ML20064G749

Bg&E 1993 Annual Rept

ML20064G749
Person / Time
Site:	Calvert Cliffs
Issue date:	12/31/1993
From:	Crooke E, Denton R, Poindexter C BALTIMORE GAS & ELECTRIC CO.
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
NUDOCS 9403160337
Download: ML20064G749 (60)

Text

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t RonuttE.Desxos Baltimore Gas ami Electric Company t' ice President Calvert Clif]s Nuclear Pawer Plant Nm lear l'nerx~y '05" ("I" CIN P"'k"'"?

f.ushy, Afaryland 20657

.$10 $S6-2 B M) 1:tt.J.j$$IDral 410 2fod.j$$ Baltimore March 11,1994 U. S. Nuclear Regulatory Commission Washington, DC 20555 ATTENTION: Document Control Desk SUBJECF: Calvert Cliffs Nuclear Power Plant Unit Nos.1 & 2; Docket Nos. 50-317 & 50-318 1993 Annual Report In accordance with the requirements of 10 CFR 50.71(b), enclosed please find a copy of the Baltimore Gas and Electric Company's 1993 Annual Report to its shareholders. l Should you have any questions regarding this matter, we will be pleased to discuss them with you.

% ery V trulyyours, l((N N 3-RED /RCG/bjd i Enclosure cc: (With Enclosure)

P. R. Wilson, NRC L E. Nicholson, NRC (Without Enclosure)

D. A. Brune, Esquire I J. E. Silberg, Esquire R. A. Capra, NRC D. G. Mcdonald, Jr., NRC T. T. Martin, NRC R.1. McIxan, DNR J. H. Walter, PSC 00k

, L 9403160337 931231 PDR '\

ADOCK 05000317 PDR

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ a

Success is neverfinal.

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l The coming of competition to our industry calis to mind the words of Winston Churchill on l

our cover: "Sitccess is netrrfinal."

in the utility business, the definition of success is dramatically changing. As a monopoly, our success was the natural consequence of providing safe, reliable senice. In 1993 we left behind that enduring standard for success. Today safe, reliable service is considered a minimum expectation.

a We also lett behind our f amiliar blue-and-orange logo: its design M

J' commemorated the double-di;unond anniversary celehnted nearly 28 years -

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' ago. The green BGI! on our tront cover takes its place.

m, Our new logo symboli/es a culture that welcomes competition-a g culture pursuing success. Like contenders in a decathlon, we emplov our

_ w *a __.7 m m c_me cA _w, natural strengths to reach rigorous goals-goals that flex with change and, when achieved, enxure our success.

a .r t ran 1 llighliyhts I or y cars we' vc printed our anmeal r eports on recyc led 2 Cor;vrate l'rofiIe paper. This y car hon crer. n c's e put a new spin on 3 To Our Shareholders ^"I' " \~~ 'I "'S' I'd P "P " ' " d "" ' ""' "*" '

It ah this annual report. we heein fadl-circle recycling. an 7 .The Year in 1(ericw to Success is Never hnal u e xcncrate. os er 35.tw pounds of BGl;"s u hire waste paper 17 Financial Contents 11 ent inh 6 prthlih Ing the paper Ola antlual report 5s prinicJ on.

52 Cor[mrate and Utility Officers / M - ir t vid r MN-ira mn'hwiimnun mirm sa lloard of Unrector' the 5(K) tons <!f waste pap < r ,s c r ecycle cac h ycar.

54 Constellation Subsidiaries INSIDE DACK COvrR Shareltolder lnfornlation

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, Baltmwe Gas and ucitruc company and 5ubsidiarin in mutum. excpt per. share amounn I993 1992  % Change COMMON STOCK DATA Earnings per share Utility operations $ 1.77 $ 1.52 16.4 9 Diversified activities 0.08 0.11 (27.3) G Total $ 1.85 $ 1.63 13.5 %

Dividends declared per share $ l.47 $ l.43 2.8 '.7c Average shares outsianding 145.I 136.2 6.5 '7e Return on average common equity 10.39 % 9.40% 10.5 % g IWk value per share-year end $17.94 $ 17.63 1.8 %

Market price per share-year-end close $25.38 $23.38 8.6 9 F'l N A N C I A L DATA Revenues Electric $2,115 $ 1,968 7.5 9 Gas 436 403 8.2 %

Diversified activities 118 120 (1.7)9 Total $2,669 52,491 7.1 %

Net income $ 310 $ 264 17.4 %

Earnings applicable to common stock $ 268 $ 222 20.7 %

Assets Utility $6,891 $6,351 8.5 %

Dhersified 1,096 1.023 7.1 9 Total $7,987 $7,374 8.3 4 Utility construction expenditures $ 455 $ 367 24.0 %

IKiE investment in Constellat;on Companies $ 307 $ 295 4.1 %

UTILITY SYSTEM DATA Electric sales-megawarthours 26.8 25.3 5.9 %

Gas salesalekathenns 108.0 108.6 (0 6) %

CARNINGS AND OlVfDENDS DECLARED RETURN ON COMMON STOCK MARKET PRICE PER SH ARE OF COMMON STOCK AVERAGE COMMON EoulTY AND BOOK VALUE l'en ent

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-CORPORATE P R O F I L E; ,

Baltimore Gas and Electric Company, with assets of nearly $8 billion and approxhnately 8,000 employees, combines a core utility business with diversified, nonutility operations. As the nation's ohlest gas utility and one ofits earliest electric utilities, wc have a tradition ofsuperior, Q low-cost service and reliability. That tradition is the key to our corporate strategic visian: To pelforn! as a World-Class Ctiergy contpany.

llGE serves an economically than one million customers.

, _ _ _ . . _ . . . ___ diserse territory with a broad Angmenting these plants are business base: 2,3(0 square three in Pennsylvania where g

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" we are part owners We are N miles in Central Mary land.

' also members of the With our 10 local power _.

i plants, including the Calvert Pennsylvania-New Jersey-Cliffs Nuclear Power Plant. Maryland Interconnection, a we supply electricity to more power pool affording us additional operating relia-remvtv4wia - bility at favorable terms.

N 'd ^" Our territory includes

% ueuWnne (8"7.??** ' t ,,,,, ,3  % \\ more than one-half million vmwnss ) natural-gas customers. We -

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'v ' natural gas purchased front WA%H'NGTOhl D C KET TERRITORY BERVE D WITH F.trCTRIOTV m 1E RRITORf SEMVITD WITH f.LFCTRICITY AND GAS afe supplelnented by our COUNIV own liquefied gas and propane facilities.

IlGE's diversificti BGl"s sen ice arnt im Indes Hultimore City and all or part <f nine Central S1anland countics. busineses, grouped under The area served with clectricity appemimates 2.!!xhquare miles with 2h million residents. Constellation 1laldings.

n hile the area served with gas includes (117 squar c nuln with a par.dation of nearly 2 million. include power generation, real estate development, and financial investments.

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To OUR SHARCHOLDERS ,

Because our beginning dates back 178 years, BGE can conipare the present against a gencrous past. Thefact that we consider I993 one of a handfid of watershed years in our contpany's history .speaksfor the year's signi{irance. Q in our traditional under-3%$

stasuhrig of the phrase.

1993 was a pxx13ear.

Consolidated earnings w cre

$268 rnillion, or 51.85 per share, an increase of 13.5 percent over 1992. And the

• Iload of Directors increased the dividend to $1 A8 per ,

f ,. p share, a 2.8 percent gain com-

.i ,9'#y pared to the previous year.

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.t, in April the Maryland 3 - ' TJ Public Sersice Conunission (PSC) pranted us a hase rate "t increase of S86.5 million to cover the cost of9 stem unchanged from I942 Chairman and Chicf E.sceutive OJ]icer Christian H. evindexter improvements and increased because of decreases in the and President and Chitf Operating Officer Edward A. Crooke operating eqwnses. 'lhose fuel rate. at the company's Etertric Operations fluilding. The advent of improvements contrihuted to The decline in fuel rates tranunission open access is gically cham:ing the traditional Ihe excellent perfonnance of was brought uhout primarily Jhcus and strm ture of the electric utihty industry. The need to our distrihution and pencra- by escellent plant perfor- accononodate suc h changes and define ourfinure spurred an tion systems duricg last mance hath at the Calvert unpra edented companywide improvement e))hrt in 1993.

sununct's prolonged peritxl Chffs Nuclear Power Plant of record high temperatures. and at our fossil plants. Since Despite the increase in base returning to operation in rates, our customers' cost per 1991. Cahert Cliffs has kilow atthour was essentially operated esceptionally well.

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logging its second-highest annual electricity output in We asAcd our become a criticalissue for 1993. This performance, staAc/m/ders to help every group, ranking near the coupled with creative bulk- In actuality, however, us define "world class." top of almost every BGE

. Q . power arrangements, enabled last year was anything but in 1993 we identified our stakeholder survey. Now the company to save about traditional. As a consequence major stakeholders* expecta- mon: than ever before, envi-525 million through sales of the Energy Policy Act of tions of a world-class energy. ,,nmental responsibility goes and purchases in the 1992, regulatory agencies company. We define our right to the core of our com-10 ofer our customers superior value, we must move beyond providingjust lajind creative. sometimes nontraditional solutions to our customers' energy wholesale power market, throughout the country began stakehoklers as any group pany's identity. In 1993 we an increased susings of to make precedent-setting that significantly affects our strengthened our programs '

35 percent over 1992. decisions that will reshape future: customers, investors, for preserving the environ-Our aggressive mar- the energy industry in the employees, regulators, legis- ment through a policy that..

Leting of natural gas con- years ahead. Clearly, the old lators, community leaders, encompasses all aspects of tinued to pnxluce excellent industry standard of the and suppliers. Through environmental responsibility, results last y ear. We added electric utihty supplying extensive surveys and inter. .We leamed, too, that 6,500 new gas customers. customers without competi- views, our stakeholders some of our stakehoklers We received approval to tion cannot he sustained. In its defined world-class perfor- misundersto<xi the use of establish a new natural-pas place is a new market-driven mance from their penpettive !world class" to define our franchise, our first since standard that relics on innova- and compared BGE's perfor- vision. Some thought a 1965, in the tow n of Mount live pricing, products. and mance with that ideal. Our workl-class vision meant we Airy, w hich lies in both services to satisfy the needs purlose was to identify the wanted to expand into the Carroll and Frederick coun- of present and future cus- gaps between the two. Tnis international energy market.

ties. And in partnership with tomers. The need to accom- information will guide our Others believed a world-Crown Central Petroleum, malate such changes and continuous improvement ~ class vision meant we we opened Maryland's first define our future spurred an efforts in the years ahead. . intended to pursue large-.

public natural gas fueling unprecedented companywide We learned that concem scale growth strategies station in Annapolis. improvement effort in 1993. for the environment had Neither is the case. Still

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e 8 others said they found liGE's Boar J of Directors "w orId class" os crused and toured /icth/ chem Stec/'s vague. Granted. we might Sparrows Point Plant, the has e been more cleser. but to companf s largc31 cu3tomer.

us the meanine of"world m At es cry /ccc/ of the organi- O class" was t leur. At ilGE it zation, HGE is stricim; to mean', we must always stris e

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)f a _ j hetter understand the needs to realize our full potential, L 4 and capectations <f its customers.

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building on our expertne in our customers' energy needs. United States a potential our appliance service and the energy m.uket. We scath Our Energy Solutions customer. meichandise operations, f or excellence in eserything Program establishes long- We aho are of fermy An organized group of we do. We aim to of f er our term relationships with our customers added value by heating and cooling service customen superior ulue for largest customers by of fering expanding our business in contractors has opposed the their energy dollars them mnoutise prnfucts. the appliante and home elec- expansion of our existing Ambitiou,," Yes. but w e sen hes. and priang. Our ironies sales and service service business. We con-belies e a s nion should le Partners for Pro perity pilot area. Late last y car we began sider this opposition both that and more. program is testing new tech- offering sersice contracts on anti-consumer and anti-nologies f or I.u ce industiial electuc heatmg and conhng (ompetitive. We expanded

1. noming world clan customen to enable them to equipment. 'Ihis program is a our sersice contract program requires innm atirc <.ontrol their energy use and logical espansion of the at our customers' reyucst. In thin kin t . costs through a two way nuintenance programs July 1993 alone, we turned Io oller our customers telecommumcations already in place f or home away more than 1JX0 cus-superior s alue. w e must netuoik. And tinough our appliances, w ater heaten, tomers requesting air-condi-mos e bey ond pios idmg just Constellation Energy and gas f urnaces. To empha- tioning service. We intend to gas and elecitiaty in order subsidiary , an independent size this business. w e are s igorously protect our right to find crealis e, sometimes power prnhner, we can planning to estabbsh a sepa- to expand into this and other nontraditional solutions te consider escry utihty in the rate subsidiary to manage all energy-related businesses.

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We took decisire action to In the end, however.

l We also rededicate our-improre our compctitire serve us well in the long run, our ability to succeed rests po3ition and get ahcad of We are passing each strategy squarely on the shoulders of sels es to presersing our industry changes, through a screen of future the men and w omen w ho investors' conlidence in in addition to seeking ways uncertainties, such as compe- work for BGE. We regret BGE as a stable, rewarding to increase our revenues, w e tition for electric and gas that preparing for competi- investinent. That is the goal also took decisise action to sales, national and regional tion means saying goodbye of our short- and long-term improve our competitive economic conditions, and to some of our long-time initiatives-to heighten position by streamlining our tet hoological advances. This employees. In coming financial performance, We costs. We es aluated every ongoing process will drise years, we dedicate ourselves are determined that BGE will function in the company to our plans and allow us to to staying ahead of the remain among industry see if it contributed to our prepare for a range of changes in our industry so leaders in the future. We mission-to achieve com- possibilities. that w e can continue to thank each of you for your plete customer satisfaction provide fulfilling careers support and look forward to by providing superior energy OPlf haxfundamentally and opportunities for sharing our success with you pnxtucts and services. As a changed the way we operate. our employees. in the years ahead.

result, we reduced the 1994 We are well on our w ay to divisional operations and becoming a company adept maintenance budget well at making changes. We below 1993 levels.These began this process three savings are, in part, being years ago when we created

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realized by eliminating about OPlP, our Organitational ,

1,000 positions. To help Perfonnance improvement  %/

reduce our work force, w e Process. Our logo change ollered a mluntary retire- serves as an outward symbol Christian 11. Poindexter ment program, an enhanced of the progress we have Chmrman qf the Ifourd and Chirflacciaire 0))icer severance package, and a made toward developing a placement program that resibent corporate cuhure helps displaced employees that encourages excellence find jobs inside and outshle and rew ards resuhs.

the company. Although we still have To respond to the uncer- ground to cover, OPIP has tain energy market, w e have fundamentally changed the Edward A. Crooke strengthened our strategic way we operate and pmi- President and Chief Operating 0]Jicer planning and identified aber- tioned us to benefit from the native strategies that couhl changes ahead. February 14 /994

THE YEAR IN REVIEW . .AND A PREVIEW OF THE FUTURE OUT E'.lcCll'ic and Gas Businesses . Cau en Cliffs suacar Review. We look the third hottest July on record in stride and mercased our annual utility res enues more thc.n $180 Pow er Plant reconled it, second. highest yearly J ~ ' "g million, or /.6 percerit, over 1992. energy output: it received .- ,- ,f high marks for continued (  %.

SALES or ELECTRICITY weather and an increase in (be improvement from the 2.Amd. [ S taas.asu Biihons eikth a n'thout s nunner of gas customers. Nudcar Regulatory . To promote the use of g industdal and commercial gas Conuaissim in its Systematic attemative luel vehicles, iS

_.___# sales fell by 2.3 percent. pri- Assessment of Licensee N1aryland's Grst public roarily because of lower gas Perfonnance report. The PSC natural-gas fueling station m - ;Q, A

/ use by our larges.t customer, opened hearings on purchased opened in Annapolis, a joint liethlehem Stect fuel and energy costs incurred elfort b: tween llGE and s~ ' i ~ during the 10Sn-1991 outages. Crow n Central Petroleum.

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. liGE w as panted a base- with a decision expected in And the Chesapeake

' " So E' 92' '3 rate increase totahng 5S6.5 late W95 or cady 1996. Consonium delivered to its e ut, ni,a' million, or 3.S percent, by members 10 electric minivans.

e buhno ..d ,rnd i omm. ou wl the 51aryland Pubhc Senice a llGli broke ground to build Consisting of 13GE, Chrysler.

Elecine sy stem sales rose by Conunimon (PSC) efle-tis e a 140-megawatt natural-gas Westinghouse, and the state of l 5.S grrcent. llecause of late April 1991 p unit at its Perryman site in Niaryland, the Consortium estremely high sunuuer heat liarford County, coonhnates research and i

< 1 and humidity compared w ith

• llGE added more than expected to be in ser- resources to develop ek ctric-miki summer temperatures in 6,500 new gas customers k  ; vice Jun- 1995, vehicle technology.

As 1992, re41ential customer through appessise maikeling . .. ... . .......... . .. ..... .. ... .... .. .......

sales ineicased 4 peteent. of natural gas. Preview: Our primary goalis to grow our revenues by Sales to out offering customers the best of both gas and electric

,f, SALES OF GAS

, industrial and * *"mi" " """" technologies at competitive prices.

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> Os erall cas sales decreased so Q .

capacitv-140 megawatts of pc.

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,, g i less than I percent comp,ued electricity for a term of 25 f 20 g 4 to the previous y ear. m years beginning June 1997.

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l ever, increased 2.5 percent . IlGE will expand natural [N 4

e % h,,a p herause a d ' 'Idcr willier e /n,b, o 1.d anJ t -w a w gas service to hjount Airy in D l ... ..

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! . IMiE's newly created Hulk Power Arnuipeme its Unit

• The remote meter-reading customers' buiklings. ,

Carroll and I rederk k coun- w ill f ocus on buy ing cad pilot will be estended in Es entual:v IIGE hopes to l ties, the first new municipal selling electric capacity and 19% Energy use is recorded sen ice 5(XU)DO customers q gas frant hhe llGE has eneigy in the emerging using a rwlio-equipped ructer, thiough remote meter-  !

requested smce 1965. w holesale bulk-power market. climinating the need to enter reading systems.

wwW- -y M' M Tpu{P'? ,Y{' ; .. T j"3 j The Constellation Contpanics  ? '

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Review: Hur Constellation subsidiaries, particularly Q'%,

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Comtellation Energy, provide dis er ificationfrom gy ,; ?( G. L[yf .ggZu n -.

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. Earnings from Constellanon and u as recognized f or . , .g- @

i lloidings were 15 X percent encryy moosation by the ]p ,7_,

atxn e 1992 hetore the %S Dep.uunent of Energy in its

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million charce to reflect :he national aw aids.

higher corporate income las Brm e M. Ambirr. Prestdent and ChiefEs'ccutive Ol]icer of rate enacted by Congress last

• In the initial public oftenny Cornicllation iloidim:s, forewes c.u client gran th v;>portunitics y ear. Herorted caniings were al Carsilal Guaranty lue., in the inJcpendent pou cr market. "To meet cmtomers' needs in 8 centu per share. Constellation Investments sold the y cars ahead and remain competitive. cncrgy companics must

, about 50 percent of its hold. tale the 'budd some, buy some, sas e some' apprmn h to genera.

c Constellation hnergy now ings in 1he A A Alaan-rated tion planning, ' says Ambler. "1 hat makes es cry utility a paren-has ou nership interest in financial guaranty company, nal Canarcl/ation rustomer.'

2-4 power projects. The - - ~ . - - . ..

25-megaw att Puna Constellanon Real Estate's Preview: Crnstellation 's minion is to emphasize energy and geothennal plant began developed pwpernes are contribute significa*stly to BGE's profin and shareholder value.

operatmg m llawaii. The 41 percent occupied, sur-I SLmegawatt Panther Creek pawing the Baltimore areaN

• ConstcIlation iloldings plans continue to develop and plant in Penns)h ania is ascrape of 85 percent for to reduce its investment in real operate wholesale power-operating wcll alter retail and commercial occu- estate os er the nest few years generation projects. The correcting f uel and turbur. pancy. And Constellation when ii can recognize reason. Constellation-developed problems discos cred during ileahh Services sold at a able value for ;ts investments. lO2-megawatt Colver Power

start-up. The ACE plant in profit its ou nership in fise Plant in Pennsylvania is sched- l I

Cahfomia had a record ycar nursing homes.

• Constellation Energy will uled to come on-hne in 1995.

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l ll1 Ollter News.

Review: Refinancings save more then $111 million, . BGE's partnership with 4 minority business gre w by 15() percent, and our community Baltimore City in operating ,

and conservation efforts drewpraise, the Mayor's Crisis Centers M.f AMI #

camed the company the  % wasus

. BGE issued almut $1 JXi2 Commerce and the Edison Electric InsUtute's gD"~

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million aflong tenn debt and U.S. Small Business Common Goals Award for S$&f((AM WAff Q

I" preference stock 5693 million Administration, w hich recog- community responsibility, as of which was used to refi. nizes outstanding programs well as awards f rom the nance existing iwnes and take and perfomiance in support of American Gas Asso<;iation community's economic advantage oflower interest minority business. and the Greater Baltimore health and the company's rates. The refinancings will Committee, an association of success. BGE employees save about 5111 million in The Cambrid Group, a Baltimore businesses. The continued to Le modeh for interest arul preference stock national consuhing firm. Mayor's Crisis Centers assist the business community.

dividends over the remaining reported that BGE'uustomer km-income customers with For example. our 5 olunteers life of the redeemed securities. f as orabihty rating is 87 energy-related problems, collected almost $145DX) l percent versus the national homelessness, and food and for the 1993 March of Dimes i

,.,,y average for utilities of ekithing shortages. TeamWalk-a 70 percent ,

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r 76 percent. increase over 1992. That l BGE continued to be the raised the company's team i The Maryland Chapter of largest corporate benefactor ranking within the utility l

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% the Nature Conservancy in Central Mary land, recop- industry from sixth awarded its lht Corporate nizing the link between the to second.

. BGE increased by 150 per- Conservation Award to BGE .. . .. . . .. . .... . .. . .... ..... .....

cent its business w ith minority for outstanding achievement l'reticw: Two Acy goals willbe to continue cost control contractors, such as invesunent in conservation. l.ast spring, and secure our right to expand into nonutility businesses.

banker Nathan Chapman, k. BGE and the Conservancy President, The Chapman signed an The PSC will hold hearings In 1994 BGE will continue Company, in recognition of agreement relating to BGE's panicipation to look for ways to impros e this accomplishment. the com- to manage , in appliance sales and service efficiency and cost-effective-pany carned six awards from businesses. In these proceed- ness. Our efforts will include j the habitat (

industry groups. Most notable of two ings initiated by our potential refining the design of a new is thejoint Corporate Award species of competitors, BGE w ill compensation system that from the Minority Business globally rare vicoroush defend its right offers excellent caming

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I Desclopment Agency of tiger beetles at to increase res enues by opportunities to empio> ees 4

the U.S. Department of Caher Cliffs. expanding into new businesses. w ho achieve desired results.

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SUCCESE IS NEVER FtNAL

" lim cannot walk the middle al the road holding himds with tradition on one side and mod-ernism on the other. )i>u have to make a choice." This saying by political pundit Alvin Rolland describes the most important decision we made last year. In 1993 HGE chose to turn Jidly gp toward change, a choice that ha s proved both painfid and liberating.

Painfid because we h]i hehind a 17& year tradition of unwavering job security fi>r our 1

employees. Liberating because with the probable loosening of regulations comes greater firedom to chfine ourfitture success. 1 We choose to define success much like a contender in a decathlon. li> come out ahead, we l

l l must per}orm wellin all essential areas: e.\panchng customer awareness, positioning to compete l l

1 on price, balancing envirotunental concern y, and heightening ourfinancial pelfi>rmance.

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i h OU R C U sT oM E R A W A R E N E S S -

l l o rem,nn our i nso nners- iions we ihai askea on, w e empim ere,i cinnio>ces

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I cuelpy pluvider of choice, casioniers to deline the with f ront hile customei I

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we inu<t tirsi become ;icutely < haraciciistics of a u oita. L ontaci io solve custoiners' cre "

an are el their necch and (lao enerp) L oinp.in) and to

. problems (luickly, of ten on espectations. In lu'O w e incasure BGli's perfonnante the br's contact.

launched an intensn e e!fon against that ideal. Nest. to The feedhat k we lo yet to know our customets inipios e customer conununi. received f rom these s asious better. Going beyond con- cations, we pahed key cus- customer contacts gase us a t entional ( nstomer mput, w e tomeis with company preater unticNanding of out fu st des eloped onroing sur- repr esentam es hom cu .tomeis' needs and espec. <

s ey s to get ahead of( hanges matLeting speciahsis to the tanons. For example, our in our ( ustomeri especta- Chainnan of the lloard. And customers need the nght uns i

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f_t t 3 ; er Last year we created an . y;7 :7 p g sSJ1 L ..

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i Energy Solutions offering i .

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sional consukation and inno-vative energy solutions at F*  ;

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approsal by the Maryland hw Public Sen ice Commission.  !- h7 As a combination utihty, we can offer new gas and lonxn h. is a characteristic BGE shares with one ofits key customers, McDonogh School, a vener-electric technologies that ,i!e 120-year-oldprivate schoolJhr kindergarten through senior-high students. BGE's account play an increasingly impor- representative, Cherise Seals, above right, has worked closely with John White, McDonogh's tant role in masimiting value Director of Facihties. tofind energy solutions that offer the right bicnd ofcost and valuefor the and profitability for our cus- school, whic h covers Hill acres and im lades 44 buildings. Sohaions such as el]icient lighting and tomers. Last year the air-conditioning energy-sarcr swiu hes emitted McDonogh to conservation rchates and monthly Unisersity of Maryland sarmes on its energy bills, Medical System reecived Seals starcJparticularly < lose to the customer during the replacement of an antiquated oil-fired

> $5%JKK) for installing an boiler last year. The new ilean-burning natural-gas boiler will save McDonogh roughly $20/XX) l l . energy-efficient cooling annually in energy costs and will add about .H),1NX) cahicfeet <>f hud to BGE's gas system.

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system -vur largest conser-vation iebate to date, managemen* Whnstogies tio,, perhaps the best indica-lluilding on our pilot elforts, to several of our large technologies to produce tion of our commitment to  ;

we will expand our Partners customers And our encrey foi sale to the customer service is our cor-

for Prospenty Program, ConstellatWn linergy independent power market, porate mission

to achieve which uses a sophisticated subsidiary continues to Although we set mea- complete customer satisf ac-g teleconnnenications network develop projects using surable yearly goals to tion by providing superior to bring an array of energy- the latest generation enhance customer satisfac- energy products and services.

Q((((Q T O CO M e E T E O N P R I C E

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• % 3 maintenance budget signiG- important continuous increasingly important in a . - / cantly below 1993 levels,in improvement tool we use to competitive m:nketplace, in t* > part because we climinated control costs. Through PITS.

1993 we examined pricing in ,

1 about 1.(W)0 positions. employees break down i cach area of our electne w - In the y ears ahead. we organizational barriers to busmess-generanon, trans- j w di continue to control costs. identify w ork-process ineffi-mission, and distobution. -

We have increased effort < to ciencies, recommend and Our studies showed that our keep our compensation les ch implement improvements, tunsmission and datribuuon competiove thmugh a com- and measure results.  ;

costs are generally in line prehensive study of our pay Two years into the PIT with those of neighboring rates and job-evaluation process, we are beginning to utihties, but that there were system. .And we have imple. see significant savings and areas u here we couki reduce mented pay-for performance improved elHeiency. Our expenduures. ~

compensation that offers Nuclear Pmeurement PIT To improve our os erall excellent earning opportuni- streamlined the prueedure for I

i competitise price position, we ties to emplo3 ees u ho receiving materials and sup-

! took decisive action to reduce achieve desired results, par- plies by reducing the number i costs. We studied es ery func- ticularly results that add of hand-offs from worker to Gon w ithin our company, value for our customers and worker. As a result, the pro-  ;

j eliminating those that did not improve company earnings cun ment area increased pro-contribute to our mission. As and etficiency. ductisity by 71 percent while l a result, w e reduced our IW4 Process impros ement reducing costs by $200,(NO dis isional operations and teams. or PITS, are an the first year with additional ,

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, a sasings eywted m the years equal sas ings e q>ected Substatioin sicp up c/cr trir al ro!tage n hen it nits the p<m er ahead. Oui lsansportation in the f uture. plant and ucp Jon n voltace n hen it reac hcs <listiibution lines.

Y.nts VI1 unpune I the VI \\ pive both manage- Altoo ther luiE vperates 2F wbstatwns in its 2 X%piasc-s) stem of 1.ny inc. loung, inent and emplo)ces a orde w i ore area and thstubutmp p.uts f or our tanyible na3 to measure 1 pro, cu imprm ement inun. or P// . u a s /vimed in April l}cet. as tne $t50.(X XI the lesul(s o[tonlinuous /W3 t,# INm inbuation mapitenam c ( mtA and [mpita e timc/i-annually. ()ur Substalloi, unprosement. Ark! YlI neu . !/ /e pitirs. /'/ / s ar e tenith #1/ ringh a res that (im s < *igani--

M .nenante VIl~ trinoned partitipants report a benetit :ation hnn ro unproce n od proce.ucs. / he Snhstation ni,unienance costs wlule that extends bey ond tost and llan;tenam r P// in omnvnded a 4 ino-trainine pmeram that maintanung rehabihty an I cinciens y unpiin emente an cho subuation n oilen dd/> to do 1.cecial tad s. /hi3 and unprus mg the lunchness of meica sed sense of self w orth othii improu ments saicd S4/2.tm lau year n nh equal substanon icpan s. Rn ines and responsibihly on the part ias onn mp< i tcd for / WJ.

tota!cil M 12Jm m lWI a ith of anp!oy ect

V l H O N M E N T A L CO N C E R N S "iU w Ww u m:n naOTEUUEN l

To llGli, being a welb Throuyhirat the past 24 spawned auturally. recovery systems would regatded corporate neighbor ycars our sense of enviton- Ahopether, ilGl! reared esentually become federally includes balancing our role mental respon ihility has 75,(XN) pounds of nn kfish rnandated, llGli huilt six of energy powider with grow n. We play ed an inte- hetore the f acility was underground f uel storage prescising the environment. yral part m replennhing the donated to Maryland \ tanks with piping for vapor Although cosironmental Chesapeake llay's dw indhng 1)epanment of Agricultme. recovery already in place, responsibility is now an nxkfish populanon for sesen We anticipated changing ming significant money in I essennal utihiy ainibute,it n years by operating an enuronmental ex pectations the long run.

not new to liGl!. hi 1970 w e aquaulture facihty that by addrewing the iwue of We took strong pollution established an ens ironmental inade marine biology history. tapor recovery w ben prevention measures w hen group to monnor and help l or the first time eser. to(k- buildmg fuel storage tankt we became one of the first improve our pertonnance. fish raned in captivity Predicting that vapor utilities in the country to

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l' $1aryland. As a result,llGE 9 h cordoned off the w ca la protect t  : the plants from construction x cr. ,rs oad ccpsipment.

- M-considerations in

• Promote efficient use locating dssigning, ofour energy products.

building, and opciating

• Work with scientific, Rk ourfacilitics, business, government.

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f e Respond quickly to andpublic representa-6 I-O st'L A 0 uur customers, ncigh- rises to help cnsure Q seseen for hanardous chemi- Since the need for ensi- bors, cmployces regula- sound public environ-cals. hequiring review and ronmemal responsibility is lois, and others when menta/ policy.

approval of any themical increasing dramatically, we they have concerns

• Support comnmnity

. prior to its use in the com- recast our existing corporate about the environmental efforts that promote pany, this policy minimizes philosophy as a commitment c]/i cts of our bu sines s. environmental aware-hazardous waste and reduces in 1993 and created an eight- . Support all employers ness and hnprove the the amount of toxic chemi- point policy that includes all in handling the enriron- environment.

cals we use. And with the aspects of environmental mental re3pomihilities Our goal is to instill in printing of this annual repmt, excellence. We pledge to: of their work and escry employee an instine-I we begin full-circle recy- Continuously improve encourage environ- tis e sense of environmental cline, an mnovatise concept om emironmenta! man- mentalawareness both responsibility, since sue-whereby we produce our agement systcms. on and <1f thejoh. cessful environmental man-printed materials directly . AlaAc polhnion pic- - Alcasure, audit, and agement rests heavily on from the 5m tons of waste rention, en vironmental taAc corrective action to knowledgeable, empow cred white paper we recycle protection. and resource improve our environ- em.nloyees making respon-l each y ear. conscrration important mentalperformance. sible decisions.

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To remain successful, we IlGl!'s performance. ,,

i must maint:.in imestors' Our individual investors -

o confidence despite industry listed the top five qualities of #

change. As with customers, a wodd-class utility as -

we began by asking our insti- healthy dividends, good dis i- t tutional and indisidual dend grow th, quality manage- -

1 investors to define a woild- ment, market value grow th, l class utiht), then to compare and conecrn for the em iron-1 i.

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incot. In all the unepories. luture; otheis are uncomhut- j our indn idual sharehohler s able w ben ilGE sentures out- many components uill be said llGli eu ceds or(oines in the "oceds improve- side its core Lusiness area. used to n.easure our financial t lose to meetine their defini. ment" category , insotuhonal We are uung this inf or- success, our primary goal is tion of a woriti class unht). imestors pixed unnmuni': . mation to implos e the quahty to prodtice an carnings stream 1 Our instuutional hons ai the top of the list. ol our im estor connnun.ca- that wi!I allow us to intrease tmns and guide our goals for our dividends.

$ investon t ited ses eral They s iewed m, as ielut tant strengths. %ey s iew favor- lo athnit past mistakes and financial perfonnant e in the ably both our < urrent yichi la(kmg a cleady articulated > cars ahead We beheve we in closing.1993 was the year and potential for camings and vision, and they f elt a major aic aheady in an emiable w e ici go of several closely dnidend growth. They credit business iategy shouhl be position. Our (ash dis idends held traditions to f ully embrace sound finant tal management cost containment. Oui busi- has e been uninterrupted f or 83 change, in the year ahead we l 1

with kt'eping m cotupetuis ely ness-diversliication soategy years. Our stock price, earn- will continne our progress l 1

prit ed. And they behese we drew imsed res iews from ings per share. equity ratio. toward becoming a lean and I j operate in a gml service both investor groups. Many and dis idend grow th has e agile cony >ctitor. Anil we will l terntury with a reasonable consider Constellation imprm ed steadily mer the always temember ihat success l regulator y em itonment. line gy the wase of the past three years. Although is neser final.

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, pcrceptions of a worId-class utihty. IVe learned that healthy dividends top our individual meestors' list <tf over tations, and that BGEs average investor depends on dividends to augment a retirement im ome. \\'e are conunitted to producing carnings that willallow us to inco ease our dividends in the l n . ma sw + u 2 y cars ahcad.

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l FtNANci AL CONTENTS UTILITY CONSTRUCTION ExecNosTURES Ahum,a of n.,n."'

19 Management's Discussion vid Analysis I

.__..I_ _:

5500 _4_

g _.l L._._ L._ d l 26 Report ofIndependent Auditors il I

_ _ p. ~

27 Consolidated Statements of Income

$30o 2a Consolidated llalance Sheets S

so Consolidated Statements of Cash Flows pg -- --

31 Consolidated Statements of Common Shareholders' Equity

.-89 90 91 9? 93

. - - ,94 .

(EsTJ 32 Consolidated Statements of Capitalization am ce,w, n,m em a, am < f.,r n,,J.i I scJ our.nr cc,nina imo 34 Consolidated Statements of Income Tases 35 Notes to Consolidated Financial Statements s2 Corporate and Utility Officers 53 Board of Directors 54 Constellation Subsidiaries 1993 OPERATING EXPENSES se Five-Year Statistical Summary

• eg INSIDE

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ELECTRIC PEAK LOAD

$* # ' l'"' > Ou flour-Mcgawam

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7 iy hSj ha[d 4.000

& PurchavJi urlmul *

• 50 24 gy W Operathm $a23 8 Msonc~ance $0 07 2000 n Deprn uetem $h )

1.000 n 1;nn $e 12 tt In,erra amt Pretwr.l og go e, og 93 and inj< rem e Du uk nah $o os n C1.. nom Sam L inn idend, $n es e Summer PmL n ka rwncJ m ituw><u $n o:

• W'"!" Pai ilGE at hmved an all-tmr pc.ak load of (n. NIX nrg.t*ath on Lsmtary IR 1464.

}Lillinkwr Csn <tnsilllcnric Csmtfynty 6,ul,%,hstJiarie.s

l SELECTED FINANClAL DATA 1993 1992 1991 1990 1989 l Ilkllar amowns ist thonmds. c u rpt per share amo n,nts)

S U M M A R Y O f" O P E R A T IO N S Total Revenues $2,668,714 $2.491,343 $2,448.853 $2.178,112 $2,032JX)9 Expenses Other'!han interest and Income Taxes 2,047,714 1,955,998 1,959.665 1.854,183 1.555,424 locome 1 rom Operations 621.000 535,345 4X9,1 HM 323.929 476,585 0:hcr Income 15,702 22,096 26.628 36,674 30,928 Intome itefore Interest and income Taxes 636,702 557,441 515.x16 360,603 507,513 Interest Expense _ 148,764 189.747 196,588 165,205 149,593 locome Helore Income Taxes 447,938 367,694 319.228 195.398 357,920 138,072 103,347 85,547 81,629 Q inc ome Ta ses 19.952 Income llefore Cumulative Ef fect of Changes in Accounting Methods 309,866 264,347 233,681 175,446 276,291 Cumulative Effect of Change in the Method of Accounting for Income Taxes -

14,745 - -

Cumulative Effect of Change in the Method of Accounting for Unbilled Revenues Net of Taxes - - - 37,754 -

Net income 309,866 264.347 253.426 213.2tX) 276.291 Preferred and l' reference Stock Dividends 41,839 42,247 42,746 40.261 32,381 Eanungs Appheable to Common Stock $ 268,027 5 222,100 $ 210.680 $ 172.939 $ 243,910 Earnings Per Share of Conunon Stock Bef ore Cumulative tilfeet of Changes in Accounting Methmis $ 1,85 $1.63 $1.51 $ 109 $2.03 Cumulatise lif fect of Change in the Method of Accounting for income Taxes -

.16 - --

Cumulause Effect of Change in the Method of Accountmp for Unbilled Revenues - - -

.31 -

Toul Earnings Per Share of Common Stock $1.85 $ 1.63 $ 1.67 $ 1.40 $2.03 Dividends Declared Per Share of Common Stak $ 1.47 $1.43 $1.40 $ 1.40 $1.38 Ratio of thuTungs to Fiwd Charges 3.00 2.65 2.27 1,78 3.02 Ratio of liunings to I ised Charges and Preferred and rieference Stock Dividends Combined 2.34 2.08 1.82 1.47 2.44 FIN ANCI AL ST ATISTICS AT YEAR END Total Assets $7,987,039 $7,374,357 $7,137,989 $6,710,375 $5,985.679 Capitalintion Long-tenu debt $2,823,144 $2.376.950 $2,390,115 $ 2,193,844 $2,076,620 Preferred smck 59,185 59,185 59,185 59,185 59,185 Redeemable preference stock 342,5(H) 395,5m 398,500 365/100 322,800 Preference stak not subject to mandatory redemption 150,000 110f R W) 110,000 llujX10 110,000 Common shareholders' equity 2,620,511 2.534,639 2,153,306 2.073.158 2JX)l,188 Total capitalintion $5,995.340 $5,476.274 $5,i 11.106 $4,801.187 $4,569,793 thk Value Per Share of Common Stock $ a 1,94 $17.63 $ 17.00 $ 16.58 $16.60 Number of Common Shareholders 82,287 80,371 71,131 73/Ll9 75,762 natum.nr (;as and Tirartc Comp.ms and AuhnJ, aria

MANAGEMENT'S DISCUSSION'AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This annual report presenis the fittancial condition and results of Consohdated Financial Statements (Notes) Utility Operatin

- operations of 13ahimore Gas and Electric Company ( BGID and its Statistics, and Selected l'inancial Data. The following discussion subsiduries (collecth ely, the Company). Among other informa- explains factors that significanity af fect the Company's results of tion, it provides Consolidated i inancial Statements, Notes to t

operations liquidity, and capital resources.

RESULTS OF OPER ATIONS (PSCL the elfeet of weather and economic condnions on sales and competition in the generation and sale of electricity. The base rate 1:nrnine per Share of Common Sim k Consolidated carnings per share were 51.85 for 1993 and 51.63 inenw authoti/cd by the PSC in Apiil 1993 will affect 1994 utilii) earnings fas orably. Seseral electric fuel rate cases now g

for 1992, an increase of $.22 and a decrease of SD4 from prior- pending befoie the PSC discussed in Notes I and 13 could aho year amounts. ~lhe ch.mges in camings per share reflect a higher affect future y ears' earnings. During 1993 and 1992, unfavorable lesel of earnings apphcable to common sh(L, ofIset partially in economic conditions diminished electric and gas sales grow th in 1993 and completely in 1992 by the larger number of outstanding BOE s senice tenitory. Electric utilities presently face competition counnon shares. The sununary behw presents the carning+per- in the construction of generating units to meet future load growth share amounts. and in the sale of electricity in the bulk power markets. Electric utili-

~

1993 Pr>2 1991 ties ako face the future prospect of competition for electric sales to Utility business 51.60 retail customers. It is not possible to predict currently the ultimate

' $1.77 $ 1.52 .. . .

Diversified businesses eH.ect competmon will have on BGE,,s camm.ys m iuture years.

(,urrent9 ear operations .0M Earnings f. rom diversified businesses, which primarily represent

.II t .09)

(,umulain e cifet t of ( hanre the operations of Constellation Iloldings, Inc. and o.s subsidiaries m the method of. accounnnp (collectnely, the C,onstellation Compam.es), decreased during 1993 for income taxes nec Note 1) and.mereased during 1992. The reasons for these changes are th.s-

.16 .

cuwed in the "Discnihed flusinesses !.'rrungs,, section on pages Total dnersified businesses .08 .I1 .07 ,3 and N.

Total $1.85 51.63 51 67 Effect of Weather on Utility Sales Earnings Applicabic to Common Stock Weather conditions aflect HGE's utility sales. HGE measures Eamings apphcable to common stoc k increased $45.9 milhon in w cather conthlions using degree day s. A degree d. *s the differ-1993 and 511.4 milhon in 1992.1he 1993 increase reflects highei ence between the aserage daily temperature and the t.aseline utihty cammgs, slightly oilset by lower earnings of diversified temperature of 65 degrees. Hotter weather during the summer, businesses.'Ihe 1992 increase reflects increases m both utihty and measured by more cooling degree days results in greater demand dwenified businesses earnings. for electricity to operate cooling systems. Conversely, cooler Utility earnings mcreased in 1993 because BGE sold more weather during the surnmer, measured by fewer coohng degree electricity than in the presions year and because of increased base day s, results in less demand f or electricity to operate cooling )

rates. Three printip'd f actors prothiced the increase in sales of elec- systems. Cokier weather during the uinter, as measured by greater l tricity; the sununer of 1993 was hotter th;m 1992; commercial heating degree days, results in greater demand for electricity and )

customen used more elei.tricity; and the nundvr of residennal gas to operate heating systems. Conversely, wanner weather customers increased. The etlect of wcather on uliht) sales is during the w inter, measured by few er heating degree days, results dheussed below. The 1993 earnings increases were panially of fset in less demand for electricity and gas to operate heating systems.

by higher operations and maintenance expenses depreciation The degree-days chart below presents information regarding espense, and propeny taxes, and the ef fect of the Omnibus Hudget cooling and heating degree days. i Reconcihation Act of 1993 t 1993 Tax Aco. which increased the WYear federal corporate income tax rate to 35% f rom M. Utihty canF 1993 1992 Average ings increased in IW2 mer 1991 because the cohler winter in 1992 i led to higher electne and gas sales. Operations expenses and Cooling degree days -

865 707 804 i interest chaiges w cre aho lower in 1992, w hde other income was E"'#"I"E# # "SC higher. Ihmeser, the sununct of 1992 w as cooler than 1991, and as '"*P"" '" I""' W"' OIM a resuh lower electric sales of fset a substantial portion of the "#"U"E N"# OD increase in 1992 utihty earnings. l'ercentage change lhe followmg factors influerx e BGE's utihty ogs rations "T

• F# W #

eanungs: regulation by the Pubhc Senice Commission of Maryland IMnm.ar Gas wu]Ilearu Cwywty and $ubsihvin

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RGE Utility Rerenuenmd Sales of operating expemes and a retum on BGE's higher level of Eiectric res enues changed during 1993 and 1992 because of the electrie rate base. He order aho reduced the authorized rate of following factors; retum to 9.40% from the previous rate of 9.94%. Base rates 1993 U>92 increased in 1992 for similar reasons the PSC's December 1990 unmm m, rate order and, to a lesser extent, the recovery of eligible electric System sales volumes $112.4 $ (32.0) conservation program costs through the energy conservation sur-Base rates 58.5 84.9 charge, w hich began in July 1992. The December 1990 rate order Fuel rates (55.0) (113.83 authorized a $124 million tuse rate increase to provide rate  ;;

recogn n for BGE's investment and operating expenses at Revenues fmm system sales i15.9 (60 9) an n Shores Unit 2, ef fective with that Unit's initial

. . Interthange sales 27.2 40 5

'"""""'"re"non in M y M3e oder funher authorized -

0 otherrevenues 4.i (6.2i a 553 million surcharge to base rates in October 1991 to recover _

Total electric revenues $147.2 $ (26.6) certain purchased capacity charges. Although these base rate increases improved BGE's electrie revenues during 1992, they had Electric system sales represent volumes sold to customers little effect on net income because they were essentially offset by within BGE's service territory at rates detennined by the PSC. two things: a decrease in the allowance for funds used during con-Dese amounts exclude interchange sales, discuwed separately struction ( AFC) and higher depreciation expense and other taxes later. In 1993, BGE thanged its classification of conunercial and because of the completion and commercial operation of Brandon industrial customers to present this inf ormation on a basis which Shores Unit 2; and increased purchased capacity charges.

is more consistent with predominant industry practices. Prior-year %e April 1993 rate order and a continued higher level of amount > have been reclassified to conform to the current year's recovery of electric conservation program costs under the energy i presentation. Behrv is a comparison of the changes in electric conservation surcharge will favorably affect base rate revenues in' system sales volumes. 1994. However, if the PSC detennines that BGE is caming in 3993 3993 excess of its authorized rate of return. BGE will have to refund a portion of energy conservation surcharge revenues to its cus-Resideniial 9.0 % (3 6)%

tomers. The portion subject to refund is compensation for fore.

Commercial 4.1 1./

pone sales from conservation programs and incentives for Industrial 2.7 (l.2) achieving conservation goals. BGE has been earning in excess of -

Total 5.M (OA its authorized rate of return on electGc operations since September 30,1993. As a result, BGE has deferred the ponion of Ilotter summer weather was the main reason for the increase electric energy conservation revenues subject to refund beginning in total sales for 1993. He sales increases to residential and in December 1993. He deferral of these billings is expected to commercial customers reflect significantly hotter summer average approximately $1.7 million each month these deferrals weather, and to a lesser extent. increased usage and customer continue in 1994. De deferral will continue as long as BGE growth. Sales to industrial customers reflect increased sales of exceeds its authorized rate of return on electric operations, as

. electricity to Bethlehem Steel to support its increased steel pro- detennined by the PSC.

duction during 1993. Sales to the residential customers decreased Changes in fuel rate revenues resuh from the operation of the -

in 1992 because of cooler weather in the summer of 1992. This electric fuel rate fonnula. The fuel rate fonnula is designed to

. decrease was partially offset by higher sales because of colder recover the actual cost of fuel, net of revenues from interchange winter weather in 1992 and grow th in the total number of cus- sales (see Notes 1 and 13). Changes in fuel rate revenues and tomers, improved economic conditions among commercial cus- interchange sales nonnally do not affect earnings. Ilowever,if the -

tomers in 1992 increased . sales compared to 1991. Sales to PSC were to disallow recovery of any part of these costs. earnings -

industrial customers in 1992 reflect the negative etfeet of eco- would be reduced as discussed in Note 13.

nemic conditions on this segment despite higher sales of elec- . Fuel rate revenues decreased during both 1993 and 1992 due tricity to Bethlehem Steel after the start-up of its new ly to a lower fuel rate.The rate was lower in both years because of a modernized hot strip mill, less costly twenty-four month generation mix from greater gener-Base rates inen ased in 1993 for two principal reasons: the - ation at the Calvert Cliffs Nuclear Power' Plant compared to the PSC's April 1993 rate order and an increased recovery of eligible year before. He 1993 decrease was partially offset by increased electric conservation program costs through the energy conserva- electric system sates volumes. The 1992 decrease also reflects tion surcharge, The April 1993 rate order for an annualized elec- 558 milhon 6f annual fuel cost savings resulting from the '

tric base rate increase of $84.9 million provided for a higher level I

Bahinre Gas miLIcctric Company alSubsihanes c .- - ____ _.__ _ _ _ _ - _ _ -_ .. . _ - . ,_ - - - _; -

, e commercial operation of Brandon Shores Unit 2 and the October of customers. Gas sales to industrial customers for 1992 rellect 1991 expiration of a surtharge to the electric fuel rate. IlGE primarily increased sales .olumes to Bethlehem Steel because of expects electric fuel rate revenues to decrease again in 1994 higher use of gas in its production and processing, because of a continued less-costly generation mit liase rates increased in 1993 for two principal reasons: the Interchange sales are sales nf ilGE's energy to the PSC's April 1993 rate order and an increased recosery of eligible Pennsylvania-New Jersey Maryland Interconnection (PJM), a gas conservation program costs thmugh the energy conservation

. regional power pool of eight meinher companies including flGE. surcharge.The April 1993 rate order for an annualized gas base interchange s: des occur after ilGU has satisfied the demand for rate increase of $1.6 million provided for a higher level of oper-system sales of electricity,if BGE's available generation is the ating expenses and a return on IlGE's higher level of gas rate least costly available to PJM utihties. Interchange sales increased base. The increased base rates during 1992 represent the effects during 1993 and 1992 because itGE had a less costly generation of the PSC's October 1991 rate order.That order authori/cd a mix than other PJM utilities. The less costly mix during 1993 $4 million annualized increase in gas base rate revenues. The g.

. reflects the higher generation levels at the Calvert Clitis Nuclear April 1993 gas base rate order and continued recovery of gas Power Plant. The less costly mis during 1992 also reflects the consers ation program costs under the energy conservation operation of the Calvert Cliffs Nuclear Power Plant and a full surcharge will favorably affect base rate revenues in 1994.

year of operation of Brandon Shores Unit 2. Changes in gas cost adjustment revenues result from the oper-Gas revenues increased during 1993 and 1992 because of the ation of the purchased gas adjustment (PGA) clause, which is following factors: designed to recos er actual gas costs incurred (See Note 1).

1993 1992 Changes in gas cost adjustment revenues normally do not affect

<In mahoim earnings. Gas cost adjustment resenues increased during both Sales volumes $ 0.6 $ 8.6 ) ears primarily because of increased prices to recover higher llase rates 2.6 3.3 costs of purchased gas and higher sales volumes subject to the

- Gas cost adjustment resenues 28.M 32.9 PG A clause. Dehvery service sales volumes are not subject to the Other res enues 0.9 to.1 ) PG A clause because these customers purchase their pas directly Total gas tes enues $32.9 $44.7

• P#

BGE Utility Fuel and Energy Expenses in 1993. HGE changed its classification of conunercial and Electric fuel and purchased energy expenses were as follow s:

industrial customers to present this infonnation on a basis u hich 1993 1992 1991 is more consistent with predominant industry practices. Prior-year un mahunn amounts have been reclassified to wnform to the current year's Acinal costs $483.9 $445.2 $492.6 presentation. The changes in gas sales volumes compared to the Net recovery of costs year hetore were: under electric fuel rate l clause (see Note 1j 50.7 111.0 105.6 1993 1992 )

Residential 2.59 6.9G Total espense $534.6 $556.2 $598.2 l Commercial 2.2 12.8 industrial 15.8) 14 Actual electric fuel and purchased energy costs during 1993 Total 10.6) 7.0 increased for two principal reasons: a higher net output of elec-tricity generated to meet the demand of IlGE's s) stem and the Total gas sales decreased dunng 1993 because of lower sales PJM sy stem, and higher purchased capacity costs under the to industrial customers, partially offset by increased sales to the Pennsylvania Power & l.ight Company Energy and Capacity  ;

- remainder of the Fas-sptem customers. Sales to industrial con Purchase Agreement. Actual electric fuel and purchased energy tomers decreased primarily because oflower use of delisery ser- costs decreased during 1992 because of a less costly generation '

vice gas by Bethlehem Steel and interruptible service customers, mis. The cost of the generation mit decreased because of the w ho increased their use of allt rnathe fuels. Gas sales to Calvert Cliff s Nuclear Power Plant's return to operation fol.

Dethlehem Steel also decreased because of a maintenance outage lowing the completion of extended maintenance and repair out.

at its 1,Hlast fumaec. The increases in sales to residential and ages and the May 1991 commercial operation of Brandon Shores commercial customers reflect the colder winter weather during Unit 2. This decrease was panially offset by purchased capacity the Orst quarter of 1993 and an increase in the number of cus- charges beginning in October 1991 under the Pennsylvania Power tomers, Sales to residential and coimnercial customers during & Light Company Energy and Capacity Purchase Agreement.

1992 reflect the colder winter of 1992 and growth in the number IMhimm % and Hmw Commmy amt S&Miann

. . - . . -_-- - -.-. - . .-. - - . = .- - - _ ~ . , , , ,

. . i Purchased gas expenses wert as Iollow r programs charged to expense; and the expected reduction in 1994 1993 1992 py)I operations egense resulting f rom the sale of a significant portion

~~~'

tin m,mo; of die ConstcHation Companies' investment in senior Using Actual costs $246.4 $21 Mi S i h$.1 faahhes hee page 23 for a dhcuwion of the sale obenior Net (deferral) reuntry of costs living facilities). 'lhese decreases will be partially of fset by the under purchased pas adjustment anskation of the de(med VSFRP cost $ and other increases in dause tsre Note l) (3.7) R$ ato opaanons extenses Maintenance cycnse increased in 1993 because of higher lahir Total expense 5242.7 52i4.1 51 M 1.5 d N@pm M N Cam Chih Wh Pm PLE Maintenance egense was essentially untbanged in 1992 because Actual purchased gas costs went up m both 1993 amt 1992 f.or lower costs at certain fossil-luel electric generating plants were m O ouce Principai reason : hiyher sas P> ices caused by mai'ei o u ny hiyhe, cost,,, Cane,, Cuffs cond2tions; higher reservanon charges: and higher output to meet I si n egense increased during 1993 and 1992 com-gieater demand for BGE gas. Purchased gas costs exclude gas pared to the year before because of higher depreciable plant in purchased by dehvery service customers, including liethlehem i The increase during 1993 resulted from the addition of Stec1, who obtain gas dhectly in>m third parnet Futme purchased electric transmiwinn and dhinbution plant and certain capital gas costs are cyceted to inyrease due to transition cosh incurred MMi m A Calvert Clif fs Nuclear Power Plant.The 1992

by llGE gas pipehne supphers m u, nplementing Federal I.nergy in rm resulted from the addition oflirandon Shores Unit 2, Regulatory Commiwmn (FLHC) Order No. 636. These transition costs, if approsed by FERC, will be pawed on to ilGb customers Wa a iA o ion in W N through the pnrdiased gas adjustment clause. Tm oh h smw e inwd dW M m g g; ,b 1 from the addition of Brandon Sholes Unit 2 to the taxable base effective July 1.1992. The Other Operating ligenws increase during P)93 abo reflects higher tranchise taxes because Operations evense inneased duiing 1993 by 550 6 milh.on.

of the increase in total electric imd gas revenues and increased The combined cfIcet of higher labor wsts employ ec reduction g egenses (dncuwed below), amortization of energy conyrvation hhm &m ddhgg em@ mend oWig program costs, postretirement benclit egenses sesuhing Irom the expenses and higher replacement cosh for utility plant assets, implementation of Statement of Financial Awounting Standants Although timely rate increases can lessen the effech of inflation. '

No. luti bec Noic M, and nucleat oivrating cosh was in total k Wany es a time lag w hich can delay llGIW 570.2 nullion higher compared to 1992. These increases were par-tially of fset by the 1993 reversal of a 59.8 mdhon charge origi-

. d com hc h a heion lg Nwihr because rate increases are based on historical cosh rather than -

nally recorded in Pr)2 for tennin uion benefits awotiated with the Company % 1992 Voluntary Spec;ial Eady Retirement Prograrn d mA Tk PSC b himi@ aHowed recovery of the cost of replacing plant uwets, together with the opportunity to j- (1992 VSFRP) to reHect the ratemaking treatment a&,pted by the earn a fair return on IlGli's investment, beginning at the time of PSC M in April 1993 rate order. In acconlance w nh that order, the l ,

Compar,y has deferred thn charge and is amortizing it over a In e-year perim beginning in May 19% Operations expense Other income and fixpenut decreased in N because of low er nudear contractor costs and lower payroll cosh annbutable to labor savings hom the y;C mon @ umhed in I993 km k umd d '

AFC on a higher les el of construction u ork in progress compared '

CompanyN 1992 VSERP and other cost control measures. Ihese '

WM ffset by the lower AFC rate aporoved in the April decreased cosh were piutiaHy olhet by the original ( harge to oper' 1903 P ddFC decreased durina 1992 because of the alions f or the 59.8 miUion cost of tenninanon benefits associated i Mion and commercial operation of thandon Shores Unit 2c with the lu92 VSERP and by higher hinge benetit costs.

offset by the effech of the expansion of the AFC policy -

the Company announced sescral employee reduction pro. .'

Mi d in h E grams during the third quarter of 1993 m conjuncuon w nh its .

ongoing cost control ef fortt The cost of these programs totaled W & d Qdy in 1993 as a higher level of i

onhtanding debt was partially of fset by a decline in the level of

$1015 million (see Note 71 Consistent with previous rate actions nterest rates and the redemption el higher coupon debt of DGE.

of the PSC, llGli has deferred and will amortire the $88.3 nullion Interest charges decreased during 1992 primarily because of lower i of 1993 Voluntary Special Hady Retuement Program (1993 MA of debt ouhtanding and a decline in the level of interest l VSERP) costs related to regulated activities over a five-year Tk ded debt levels in 1992 are attnbutable to the period beginn,mg in Febmary 1994.The remaining $17.2 milhon additional shares of common snxk issued and the recovery of pre-of these prognun costs was charged to expense in 1993.

vioudv defened electric fuel costs.

Operations cyctne is eyrcted to be ieduced m 1994 by three factors: cost savings f rom the 1993 employee reduction programs

(. din d im*d immd du% 1993 Wm BGE -

began actrump' carrying charges on elet tric deferred fuel cosh are expected to be reahted begmning in 199k 1993 operations egense reflects the portion of the cost of employec reduction p - thkmme Gw and I kanc Cmtuny amthuluaam

-- - - - _ - - - - ~ - . - . . _ _ _ - - _ _ _ - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - -

s

• excluded from rate base (see Note 5).1992 capitali/cd interest sents a utility's next lowest cost generation to service the decreased because the Comtellation Companies discontinued demands on its spiem. These pow er generation projects are interest capitahianon at certam real estate projects. xheduled to convert to suppigng electricity at asoided cost rates income tait expense increased dming both y ears because of in various y ears beginning in late 1996 through the end of 3NX).

higher pre-tas earnings. The Ps93 increase also reflects the ef fect As a result of declines in purchasing utilities' avoided costs sub-of the 1991 Tax Act, w hith increased the federal corporate income sequent to the inception of these apeements, resenues at these tas rate to 35% from 34'4, retroachve to January 1,1993. As a proiccts based on current avoided cost les els would be substan-result, income tax expense related to 1993 operatiom increased by to..n . mer than revenues presently being realized under the fixed 54 6 mdhon, and the Comp.my's defened income tas habihty price terms of the agreements. If current avoided cost levels were increased by 520.1 million. The Company deferred 512.M million to continue into 1996 and beyond, the Constellation Companies of the increase in the deferred income tax hability apphcable to utihty operations for recm cry through future rates and charged the could esperience reduced earnings or incur losses associated with these projects w hich could be significant. The Constellation g

remaining 57.3 mdlion to income tax expense. Of this 57.1 mdlion Companies are investigating altematives for certain of these charged to expeme, Si8 nullion pertains Io the Constellation power generation projects including, but not limited to, repow-Compames as discussed on page 24. ering the projects to reduce operating costs, renegotiating the pow er purchase agreements and selling its ownenhip interests in Dirrrdfied thnincues Earning the projects. The Company cannot predict the impact these mat-Earnings per shaie f rom dhersified businesses wcre: ters may has e on the Constellation Companies or the Company, g993 pgy pp)g but the impact could be material.

Earnings from the Constellation Companies' portfolio of Power generahon sptems $.07 S.08 5.03

,10 financial investments include capital gains and losses dividends, Financial im estments .09 .01 income from financial limited partnerships, and income from Real estate deselopment and seniot fim M mmy inwam conpnin UN3 finacialinvestment living facihties LO4) (.0M L1I) camines increased sliehtly over 1992.56.1 milbon in income from liffect of liN3 Tas Act 004) ~ ~

m in[eument in a liidmcial guaranty insurance company was sub.

Other 0011 001) U12) wmiMiy of fset by lower imestment income compared to 1992.

Cm rent-y ear operations .08 .11 W4 resulting from the decline in the site of the imestment port! olio Cumulative etfect of change m due to the sale of selecteJ awets to pmvide liquidity for ongoing the method of accounting businesses of the Constellation Companies. Financial investment Ior income tnes (see Note !)  ; -

.16 earnings increased in 1992 primarily because of w nie-downs taken Total diversified busineres $ .08 5.I1 5.07 on certain im estments in 1991 and because of an improvement in the per formance of certain financial limited partnerships.

The Comtellatmn Companies' pmer generation mtems ~Ihe Constellation Companies' real estate deselopment busi-bmineu includes the development, ow nenhip mana$ement, and ness includes I nd under development; office buildings; retail operatmo of u holesale power generatmg projects in w hich the pndects; commercial projects; an entertainment, dining and retail Comtellation Companies bokt ownership interests, as well as con 1 plex in Orlando, Horida; a mied-use planned-unit-deselop-the Ptomion of sen ices to power generation projects under oper- ment; and senior living facit; ties. Tiv majority of these projects ation and maintenant e contracts. Power generation systems earn- are in the Haltimore-Washmgton conidor. Tivy have been ings during UN3 were llat compaied to 1992. The r[ cognition of af fected adversely by the depressed real estate market and eco-58 nulhon of energy tax credds on the tonunercial operation of nomic conditions, resuhing in reduced demand for the purchase the Puna geothennal plant w as off set by costs incurred at the or lease of available land, office, and retail space.

Panther Creek w aste<oal projet t in order to resohr fuel quahty Eamings fro real estate des elopment and senior lis ing facili-and other start-up problems Adthlionally,1992 earnings reflect tie > were essentially unchanged in 1993 compared to 1992 the gain on the partial sale of an ownenhip interest in a power bna se a $11 mHhon gain on the sale of the nursing home generahon project, representing most of the increase in pmer pntion of the Con tellation Companies' investment in senior generation systems earmngs compared to 1991. hs ing fadhties u as offset by greater operating losses at other real lhe Constellation Companies' imestment in w holesale pm er estate padatt The senior hving facilities which were sold con-generating pniects meludes $163 milhon representing ownership tributed real estate revenues and operating expenses of approxi-interests in 16 projects which sell electricits in California under mately 517 nulhon and 516 million, respecthely, in 1993. The Intenm Standard Of fer No. 4 pmer puu hbe acreements. Under increase in earnings in 1992 reflects the U191 write-downs these agreements the projects supply electricity to purchasing rnonkd by the Constellation Companies aggregating utilities at a fixed rate for die lir t ten scars of ihr agreements and $10 illion on certain teal estate projects and a 53,6 million j at variable rates based on the utthties' avoided cmt for the aw for loans u here the value of the collateral was less than remaining tenn of the agreements Asoided cost generally repre- the outstanding loan balances. Additionally, the Comtellation tra%n e Gas watn insmpa,n ant %%wam e

- . - _ _ _ _ _ . _ _ ._ _ _ - - .- m . - .m . _ _ . .

e Companies' real estate pmtfohn has experience.1 contmuing car- jects in the current depressed maiket, lowes would occur in

- rying wsts and depreciation and, dunng 1991, the Comtellation amounts dif ficuh to detennme. Depending upon m.uket condi-Companies began expensing rather than capitah/ing interest on tions future sales could aim resuh in losset 10 addnion, weie the certain umlescloped land w heie desclopment atinities were at Constellation Companies to change theli intent about any project minimal les cis. These f acion have af fected carmngs negatisely from an intent to hold until market conditions improve to an during 1993 and 1992 aini .ue equ ted to contmue to do so until intent to sell, applicable accounting rules would sequire a w rite-current market comhtions impon e. Cash flow f rom real estate down of the project to maiket salue at the time of such change in operations has been insulheient to cover the debt sen ice require- intent if market value is below book value.

ments of certtun of these projects Hesulting cash shortfall 3 h.ne The liflect of the 1993 Tax Act represents a $5.8 million ch.uge been satisfied thmugh cash inimions f rom Constellation to income las expeme fo rellect the increase in the Constellation

'g f lokhngs. Inc 4 w hit h obtained the funds through a cornbination Companies' defe red mcome tax habihty because of the increase in of(ash flow genemted by other Constellation Companies and its the federal corporate las rate.

co porate borrowings Unni the real estate market shows sus-tained improvement, earnings f rom real estate at tisities are Eniironmental Matters espet ted to remiun depressed. The Company is subject to increasingly stringent federal, state, and The Comtellation Companies contmued investment in real local laws and regulations relating to improving or maintaming the estate projects is a f unctme of market demand. interest ratrs, quality of the emironment. These laws and regulations require the credit aviolahdity. and the strength of the econoiny in general. Company to remove or remedy the ef fect on the emironment of the The Comtellation Companies' Management belieses that dipal oi release of specified substances at ongoing iuni former although the real estate market is beginning to show sigm of operatmg sites including linviromnentall' rote (tion Agency imprmement, until the emnomy reflects sustamed growth and the Superfund sites. Iktads reganting these maucts int,luding financial l

excew imeinory in the market in the 11altimore Washington cor miomiation, are presented in Note 13 and in the Company's i tidor goes dow n real estate values will not imprme signihcantly. Annual Report on Ibrm 10-K under item 1. Ilusiness-If the ComtcIlation Companies were to sell lheir real estate pro- lintiminnental Mauers.

LIQUIDIT Y AND C APIT AL HESOURCES Capital Requirements The Company's ( apital requirements reflect the capilabmterhive ycars 1991 through 1993, along wiih estimatet! amounts for the natuie of the utihty businew. Actual capital requiremenh for lhe years 1994 through 1996, are reflet ted below, 1991 1992 1991 1994 1995 1996 fln mdlia mn Utdily lhhincW.

Cnnstruenon expenditures haciudmg Al C)

Ijet tric $ 328 $ 292 $ 3(/) $345 $319 $30()

Ga 43 36 51 54 rd) 56 Common 48 39 44 51 46 44 k ,

O AI C 37 22 23 34 35 25 l-i Ikfened mKleal expelhhtutes 23 16 l4 12 -

I- Delened energy mmen ation espenditmes 3 20 33 48 45 40 Nuclear fuel turanium pmchases and procewing (h.oyeu 2 40 47 42 46 51-l Retuement of long term debt and redemption of preference simL _339 4x6 907 36 281 48 l lotal utihty business %23 951 1.479 622 812 614 thvenihed lludnesseu Retucment of long lenn debt 167 118 222 9 M1 77 Im estmeni requnements 109 80 7X 63 60 20 Total diversdied bmine .scs 276 19s 1no 72 141 97  ;

'Iotal  % i m9 $ 1,i19 11,779 5694 $973 $7II 141timm tun miiIn un Compm <m.t %hmim ,

J

- r . - --.. ~_ _ .- _._ ____._._ -- _ _ - - _ _ . _ - _ _ _ _ - - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ = . _ . _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _

. BGli Utility Capital Requirements DiverMfied IInsinesses Capital Requirements HGE's construction program is subject to contmuous review and Debt amt Liquithly malification, and actual expenditures may 5ary from the esti- During 1993, Constellation lloidings, Inc. tCill) closed tw o pri-mates on page 24. Electric construction expenditures include the vate placements totaling $225 million of unsecured serial notes installation of two 5JKX) Lilowatt diesel generators at the Calvert with several institutional investors. Clil used proceeds of the Chtis Nuclear Power Plant, scheduled to be placed in service in private placements to pay off its bank debt facility, w hich Cill 1995; the construction of a 140 megawau combustion turbine at elected to tenninate, as w ell as for other general corporate uses.

Perryman, scheduled to be placed in ser ice in 1995, which the in addition, Cl11 entered into a $20 million unsecuted revolving PSC authorized in an order dated March 25,1993; and improve- credit facility with a bank on September 30,1993. This facility ments in BGE's existing generating plants and its transmission matures September 29,1994 and will be used to provide liquidity and distribution iacilities. Future electric construction expendi- for general corporate purposes. As of December 31,1993 Clll had no borrowings under this facility.

g tures do not include additional generating units in light of the competitive bidding process established by the PSC. The The Constellation Companies intend to meet capital require-Company estimates currently that expenditures for compliance ments by refinancing debt as it comes due and through internally with the sultur dioxide prmisions of the Clean Air Act of 1990 generated cash. These sources include cash that may be generated will total approximately 555 million through 1995, from operations, the sale of assets, and cash generated by tax During 1993.1992, and 1991, the intemal generation of cash benefits earned by the Constellation Companies. In the event the from utihty operations prmided 714. 814 and 74% respec. Constellation Companies can obtain reasonable value for real tively, of the lunds requhed for ilGE's capital requirements estate properties, additional cash may become available through culusise of retiremenu and redemptions of debt and preference the sale of projects (for additional infonnation see the discussion stock. During the three-year period 1994 through 1996. BGE of the real estate business and market on page 23 under the expects to prmide through utihty operations approximately 70% heading "Disersified Businesses Earnings"). The ability of the of the funds r; quired for RGE's capital requirements, exclusive Constellation Companics to sell or liquidate assets described of retirements and redemptions above will depend on market conditions, and no assurances can Utility capital requirements not met through the mternal gener- be given that such sales or liquidations can be made. Also, to ation of cash are met through the issuance of debt and equity provide additional liquidity to meet interim financial needs, Cill securities During the three9 ear period ended December 31, may enter into additional credit facilities.

1993. HGE's issuances of long-tenn debt, preference stock, and

• common stock were 51,733 million. $165 million. and 5446 mil- Invc3tment Requirements lion. respectively. During the same penod, retiiements and 'Ihe investment requirements of the Constellation Companies redemptions of HGEN long-tenn debt and preference stock totaled include its portion of equity funding to committed projects under

$ L546 n ilhon and $167 million, respectively, exclusive of any development, as well as net loans made to project partnerships.

redemption piemmms. The increa.se in issuances and retirements investment requirements for the years 1994 through 1996 reflect of long term debt during 1943 re flects the refinancing of a signifi- the Constellation Companies' estimate of funding for ongoing cant ponion of BGE's debt in order to take ads antage of the and anticipated projects and are subject to continuous review and f asorable interest rate market. 'lhe amount and timing of future modification. Actual investment requirements may vary signiti-issuant es and redemptions will depend upon market conditions cantly imm the estimates on page 24 because of the type and and BUE's actual capital requirements, number of projects selected for development. the impact of The Constellation Companies' capital requirements are dis- market conditions on those projects, the ability to obtain cussed below in the section titled " Diversified Businesses Capital financing, and the availability of internally generated cash. The Requirements-Debt and Liquidity."The Constelhuion Constellation Companies have met their investment requirements Companies plan to meet their capital requirements w ith a in the past through the intemal generation of cash and through combination of debt and internal generation of cash from their borrow ings from banks and institutional lenders, operations. Additionally. from time to time. BGE may make loans to Constellation Itoldings, ine., or contribute equity to Constellation Iloklinys. Inc.

I 1

halvwe Gas ed[Mim Gmismv edWJwno j 4

^ ~ - .

~m .. - . _ - __ _ _ _ _ _ .. _ _ _ . _ . _ _ _ _

+ ,

)

REPORT OF MANAGEMENT 1he management of the Company is responsible for the informa- conducts perialic review s to maintain the effectiveness of tion and representations in the Company's financial statements. internal control procedures.

The Company prepares the fmancial statements in accordance Coopers & Lybrand, independent auditors audit the financial w ah generally accepted accounting principles based upon asail- statements and express their opinion about them. They audit in able facts and circumstances and management's best estimates accordance with generally accepted auditing standards and judgments of known conditions, 'Ihe Audit Committee of the floard of Directors, which >

The Company mamtains an accounung system and related consists of four outside Directors, meets perinfically with system of internal wotrols designed to proude reasonable Management, internal auditors, and Coopers & .L) hrand to resiew Q ' assurance that the financial records are accurale and that the the activities of each in discharging their responsibdities. The Company % assets are piotected. The Company's stalf of intem.d intemal audit staff and Coopers & 1) brand have free access to auditors, w hit h reports directly to the Chairman of the ikurd, the Audit Committee.

4 REPORT OF lNDEPENDENT AUDITORS la the Sharcholders ej Haltimote Gas and Ela ttic Company We base audited the accompanying consolidated balance sheets in out opmion, the finan ial statements referred to above pre-and statements of capitalization of flaltimoie Gas and filectric sent fairly,in all material respects, the consolalated financial Company and Subsidiaries at December 31.1993 and 1992, and position of flakimore Gas and Electric Company and Subsidiaries the related consolidated statements of income, cash flow s. at December 31,1993 and 1992, and the consolidated results of common sharcholders' equity, and income taxes Ior each of the their operations and their cash flows for each of the three years in three > cars in the perial ended December 31.1993. These finan- the peiiod ended December 31,1993 in confomiity with generally cial statements are the responsibihty of the Company's accepted accounting principles.

Management Our responsibihty is to express an opinion on these As discussed in Note 13 to the consolidated financial state-financial statements based on our audits ments, the Public Seniec Commission of Maryland is currently We conducted our auJas in acwtdance with generally reviewing the replacement energy costs resulting from the 1989, accepted auditing standards. Those standards require that we plan 1991 outages at the Company's nudear power plant, and the and perfoon the audit to obtain reasonable assurance about Company established in 1990 a reserve of 535 milhon for the whether the financial statements are free of materi:d misstate- possible disallowance of replacement energy costs. The uhimate ment. An audit indudes examining, on a test basis, es idence sup- outcome of the fuel rate proceedings, however. cannot be deter-porting the amounts and diwlosures in the financial statements. mined but may result in a disallowance in excess of the resene An audit also includes assessing the accounnng principles used provided.

and significant estimates made by Management, as well as evalu- As discussed in Note I to the consolidated financial state-ating the os erall financial statement presentation. We beliese that ments. the Company changed its method of accounting for our audits proside a reasonable bam for our opinion, income taxes in 1991.

l)) v2. 0 ' - A Coopers & Lybrand flakimore, Maryland January 21,1994 Batum Gm and unsinmpm amt %ba.hano

e

• l CONSOLIDATED STATEMENTS OF INCOME j I

l Year Lnded Dec endwr 31, 1993 1992 1991 qIn th<nnands esapt per share amawns)

Resenues Electric $2,115,155 $1.967,923 $1.994.525 Gas 435,849 402,937 358,195 Diversified businesses 117,710 120,483 96,133 Total revenues 2.668,714 2,491,343 2.448.853 thpemes Other ~1han Interest and Income Tases Electric fuel and puichased energy 534,628 556,184 598,208 Gas purchased for resale 242,685 214,103 181,455 Operations 657,110 606A98 634,309 Maintenance 181,685 172,726 173,MM Depreciation 236,774 223,483 201,264 Taxes other than income taxes 194,832 183,041 170,781 Total expenses other than interest and income taxes 2,047,714 1,955.998 1,959,665 Income from Operations 621,000 535.345 489,188 Other income Allowance for equity funds used during construction 14.492 13,892 23,596 Equity in carnings of Safe ILubor Water Power Corporation 4,243 4,267 4,388 Net other income and deducuons (3,033) 3,937 t1,356)

Total 01her income 15,702 22.096 26,628 Income liefore Interest and Income Tases 636,702 557.441 515.816 Interest Espense Interest charges 212,971 211,712 231,41l' Capitalized interest (16,167) (l3,800) (20,953)

Allowance for honowed funds used during construction (8,040) (8,165) (13.870)

Net interest expense 188,764 189.747 196,588 Income liefore income Tases 447,938 367,694 319,228 income Tases 138,072 103,347 85,547 income liefore Cumulatise Effect of Change in Accounting Slethod 309,866 2M,347 233,681 ,

l Cumulatise EITect of Change in the .\lethod of Accounting  !

for Income Tases (See Note 1) - - 19,745 Not Income 309,866 2M 347 253,426 Preferred and Preference Stock Disidends 41,839 42,247 42,746 Earnings Applicable to Common Stock $ 268,027 5 222,100 $ 210.680 Aserage Shares of Common Stock Outstanding 145,072 136.248 126,093 i

Earnings Per Share of Common Stock l l

Befort cumulatise effect of change in accounting methat $1.85 $1.63 $1.51 Cumulative effect of change in the methat of accounting for income taxes - - ,16 Total camings per share of common stock $1.85 $1.63 $1.67 Scr Nota la ConwiidawJ l'inam ml Statemenix.

Crriain prior war am writs ha c been intated to c ontorm to the c arre>a year's preuntation Balumore Gas and Electrw Conyuny and Subsidiar tes i

CONSOLIDATED BALANCE SHEETS At lic< embcr 31. I993 1492 tin thouwmsh)

ASSETS Current Assets Cash and cash equivalents $ 84,236 $ ' 27,122 Accounts receivable (net of allowance for uncollectibles) 401,853 369,144 Fuel stocks 70.213 85,063 Materials and supphes 145,130 141,611 Prepaid taxes other than income tases 54,237 54,510 Other 38,971 29,6N Total current assets 794,660 707,054 Insestments and Other Assets Real estate projects 487,397 462,N2 Power generation sptems 298,514 259 9)6 Financial investments 213,315 207,01i Nuclear deconunissioning ',ust fund 56,207 43,118 Safe liarhir Water Power Corporation 34,138 34,176 Senior living f acilities 2,005 24,538 Other 65,355 64,986 Total invesonents and other assets 1,156,931 1,095.867 Utility Plant Plant in service 131ectric 5,713,259 5,474.590 Gas 557,942 526,058-Coinmon 487,740 468,2M Total plant in seruce 6,758,V41 6,468,912 Accumulated depreciation (2,161,984) (! 980,361)

Net plant in senice 4,596,957 4,488.551 Construction work in progress 436,440 308,908 Nutlear fuel (net of amortizationi 139,424 147,374 Plant held for future use 24,066 21,486 Net utility plant 5,196,887 4,966,319 Deferred Charges Regulatory assets 768.125 568,563.

Other 70,436 36,554 Total deferred charges 838,561 605.117 Total Assets $7.987,039 - $ 7,374,357 sa kes to cmunlidarcJ l mancial Statemenn.

• Certaior prior.>rar amosma h.n r bren tc.uawd to e onths m to the current year 's j>resemanon.

Baltimore Gen and Elcctric Compm> and Subs lJiarics

CONSOLIDATED BALANCE SHEETS At Det ember 3/, 1993 1991 tinthousando -'

LI ABILITIES AND C APITALIZ ATION Current 1, labilities '

Shon-term lorrowings $ -

$ ll,9(K)

Current portions of long-temi debt and prefcience stock 44,516 291.270 Accounts payable 195,534 175,495 Customer deposits 22,345 20,027 Accrued taxes 20,623 20.925 Accrued imerer.t 58,541 55,537 Dividends declared 63,966 62;282 Accrued vacation costs 35,546 28;908 @ "

Other 38,716 2,567 Total current liabilities 479,787 668.911 Deferred Credits and Other 1,iabilities Deferred income taes 1,067,611 983,534 Deferred investment in credits 157,426 165,697 Pension and postemployment benefits 183,043 5,352 Decommissioning of federal uranium enrichment facilities 46,858 55,000 Other 56,974 19,589 Total deferred credits and o:hcr liabilities 1,511,912 1,229,172  ;

Capitalitation Long-term debt 2,823,144 2.,376.950 1 Preferred stock 59,185 59,185 I Redeemable preference stock 342,500 395,500 l Preference stock not subject to mandatory redemption 150,000 l10,000 Conunon shareholders' equity 2,620,511 2.534,639 Total capitalization 5,995,340 5.476.274 l l

Commitments, Guarantees, and Contingencies- See Note 13 l

l l

Total I iabilities and Capitalization 57,987,039 $7.374,357 Set Notn to Conwlid,ned Finanaal 5sarrmenn.

Crrrain prior 9 var amounts has e tven restat<J to amform to the < urn nr year's prnentation.

I fla!rimor e Gas and Dectuc Cony >any and Suh,udaria

CONSOLIDATED STATEMENTS OF CASH FLOWS I

1993 1992 nar I mkJ vn ember 31, 1991 tin ihmnanda Cash I?hms l' rom Opeuting Actisities Net income $ 309,866 $ 2M,347 $ 253,426 Adjusnnents to reconcile to net cash prmided by operating actiuties Cumulatist etfeet of thange in the methmt of accounting for income lases - - (14,745)

Depreciation and amorti/ation 314,027 273,549 244,017 Delerred income tases 53,057 26,914 30,725 Investment tas credit adjustments (8,444) (8,854) (6,225)

Deferred f uel costs 51,445 105,430 102.754 Wnte down of financial investments and real estate pnyects 23,563 Q Allowance for equity funds med during construction (14,492)

(13,892) (23,596)

Eqmty in earmngs of alliliates and inint s entures (net) (4,655) (11,525) 8,707 Changes in current aucts (37,252) (26,20m (6,563)

Ch,tnges m turrent liabihties. other than short-term borrowings 71,153 (9.614) (6,027)

Other (31,919) (31EKt5) (5,373)

Net cash prosided by operating acinities _ 702,7h6 569.144 595,663 Cash I'hms l' rom l'inancing Actisities Proceeds hom iwuance of Short teim bormwings (ntt; i11,900) ( l 39,(#1) ( 15,530 >

l.ong-tenn debt 1,206,350 603.400 1,015,950 Preference sto( L 128,776 - 34,801 Common stock 57.379 355.759 32,263 Reacquisition of long-tenn debi (l.012,514) (687,052) (959,379)

Redemption of preference stotk i144,310) (2.924) (22,800)

Common stock dividend 3 paid (211,137) (184,1ND (17634)7) heterred and preference stotk dividends paid (42,425) (42,3(K)) (42,743)

Other (7,094) i399) (442)

Net cash used in financing attisities (36,8751 (102,296) (133.887)

Cash Flous l' rom insesting Artisities Utdity comtruction eyienditures (477,878) (389,416) (456,244)

Allowance for equity f unds used during comtruction 14,492 13,892 23,596 Nuc' ear fuel eqwnditures (47,329) (39,486) (l,854)

Deferred nuclear expenditures (13,791) ( 15,W)) (22,6A1)

Deferred energy comen ation expenditures (32,909) (19,918) 0,489)

Nuclear decommiwinning trmt fund (9,699) (8,900) (8,900)

I mancial imestments 6,523 52,616 67,282 Real estate projects 0 0,330) (23,385) (45,322)

Power generation systems (26,841) (31,483) (33,2(M )

Other 8,965 4,746 (3,422)

Net cash used in im esiing ai, tis ities (608,797) (457,143) (484,238)

Ne( lucrease t Decrease)in Cash and Cash Equivalents $7,114 9,705 (22,462)

Cash and Cash Equis alents at lleginning of Year 27,122 17.417 39,879 Cash and Cash 1:quisalents at End of Year $ 84,236 5 27,122 i 17,417 Other Cash I hm Information Cash paid during the year for:

Interest (net et amounts capilahred) $ 183,266 S I83,209 $ 189,271 Income tases $ 126,034 5 87/>93 $ 16.078

% %to tA hn AJawJ l wan. mi Sn:*cmcras in ram pnm 3 car ame > have bn n wmaraim venir m to the t urren 3rarLt prewraaturn Italamore Go and i In son Com;wtr and Subsbarin

CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUlTY Net Unrealited Pension loss on Common Stock Retained Liability Marketable Total raus I ru/cd /k< rmher fl. /W3. Iw2. und /wl Shares Amount Earninp Adjustment Securities Amount tin thousandst flalance at December 31,1990 125,039 5 947,147 51,139,999 5 - 5(13,988) 52.073.158 Deferred taxes on net unrealized loss 4,756 4,756 Net income 253,426 253,426 Dividends declared Prefened and preference stock (42,746)

(42.746)

Common stock ($1 A0 per share) (176.584) (176,584)

Common s'ock issued 1,651 32.263 32,263 Other (199) (199)

Change in net unrealized loss on marketable secunties 13,988 13,988 Change in deferred taxes on net unrealized loss (4,756) (4.756) llalance at December 31,1991 126.690 979,211 1.174,095 - -

2,153.306 Net income 264.347 264,347 Dividends declared Preferred and preference stock (42,247) (42,247)

Common stock (51 A3 per share) (196.601) (196.601)

Common stock issued 17.098 356.230 356,230 Other (4) (439) 43 (396)

Italance at December 31,1992 143.784 1.335,002 1,199.637 - - 2.534,639 Net intome 309,866 309,866 Dis idenJs declared Prefened and preference stock (41.839) (41,839)

Common stock ($1 A7 per share) (213,407) (213,407)

Common stock iwued 2.250 57,379 57,379 Other (917) (3.117) (4.034)

Pension liability adjustment (33,990) (33,990)

Deferred tases on pension liability adjustment 11,897 11.897 Italance at December 31,1993 146.034 51.391.464 51.251.140 $ (22.093) 5 -

52.620.51I su sta to consolua.wd I mam ial statemenn Ca ravu prwr -3 car amowa s has e be en ecstated in conjhrnt to the cw rent > car's procru,nwn l

l 1' l

i f

tuw,wu aas wa un tru compan w,asususiario i

In CONSOLIDATEDSTATEMENTS OF CAPITALIZATION As IM rmber 3/, 1993 1992 Iin tiu aan,to long-Term Dchl First Helunding Mortgage llorals of IlGf!

44 Series,da March 1,1993 $ - 5 24,061

- 29,921 4%% Series,duc July 15,1994 9x% Series, due (ktober 15,1995 200JHHi .2(Kl.(X NI -

26,585 26,585 .

$XM Series,due April 15,1996 6x9 Series,due August 1,1997 24,957 24.957 SW Installment Series,due August 15,1998 - 50j0) 7% Series, due December 15,1998 -28,638 28.638 Q 8.40% Sesies, due October 15,1999 100JHHI 1(N)JXX) 5x4 Series,due July 15,2(WX) 125,000 -

59,911 59,914 7X% Series, due April 15,2tX)I 844 Series,due August 15.2(Nil 124,980 125JXX) 7X% Series,due September 1,2(X11

- 59,975 7X4 Series. duc January 1,2002 49,999 49,999 l 125,000 7X% Series, duc July 1,2002 125JKK) 7M% Series, due July 1,2002

- 49,985 5M Installment Series,due July 15,2002 12J180 12,500 7M% Series,due September 15,2002

- 49,990 6M% Series,due February 15,2(X)3 125,000 -

6k% Series, duc July 1,2(W13 125,000 -

NWM Series, due Febmary 1,2(x4

- 74,983 SM% Series,due April 15,2tX4 125,000 -

20,000 20jXX) 6.80% Seties, due September 15,2004 HX% Series, due September 15,2(K)6

- -74,900 7M% Series,due January 15,2007 125,000 125fxX)

MX% Series,due September 15,2(X)7 75fXX) 6%%, Series,due March 15,2008 125.000 -

-- 12,718 9X% Series, due July 1,2008 6.90% installment Series, due September 15,2(N6 55,000 55JXX) 9%% Series,due March 1,2016 - 98,(XX) -

73% Series, due March I,2023 124,998 -

X% Seties, due April 15,2023 100,000 -

Total First Refunding Mortgage lionds 1,802.148 1.552,186 Other long tenn debt of liGli Medium-term notes, Series A 23,500 69,500 Medium term notes, Senes 11 100,000 100jux) 173,050 138,050 Medium term notes Series C

.9X% Notes, due May 1,1993 - l(X),(XX)

Pollution control loan, due July 1,2011 36,000- 36JXX)

Port facilitiesloan,due June 1,2013 48,000 48,000 Adjustable rate pollution centrol loan, due July 1,2014 - 20,000 20,(KR) 5.55% Pollution control revenue refunding loan, due July 15,2014 47,000 -

Economic development loan, due December I,2018 - 35,000 35Jul 482,550 546,550 Total other long-term debt long-tenn debt of Constellation Comp mies Mortgage and construction loans and other collaterali/ed notes 7.75% , due Decermer 16,1995 - 5,575 Variable raies, due through 2009 151,251 160,572 8.5%, duc May 1,2001 - 3,300 7.73%,due March 15,2009 6,465 -

I nans under revohing credit agreements - 152pxl weimudom p ge.t.f

$te htcs to CarnoluJatt d i manaal Starcmems.

Dahieune Gas and11ervic Computy and 5.,b.udianes

i CONSOLIDATED STATEMENTS OF CAPITALIZATION At Dcumber 31. 1993 1992 (in thoinanh1 Unsecured notes $ 440,000 $ 255JMX)

Total long tenn debt of Constellation Companies 597,716 576.447 Unamortized discount and premium (17,754) (8,463)

Current portion of long-tenn debt (41,516) (2K9.770)

Total long term debt 2,N23,144 2,376.950 Preferred Stock Cumulative,5100 par value, ljX NtjXX) shares authorized Series 11,4M ,222,921 st, ares outstanding, callable at 5110 per share 22,292 22,292 h Series C,49,68.928 shares outstanding, callable at $105 per share 6,893 6,893 Series D,5.40%,300JkW) shares outstanding. callable at 5101 per share 30,000 30fKK)

Total prefened stock 59,185 59,185 Preference Stock Cumulative, $100 par value,6.500,000 shares authorized Redeemable preference stock 7.50% ,19X6 Series,470f KNI and 485JWX) shares outstanding, respectis ely. Callable at 5105 per share prior to October I,1996 and at lesser amounts thereafter 47,000 48,5(K) 6.759,19x7 Series,4S5JXN) shares outstanding. Callable at Sif Lt.50 per share prior to April 1,1997 and at lesser amounts thereafter 48,500 48,500 6.954,1987 Series,5(K)J N)0 shares outstanding 50,000 50JXK) 7.649.1988 Senes,500JNX) shares outstanding. called at $103.M2 per share on July 1.1993 - 50jxW) 7.804,1989 Senes. 5(KUX)0 shares outstanding 50,000 50jXX) 8 25%,1989 Series,500,01N) shares outstandmg 50,000 50JKX) 8.6259,1900 Series,650Jx10 shares outstanding 65,000 65JN)0 7.859 ,1991 Series,350JXX) shares outstanding 35,000 35fKX)

Current portion of redeemable preference stock (3,000) ( 1,5f M))

Total redeemable preference stock 342,500 395.500 Preference stock not subject to mandatory redemption 7.889,197i Series,500lxX) shares outstanding, called at $101 per share on September 1,1993 -

50fxW) 7.759,1972 Series 4(NUXW) shares outstandmp, called at $101 per share on November 8.1993 -

40JWX) 7.789,1973 Series,200jK)0 shares outstanding, callable at $101 per share 20,000 20JXW) 7.1259 .1993 Series,400AK10 shares outstanding, not callable prior to July 1,2003 40,000 -

6.979,1993 Series, SOOJX10 shares outstanding, not callable prior to October 1,2003 50,000 -

6.704,1993 Series,400f WX) shares outstanding, not callable prior to January 1,2(KM 40,000 -

Total preferem e stock not subject to mandatory redemption 150JWK4 110f(W)

Common Shareholders' Equity Common stock wnhout par value,175jXX:lfKK) shares authorized; 146.034,014 and 143,7h3.581 shares issued and outstanding at December 31, l993 and 1992, respectively. ( At December 31, 1993,166.893 shares w ere resetved for the Employee Savings Plan and 4,770,773 shares were resersed for the Disidend Reineestment and Stock Purchase Plan.) 1,391,464 1,335,002 Retained camings I,251,140 1,199,637 Pension liability adjustment (22,093) .-

Total common shareholders' equity 2,620,511 2,534,639 Total Capitalisation $5,995,340 55,476,274 Sa Mes I , Con wnd,acJ Finam ial Statom na C<r sain prwr scar amowns h n r brrn n stateJ to wnjbr m to the < un eni vrar's pmentanarr Balnmor e (las aml W inc Comparty and hubmharics

CONSOLIDATED STATEMENTS OF lNCOME TAXES kcar i ndallin ember 3I. 1993 1992 199l tIwilar amounn in thonnandq income Tines Cunent S 93,459 5 M5.287 $ 61,nl7 Deferred 63,972 44.975 28,361 Ctange in tax etrett of temporary dilferences Change in mcome I,nes recoverable thiough f uture rates (30.086) (18.thl) (12,625)

Defened t nes credited (t hargedI to shareholders' etluity 11.M97 - f4,756) 45,783 26.914 10,9X0 Deferred ines charged to expense Ef fect on deferred taxes of enacted change in tederal corporate income tax rate increase in deferred tax hability 20,105 -

Income lases recoverable thmugh future rates (12,831) - -

Deterred taxes charged to expense ,274 - -

Insestment tax credit adjustments 18,444) (8.854) t 6.225 )

13X,072 10 U47 65,802 -

lotal income taxes Cumulatise ef fect of change in the inctbod of accounting for income taxes increase in def erred tax liability - 286,787 (267,D42 )

income taxes recoserable through l'uture rates - -

Amount recogniicd in mcome - 19.745 income taxes per Consohdated Statements of locome $138,072 510U47 $ 85.547 Reconciliation of Income Taxes Computed at Statutory I'ederal Itate to Total income Taxes income hetoie income taxes sincludmg cumulatise ef fect of accounting change) $447,938 5367.694 5319,228 Statutory federal income tax rate 35 % 3M 34ci income taxes computed at statutory federal rate 156,778 125,016 108.538 increases (deaeases) in income taxes due to Ikpreciation dif ferences not nonnalized on regulated at tisitles 9,253 8.955 7 S08 Allowance for equily funds used during construction (5.072) (4,723) (8,023)

Amortization of deferred imestment tax credits (8,444) (8,854) (9.344)

'I as credits flowed through to income 19,736) (804) (1,335) .

Change in federal corporate income tax rate charged to e pense 7.274 - -

14csersal of defcned taxes on nonregulated actisines - - (19,745)

Amorti/ation of deferred tax rate dif ferential on regulated actaities (5,789) (7,365) (5,024)

Other (6,192) (8.878) (6,273)

Total income taxes $138,072 $ 103,347 $ 65.N02 l!!fettise federal income t n rate 30.8% 2M.1 % 20.6%

tr De, emhcr J /. 1993 1992

'lh!!ar amonn's m 'housandd Utferred Income Taxes Defened tax liabihties Accelerated depreciation $ 789,165 5714,019 Allowante for funds used during comnuction 202,490 199,577 income taxes recm crable through future rates 90,950 73,759 Delerred termination and poslemployment costs 55,890 -

Delened fuel costs 45,518 61,709 Leveraged leases 32,613 33,867 l'ercentage repair allowante 35,431 33,367 Otner 129,130 95,995-1,381.187 1,212.293 Total deferred tax liabihties Defened tax assets Alternatn e minimum tax 72,187 72,1 K9 Accrued pension and postemploy ment benefit costs 67,016 I,595 Deterred imestment tax credits 55,099 56.337 Other iI9,274 98.638 Total deferred tax assets 313,576 228,759 Deferred income taxes per Comolidated Italans.c Sheets $1,067,511 $983.534 sa rm nnnLua r.rwwi ww,w Ce uan g r w war .wornn h e im rruol w < ,7th ey w sk a unent yw s ;n r.cntaunn luinmore G.n and Ilatrw Gunpany and %huJiarles

N O_ T E S TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SIG NIFIC A NT AC C O U NTIN G PO LIC..ZS Nature of the Ifusinrst The purchased gas adjustment is based on recent annual vob liahimore Gas and Electric Company tilGE) and Subsidiaries umes of gas and the related current prices charged by BGE's pas (collectively, the Company) is primarily an electric and gas utihty suppliers. Any deferred underreemeries or overrecoscries of serving a territory w hich encompav,es liaitimore City and all or purtbased gas costs for the twelve months ended November 30 part of nine Central Maryland counrict The Company is also each year are charged or credi!cd to customers over the ensuing engaged m diser4fied businesses as desenhed funher in Note 3. calendar year.

Principles of Conwlidation income Ta.rrs 11hc consolidated financial *,tatements indode the account of The Cmnpany adopted Statement of Fmancial Accounting IlGli and all subsidiaries in w hich IIGE owns directly or indi- Standmds No.109, " Accounting f or income Taxes," effectis e g

rectly a majority of the voting skick Intercompany balances and January 1,1991. Statement No.109 requires the use of the lia-transactions base tven eliminated in consolidation. Under this bihty metini of accountmg for incorae taxes. Under the liability policy, the accounts of ConsteHation lloidings, Inc. and its sub- method, the deferred tax hability represents the tax effect of tempo-sidiaries (collectis ely, the Constellation Companies) and itNG, rary differences between the financial statement tuid tax bases of ine, are consolidated in the financial Matements. Safe ilarbor asseo and habilities. It is measured using presently enacted tax Water Power Corporation is reported under the equity methat. rar< *

. portion of BGE's deferred tax liability apphcable to Corporate joint ventures, partnersinps and aflikated companies in utib.y werations which has not been rethted in current service which a 209 to 501 sotmp interest is held are accounted for rates represents income taxes recoverable through future rates, it under the equity methat, unless control is evident, in w hich case has been recorded as a regulatory asset on the balance sheet.

the entity is consolidated. Imestments in power generation sys- Ikfened income tax expense represents the net change in the tems and certain financial investments in w hich lew than a 20% defcned tax liability and regulatory asset during the year, exclusise voting interest is held are accounted for under the cost method. of amounts charged or credited to common shareholders' equity, unless significant in0uence is exercised over the entity, in which The 1993 and 1992 current tax expense consists solely ofirg-case the im esonent is accounted for under the equity method ular tax. The 1991 current tax expense consists of a regular tax of

$46E million and an altemative minimum tax ( AMT) of $14.2 Regulation of Utility operationi million. The AMT liabilities generated in 1991 and prior years BGE's utihty operations are subject to regulanon by the Pubhc can tv carried forward indefinitely as tax credits to future yean in Service Commiwion of Maryland t PSCL The accountmg pohcies which the regular tax liabihty exceeds the AMT liability. As of and practices used in the detenmnation of sen ice rates are also Ikccmber 31.1993, this carryforward totaled $73.2 million.

generally used for financial reportmg purposes in accordance with As a resuh of its effect on nonregulated activities. the cumula-generally accepted accounung ptinciples fm regulated industrict tise effect of the change in the method of accounting for income See Note 5. taxes resuhed in an increase in 1991 net income of 519.7 million, or 16e per common share, because of the reversal of deferred :

Utility Rcrenner income taxes on nonreputated actis ities accrued in prior years at BGE recogm/es utd. ity tesenues as service is rendered tax rates in excess of the 34% tax rate in effect at that time.

to customers

.& i emm da MTO miM wie BGE's wp-Furiand l'urchased Energy Cous ned utdity opetutions has been deferred and is amortised to i

. Subject to the appmval of the PSC, the cmt of f uel used in gener- mconie rataNy om the Hses of the subject pmperty. ITC and ating electncity, net of revenues f rom interchange sales, and the other tax credits associated with nonregulated diversified business activities other than leveraged leases are flowed through to (ost of gas sold may be reemered through /cro-based ekerne iuel rate (see Note 13) and purchasce gas adjustment clauses. The dif- income. As of December 31,1993, the Company had energy and ference between actual fuel costs and f uel res ennes is delened on other tax crea carry forw ards of $4E miHion u hich expire in the y ears 2005 through 200S.

, the bahmce sheer to be recmered from or refunded to customers in futme periods. HO utihty revenue fmm systern salo is subject to the ,

The electne fuel rate formula is based upon the latest tu enty - Maryland public service company franchise tax in heu of a state income tax.1he franchise tax is included in taxes other than four month peneration mix, subject to a minimum lesel of nuclear generation, and the latest three-month aserage fuel cost for each income tam in the Consohdated Statements of Income.

cencratmg umt. The toci rate does not change unless the calcu-lated rate is more than 5% abme or betw the rate then in effect. I" ""'"F7 U"I""#I""

Fuel stods and materials and supplies are generally stated at userage cost.

I I I

l Baldmwr bus and Elwin< Corpun and Suhudwnn i i i

,, - - ~ . -- .,- .-. - - - - - - .- -- .- - . . . .

.j

. .i I

l i

l I

Real utate Projects the plants' output to the joint owners' service tenitories. IlGE's -;

Real estate projects comist of the Constellation Conyunies' ow nership interest m these plants is 2tL99% and 10.5ML iespec-imestment in rental and operating properties and properties under tis cly, and repesents a net imestment of $128 million as of i development. Rental imd operating prolerties are held for invest. December 31.1993. Financing and accounting for these proper- .

ment l Pmperties under deselopment are hehl for future develop- ties are the same as for wholly owned utihty plant.

ment and sale. Costs incurred in the acquisition and active Nut lear fuel expenditures are amortired as a component of development of sus h pmperties are capitali/ed. Rental and oper. actual fuel cosh based on the energy produced over the life of the ating properties and properties under development are stated ai tuel. Fees for the future disposal of spent fuel are paid quanctly to cost unlew the ammmt im ested escceds the amounts eyrcied to the Department ut F.nergy and are accrued based on the Isilowatt-he recm cred through operations and sales. In these cases, the pro. hours of electricity generated. Nudear fuel expenses are subject g jects are written down to the amount estimated to he recoverable, to retmery through the electric fuel rate.

Nuclear decomnussioning costs are accrued by and recovered inrntments through a sinking fund methodology. In its April 1993 rate order, t Marketable cymty securities are stated at the lower of cost or the PSC granted BGE resenue to accumulate a decommissioning market value, and other securities are stated at cost. Where appro- resers e of $336 million m 1992 dollars by the end of Calvert piate. cost reDetts anuirtitation of premium and thscount com- Cid fi sen ice life in 2016. adjusted to reflect en.pected inflation, puted on a straightdine baus. Gams and lowes on the sale of the to deconuniwion the radioactise portion of die plant The total Constellanon Companies' im estment securities are int luded in deconunisuoning reserve of $914 rmilion and $77.8 million at revenues hom dnersified activities on the income statement and December 31.1993 and 1992, respectisely,is included M accu 4 are recognited upon realization on a specibe identification basis. mubted depreciation in the Consolidated llalance Sheets. In Gains and losses on the sale of HGE's nuclear decommissiomng accordance with Nuclear Regulaiory Commiwion (NRC) regula. +

trust fund securities are included in net other income and deduc- tmos HGE ha3 established an extemal decommissioning trust to  ;

tions on the income statement and are recognized upon reali/ation which a ponmn of accrutd decomminioning costs have been on a spenfic idemification basis. contnhuted.

Statement of Financial Aco>uniing Standards No. I13, wluch The NRC requires utdities to proside financial awurance that must be adopted in 19% requires that investments in equi secu- they will act umulate sufficient funds to pay for the cost of nuclear dries hm ing readily detemiinable fait s alues and debt securities . decomminioning based upon either a generie NRC formula or a other than those which the Company has the posinvc intent and raciijiy.specilie decomnuwioning cost estimate, pros ided that the abihty to hold to maturity te recorded at fair value rather than ;u facility specific estimate is equal to or greater than that of the amortized cost. Changes in the fait value of these securities will NRC formula. Subsequent to the PSC's Apil 1993 rate order, the tv recorded in shareholders' equity escept for trathng securiticN NRC uplated its generic formula to reDect substantially higher for w his h such changes will he recotded in income. Adoption of waste burial i,harges. 'the revised NRC fonnula generates a this statemeni is not espected to have a matetial impact on the decommiwinning cost estimate of $703 nullion in 1992 dollars.

Company 's Onancial statements- Addnionally, the Company initiated a facihty-specific study

. . w hich, u hen completed,is eyiected to generate an estimate of the Utility Plant, Ikepreciarmn and A marti:ation, ,

. . cost to decommiwion the radioactive portion of the plant which is and l>ccomnu.ssmmng 9 y gg (g ,  ; 9 (gg ';

Utdity plant n stated at origmal cost, which includes material.

completing the f.achty -specib..e study and plans to request the labor, and. w here apph.eable, construction overhead costs and an NRC to pennit the use of the f acihty-specific decommiwioning allowance for f unds used during construction. Adduions to utility bn dsd4 h e W pidy k plant and replacemer. s of units of propeny are capaab/ed to requisite financial awurance.

utilii> pbt unr i,lamtenance and repasts of property and replacements of Hems of property detennined to be icw than a uO d oroperty are charged to maintenance expense. y y .n6 & dI)nring Construction and N reciation is generally computed using composite straight. jgjg fgg w ~ spphed to the userage investment in classes of depre-W Miowance for funds used during construction ( AFC) is an ciable property. Ihe compo.ite depreciation rates by claw of i accounting pmcedure w hich capitalizes the cost of funds used to depeciable property are 2.809 for the Calvert Clif fs Nuclear h di hon pmjects as part of utihty plant on the Power Plant. 2.75% for the lirandon Shores Power Plant. 3.26%

halance sheet, ciediting the cost as a nuncash item on the income for other electric plant. 3.12% for gas plant. and 1029 for statement. The cost of borrowed and equity funds is segregated common plant other than schicles. Vehicles are depreciated hetween interest expense and other income, respectively. BGE based on their estimated useful lis es.

m overs the capitah/ed AFC and a return thereon after the related BUE owns an undivided interest m the Keystone and din plant is placed in senice and included in depreciable assets Conemaugh electric generating plants hicated m western d w ha PennsyIvania, as wcli as in the transmivion line w hich transports T

liainmaie G.n and 11canc company und %bsidiarics

> ~- .. . .

n ,

During the period January 1,1991 through April 23,1993, the Long-Term Debt Company accrued AFC at a pre-tas rate of 9.949, compounded The discount or premium and expense of issuance associated with 4

annually. Effectisc April 24,1993, a rate order of the PSC long-term debt are deferred and amortized over the original lives reduced the pre tas AFC rate to 9.401, compounded annually, of the respective debt issues, Gains and losses on the reacquisition

_ Effective January 1,1992. the PSC authnrized the accrual of of debt are amortited over the remaining original lives of the AFC on all electric, pas, and common utility construction projects issuances.

with a wnstruction period of more than one month. Prior to 1992.

Al C was accrued on major electric projects only. Cash Flows

'Ihe Constellation Companies capitalize interest on qualif ying For the purpose of reporting cash flow s, highly liquid investments real estate and power generation des elopment projects. BGE capi- purchased with a maturity of three i,onths or less are considered tah/cs interest on certain deterred fuel costs as diwussed in Note 5. to be cash equivalents. g i

NOTE 2. SEGMENT INFORM ATION 4

FrarIhledI)n emher 3/. 1993 1992 1991 iln thouwmh) '

Electric

' Revenues 52,115,155 51,967,923 $ 1,994,525

) income from operations 538,340 441,784 444,530 +

income from operations net of income taxes 402,893 350,429 352,385 Depreciation 203,476 191.970 173,349 Construction expenditures Iindudmg Al O 419,519 346,728 406,008 ldentiliable anets at December 31 6,025,798 5,508.008 5,374,940 Gas Resenues S 435,849 5 402.937 5 358.195 Income f rom operations 39,426 45,552 35,607 income from eperanons nel of income tases 33,18N 37,514 30,945

[kprecianon 22,995 21,364 18,896 C"nstruction expenditmes Oncluding AIO 5h,359 42,688 50,236 Identifiable assets at December 31 694,977 579,386 555.609 f

Dhcrsified Ilusinesses Revenues $ 117,710 $ 120,483 $ 96,133 Income from operations 43,234 48,009 9,051 income from operations net of income taxes 46,847 44,055 20,313 Depreciation 10,303 10,149 9,019 Cumulaine ef fect of change in the method of accounting for income lases - - 19,745 Idenotiable assets at ikcember 31 1,096,220 1,023.315 1,(Xil.313 Total Res enues 52,66H,714 52,491.343 $2,448.853 income 1 rom operations 621,000 535,345 489,188 incorne from operanons net of income tases 4M2,928 431,998 403,M1 Depreciation 236,774 223,483 201,264 Cumulative effect of change in the method of accounting for income taxes - - 19,745 Construction eyenihtures l'includmg AIO 477,878 3k9,416 456,244 jdentifiable assets at December 31 7,816,995 7,110,709 6,931,862 L. Other ussets at December 31 170,044 263,M8 206.127 Total assets at December 31 7,987,039 7,374,357 7,137,989 Ikhimarr Ga s an.II latrk Com;'an ,mJ S,hid, arks

N OT E 3 SU E[SIDI A R Y IN FORM ATION Diversified businesses consist of the operations of Constellation flGE's investment in Safe 11 arbor Water Power Corporation, a IIoldings. Inc. and its subsidiaries and ling. Inc. pnklucer of hydroelectric power, represents two-thirds of Safe Constellation lloldings Inc., a wholly owned subsidiary, holds lladmr's total capital stock, includmg one-half of the voting all of the stock of three other subsidiaries. Constellation Real stock. and a two-thirds interest in its retained earnings.

Estate Group, Inc Constellation Energy. Inc,. and Constellation The following is condensed financial information for imestmerits. Inc. These companies are engaged in real estate Constellation lloldings, Inc. and its subsidiaries. Similar informa.

development and ow nership of senior living facilities; deselop- tion is not presented for Safe llartur Water Power Corporation .

ment, ownership, and operation of power generation systems; and and 13NG. lac, as the financial position and results of operations g financial im estment s, respectisely.

BNG. Inc. is a v holly ow ned subsidiary w hich invests in nat-of these entities are immaterial. The condemed financial informa-tion for the Constelhition Companies does not reflect the elimina-ural gas reserves. tion of intercompany balances or transactions w hich are eliminated in the Company's consolidated financial statements.

1993 1992 1991 nin ilwusands. cu ept per slwe omimnto income Statements Resenues Real estate projects 5 77,598 5 76.582 $ 75.205 Power Feneranon systenn 24,971 28N4 17,732 I inancial im estments 21,195 21.485 H.059 ,

l otal res enues 123,764 126.151 100,996 lapenses other than interest and mcome taxes 80.427 77,872 91,848 Income ham operaiions 43,337 48.279 9.148 Mmority interest (2801 718 3,550 Interest expense (33.143) (30.103) 132.938)

Income tax benent (expense) 1,984 (3,637i 9.005 Cumulame effect of change in the method of accountmg for mcome taxes - -

19.745 Net income $ I1,898 5 15.257 5 8.510 Coninbution to the Company 's camings per share of common stock $ 08 $ .I1 $ .07 Ilahmce Sheets Current assets $ 54,039 5 29.899 5 20,453 Noncurrent assets 1,036.507 990.273 976.179 '

o Total asets $1.090,546 $1.020.172 5996.642 Current habilities $ 24.201 S 113.4(4 $285.130 Noncurrent habihties 759,04N 611,370 431,370 SlareholderN equay 307,297 295.398 280.142 Total habihnes and shareholder's equay $1.090.546 51.020.172 5996.642 l >

i Batrmuae Gas and[tertesc Comp,nn and Subsidiancs l

gr - -

NOTE.4.. REAL EST ATE PROJECTS AND FIN ANCI AL INVESTMENTS Real estate projects consi t of the following insestments held by in 1991, a subsidiary of Constellation iloidings, Inc recog-the Constellation Companies: nized a low of $10.5 million to write-down the carrying value of Ai un em/w 3L 1993 1992 financial investments to reticct previously unrealized losses on 1 i

tir, thou ungo certain marketable equity securities.The securities written down Pioperties under development $249,473 5231,856 were subsequently sold. A subsidiary of Constellation Ifoldmgs, Rental and operating propert es Inc. aho recognized a loss of $3.1 million on twa financial lim-(net of accumulated ited partnerships that were adjusted to refket market value when depreciation) 237.194 227,412 l the partnerships were reclassified as short-tenn investments.

Other real estate vemunes 730 2.774 ib of December 31,1993, gross unrealized gains and losses 'g Total 5487.397 54623M2 applicable to marketable equity securities totaled 51.8 and $0.5 In 1991, a subsidiary of Constellation lloldings,Inc. recog. million, respectively. Net realized gains (losses) from financial , ,

nited a loss of $10 million to write down the carrying s alue of investments included in net income totaled $6.5 million in 1993, I certain operating properties and properties under develop,nent to $9.8 million in 1992, and $(11.6) million in 1991.  !

tellect the depressed real estate and economic markets.

Financial investments consist of the following investments

' held by the Constellanon Companico As Denmha 3L 1993 1992 tln ihn wndn Insurante companies $ 83,275 5 93h48 Financial hmited partnerships 44,903 41,076 In eraged leases 38,669 39.441 Marketable equny secunnes 42,681 25,304 Other secunties 3,787 8,142 Total Y t 3,315 5207.011 NOTE 5. REGULATORY ASSETS Certain utility expenses and credits normally redected in income Income taxes recoverable through future rates represent princi-are deferred on the balance sheet as regulatory assets and liabili- pally the tax effect of depreciation differences not nonnalized and ties and are rccopmzed in income as the related amounts are the allowance for equity funds used during construction. offset by included in service rates and recovered from or iefunded to cus- unamortized deferred tax rate differentials and deferred taxes on tomers in utility revcnues. The following table sets forth IlGE's deferred FIC. These amounts are amortized as the related tempo-regulatory assets. rary dif ferences reverse. See Note i for a further discussion of income taxes.

y oncmbn a 1993 1992 Deferred fuel costs represent the difference betwecn actual de th,mando fuel costs and the fuel rate revenues under IlGE's fuel clauses income taxes recoverable isee Note 1). Deferred fuel costs aie amortized as they are col-through future rates $259.856 5216,939 lected from customers.

Ikferred fuel costs 130,052 181,497 The underrecovered costs deterred under the fuel clauses were Defened tennination as fouou benefit costs 96,793 --

. Deferred nucicar espendnutes 86,726 76.549 A ' U" """ E I993 W92 Deferred petemplosment * 'h""'d'"N

' benefit costs U#CUN -

62.892 -

Deferred cost of Coe deferred $155,901 $210.483 decommissionmg federal IM e for pos@le uranium enrkhnient fauhties 49.562 55JKio disauow ance of n placement ikferred energy conscrsation enug ma hee Note W 05, 2 05 M expenditures 38.655 20,519 Net electrie 120.901 175,483 Deferred em nunmemal costs 32,966 -

Gas 9,151 6.014 Other 10,623 18.059 Total 5130.052 5181.497 Total Ot.8,125 5 %8.5M Ba%wre Gas amiLin tra Com;wn andSufnuhams u.. -

. ~ ,. -. - - . ~ . - . . ~ -

,- J

. Deferred tennination beneht costs represent the net unamonized such contributions, which are generally payable over a fifteen-year balance of the cost of certain tennination benefits (see period w ith escalation for inflation and are based upon the amount r Note 7) applicable to llGE's regulated operations. These costs are of uranium enriched by DOE for each utility. These costs are being amortized over a fise-> ear period in accordance wR rate being amortired over the contribution perimi as a cost of fuel.

actions of th'c PSC. Defened energy comervation expenditures repiesent the r .  ;

Deferred nuclear expenditures represent the net unamonized unamonized balance of sertain operations costs which are tyng balance of cenain operations 'md maintenance costs w hich are amortized over five years in accordance with orders of the PSC.

bemp amonized over the remaining life of the Calvert Chifs These expenditures consist of labor, materials, and indirect costs Nuclear Power Plant in accordance with orders d the PSC.1hese associated with the conservation programs approved by the PSC.

e3penditures comist of costs inemred from 1979 thmugh 1982 for Deferred environmental costs represeni the estimated costs of

.g inspecting and repairing seismic pipe supports, expenditures imestigating contamination and perfonning certain remediation incurred from 1989 through 1993 associated with nonrecurring activities at contaminated Company-owned sites (see Note 13).

phases of certain nuclear operations projects, and ewndnures These costs are generally amorti/ed mer the estimated te4m of' incurred during 1990 for investiganng leaks in the prusurifer the remediation process.

heater sleeses. Electnc deferred fuel costs in excess of $72.8 million are -

Deferred postemployment benefit costs represent the excess of excluded from rate base by the PSC for ratemaking purposes.

snch costs recognized in accordance with Statements of Fmancial liffective April 24.1993. IIGE has been authorized by the PSC -

Accounting Standards No 106 and No. I12 mer the amounts to accrue carrying charges on electric deferred fuel costs excluded -

reflected in utility raies. These cmts will be amonized over a from rate base. These carrying charges are accrued prospectis ely i

' 15-) ear period beginaing no later than 1998 (see Note 6h at the 9.409 authorized rate of retum. The income effect of the Deferreti cost of demmmissioning federal uranium enrichment eqmty funds ponion of the carrying charges is being deferred lacihties represents the unamonized ponion of IIGE's required until such amounts are recovered in utility service rates subse-contobutions to a fund for decommissioning and decontaminating quent to the completion of the fuel rate pmceeding esamining .

the Department of Energy 's (DOE) uranium enrkhment facilities. the 1989-1991 outages at Calvert Clilfs Nuclear Power Plant as-The Energy Policy Act of 1992 requires domestic utilities to make diwuwed in Note 13.

NOTE 0, PENSION AND POSTEMPLOYMENT BENEFITS Prmion Ihnefits cretht cost method. Pension Plan assets at December 31.1993 The Company sponsors several noncontributory defined benetit consisted primarily of marketable thed income and equity pension plans, the largest of which Ohe Pemion Plan) emers securities group annuity contracts, and short term imestments.

substantially all llGE employees and cenain employees of the The following tables set fonh the combined funded status of ,

Comiellation Compeuucs. The other plans, w hich are not the plans and the composition of total net pension cost. Due to material in amount. prm ide supplemental benefits to certain dechnmg interest rates, the Company reduced the discount rate non-employee directors and key emplo)ecs. lienefits under used to measure its liability for pemion, postretirement, and the plam are generally based on age, years of service, and postemploy ment benefits to 7.5% as of December 31,1993. This compensation levels. decrease in the discount rate, coupled with the increased pension Prior senice cost asweiated with retto4ctis e plan amendments liability resuhing from the 1993 Voluntary Special Early is amonized on a straightline basis mer the as erage remaining Retirement Program, produced an accumulated pension obliga-

~

3 sen ke period of actis e employees. tion greater than the fair value of the Pemion Plan's assets. As a  ;

The Companyi funding policy is to contiibute annually the result. the Company recorded a pension liability adjustment, a cost of the Pension Plan as detennined under the piojected unit portion of which was charged to shareholders' equity.

k I

i Balvmore Gas and Elarru compty .md hhudarin

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Ar purmher 3 /, 1993 1992 tin ilwusaruts)

Vated benefn obligation $677,069 5485,098 Nonvested benefit obligation 11,359 9.814 Accumulated benent oNigation 688,428 494,912 Projected benefits related to increase in future compensation lesels 1092 61 86.882

- Projected benefit obligation 797,589 581,794 Plan assets at fair value (605,629) (542,190)

Projected benefit obbgation less plan assets 191.960 39,604 Unrecognized prior sersice cost (21,252) (17,671)

Unrecognized net loss (148,450) (28.017)

Pension hability adjustment 58,553 -

.k Unamorti7ed net asset fmm adoption of FASil Statement No. 87 I,812 2,039 Accrued pension habihty (asseti 5 82.623 $ (4.045)

Ycar /xled De remtvr 11. I993 1492 199I ein thousand0 Components of net pension cost Sen ice cost.benerin earned dunng the period $11,645 511,771 511,729 Interest cost on projected benefit obligation 51,183 47.3 % 43,143 Actual return on plan assets (56,225) (33 b 't (56,737)

Net amortitation and deferral 6,591 (12.25 i 12.810 Total net pension cost 13,194 13,184 10,945 Amount capitahzed as construction cost (1,800) t1.839) t1,500)

Amount charged to espense 511.394 s11.345 5 9.445 Net pension cost show n chove does not include the cost of Effective January 1,1993, the Company adopted Statement of termination benefits described in Note 7. Financial Accounting Standards No.106, which requires a change The Company also sponsors a defined contribution savings in the method of accounting for postretirement benefits other than plan roseting all eligible BGE employees and certain employees pensions from the pay-as-you.go method used prior to 1993 to the of the Constellation Companies. Under this plan. the Company accrual method. The transition obligation existing at the begin-makes contobutions on behalf of participants. Company contribu. ning of 1993 is being amortized over a tw enty-year period.

tions to this plan totaled 59 rnillion. 514.8 million and $10.6 in April 1993, the PSC issued a rate order authorizing BGE to million in 1993,1992, and 1991, respectively. recognize in operating expen .e one. half of the annual inercase in PRB costs applicable to regulated operations as a result of the Nitrtircment Benefits adoption of Statement No.106 and to defer the remainder of the

' The Company sponsors defined benefit postrctirement health annual increase in these costs for inclusion in BGE's next base care and hfe insurance plans which cover substantially all rate proceeding. In accordance with the PSC's Order, the BGE employees and certain employees of the Constellation increase in annual PRB costs applicable to regulated operations

]

Companies. Benefits under the plans are generally based on age, for the period January through April 1993, net of amounts years of service, and pension benefn levels. The pmtretirement capitalized as construction cost, has been deferred. This amount, benefit (PRIO plam are untunded. Substantially all of the health which totaled 55.7 million, as well as all amounts to be deferred care plans are contributory, and participant contributions for prior to completion of BGE's next base rate proceeding, will be employees who retire after June 30,1992 are based on age and amortired over a ISyear period beginning no later than 1998 in -

years of service. Retiree <;ontributions increase commensurate accordance with the PSC's Order. This phase-in approach meets with the expected increase in medical costs. The postretirement the guidelines established by the Emerging issues Task Force of life insurance plan is noncontributory, the Financial Accounting Standards Board for deferring post-1

'I I

i

-l (Ldumre Gas anHlutric Company and Mudiancs i

. -. . ,__ ._ _m . -- . . _ . ,

a 1

tetirement beneht cinis as a regulatory asset. Accrual. basis The following table sets forth the components of the accumu.

' PRIl costs applicable to nortregulated operatiom are charged lated pntretirement benelit oblidation and a reconciliation of to egeme, these amounts to the accrued postretireinent benefit liabihty.

As pronta 3I, 1493 1%1 1.ife I.lfI Ilealth Carc imurance llcal'h Care imurance -

tin shouwnds)

Accumulated puretirement benefit obhgation:

Retuces $1N2,638 $45,461 $116,935 $34,6001 12nlly chgible active employ ees 19.177 H39 18.082 '143 O- od- acoveempimen Sa m i5. m Sox i6.45x

'lotal pu umulated pntretiremem benefit ohhgation 260.647 61,677 - i89,225 51,201' Umecogni/cd trarnnion ohhpation (179,764) (48,641) (189,225). (51,201) -

Umecognized net to,s (36.675) 19,072) - - -

Acenwd pwretirement benent habihty $ 44,20N $ 3.964 $ -

The following table sets forth the compnition of net whit h requires a change in the method of accounting for these pNrcorement benefit cost. bene 6ts from the pay-as you-go methotl to an accr".il method, as of December 31,1993. The liabihty for these benefits totaled -

ymr min.tonem/w fl. 1993 552,1 million as of thember 31.1993, and the p>nion of this un thousando liability attributable to regulated actnities was defened,'Ihe Compwnh of net posnetirement benefit cost: amounts deferred will be amortized over a 15-year period begin.

.Nen ice cmt - benehts earned during the period $ 4,373 ning no later than 1998. The adoption of statement No. I12 did .

Interest emt on accumulated postreiirernent not han a niaterial iinpact on twt incorne.The increase in the benef n ohhpation 2n,451 annual cost of these benefits subsequent to the adoption of accrual Amoni/ation of tramition obhgation 12.021 accounting is not expected to base a material impact on the Total net pisnetirement bene 0: cost 36,845 Coinpanyi financial statenwnts.

(5,N9M)

Amount capitatued as wintruction cost Amount detened tiI,965) M 5 "*f'I'*

• Amount charged to espense -SlH,9N2' 'lhe pension and pntemployment lene61 liabilities wete deter-mined using the following assumptions.

Net postretirement benefit cmts shown abm e do not include Ar vn ember 31. 1993 1992-

. the cost of termination tenefits described in Now 7. Assumptiom:

Postretirement be-aelit costs recognized under the pay as you- 9;,, count rate 7.5% 8.75 %

yo method wcre as ndlows: Average inercase in ,

rear enses om mhcr 31. lW2 1991 future compensation leveh 4.59' 4.59 un rheando thpected long-tenn rate of

'Iotal pnuetirement benent cmt $11,676 54.74i retmn on assen - 9.5% 9.54 Amount (apitalized in comtruction cost t1,411) ( t,57h Amount charged to espeme 5 9,765 58,16g 1he heahh care innation raws for 1993 are awunwd to be 9.5% for Medicarrelipihte retirees and 12% for retirees not -

covered by Medicare. Iloth rates are awumed tu decrease by 0.5%

Other /Wirmployment flenefits annually to an ultimate rate of 5.5% in the years 2001 and 2006,

'lhe Company provides cenain pay continuanon pay ments and respectively. A one peicentage point increase in the heahh care

~

heahh and hie insmance benehts to empimees of IlGli and cer. inHation rate fmm the munn! mtes would increase the accumu.

~

tain of the Constellation Companies w ho are determined to be Lied pntretirement benefit obligation by approtitnately $37.H j disabled under 110l!% l.ong-Tenn Disability Plan. 'lhe Company inilhon awf December 31.1993 and would increase the aggre.

udopted Statement of1 inancial Accounting Standards No. I12, gate of the serdce cost and interest cost components of put.

retirement benefit cost by apprmimately $3.M million annually; trathwre Gas and Llatw Gnpar and Suhaharies

NOTC 7, TERMIN ATION BENEFITS The Company offered a Voluntary Special Early Retirement The Company of fered a second Voluntary Special Early Program (the 1992 VSERP) to eligible employ ees u ho retired Retirement Program (the 1993 VSERP) to eligible employees during the period February 1,1992 through April 1,1992. In who retired as of February 1,1994. The one-time cost of the 1993 accordance with Statement of Fmancial Accounting Standards VSERP consisted of enhanced pension and postretirement bene.

No. 88," Employers' Accounting for S nJements and fits. in addition to the 1993 VSERP, further employee reductions Curtailments of Defined Benefit Pension Plans and for have been accomplished through the elimination of certain posi-Termination Benefits," the cost of termination benefits associated tions, and various programs have been offered to employees with the 1992 VSERP, w hith consisted principally of an impacted by the eliminations. In accordance with Statement No.

enhanced pension benefit, w as recognized in 1992 and reduced 88, the cost of termination benefits associated with the 1993 g net income by 56.6 million. or Se per common share. In April VSERP and various programs, w hich totaled $105.5 million, ras 1993, the PSC authorized IlGE to amortite this charge oser a recognized in 1993. TL 5883 million portion of 1993 VSERP five-year period for ratemaking purposes. Accordingly. BGE attributable to iegulated activities was deferred and will be amor-established a regulatory asset and recorded a corresponding credit tired over a five-year period for ratemaking purposes. beginning to operating expense for this amount. The reversal of the 1992 in February 1994, consistent with previous rate actior.s of the VSERP in April 1993 increased net income by $6.6 million, or PSC. The $17.2 million remaining portion of the cost of 5e per common share. tcrmination tvnefits was charged to expense in 1993.

NOTE 8. SHORT TERM BORROWINGS Information concerning commercial paper notes and lines of compensating balances which have no withdrawal restrictions.

credit is set forth below. In support of the lines of credit, the Borrowings under the lines are at the banks' prime rates, base Company pays commitment fees and,in some, cases, maintains interest rates, or at vitrious money market rates.

1993 1992 1991 '

muitar ammmis in thouxmdo llGE's Commercial Paper Notes Borrowings outstandmg at December 31 5 - $ I 1,000 5159,500 Weighted aserage interest rate of notes outstanding at December 31 - % 3.62% 4.759 Unused hne. of credit supporting conunercial paper noies at December 31 (a) 5208.000 5203,0nD S303/KXI hlaximum borrowings during the year 96,900 393.650 336.200 Average dady borrow mgs during the year ib) 10,322 98,892 210.883 Weighted ave age mterest rate for the year te) 3.2N % 4.79% 6.081 Constellation Companies' Lines of Credit Borrow ings outstandmg at December 31 5 -

S 52.(CD Weighted as crape interest rate of bonowings ouistanding at Detember 31 ~ % -

'7e 5.94 9 Unused lines of credit at December 31 $ 20,000 5 -

5 8.000 hlasimum bonow ings during the year -

60.670 75.000 Average daily terrowings during the Scar (b) - 31,773 61.860 Weighted average interest rate ior the year (c) - % 6.019 7.19 %

(a) HGE decreased its hnes of credit supporting commercial paper notes to $143 milhop ef fective January 1.1994.

(b) The sum of dollar days of ontstandmg borrowings divided by the ne iber of days in the period (c) Total interest accrued dunng the period disided by aserage daily norrowings.

i 0.lllt Mt 72 ($Jt und E!h'Vif (Ort lMy drid.hH5hidtdrirS

- , _ _ .__ _. _._ . _ . . . _ . m . _ . .

NOTE 9. LONG TERM DEDT Fint Refunding Afortgage llonds of flGE I,mtg-Term ikbt of Constellation Companies Substantially all of the principal properties and franthkes ow ned The mortgage and construction loans and other collaterali/ed notes by BGE, as well as the capital stock of Constellation lloidings, have varying tenns. Of the $151.2 million of variable rate notes.

Inc.. Safe 1 f athor Water Power Corporation, and UNG, Inc., are 551.1 million requires perkxhc interest only payments widi var-subject to the lien of the mongage under w hich BGE's out. ious maturities from Septernher 1995 through March 1996, and standing Hrst Refunding Mortgage Bonds have been issued. $UXLi milhon requires periodic payment of principal and interest On Augu.11 of each year BGE is required to pay to the mort. w ith s arious maturities from January 1995 thn> ugh January 2009, gage trustee an annual sinking fund payment equal to 19 of the 'lhe $6.5 million. 7.739 mortgage note requires quanerly g largest principal amount of Mortgage lionds outstanding under the mortgage during the precedir g twehe months. Such funds are pnncipal and interest pay ments through March 15,2009 The unseemed notes outstanding as of December 31,1993 to N used, as prmided in the mortgage, for the purthase and mature m accordante with the following schedule:

retirement by the trustee of Mortgage lionds of any series other gy ,ggyg than the Installment Series of 2002 and 2009, the 9%% Series of 8.359,due August 28.1995 5 20J 0) 1995, the M.40% Series of 1999, the 5%9 Series of 2(m, the 8.714,due August 28.1996 23JKK) 8%% Series of 2001, the 7%% Series of 3K12, the 6%9 Series of 6J 99, de S@mher 9,1996 10D XI 3KH, the 6%G Series of 2003, the 5%4 Series of 3KM, the 8 934, due August 28,1997 52#X) l 6 801 Series of 2004 the 7%9 Series of 3W)7, and the 6%% d 05% due September 9,1997 15MK)

Series of 2008. g ,39, due Octoba 15,1997 30.000 7D59, due Apol 22,1998 25S00 tither Ismg-Terra Ikht of flGE 7.06% , due September 9. I998 205m BGE m;nntains revohing credit agreements that expire at various 8.489. due October 15.1998 7530) times during 1995_and 1996. Under the terms of the agreements. 7.30% due April 22.1909 - 90AN)

BGE may, at its option, obtain loans at various interest rates. A S.73% due October 15,1999 15S00 commitment fee is p-id on the daily as etage of the unborrowed 7.55% due April 22,3i00 35MO portion of the commitment. At December 31,1993. BGE had no 7.43% due Seriember 9,3NO 30D 0 borrow ings under the3e revolving credit agreements and had gg avadable $165 million of unused capacity under these agree-ments. Elfeetive January I. I994, BGH decreased its revoking n'eighted A verage Interest Ratesfor Variable Rate skbt credit agreements to S125 milhon.

Th WWd wg iwW e for variable rate debt during The Medium-term Notes Series A mature at various dates f rom , ygg g gg ., 7g Febmary 1994 through February 1996. The weighted average  !

interest rate for notes outstanihng at December 31,1993 is 7.939. 1993 1992 The Medium-tenn Notes Series B mature at s arious dates HGE from July 1998 through Septemoer 2006. The weighted average Imns unda remhing credit agreements -% 4.23 %

interest rate for notes outstanding at Decerrdvr 31, PN3 is H.431 Hoating rate notes Series II - 7.90 The Medium-tenn Notes Series C mature at s arious dates Pollution control loan 2.39 2.90 from June 1996 through June 3X)3. The w eighted as erage interest Port facilities loan 2.53 3314 rate for notes outstandme at December 31,1993 is 7J 61 Adjustable rate pollution control loan 3M1 4.13 The principal amounts of Installment Series Mortgage Bonds Economic development loan 2.49 3.11 payable each year are as follows: Constellation Companies Bonds Due Bonds Due Mongapc and construction loans year 2002 3m and other collateralized notes 6.26 6.74 i/n nm%=6 4 Loans under credit agreements 5.94. 6.15 .

1994 S 430 ,

1995 through lo97 605 1998 and 1999 690 2t100 and 2001 865 2002 0.725 2005 through 3m $ 3.250 2009 42M10 ltaittnac Ge andIJn Idc Comtunv and Mid: ann

_. _ _ . _ ~ . _ . . _ . - __ ,_ _ _. _ _

~ ._ . _ . . _

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1 1

Aggregate Maturities Constellation }

- The combined aggregate maturines and . sinking fund requhe- Fear HGE Companies .

ments for all of the Company's long tenn bonowings for each of r/n i/musando the next five years are as follows: 1994 $ 32,728 $ 8,788 1995 218,429 81,260  ;

1996 72,330 77,213 '

1997 80.754 112.359 1998 84,112 128.355 G '

N OT E 10. R E D E E M A E3 LE P R E FE R E N C E STOC K The 6.95% 1987 Series and the 7.80% 1989 Series are subject to The combined aggregate redemption requirements for all mandatory reuemption in their entirety at par on October 1,1995 series of redecmable preference stock for each of the next five and July 1,1997 repectisely. years are as follows:

The folkm ing series are subject to an annual mandatory ynir redemption of the number of shares show n below at par begin- fin thousands) ning in the year shown below. At HGE's option, an addnional

,994 3 3pg number of shares, not to exceed the same number as are manda-1995 -63,000 tory, may be redeemed at par in any year, commencing in the 39 3pg same year in w hich the mandatory redemption begms.The 1997 83,fKK) 8.25% 1989 Series, the 8.625% 1990 Series, and the 7.85%

,993 33jgg .

1991 Series listed below are not redeemable except through oper-ation of a sinking fund.

W'is d m snm d'dn'idd me available in the

"#E*"ing esen, ofliquidation, preferred stock ranks prior to prefen nce and

- Series Shares i. ear common stock; all issues of preference stock, w hether subject to 7.50r/r,1986 Series 15,tM O 1992 mandatory redemption or not, rank equally; and all preference 6.754,1987 Series 15.t x10 1993 stock ranks ptior to common stock. ->

8.25% 1989 Series 1003Kx) 1995 M.625L 1990 Series 130,000 1996 7.M54,1991 S.oes iOJXX) 1997

)

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Italumwe Gas und Electrse Company and Subskharin 1

. - . -. -~ . . .- .- - - --. - . - - -. - ._

' NOTE 11. LEASES The Company, as lessee, contracts for certain f acilities and equip- Certain of the Constellation Companies, as lessor, have ment under lease agreements with various expiration dates and entered into operating leases for ofuce nd retail space. These renewal options. Consistent with the regulatory treatment, BGE leases expire over periods ranging from I to 23 years, with lease payments are charged to expense. Lease expense, which is options to renew. The net tmk value of property under operating comprised primarily of operating leases, totaled $13.h million. leases was SIR 7 million at December 31,1993. The future mini-

$14 million. and $12.6 milhon for the years ended 1993,1992, mum rentals to be r"cched under operating leases in effect at and 1991, respectively. December 31,1993 are as Silow s:

The future mmunum lease payments at December 31,1993 for yeg7 g long term noncancelable operating leases are as follow s: g,1 thuumd::

Year _

1994' 5 16,685 du thouunh) 1995 15.222 1994 5 4.439 1996 13,826 1995 4.185 1997 12,398 1991 3.627 1998 10,744 1997 2.755 Thereafter 62.888 1098 1.751 tom minimum rentals $131.763 Thereafter 2.770 Total ounimum lease payments 519.527 }

NOTE 12. TAXES OTHER TH AN INCOME TAXES Taxes other than income taxes u ere as 'ollow$.:

Tour Endal /kremher 3/, 1993 1992 1991 dMlar amounts in thousanh)

Real and personal property $107,958 5100.419 5 89.379 PuNie service company ftanchise 48.693 45,654 46,041 Social secunty 35,724 34,911 33,12i Other 9.836 9.355 9,026

~1 otal taxes other than income taxes 202.211 190.339 177,567 .

Amounts included above charged to accounts other than taxes (7.379) (7.335) f 6.786)

Tases other than income taxes per Consohdated Statements of income $194.M32 $ 183.004 $ 170.781 NOTE 13. COM MITM ENTS. GU A R ANTEES, AND CONTINGENCIES f Cosmmitments Year IMIE has made substantial commitments in connection with its t/n thousands; construction program for 1994 and subsequent years. In addition. 1994 5 63.675 HGE has entered into :wo long-term contracts for the purchase of 1995 71,884 electric generating capacity and energy. The contracts etpire in 1096 71,051 2001 and 2013. Total pay ments under these contracts were 1997 67,496

$68.7 million,560h milhon, and $30 million during 1993.1992, 1998 67,556 and 1991, respectively. At December 31,1993, the estimated Tlierealttw 415.736 future pay ments for spacity and energy that BGE is obligated to Total payments $757.398 buy under thew contracts are as follows:

L 1

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Baltimot e Gas and 1:lettuc Cornpmr and substal;arws

1

)

I l

l Certain of the Constellation Companies have commitled to considered a potentially responsible party with respect to the contribute additional capital and to make additional loans to cer- cleanup of certain environmentally contaminated sites owned and tain affiliates, joint ventures, and partnerships in which they have operated by third parties. Although the cleanup costs for certain j an interest. As of December 31,1993, the total amount ofinvest- envimnmentally contaminated sites could be significant, BGE I ment requirements commined to by the Constellation Companies believes that the resolution of these matters will not have a is $44 milhon, material effect on its financial position or resuhs of operations.

Also, BGE is coordinating investigation of several former Guarantres gas manufacturing plant sites, including exploration of corrective ]

BGE has agreed to guarantee two-thirds of cenain indebtedness action options to remove coal tar. Ilowever, no formal legal pro- l incurred by Safe liarhor Water Power Corporation. The amount ceedings have been instnuted. In 1993 BGE accrued a liability of .;

of such indebtedness totals $40 million.of which 526.7 million approximately $25 A million for estimated future environmental g represents BGE's share of the guanmtee. BGL believes that the costs at these sites. Based on previous actions of the PSC, BGE risk of material loss on the loans guaranteed is mininul. has deferred these estimated future costs, as w ell as actual costs As of December 31,1993, the total outstanding loans and which have been incuned to date, as a regulatory asset (see Note letters of credit of certain power generation and real estate pro- 5 h The technology for cleaning up such sites is still developing, jects guaranteed by the Constellation Companies were $50 md- and potential remedies for these sites have not been identified, hon. Also, the Constellation Companies have agreed to guarantec Cleanup costs in excess of the amounts recognized, which could certain other borrowings of various power generation and real be significant in total, cannot presently be estimated.

estate projects. The Company believes that the risk of matenal loss on the loans guaranteed and perfonnance Nuclear Irnurance guarantees is minimal. An accident or un extended outage at either unit of the Calvert Chffs Nuclear Power Plant could have a substantial adverse effect Enrironmental3fatters on BGE. The primary contingencies resulting fmm an incident at The Clean Air A(t of 1990 t'the Act) contains provisions duigned the Calvert Cliffs plant would involve the physical damage to the to reduce sulfur dioxide and nitrogen oude emissions from elec-- plant, the recoserability of replacement power costs and BGE's tric generating stahuns in two separate phases. Under Phase I of liability to third parties for property damage and tulily injury, the Act, which must be implemented by 1995. BGE espects to Although BGE maintains the various insurance policies currently incur expenditures of approximately $55 million, most of which available to provide coverage for portions of these contingencies,-

is attributable to it, portion of the cost of installing a flue gas llGE does not consider the available insurance to be adequate to desulfurization spiem at the Conemaugh generating station,in cm er the costs that could result from a major accident or an w hich BGE ouns a 10.56% interest. IlGE is cunently examining extended outage at either of the Calvert Cliffs units, what actions will be required in order to comply with Phase II of In addition, in the event of an incident at any commercial the Act, which must be implemented by 2000. Iloweser, BGE nuclear power plant in the country, BGE could be assessed for a anticipates that compliance will be attained by some combination portion of any third party claims associated with the incident.

of fuel swm hing, flue gas desulfurization, unit retirements, or Under the provisions of the Price Anderson Act, the limit for third  ;

allowance trading. party claims from a nuclear incident is $9A billion. If third party -l At this time, plans for complying with mtrogen oxide (NOi) claims relating to such an incident exceed $200 million (the control requirernents under the Act are less cenain because all amount of primary insurance), BGE's share of the total liability implementation regulations have not yet been finaliicd by the for third party claims could be up to $159 million per incident, posernment. h is expected that by the year 2000 these regulatbns that would be payable at a rate of $20 million per year.

will require additional NO xcontrols for ozone attainment at BGE and other operators of commercial nuclear power plants BGE's generating plants and at other BGE facilities. The controls in the United States are required to purchase insurance to cover will rcstdt in additional expenditures that are difficult to predict claims of certain nuclear u orkers. Other non-governmental com-prior to the issuance of such regulations. Based on custing and mercial nuclear facilities may also purchase such insurance.

proposed ozone nonattainment regulations, BGE currently esti. Coverage of up to $400 million is provided for claims against mates that the NOg controls at BGE's generating plants will cost BGE or others insured by these policies for radiation injuries. If approximately $7B million. BGE is cunently unable to pre <het certain claims were made under these policies, BGE and all poli-the cost of compliance with the adduional requirements at other cyholders could be assessed, with BGE's share being up to $6.2 BGE facilities. million in any one year. ,

BGE has been notihed by the Ensiromnental Protection For physical damage to Cah ert Cliffs. BGE has $2.7 billion j Agency (EPA) and several state agencies that it is being of property insurance, including $1 A billion from an industry  ;

j

).

Ifaluwre Gm and[ln n k Compun and hhu.bwes

. - ~ - . . . ~. -.- - - - - = . .-- .-- - - - -

i mutual insurance company. !! accidents at any insured plants in October 1988. HGE filed its first fuel rate appliccion for a cause a shortfall of funds at the industry tautual. HGE and all change in ils electric f uel rate under the GUPP program. The policy holders couhl be assessed. with IlGli's share being up to resultant case before the PSC covets 15Girs operating perfor-

$14h milhon. mance m calendar y ear 1987, and HGE's filing demonstrated that If an outage at Calvert Clif fs is caused by an insured physical it met the system-wide and inthvidual nuclear plant performance damage low and lasts mote than 2I weeks, BGE has up to 5426 targets for 1987. In November 1989, testimony was filed on million per unit of insurance, punided by a different industry behalf of Maryland People's Counsel alleging that seven outages mutual insurance company for replacement pmer costs.1 his at the Calven Chifs plant in 1987 wete due to management amount can be reduced by up to $85 million per unit if an outage imprudence and that the replacement energy costs associated with to both units at Cahert Chifs is caused by a singular insured those outages should be disallowed by the Commission. Total g physical damage loss. If mi outage at any insured plant causes a replacement energy costs associated with the 1987 outages were i short-fall of funds at the industry mutual, IKiE and all policy- approtimately $33 million.

holders coukt be assessed. with UGE's share belng up in in May 1989. BGE filed its fuel rate case in w hich 1988 perfor-

$9.4 milhon. mance was to be examined. BGd met the system-wid: and nuclear plant pertonnance tarnets in 1988. People's Counsel i lleges that RecureraNiity of Electric Furt Cmtv IlGE imprudently managed several outages at Cahert Phffs, and By statute, actual elec tric f uel costs are recoverable so long as the HGE estimates that the total replacement energy costs ass,ciated PSC finds that HGE demonstrates that, among other things it has with these 1988 outages wcre appnnimately $2 million.

maintained the pmducthe capacny ofits generating plants at a rea- On November 14,1991, a llearing Examiner at the PSC issued sonable levet The PSC and Maryland's highest appellate court a proposed Order, which became final on December 17.1991 and have mterpreted this as pennitting a subjective es aluahon of each concluded that no disallowance was warranted. The llearing unplanned outage at HGEi genemting plants to detennine whether Examiner lound that HGE maintained the productive capacity if or not HGE had implemerued all reasonable and cost effectne the Plant at a reasonable level noting that it pmduced a near maintenance and operating contml procedures appropriate f or pre- record amount of power and exceeded the GUPP standard. Based senting the outage. Effective January 1,19S7. the PSC authori/ed on this recoid, the Order concluded there was sufficient cause to .

the estabbshment of the Generating Umt Perfonnance Program excuse any ascidable failures to maintain pnxtuctive capacity at (GUPP) to measure, annually, utihty compliance w uh maintaining higher levels.

the pnductive capacity of yencrating plants at reasonable leveh by Dunng 19M9,1990, and 1991, BGE experienced extended out-estahlkhing a system wide generating irrfonnance target and indi- ages at Calvert Cliffs. In the Spring of 1989, a leak was discov-vido.d perfonnance targets for each base load generating unit. In cred around the Umt 2 pressurizer heater sleeves during a future f uel rate hearings. actual generating perfonnance after refuchng outage. HGE shut down Unit I as a precautionary mea-adjustment for planned outages will be compared to lhe sptern- sure on May 6,1989 to inspect for similar leaks and none were wide target and,if met. shouhl signif) Ihat HGE has comphed found. Ilowever, l' nit I was out of senice for the remainder of ,

with the requirements of Maryland law. Faihne to meet the 1989 and 285 dap of 1990 to undergo maintenance and moditi-system-wide target will result in resiew of each umt's adjusted cation wmk to enhance the reliability of various safety systems, to actual generatmg performance versus ih performance target in repair equipment. and to perform required periodic surveillance determining comphance with the law and the bnis for possibly , tests. Unit 2, w hich retumed to service on May 4.1991 remained im[mir.g a penalty on HGE. Parties to fuel rate hearings may still out of service for the remainder of 1989,1990, and the first part -

question the prudence of HGEN actions or mactions with respect of 1991 to repair the prewuriier, perform maintenance and modi-to any given generating plant outage, whic h could result in the fication work. and complete the refueling. The replacement disallowance of replacement energy costs by the PSC. energy costs amiated with these extended outages for bdh units Smce the two units at HGE's Cahen Cidfs Nuclear Power at Cahert Chffs, wneluding with the return to senice of Unit 2.

Plant utihre UGE's low est cost f uel replacement energy costs are estimated to be 5458 milhon.

awociated with outages at these unih can be significant. BGE in a December 1990 order inued by the P5C in a HGE base cannot estimate the amount of replacement energy costs that rate proceedmg. the PSC found that certain operations and main-could he challenged or disallowed in future fuel rate preceedings. tenance expenses incuned at Calvert Chffs during the test year but such amounts could be matenal should not be recovered f rom ratepayersfIhe PSC found that this l

l i

Osd!Am>ff Git amt I:5CVf dl Um[wty g)m} Wu.bMW s i i l

I d.s e-.. .- v. .- , 4 - e. m g .e+-.,..--- m.+ #. g .w bi..r.e,w.

work, which was perfonned during the 1989--1990 Unit I outage 1991 outages. The work characterized as asoidable significantly and fell withm the te3t year. was avoidah!e and caused by BGE increased the duration of the Unit I outage. Despite the PSC's actions whith were deficient. statement regarding no binding c0ect, BGE recognizes that the lhe Commiwion noted in the order that its resiew and find- tiews expressed by the PSC make the full recovery of all of the ings on these iuucs pertain to the reasonableness of BGEs test- replacement energy costs associated with the Unit 1 outage year operations and mamtenance expenses for purposes of setting doubtful. Therefore. in December 1990. BGE recorded a provi-base rates and not to the responubdily for replacement power sion of $35 million against the possible disallowance of such costs associated with the outages at Calsert Cliffs. The PSC stated costs ilGE cannot determine w hether replaecment energy costs ,

that it.s decision in the base rate case will has e no resjudit ata may be disallowed in the present fuel rate proceedings in excess (binding) ef fect in the fuel rate proceeding ex amining the 1989 of the prosision, but such amounts could be mateiial.

NOTE 14. F AIR V A LU E OF FIN A N CI AL IN ST R U M E NTS 1he following table presents the canying amount and fair value of financialinstruments included in the Consolidated Balance Sheets.

As thermher 3/. 1993 1992 Carrying Fair Carrying I' air Amount Value Amount Value clntlw n mJn Current assets $ 496,919 $ 496,919 $ 408.790 $ 408,790 lovestmenk and other asseh 125,046 129,752 93.834 97,135 Current habihties 443,968 443,968 649h50 649,650 Captalization 3,165.644 3,303,615 2.772,450 2.871.291 The carrying araount of cunent awets and cuntnt liabihties Financial instrumenh included in capitabration are long-term approximates fair 5alue because of the short maturit,, of these debt and redeemable preference stock. The fair s alue of fixed-rate instruments. long. term debt and redeemable preference stock is estimated The fair value of imestments and other asseh is based on using quoted market prices w here available, or by discounting quoted n :uket pnces w here available. Certain insestments with a remaining cash flow s at the current market rate. The carrying carrying amount of $70 million at December 31,1993 and amount of variable-rate long-term debt approximates fair value.

$71 million at December 31,1992 are escluded from the amounts BGE and the Constellation Companies have loan guarantees show n in insestmenh and other assets because it was not practi- totalling $26.7 million and $36 million, respectively, at cable to detennme their fair values. These investments include December 31,1993 and $30 and $38 million, respectively, at partnership ins estments in public and pris ate equity and debt December 31,1992 for w hich it is not practicable to determine securities, partnerslup insestments in solar pow cred energy pro- fair s alue. h is not anticipated that these loan guarantees will need duction lacihties, and im estment in stock trusts. to be funded.

~ lla!nmare Gaa walikciri Congwy and %hnharics

NOTE 15. QU ARTERLY FIN ANCI AL D AT A (UN AUDITED)

The following data are unaudited but, in the opinion of Manage- periods generally occuning during the summer and winter ment, include all adjustments necessary for a fair presentation. months. Accordingly comparisons among quarters of a year may IKHi's utdity business a seasonal in nature with the peak sales not be indicative of m etall trends and changes in operations.

quarter Ended Year l'nded .

M.uth 3 I June 30 September 30 December 31 December 31 Ll 1993 tin tlwnwnk e tcept per-sharr umow;ts) .j I

Revenucs $6M3,M25 $564,721 S774,064 $646,104 52,668,714 O income 1,om operatiem i36,094 io7.3x7 2x7.46: 90,058 62i,000 Net income 65,796 55.N76 157,058 31,136 309,866 -

Eamina apphcable to common slock 55,276 3,.W) 146,511 20,940 26N,027 Larru gs per share of common sork _

0.38 J 11 1.01 0.14 1.85 1992 .

Revenues $669.253 5540M5 5677.059 $tm,136 52.491.343 -

income f rom operahom 127,121 91,309 222,627 94,288 535,345 Net inwme 59.254 38.049 124.620 42,424 264,347 Earnmgs apphcable to common stock 48AND 27,475 II4J47 31,h98 222,100 Earnings per share of common san k DJ47 n20 0 84 0 22 '1 M

, Reudtsfor the sn und quarto of 1993 niin t the rn vnal of the cost if the termmation bcncfits associated with the 1942 Voluntary 5pecialliarly ,

Retiremna Program (See Neve 7[

Results fhr the third quarter of 1993 tt:llect the effet it of the Ommbus Budget Reconcihation Act of 1993.

Resodts for thelhurth quarter of lYY3 n11ect the e ost of cerrain to unnation benefits (See Note 7L '

Resultsfix thefint und thud quar ten of 1992 repec t the nnt of Inminanon boafits anociated with the 1992 Voluntary Specialliarly Renrement Program ISee Notc 71 1he .uan of the quaircrly rarmnys per sharr amounts tuay not equid thc tondfor the ycar due to changes in th: as erage numhc c dshares out-stan,hng rivon ghout the ycar.

+

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Balnnwr e Gas amt I hrtnc Company andSulut.twrin

, e i UTILITY OPERATING STATISTICS 1993 1992 1991 1990 1989 l EL ECTRIC OPER ATING STATISTICS Revenueuin nousands)

Residential $ 931,643 $ 839.954 $ 882.591 $ 718.032 $ M 8.883 Commercial 869,829 842.694 850,038 758,573 668,819  !

199,M2 212,8M 194,951 I Indusinal 201.950 191,79 1 System Sales 2,000,514 1,884,598 1,945,493 1,671.556 1,509.498 Interchange Sales 91,543 64,323 23,845 26,629 17,802 Other 23,098 19.002 25,187 14.268 19.867 j Total $2,115,155 $1,967.923 $1.994.525 $1.712.453 $ 1,547,16, Sales tin nousands F w n Residenti.d 10,614 9.735 10,097 9,283 9.451 Commerci.d Industrial 12.395 3,763 11,909 3A63 11,707 3,708 11,352 3,743 11,079 4,261 System Sales 26,772 25,307 25,512 24,378 24,791 Imerchange Sales 4,149 3,180 1.166 1.088 595

]

lotal 30,921 28,487 26,678 25,466 25,386 ':

Customers )

Residential 968,212 956,570 939,734 930,880 913,910 i Commercial 100,820 99,673 98,254 96.567 95,102 Industrial 3,800 3,761 3,584 3.526 3.132 Total 1,072,832 1.m0J M 4 1,041,572 1,030.973 1,012.144 Aserage Use per Residential Customer 4w n 10,963 10.177 10.744 9,973 10,341 Asetage Rate per wn (System SalesH ,

Residentiai 8,78 8.63 8.74 7.73 6.87 i Commercial 7.02 7.08 7.26 6.68 6.N l Industrial 5.29 5.51 5.74 5.21 4.50 Peak 1.oad (One4mur)atw 5,876 5,558 5.910 5,477 5,304 Capabihty at Summer Peak Mw 6,701 6,687 6.608 6,159 6.164  ;

Sptem 1.oad Factor 55.2 % 54.8% $2.4% 54.1% 57 #4 :j G As OPER ATING ST ATISTICS j Revenues (in housands) ]

Residential $ 265,601 $ 242.737 5 220.653 $ 218,967 $ 242,389 .l Commercial beludmg I)ehvery Service 121,832 112,147 96.189 89,573 112,630  ;

Dehvery Senice 3,287 3,591 3.03) 3.304 4,409 l Industrial l Including Delivery Senice 22,250 21,123 14.855 32,439 18,363 )

Ikhsery Service 12,920 14.290 14.288 17,851 22,% I j Other 9,959 9Ju9 9,179 11.285 11,349 Total $ 435.849 $ 402,937 $ 358,195 $ 373.419 $ 411,80l Sales (In nousand+oiu Residential 40,029 39J)42 36,519 35.026 39.806 Conunercial bcluding ikliwry Senice 23,830 ?3,478 20.6k7 18.164 21,9M Dehs ery Sen ice 7,428 7.102 6,433 5.872 5,778 Industrial I;uluthng Delivery Senice 5.298 5,314 3,605 7,305 3.697 31,390 33.638 34.240 34,720 39,452 Dehser) Sersite Total 107,975 108.574 101.484 101,087 110.697 Customers Residential - 491,165 486,863 482.085 482,680 482,538 Commercial 3' 518 37JnK) 36.561 35,953 35.790 Industnal 1,353 1,412 1,385 1.401 1.398 Total 530,036 525,275 520.031 $20.034 519,726 Average Use per Residenti.d Customer-Therms 815 802 758 726 825 Aserage Rate per herm $

Residential .66 .62 .60 .63 .61 Commercial (finluding ikliser) Sen ice) .51 .48 46 .49 .51 industnal(liuluding Dehscry Service) .42 .40 .41 .44 .50 Peak Day Sendom.ntu 657,700 U N.200 610,200 653,900 663.200 Peak Day Capabihty-oln 847,(HH) 847.000 817JKK) 853J100 7613XK)

Ccnain poiom car awur:n h,n e is n ivraini to conform s,, the t un ent ycar's prevntation.

Bahrnwrr Gas and I la tr w Company and Subudranch

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LC O R' P. O R 'A T E A N D .U T I L I T Y ~ OFFICERS

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Christian 11. Poindexter Ronal'd W. Lowman

' Chairman of the Board and ChiefEsecutive Oficer ' Vice President, Fossil Energy Age:55 Years ofservice:26 Age:49 Years ofservice:25 Edward A.Crooke G. Dow eli Schwartz, Jr.

President and Chief Operating Oficer Vice President, GeneralSeriices-Age: 55 Years of servic e: 25 - Age:57 Years ofservece: 35

- George C. Creel Charles W. Shivery

-0 Senior Vice President Generation Vice President, Finance & Accounting i Age:59 Ycars of serrice: 38 Chief Financial 0))icer and Secretary Age: 48 Years ofservice:21  ;

Thomas F. lirady  !

Vice President. Customer Service & Distribution Joseph A.Tiernun ,

Age:44 Years ofservice: 24 Vie e President, Cooporate Affairs Age: 55 Years ofservice: 23 IIerbert D. Coss. Jr.

Vice President, Afarieting & Gas Operations Richard M. liange, Jr; Age:59 Year > of service: 37 Controller and Assistant Secretary Age: 49 Years of service: 22 .  ;

. Robert E. Denton Vice President, Nuclear Energy Lynne ll. Church Age: SU Years of senice: 23 Treasurer and Assistant Secretary Age:50 Years ofscrvice: 9 Carserlo Doyle Vice President. Electric Interconnection & Transmission Thomas E. Rusiin, Jr.

Age;49 Years ofservice: 22 Assistant Treasurer Age: 39 Years ofservice: 17' Jon M. Files Vice President, Afanagement Services Age:58 Years of service: 36 ,

CHANGES IN OFFICERS AND DIRECTORS '

Effective January 1,1994, the Board of Directors elected Carserlo Effective January 1,1994. the following members of the Board Doyle, fonner Manager of Telecommunications, to the position of were elected: James R. Curtiss. Dr. Freeman A. lirabowski 111, Vice President. Electric Interconnection & Transmission. lie and Nancy Lampton.

replaced lierbert D. Coss. Jr., w ho was named Vice President. The following members retired from the Board of Directors Marketing & Gas Operations. Mr. Coss replaced ef fective December 31,1993: Imlie B. Disharoon, George G.

Michael J. Chesser, w ho left the company in January 1994. '

RadcFffe. and llarry K. %fellt Also during 1993. Charles W. Shivery became Vice President of Finance & Accounting and Chief Financial Officer. Lynne H.

- Church ivas elected Treasurer and Assistant Secretary, and Richard M. Bange, Jr., w as electcJ Controller and ~

- Assistant Secretary.

Effective July 1.1993, George D. England retired from the company w ith more than 38 years of service.

Bahimore Gas and Eles tric Caantuny and Subsi.haries 3

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y CON $TELLATION SUBSIDIARIES

-OFFICERS

- Christian 11, Poindester - Stesen D,liesler-Chairman of the finarJ Constellation flohlings,Inc. President, Constellation Investments. Inc.

Age: 55 Axe:42 Ilruce M. Ambler Randall M, Griflin l' resident andChief thcanive Officer, l' resident. Constellation Real Estate Group. Inc.

.. Constellation livldings, Inc. Axe: 49 O: Actine ru,iseni, Conanasn ennn inc.

Age: 54 James W. Jeffenat l'rcsident, ConstcIlation licastis Services, Inc.

Douglas S. Perry Avre40 Vice President and General Counsci.

. Constellation flo! dings. Inc. Robert E, Windham

, Ace: 41 President. Chun h Strert Station, lnc.

Age: 51 CONSTELL ATION HOLDINGS CONSTELL ATION RE AL CSTATE GROUP Constellatien 1mldmgs prosides direction to all of its operating This is the parent company of several businesses, including subsidiaries and furnishes them with legal, financial, ta% Church Street Station in Orlando, Florida, that operate projects accounting, and personnel sers ices. In addition. decisions on in sescral real estate categories. Constellation Real Estate -

new investments are controlled from Constellation iloidings. performs development, construction, and operational activities.

Constellation Ilealth Services. through joint ventures, owns -

CoNsTELLA7 #ON ENEHGY henior living and retirement communities, as well as assisted-This is the senior member of our Energy Group. Under the living facilities for the elderly, auspices of Constellation Energy, the company participates in a l

number of attemative energy and co generanon pmjects punlucing CON $TELLATtON lNVESTMENTS clectricity for sale to other utilities. The energy group det elops. Conste!!ation Investments serves as a significant provider of arranges financing for, builds, and operates a number of wholesale current income from its investments in securities, investment powcr projects throughout the country. partnerships, and financial-service companies, f

CH ANGES IN OrFIC EMS Bruce M Ambler became Acting President of Constellation -

Energy when Terry L. Ogletree resigned from the company

_ ef fective March 31,1993.

Randall M. Grif fin became President of Constellation Real Estate Group on May 24,1991 J. Richard O'Connell, w ho

- was President of Constellation Real Estate, Inc., resigned

~ from the company on July 1,1993.

Ralrin er Gas ad th civic Comisany and submitaries

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CONSTELLATION SUBSID1 ARIES l

n - = .

BOARD OF DIRECTORS Christian 11. l'oindexter hy. M' , . ^

Chairman qf the Board, ConsteBation Holdings; Chairman of the Board and ChiefDecutive Officer, Bahimore Gas and Electric Company: member since 1985 liruce M. Ambler Afr. Poindetter President and Chitf becutive Officer, Constellation iloidings:

member since 1989. &

ll. Furlong italdwin Chairman of the Board and Chief Executive Officer.

t Alercantile Bant:. hares Corporation thank holding company),

(;d; RV~

^ z l Bahimore; member since 1987; serves on audit wmmittee. l

\

Edward A.Crooke Atr. Ambler Air, Baldwin Afr. Crooke President and Chief Operating OJ)iccr, Baltimore Gas and Electric Company; member since 1993.

,lerome W. Geckle 17 ~f

.%, v

~ Q Retired Chairman of the Boar J. PHH Corporation (vehicle,  ;

s, iclocatinn, and management services). Baltimore; member

,NY *

{ sim e 19NS: chairman of e omminee on managcment.

Edward W. Kay hir, Gecile Retired Co-Chairman and Chief Operatin:: Officer, Ernst &

Afr. Kay Air. AlcGowan Wr rn&J hk av untants),1Yalhington. D.C..

member since 1983: chairman of audit commatec.

3

, f g.' George V. McGow an

'l _. [' Formcr Chairman of the Board and Chhf 6ccutive Offh cr, A  ;

p; Bahimore Gas and Elearic company; member since 1983.

4 l'aul G. Miller Chairman of the Board. Supercomputer Systems Inc. (design, Afr. Afdier Air. Shattm L Atr. Trueu hicr manufacture. un i sale of supercomputers), and Chairman of the Board and Trcasurer,1.SC. Inc. (computer data storage systems), Baltimore; member sim e 1984; scn es on audit commince.

C H A N G f' S IN DlRECTOR$

Ma3o A.Shattuck Ill Ef fectis c June 18,1993 Edwani A. Crooke was elected to the pr esident and Chief Operating O/Ticer. Alcr. Brown Inc, -1 150ard of Constellation Ifohlings. t investment lumiing and set urnies brolcragel, Baltimore; membcr since 1994.

On Decendvr 31,1991,1.cshe 11. Disharoon retired from the floard of Constelhttion llohhnn. Ikrnard C. Trueschler Former Chan man of the Board and Chief Ercoan e Oj]icer.

Ef fectne 1:ebruary 1,1494 Mayo A. $hattuck lit uas elected to Bahimore Gas and Llearic Company l member sinre 1981 the lloard of Constellation liohtinp.

statoww c as amt Tin m.Dny,,my on.1 subwtwics

~

FIVEaYEAR STATISTICAL

SUMMARY

1993 1992- 1991 1990 1989 i COMMON STOCK DATA Quarterly Earnings Per Share Hrst Quaner $ .38 5 37 a .40 5 .54 5.53 Second Quarter .31 .20 .38 .23 .30 Third Quarter 1.01 .F4 .84 .72 .91 l'ourth Quarter .14 .22 .05 ( .09) .29 -

Total $1.85 51.63 51.67 51.40 52.03

'~. Ilividends Div idents declared per share $1.47 51.43 $1.40 $1.40 $ l.38 Daidends paid per share 1.46 1.42 1.40 1.40 1.37 Dividend payoui ratio 79.5 % 87.7 % 83.8% 1(n0% 68.0%

Afarket Prices I liigh $27% 524 % . $22% $23% 523 %

low 22 % 19 % 17 % 16% 19 Close 25 % 23 % 22 % 18 % 23 ,

C APli AL STRUCTURE Conwlidated Imng-term debt 47.4 % 46.1 r; 47,g,y 47,9g 44,9g Shon term debt -

0.2 3.S 4.I 2.6 l'ref erred and preference stock 9.2 9.8 10.1 10.2 10.5 Conunon shareholders' equity 43.4 43.9 38.3 37.8 42.0 Utility Only long-tenn debt 44.59 42.99. 45.6% 45.0% 42.4%

Shon-term debt -

0.3 3.4 3.6 2.9 l' referred and preference stock 10.9 11.6 12.1 12.3 12.4 Common sh.treholders' equity 44.6 45.2 38,9 39.1 42.3 The ,uon of the quarterly cornings per share amounn may not equal the totalfor the year due to e hanges in the average number of shares outrianding throughout the year.

I l 1

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.-(. p p _a S' H A R E H O'L D' E R lNFORMATION COMMON STOCK DIVIDENDS AND PRICE R ANGES 1993 1992 Disidend Price Dividend Price Dedared liigh I,ow Declared fligh Low Firsi Quarter $ .36 526% $ 22% S .35 $ 23% $ 19%

I .37 26 % 23% 36 22%

Second Quaner 19 %

Third Quarter .37 27 % 25"s 36 24 % 21 %

Fourth Quarter .37 26% 23 % 36 24 % 21%

Total $ 1.47 $ 1.43 W

DIVIDEND PO LIC Y ANNUAL M E ETING The common stock is entitled to dnidends u hen and as declared by The annual meeting of shareholders will be held at 10:00 a.m. on the Board of Directors. There are no limitations in any indenture or Wednesday, April 20,1994, at the Sheraton inner liarbor llotel, other agreements on payment of disidends. Iloiders of preferred 300 South Charles Street, Baltimore, h1aryland.

stock Ifirst) and holders of preference stock (nextk howeser, are entitled to receive, when and as declared from the surplus or net FORM 1 O.K profits, cumulative yeady thvidends at the fixed preferential rate Upon u ritten request, the company will furnish, without specified for each series and no more, payable quarterly, and to charge, u copy of its Form 10-K annual report, including receive when due the applicable pref erence stock redemption pay- financial statements, after it is filed with the Securities and ments, before any dividend on the common stock shall be paid or Euhange Commission in Alarch 1994. Requests should be set apart. Dividends base been paid on the common stock continu- addressed to Charles W. Shis ery, Chief Financial Officer ously since 1910. Future disidends depend upon future earnim 4, and Secretary, Vice Pnsident-Finance & Accounting, the financial condition of the company, and other factors. Quanerly P.O. Ilos 1475, llattimore, hlar3 and1 21203-1475.

- dividends were declared on the common stock during 1993 and 1992 in the amounts set fonh above. AUDITORS Coopers & Lybrand COMMON STOCK DIVIDEND D ATES Rccord dates are normally on the 1Oth of h1 arch, June, September, EXECU TIVE OFF1CES and December. Quarterly dividends are customarily mailed to each Gas and Electric Building sharehokler on or about the 1 st of April, July, October, and January. Charles Center Baltimore, h1aryland 21201

. DIVIDEND R EINVESTMENT hjail p,0,Bosl475 AND5TOCK PURCHASE PLAN Baltimore, hlaryland 21203-l-875 The company's Dividend Reimestment and Stak Purchase Plan provides an opportunity for boklers of the company's common S H AREHOLDE HS' lNQUIRtES AND Assist ANCE stock to acquire additional shares of such stock in a convenient and Shareholders desiring assistance with lost or stolen stock certifi-economical manner, Participants in the plan may reinvest cash cates or dividend check.% name changes, address changes, stock dividends on all or a portion of their shares of common stock and/or transfers, or other matters shouki call the shareholder services make optional cash payments. representatives on our toll-free telephone numbers.

The following toll free telephone numbers are available STOCK TR AD1No during our business hours 8:(10 a.m. to 4:45 p.m.:

The company's common stot L, w hich is traded under the ticker Bahimore hietropohtan Area (410)783 5920

'; symbol BGE. is listed on the New York, Chicago, and Pacific stock Within Alaryland 1-800-492-2861 ewhanges. and has unlisted trading privileges on the Boston, Outside of N1aryland 1-800-258-D499 Cmeinnati, and Philadelphia exchanges. As of December 31,1993, TTY /ITD 11 earing impaired 1-800-492-5539 there were 82,287 common sharehoklers of record. Letters should be ackfressed to:

Bahimore Gas and Electric Company TRANSFER AGENT A N D R E Gl S'i R A R Shareholder Services llanis Trust and Savings Bank P.O. Hos IM2

- Chicago,lilinois Ba!timore, h1aryland 21203-lM2 e

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