ML18101B330

Atlantic Energy 1995,Summary Annual Rept.

ML18101B330
Person / Time
Site:	Salem, Hope Creek
Issue date:	12/31/1995
From:	HUGGARD E D, JACOBS J L ATLANTIC ENERGY, INC.
To:
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ML18101B327	List: ML18101B326 ML18101B328 ML18101B329 ML18101B330
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NUDOCS 9604190178
Download: ML18101B330 (40)

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• The same power company that turns things on is shaking things up.

ATLANTIC ENERGY EARN I NGS AND DIVIDE N D S PAID PER S H ARE OF COMMON STOCK 2 1.5 .5 0

• 1.80 1.67 1.49 LSI 1.53 l.54 l.55 1.54 1.41* 9 1 92 93 9 4 95 -EARN I NGS D I V ID ENDS Earnings per share of Common Stock is nee income divided by rh e average number of common shares owsrandi ng. Dividends paid per share is the si<m of the quarterly dividend payments made m Jamtar)', AIJTil, and October. ATLAN TI C ENERGY MARKE T P RI CE PER S H ARE OF CO MM ON STOCK 25 23.IJ !US 20.50 2 0 17.63 19.25 15 1 0 5 0

• 9 1 92 93 9 4 95 ' ' ' -------------------This is the closing price of Atlantic Energy's Common Stock on the last trading day of each year, as reported by the New York Stock Exchange Composite T ransacrions listing. Financial Highlights Earnings Per Common Share DiviJends Paid Per Common Share Book Va lu e Per Co mm on Share Number of Common Shares Year-end (000) Average Actual Return on Average Common Equity Electric Operating Revenues (000) Operating Expenses (000) Net Income (000) Uti lit y Cash Construction Expenditures (000) Total Assets (000) Sales of Electricity to Ultimate Custo mer s (KWH) (000) Price Paid Per Kilowatt-hour (Ultimate C u stomers) Total U ltim ate Electric-Customer Accounts (Year-end)

Number of Share hCommon Stock (Year-end)

Number of Atlantic Electric Employees (Year-end)

$ $ $ 1995 1.55 1.54 15.48 52,815 52,532 9.88% $ 953,137 $ 804,600 $ 81,768 $ 100,904 $2,620,896 8,052,865 11.213¢ 473,588 48,683 1,455 % Change 1995-1994 9.93 (0.5) (2.5) (3.0) 8.9 4.4 5.9 7.4 (15.9) 2.4 (1.4) 5.7 1.0 (0.3) ( 18.9) $ $ $ 1994 1.41

• 1.54 15.56 54,149 54, 155 9.07%* $ 913,039 $ 759,499 $ 76,113* $ 119,961 $2,5 45,5 55 8, 167 ,856 1 0.6 10¢ 4 68,7 12 4 8,850 1,7 94 % Change 1994-1993 (21.7) 0.7 (0.4) 2.4 1.2 (22.5) 5.5 7.6 (20.l) (13. l) 2.3 1.3 2.8 1.2 2.1 (2.2) $ $ $ 1993 1.80 1.53 15.62 52,888 53,507 11.71% $ 865,675 $ 706,091 $ 95,297 $ 138,111 $ 2,487,508 8,066,4 l 2 10.316¢ 463 ,073 4 7, 832 1 ,835 % Change 1993-1992 7.8 1.3 3.0 2.5 2.5 5.1 6.0 3.9 10.5 l 2.1 5.4 0.6 1.0 2.8 (9.3) *rdll'clS 1lJk'-llnlC 1.:haq,:l'S of $0. n per share , primarily for employee :->epar::ltion ClhtS A tl a nti c En e r gy , In c. i s th e p a r e nt h o l d i n g co mp a n y for Atlant ic C it y E l e ctric Co mp a n y (A tl a nti c El ec tri c) a nd A tl a nti c En e r gy Ent e rpri ses (A EE). A tl a nti c Ele c tri c , a r eg ul a t ed e l ec tri c utilit y, is t h e co m pa n y's co r e bu s in ess a nd m a k es up 9 4% of t o t a l asse t s. A tl a nti c El ec tri c se rv es mor e th an 4 73, 000 c u s tom e r s in a 2,700-s qu a r e-mil e a r ea in so uth e rn New J e r sey. Mor e th an 9 8% o f th e c u sto m e rs a r e h o m es a nd s m a ll b u s in esses. A EE i s th e h o ldin g co m pa n y fo r E n e r gy's n o n-r eg ul a t e d b u s in esses. T oget h e r, th e two s u bs idi a ri es a r e ca rr y ing o ut A tl a nti c En e r gy's mi ss i on t o b eco me a co mp e titi ve e n e r gy co mp a n y th a t o ff e r s c u sto m e rs a f ull spect rum of prod u c ts a n d se r v i ces.

]. L. J aco b s E. D. Hu gga rd Pr es id e nt & C hi ef E xec uti ve O ffi ce r C h a irm a n o f th e B oa rd To you, our shareholders:

S u ccess in to d ay's el ec tri c utilit y indu s tr y is a ll a b o u t n av i ga tin g ch a n ge a nd finding s m a rt er w ays to run yo ur bu s in ess. A g l a n ce a t o ur cover m ay h av e g i ve n yo u so m e id ea th a t thin gs a r e ind ee d c h a n g ing a t A tl a nti c En e r gy. In 1 995 w e co ntinu ed t o m ove fo rw a rd with o ur pl a n s to cr ea te a n e n e r gy c o mpan y th a t will co mp e t e profit a bl y in th e rapidl y ch a n g in g e n e r gy indu s tr y. Al o n g th e w ay w e've met so m e diffi c ult c h a ll e n ges, but we've a l so m a d e so m e h a rd-ea rn e d pro g r ess. W e'r e w o rkin g h a rd e r th a n ever t o grow n ew m a rk e t s, imp rove p ro ducti v ity a nd c u s t o m e r se r v ice a nd cut cos t s -a ll imp o rt a nt e ff o rt s th a t a r e pr e p a rin g u s fo r d e r eg ul a ti o n a nd intensifi e d co mpetiti o n. 1995 's Financial Pe r fo r mance O ur fin a nci a l p e rf o rm a n ce durin g 1 99 5 cl ea rl y did n ot m ee t o ur ex p ec t a ti o n s -w e ea rn e d $1.55 p e r s h a r e, a de clin e fr o m the $1.7 8 pe r s h a r e ea rn e d fr o m o p e r a ti o n s l as t yea r, b efo r e 1 9 94's o n e-tim e $0.3 7 a dju s tm e nt. Di v id e nd s p a id, plus s h a r e price ac i a ti o n during 1995, y i e ld e d a t o t al r e turn o f 1 8.0%. Ce rt a inly a fa ir r e turn, but w e did n ot k ee p pace w ith m a ny o f o ur p ee r utiliti es. (co nt'd) 1 99 5 o p e rati o n a n d m a int e n a n ce (O&M) ex p e ns es for ou r co r e utilit y busi n ess we r e re duc ed b y m o r e th a n $8 mill io n , a 4 pe r ce n t red u c ti o n fro m las t yea r's m ar k. Th e m os t signif i ca nt sav in gs were ac h ieved th ro u g h a utilit y downs i z in g pr ogra m that t r imm e d th e wo rk f o r ce b y cl ose to 300 e mpl oyees. Co r e O&M ex p e ns es are e xp ec t ed to r e main flat o v e r th e n e xt thr ee-to fi ve-ye ar p e ri o d. A t lantic Energy We are not, a nd will not be satisf i ed w ith these kinds of result s. A very mild w in ter and s pring held back earn in gs through the first h a lf of '95 and the s ummer's air tioning l oad was n ot robust enough t o help u s make up t h e l ost ground. Electric sa l es in 1995 were 1.4% off 1994 l evels. O th e r factors co ntributin g t o the 199 5 ea rnin gs decline includ e the add iti ona l expe n ses related t o the prolonged outage at Sa l em Nuclear Stat i o n a nd the continuation of the eco n o mi c initi a tive c r ed it includ ed in our e n e r gy clause rate s. Whil e the cred it helps u s make o ur rates m o re compet i tiv e, it did h ave a s ignific a nt e ff ec t o n earnings in 1995. We d o n o t expect t o renew the credit in o ur next fuel adjustment rate r e qu es t. Overall, o ur n o nutilit y activities r es ulted in a l oss of $0.0 4 per s h a r e in ea rnin gs. Includ e d in o ur nonutility results i s a $0.0 1 per s h a r e l oss fr o m Atlantic En e r gy Ent e rpri ses, (AEE), reflectin g the s tart-up m o de o f so me of their bu s in esses. L oo kin g t o the futur e, a ll Atlantic En e r gy copa ni es will pl ay s i g nific a nt roles in o ur w o rk to expa nd th e number o f energy op tion s we can o ff e r o ur customers as we ll as broaden o ur so urces o f earnings.

O ur Compe tit ive S t ra t egy The d e regul at i o n o f th e electric utility indu s try is a nd will continue to b e the s ing l e greatest factor i nflu e ncing o ur future. It will be the m a rketpl ace -n o t the regu l a t o r s -that will ultim a tel y dictat e the pace a nd extent t o which th e indu st r y changes. A s competition take s h o ld, we want to be in a p os iti on t o compete and win

• Th e Co mpan y continues t o tak e adva nta ge of th e 1 owe r pr eva ilin g int eres t rat es by r ef inancin g hi g h e r-c os t debt. In 1995 tw o b ond is sues we r e redeemed o r refi n a n ce d , savi n g th e co mpan y m o r e th a n $1 miUion p e r year in int eres t expe n se. Over th e 1ast thre e years more than $4 30 miUi on of the company's 1ong-term debt h as been r efi nan ced. in the new marketplace.

Our five-year strateg ic pla , ca ll ed AE2000, initi ated last year, is setting the course for our transformation.

The plan calls for enhancing the effic i ency and profitability of our core electric utilit y business while developing growt h and profit oppo rtunities in new ene r gy-rel ated markets. The pages that follow our letter det a il some of the st rid es we've made in c arry ing o ut o ur AE2000 plans. As we m ove toward full co mp eti ti o n , we a ntic i p ate continued pressure a nd vulnerability with regard to o ur earnings o utl oo k. We will regu l a rly evaluate the l eve l o f o ur common sto ck dividends in rel a ti on to o ur fin a n-cial performance.

We a r e mindful of ou r s h a reh o lder s' traditional reli a nce on s te ady div id e nd income. Competing with th at priority, h oweve r, i s the need to h ave enough financial flexibility to re s p o nd quickly t o emerging m a rket o pp o rtunities o r threat s. And as we wrote in la st year's letter, o ne way t o ga in that fi e. bility i s to pay ou t a rel at ively s m a ller portion o f o ur earnings in dividend s. We expect t o dedicate incre as in g amounts of r esources to new op p o rtuniti es that will grow o ur business , and in turn , increase o ur earnings. Our intent i s t o carefully b a l a nce o ur dividend a nd busines s gro wth commitments, creating the g re a te s t v a lue for o ur s h a r e h o ld ers. Building Strong Customer Relationships To compete in the future, we kn o w we must work now to bui l d stro n ger rel a ti ons hi ps with o ur customers.

• A tlantic Generation Inc. (AGI) turn ed in a so lid finan c ial performance in 1.995. Th e nonutilit y power produ ce r tribut ed $0.0 5 per s har e t o conso lidat ed earnings. AGI's business p1ans ca U for adding to its current portfolio of thr A co ge nerati o n plants. 'W Achieving our vision of becoming a full-service energy co mpan)' will depend on building exce llent relations hip s wit h our customers.

Pictured above, Atlancic Electric President a nd C hi ef Operati n g Off i cer Mike C h esser talks to customer service r e pr ese ntativ es about so m e n ew initiativ es that will sup/Jort them in their da)*-t o-da)' interactions with c ustom ers. W e'r e ass uming o ur l a r ges t bu s in ess c u sto m e r s w ill b e a m o n g th e fir s t t o h a v e th e fr ee d om to c h oose th e ir e n e r gy s uppli e r. We kn o w th a t w ill h a pp e n , but ca n't prdi c t exac tl y wh e n. O ur pl a n i s to be fully p r e p a r e d fo r co mp e titi o n ri g ht a round the turn o f th e ce ntur y. Th a t's wh y we'r e deve l o pin g n ew prod u c ts a n d se r v i ces th a t c r ea t e n ew so ur ces of r eve nue w hil e m a king A tl a n t i c En e r gy a mu c h m o r e imp o rt a nt facto r in o ur c u s t o m e r's day-to-d ay li v es a nd b u s in e s ses. N e w se r vi ces lik e hi g h vo lt a g e eq ui pm e nt m a int e n a nce a nd e ffi c i e nt li g h tin g d es i g n a nd in s t a ll a ti o n p l ace us o n the c u sto m e r s' ide o f o ur m e t e rs a nd d e m o n s t ra t e h ow w e ca n co ntri b ut e to th e ir p ro fit a bili ty. Our N ew Gas Mark e tin g Venture W e wo n't a l ways b e go in g it a l o n e as w e expa nd o ur po rtfo li o of p ro du c t o ff e rin gs. W e've l ea rn e d th at i t c a n be a g r ea t a dv a nt age t o p a rtn e r with a bu s in ess th a t h as prov e n ex pe ri e nce in a n e w m a rk e t. F o r in s t a n ce , ea rl y in 1 99 5 we es t ab li s hed a s tr a t eg ic a lli a n ce with a s ub s idi a r y o f ort h e rn S t a t es P owe r of Minn eso t a -o ne o f th e co untr y's m os t pro g r ess i ve gas a nd e l ect ri c u t iliti es. With th e m , w e h ave creat e d A tl a nti c CN R G Se r v ic es, LL C (A CN R G), a nd a re s ellin g n at u ra l gas se r v i ces to co mm e r c i a l a nd s m a ll indu s tri a l bu s in esses in several r eg i o n s o f th e No rth eas t. Sin ce o ur p a rtn e r a lr ea d y h a d a foo t in th e m a rk e t , w e we re a b l e to ge t th e bu s in ess up a nd runnin g in a r e m a rk a bly s h o rt p e ri od o f t im e. W e'r e l oo kin g fo r ACN R G to grow stead il y in th e co min g yea r. Ou r se ar c h f o r s m a rt e r wo rk p rac ti ces a nd c os tcut tin g m easu r es l ed us to pa rtn e r w i t h o ur u ni o n to c r eate m ore fl e x i ble work rul e s and broade r job d e scr i pt i ons a t our poiver plants. Day-to-day tasks t h at o n ce re qu i r ed t h e in vo l ve m e n t of as m a n y as thr ee e mpl oyees can n ow b e h a ndl ed b y ju s t o n e multi-ta sk ed w o rk e r. Atlantic E nergy 3 Competing on Price New products and stro ng c u stomer rel ationsh ip s will on l y be part of the competitive so luti on. We must a l so make the price of our primary product -e l ectricity

-more attract iv e in o rd er to m eet the threat of co mp et iti o n. W e're makin g exce llent h eadway in gett ing o ur int e rnal cost str u ctu r e in o rd er. By doing things lik e trimming close to a third of ou r utility work fo rc e over 3 yea r s, r e n ego ti at in g fuel s upply contracts a nd creat ing gro und-br ea kin g partnerships with o ur uni o n , we're m a king electricity a better va lue for customers.

We a l so expect to offe r customers, o n a very limited basis, price disc o unts c urrentl y permitted under New Jer sey's n ew flexibl e ratemaking l aws. S i g nificant cost c h a llen ges s till lie a head of u s, ul a rl y in the a r ea of power ge n e r at i o n and s uppl y. The power purcha se contracts we hav e with our indep e nd e nt power produc e r s (IPPs) are pushing o ur rates well above prevailing market levels. Serious talks with the project ow ner s continue with the goa l of achieving further cost reductions.

One p os itive outcome o f our talks ha s been the rest orat i o n o f GEON, a chemical manufacturer , as a full customer.

An ag reement reach ed with a n o ther !PP calls for the r et urn o f Mons a nt o.

• New J e rs ey's utility regulators are working closely with the state's electric utilities to create a smooth transition to a mark e t-driven environment.

The Board of Public Utilities' new flexible rate regulations give us the ability to respond to competitive threats by offer in g business customers, at our discretion, customized or discount rate agreements.

Managing Regulatory Issues The complex process of utility deregulation is expected to occur primarily lll1 a state-by-state basis. States across the U.S., including New Jersey, are taking a hard look at the traditiunal regulations that govern the industry and are devdoping new standards that better reflect the realities of the marketplace.

Memhers of our corporate leadership are playing key mks in the New Jersey Board of Public Utilities' (BPU's) ongoing Energy Master Plan Proceeding.

One of the most critical questions being addressed in the proceeding is the extent to which New Jersey's utilities will he able to recover long-term investments anJ commitments prudently made and placed into dectric rates under the traditional regulatory compact. We firmly hdieve our regulators and lawmakers must build in a transition period to provide for renJVery of our investments as we move toward open competition.

To date, ot' jurisdictions grappling with this same issue, includmg the Federal Energy Regulatory Commission, appear to he in alignment with our position.

Whik the BPU hasn't yet made any formal pronouncements, we are pleased with the thoughtful and ddiherate manner in which they are handling this very important process. Growth In Our Se r vice Territory When we take inventory of the strengths that set us apart from other utilities, the quality of our service territory always tops the list. We're very optimistic

• Developers and investors continue to show strong interest in Atlantic City. In mid-1995 , Steve Wynn of Mirage Resorts announced his intent to build a half-billi o n-d o llar casino and entertain m ent r esort in the city's marina district.

Th e project could crea t e thousands of new jobs as we1-s ignificant n ew business for Atlantic Energy.

A P erso n a l No t e ... Thi s year I w ill e n d m y near l y 41 yea r s o f se r v i ce w ith Atlanti c En e r gy. I a m fo rtun a t e to ha ve e nj oyed b o th a c h a ll e n gi n g and r ewa rdin g ca r ee r. The c h a ll e n ges we r e m e t , a nd th e r ewa r ds de r ived fro m th e grea t assoc i a ti o n I s h ared w ith th e e m p l oyees , d i rectors , custo m ers and s har e h o ld e r s o f o ur co mp a n y. Now, m ore th a n a n y t i me i n my ex p e ri e n ce, o ur in d u s tr y a nd o u r co mp any are fac i ng ti m es r eq ui r in g exce pti o n a l v i s i on a n d stra t egic l eaders hi p. I b e li eve Atlanti c En e r gy's l eade r s hip w ill successf ull y gu id e o ur co rp o rati o n .g h th e vas t c h a n ges a n d n ew op p o rtuniti es that li e a h ead of u s. A tl a n ti c En e r gy is a fi n e co m pa n y, a n d I am h o n ored to ha ve se r ve d as i t s l eader. I u r ge m y f e ll ow s h a r e h o lder s to m a int a in th e ir s t eadfas t s upp o rt. I bel i eve A tlantic En e r gy h as a l ways e n de a vo r ed to f a irl y reward you fo r your in ves tm e n t co n f i de n ce a nd w ill co ntin ue to do so in th e futur e.

• Atla ntic E n e r gy gained a new b u si n ess tomer w h en M i ssa Bay moved i ts operat i ons to southern New Jerse)'* The food distributor built a 50 ,000-square-foot facility that boasts a state-of-t h e-art, 30 ,000-squa r e-foo t frigeration-freezer area. Factors i nfluencing M i ssa Bay's m ove included lower taxes and energy expenses.

• abo ut t h e growth t r e n ds we'r e see in g i n seve r al r eg i o n s of o ur m a rk e t. A tl a nti c C i ty i s un de r go in g a r e n a i ssa n ce t h at pro mi ses t o make t h e r eso rt a p r e mi e r to uri st a n d e n te r ta inm e n t att r act i o n. A n ew co n ve nti on ce n te r , nu m ero u s cas i no a n d h ote l expa n s i ons a n d r eco r d cas in o prof i ts a re e nh anc in g the c i ty's appea l , as w e ll as o ur ow n bu s in ess opport u n i t i es in t h e ci t y. Atla n t i c Th e r ma l Systems, o ur t h er m a l e n ergy s u bs i d i a r y, w ill soo n beg in const ru ct ing a h eat i ng a n d coo lin g syste m in A tl a n t i c C it y to se r ve t h e b ur geo nin g cas ino a n d co mm e r c i a l di str i c t. T o th e wes t , we co ntinu e to expe rie n ce growt h in o ur in d u s tr ia l a nd co mm e r c i a l secto r s. M a n ufact uring a nd d i s tri b u t i o n fac iliti es a re c h oos in g so u t h e rn New J e r sey. Th ey a r e attracted b y a m p l e roo m to grow a n d a n exce ll e n t tra n sportat i on i n fr ast ru ct u re. Ove r t h e n ex t t wo to t hr ee yea r s we will be c h a ll e n ged b y th e m a rk etp l ace in ways we n eve r im ag in ed a f ew s h o rt yea r s ago. W e'r e co n f i de nt we'r e u p fo r t h e c h a ll e n ge. B e ass ur e d t h a t th roug h o ut th e process o ur ove rri d in g ob j ec ti ve w ill be t h e m ax imi za ti o n of s h a r eh o l de r va lu e. In t h e pages t h at fo ll ow you'll see h ow we're a l ready s h aki n g t hin gs u p to c r eate j u st t h e ri gh t b l e n d of inn ovat i o n , growt h a nd q u a li ty se r v i ce to ac hi eve th a t ob j ec ti ve fo r you . P os t Sc ript From J e rr y J aco b s O ur C h a irm a n , D o u g Hu gga r d, w ill r e tir e fro m o ur boa rd o f d ir ecto r s in April. O n b e half of m y fe ll ow e mpl oyees, b oa rd m e m bers and s h a r e h olde r s , I wa nt t o thank D oug fo r hi s n ea rl y 41 year s of fin e se r v i ce a n d leaders hi p. His w i sdo m , v i s i o n a nd busin ess se ns e h ave s t e adil y gu i de d us th ro u g h per i ods o f t r e m e n dous grow th a nd c han ge. W e'll mi ss hi s va lua ble co ntributi o ns a nd w i s h him a l o ng a n d h ea lth y r e tir e m e nt. -].L. J aco b s The same power company that lights corridors is blazing new trails. W e'r e r e placin g our co mput e ri ze d e n e r gy mana ge m e nt system (EMS) w ith a rt t ec hn o l ogy th a t will h e lp us o p era te o ur genera ti on a nd transmission equ ipment m ore effic i e nt!)' into th e next centu r)'. Th e n ew EM S w ill keep a closer watch on th e limits of o ur p owe r system a nd allow u s to b e tt e r mana ge o ur inv es tm e nt s in e quipm e nt and lab or. In effic i e nt li g hting a n d pace co ndi t i o nin g systems a r e e n e r gy guzz l e rs t h at can h r ink a bus i ness' bottom l i n e. W e've e nt e r e d th e grow ing e n e r gy se r v i ces indu s try a n d a r e n ow m a rk e tin g co m p r h e n s i ve e ffici e n cy so luti o n to bu s in ess a nd in d u s tr y in o uth e rn N ew J e r sey a nd o th er r eg i o ns o f th e N o rth eas t. W e're o ff e ring c u sto m e r to p-to-b o tt o m e n e r gy e ffi c i e n cy a udit s , as w e ll as d es i g n , co n s tru ct i o n a n d r etro fit of new li g hting a nd e n e r gy syste m s. W e even p rov i de pro j ec t f in a n c in g, so b u s ines es d o n't h a v e t o dr a in th e ir o wn ca pit a l r eso ur ces. Fo r so uth e rn N e w J e r sey firm s fac in g int e rn a ti o n a l co mp et i-ti o n, o r e v e n co mp e titi o n fr o m s i s t e r fa ciliti es in o th e r e sta t es, l o w e r o p e r a tin g cos t s h e lp sec ur e their future a nd va lu ab l e j o b s h ere. An d fo r A tl a nti c En e r gy , the s tr ateg i c b e n e fits o f thi s initi a ti ve a r e cl ea r: w e'r e co m pe tin g h ea d-to-he a d with e n e r gy se r v ic e co mp a ni es th a t a r e a lr ea dy prop os ing e ffi c i e n cy p rog r a m s to o ur o wn c ut o m e r s; we'r e expa nding o ur bu s in ess rel a ti o n s hips w i t h c u s t o mers a nd w e'r e cr ea tin g n ew r e v e nue s tr ea m s. Our n ew I nt e rnati ona l Procur e m e nt gro up worked to crea t e a mark et f or n ew a nd used electr i ca l eq uipm e nt in several developing r egions of the wo rld. In 1996 th e t ea m w ill work to penetrate mark e ts in th e Far East.

During 1 995 we installed approximately 1 ,800 Nig h tGuard outdoor lights at our customers' business es and h omes, bringing the total number of lights l eased under th e program to 23 ,800. Nig ht Guard li g ht s /)roduce more than $6 million in annual revenue, w hil e providing secur it y and convenience for o ur customers.

Nighttime in Atlantic C it y i brighter than eve r -and it's n ot ju s t the c it y's casinos that are c r eat in g the in v iting g l ow. We in sta ll ed thousands of decorative st r eet li g ht s throughout the r eso rt's parks, n e i g hb o rh oods a nd b o ul eva rd s. S u ppo rt ed by fundin g from bu s in esses a nd public agenc i es, m a ny o f the city's main ent r a nc eways h ave been r eb uilt with lu s h l andscap ing a nd new street li ght in g. T o h e l p the projects run smoot hl y, we've t a ken the l ead in coo rdin a ti i;ig the co mpl ex j ob of burying seve r a l different utilitie s' cables underground a nd o ut of s i g ht. i dewa lks a nd s tr eet co m e r s in so me o f the c ity's o ld est n e i g hb o rh ood n ow s hin e with o rn a m e nt a l street l a m ps, m a kin g them sa fer and more inviting for r esidents and vi itor . Th e centerp i ece of the li g htin g p ro j ects promises to be the 16-square-block gateway corridor that will co nn ect the n ew co n ve n-ti o n ce nt e r with the boa rdw a lk. Sc h ed ul ed fo r c o mpl et i o n in 1 997, the project will c r eate a gra nd a nd spectacu l a rl y li g ht ed e n tranceway to Atlant ic C it y. Our Atl antic City off ic e was hired b)' the Showboat H o tel and Casino to coordina t e the installation of all underground utilities needed for a n ew parking facility.

The j ob was completed in just e i g ht weeks and in time for th e busy su mm er season. Atlantic Energy The same power company that cools things down is heating up.

• W e're co nstructin g a th er mal energy production plant in Atlantic City that, under a 30-year contract , w ill suppl)' h eating a n d coo lin g se r v i ces to th e city's n ew co n ve nti o n ce nt e r. Th e ce nt er i s sc h ed ul e d to o p e n in th e .a s j)ring of 1 997 and will boast the largest W ex hibiti o n hall o n th e eas t e rn seaboard.

• 1 t's important to find a good ba l ance between ou r busin ess pri orities and t h e env i ron ment. That's why in Jun e we donated 114 acres of und eveloped woodlands to t h e New J ersey chapter of the Nature Conservancy.

The t rac t of land, l oca t ed n ear our Cu mb erla nd Ge n e ratin g Stat i o n , i s adjacent to th e onse r va n cy's Manumuskin Ri ve r Pr ese rv e a nd in creases its total size to 3 , 50 0 acres. W e t hin k it's smart business to s ti ck cl ose to w h a t we do best. Th a t's why a key e l e m ent o f Atl a ntic En e r gy's growt h s tr a teg y i s to d eve l op n ew businesses a nd pro duct s cl ose l y a li g n ed with o ur co r e el ec tri c utilit y b u s in ess. Atlantic Th e rm a l Sys t e m (ATS), o ur th e rm a l e n e r gy se rvi ces s ub s idi a r y, i d o in g ju s t th a t. ATS offe r s bus in ess custo m e r s in so u t h e rn ew J e r sey a nd across th e U.S. a spec trum o f o pti o n s -fr o m o peratin g a nd m a int a inin g ex i s tin g t h e rm a l e ner gy fac iliti es to se llin g th e c u sto m e r th e rm a l e n e r gy in the fo rm o f c hill e d water a nd stea m fo r indu s tri a l processes o r t o h eat a nd coo l t h e ir bu il d in g . Atlantic C ity's thrivin g h ot el a nd cas in o indu s try i s A T S' ini tia l foc u s. W e'r e designing a centra l ene r gy syste m th a t will s upply s t ea m a nd c hill e d wate r to th e c it y's mid-town cas ino a n d bu s in ess di st ri ct. With m a j o r faciliti es like t h e Trump Pl aza a nd t h e Trump R ege ncy a lr eady und e r co ntr act fo r th e se r v i ce, A T S expects to begin co n s tructi o n o n th e $88 milli o n elec tric a n d n a tur a l gas p o w e r e d proj ect in mid-1 996.

• A growing numb e r of sc h ools in o uthJ e rs ey are c h oos in g geo th ermal h eat in g and cooling systems. Eight sc h ools , including t wo co ll eges, a re e nj oyi n g th e co mfort and effic i enC)' of geot h ermal. Four more sc h ools are now installing sys t e ms. Geothermal systems help u s trim p o w e r demand at p ea k tim es, w hil e in creas in g yea r-round electric it y consump ti o n. Atlantic Energy _____ __.

The same power company that connects with you is building new bridges.* Throu g h a n ew billing e nhanc e m e nt, o ur larg es t customers n ow hav e th e convenient o pti o n of r ece i v ing a s in g l e monthl y bill that su mmari zes e n e r gy consu mpti o n for all of th e ir separately m e t ered facilities.

Durin g 1996 we will ex pand th e bill co n so lidation program to include o th e r customer groups. E ve r y bu s ine ss d ay m o r e th a n 2 5 ,000 o f o ur c u ta m e r s pay th e ir el ec tric b ill o r ca ll us w ith qu es ti o n o r r eq u es t s. In m a n y cases, c u sto m e r s base their o pini o n s a b o ut o ur service qu a l ity o n the se routine conn e cti o n s. Durin g 1995 we c r ea t e d se v e ral pro gra m s th a t imp rove o ur e ffi c iency a nd co n ve ni e nc e. C u ta m e r s c an n ow p ay th e ir bill s u s ing a c r e dit ca rd o r by g i v in g us a pp rova l to a u to m a tic a ll y d e bit th e ir b a nk acco unt. And th ey'll soo n be ab l e to u se o ur co n ve ni e nt pay-b y-ph o n e se r v i ce t o pay th e ir m o nthly e l ec tri c bill -for l ess th a n th e cos t o f a p os ta g e s t a mp. Th ese n e w o pti o n s c a n sa v e u s , as w e ll as o ur cu s t o m e r s, time a nd m o n ey. W e've a l so m a d e

• it eas i e r fo r cu s t o m e r s to co nt act u s by p h o n e. Ph o n e r ep r ese nt a ti v e s wh o "t e l e-co mmut e" fr o m their h o m es o ff e r quick e r se rvic e durin g p ea k ca llin g times a nd ca n s t a ff th e ir ph o n es in a m a tt e r o f minute s durin g ni g ht-tim e to rm s and o th e r e m e r g enci es. And o ur n e w v o ia utom a t e d sy s t em l e ts c u s t o mer s h a ndl e routin e requ es t s with o ut ass ist a nce 2 4 h o urs a d ay. Utility fi e ld p e rs o nnel are t es ting a n ew m o bil e co m/JUt e r system that schedules and tra cks their daily work ac ti v iti es. It cuts down o n time-consuming paper wo rk and "ta lks" with o ur c u sto m e r inf o rm atio n system to give e o ur ph o n e r ep r e s e ntati ves up-to-th e-minut e status r e/J o rts o n service requests and r e pair work.

O ur new env ir o nm ental partnering pro gram is h e lpin g business custo m ers address and solve complex regulatory issues. Our expert ass istan ce h as proven to be of great va lu e to customers that are expanding their facil iti es and are unsure of h ow to comp ly w ith New J ersey's e n viro nm e n ta l laws. In c re ased co mp et iti on m ea n s we ca n't l et o ur power lin es be the o nl y dir ec t ti e with o ur l a r ges t c u sto m e r s. We're building bridges to o ur l a r ge business c u stome r s th a t pav e the w ay for hi g h-qualit y se rvice a nd strong-e r c u sto m e r partnerships.

F o r in s t a nc e, w h e n So n y Mu s ic came to u s with a r eq ue st t o build a n ew p owe r lin e to se r ve it s co mp act di sc m a nufacturin g plant, o ur account executive Nathan Berk saw a go ld e n oppo rtunit y to s h ow a k ey c u sto mer the kind of top-n otch se r v i ce we deliver. "Sony's spec ific at i o n s c h a llen ge d o ur project team t o co me up with so m e inn ovat i ve e n gi n ee ring a nd construction so luti o n s," B e rk e xp l a ined. " W e completed a m a j o r piece o f the j ob during a s in g le 2 4-h o ur period to minimi ze di s rupti o n s at the plant." Thr ee AE crews worked aro und the clock to m ee t the dea dline a nd co mpl eted the j ob in time for Sony to begin it s m o rning s hift. "Exec utin g j obs lik e this proves to o ur customers that we ca n bridge the gap between what they expect fr om a traditional electri c utilit y, a nd what Atlantic En e r gy can deli ver to the co mp et iti ve marketplace." A l a t e-summer drought led to severe ocean sa lt build-up on critical power lines serving our seashore communities.

To prevent costly equipme nt damage and keep our customers' power on, we used truck-and h mounted power was h ers to remove sa lt from m o r e than 25 miles of lin e. Atlantic Energy 11 The same power company that controls the spark is lighting your fire .

• O ur n ew bulk p ower m a rk e tin g t ea m see k s o ut th e m os t co mp e titi v el y pri ced p owe r ava i la b le in th e m a rk e t. Durin g 19 9 5 th e gro up n ego ti a t ed powe r-r e l a t ed sa l es a n d p u r c h ases th a t saved us a ppr ox im a t e l y $5 .4 milli o n in ca p ac ity a nd e n e r gy cos t s.

• N e w co mput e ri zed e quipm e nt install e d a t o ur D ee pw a t e r G e n e ratin g Stati o n i s m a kin g th e j ob o f u nl oa ding a n d h a ndlin g coal m o r e cos t-effect i ve. A re m o t e-co ntr o l led l oco m o-ti ve a nd a v i deo sys t e m t hat m o ni to r s th e coa l e as it's t ra nsf e rr e d to th e b o il e r fuel sys t e m a r e savin g th e pl a nt an es timat e d $200 ,000 eac h yea r in o p era ti o ns costs.

• O n e way we'r e m a kin g th e rat es we c h arge o ur custo m e rs m o r e co mp et iti ve i s b y r e n ego ti at in g ou r coa l s uppl y co ntra c t s. During 1 995 we renegotiated ou r five larges t coa l-rela t ed contrac t s, sav in g u s a nd ou r customers approx im ately $3 .4 milli o n o n a n a nnu a l basi s. Atl a nti c Energy h as broken o ut o f the e l ec tri c-o nl y b u s in ess a nd i s se llin g n atura l gas se r v i c e s to co mm e r c i a l a nd indu s tri a l c u sto m ers. In ea rl y 1 995 we c r ea ted Atlantic CN R G Se rvic es, LLC (A CN RG), a j o int venture with Minn eso t a-base d o rth e rn Sta t es P owe r. ACNRG hit the gro und runnin g a nd imm ed i a tel y w o n a c o ntr act t o s uppl y n a tural gas to Atlantic it y's h ote l-cas in o indu s t ry. A RG' c u sto m e r po rt fo li o h as bee n gro win g at a s t ea d y pace, w ith 80% o f it s bu s in ess n o w l oca ted o ut s id e so uth e rn New J e r sey. " We'r e gro wing o ur c u s t o mer ba se by t a r ge tin g s m a ll t o m e dium-s i ze d bu s in esses that d o n't h ave th e int e rn a l r eso ur ces n eeded t o cap tur e the s i g nifi ca nt sav in gs ava il ab le o n th e ope n gas m a rk et," sa id AC RG Executiv e R o n Sc h e ir e r. " In m a ny cases w e ca n save a c u s t o mer w h o is s till rel y ing o n th e ir l oca l di s tributi o n co m pa n y as mu c h as 30% o n their n at u ra l gas bill." ACNRG i s a l so a n a tur a l s tr a t eg i c fit with o th e r Atl a n t ic Energy busine sses lik e Atl a nti c Gener a ti o n In c. a nd ATS, th at u se l a r ge vo lum es o f n a tur a l gas in their bu s in esses. Th ey ca n e nj oy the co mp e titi ve benef it s of l ower n a tur a l gas pri ces ob t a in e d fo r them b y A CN RG .

• W e'r e trimming ca pital expe ns es and co ntr o llin g ou r electric rates by in c r eas in g th e efficie n cy of our p owe r de li ve r y system. O ur n ew planning and operatio n strategy h as incr eased th e ca pa c it y of o ur ex i st in g d e liv e ry sys t e m b y a n average o f I 0% a n d will save u s a n est imat e d $I 6 milli o n in cap ital cons tructi o n ex p e nditur es ove r th e n ex t fi ve yea r s. Atlantic Energy ______ --1 The same power company that keeps the cocoa flowing is making waves. *

• Our commercial sector turned in th e strongest grow th tr e nds in 1 995, which is t y picall y a sign of a s tr e n g th e nin g eco n o m y. Close to 1 ,000 n e w commercial accounts were added t o o ur sys t e m.

• Our eco n o mic d eve lopm e nt inc e nti ve rate provid es discounts to expanding or n ew co mm e r c ial and industrial customers.

Th e 4 5 busin esses n ow o n th a t rate account for $6. 6 milli o n in n e w annual el ec tric r eve nue e a nd h ave c r ea t ed m o r e than 1 , 5 00 full-time j obs in Sou th J ersey.

• Atlant i c City is exper i enc ing a building boom, led by th e construction of more than 3, 600 new casino h otel rooms. All signs indicate that the growth will continue, viding a s i gn ifi cant boost to our projected sales l evels to the seas id e r esort. o uth e rn New J e r sey's boat building indu s tr y does m o r e th a n s impl y provide j obs. It's a l so a pi ece of o ur uni que seas h o r e hi sto r y. Boats h ave been built h e r e for m o r e than 300 yea r s, a nd so m e fa mil y-run bu s in esses hav e been in ope r a ti o n for ge n e r a ti o ns. So when a 10% federal luxur y tax n ea rl y d rove the industr y to ext in ct i o n, the co mmunit y felt a g r eat l oss. In August 1 993, the t ax was r epea l ed, a n d today the indu s tr y i s back o n a n even k ee l. Co mp a ni es lik e Viking Yachts h ave r e hir ed m o r e than 500 s kill e d workers to m ee t a r e n ewe d dem a nd. L ast yea r Viking built 7 5 luxur y yac ht s valued a t $50 milli o n a nd expects to in c r ease product i o n by more than 25% in 1 996. A tl a nti c Energy i s act i vely in vo l ved in a public-private n e r sh i p that is f u eli ng t h e growt h of ew J e r sey's boat building a nd m a rin e indu st ri es. Th e partnership i s d eve l o pin g nati o nal a nd internati o nal m a rk e tin g strateg i es a nd w o rkin g to find n ew financing so lu-tions fo r the indu st r y. Th e gro u p is a l so developing r e l at i o n s hi ps with a r ea sc h oo l a nd co ll eges to sec ur e a new ge n e r at i o n of hi gh l y sk ill ed c r aftspeop l e .

• An $8.4 milli on expansion nears complet i on at th e Atlantic City Int ernatio n al Ai rp o rt that will m ore t h an double the size of it s terminal.

The airport w ill also be the home of Raytheon's new regional aircraft nance facility.

R ayt h eon's grow th wi ll be supported by our economic developme nt discount rate. Atlantic Energ)'-------1 The same power company that

• generates current is energizing the future. I n 1 995 our power plant m ai n te n ance crews hit t h e road. Th ey n ow m ove fro m plant to plant, depe n d in g on w h ere over h au l work is be i ng do n e. Thi s new fl.exib ilit y t r i ms labor costs, re d uces th e n eed for contractors, a n d cuts costly pla n t dow n-ti m e. T h e m ob il e crews are also creat i ng a new source of revenue by performing similar work for ot h er businesses in the region. O n e o f o ur m ost c riti ca l ob j ect i ves in 1 99 5 w a s to find ways to c ut the cos t of opera tin g Atlantic El ect ri c's u t ilit y business.

In 1 995, we reduc e d co re utili ty ope r a-tion a nd m a int e n a nc e costs by over 4%. One way we did t hi s was to create a n ew j ob category at o ur power p l a nts th a t combines three previ o u s l y sepa r a t e j obs. Th e ide a for a n O&M T ec hnici an p os iti o n fir s t s urfaced as we were working with o ur uni on t o find the m ost cost-effective way to run o ur n ew d es ulfuri za ti o n ("scrubber")

pl a nt at B.L. En g l a nd Sta ti o n. By training o n e worker t o ope r a te a nd m a int a in the sys t e m, plus d o electrical w or k , w e found w e could dr a m a tic a ll y. r ed uc e plant d o wn-time a nd ope r at in g costs. Also, s in ce the O&M Tech s ha ve c o mplete r espo n s ibilit y for a ll facets o f pl a nt o perati o n s, they're constantly l oo kin g for w ays to improve processes a nd take full advantage o f th e n ew fle x ibili ty they've ga ined in their j o b s. Th e program h as w o rked so well a t th e scrubber, it's b ee n ex p a nd e d to o ur l a r ge ge n era ting s t a ti o n s. Th e n ew scrub b e r a t B .L. E n gland Stat i o n converts s ul fur d i ox i de e m iss i ons i nto ca l ciu m su l fate d ih ydra t e, m ore co m mo nl y k n ow n as gypsu m. D u ri n g 1 995, more th an 4 8,000 tons of gypsu m were produced by t h e scrub-e be r. Th is va l uab l e by-produc t is be i ng so l d to a New ] ersey wa ll board m aker, avoidi n g t h e cost and environ m enta l impac t of placi n g it in a landfill.

Grants from Atlantic En e r gy, th e US EPA , and ot h e rs help ed th e Richard Stockton Co ll ege of New J ersey install the state's largest voltaic system in a new academ ic building.

The system converts solar energ)' into 18 kilowatts of power and will h e//) us learn more abou t th e busin ess and e nvir on m e ntal benefits of this technology.

W e know we mu st co ntinue to create n ew, a nd some-tim es radically different, ways to run o ur business if we a r e to be s ucce ssfu l in the 21st century -the market-place will demand it! O ur vis i on i s to become a grow in g , competitive c o mp a n y that delivers a steady st r eam of inn ovat i ve e ner gy so lu tions to the m a rk etp l ace. New energ i es a re at work to make that transfo rm a ti o n h appen, a nd we're beg innin g t o see so m e prom i s in g r esu lt s. We're cutting costs, a nd with the help of ou r employee , finding c r eat iv e ways to be m o r e competi-tiv e in o ur co r e electric b u s in ess. Thr o u g h o ut 1 996 we wil l continue t o m a ke o ur power a better va lu e for c utomers. Th e deve l opment of new products a nd se r v i ces i s another key pri o ri ty in 1 996. We have c reated a di sc ip lin ed proce ss that h e l ps u s assess m a rk et oppo rtuniti es a nd then a lign the internal re so urc es needed to bring profitab l e product a nd se rvice offers to o ur customers.

Th e i dea i s to bec o me a key partne r in o ur c u sto mer s' li ves and bu in esses, deliv e rin g more and m o r e value to them and ultim ate ly o ur s h a r e h o ld e rs. Th at's o ur c h arge for the future a nd that's where we'll be focu ing o ur energies.

CoastalCo mm , In c. ha s joined a venture that is enteri ng the /)ersona l communications systems (PCS) market. PCS is considered the next generation of wireless communication technology and offers users high-quality digital, voice and data transmission capabil iti es. Atlantic Energy ---------17 0 *

• Ma t th ew H o ld e n , J r. Mr. H ok/en, a director since 1 98 1 , is the H enry L. and Grace M. Doheny P rofessor of Government and Foreign Affairs at th e Un i vers it y of Virginia.

H e i s a form er co mmi ss ion e r of the F edera l Energy R eg ulatory Commission and t h e Wi sconsi n Publi c Serv i ce Co mmi ss i o n , and a f o nn e r m e mber of th e Pr esident's Air Quality Adviso r y Board. H e h olds a doctorate in political science from No rth western U ni ve r si t y. Age: 64. Prof essio nal Experience:

regulatory affairs, e n e r gy consu ltati o n , ti on. Com mitt ee C h airman: Audit. Committee Membership:

Personnel

& Benefits; Wholesale . G e ra l d A. H a l e Mr. H ale, a director since 1 983, is president of H ale R esoi ir ces, In c. , a h ea lth ca r e, industrial/natural resource investm e nt and mana ge m e nt co mpan y. H e i s a dir ecto r of New J ersey Manuf ac tur e r s Insuran ce Co mpan y, New J e r sey Bu si n ess and I ndustry A ssoc iati o n and H o k e, I nc. H e i s a uat e of W este rn Mi c hi ga n Un i ve r s it)'* A ge: 68. Prof ess i o nal Experience:

industrial min e ral s, chemicals a nd f cated O.E.M. produ cts. Co mmitt ee M e mb ers hi/J: P erso nn el & Benefits; R etail. C hairm an of Atlant i c Energ)' Ent erprises, In c . J e rro ld L. Ja co b s Mr. J acobs i s president a nd c hi ef execut iv e off i ce r of th e Co mp a n y and c h airman and c hief execu ti ve of fi ce r o f Atlantic City Electri c Co m/Ja n y. H e h as been wi th th e Co mp any for 3 4 years. H e i s a graduate of the Newar k College of Engineering (New J erse)' Institut e of T ec hn o l ogy). Age: 56. Pfessional Experience:

utilit y opera ti o ns. Committee M e mb e r s hip: E x-o fficio m e mb e r of all co mmitt ees exce pt Audit and P erson n el & Benefits.

Director of Atlantic Energy Enterprises, I nc. 0 Atlantic Energy's Board of Directors J os. Mi c h a e l Ga l v in , J r.

• Mr. Galvin, a director s inc e 197 8, is president and c hi ef execut i ve office r of th e Sou th J e r sey H ea lth Co rp ora tion -Th e M e m or ial H os pital of Salem Co unty. H e i s a director of Woodstown National Bank and th e Ce nt er for H ea lth A ff airs. H e is a graduate of th e Unive r s it y of Scranto n and h o l ds a master's degree in business adm ini s tr a ti on from Xavie r University.

Age: 5 0. Prof ess i ona l Experience:

/J e r so nn e l , h ea lth ca re mana ge m e nt. Co mmitt ee C hairman: P e rsonnel & Benefits.

Co mmitt ee M embers hip: Wholesale.

Director of Atlantic Energy Enterprises, In c. R i c h ar d B. M c G l y n n Mr. McGlynn, v ic e /JT es id e nt and ge n e ral cou n se l of U nit ed Water R eso ur ces, I nc., h as been a director since 19 8 6. A practicing lawy e r for over 30 yea rs , h e is a former co mmisioner of the New J ersey Board of Public Uti liti es and a former judge.'*-Ess ex Co unt y, New J ersey. H e is 1 ua t e of Rut ge r s Law Sc h oo l and -' ceto n University.

Age: 57. Prof ess i o nal Exp e ri e nc e: law , utilit y r eg ulation. Com mit tee M e mber s hip: Finan ce & Publi c Policy; Personnel

& B e nefits , R etai l.

• C y rus H. Holl ey Mr. H o lley , a director since 199 0, is president of Manag e m e nt Consulting Services.

H e was formerly chief ing off i ce r , execu ti ve vice president and a director of Engelhard Cor/Joration.

H e is a grad uat e of T ex as A&M .. iversity.

Age: 59. Prof e ssional )erienc e: indu s trial minerals, e micals and precious metals. Co mmitt ee C hairman: Wholesale.

Com mitt ee M e mb e r s hi/J: P e r so nnel & Benefit s. Director o f Atlantic En e rgy Ent e rprises , I nc.

• E. Dou g las Huggard Mr. Hu ggard, a director since 19 8 4 , i s c hainnan uf th e board of th e Compan)'* H e se r ved as chairman and chief executive officer of the Co mpany and Atlantic City El ectr i c Company from 1 989 until 1993 , when h e r e tir ed after com/Jleting 38 years of service. Pri o r to that , h e was director, president and c hi ef exec utive officer of th e Company and Atlantic City El ectric Co m/J a n y. H e h o lds a ma s t e r's degree in mechanical e ngin eer ing from th e University of Delaware.

Age: 62. Prof ess ional Exp e ri e nc e: utility o p era ti o ns. Committee Memb e r s hip: Finance & Publi c P o li cy; R eta il; Wholesale.

• B e rnard ] . Morgan Mr. M organ, a banking in d u s tr y execu ti ve, was e l ec t ed as a director in 19 88. H e h o lds a m as t e r's degree in business administration from the Wharton School of th e University of P e nns y lvani a. A ge: 59. P al Ex/J e rience: banking , f i nance. Committee Chairman:

Finan ce Publi c P o li c)'. Committee M embers hip: Audit. Dir ector of Atlantic En e r gy Enterprises, I n c. Kathl ee n Ma c D o nn e Ll M s. Mac D on n e ll was elected as a director in 1 993. She is a co rp o rate vi ce /Jr es id e nt of Cam/Jbell Soup Company and president of its Froz en F oods Group. She i s a m e mb e r of th e board of directors of th e Ca mpbell/Nakan o J oint Venture, a member of th e board of directors of th e American F rozen Food I nstitut e and a t rust ee of t h e Campbell Sou/J Com/Jany Foundati o n. Sh e i s a gradiwte of th e Un i ve rsit)' o f M assac hu setts and h o ld s a m as t er's degree in int e rnati o nal mana geme nt from the American Graduate School of I nt erna ti o nal Mana ge m e nt. Age: 47 Prof ess i o nal Experience:

consumer /Jr od uct s, marl<e tin g and internati o nal management.

Co mmitt ee C hairw o man: R eta il. Committee Membership:

Audit; P e rs o nnel & B e nefit s. Harold J. Ra ve ch e Or. Ra vec h e, who became a director in 199 0, is president of th e St eve ns l nsritiae of T ec hnology. H e was formerly th e dean of sc ienc e o f th e R ensselaer P o lytechni c I nstitute.

H e is a director of National W es tminster Ban cor/J, I n c., and a member of the U.S. Council on Competitiveness a nd Business Executives for National Security.

H e h olds a doc t orate in physical c h e mistry from th e University of California.

Age: 52. Prof ess ional Experienc e: higher ed ucari on, science and t ec hn ology p o li cy. Committee M e mber s hip: Audit; Financ e & Publi c Policy; R e tail , Wholesale.

Atlantic En e r gy _______ -1 A closer look at the companies of Atlantic Energy (A ll 1n fo rmari o n a; o f 1 2/3 1/9 5) Atlantic Electric Atlant i c El ec tric, Atlantic Ener gy's primary subsidiary, is a r eg ul ate d electric utilit y, se r vi n g mor e th an 4 70,000 h o m es a nd b u s in esses across so uth e rn New J e r sey. With $2.4 b illi o n in asse ts a nd $9 54 milli o n in a nnu al r eve nu e , Atlant i c El ect ri c i s ac ti ve l y deve l op in g new e n e r gy-r e l a t ed product a n d e rvic es to ex p a nd it s so ur ces o f r eve nu e a nd be co m e the e n e r gy p r ov id e r o f c h o i ce fo r it s c u sto m e r s. Atl a ntic En e r gy Ent e rpri ses, Inc. (AEE) AEE w as estab li s h ed as a h o ldin g co mp a n y fo r Atl a nti c En e r gy's n o n-r eg ul a t e d s u bs idi a ri es in J a nu a r y 1995. AEE h as asse t s tota ling $175 milli o n a nd t h ro u g h it s v a ri o u s busine ss e ntiti es ex pect s to inve t a n a dditi o n a l 4 00 milli o n ove r the n ex t fiv e yea r s. Th ese co mp a ni es will p ur s u e growt h o pp o rtunitie s in ene r gy-r e l a t ed field s , p a rti c ul a rl y th ose t h a t will l eve r age Atlantic En e r gy's ex i s t i n g bu s i-n esses a nd c u sto m e r r e l a ti o n s hi ps.

• Table of Contents Report of Management and Ind ependent Auditors' Report --------.-

Page 22 Co nd ensed Consolidated Statement of Inc ome ----------------------.-

Page 23 Condensed Consolidated Balance Sheet -----------------------------.-

Page 23 Condensed Consolidated Statement of Cash Flows ------------------.-

Page 24 Consolidated Statement of Changes in Common Shareholders' Equity ---------*

Page 25 Notes to Condensed Consolidated Financial Statements

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.-Page 26 Management's Discussion and Analysis of Financial Condition and Results of Operations

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*Pages 2 7-31 Financial and Statistical Review 1995-1985

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Pages 32-33 Investor Information

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Page 34 Officers ---------------------------------.-

Pages 35-36 We've carried our "shake-up" theme all the way into the financia l section of this report. The traditional 40-plus page document has been trimmed down to a 16-page summary. All the essential information is still here, presented in a more u er friendly form. For those of you who require the details, our full financial disclosure is included in the proxy stateme nt for the 1996 annual meeting of shareho ld ers. Atlantic Energy ____ __,

The management of Atlantic Energy, Inc. and its subsidiaries (the Company) is responsible for the financial statement and related information presented in this Summary Annual Report. These statements and information are derived from the complete set of financial statements and related information contained in the 1995 Annual Report on Form 10-K and accompanying the 1996 proxy statement for the annual meeting of shareholders, both of which are filed with the Securities and Exchange Commission.

Those financial statements are prepared in conformity with generally accepted accounting principles and have been audited by Deloitte & Touche LLP, Certified Public Accountants.

For more complete details regarding financial information on the Company, refer to the Form 10-K or the Proxy Statement.

J. L. Jacobs Pre ident and Chief Executive Officer M. J. Barron Vice President and Chief Financial Officer February 2, 1996 Independent

• Auditors' Report Deloitte & Touche11P 0 Deloitte & Touche LLP Certified Public Accountants Two Hilton Court Parsippany, New Jersey 07054 To the Shareholders and the Board of Directors of Atlantic Energy, Inc.: We have audited the consolidated balance sheets of Atlantic Energy, Inc. and its subsidiarie as of December 31, 1995 and 1994, and the related consolidated statements of income, changes in common shareholders' equity and cash flows for each of the three year in the period ended December 31, 1995. Such consolidated financial statements and our report thereon dated February 2, 1996, expressing an unqualified opinion (which are not included herein) are included in Appendix A to the 1996 proxy statement for the annual meeting of shareholders.

The accompanying condensed consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to expre an opinion on such conden ed consolidated financial statements in relation to the complete consolidated financ i al statements.

In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1995 and 1994 and the related condensed consolidated statements of income and cash flows and changes in common shareholders' equity for each of the three years in the period ended December 31, 1995, i fairly stated in all material respects in relation to the basic consolidated financial statements from which it. been derived. LL/-' February 2, 1996 Condensed Consolidated Statement of Income e For the Years Ended December 31 , (Thousands of Do ll ars) 1995 Operating Revenues -Electric $953,137 Operating Expen es: Thi s expense includ es---* Energy and Purchased Capacity 382,336 th e cost of fuel and Operations and Maintenance 186,439 power purchased from utility and nonutility Depreciation and Amortization 78,461 sources, including IPP s. Taxes 157,364 Th e increase in 1 99 5 's expense reflects the Total Operating Expenses 804,600 first time all 4 of Operating Income 148,537 ACE's IPP contracts were in fuU operation.

r-.-Other Income and (Expense)

-Net 9,058 I I Interest Charges -Net 61,200 I I I Less Preferred Stock Dividend Requirements I This i s the net of in-.J of Subsidiary 14,627 come and expenses f r om a numbe r of Net Income $ 81,768 diverse activi ti es. Th e results of nonregulated Average Number of Shares of Common Stock bu.sinesses are reflected Outstanding (In Thousands) 52,815 h ere, and in 1994 thi s line-item included the Per Common Share: cos t of ACE's down-Earnings $ 1.55 sizi n g program. Dividends Declared $ 1.54 Dividends Paid $ 1.54 (Thousands of Do ll ars) Assets Electric Utility Plant (Net of accumulated depreciation:

1995 -$794,479; 1994 -$725,999)

In vestments the com-pany makes in its nonutility activities T o tal Inve s tments and Nonutility Property Total Current Asset s are accounted for h e r e.Th e 14% c r ease over last year primarily reflects investments made by ATS for th e Atlantic City th er mal energy project. ,. * .._ Recoverable Future Federal Income Taxe s [Unrec ove red Purchased Power Costs : Unrecovered St a te Excise Taxes : Other Regulatory Assets I I I I I I I I The se regulawry assets -" represent costs incurred by ACE that under BPU regulation may be collected from customers in the ,A e. As they are 'W e r ed th ese cos t s are r ecogn i zed as an expense in the income sta t eme nt. Other Noncurrent Assets Total Assets Liabilities and Capitalization Common Shareholders' Equity Preferred Stock o f Atlantic City Electric Company Long-Term Debt T o tal Capitalization (excluding current portion) Current Debt and Preferred Stock Maturitie s Other Current Liabilities Deferred Income Taxes and Investment Tax Credits Other Noncurrent Credits Total Liabilities and Capitalization 1994 1993 $913,039 $865,675 341,820 270,219 193,977 207,511 73,344 67,950 150 , 358 160,411 759,499 706,091 153,540 159,584 (5,023) 12,688 55,688 59,570 16,716 17,405 $ 76 , 113 $ 95,297 54 , 149 52,888 $ 1.41 $ 1.80 $ 1.54 $ 1.535 $ 1.54 $ 1.53 December 31 , 1995 1994 $1,801,786

$1,781,923 216,284 177,323 248,322 207,979 99,817 115,538 85,858 85,854 64,274 73,834 87,678 79,282 16,877 23,822 $ 2,620,896

$ 2,545,555

$ 813,177 $ 842,656 154,750 189,250 829,856 778,288 1,797,783 1,810,194 118,042 21,850 138,724 166,751 474,987 464,220 91,360 82,540 $ 2,620,896

$ 2,545,555 Atlantic Energy **

• For Years Ended December 31 , 19-I I I (ThousanJs of Dollars) 1995 1994 This statement re-Cash Flows of Operating Activities

conciles the cash bal-Net Income $ 81,768 $ 76,113 $ 95,297 ance at the start of the Deferred Ener gy a nd Purchased P owe r Costs (4,714) 11 , 101 (21,319) year with the year-end cash balance. It also Depreciation a nd Amortization 78,461 73,344 67,950 shows how the com-Deferred Inc ome T axes -Net 25,946 17 ,863 20,901 pany generates and Unrecovered State Excise Taxe s 9,560 (40,128) (33,706) uses cash, categorizing sources and disburse-Employee Separation Costs (19,112) 26,600 menis of cash into Other -Net (23,548) (7,213) 49,027 3 major activities

-Net Cash Provided by Operating Activities 148,361 157 ,680 178,150 operations, investment and financing.

Cash Flows of Investing Activities:

This line includes Utility Cash Construction Expenditures (100,904)

(119,961) ( 138, 111) energy costs that were Other -Net (39,466) (28,413) (26,202) def erred -or not recog-Net Cash Used by Investing Activities (140,370)

(148,374)

(164,313) nized as an expense -in our income statement Cash Fl ows of Financing Activitie

to adjust for an Debt I ssued, Retir ed and Matured -Net 133,360 20,508 79,492 underrecovery of fuel and energy costs from Stock I ss ued , Repurcha sed a nd Redeem ed -Net (54,126) (18,120) 10,739 our customers.

This Dividends Declared (95,715) (92,545) (84,664) expense is subtracted Other -Net 9,067 12,330 8,584 from net income here w account for the cash Net Cash (Used) Provided by Financing Activities (7,414) (77,827) 14,151 used to purchase the fuel and energy. Net lncrea e (Decrease) in Cash a nd Temp ora ry Inv es tment s 577 (68,521) 27,988 Cas h and Temp orary Investment s, beginning of year 5,114 73,635 45,6-Cash Temporary Investments, end of year $ 5,691 $ 5,114 $ 73,635 Consolidated Statement of Changes in Common Shareholders' Equity -(Th o usands o f D o llar>) Shares Balance, December 31, 1992 52,198,624 Common Stock Issued 1,308,162 Net Income Capital Stock Expense of Subsidiary Dividends Declared Balance, December 31, 1993 53,506,786 Common Stock Issued 870,159 Common Stock Repurchased (221,700)

Net Income Dividends Declared Balance, December 31, 1994 54,155,245 Common Stock I sued* 1,633 Common Stock Repurchased (1,625,000)

Net Income Dividends Declared Balance , December 31, 1995 52,531,878 Common Stock $ 549,147 30,296 579,443 17 ,941 (3,909) 593,475 (413) (29,626) $563,436

• Includ e d in Co mm o n S t oc k l so u e d a re a m o un ts assoc i a t e d w1th a dju st m e n ts m a d e fo r e mpl oyee s t oc k pl a n>. Retained Earnings $ 242,768 95,297 (169) (81,347) 256,549 76,113 (83,481) 249,181 81,768 (81,208) $249,741 Atlantic Energy ____ -1 Notes to Condensed Consolidated Financial Statements NOTE 1. SIGNIFICANT ACCOUNTING POLICIES Atlantic Energy, Inc. (the Company, AEI or parent) is the parent of Atlantic City Electric Company (ACE) and Atlantic Energy Enterprises, Inc. (AEE), which are owned subsidiaries.

Principles of Consolidation

-In the consolidated financial statements presented for the Company and its subsidiaries, all significant intercompany accounts and transactions have been eliminated. Regulation

-The accounting policies and rates of ACE are ubject to the regulations of the New )er ey Board of Public Utilities (BPU) and in certain respects to the Federal Energy Regulatory Commission (FERC). ACE follows generally accepted accounting principles and financial reporting requirements employed by all industries as specified by the Financial Accounting Standards Board and the Securities and Exchange Commission.

However, certain economic effects of the ratemaking process are permitted special accounting treatment regarding the timing and recognition of expenses and revenues.

Earnings Per Common Share -This is computed based upon the weighted average number of common shares outstanding during the year. NOTE 2. RATE MATTERS OF ACE ACE has not filed for an increase in base rates since 1990, but recovers its fuel and energy costs through its Levelized Energy Clause (LEC). Change in LEC rates are shown in the table below. Date Filed 3/93 2/94 4/95 Changes in Levelized Energy Clause Rates 1993-1995 Amount Amount Requested Granted Date (millions) (millions)

Effective

$14.2 $10.9 10/93 63.0 55.0 7/94 37.0 37.0 7/95 ACE's LEC is subject to annual review by the BPU and sets June 1 through May 31 as the LEC period. In the 1994 and 1995 LEC filings, ACE initiated the Southern New Jersey Economic Initiative (SNJEI) which forgoes the recovery of a portion of fuel and energy costs as incurred.

The SNJEI was de igned to keep ACE's rates competitive with neighboring utilities and has reduced the LEC recovery by $28 million in 1994 and $10 million in 1995. In the 1995 LEC filing, ACE deferred the recovery of $20.6 million of costs incurred during the 1995/1996 LEC period to a future period. In other rate proceedings, the BPU is investigating the potential double recovery of capacity costs by New Jersey utilities based on a claim by the Ratepayer Advocate

• certain capacity costs are being recovered through b base rates and LEC rates. The Ratepayer Advocate claims that the amount which ACE has overrecovered is $46 million over the period June 1991 through May 1995. ACE has filed rebuttal testimony and plans to litigate this matter fully. NOTE 3. COMMITMENTS AND CONTINGENCIES ACE has arrangements with various providers of bulk energy to satisfy existing and future capacity and energy requirements.

Following is information regarding these arrangements relative to ACE. 1995 1994 1993 As a % of Capacity (year-end) 30% 29% 23% As a % of Generation 52% 48% 46% Capacity Charges (millions)

$190.6 $130.9 $110.8 Energy Charges (millions)

$135.4 $128.6 $98.3 ACE owns 7.41 % of the Salem Nuclear Generating Station and 5% of the Hope Creek Station, both operated by Public Service Electric & Gas Company (PS). PS removed Salem Units 1 and 2 from service in May and June 1995, respectively.

Unit 2 is expected to return to service in the third quarter of 1996 after the equipment A management issues that have affected the operation

h. been resolved and corrected.

Unit 1 is undergoing extended testing of its steam generation equipment and its return has been delayed for an indefinite period. ACE estimates that expenditures associated with restart activities in 1996 will approximate

$5.6 million. Hope Creek was taken out of ervice in November 1995 for a scheduled refueling outage which has been extended to correct maintenance and performance problems.

The Hope Creek unit is scheduled to return to service in March 1996. The incremental cost of replacement power during the outage is approximately

$1.8 million per month. Recovery of replacement power costs are limited by a imposed nuclear performance penalty. Nuclear performance must attain a target capacity factor, with penalties or rewards above or below the band of reasonable performance.

ACE expects to incur a penalty of $845 thousand, after tax, for 1995 performance.

ACE has a trust to fund co ts of decommissioning each of the five nuclear units in which it has an ownership interest.

The current annual funding is equal to the amount being collected from customers through rates as authorized by the BPU. The funding amount is based on costs estimated by the BPU for decommissioning activities,

• dates the decommi sioning activities are expected to be and the expected return on trust assets. In accordance with BPU requirements, updated site specific studies are underway.

Amounts to be recognized and recovered in rates ba ed on the updated studies are not presently determinable.

Management's Discussion and Analysis of Financial Condition and Results of Operations

SUMMARY

operating revenues for 1995, 1994 and 1993 were $953.l million, $913.0 million and $865.7 million, respectively.

The increase in 1995 revenue over 1994 largely reflects a provisional increase in annual LEC revenues of $37.0 million granted in July 1995 and an increase in unbilled revenues.

The increase in 1994 revenue from 1993 wa primarily due to an increase of $55.0 million in LEC revenues effective July 1994, accompanied by an increase in sales of energy. Con olidated earnings per share for 1995 were $1.55 on net income of$81.8 million, compared with $1.41 on net income of $76.l million in 1994 and $1.80 on net income of $95.3 million in 1993. The 1994 and 1993 earnings include reductions of $.3 7 and $.10 for special charges, respectively.

Excluding the 1994 special charges, 1995 earnings per share decreased from 1994 primarily due to reduced sales of energy. Contributions to consolidated earnings per share were as follows: Utility Nonutility 1995 $1.59 (.04) 1994 $1.41 1993 $1.73 .07 *e quarterly dividend paid on Common Stock was $.385 share, or an annual rate of $1.54 per share. Information with respect to Common Stock is as follows: 1995 1994 1993 Dividend Paid Per Share $ 1.54 $ 1.54 $ 1.53 Book Value Per Share $15.48 $15.56 $15.62 Annualized Dividend Yield 8.0% 8.7% 7.0% Return on Average Common Equity 9.9% 9.1% 11.7% Total Return (Dividends paid plus change in share price) 18.0% (11.9)% 0.6% Market to Book Value 124% 113% 139% Price/Earnings Ratio 12 13 12 Year-End Closing Price -NYSE $19.25 $17.63 $21.75 LIQUIDITY AND CAPITAL RESOURCES Atlantic Energy, Inc. The Company's cash flows are dependent on the cash flows of its subsidiaries, primarily ACE. Principal cash inflows of the Company were as follows: (m1ll1 o ns) 1995 1994 1993 Dividends from ACE $81.2 $83.2 $81.3 Credit Facility 34.5 Dividend Reinvestment and Stock Purchase Plan 6.7 16.2 AEI established a $75 million revolving credit and term loan facility to be used to fund further acqui itions of Company Common Stock and for other general corporate purposes.

As of December 31, 1995, AEI had $34.5 million outstanding.

Agreements between the Company and its subsidiaries provide for allocation of tax liabilities and benefits generated by the respective sub idiaries.

A separate credit support agreement exists between the Company and ATE Investment, Inc. (ATE). Principal cash outflows of the Company were as follows: (Mil\1 u n;) 1995 1994 1993 Dividends to Shareholders

$81.2 $83.2 $81.3 Advances and Capital Contributions to Subsidiaries*

(6. 7) 25.6 29.8 Common Stock Reacquisitions 29.6 3.9 Loans to Subsidiaries 7.5

• N e t o ( R e pa y m e n t!; Current year Dividends Declared as presented on the Consolidated Statement of Ca h Flows includes the effects of market purchases of Common Stock with reinvested dividends as instituted since July 1994. Prior to this, funds were available to the Company from the issuance of original shares. The Company has a program to reacquire up to three million shares of the Company's Common Stock. There is no schedule or specific share price target associated with the reacqui itions. At December 31, 1995, the Company had reacquired and cancelled 1,846, 700 shares. Atlantic Energy _____ _

Management's Discussion and Analysis of Financial Condition and Results of Operations Atlantic City Electric Company Cash construction expenditure for 1993-1995 were $359.0 million and included expenditures for upgrades to existing transmi sion and distribution facilities and compliance with provisions of the Clean Air Act Amendments (CAAA) of 1990. ACE's current estimate of cash construction expenditures for 1996-1998 is $255 million. These estimated expenditures reflect necessary improvements to generation, transmission and distribution facilities.

ACE also utilizes cash for mandatory redemption of Preferred Stock and maturities and redemption of long-term debt. Optional redemptions of securities are reviewed on an ongoing basis with a view toward reducing the overall cost of capital. For 1993-1995, the redemption and maturity of ACE's securities were as follows: (mtllions)

Preferred Stock First Mortgage Bonds 1995 $24.5 57.7 1994 $24.5 41.6 1993 $ 5.3 344.7 Scheduled debt maturities and sinking fund requirements aggregate

$113.8 million for 1996-1998.

On or before April 1 of each year, ACE and other New Jersey utilities are required to pay excise taxes to the State of New Jersey. In March 1995, ACE paid $98.7 million, funded through the issuance of short-term debt. In 1994 and 1993, ACE paid an additional

$50 million and $45 million, respectively, for the accelerated payment of one year's tax due as required by amended state law. These acce lerated payments are being recovered through rates. On an interim basis, ACE finances construction costs and other capital requirements in excess of internally generated funds through the i ssuance of unsecured short-term debt consisting of commercial paper and borrowings from banks. A of December 31, 1995, ACE has arranged for lines of credit of $150 million of which $119.5 million was availab le. ACE's nuclear fuel requirements associated with it jointly-owned units have been financed through arrangements with a third party.

I Management's Discussion and Analysis of Financial Condition and Results of Operations

• ummary of the issue and sale of ACE's long-term t for 1993-1995 is as follows: (millions) 1995 First Mortgage Bonds Medium Term Notes $105 Pollution Control Bonds 1994 $ 55 1993 $ 22 240 4 The proceeds from these financings were used to refund higher-cost debt and for construction purposes.

During 1996-1998, ACE may issue up to $150 million in new long-term debt to be used for funding of construction and repayment of short-term debt. The provisions of ACE's charter, mortgage and debenture agreements can limit, in certain cases, the amount and type of additional financing which may be used. At December 31, 1995, ACE estimates additional funding capacities of $288 million of First Mortgage Bonds, or $490 million of Preferred Stock, or $413 million of unsecured debt. These amounts are not necessarily additive.

Atlantic Energy Enterprises, Inc. and Subsidiaries Funds for investment in activities of AEE subsidiaries have been obtained through capital contributions from AEI and borrowings under loan agreements with ATE and AEI. Jliiii..E's business strategy reflects the potential investment of .roximately

$400 million over the next five years. ATE provides funds management and financing to affiliates.

ATE obtained a portion of the funds for its business activities and loans through external borrowings.

These borrowings include $15 million principal amount of 7.44% Senior Notes due 1999 and a $25 million revolving credit and term loan agreement.

At December 31, 1995, $18.5 million were outstanding under the revolver.

ATE had loans outstanding with affiliates totaling $19 .4 million as of December 31, 1995. ATE's cash flow are provided from lease rental receipts and realization of tax benefits generated by its leveraged leases. RESULTS OF OPERATIONS Operating results are primarily dependent upon the performance of ACE. Revenues Operating Revenues -Electric increased 4.4% and 5.5% in 1995 and 1994, respectively.

Components of the overall changes are shown as follows: (m1ll1ons) 1995 1994 Levelized Energy Clause $ 49.2 $ 30.3 Kilowatt-hour Sales (10.0) 9.6 Unbilled Revenues 16.6 (7.3) Sales for Resale (11.9) 17.8 Other (3.8) (3.0) Total $40.1 $ 47.4 Billed Sales to Ultimate Utility Customers Change in kilowatt-hour sales are generally due to changes in the average number of customers and average customer use, which is affected by economic and weather conditions.

Energy sales statistics, stated as percentage changes from the previous year, are shown as follows: 1995 1994 Avg. Avg.# Avg. Avg.# Customer Class Sales Use of Cust. Sales Use of Cust. Residential (2.0)% (3.1)% 1.2% 1.5% .4% 1.1% Commercial 1.4 (.1) 1.5 1.5 2.6 2.1 Industrial (7.4) (9.0) 1.7 (2.9) (3.8) .9 Total (1.4) (2.6) 1.2 1.3 1.2 Costs and Expense Total Operating Expenses increased 5.9% and 7.6% in 1995 and 1994, respectively.

Included in these expenses are the costs of energy, purchased capacity, operations, maintenance, depreciation and taxes. lncrea ed expenses are attributable to additional purchased capacity costs and, in 1994, the costs of increased generation.

ACE's workforce reduction, which began in March 1995, resulted in savings of $8 million net of tax in 1995. The original estimate of $10 million savings was based on a full year's assessment.

Atlantic Energy _____ _

Managetnent's Discussion and Analysis of Financial Condition and Results of Operations

• Long;rerm nonuciltry contracts.

Manage1nent's Discussion and Analysis of Financial Condition and Results of Operations

-look the next five years, Atlantic Energy will devote considerable resources to the development of related businesses and markets. Atlantic Energy Enterprises' business plan calls for additional investments of $400 million. AEE's investment strategy will further its long-term objectives of becoming a wholesale energy supplier and aggregator as well as a provider of energy services while continuing to pursue strategic business alliances and services for its customers.

AEE also expects to make additional investments in energy-related technologies and services that will support its growth and financial performance.

AEE's business plan indicates a positive contribution to earnings in 1996. Throughout this period, however, ACE's utility business will continue to be the primary factor influencing the Company's overall financial performance.

Factors such a regional economic trends, abnormal weather conditions and inflation will continue to be important determinants of ACE's financial performance.

However, cont inu ed competition from independent power producers and anticipated deregulation of the electric utility industry are becoming the most critical strategic factors for ACE. Fundamental changes in the industry have l ed to the *rgence of significant competitive issues for ACE, uding heightened competition in the wholesale bulk power market, the growth of the independent power industry and the pre sure to offer more competitive rates to customers.

ACE is closely monitoring deregulation of the industry on both a state and federal level. FERC's ongoing rulemaking proceeding is proposing changes to rules governing transmission access and pricing. FERC is also estab li shing guide lin es for recovery of tranded costs and investments stemming from wholesale transactions.

In response to FERC's initiative, the power pool in which ACE participates has proposed significant changes to its structure and operation.

State jurisdictions across the country, including New Jersey, are closely examining the issues surrounding deregulation or are creating new regulations designed to foster a more competitive industry.

ACE is playing an act i ve role in the BPU's ongoing Energy Master Plan proceeding.

Among other things, the proceeding is investigating the extent to which utilities, in a competitive environment, may be threatened with the inability to recover investments or long-term commitments prudently made and placed into rates under traditional ratemaking a ulations.

To date, the BPU has made no formal policy -nouncement regarding deregulation or the recovery of stranded commitments.

In anticipation of heightened competition in energy markets, ACE is pursuing a number of initiatives designed to strengthen its position in the marketplace.

The cost of ACE's power supp l y, including the cost of power purchased from independent power producers, a l ong with its retail prices are expected to be critical success factors in a competitive marketplace.

ACE is focusing on cost and rate control measures as well as the development of new energy-related products and services.

To allow for more flexibility and clo er cost control, ACE transferred its production operations to its subsidiary, Deepwater Operating Company, in January, 1996. Alternate pricing mechanisms and long-term discount power contracts are being exp l ored as means of retaining key customers that are at risk of leaving ACE's system. While any such discounts are intended to have a long-term beneficial impact, they could have a detrimental effect on ACE's operating revenues and net income in the short term. The electric utility industry continues to be capital inten ive. ACE has lowered its planned construction budget to $398 million for 1996-2000, with an expected reduction in its external cash requirements.

ACE's ability to generate cash flows or access the capital markets to fund capital requirements will be affected by compet itiv e pressures on revenues and net income as well as regulatory initiatives and rate developments.

ACE's net income and the level of its LEC rates may be affected by the operational performance of nuclear generating facilities and a BPU-mandated nuclear unit performance standard.

Net income may also be affected by significant changes in the decommissioning costs associated with the nuclear units. At this time, it is not known what impact there may be on future operations and financial condition associated with the uncertain status of Salem Station Unit 1. Atlantic Energy _____ ---1 Financial

&Statistical Review 1995--1985 1995 1994 1993 Atlantic Energy, Inc. -Investor Information Operatin g Revenues (000) $ 953,137 $ 913,039 $ 865,675 $ 816,825 Net Income (000) $ 81,768 $ 76,113 * $ 95,297 $ 86,210 Average Number of Common Shares Outstanding (000) 52,815 54,149 52,888 51,592 Earnings per Average C o mmon Share $ 1.55 $ 1.41 * $ 1.80 $ 1.67 Total Asset s (Year-end)

(000) $ 2,620,896

$ 2,545,555

$ 2,487,508

$ 2,219,338 Long-Term Debt and Cumulative Preferred Stock Subject to Mandatory Redemption (Year-end)

(000) $ 1,019,603

$ 940,788 $ 952,101 $ 842,236 Capital Lease Obligations (Year-end)

(000) $ 40,886 $ 42,030 $ 45,268 $ 49,303 Dividends Declared on Common Stock $ 1.54 $ 1.54 $ 1.535 $ 1.515 Dividend Payout Rati o 99% 109% 85 % 90% Book Value per Share (Ye a r-end) $ 15.48 $ 15.56 $ 15.62 $ 15.17 Price/Earnings Ratio (Year-end) 12 13 12 14 Times Fixed Charges Earned (pre-tax, Atlantic Electric) 3.34 3.21 3.54 3.76 Common Shareholders (Year-end) 48,683 48,850 47,832 46,524 Atlantic City Electric Company (Principal Subsidiary)

Employees (Year-end) 1,455 1,794 1,835 2,023 Facilities for Service Total Utility Plant (000) $ 2,596,265

$ 2,507,922

$ 2,402,415

$ 2,279,107 Additions to Utility Plant (000) $ 103,399 $ 126,367 $ 141,927 $ 134,326 Generating Capacity (Kilowatts) (Year-end) (a) (b) 2,351,700 2,327,700 2,307,700 2,160,700 Maximum Utility System Demand (Kilowatts) 2,042,000 1,834,000 1,962,000 1,796,000 Capacity Reserve at Time of Peak (%of Installed Generation) 12.8 % 19.4 % 11.2 % 16.9 % Energy Supply (mwh): A Net Generation 5,698,996 6,081,778 6,025,861 Purchased and Interchanged 4,723,701 4,439,228 3,753,433 Total System Load 10,422,697 10,521,006 9,779,294 Electric Sales to Ultimate Customers (mwh): Residential 3,476,540 3,546,789 3,495,722 3,276,330 Commercial 3,391,319 3,344,675 3,259,541 3,100,133 Industrial 1,133,788 1,224,721 1,261,069 1,229,211 All Others 51,218 51,671 50,080 49,464 Total (c) 8,052,865 8,167,856 8,066,412 7,655,138 Residential Electric Service (Average per Customer)

Amount of Electricity Used During the Year (kwh) 8,368 8,638 8,608 8,131 Revenue for a Year's Service $ 1,037.88 $ 1,003.30 $ 969.86 $ 903.91 Revenue per Kilowatt-hour 12.40 ¢ 11.62 ¢ 11.27 ¢ 11.12 ¢ Ultimate Customer Data (Average Customers)

Residential With Electric Heating 82,759 82,612 82,385 82,206 Residential Without Electric Heating 332,695 327,985 323,722 320,744 Total Residential 415,454 410,597 406,107 402,950 Commercial 54,883 54,094 52,988 51,996 Industrial 997 980 971 990 All Others 517 518 522 524 Total Ultimate Customers (c) 471,851 466,189 460,588 456,460 Operating Revenues (000) Electric Service: Re idential $ 431,206 $ 411,954 $ 393,866 $ 364,232 Commercial 352,432 332,145 315,089 299,866 Industrial 99,074 101,093 100,812 97,475 All Others 11,163 10,905 10,575 8 Total from Electric Service 893,875 856,097 820,342 Unbilled Revenues -Net 9,445 (7,239) 28 Sales for Resale 42,438 54,370 36,576 Other Electric Revenues 8,021 9,998 8,853 Total Operating Revenues (c) $ 953,779 $ 913,226 $ 865,799 $ 816,931 R e fl ect-; s p ec i a l c h a r ge!!, p ri ma ril y fo r e mpl oyee separat i o n costs. (a) E xcludes ca p ac tty a ll ocate d to a L uge i ndu s tri a l cusco m e r p ri o r co 199 4. (b) ln clu J es u n i t a nd !i.1 l e!i of capac i ty u n de r co n t r acts wi t h ce rt a in othe r uti li t i es a n d n o n un hu es. (c) In clu d es 'ale:-. to an aff ili a t e with in c h e Atlantic En e r gy co n so ltd a c e d gro up.

1990 $ 808 374 ' $ 740 894 ' $ 85,635 $ 68,879 49,008 45,590 $ 1.75 $ 1.51 $ 2,151,416

$ 2,006,010

$ 807,347 $ 747,877 $ 53,093 $ 57,971 $ 1.495 $ 1.4 7 85 % 97 % $ 14.84 $ 14.36 12 11 3.68 2.94 43 802 42 295 2,032 2,055 $ 2,175,601

$ 2,027,138

$ 177,298 $ 170,772 2,090,700 1,959,700 1,911,000 1,741,000 5.2 % 10.9 % 6,300,891 6,267,559

_3 *. 024 2,606,067

,915 8,873,626 3,370,327 3,267,606 3,147,318 3,063,069 1,368,329 1,376,423 49,626 49,769 7,935,600 7,756,867 8,440 8,251 $ 906.66 $ 844.37 10.74 ¢ 10.23 ¢ 81,838 81,479 317,486 314,529 399,324 396,008 51,077 50,274 998 1,002 524 537 451,923 447,821 $ 362,050 $ 334,375 292,349 271,688 102,202 96,766 ,136 9,668 766,737 712,497 3,229 (4,055) 30,404 24,115 8,112 8,448 $ 741,005 1989 1988 1987 1986 1985 $ 723 216 ' $ 687 335 ' $ 635 657 ' $ 604 716 ' $ 612,035 $ 80,964 $ 72,171 $ 73,765 $ 54,946 $ 46,150 43,268 39,186 36,622 36,532 36,138 $ 1.87 $ 1.84 $ 2.01 $ 1.50 $ 1.28 $ 1,864,461

$ 1,660,286

$ 1,499,381

$ 1,401,064

$1,319,027

$ 725,329 $ 594,461 $ 522,815 $ 534,822 $ 521,612 $ 33,146 $ 32,880 $ 37,694 $ 37,603 $ 38,857 $ 1.425 $ 1.37 $ 1.3575 $ 1.305 $ 1.2775 75 % 75 % 66% 87 % 99 % $ 14.27 $ 13.58 $ 12.86 $ 12.18 $ 11.98 10 9 8 12 11 3.19 3.06 3.68 2.99 3.06 43 383 44 473 45 586 47 133 48 635 2,021 2,092 2,148 2,168 2,099 $ 1,846,122

$ 1,712,614

$ 1,602,801

$ 1,503,010

$1,438,643

$ 147,886 $ 130,281 $ 105,521 $ 109,303 $ 105,213 1,879,700 1,807,700 1,660,700 1,660,700 1,605,700 1,700,000 1,636,000 1,609,000 1,459,000 1,432,000 9.6 % 9.5 % 3.1 % 12.1 % 10.8 % 6,260,942 5,863,119 6,157,938 5,966,600 5,817,254 2,597,623 2,567,871 1,773,837 1,454,491 1,333,174 8,858,565 8,430,990 7,931,775 7,421,091 7,150,428 3,265,918 3,213,010 3,040,410 2,839,114 2,638,121 2,917,162 ( 2,741,976 2,592,232 2,401, 199 2,298,895 1,380,832 1,339,005 1,323,567 1,222,981 1,204,971 53,872 56,289 58,191 58,120 57,685 7,617,784 7,350,280 7,014,400 6,521,414 6,199,672 8,382 8,460 8,281 7,982 7,643 $ 840.34 $ 838.70 $ 808.14 $ 791.09 $ 799.29 10.03 ¢ 80,409 309,245 389,654 49,509 1,008 549 440,720 9.91 ¢ 78,805 300,974 379,779 48,398 1,014 552 429,743 9.76 ¢ 75,900 291,253 367,153 46,775 1,015 554 415,497 9.91 ¢ 10.46 ¢ 72,640 68,871 283,062 276,305 355,702 345,176 45,359 44,256 1,022 1,020 554 554 402,637 391,006 $ 327,443 $ 281,393 $ 275,897 $ 318,520 $ 296,712 256,199 214,230 216,052 240,890 222,129 94,634 80,037 83,628 91,661 84,476 9,901 10,230 10,470 9,935 10, 199 688,177 585,890 586,047 661,006 613,516 7,215 (1,813) 3,076 6,716 385 11,476 12,840 8,137 8,916 $ 723,353 $ 604,716 $ 612,035 $ 687,335 $ 635,657

_j =========================================="===================================

Atlantic Energy $ 808,482 Investor Information (As o f De ce mber 31 , 1995) Where should I send inquiries concerning my investment in Atlantic Energy or Atlantic Electric?

The company serves as recordkeeping agent, dividend disbursing agent and also as transfer agent for common stock and Atlantic Electric's preferred stock. Correspondence concerning such matters as the replacement of dividend checks or stock certificates, address changes, dividend reinvestment and stock purchase plan inquiries or any general information about the company should be addressed to: Atlantic Energy, Inc. Investor Records 6801 Black Horse Pike P.O. Box 1334 Pleasantville, New Jersey 08232 Telephone (609) 645-4506 or (609) 645-4507 Effective February 1, 1996, the role of transfer agent for common stock will be shared with Continental Stock Transfer & Trust Company. Requests for the transfer of common stock certificates should be forwarded to: Continental Stock Transfer & Trust Company 2 Broadway, 19th Floor New York, NY 10004 Telephone (212) 509-4000 Preferred stockholders should continue to contact Atlantic Energy with regard to the transfer of their stock. When are dividends paid? The proposed record date and payable dates are as follows: Record Dates March 25, 1996 June 24, 1996 September 23, 1996 December 23, 1996 Payable Dates April 15, 1996 July 15, 1996 October 15, 1996 January 15, 1997 The following table indicates dividends paid per share in 1995 and 1994 on common stock: 1995 1994 First Quarter $ .385 $ .385 Second Quarter .385 .385 Third Quarter .385 .385 Fourth Quarter .385 .385 Annual Total $1.54 $1.54 Dividend checks are mailed to reach shareholders approximately on the payment date. If a dividend check is not received within 10 days of the payment date, or if one is lost or stolen, contact Investor Records. Dividends paid on common stock in 1995 and 1994 were fully taxable. Some state and local governments may impose personal property taxes on shares held in certain corporations.

Shareholders residing in those states should consult their tax advisors with regard to personal prop. tax liability.

Who is the trustee and interest paying agent for Atlantic Electric's bonds and debentures?

First mortgage bond recordkeeping and intere t disbursing are performed by The Bank of New York, 101 Barclay Street, New York, New York 10286. Debenture recordkeeping and interest disbursing are performed by First Fidelity Bank, N.A., 765 Broad Street, Newark, New Jersey 07102. Does the company have a Dividend Reinvestment and Stock Purchase Plan ("Plan")?

Yes. The Plan allows shareholders of record and interested investors to automatically invest their cash dividend and/or optional cash payments in hares of the company's common stock. Other services available to Plan participants include certificate safekeeping and automatic investment.

Holders of record of common stock or interested investors wishing to enroll in the Plan should contact Investor Record at the address listed. In addition, shareholders whose stock is held in a brokerage account may be able to participate in the Plan. These shareholders should contact their broker or Investor Records for more information.

Where is the company's stock listed? Common stock is listed on the New York Stock Exchange.

The trading symbol of the company's common stock is ATE; however, newspaper listings generally use AtlEnrg or AtlanEngy.

The high and low sale prices of the common stock reported in the Wall Street Journal as New York Stock Exchange-Composite Transactions for the periods indicated were as follows: 1995 1994 High Low High Low First Quarter $19.000 $17.750 $21.750 $19.875 Second Quarter 19.625 17.875 21.500 16.375 Third Quarter 19.875 18.125 19.625 16.125 Fourth Quarter 20.125 19.000 18.250 16.000 Is additional information about the company available?

A full set of financial statements is included in Atlantic Energy's 1996 Proxy Statement.

The annual report to the Securities and Exchange Commission on Form 10-K and other reports containing financial data are available to shareholders.

Specific requests should be addressed. Atlantic Electric Financial Services Department 6801 Black Horse Pike Egg Harbor Township, New Jer ey 08234-4130 Telephone (609) 645-4483 or (609) 645-4150 FAX ( 609) 645-4132 Officers Of Atlantic Energy, Inc. and Subsidiaries

./Year> of S e rvice) As of December 31, 1995 .rold L. Jacobs (56/34) President and Chief Executive Officer of Atlantic Energy Director of Atlantic Energy, Atlantic Electric and Atlantic Energy Enterprises Chairman and Chief Executive Officer of Atlantic Electric Mr. Jacobs was elected president

& chief executive officer of Atlantic Energy in 1993 and has also held the position of chairman & chief executive officer of Atlantic Electric since 1993. He has also held the positions of president, chief operating officer and executive vice president of Atlantic Electric.

Mr. Jacobs joined Atlantic Electric in 1961 as an engineer.

Michael J. Chesser ( 4 7 /2) Senior Vice President of Atlantic Energy President and Chief Operating Officer of Atlantic Electric Director of Atlantic Electric and Atlantic Energy Enterprises Mr. Cheser was elected to his current position in 1995. He joined Atlantic Energy in 1994 as vice president as well as executive vice president and chief operating officer of Atlantic Electric.

Prior to joining Atlantic Energy, he was an executive with Baltimore Gas & Electric, where he served as vice president-marketing

& gas operations.

.chael J. Barron (46/1) Vice President and Chief Financial Officer of Atlantic Energy Senior Vice President and Chief Financial Officer of Atlantic Electric Mr. Barron joined Atlantic Energy in 1995. He previously served as vice president and treasurer of Maxus Energy Corporation, Dallas, Texas. James E. Franklin II (49/2) Vice President, Secretary and General Counsel of Atlantic Energy Secretary of Atlantic Energy Enterprises Director, Senior Vice President, Secretary and General Counsel of Atlantic Electric Mr. Franklin joined Atlantic Energy in 1994 as general counsel and was named to his current positions in 1995. He was previously a senior partner with the law firm of Megargee, Youngblood, Franklin & Corcoran, P.A. where he represented Atlantic Energy in the capacity of external legal counsel. Meredith I. Harlacher, Jr. (53/30) Vice President of Atlantic Energy Director of Atlantic Electric ...lt.nior Vice Pre ident-Power System of Atlantic Electric *. Harlacher has served as vice president of Atlantic Energy and senior vice president of Atlantic Electric since 1987. He was named senior vice president-power system in 1995. He most recently served as senior vice president-energy supply. He joined Atlantic Electric in 1965 as an engineer.

Henry K. Levari, Jr. ( 4 7 /24) Vice President of Atlantic Energy Director of Atlantic Electric Senior Vice President-External Affairs of Atlantic Electric Mr. Levari has served as vice president of Atlantic Energy and senior vice president of Atlantic Electric since 1991. Mr. Levari was named senior vice president-external affairs in 1995. Prior to his current position he served as senior vice president-customer operations.

He joined Atlantic Electric in 1971 as an engineer.

Marilyn T. Powell (48/2) Vice President of Atlantic Energy Senior Vice President-Marketing of Atlantic Electric Mrs. Powell was elected to her current po ition in 1995. She joined Atlantic Electric in 1994 as vice marketing.

She previously erved as IBM's director of marketing process for its U.S. unit. Scott B. Ungerer (36/14) Vice President of Atlantic Energy Director of Atlantic Energy Enterprises (AEE) and all AEE subsidiaries President and Chief Operating Officer of Atlantic Energy Enterprises President of ATE Investment, Atlantic Energy Technology, Atlantic Southern Properties and Coa talComm Member of the operating committee for Atlantic CNRG Services, LLC Mr. Ungerer was named vice president of Atlantic Energy in 1994, and president and chief operating officer of Atlantic Energy Enterprises in 1995. He previously served in various executive positions in Atlantic Energy's nonutility companies and held various management positions at Atlantic Electric.

He joined Atlantic Electric in 1980 as an engineer.

Louis M. Walters (43/17) Treasurer of Atlantic Energy Vice President, Treasurer and Assistant Secretary of Atlantic Electric Certified Public Accountant Mr. Walters was named to his current position in 1995. He has served as vice president-treasurer of Atlantic Electric since 1993. He previously served as general treasury and finance of Atlantic Electric.

He joined Atlantic Electric in 1978 as an accountant.

Atlantic Energy _____ --1 Officers Of Atlantic Energy, Inc. and Subsidiaries (continued) (Age{Years of Service) As of December 31 , 1995 Frank E. Di Cola ( 48/2) Vice President and Treasurer of Atlantic Energy Enterprises (AEE) Director of all AEE subsidiaries President of Atlantic Thermal Systems Treasurer of ATE Investment, Atlantic Energy Technology, Atlantic Generation, Atlantic Southern Properties and CoastalComm Member of the operating committee for Atlantic CNRG Services, LLC Secretary of Atlantic Generation Mr. DiCola was named to his position in 1995. He joined Atlantic Thermal Systems as president in 1994. He was previously with Cogeneration Partners of America where he served as president.

Ernest L. Jolly (43/15) Vice President-Atlantic Transformation of Atlantic Electric Mr. Jolly was elected vice president of Atlantic Electric in 1992 and was named to his current position in 1994. He previously served as vice president-external affairs. He joined Atlantic Electric in 1980 as an engineer.

J. David McCann ( 44/23) Vice President-Strategic Cu tomer Support of Atlantic Electric Mr. McCann was named to his current position in 1994. He ha served as a vice president of Atlantic Electric since 1985. Prior to his current assignment, he served as vice engineering

& construction service of Atlantic Electric.

He joined Atlantic Electric in 1972 as an engineer.

Henry C. Schwemm, Jr. (54/26) Vice President-Power Generation

& Fuels Management of Atlantic Electric Mr. Schwemm was named to his current position in 1993. He previously served as vice president-production of Atlantic Electric.

He joined Atlantic Electric in 1969 a an engineer.

James C. Weller (46/2) Vice President and Assistant Secretary of Atlantic Energy Enterprises (AEE) and Director of all AEE subsidiaries President of Atlantic Generation ecretary of ATE Investment, Atlantic Energy Technology, Atlantic Southern Properties, Atlantic Thermal Systems and CoastalComm Treasurer of Atlantic Thermal Systems Mr. Weller was named to his current position in 1995. He joined Atlantic Generation, Inc. as president in 1994. He previously held the position of vice president-engineering and project development for Cogeneration Partners of America.

• llPI .llMTl.-1'11 Ll"ln I II.. ENERCY FIRST CLASS MAIL l U.S. POSTAGE PAID PERMIT NO. 2 A PLEASANTV l.LL?9' NEW JERSEY 08232-4130 6801 Black Horse Pike, Egg Harbor Township, New Jersey 08234-4130