrecourse indebtedness) and estimated residual values of the credits of the Company's nonregulated operations (excluding leased equipmenr less unearned and deferred income (including leveraged leases) are accounted for by the flow-through method. investment tax credits). Unearned and deferred income is rec-Refer to Note 3 to the Consolidated Financiai Statemenrs for ognized at a level rate of return during the periods in which information concerning the Company's adoption of Statemenr the net investment is positive.

of Financial Accounring Standards (SFAS) No. 109, "Accounring for Income Taxes," in the first quarter of 1993. Funds Held by Trustee Funds held by trustee generally include deposits in the Interest Expense Company's external nuclear decommissioning trusts and unex-The amortization of debt discount, premium, and expense, pended restricted or tax exempt bond proceeds. Earnings on including refinancing expenses, is included in other interest such trust funds are also reflected in the balance.

@ Delmarva Power & Light Company

2. BASE RATE MATTERS On October 30, 1992, the Company filed applications for elec- Changes in base rates which became effective in 1992 are sum-tric base rate increases, as follows: marized below.

Proposed Base Revenue Effective Proposed Base Effective Jurisdiction Increase Date Jurisdiction Revenue Increase Date Retail electric Retail Electric Delaware<*> $18.5 million or 4.3% 01101192 Delaware $41.6 million 06101193 Maryland<2l $ 5.5 million or 3.3% 01101192 Maryland $14.6 million 06101193 Virginia<3l $ 1.5 million or 6.7% 07101192 Resale (FERC) $ 5.6 million 06/03/93 Resale (FERC)<<> $ 4.8 million or 5.1 % 02/19/92 Delaware gas<>> $ 4.8 million or 6.5% 02/02/92 The above proposed base rate increases, as filed, reflect a requested 12.5% return on common equity and recovery of (1) The rate increase is based upon a final decision by the DPSC higher costs, including the cost of the new Hay Road Unit 4 and it reflects a 12.5% return on equity.

combined-cycle power plant, inflation, and µie expense increase (2) The rate increase is based upon a final decision by the MPSC.

associated with the cost of postretirement benefits under SPAS A specific return on equity was not stated in the settlement agreement approved by the MPSC.

No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions. " The proposed base rate increases will be (3) The rate increase is subject to refund since the case is in process.

mitigated by fuel savings amibured to Hay Road combined- (4) The Company and resale customers representing 99% of resale revenues have reached an agreement in principle which would cycle operations. Net of the fuel savings, the proposed provide for a $4.125 million increase. The agreement is subject Delaware, Maryland, and resale rate increases would result in to approval by the FERC.

rate increases of approximately 8.5%, 7.2%, and 3.8% respec- (5) The rate increase is subject to refund since the case is in process.

tively. However, a 12.5% return on equity has been stipulated for the final decision.

Delmarva Power & light Company @

I I 3. INCOME TAXES I

Components o f Consolidat ed Income Ta x Expense (Dollars in Thousands) 1992 1991 1990 Operation Federal: Current $30,819 $31,777 $29,930 Deferred 11,597 8,924 11,721 I

State: Current 6,755 6,596 6,756 Deferred 2,638 1,455 2,875 Investment tax credit adjustments, net (2,417) (2,844) (3,199)

Other income Federal: Current 7,559 (4,773) (9,054)

Deferred (3,482) 2,336 (14,863)

State: Current 1,369 (34) 251 Deferred (4) (188) 139 Income taxes on cumulative effect of a change in accounting for unbilled revenues - 8,520 -

Total income tax expense $54,834 $51,769 $24,556 Reconcil iation of Effective Income Tax Rate The amount computed by multiplying income before tax by the federal statutory rate is reconciled below to the total income tax expense:

1992 1991 1990 (Dollars in Thousands) Amount Rate Amount Rate *Amount Rate Statutory federal income tax expense $52,142 34% $49,302 34% $21,035 34%

Increase (decrease) due to Depreciation not normalized 1,959 1 2,103 I 509 1 ITC amortization/flow-through (2,780) (2) (3,456) (2) (4,229) (7)

State income taxes, net of federal tax benefit 7,099 5 6,120 4 6,614 11 Other, net (3,586) (2) (2,300) (1) 627 1 T oral income tax expense $54,834 36% $51,769 36% $24,556 40%

Components of Deferred Income Taxes The tax effects of tim ing differences between book and tax inco me that comprise deferred tax expense are as follows:

(Dollars in Thousands) 1992 1991 1990 Depreciation $ (307) $ 3,119 $24,909 Deferred energy costs (1,957) (4,790) 957 I

Capitalized overhead costs (3,313) (2,871) (2,171)

ADR repair allowance 1,818 2,112 2,803 Unbilled revenues 126 4,932 (1,707)

I Alternative minimum tax 2,205 3,848 (6, 146)

Write-off of joint venture investments 2,644 6,170 (20,261)

Debt refinancing costs 4,978 1,948 (15)

Other, net 4,555 (l,598) 1,503 Total $10,749 $ 12,870 $ (128)

In 1990, investment tax credits of $879,000 were utilized to reduce federal income taxes payable.

@ Delmarva Power & Light Company

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In the fi rst quarter of 1993, the Company will adopt SFAS No. than record a charge to earnings, the Company will record a net 109, "Accounting for Income Taxes," and change to the liability regulatory asset representing the probable future recovery of the method from the deferred method of income tax accounting, net liability through utility revenues over the life of the related which these financial statements are based on. Under the liability utility plant. The major components of the adjustment to record method, deferred income tax assets and liabilities represent che tax the net regularory asset and net deferred tax liability include the effects of temporary differences berween che financial statement follow ing: (1) Recognition of additional deferred tax liabilities and tax bases of existing assets and liabilities and are measured for tax benefits previously flowed through ro customers ($100 using presently enacted tax rates. Deferred tax assets and liabil- million); (2) Recognition of deferred tax liabilities not previously ities are adjus ted currently for the effects of changes in tax laws provided on a portion of AFUDC included in utility plant or rates. ($65 million) ; (3) Reduction of deferred tax liabilities on utili ty assets due to lower federal income tax rates enacted under the T he main impact of SFAS No. 109 on the Company's financial 1986 Tax Reform Act ($61 million); (4) Other net temporary statements will be a $78 million net increase in deferred tax liabili-differences resulting in recognition of a deferred tax asset primar-ties related to temporary differences principally associated with the ily on deferred investment tax credits ($26 million). The impact Company's utility plant. Prior to adoption of SFAS No. 109, of SFAS No. 109 on the Company's subsidiary and other non-deferred taxes were not established on certain temporary differ-utility operations is expected to be immaterial to the Company's ences because ratemaking practices allowed cost recovery from cus-financial position and results of operations.

tomers as the taxes were paid. To establish the net liability, rather I

4 . OTHER INCOME I T he components of "Other income, nee of income taxes" as pre- Statements for financial information about the Company's non-sented in the Consolidated Statements ofincome are shown in the utility subsidiaries.

table below. Refer ro Note 18 to the Consolidated Financial

• (Dollars in Thousands)

Revenues and Income Steam and other revenues Peach Bottom lawsuit settlement Interest, dividends, other income Expenses 1992

$14,837 18,538 2,424 1991

$22,509 3,966 1990

$22,926 5,206 Steam operating and other expenses 15,326 22,192 21,864 Income tax expense 7,618 241 1,668 Net $12,855 $ 4,042 $ 4,600 On July 27, 1988, the Company, Atlantic City Electric Company, the shutdown were charged against earnings during the period of and Public Service Electric and Gas Company filed lawsuits the shutdown (March 1987 through November 1989). On March against Philadelphia Electric Company (PE) to recover replace- 31, 1992, the Peach Bottom co-owners reached a settlement agree-ment power and other costs incurred as a result of the shutdown ment under which PE paid $18,538,000 to the Company. The of Peach Bottom by the Nuclear Regulatory Commission (NRC) settlement increased 1992 net income by $11,397,000 ($0.21 on March 31, 1987. The Company's share of costs resulting from per share) .

Delmarva Power & Light Company @

5. JOINTLY-OWNED PLANT The Company's balance sheet includes its proportionate share of dated Statements of Income. The Company is responsible for assets and liabilities related to jointly-owned plant. The Company's providing its share of financing for the jointly-owned facilities.

share of operating and maintenance expenses of the jointly-owned Information with respect to the Company's share of jointly-plant is included in the corresponding expenses in the Consoli- owned plant as of December 31, 1992 was as follows:

Megawatt Construction Ownership Capability Plant in Accumulated Work in (Dollars in Thousands) Share Owned Service Depreciation Progress Nuclear Peach Bottom 7. 51 % 157MW $121,446 $ 52,767 $ 4,727 Salem 7.4 1% 164MW 195,375 76,422 5,888 Coal-Fired Keystone 3.70% 63MW 15,650 6,516 157 Conemaugh 3.72% 63MW 15,734 7,325 3,914 Transmission Facilities Various 4,554 1,834 Total $352,759 $144,864 $14,686

6. NUCLEAR DECOMMISSIONING In compliance with regulations of the NRC, the Company has a Bottom and Salem nuclear reactors, which is reflected in the plan to fund its share of the future costs of decommissioning accumulated reserve for depreciation, was $25.1 million as of (decontaminating and removing) the Peach Bottom and Salem December 31, 1992. The Company estimates its share of future nuclear reactors over the remaining lives of the plants. The decommissioning costs to be $53.7 million, which is the NRC Company has established external trust funds ($13.8 million bal- minimum funding requirement. The Company is currently col-ance at December 31, 1992) to begin to externally fund its share lecting in rates a sufficient amount from its customers to satisfy of future decommissioning costs. The trust fund balances are the NRC minimum funding requirement. However, the ultimate included in "Funds held by trustee" on the balance sheer. The cost of decommissioning the Peach Bottom and Salem nuclear Company's accrued liability for decommissioning the Peach reactors may exceed the NRC minimum funding requirement.

@ Delmarva Power & Light Company

7. COMMON STOCK

1) The Company's Restated Certificate and Articles of marely $169.8 million was available for payment of common Incorporation, as amended, and rhe Mortgage and Deed of Trust, dividends.

as supplemented and amended, securing the Company's outstand-

2) The Company has a nonqualified stock option plan for certain ing bonds contain restrictions on the payment of dividends on employees. Options are priced at the actual marker value on the common stock. Such resr~icrions would become applicable if the grant dare. As of December 31, 1992, 262,000 shares were avail-Company's capital and retained earnings fall below certain specific able to be granted under the nonqualified stock option plan.

levels or if preferred dividends are in arrears. Under the most Changes in stock options are summarized below.

restrictive of these provisions, as of December 31 , 1992, approxi-1992 1991 1990 Number Option Number Option Number Oprion of Shares Price of Shares Price of Shares Price Beginning-of-year balance 274,050 $17 Yz-$21 y. 306,750 $17 Yz-$21 J4 190,100 $17 Yz-$17 %

Options granted 59,900 $20 Yz 117,750 $18 y. 120,250 $21 J4 Options exercised 129,500 $17 Yz-$21 y. 150,450 $17 Yz-$17 % 3,600 $17 Yz-$17 %

End-of-year balance 204,450 $17 Yz-$21 y. 274,050 $17 Yz-$21 J4 306,750 $17 Yz-$21 J4 Exercisable 144,550 $17 Yz-$21 y. 156,300 $17 Yz-$21 J4 186,500 $17 Yz-$17 %

8. PREFERRED STOCK

1) On August 4, 1992, the Company issued 1,600,000 shares of proceeds from the issue were used for financing the capital 7 %%, cumulative preferred stock-$25 par value for $40 million. requirements of the Company and for other general corporate The preferred stock is nor redeemable prior to September 30, purposes relating to rhe Company's utility business, including 2002. On or after September 30, 2002, the preferred stock is the repayment of short-term borrowings.

redeemable at the option of the Company, in whole or in part, at

2) The annual preferred dividend requirements on all outstanding

$25 per share plus unpaid accumulated dividends, if any. The preferred stock at December 31, 1992 are $10,138,000 .

Delmarva Power & Light Company @

9. LONG-TERM DEBT

1) Annual sinking fund requirements for the First Mortgage 1999. On June 15, 1992, the proceeds were used to redeem $30 Bonds may be reduced by an amount not exceeding sixty percent million of 8 ~%First Mortgage Bonds, due January l, 2000.

of the bondable value of property additions. For the years 1990-1992, property additions satisfied the sinking fund requirements. 6) On October 6, 1992, the Company issued $66 million of Substantially all utility plant of the Company now or hereafter 8.15% First Mortgage Bonds which mature on October l, 2015 owned is subject to the lien of the Mortgage and Deed of Trust. and issued $30 million of 6.95% First Mortgage Bonds which mature on October 1, 2002. The proceeds from these two issues

2) On February 4, 1992, the Company issued $50 million of were used on November 2, 1992 to redeem $66 million of9 !4%

8 Yi% First Mortgage Bonds which mature on February l, 2022. First Mortgage Bonds due June l, 2015 and $30 million of 8 Y.%

The proceeds were used on March 2, 1992 to redeem the remain- First Mortgage Bonds due December l, 2000.

ing $48.5 million of 10 Yso/o First Mortgage Bonds ($60 million originally issued), due January l, 2016. 7) As of December 31, 1992, the fair market value of the Company's long-term debt was $822,494,000 in comparison to

3) On April 22, 1992, the Company issued $50 million of the book value of$787,387,000. As of December 31, 1991, the 8 Yso/o unsecured Medium Term Notes which mature on May l, fair market value of the Company's long-term debt was 2007. The proceeds were used on May 20, 1992 to redeem $50 $806,721,000 in comparison to the book value of $770, 146,000.

million of 9 Y.% First Mortgage Bonds, due July l , 2008. The fair market value of the Company's long-term debt was esti-

4) On May 6, 1992, the Delaware Economic Development mated using discounted cash flow calculations, based on interest rates currently available to the Company for debt with similar Authority issued on behalf of the Company $15 million of 6.85%

terms, maturities, and credit worthiness.

tax-exempt Series A Bonds, due May l , 2022, and $31 million of

6. 75% tax-exempt Series B Bonds, due May 1, 2019. The pro- 8) Maturities of long-term debt and sinking fund requirements ceeds from the Series A Bonds were used to finance additions to during the next five years are as follows: 1993-$4,356,000; the Company's gas system. On June 8, 1992, the proceeds from 1994-$29,443,000; 1995-$4,506,000; 1996-$4,583,000; the Series B Bonds were used to refund $31 million of 7 !4% Pol- 1997-$29,670,000. The Company expects that the annual sink-lution Control Notes, due 1992-2001. Both the Series A and B ing fund requirements (discussed in item 1 above) of $3,410,000 Bonds are collateralized by First Mortgage Bonds and are insured. will be satisfied by property additions during the next five years.

5) On May 19, 1992, the Company issued $30 million of 9) The annual interest requirements on long-term debt at 7 Yi% unsecured Medium Term Notes which mature on May l, December 31, 1992 are $61,547,000.

10. SHORT-TERM DEBT As of December 31, 1992, the Company had unused bank lines of As of December 31, 1992, the subsidiaries could borrow up credit of $75 million. The Company is generally required to pay to $7.8 million under a bank credit agreement which expires commitment fees for these lines. Such lines of credit are periodi- December 31, 1995 . This agreement is collateralized by the cally reviewed by the Company, at which time they may be leveraged lease portfolio and certain other subsidiary assets.

renewed or cancelled.

11. VARIABLE RATE DEMAND BONDS A total of $41.5 million of Variable Rate Demand Bonds were interest rates at market rates and, if advantageous, by utilizing outstanding as of December 31, 1992 and 1991, respectively. one of the fixed rate/fixed term conversion options of the bonds.

Although Variable Rate Demand Bonds are classified as current The bonds are due on demand or at maturity in the years 2014 liabilities, the Company intends to use the Variable Rate Demand to 2017. Average annual interest rates on the Variable Rate Bonds as a source of long-term financing by setting the bonds' Demand Bonds were 3.0% in 1992.

@ Delmarva Power & Light Company

I

12. PENSION PLAN I

The Company has a defined benefit pension plan covering all reg- tax deductible contribution. There were no pension contributions u lar employees. The benefits are based on years of service and the in 1992, 1991 , or 1990.

employee's compensation. The Company's funding policy is to The following table reconciles the plan assets and liabilities to rhe contribute each year the net periodic pension cost for that year.

funded status of rhe plan as of December 31, 1992 and 1991.

However, the contribution for any year will not be less than the Pension plan assets consist primarily of equity securities and pub-minimum required contribution nor greater than the maximum lie bond securities.

Actuarial Present Value of Benefit Obligations 1992 1991 (M illions of Dollars)

Accumulated benefit obligation Vested $218.8 $206.0 Non vested 22.7 20.7 241 .5 226.7 Effect of estimated furure compensation increases 112.9 110.2 Projected benefit obligation 354.4 336.9 Plan assets ar fair value 475.7 448.6 Excess of plan assets over projected benefit obligation 121 .3 111.7 Unrecognized prior service cost 19.0 10.0 Unrecognized net gain (93.4) (75.5)

Unrecognized net rransirion asset (39.8) (43.1)

Prepaid pension cosr $ 7.1 $ 3.1 Components of Net Pension Cost 1992 1991 1990 (Millions of Dollars)

Service cost-benefits earned during period $12.6 $ 9.8 $ 10.9 Interest cost on projected benefit obligation 24.2 21.9 20.9 Actual return on plan assets (39.1) (96.3) 7.2 Ner amorrizarion and deferral (1.7) 64.5 (41.1)

Net pension cost $ (4.0) $ (0.1) $ (2.1)

Assumptions 1992 1991 1990 Discount rates used to determine projected benefit obligation as of December 31 7.25% 7.00% 7 .75%

Rates of increase in compensation levels 6.50% 6.50% 6.50%

Expected long-rerm rates of return on assets 8.25% 8.00% 8.00%

13. OTHER POSTRETIREMENT BENEFITS The Company provides health-care and life insurance benefits for 106, "Employers' Accounting for Posrretirement Benefits Other retired employees. Substantially all of the Company's employees Than Pensions," which requires employers, if obligated or com-may become eligible for these benefits if they reach normal retire- mitted to provide posrretiremenr benefits other than pensions, to ment age while still working for the Company. The Company has recognize their obligation on an accrual basis. The cost of the recognized the cost of providing these benefits by expensing the posrretirement benefit obligation will be attributed to the period insurance claims as they are paid. These costs were $4,496,000, of employee service ending on the date the employee becomes

$4, 176,000, and $3,386,000 in 1992, 1991 , and 1990, respec- eligible for the postretirement benefits.

tively.

The Company estimates its posrretirement benefit obligation, In the first quarter of 1993, rhe Company will adopt SFAS No . measured as of January 1, 1993, to be $72 million and will Delmarva Pow er & Lig ht Company @

recognize chis obligation by accruing ir over a 20-year period. increases (Nore 2 ro rhe Consolidated Financial Statements)

Before considering amounts capitalized, rhe annual expense of include recovery of rhe ner SFAS No. 106 expense increase associ-postrerirement benefits under SFAS No. 106 is esrimared to be ated wirh rhe Company's utility business. Until new rares become

$11.4 million, or approximately $7 million higher rhan rhe effective, chis expense increase will be deferred, due ro probable expense currendy recorded. Afrer considering amounts capiralized, rare recovery. Based on requested rare treatment, rhe Company rhe expense increase associated wirh SFAS No. 106 will be about expects ro amortize rhe deferral over five years. The impact of

$5.5 million. The Company's esrimared obligation and expense SFAS No. 106 on rhe Company's subsidiary and ocher non-utility under SFAS No. 106 are based on a discount rare of7.75% and operations is expected to be immaterial ro rhe Company's finan-healrh-care cosr trend rate of 12% currendy, which decreases grad- cial position and results of operations.

ually ro 5.5% by 2011. The Company's current filings for rare I

14. COMMITMENTS I

The Company esrimares char approximately $189.4 million, cerrain commitments under long-term fuel supply contracts.

excluding AFUDC, will be expended for consrrucrion purposes Excluding nuclear fuel discussed below, the Company's commit-in 1993. ments under irs long-term fuel supply contracts are $76 million in 1993, $55 million in 1994, $50 million in 1995, $44 million The Company has a 26-year agreement wirh Scar Enterprise, effec-in 1996, and $43 million in 1997.

tive June l, 1992, ro purchase 48 MW of capacity supplied by rhe Delaware City Power Plane, which rhe Company sold ro Scar During 1990", the Company entered into a nuclear fuel energy Enterprise in December 1991. Under rhe terms of rhe agreement, contract in order to finance its share of nuclear fuel for the Peach rhe maximum capacity charge for a 12-month period is $3.4 mil- Bottom and the Salem nuclear power plants. Payments under the lion, if rhe unit's availability exceeds 85 percent. nuclear fuel energy contract, which is accounted for as a capital lease, are based on the quantity of nuclear fuel burned by Peach The Company has commitments for capacity payments under rwo Bottom and Salem. The Company's obligation under the con-recendy signed agreements which were submitted to rhe DPSC tract is generally the net book value of the nuclear fuel financed.

and MPSC for approval. Under rhe first agreement, beginning at rhe Company's option in 1996 or 1997, the Company will pur- The Company leases an 11.9% interest in the Merrill Creek chase 165 MW of capacity over 30 years from a cogeneration facil- Reservoir. The lease is considered an operating lease and pay-ity at a Delaware refinery. Assuming the purchase begins in 1996, ments over rhe remaining lease term, which ends in 2032, are annual capacity charges are estimated to be $27 .8 million in 1996, $169 .4 million in aggregate. The Company also has long-rerm

$47.6 million 1997 rhrough 2012, $33.3 million in 2013 rhrough leases for certain other faciliries and equipment. Minimum 2025, and $13.9 million in 2026. Under the second agreement, commitments as of December 31, 1992 under all non-cancellable the Company plans to purchase 33 MW, beginning in 1997, from lease agreements (excluding payments under the nuclear fuel a nonurility generation facility ro be located in Delaware. Capacity energy contract, which cannot be reasonably estimated) are as charges under this agreement are estimated to be $4.5 million in follows: 1993-$6,836,000; 1994-$6,556,000; 1995-1997, $7.8 million in 1998 through 2011, $6.4 million in 2012, $6,526,000; 1996-$6,551,000; 1997-$5,462,000; afrer

$5.4 million in 2013 through 2016, $3.9 million in 2017, $2.7 1997-$155,520,000; roral-$187,451,000. Approximately million in 2018 through 2020, $1.9 million in 2021, and $1.4 90% of the minimum lease commitments shown above are pay-million in 2022 through 2026. ments due under the Company's lease of an 11. 9% interest in the Merrill Creek Reservoir.

In order to ensure adequate supplies of fuel, rhe Company has Rentals Charged to Operating Expenses The following amounts were charged ro operating expenses for rental payments under borh capital and operating leases:

1992 1991 1990 (Dollars in Thousands)

Interest on nuclear fuel capital lease $ 1,111 $ 1,633 $ 1,550 Interest on ocher capital leases 321 345 405 Amortization of nuclear fuel capital lease 10,231 10,242 7,832 Amortization of other capital leases 323 351 663 Operating leases 14,063 14,507 10,575

$26,049 $27,078 $21,025

@ Delmarva Power & Light Company

15. ENVIRONMENTAL MATTERS The Company is subject co regulation wich respect co che environ- auchorize governmencal agencies co compel responsible parries co mental effects of ics operations, including air and wacer qualicy clean up certain abandoned or uncontrolled hazardous wasce concrol, solid wasce disposal, and limicacion on land use by various sires. Alchough che Company is currencly a pocencially respons-federal, regional, scare, and local auchoricies. The Company has ible parry ac one such sire, and is alleged co be a chird parry incurred, and expects co concinue co incur, capital expendicures concribucor ac cwo ocher such sires, che Company does nor expecc and operating coses because of environmencal considerations and remediation and ocher pocencial coses relaced co che sires, eicher requirements. The disposal of Company-generated hazardous sub- separately or cumulacively, co have a material effecc on che stances can resulc in coses co clean up facilicies found co be conca- Company's financial position or resulcs of operations.

minaced due co pasc disposal praccices. Federal and scare scacuces

16. CONTINGENCIES 11 Nuclear Insurance In che evenc of an incidenc ac any commercial nuclear power plane The Company is a member of an indusccy mucual insurance in che Uniced Scares, che Company could be assessed for a porcion company, which provides replacement power cost coverage in che of any chi rd parry claims associated wich che incidenc. Under che evenc of a major accidental oucage ac a nuclear power plane. The provisions of che Price Anderson Act, if chird parry claims relating premium for this coverage is subject co retrospective assessment co such an incident exceed $200 million (che amounc of primacy for adverse loss experience. The Company's presenc maximum insurance), che Company could be assessed up co $19.7 million share of any assessment is $1.4 million per year.

for chird parry claims. In addition, Congress could impose a rev-enue raising measure on che nuclear industry to pay such claims. 21 Other The co-owners of Peach Botcom and Salem maintain nuclear The Company is involved in cercain ocher legal and administra-property damage and decontamination insurance in the aggregace tive proceedings before various courcs and governmental agencies concerning races, fuel concracts, cax filings, and ocher matcers.

amounc of $2.590 billion for each station. The Company is self-insured, co the excenc of its ownership incerest, for its share of The Company expects that the ultimate disposition of these pro perry losses in excess of insurance coverages. Under the terms proceedings will not have a material effecc on the Company's of che various insurance agreemencs, che Company could be financial position or resulcs of operacions.

assessed up co $3.5 million in any policy year for losses incurred at nuclear planes insured by the insurance companies.

17. SUPPLEMENTAL CASH FLOW INFORMATION (Dollars in Thousands) 1992 1991 1990 Cash paid during the year for:

Interest, net of capitalized amount $62,127 $65,788 $62,440 Income taxes, net of refunds $46,310 $37,397 $21,635 For purposes of the Statement of Cash Flows, the Company During 1990, the Company incurred a capital lease obligation considers highly liquid marketable securicies and debc instru- of $47,489,000 as a resulc of financing Peach Botcom and mencs purchased with a maturity of three monchs or less co be Salem nuclear fuel through a nuclear fuel energy contract. The cash equivalencs. Company received $18, 706,000 of proceeds from che 1990 sale of its inceresc in the Salem nuclear fuel. Refer co Note 14 for additional informacion about che nuclear fuel energy contract .

Delmarva Power & light Company @

18. NONUTILITY SUBSIDIARIES I I

The following presenrs consolidared condensed financial informa- sidiary which leases real estate to the Company's urility business, rion of rhe Company's nonregulared wholly-owned subsidiaries- is excluded from rhese statements since irs income is derived from Delmarva Energy Company; Delmarva Indusrries, Inc.; and inrercompany transactions which are eliminated in consolidation.

Delmarva Capiral Invesrmenrs, Inc. Delmarva Services, a sub-Consolidated Condensed Subsidiary Statements of Income (Dollars In Thousands) 1992 1991 1990 Revenues and Gains ______________ ___________ _ __,

Landfill and wasre hauling $9,021 $6, 154 $ 3,066 Operaring services 3,038 2,939 4,968 Orher revenues 1, 101 1,129 4,457 Gain on sale of oprions on leveraged leases 4,445 Orher invesrmenr income 880 1,721 4,613 14,040 16,388 17,104 Costs and Expenses Operaring expenses 15,408 16,449 17,932 Equiry in losses of joinr venrures 12,772 Wrire-off of joinr venrure invesrmenrs 62,534 Inreresr expense 550 1,704 1,720 Capiralized inreresr (231) (143) (373)

Income rax (benefir) (2,176) (2,900) (25,195) 13,551 15,110 69,390 Ner income (loss) $ 489 $1,278 $(52,286)

Earnings (loss) per share of common srock arrribured ro subsidiaries * $0.01 $0.03 $(1.10)

Consolidated Condensed Subsidiary Balance Sheets (Dollars In Thousands)

Assets Currenr assers Cash and cash equivalenrs $

1992 6,033 Ar December 31 1991

$14,601 Liabilities and Stockholder's Equity Currenr liabiliries Debt due wirhin one year $

1992 181 Ar December 31 1991

$ 11,211 Orher 2,477 4,639 Orher 9,!)89 11,729 8,510 19,240 9,870 22,940 Noncurrenr assers lnvesrmenr in Noncurrenr liabilities Leveraged leases 72,858 78,771 Deferred income taxes 65,604 70,110 Orher 5,481 6,511 Other 3,196 5,535 Properry, planr and equipmenr 68,800 75,645 Landfill and wasre hauling 28,488 24,555 Orher 2,089 6,032 Stockholder's Equiry 39,981 39,493 Other assers 1,225 2,969 Total $118,651 $138,078 Total $118,651 $138,078 In 1991, the sale of purchase options on the residua l values of were wood-b urning power planes with related sawmill operations assets owned through leveraged lease arrangements increased net char incurred substanrial operating losses due to unfavorable mar-income by $3,685,000 ($0.07 per share). ket conditions for timber and lumber. One of the projects, Burney Forest Products, is still operating under the management of the In December 1990, the Company wrote off$62,534,000 of Company's subsidiaries. The third joinr venture project that investments ($42,497,000 after tax or $0.89 per share) in three was written off, a planned trash-to-steam faciliry, was unable joint venrure projects char, based on management's evaluation, to secure rhe environmenral permits required for construction

• wou ld nor generate sufficienr cash flows to recover the book value of the facil iry.

of rhe Company's investment. Two of rhe joinr venrure projecrs

@ Delmarva Power & Light Company

19. SEGMENT INFORMATION Segment information with respect to electric and gas operations was as follows:

(Dollars in Thousands) 1992 1991 1990 Electric operations Operating revenues $ 780,175 $ 784,599 $ 732,381 Operating income 134,260 129,295 137,210 Depreciation 89,421 83,363 77,395 Construction expenditures 192,493 163,399 171 ,581 Gas operations Operating revenues 83,869 71,222 79,836 Operating income 9,451 7, 115 7,263 Depreciation 5,864 5,247 4,758 Construction expenditures 14,888 18,302 16,176 Identifi able assets, net Electric 2,035,977 1,892,24 1 1,789,426 Gas 142,173 130,624 116,958 Assets not allocated 196,643 240,853 219,331

20. QUARTERLY FINANCIAL INFORMATION I I

The quarterly data presented below reflect all adjustments neces- perarure variations, differences between summer and winter rates, sary in the opinion of the Company for a fair presentation of the the timing of rate orders, and the scheduled downtime and main-interim results . Quarterly data normally vary seasonally with tern- tenance of electric generating units.

Earnings Earnings Applicable Average per Quarter Operating Operating Net to Common Shares Average Ended Revenue Income Income Stock Outstanding Share (Dollars in Thousands) (In Thousands) 1992 March 31 $225,130 $ 38,058 $34,789 $32,988 52,876 $0.62 June 30 193,797 29,279 14,259 12,464 53,285 0.24 September 30 237,717 48,080 34,056 31,810 53,685 0.59 December 31 207,400 28,294 15,422 12,915 53,980 0.24

$864,044 $143,711 $98,526 $90,177 53.456 $1.69 1991 March 31 $216,315 $ 33,424 $34,896 $32,815 48,149 $0.68 June 30 205,934 31,730 17,09 1 15,091 49,586 0.30 September 30 238,715 46,867 32,032 30,070 52,115 0.58 December 31 194,857 24,389 9,217 7,283 52,476 0.13

$855,821 $136,410 $93,236 $85,259 50,581 $1.69 Quarterly amounts presented for 1992 and 1991 have been Financial Statements) which increased 1992 net income by restated for changes in the method of reporting interchange rev- $11,397,000 ($0.21 per share).

enues and the Company's steam business. As discussed under Effective January l, 1991, the Company changed its method of "Financial Statement Reclassifications" in Note l to the accounting for unbilled revenues as discussed under "Unbilled Consolidated Financial Statements, these reclassifications did not Revenues" in Note 1 to the Consolidated Financial Statements.

affect net income.

The first quarter of 1991 includes an increase in net income of In the first quarter of 1992, the Company recorded the results of $12,730,000 ($0.25 per share) for the one-time cumulative effect the Peach Bottom lawsuit settlement (Note 4 to the Consolidated of the accounting change.

Delma rv a Po wer & Li ght Com pany @

I I CONSOLIDATED STATISTICS I 1992 1991 1990 1989 1988 Electric Revenues Residential $273,463 $275,888 $259,113 $251,490 $247,950 (Thousands) Commercial 220,659 218,558 209,174 197,362 191 , 104 Industrial 144,094 144,272 140,288 133,451 130,094 Resale, etc. 102,690 104,819 93,179 90,206 90,220 Unbilled revenues, net 943 (73) - - -

Sales revenues 741,849 743,464 701 ,754 672,509 659,368 Interchange deliveries 1' 1 30,606 33,523 23,905 31,476 41, 162 Miscellaneous revenues 7,720 7,612 6,722 5,887 8,185 Total electric revenues $780,175 $784,599 $732,381 $709,872 $708,715 Electric Sales Residential 3,228,237 3,236,616 3,081,943 3,049,882 2,944,477 and Interchange Commercial 3,140,149 3,098,599 2,979,738 2,875,681 2,734,069 Deliveries Industrial 3,115,677 3,105,338 3,142,439 3,025,653 2,729,409 (1,000 Kilowatt-Hours) Resale, etc. 2,038,844 2,000,913 1,877,091 1,877,623 1,817,088 Unbilled sales, net (2,096) 18,814 - - -

Total electric sales 11,520,811 11,460,280 11,081,211 10,828,839 10,225,043 Interchange deliveries 01 1,113,423 726,090 894,402 1,413,150 998,679 Electric Customers Residential 336,076 330,632 326,175 319,696 311,577 (End of Period) Commercial 42,427 41,539 40,766 40,104 38,629 Industrial 726 753 774 798 825 Resale, etc. 590 578 562 562 547 Total electric customers 379,819 373,502 368,277 361,160 351,578 Gas Revenues Residential $43,147 $35,636 $38,487 $42,908 $40,303 (Thousands) Commercial 20,175 16,370 16,939 18,816 16,404 Industrial 15,365 14,395 16,498 17,546 12,208 Interruptible and other 3,520 3,552 6,819 6,806 8,375 Unbilled revenues, net 255 194 - - -

Gas transported 1,032 710 602 174 2 Miscellaneous revenues 375 365 491 492 494 Total gas revenues $83,869 $7 1,222 $79,836 $86,742 $77,786 Gas Sales Residential 7,264 6,410 6,484 6,795 6,797 and Gas Transported Commercial 4,286 3,653 3,452 3,562 3,333 (Million Cubic Feet) Industrial 4,358 4,398 4,418 4,245 3,229 Interruptible and other 1,090 1,058 1,715 2,043 2,795 Unbilled sales, net 15 55 - - -

Total gas sales 17,013 15,574 16,069 16,645 16,154 Gas transported 3,155 2,610 2,194 677 2 Total gas sales and gas transported 20,168 18,184 18,263 17,322 16,156 Gas Customers Residential 82,996 80,874 78,893 77,021 74,762 (End of Period) Commercial 6,500 6,313 5,983 5,689 5,322 Industrial 152 154 154 159 162 Interruptible and other 11 10 14 14 17 Total gas customers 89,659 87,351 85,044 82,883 80,263 (1) Interchange delivery revenues have been retroactively reclassified from operating expenses to electric operating revenues. See "Financial Statement Reclassifications" under Note I to the Consolidated Financial Statements for additional information.

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COMMITTEES AND OFFICERS DIVIDEND REINVESTMENT AND COMMON SHARE PURCHASE PLAN

• Audit Committee More than 30 percent of the Company's common shareholders of John R. Cooper, Chairperson; James C. Johnson III; record are now participating in the Dividend Reinvestment and James T. McKinstry Common Share Purchase Plan. If you are not participating, you may want to consider the benefits of joining this plan. Under the Compensation Comm ittee plan, you can invest your cash dividends and also invest additional Elwood P. Blanchard Jr., Chairperson; David D. Wakefield, cash, up to $100,000 per calendar year, to purchase additional Vice Chairperson; Sarah I. Gore; Donald W. Mabe shares of common stock without a service fee. Shares of common stock to be purchased under the plan may be either newly issued Executive Committee shares or shares purchased in the open market, depending on the Nevius M. Curtis, Chairperson; Howard E. Cosgrove, Vice financing needs of the Company.

Chairperson; Elwood P. Blanchard Jr.; James T. McKinstry; You may obtain a prospectus with the plan description and David D . Wakefield an enrollment authorization card by writing to:

Investment Committee Delmarva Power & Light Company David D. Wakefield, Chairperson; Elwood P. Blanchard Jr.; Shareholder Services Howard E. Cosgrove; Nevius M. Curtis; Donald W. Mabe 800 King Street P.O. Box 231 Nominating Committee W ilmington, DE 19899 Audrey K. Doberstein, Chairperson; Nevius M. Curtis; Donald W. Mabe DUPLICATE MAILINGS You may be receiving more than one copy of the Annual Report Nuclear Oversight Committee because of multiple accounts within your household. The James T. McKinstry, Chairperson; John R. Cooper; Company is required to mail an Annual Report to each name on Howard E. Cosgrove the shareholder list unless the shareholder requests that duplicate maili ngs be eliminated. To eliminate duplicate mailings, please Officers As Of January 1, 1993 send a written request to Shareholder Services and enclose the mailing labels from the extra copies.

Howard E. Cosgrove, Chairman of the Board, President and Chief Executive Officer H . Ray Landon, Executive Vice President Ralph E. Klesius, Senior Vice President Thomas S. Shaw, Senior Vice President/President, Delmarva Capital Investments, Inc.

Barbara S. Graham, Vice President and Chief Financial Officer Donald E. Cain, Vice President, Administration Paul S. Gerritsen, Vice President Kenneth K. Jones, Vice President, Planning Wayne A. Lyons, Vice President, Division Operations Frank]. Perry Jr., Vice President, Production Dale G. Stoodley, Vice President and General Counsel Jack Urban, Vice President, Gas Division W. Douglas Boyce, Vice President, Central Division Donald P. Connelly, Secretary Richard H . Evans, Vice President, Corporate Communications Richard T. Johnson, Vice President, Southern Division James P. Lavin, Comptroller-Corporate and Chief Accounting Officer Dennis R. McDowell, Comptroller-Operating Philip S. Reese, Treasurer D uane C. Taylor, Vice President, Information Systems D. Wayne Yerkes, Vice President, Northern Division Delmarva Power & Light Company @

OUARTERL Y COMMON STOCK DIVIDENDS AND PRICE RANGES The Company's common stock is listed on the New York and Philadelphia Stock Exchanges and has* unlisted trading privileges on the Cincinnati, Midwest, and Pacific Stock Exchanges.

The Company had 56,334 holders of common stock as of December 31 , 1992.

Dividend Price Dividend Price 1992 Declared High Low 1991 Declared High Low First Quarter $.38% $21 y, $20 First Quarter $.38 y, $19 y. $16 Ys Second Quarter .38% s22 Ya $20 y, Second Quarter .38 y, 19 !4 17 Ys Third Quarter .38 y, $23 '% $22 y, Third Quarter .38 y, 20 y. 18 !4 Fourth Quarter .38 y, $23 Ya $22 'la Fourth Quarter .38 y, 21 Ys 19 ~

SHAREHOLDER SERVICES TRANSFER AGENTS AND REGISTRARS Carol C Conrad, Assistant Secretary First Mortgage Bond Trustee Delmarva Power & Light Company Chemical Bank 800 King Street, P.O. Box 231 55 Water Street, Suite 1820 Wilmington, Delaware 19899 New York, New York 10041 Telephone (302) 429-3355 or toll free (800) 365-6495 Preferred Stock Wilmington Trust Company STOCK SYMBOL Corporate Trust Division Common Stock, DEW-listed on the New Rodney Square North York and Philadelphia Stock Exchanges. Wilmington, Delaware 19890 ANNUAL MEETING Common Stock The Annual Meeting will be held on Wilmington Trust Company May 27, 1993, at 11 :00 a.m. in the Corporate Trust Division Clayton Hall, University of Delaware, Rodney Square North Newark, Delaware. Wilmington, Delaware 19890 REGULATORY COMMISSIONS Chemical Bank Federal Energy Regulatory Commission Stock Transfer Department Martin L Allday-Chairperson P.O . Box 24935 825 North Capitol Street, N.E. Church Street Station Washington, D.C 20426 New York, New York 10249 Delaware Public Service Commission ADDITIONAL REPORTS Nancy M. Norling-Chairperson To supplement information in this Annual 1560 S. duPont Highway Report, a Financial and Statistical Review P.O. Box 457 (1982-1992) and the Form I 0-K are Dover, Delaware 19903-0457 available upon request. Please write to:

Maryland Public Service Commission Delmarva Power & Light Company Frank 0. Heintz-Chairperson Shareholder Services American Building 800 King Street 231 East Baltimore Street P.O. Box 231 Baltimore, Maryland 21202-3486 Wilmington, Delaware 19899 Virginia State Corporation Commission Preston C Shannon-Chairperson P.O. Box 1197 Richmond, Virginia 23209

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