ML18100A306

1992 Annual Rept Delmarva Power.

ML18100A306
Person / Time
Site:	Salem, Hope Creek
Issue date:	12/31/1992
From:	COSGROVE H E DELMARVA POWER & LIGHT CO.
To:
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ML18100A302	List: ML18100A301 ML18100A304 ML18100A305 ML18100A306
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NUDOCS 9304190168
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• 9304190168 930414 PDR ADOCK 05000272 I PDR

• FINANCIAL HIGHLIGHTS I I Perc e nt In c r ease 1992 1991 (Decrease) Revenues <1 1 $ 864.0 million $ 855.8 million 1.0 Net Income $ 98.5 million $ 93.2 million 5.7 Earnings Per Share of Common Srock $ 1.69 1 2 1 $ 1.69 (3! Dividends Declared Per Share of Common Srock $ 1.54 $ 1.54 Aver a g e Share s of Common Srock Outstanding (000) 53,456 50 , 581 5.7 Common Srock Book Value Per Share $ 13.77 $ 13.42 2.6 Construction Expe n ditures <<1 $ 207.4 million $ 181.8 m i ll i on 14. l Internally Generated Funds 111 $ 130.3 million $ 96.1 million 35.6 Electric Sales 11,520,811 mwh 11 , 460 , 280 mwh 0.5 Interchang e Del i veries 998,679 mwh 1 , 113 , 423 mwh (10.3) Electric Cu s tomers (year end) 379,819 373,502 1.7 Average Annua l Resident i a l Usage 9,680 kwh 9 , 843 kwh (1.7) Gas Sales 17.01 million met 15.5 7 million mcf 9.2 Gas Tr a nsported 3.16 million met 2.61 million mcf 20.9 Total Gas Sold and Tran s ported 20.17 million met 18.18 million mcf 10.9 Gas Cu s tom e rs (year end) 89 , 659 8 7, 351 2.6 Average Annual Residential Usage 88.71 met 80.24 mcf 10.6 (!) I n cl u d es interc h a n ge d el i very reven u es of$3 0.6 milli o n in 1 992 an d $33.5 mi ll ion i n 1 991. (2) I ncludes $0.21 pe r sha r e from secclement of r h e Peac h B onom lawsuir. (3) I ncludes $0.25 per sha r e for rhe Cumulative Effect of a C h ange in Accounting for Unbilled Revenues.

(4) Excludes Allowance For Funds Used D u ring Construction.

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

• Customer satisfaction rose to an all-time high. Service reliability, reasonable rates , and customer service spurred customers' favorable marks. Energy supply activities helped the Company to meet climbing demand for energy while keeping prices at 1983 levels. Teamwork continues to enable the Company to manage change and satisfy customers. Outlook data projects that the service territory will continue to prosper. During the next 20 years, the Company will pursue options to grow earnings. CONTENTS Mission Statement

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2 Service Territory

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3 Chairman's Letter .............

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......... 4 Customer Satisfaction

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................. 8 Energy Supply ..............

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12 Teamwork ......................................................

......... 14 Outlook .....................................

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................ 16 Board of Directors

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....................... 18 Financials

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

SERVICE TERRITORY The Delmarva Peninsula stands our as one of the most distinctive geographical features on the East Coast. Centrally located between major East Coast markers, the peninsula lies within overnight access to approximately l/3 of the nation's population and l/3 of the total U.S. effective buying income. Delmarva Power provides electr i c service out most of the 5 , 700 square-mile Delmarva Peninsula, which includes Delaware, portions of nine Eastern Shore Counties of Maryland, and the

• two Eastern Shore Counties of Virginia.

In tion , the Company distributes natural gas service in a 275 square-mile area of northern Delaware.

To serve this region, Delmarva Power maintains an electric system with 2,684 megawatts of ation capacity, 1,326 miles of transmission lines, 10,781 miles of distribution lines, and a natural gas system with 1,339 miles of gas main. Delmarva Power owns four fossil fuel power plants within the service territory and shares ownership of two coal plants and two nuclear plants outside the service territory.

Our 379,819 electric customers and 89 , 659 natural gas customers are served by 2 , 842 ployees working in 13 customer service locations on the peninsula.

Division headquarters stand in Christiana, Delaware; Harrington , Delaware; and Salisbury, Maryland.

Corporate headquarters are located in Wilmington, Delaware.

Delmarva Power directors elected Howard E. Cosgrove chairman and chief executive officer on October 1 , 1992. Cosgrove joined the Company in 1966 and has served as a board member since 1986. ... CHAIRMAN'S LETTER Dear Stockholder

Thank you. The entire Delmarva Power team appreciates and respects your investment in our Company, your interest in our performance, and your trust in us. I also want to add my personal thanks for your confidence in me as chairman and chief executive officer. As you read this year's report, please remember two important points:

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

• Delmarva Power is positioned to meet the challenges and opportunities that come with this change. This letter will address the uncertainties developing in our industry and will discuss the principles guiding our success in the'90s. It will also highlight the strengths that position us to take advantage of the challenges ahead . Industry Uncertainty Our industry is becoming l ess predictable for several reasons. These include regulatory change, an uncertain national economy, increasing environmental concern, and pending rate cases. The recenrly enacted Nationa l Energy Policy Act has opened utility markets to increased competition.

Under the law, utilities and other companies can more easi l y invest in power generation projects and gain access to transmission systems of other utilities.

For example, one of our customers, Old Dominion Electric Cooperative, has announced it will buy part of its electric supply from another utility in about two years. In the narural gas business , Federal Energy Regulatory Comm i ssion Order 636 is altering the way Delmarva Power and other local bution companies buy and manage their gas supplies.

The economy remains uncertain.

Across the nation, interest rares have stayed l ow. This reduces the returns that regulators feel comfortable granting to utilities.

Large companies, s u ch as General Motors Corporation, wh i ch operate facilities

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• in the service territory, continue to restructure to compete better in national and international markers. However, despite the recession, the Delmarva Penisula's population and businesses continue to grow. Concern for the environment is still on the rise. Often this concern results in islation that affects the way we do business.

The full effects of the Clean Air Act Ame ndment s of 1990 are still unclear. And, legislators are debating proposals for broad energy taxes along with proposals to deal with global warming. Finally, in setting prices, the regulatory process always carries some uncertainty.

This is especia ll y true in 1993 because the Company will have rate cases pending in a ll of its jurisdictions.

These decisions will be important to the financial health of the Company. In facing these challenges, Delmarva Power will prosper because of our strengths:

• Diverse service territory

• High customer approva l raring

• Low regional prices

• Productive and progressive employees.

Guiding Principles During the 1980s, Delmarva Power performed well because we focused strategies and actions on three well-defined principles:

1. Satisfy customers and gain their trust 2. Provide a reliable supply of energy at competitive prices 3. Develop people to form a dynamic Company ream. Although some strateg i es and actions will be different in the '90s, we believe that keeping our efforts focused on these three principles will bring us financial and operating successes similar to those in the '80s. Delmarva Power's energy supply plan includes saving energy , buying energy from other suppliers , and building and owning new power plants such as the Hay Road facility.

0 On October 1 , 1992, Nevius M. Curtis retired from Delmarva Power & Light Company. As chief executive officer since 1981 and chairman of the board since 1983, Nev led efforts to strengthen the Company and position it for the challenges ahead. We will miss his wisdom, insight, and dedication to the respect of individuals. The board of directors and the Delmarva Power team thank Nev for his leader-ship and wish him and his family a happy future. Customer Satisfaction. Customer confidence is crucial to our success. We need our customers to be able to say they trust us to charge fair prices, to locate plants properly, and to run them well. People at the Company work hard to understand customers' changing needs through surveys and face-to-face contacts.

With that information, employees then work to balance improving service and controlling cost. To respond to customers' concern about the environment and to maintain customer favorability, we strive to balance our obligation to serve customers with our responsibility to preserve the environment.

Since 1982, the percentage of tomers rating the Company favorably in the annual survey moved from 46 percent to 83 percent. This is the highest rating among 23 utilities polled by an independent survey company. Energy Supply. In 1987, to meet rising demand for electricity, Delmarva Power developed a flexible, balanced plan called Challenge 2000. We accelerate, slow, or modify the plan to respond to changing energy demands, changing energy markets, fluctuating fuel prices, and emerging technologies.

Challenge 2000's three-element approach includes saving energy, buying energy from other suppliers, and building and own i ng power plants. This plan is critical to the Company's success and has been instrumental in keeping our electricity prices about 50 percent less than in neighboring Pennsylvania and New Jersey. Teamwork.

Employees are essential to managing change. Delmarva Power continues to build on a participative worksryle where people closest to the problems help solve the problems.

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

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

Financial Perspective Turning to our 1992 financial performance, earnings closed at $1.69 per share, compared to $1.69 per share in 1991. Both years contained one-time gains: 21 cents in 1992 and 25 cents in 1991. Core utility earnings were $1.47 versus $1.41 in 1991. The increase was primarily due to higher rates, which were offset by usually mild summer weather and increased operating costs. As we assess the uncertainties of industry changes and pending rate relief, we believe that holding the quarterly dividend at 38 1 12 cents is appropriate.

You can find a more thorough financial review on pages 20 to 29. We believe we can convert the Company's strengths into improved financial formance and profits for shareho l ders. We foresee an improving economy and economic development on the Delmarva Peninsula, enhanced by very competitive energy prices. With the progress we have made in managing our prices and tomer satisfaction, the Company should receive above-average returns from regulators and should benefit from the new and developing markets. Around the Company, I see people preparing for change , people making an extra effort for customers, and people managing energy resources well. Delmarva Power's 2 , 800 team members thrive on challenges and can turn them into opportunities.

I thank them for their efforts and look forward to working with them. Sincerely, Howard E. Cosgrove Chairman of the Board and Chief Executive Officer Employees work hard to limit customer outage time. In 1992 , the Company exceeded its service reliability goal.

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

Competitive prices help keep customers satisfied and stimulate economic growth in our service area. Delmarva Power's prices for energy-both electricity and natural gas-are among the best in the region. Here is how electric prices compare (for all tomer categories in cents per kilowatt-hour for 12 months ended September 30, 1992): *New York 10.83 *Philadelphia 9.09 *Newark, N.J. 9.07 *Baltimore 7.06 *Norfolk, Va. 6.19 *Delmarva Peninsula (Delmarva Power) 6.13. Locally, Delmarva Power prices are low. For a cal 1,000-kilowatt commercial/industrial customer, such as a mid-sized office building or small factory, the Company's prices are about 10 percent less than the Choptank Electric Cooperative, about 15 percent less than the City of Dover, and about 20 percent less than the Delaware Electric Cooperative.

We have kept prices stable as well as competitive.

Even with proposed rate increases anticipated for mid-1993, the prices for typical Delaware and Maryland residential customers using about 750 kilowatt-hours per month in the summer, for example, will be about two percent lower than in the mid-1980s.

When adjusted for inflation, these residential prices remain about 30 percent lower than prices in the mid-!980s.

For natural gas, here is how prices compare (for all customer categories in cents per I 00 cubic-feet for 12 months ended September 30, 1992): *New York 69.75 *Philadelphia 64.32 *Norfolk , Va. 56.20 *Baltimore, 55.38 *Newark, N.]. 52.99 *Wilmington, Del. (Delmarva Power) 47.42.

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

Each year, Delmarva Power commissions a denrial customer opinion survey to see how the community feels abour our performance.

For 1992, the survey found that 83 percent of the customers surveyed gave the Company a favorable rating. This rating has improved conrinuously from 46 percent in 1982. Customers list service reliability, reasonable rates, and customer service as the top reasons for their favorable rating. The Company's mark was the highest among 23 electric and ural gas utilities surveyed by our pollster during the past year. The average favorability rating among these urilities equaled 70 percent. The Company looks for ways to serve customers better. One example of rhis is the Resource Management System. The computer-based system automates service order dispatching and schedul-ing, leading to increased productivity for the Company and increased sarisfacrion for customers.

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

Answer Line also makes our service more nient for customers.

In 1992, rhe Company introduced rhis new 24-hour telephone system to Northern Division customers.

Previously, when customers reported outages during "off-hours," rhey often received a busy signal due to rhe large volume of calls and limited staff. Now, with Answer Line, more customers ger through on rhe first try. Answer Line provides ourage updates, records customer outage information, and matically sends rhis information to employees trying to restore service. This dara improves our ability to pinpoint and dispatch help to problem areas. In addition, Answer Line records up to I 0,000 merer readings called in by customers each month. This saves customers rime, identifies inaccurate readings, and helps customers provide correct information.

These readings go directly into the Company's billing computer system, which eliminates data entry and estimated bills and saves us money. According to industry figures, Delmarva Power customer-use rare for Answer Line is rwice as high as customer-use rares for similar programs offered by other utilities.

The Resource Management System enables the Company to limit the time customers spend waiting for a service person to arrive.

The Delaware Department of Transportation used about 260,000 tons of recycled fly ash from Company power plants to construct part of the new highway to the Delaware beaches. Environmental efforrs improve the quality of life in the serv i ce area. " Serving & Conserving Delmarva" i s the Co mpany's environmenta l stewardship program that seeks to balance the obligation to serve cu s tomers with the responsibility to protect and preserve the environment of the Delmarva Peninsula.

Delmarva Power received the 1992 Wildlife Habitat Enhancement Council award for our efforts to maintain and enhance mentally sensitiv e land near the Vienna power plant in Maryland.

On l y nine other U.S. companies received this honor. Employees at the Vienna power plant spend some of their spare time raising striped bass at the Company's hatchery.

More than 150,000 fish raised at the Company's two hatcheries have been placed into the Chesapeake Bay and Delaware River. The striped bass population in the Delaware River received a healthy boost from another "Se rving & Conserv in g Delmarva" project. Federa l and state offic i a l s released 40 , 711 striped bass, raised at the Company's Edge Moor hatchery , into the river. Including the Company's hatchery ar the Vienna power plant, more than 150,000 bass have been placed into the Chesapeake Bay and Delaware River. As part of the " Serving & Conserving Delmarva" program, the Company began using retreaded

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• More than 1,800 volunteers cleared 13 tons of litter from Delaware waterways during the Company-sponsored Coastal Cleanup Day. tires on Company trucks. These tires cost about 67 percent less than new tires; perform as well as new tires, with no loss in safety or comfort; and reduce the amount of old tires that end up in landfills on the peninsula. "Serving & Conserving Delmarva" also seeks to create greater customer awareness and use of energy-saving products, and to inform customers of the association berween saving energy and serving the environment.

For example, Delmarva Power offered 1,000 energy-efficient compact fluorescent bulbs, 1,000 refrigerator efficiency kits, and 1,000 environmentally friendly travel mugs in prize drawings.

About 86,000 customers registered for rhe lottery for these products.

From the ceeds of 1993 "Serving & Conserving Delmarva" calendar sales, rhe Company contributed

$12,540 to The Nature Conservancy.

Employee involvement is part of our environmental stewardship program's success. This year, the Com-pany formed Green Teams. These reams represent a cross section of employees at each Company location.

Green Teams plan recycling programs and other activities to improve the environment.

So far, projects at various Company locations recycled nearly 600 tons of paper while saving rhe any more than $24,000 in trash disposal costs. Employees rallied to cut Company electricity use by 913,000 kilowatt-hours during the last half of 1992. Delmarva Power has set a goal to reduce electricity use by 2.4 million kilowatt-hours per year by 1996. This goal supports the Company's energy supply plan that includes conservation in its balanced approach.

Ir also demonstrates to tomers that we are committed to saving energy. In addition, for the second consecutive year, the Company sponsored Delaware Coastal Cleanup Day. More than 1,800 volunteers cleared litter from Delaware waterways during this year's event.

ENERGY SUPPLY Clean-burning natural gas supplied by this new pipeline will fuel electric generating units at Delmarva Power's Hay Road power plant. @ The Challenge 2000 plan continued to assure customers an adequate, reliable supply of ity at competitive prices. Challenge 2000 use s a flexible approach that blends customer energy conservation and load management programs ("Save Some"), power purchases

("Buy Some"), and new power plants ("Build Some"). This approach enables Delmarva Power to quickly respond to changes in demand, markers, gy, and governmental regulations.

Between 1984 and 1992, electricity demand at peak periods increased nearly 50 percent. "Save Some, Buy Some, Build Some," has enabled the Company to keep up with the growing demand for electricity and to keep prices at about 1983 levels. As part of "Build Some," the Hay Road complex (below) will generate 496 megawatts when it is completed in mid-1993. Under "Buy Some," the Company began a 26-year purchase agreement for 48 megawatts with Star Enterprise of Delaware City, Delaware (near right). All these new townhomes (far right) include energy switches that help the Company to reduce demand for electricity during peak summer periods. "Save Some" programs such as this one should reduce load by 350 megawatts by the year 2003. "Save Some," helps to delay the need for sive new power plants. This element of Challenge 2000 consists of load management and tion programs that the Company offers to all types of customers.

Delmarva Power considers itself a leader in this area with the ability to manage eight percent of its load during peak periods compared to the regional average of four percent. Load management programs offer bill credits and pricing options to customers who lower their ergy demand during peak use periods. For example, residential customers participating in Energy For Tomorrow receive bill credits for allowing the pany to cycle their air conditioners, heat pumps, and electric water heaters a few rimes during the summer. More than 53,500 customers participate in this program. *

• Recenrly approved conservarion programs will promore energy efficiency srandards for new strucrion of homes and commercial buildings.

Some programs will enrice cusromers ro insrall energy-efficienr equipmenr by offering rebares for these insrallarions.

Ocher conservarion programs will make energy-efficienr producrs such as pacr fluorescenr bulbs available ro residenrial cusromers ar discounr prices. These programs are rhe resulr of a joinr research and design process involving Delmarva Power and various srare cies from Maryland and Delaware.

By rhe year 2003, " Save Some" programs should reduce load by more rhan 350 megawarrs.

This overall load reduction represenrs a savings of abour $188 million (1992 dollars), which imarely equals rhe building coses for rhree small power planes. Under "Buy Some," rhe Company began a 26-year purchase agreemenr for 48 megawarrs of peaking capaciry from Srar Enrerprise of Delaware Ciry, Delaware.

Srar's generaring unir, nexr ro irs oil refinery, was selecred in 1989 from among 10 proposals because ir provided rhe lowesr cosr ro Delmarva Power cusromers.

Also in 1992, Delmarva Power evaluared 27 posals from power projecr developers ro supply elecrriciry ro rhe Company in rhe mid-1990s.

The Company selecred rwo projecrs.

The firsr, rhe Delaware Clean Energy Projecr, proposes ro build a 165-megawarr power planr ar rhe Srar Enrerprise Delaware Ci ry refinery for service in 1996 or 1997, ar rhe Company's oprion. The jecr will gasify and burn perroleum coke, a refinery wasre producr, ro generare elecrriciry.

The second projecr, proposed by Narional Energy Resources Corporarion ( ERC) of Avon, Connecricur, rures a 33-megawarr power planr rhar NERC will build near Wilmingron, Delaware, by 1997. NERC will fuel rhis planr wirh waste paper and petroleum coke. The Company plans ro achieve abour half of the reserve margin rhrough power purchases.

Thar rotals abour 250 megawatts or abour nine percenr of the 2003 peak demand. As parr of "Build Some," rhe Company plans ro complere a combined-cycle unir, called Hay Road 4, in 1993. The unir will use exhausr hear from rhree exisring combusrion rnrbines ar Hay Road ro cleanly and efficienrly generare 160 megawarrs of elecrriciry.

The planr is on schedule and budger. Toward rhe rurn of rhe cenrury, Delmarva Power plans ro build and own a 300-megawarr pulverized coal power plane near Vienna, Maryland.

We began rhe licensing process for rhis planr in 1992. Also, rhe Company will upgrade exisring unirs ar rhe Indian River power plane ro exrend rhe lives of rhe unirs and ro reduce emissions.

.i I --t'1"T" --1 . TEAMWORK Ninety-six percent of employees said that Delmarva Power is a good place to work. The Company continues to develop a more pative workstyle where people closest to problems solve the problems.

Delmarva Power has worked to create an environmenr that appreciates and ognizes the value of teamwork while respecting the contribution of each individual member of the team. As the participative process has matured, more employees at all levels have had opportunities to advance new ideas and to improve existing methods of performing their work. For example, during the last 10 years, employees have controlled costs well. Delmarva Power's non-fuel operating and maintenance costs per kilowatt-hour have increased only 11 percent , while the industry average has increased more than 60 percent. Working in teams , employees set high goals and suggest innovations that are efficient and cost effective.

Employees achieved seven of the eight corporate goals in 1992. Through the achievement of the wellness goal over the last five years, absenteeism has decreased by more than one day per employee per year. This accomplishmenr saved the Company approximately

$2 million since 1988. Employees are also working together to continually improve the health and safety of individuals.

In 1992, lost work days due to illness decreased by 20.8 percenr. More than 96 percent of employees remained jury-free.

In addition, Delmarva Power's WellTrak employee wellness program received an award of excellence from the Delaware Center for Wellness.

The center selected WellTrak from among several *

• Teamwork, demonstrated by this Northern Division line crew , enabled the Company to hold expenses significantly below industry average. area corporate health promotion programs tO recognize its commitment to healthy lifestyles.

According to the 1992 Employee Survey, nearly all employees, 96 percent, agree that Delmarva Power is a "a good place to work" and nine out of ten agree that Delmarva Power is becoming a more customer-focused company. In addition, three quarters of employees feel the Company has a commitment to: *Treat employees with respect *Apply participative management

• Give serious consideration to employee ideas and suggestions.

The Company strives to act as a good citizen and encourages employees to participate in the communities they serve. As part of the highly successful Radio Watch program, employees continued to summon aid for people in the munity by using radios in Company vehicles. Through the Gatekeeper program, trained ployee volunteers linked 200 older customers with community services since 1989. In one case, Delmarva Power employees helped a 105-year-old woman pay bills and arrange house cleaning.

The 1992 Employees United Way Campaign raised nearly $270,000 to help people in need, and the Good Neighbor Energy Fund contributed more than $2 million during the last 10 years to customers having trouble paying energy bills. Delmarva Power received the Outstanding Corporate Leadership Award for community anthropic activities and involvement from the National Society of Fund Raising Executives' Brandywine Chapter. In addition, the Company's finance & accounting group received the 1992 State of Delaware Governor's Outstanding unteer Award. This group, which plans a different project quarterly, raised funds to assist the lies of military personnel serving in Desert Srorm, cleaned a newly constructed Ronald McDonald House, donated clothes to the Adopt-A-Family program, served meals for needy guests at the Emmanuel Dining Room, collected food ro fit the Southbridge Neighborhood House, and performed many other volunteer activities . The Company's finance & accounting group received the State of Delaware Governor's Outstanding Volunteer Award for collecting food for the homeless and other e fforts to help people in the community.

OUTLOOK Wilmington's St. Francis Hospital added natural gas service in 1992. For the next 20 years, firm gas sales are expected to grow by 1.5 percent per year. Delmarva Power is well positioned to meet the challenges and opportunities of competition and change in the industry.

Our service territory is healthy , diverse , and growing. Our customers view us favorably, and our prices continue to be nationally and regionally competitive.

The economy of the Delmarva Peninsula showed some strength in 1992 compared to other parts of the country. The region's blend of industries (chemicals, food processing, agriculture, finance, plastics, and recreation) makes the demand for electricity and natural gas here less affected by fluctuations in the national economy than in many other areas of the U.S. Delmarva Power's low energy prices also help the economy. They help to attract new customers and encourage increased production at local plants when managers of large companies have options in other geographic areas. The Company anticipates that the local economy will improve in '93 , but not return to the level of the late 1980s. With the slow recovery from the recession and the restructuring of some local industries, the pany expects electricity sales to grow 3.6 percent and 2.2 percent in 1993 and 1994, respectively.

For the next 20 years, Delmarva Power forecasts tricity sales to grow at an average annual rate of 2.0 percent, with residential space heating sales growing the fastest at 2.6 percent and industrial sales at 1.6 percent. Growth of the summer and winter peak demands for electricity are expected to average 2.5 percent per year through 2002. Similar sales growth is expected for natural gas. For the long term, firm sales are expected to grow at an average annual rate of 1.5 percent. *

• The population of the Delmarva Peninsula continues to grow. This means more people will rely on the Company for service. As part of the ongoing strategic planning process , the Company reorganized ro focus talent on the opportunities developing in the changing energy industry.

The effort is led by Paul S. Gerritsen, former chief financial officer, and includes Louise M. Morman, former general manager of marketing.

It also includes the regularory department since this ream seeks ro develop and advocate strategic ing alternatives that respond to cusromers' n ee ds. The team and the Company have already been fronted by rwo challenging events. Old Dominion Electric Cooperative has announced ir would chase 150 megawatts of electricity from another utility in about two years. This is equivalent ro about two years of load growth or approximately

$25 million in net annual electric revenues.

Also, General Motors announced it would close its Boxwood Road assembly plant in 1996. This plant uses about one percent of rhe electricity and three percent of the natural gas sold by Delmarva Power. Because of the lead time and the number of options available to us, we cannot, at this time , estimate the effect, if any, on earnings of these actions. Some of those options or potential gating events include additional load growth, competitive sales of any excess capacity to other wholesale customers outside our service area, setting rates ro recover investments in plant and equipment, and modifications to the Company's Challenge 2000 plan, which may postpone ty additions and their attendant costs. Thus, for the short term, our ability to increase earnings will continue ro be affected b y rh e m y, regulation , and competition both in s ide and outside our own terrirory.

Over the long haul , earnings will depend more on our ability ro meet capital requirements associated with meeting our customers' energy needs and our environmental responsibility , as well as continued supportive regulation in an increasingly changing and petitive environment.

However, we approach rhe challenges of change as a financially st rong Company with a skilled and effective team of employees.

With your support and our ream's continued strong performance, we will build upon our record of excellence and face the future with confidence.

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

BOARD OF DIRECTORS Directors as of December 31, 1992, pictured left to right Howard E. Cosgrove Chairman of the Board, President and Chief Executive Officer of the Company; member since 1986; serves on executive, investment, and nuclear oversight committees; term expires in 1995. John R. Cooper Former Director of Environmental Affairs of E. !. du Pont de emours & Company (a diversified chemical, energy, and specialty products company), Wilmington, Delaware; member since 1981; serves o n a udi t and nuclear oversig ht comm itt ees; term expires in 1993. Sarah I. Gore Human Resources Associate, W. L. Gore & Associates In c., (a hi gh technology manufacturing compa n y), Newark, Delaware; member s in ce 1 990; se rv es on compensation committee; term expires in 1994. David D. Wakefield Execmive Secreta r y Longwood Foundat i on, In c., Wilmington, Delaware; former Cha irm a n and President of J. P. Morgan Delaware (a commercial banking subsidiary of J. P. Morgan and Co. Incorporated), Wi lmi ngton, Delaware; member since 1984; serves on compensation, execut i ve, and investment committees; term expires in 1 993. J\ ' ,f ' '. . '. i) -1 "----.. ' -* ,_. .---... -* ' ..., .. James T. McKinstry Partner and Director, Richards, Layton & Finger (a l aw firm), W ilmin gton, Delaware; member since 1 987; serves on aud it , exec uti ve, a nd nucl ear oversight committees; term exp ir es in 1995. Nevius M. Curtis Former Chairman of the Board an d C hi ef Execut i ve Officer of the Com p any; member s in ce 1979; serves on execut i ve, investment, and nominating committees; term expires in 1993. Audrey K. Doberstein Presidem of W ilmin gto n Co ll ege, Wi lmin gton, Delaware; member since 1992; serves on n om in at in g committee; term expires in 1995. Elwood P. Blanchard Jr. Former Vice C h airman of t h e Board of Directors and member of the Office of the Cha irm an of E. I. du Pom de Nemours & Company (a diversified c h emica l , energy, and specia lt y products company), Wilmington, Delaware; and Cha irm an of the Board of Du P ont Canada, Mississauga, Ontario, Ca n ada; member si n ce 1 988; serves on compensation, exec u tive, and in vestment commi tt ees; term expires in 1994. H. Ray Landon Exec uti ve V i ce Presidem of the Company; member since 1 988; term expires in 1994. Donald W. Mabe Former Presidem a nd Chief Execut i ve Officer of Perdue Farms In corporated (an inte grated poultry company), Salisbury, Mary l and; member s in ce 1 986; serves on compensat i on, investment, and nating committees; term exp ir es in 1993. James C. Johnson III Presidem of Loyo l a Cap it a l Corporation and its primary subsid i ary, Loyola Federal Savings Bank, Baltimore, Maryland; member since 1992; serves on audit committee; term expires in 1995. *

• FINANCIALS Key Financial Data Graphs ..............*.........................

• ..........*.. 20 Selected Financial Data ............

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21 Financial Review and Analysis .....................

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22 Reports of Management and Independent Accountants

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31 Notes to Consolidated Financial Statements

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........ 37 Consolidated Statistics

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50 Committees, Officers, and Investment Information

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51 Stockholder Information

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Mill i on s rl $200 -150 -100 0 Ii $2.00 -1.50 -1.00 -0.50 -0.00 Ii $2.00 -1.50 >-1.00 >-0.50 >-0.00 UTILITY CONSTRUCTION EXPENDITURES Mill i ons UTILITY EXTERNAL FINANCINGS

$200 150 100 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993*1994* 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993*1994* *Forecast Delmarva Power expects construction expenditures to increase at a manageable rate to meet customer energy needs and stricter environmental regulations.

The Company will finance these expenditures with a combination of internally generated cash and external financing. *Forecast EARNINGS PER SHARE RETURN ON AVERAGE COMMON EQUITY OF COMMON STOCK 16% 12 8 I 4 0 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Future earnings growth will depend on the Company's ability to raise prices to reflect increasing levels of construction expenditures and to provide investors with a fair return on their investment. DIVIDENDS DECLARED PER SHARE OF COMMON STOCK 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 $25 20 15 10 5 0 rl AVERAGE COMMON STOCK MARKET PRICE -----I 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 During the past 10 years, investors have earned a 16.9% annual return through a combination of dividends and stock price appreciation.

The January 1993 yield of 6.8% was above the average yield of "A" -rated utilities. @ Delmarva Power & Light Company SELECTED FINANCIAL DATA I I (Dollars in Thousands, Except Per Share Amounts) Year Ended December 31, 1992 199 1 1990 1 989 1988 Operating Data Operating Revenues 0> $864,044 $855,821 $812,217 $796,614 $786,501 Operating Income $143,711 $136 ,410 $144,473 $137,650 $127,577 Income Before Cumu l ative Effect of a Change in Accounting Principle

$98,526 $80,506 $37,311 $91,308 $84,721 Cum ul ative Effect of a C hange in Accounting for Unbilled Revenues $12,730 Net Income $98,526 $93,236 $37,311 $91,308 $84,721 Electric Sales (kWh 000) 11,520,811 11,460,280 11,081,211 10,828,839 10,225,043 Interchange Deliveries (kWh 000) 998,679 1,113,423 726,090 894,402 1,413 , 150 Gas Sales (mcf 000) 17,013 15,574 16 , 069 16,645 16 , 154 Gas Transported (mcf 000) 3,155 2,610 2,194 677 2 Common Stock Data Earnings Per Share of Common Stock Before Cumulative Effect of a Change in Accounting Principle

$1.69 $1.44 $0.60 $1.80 $1.70 Cumulative Effect of a C h ange in Accounting for Unbilled Revenues $0.25 Total Earnings Per Share $1.69 $1.69 $0.60 $1.80 $1.70 Div i dends Declared Per Share of Commo n Stock $1.54 $1.54 $1.5 4 $1.51 $1.47 Average Shares Outstanding (000) 53,456 50,581 47,534 46,687 45,892 Year-End Common Stock Price $23 % $21 }.j $18 )i $17 ook Per Common Share $13.77 $13.42 $12.84 $13.67 $13.28 Return on Average Common Equity 12.2% 12.4% 4.3% 13.2% 12.7% Capitalization Variable Rate Demand Bonds (VRDB) <2> $ 41,500 $ 41,500 $ 41,500 $ 41,500 $ 75, 000 Long-Term Debt 787,387 770,146 741,032 662,544 609,687 P referre<l Stock <3> 176,365 136,365 136,365 136,442 104,983 Common Stockholders' Equity 745,789 706,583 614,692 642,641 613,177 Total Capitaliza tion with VRDB $1,751,041

$1,654,594

$1,533,589 $1,483,127 $1,402,847 Other Information Total Assets $2,374,793

$2,263,718

$2,125,715

$2,028,661

$1,907,790 Long-Term Capital Lease Obligation

$26,081 $29,337 $32,354 $2,071 $2,630 Construction Expenditures e<> $207,439 $181,820 $187,823 $175,843 $171,102 Internally Generated Funds (IGF) cs> $130,275 $96,081 $112,551 $106,698 $107,413 IGF as a Percent of Construction Expenditures 63% 53% 60% 61% 63% (!) As discussed in Note 1 to the Consolidated Financial Statements, operating revenues were restated to include interch ange delivery revenues and exclude sream revenues. Amounrs included for interchange delivery revenues are $30.606 million in 1992 , $33.523 million in 1991, $23.905 million in 1990 , $31.476 million in 1989, and $41.162 million in 1988. (2) Alrhough Variable Rate Demand Bonds are classified as current liabiliti es, rhe Company intends to use rhe bond s as a so urce of long-rerm financing as discussed in Note 11 to rhe Conso lidated Financial Statements.

(3) Includes preferred stock with mandatory redemprion in 1989 and 1988. (4) Excludes Allowance for Funds Used During Consrruction.

(5) Ner cash provided by operaring activities les s common a nd preferred dividends. D e lmarva Power & Light Company @

Earnings The earnings per share of common stock attributed to the core utility business and non utility subsidiaries are shown below. 1992 Core Urility Operations Peach Borrom lawsuir serdement Cumulative effect of a change in accounting for unbilled revenues Nonurility Subsidiaries Tora! Dividends

$1.47 0.21 O.o1 $1.69 On December 29, 1992, the Board of Directors declared a mon stock dividend of $0.38 Yi per share for the fourth quarter. The common dividend remained unchanged from the prior ration. The Board believed it was appropriate to hold the quarterly Core Utility Earnings Earnings per share from core utility operations increased by $0.06 in 1992 compared to 1991 primarily due to additional electric and gas revenues from higher customer base rates (which are discussed in Note 2 to the Consolidated Financial Statements).

By February 1992, base rate increases had become effective in jurisdictions that regulate 97% of the Company's utiliry operating revenues. The additional revenues from higher customer base rates were partly offset by unfavorable effects of cooler summer weather on electric revenues, increased non-fuel expenses, and an increase in the age number of common shares outstanding.

Core utility earnings for 1992 and 1991 include earnings from one-time, unusual items, not related to ongoing utility operations. As discussed in Note 4 to the Consolidated Financial Statements, net income and earnings per share were increased in 1992 by $11 , 397 , 000 and $0.21, respectively, due to settlement of a suit filed by the Company concerning the 1987-1989 shutdown of the Peach Borrom Atomic Power Station by the Nuclear Regulatory Commission.

In 1991, as discussed in Nore 1 to the Consolidated Financial Statements, a change in accounting for unbilled revenues increased net income and earnings per share by $12 , 730,000 and $0.25, respectively.

In 1991 , earnings of core utility operations declined $0.29 per share compared to 1990 mainly because customer rates had not yet been raised to recover financing and operating cost increases associated with new utility plant added to the Company's electric and gas systems. The adverse effect on earnings per share of the @ Delmarva Power & Light Company 1991 $1.41 0.25 0.03 $1.69 1990 $1.70 (1.10) $0.60 common dividend constant while the Company assesses the impact of changes raking place within the utility industry and the uncertainties associated with rate relief. For 1992, dividends declared per share of common stock were $1.54. financing and operating cost increases was partly offset by tional electric revenue artributed to a 3.4% increase in 1991 kilowatt-hour (kWh) sales. Earnings of the Company's core utility operations over the past several years reflect the cycle which typically occurs as new utility plant is added and customer rate increases are necessary to recover cost increases associated with the new plant. Growing energy needs of the Company's customers and stricter environmental regulations have kept the construction program at a high bur manageable level. As plant is added and costs rise, rates must be increased on a timely basis. Resetting customer rares through the regulatory process often results in a lag between the rime when costs rise and when prices can be adjusted, causing earnings to temporarily decline. On October 30, 1992 , the Company filed applications with latory commissions for $61.8 million, in total, of proposed electric base rare increases.

The rare increases are designed to recover higher costs, including the cost of the new Hay Road Unit 4 bined-cycle power plant, inflation, and costs associated with the accounting standard for postrerirement benefits other t h an pensions. These new base rares are proposed to become effective immediate l y following the planned May 31, 1993 in-service date of Hay Road Unit 4. Even with the p l anned rate increases, the Company expects the price of electricity for its .customers to be comparable to 1983 levels and competitive with other utilities in the region.

• In October 1992, the Energy Policy Act of 1992 (the Energy Act) was enacted. The Energy Act is designed, among other things, to romote increased competition among utility and non-utility tric generators and contains provisions giving the Federal Energy Regulatory Commission (FERC) increased authority to order "wheeling" of electric power on the transmission systems of tric utilities.

The transmission access provisions , which apply to wholesale (resale), but not retail, "wheeling" of power , allow a utility to recover all costs of transmi ss ion services.

As a re s ult of the Energy Act, industry-wide resale markets are experiencing increased competition.

In 1992, gross electric enues from the Company's resale business were $96.5 million or 13% of electric sales revenues.

In December 1992, Old Dominion Electric Company (ODEC), a resale customer, advised the Company that it has decided to terminate contracts with the Company for the purchase of up to 150 megawatts (MW) of tricity beginning December 1, 1994, and to purchase such tricity from another investor-owned utility. This load loss is equivalent to about two years of load growth, or up to matel y $25 million in non-fuel revenues.

The effect, if any, of the loss of up to 150 MW of ODEC's load on the Company's net income in 1995 and subsequent years is not determinable at this time , given the approximately two-year lead omponents of Utility Revenue s Fuel and energy costs billed to customers (fuel revenues) are based on rates in effect in fuel adjustment claus.es which are adjusted periodicall y to reflect cost changes and are subject to regulatory approval.

Rates for non-fuel costs billed to customers are dent on rates determined in base rate proceedings before tory commissions.

Changes in non-fuel revenues can directly affect the earnings of the Company. Fuel revenues, or fuel costs billed to customers, generally do not affect net income since the expense recognized as fuel costs is adjusted to match the fuel revenues.

The amount of under-or over-recovered fuel costs is generally deferred time before the termination, additional load growth, and the potential for mitigating action by the Company. In the interim , the Company is pursuing additional off-system sales to offset any loss of revenues and is considering the resetting of rates to recover any investments related to servicing ODEC's requirements.

The Company also has the ability to modify its Challenge 2000 Pl a n to postpone capacity commitments and their attendant costs ing the postponement of a contract for the purchase of 165 MW of capacity).

Economic trends in the Company's service territory during 1992 were mixed. Positive developments included a drop in Delaware's unemployment rate to well below the national average. Also, the number of customers served b y the Company grew by 1.7% in 1992 compared to 1.4% in 1991. On the downside , in December 1992, General Motors announced plans to close its Delaware manufacturing plant by 1996. The plant's clos i ng could increase De l aware's unemployment rate by one or two percentage points. The direct impact on the Company's revenues from the loss of General Motors as a utility customer would be a decrease of approximately

$7 million in gross operating revenues , which includes about $4 million of non-fuel revenues.

Efforts co ntinue by the State, the Company and other major businesses to avert the planned closing of the plant in 1996. until it is subsequently recovered from or returned to utility tomers. As discussed under "F inancial Statement Reclassification s" in Note 1 to the Consolidated Financial Statements, electric enues also include interchange delivery revenues, which result from the sale of electric power to the Pennsylvania-New Maryland (PJM) Interconn ection and certain utilities.

Int erc hange delivery revenues are reflected in the calculation of rates charged to customers under fuel adjustment clauses. Due to this making treatment, interchange delivery revenues do not affect net income. D e l marva Po wer & Light C o mpany @

• Electric Revenues and Sales Derails of che changes in che various components of electric enues are shown below: Comparative Increase (Decrease) in Electric Revenues from Prior Year (Dollars in Millions) 1992 1991 Non-fuel Revenue Increased Base Races $27.4 $ 0.4 Sales Volume and Ocher (5.1) 20.0 Fuel Revenue (23.8) 22.2 Interchange Delivery Revenue (2.9) 9.6 Total $(4.4) $52.2 The $27.4 million increase in 1992 non-fuel revenues over 1991 shown above as "Increased Base Races" resulced from the increases in 1992 electric customer base races discussed in Nore 2 co che Consolidated Financial Statements.

The non-fuel revenue variances shown in the above cable as "Sales Volume and Ocher" are attributable co changes in sales volume, sales mix, and ocher factors. In 1992 , non-fuel revenues decreased

$5.l million compared co 1991 due co " Sales Volume and Ocher" variances.

Despite a 0.5% increase in coral kWh sold, non-fuel revenues were adversely impacted by cooler summer weather which resulted in lower demand charges billed co resale and oche r large customers, and l owe r average residential electric races. Although 1992 coral residential electric sales were relatively flat compared co 1991, a disproportionately lower volume of tial sales occurred during che summer months when che race per kWh is higher. Electric sales co commercial and resale customers increased in 1992 by 1.3% and 1.8%, respectively, mainly due co che growing customer base. Sales co industrial customers in 1992, which Gas Revenues , Sales , and Transportation The Company earns gas revenues from the sale of gas co customers and also from transporting gas through the Company's system for some customers who purchase gas direccly from gas producers and pipelines. In 1992, the non-fuel portion of gas revenues increased

$7.0 million in comparison to 1991 due co $3.2 million of tional revenue from higher customer base races, as discussed in Nore 2 to the Consolidated Financial Scacemencs, and due to $3.8 million from higher sales volume. Total cubic feet of gas sold and transported in 1992 increased 10.9% over 1991 due to colder winter weather and new residential-space heating customers.

The fuel portion of gas revenues increased

$5.6 million in 1992 marily due to higher sales and bill-credits made to customers dur-@ Delmarva Power & Light Company account for less than 20% of electric sales revenues, remained tively unchanged from 1991 due co the slow economic recovery and energy conservation efforts by large custome r s. In 1991, non-fuel revenues increased

$20.0 million from 1990 due to " Sales Volume and Ocher" variances.

This increase resu l ted from a 3.4% rise in total 1991 kWh sales char was mainly due to a higher number of customers and greater usage by residential and commercial customers, parcly due to a hoc summer. Residential and commercial sales grew in 1991 at races of5.0% and 4.0%, respectively. Resale electric sales were also strong, up 6.7%. A 1.2% decrease in industrial sales, attributed to the economic downturn, was tempered by the diverse mix of industrial c utomers served by the Company. The $23.8 million decrease in 1992 electric fuel revenues from 1991 was due to lower races charged to customers under the fuel adjustment clauses. In 1991, fuel revenues increased

$22.2 million from 1990 due co higher fuel adjustment clause races and higher electric sales. Interchange delivery revenues decreased

$2.9 million in 1992 mainly due to extended maintenance outages at the Company's generating units which reduced potential sales to che PJM Interconnection.

If there is demand for power within the PJM Interconnection and che Company has kWh o u tp u t available, then it will sell power to the PJM Interconnec t io n if economica ll y beneficia l to both parries. Interchange delivery reve n ues b enefit customers by reducing the effective fuel cost billed co customers.

In 1991, interchange delivery revenues increased

$9.6 million due to additional energy sources chat enabled che Company to sell more power to che PJM Interconnection.

Additional energy sources in 1991 incl u ded a 200 MW power purchase from Philadelphia Electric Company (PE) and che scare of commercial operations by Hay Road Unit 3, a 112 MW com bu stion tur b ine. ing 1991 for previously over-co ll ected fuel coses. These increases in gas fuel revenues were parcly offset by che effect of lower 1992 fuel races charged co gas customers.

In 1991, gas revenues decreased by $8.6 million in com p arison to 1990 due co decreases in non-fuel revenues and fuel revenues of $1.2 million and $7.4 million, respect i vely. T h e decrease in fuel revenues was attributed to mild winter weather and a s l uggish 1991 economy which caused cora l gas sold and tr ansported to decline 0.7%. Fuel revenues decreased because races c h arged to customers to recover gas fuel coses were reduced in 1991 to reflect lower prices paid for purchased gas.

• Operation, Maintenance , and Depreciation Expenses *Operation and maintenance expenses increased by $6.8 million in 1992 in comparison to 1991 primarily due to higher maintenance outage costs for electric generating units and due to charges for the purchase of 48 MW of capacity which began June l, 1992. These increases were partially offset by decreases in administrative and general expenses, including pension cost, and lower costs of ating and maintaining the electric transmission and distribution systems. Future increases in operation and maintenance expenses are expected due to additions of new utility plant, aging of existing utility plant, and normal inflationary cost increases.

Depreciation expense increased

$6.7 million due to additions to the electric tem , including a new stack for the Indian River power plant that was completed in January 1992. A full year's depreciation expense Electric Fuel and Purchased Power E x penses The components of the changes in electric fuel and purchased power expenses are shown in the table below. Comparative Increase (Decrease) from Prior Year in E l ectric Fue l an d Purc h ased Power Expenses (Dollars in Millions) 1992 1991 Average Cost of Electric Fuel and Purchased Power $ (9.9) $ (6.6) Increased (Decreased) kWh Output (1.9) 19.6 Deferral of Energy Costs (12.0) 21.1 Total $(23.8) $ 34.l The 1992 "Average Cost of Electric Fuel and Purchased Power" decreased

$9.9 million from 1991 mainly due to lower coal and oil prices and increased power purchases at lower prices. These favorable cost variances were partly offset by decreased low-cost nuclear generation and capacity deficiency charges under the Company's agreement with the PJM Interconnection which requires the Company to p l an for and provide a certain capacity level. The Company does not anticipate PJM Interconnection capacity deficiency charges in 1993 due to the expected start of commercial operations at Hay Road Unit 4 in May 1993 and a trade of PJM Interconnection capacity credits with another utility. The trade is expected to provide the Company with a credit towards current PJM Interconnection capacity requirements and in return, the Company will provide the same credit to the other utility in a future period. for Hay Road Unit 3, completed as of June 1, 1991, also tributed to the increase.

Continued increases in depreciation expense are expected as new electric plant is added. In 1991, operation and maintenance expenses increased by $21.3 million in comparison to 1990 mainly due to increased costs of operating and maintaining the electric transmission and tion systems, higher expenses at the jointly-owned nuclear power plants, and higher administrative and general expenses. ciation expense increased

$6.5 million in 1991 primarily due to additions to electric utility plant which included the installation of Hay Road Unit 3. The 1991 "Average Cost of Electric Fuel and Purchased Power" decreased

$6.6 million from 1990 mainly due to lower oil and gas prices and a decrease in the cost of purchased power. The $1.9 million decrease in 1992 shown above as "Increased (Decreased) kWh Output" was due to lower output from ing units attributed ro extended maintenance outages. In 1991, a $19.6 million increase in "Increased (Decreased) kWh Output" mainly resulted from higher kWh generated and purchased to meet higher electric sales demand in the Company's service tory. The $19.6 million increase also reflects more kWh generated for sale to the PJM Interconnection.

The kWh output required to serve load within the Company's vice territory is equivalent to rota! output less interchange delivery kWh sold. In 1992, the Company's kWh output for load within its service territory was provided by 39% coal generation, 14% nuclear generation, 14% oil generation, 4% gas generation, and 29% purchased power. Purchases under the Company's agreement with PE for 200 MW of energy accounted for 22% of the Company's 1992 kWh output for load within the service territory.

This agreement has been extended until December 31 , 1993. The decrease of $12.0 million in the 1992 "Deferral of Energy Costs" compared to 1991 was primarily due to lower tions of fuel costs from customers which resulted in lower deferred energy expenses.

The increase of $21.1 million in the 1991 "Deferral of Energy Costs" compared to 1990 was primarily due to an over-collection of fuel costs in 1991 that was deferred through a corresponding charge to deferred energy costs. Delmarva Power & Light Company @

U t ility Financing Costs In 1992, interest charges on debt of the core utility decreased

$1.3 million in comparison to 1991 because lower interest rates enabled the Company to reduce the average cost of its outstanding term debt through refinancings. The Company refinanced

$255.5 million , $85.5 million, and $15.0 million of its long-term debt in 1992, 1991, and 1990, respectively, resulting in annualized est savings of $6.3 million in total. In 1992, lower interest charges due to lower rates on refinancing bonds and variable rate demand bonds were partly offset by interest charges on additional term debt issued to finance the Company's investment in u t ility plant. The increase in preferred dividends from the issue of $40 million of 7 %% preferred stock in August 1992 was largely offset by lower dividend payments on $61.1 million of the Company's preferred stock which has market-based dividend rates. In 1991 , interest charges on debt of the core utility increased

$4.2 million from 1990 due to higher average debt balances.

The Challenge 2000 Plan The Challenge 2000 Plan is the Company's strategy for providing an adequate, reliable supply of electricity to customers at tive rates. The Company's Plan, which is updated periodically, is based on PJM Interconnection reserve requirements and forecasts of demand for electricity in the service territory.

The Company's Plan combines customer energy conservation and load ment programs (" Save Some"), power purchases

("Buy Some"), and new power plants ("Build Some"). As an electric utility, the Company must balance the potential risks of providing too much or not enough capacity.

The main risk of excess capacity is that regulators wou l d not allow the ated costs to be recovered from ratepayers.

The principal risks of not having an adequate level of capacity are reliability of service and that capacity deficiency charges would be owed to the PJM Interconnection.

The flexibility of the Challenge 2000 Plan allows the Company to balance these risks by more closely matching capacity with load. @ Delmarva Power & Light Company increase was moderated by lower interest rates on refinancing bonds and variable rare demand bonds and by a lower average short-term debt balance. Allowance for equity and borrowed funds used during tion (AFUDC) increased

$2.1 million in 1992 and $2.2 million in 1991. These increases were principally due to higher average struction work-in-progress (CWIP) balances.

AFUDC represented a relatively low 8.3% of 1992 net income. Due to increased common equity financing, the average number of shares of common stock outstanding increased in 1992 and 1991. The additional shares outstanding decreased earnings per share by $.09 in 1992 and $.10 in 1991. However, the new rates charged to the Company's customers in 1992 were intended to result in sufficient revenues to offset the adverse effect on earnings per share of increased common equity financing.

In 1992, the Company began purchasing 48 MW of capacity supplied by the Delaware City Power Plant, which the Company sold in December 1991. Looking forward, the Company's current plans for meeting the demand for energy during 1993-2003 include the following:

(1) "Save Some"-140 MW of load reduction from various tomer-oriented energy management programs.

(2) " Bu y Some"-278 MW of capacity purchases, including (a) 165 MW beginning, at the Company's option, in 1996 or 1997, and (b) 33 MW beginning in 1997. (3) " Bui l d S o me"-464 MW of capacity from new power plants including (a) completion in May 1993 of Hay Road Unit 4 , a 160 MW combined cycle addition to the Hay Road combustion bines , and (b) construction by the year 2000 of a 300 MW ized coal baseload unit near Vienna, Maryland, which is called Dorchester Unit 1 and has an estimated construction cost of $725 million, including AFUDC.

• Liquidity and Capital Resources

• The Company's primary capital resources are internally generated funds (net cash provided by operating activities less common and preferred div i dends) and external financings.

These resources vide capital for the Company's uciliry construction program and ocher capital requirements , such as repayment of maturing debt and capital lease obligations.

Utility construction expenditures, the Company's largest capital requirement , were $207 .4 million in 1992, $181.8 million in 1991, and $187.8 million in 1990. The level of construction expenditures is affected b y many factors, including growth in demand for electricity, compliance with environmental tions, and the need for improvement and replacement of existing facilities.

Strategic planning and project prioritizing provide agement the means co match the level of construction tures w i th available capital resources.

During 1992, 1991, and 1990 , internally generated funds provided 63%, 53%, and 60%, respectively , of the cash required for construction.

In 1992 , the payment received for secclement of the Peach Bottom lawsuit increased internall y generated funds b y $11.4 million (5% of struction expenditures).

Over the past several years, internall y erated funds have been constrained b y slower electric sales growth, increased expenses, and increased common dividend pa y ments due to more shares outstanding.

In 1992 , rhese factors were offset by additional revenues from increased customer races. Capital raised externally during 1990-1992 , before considering issuing and refinancing costs, consisted of $137 million of mon equity, $40 million of preferred stock, and $128 million of long-term debt, ner of $356 million of refinancings.

The coses associated wirh issuing and refinancing debr and equity securities during 1990-1992 were approximately

$26 million. In 1992, the Company issued $273.3 million oflong-rerm debt ar an average race of7.8% and repurchased

$257.2 million of term debt which had an average race of 9 .1 %. As of December 31, 1992, the Company's embedded cost of long-rerm debr and able rare demand bonds was 7.7%. Equity capital issued in 1992 included $40 million of7 %% preferred stock and $32.2 million of common stock. Book value per s hare of common stock increased from $13.42 as of December 31, 1991 to $13.77 as of December 31, 1992. Long-rerm debt and variable rare demand bonds (VRDB), preferred stock, and common stockholders' equity as a percent of total capitalization, including VRDB, as of December 31, 1992 and 1991 were as follows: Long-rerm debt and VRDB Preferred stock Common Stockholders' Equity 1992 1991 47.3% 10.1% 42.6% 49.1% 8.2% 42.7% Capital requirements for rhe period 1993-1994 are estimated to be $426 million, including a $25 million long-rerm debt maturity in 1994 and $380 million for utility construction, excluding AFUDC. The estimate of 1993-1994 utility construction ments includes $38 million of capital expenditures related co plans for compliance with provisions of the Clean Air Act (CAA). During 1995-1999 , an additional

$67 million of capital tures related to compliance wirh rhe CAA are planned. The Company's plans for compliance with major provisions of rhe CAA are subject co approval by the stares in which the Company's generating units are located. In 1990, rhe New Jersey Department of Environmental Protection (NJDEP) issued Public Service Electric and Gas (PSE&G), the Salem nuclear plane operator, a drafr permit which would require construction of cooling rowers and a shutdown of the plane during the construction period. PSE&G continues co oppose the draft permit and is seeking a mutually acceptable resolution of this ter with the NJDEP. If the cooling rowers are constructed, the Company, as a co-owner of Salem, would incur substantial replacement power costs during the const ruction period and mated capital costs of $40 co $50 million. The Company's casts of 1993-1994 capital expenditures do not include possible additional costs for the construction of cooling rowers for Salem. The Company anticipates that $226 million will be generated internally during 1993-1994.

This forecast reflects expected rate relief which is designed co recover increased investments and higher coses. Forecasted internall y generated funds for 1993-1994 represent 53% of estimated capital requirements and 59% of estimated utility construction expen ditures. The balanc e is expected co be externally financed.

Long-term external financings during 1993-1994 are presencly estimated at $246 million, including

$80 million of long-term debt, and $166 million ket value) of common stock. On January 29, 1993, the Company registered 3,300,000 shares of common stock with the Securities and Exchange Commission for a planned issue of approximately

$75 million (market value) of common stock in the first quarter of 1993. One of the Company's objectives is co maintain certain financial measures within the ranges that warrant a strong "A" bond racing. Accordingly, rhe Company's long-rerm planning capital structure target ranges are 44-49% debt , 8-10% preferred stock, and 42-46% common stockholders' equity. In 1992 , the Company's ratio of pre-tax earnings co fixed interest charges (computed according co SEC regulations) was 3.03, within rhe range of 2.5 co 4 rhar is generally required for an A bond rating. However, in order for the Company co meer its objectives, it will need co meet rhe challenges presented by rhe Energy Acr and co obtain timely and adequate rate relief from regulatory commissions.

Delmarva P ower & Light Company @

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

Nonutility subsidiaries earned $.01 per share in 1992 primarily due to earnings from leveraged leases, operating services, and other businesses, which were partly offset by operating losses at the Pine Grove Landfill and administrative and general expenses.

In 1992, the subsidiaries continued to reduce administrative and general expenses and lower the operating loss of the Pine Grove Landfill.

Despite the landfill's operating loss, which reflects non-cas h charges for amortization and depreciation, landfill operations tinue to generate positive cash flow. One of the nonutility subsidiaries leases five aircraft, in total, to three different airlines as part of its leveraged leasing business.

The airline industry is facing increasing pressures due to intense fare competition, heavy capital expenditures, and reduced access to capital due to the current global economic downturn.

Certain other airlines, which are not lessees of the Company's su b sidiary, have filed for protection under the bankruptcy laws. Northwest Airlines, to whom the subsidiary leases a Boeing 747, encountered significant liquidity problems during 1992 and had its debt ra t ings downgraded.

However, Northwest is current on its lease payments to the Company's subsidiary, and the effect, if any, of its financial difficulties on the lease remains uncertain.

Total subsidiary revenues, including gains, were $14.0 million in 1992 compared to $16.4 million in 1991. The decrease occurred mainly because 1991 revenues included a $4.4 million pre-tax gain on sales of purchase options on leveraged leases. An increase in landfill and waste hauling revenues from $6.2 million in 1991 to $9.0 million in 1992 reduced the total revenue decrease.

The @ Delmarva Power & Light Company increase in landfill and waste hauling revenues was driven by a large increase in tonnage received by the Pine Grove Landfill.

Revenues from operating services (management and operation of power plants) were $3.0 million in 1992 compared to $2.9 lion in 1991. The subsidiaries funded their 1992 capital investments, primarily related to the Pine Grove Landfill, and the repayment of $11. l million of short-term debt mainly through the drawdown of cash balances, funds generated by the landfill's operations, insurance proceeds for a casualty loss, and tax benefit payments.

The sidiaries receive tax benefit payments resulting from inclusion of their income or loss in the Company's consolidated tax return. As of December 31, 1992, the subsidiaries could borrow up to $7.8 mi ll ion under a bank credit agreement that expires in December 1995. In 1991, the nonutility subsidiaries earned $0.03 per share. Gains from sales of purchase options on leveraged leases, which tributed $0.07 to 1991 earnings per share, were partly offset by the operating loss of the Pine Grove Landfill and accruals for potential settlements of litigation.

In 1990, the non utility subsidiaries had reported a loss of $1. l 0 per share principal l y due to a write-off of investments in joint ventures and to opera t ing l osses from the projects that were written-off.

As disc u ssed i n Note 18 to the Consol i dated Financia l Statements, the Compa n y wrote off $62,534,000 of investments in three joint venture projects which reduced 1990 net income by $42,497,000 or $0.89 per share. The losses on the operations of these projects during 1990 reduced earnings by an additional

$0.18 per share. * *

• Impact of Accounting Standards In rhe first quarter of 1993, the Company will adopt the new accounting principles of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers

' Accounting for Posrretirement Benefits Other Than Pensions." SFAS No. 106 requires employers, if ob l igated or committed to provide retirement benefits other than pensions , to recognize their tion on an accrual basi s. In December 1992, in order to control posrretirement health-care costs, the Company implemented caps , or limits , on medical benefits for employees retiring after] uly l , 1995, and also reduced certain other medical benefits. The Company estimates its obligation for posrrerirement benefits other than pensions to be $7 2 million and will recognize this obligation by accruing it over a 20-y ear period. The Company's current ings for rare increases include recovery of the SFAS No. 106 expense increase associated with the Company's utility business.

After considering amounts capitalized, SFAS No. 106 will result in approximately a $5.5 million expense increase.

Until the new rares become effective, rhe expense increase will be deferred , due to probable rate recovery.

The Company expects to amortize the deferral over a five-year period.The Company has proposed to its regulatory commissions , assuming recovery of the SFAS No. 106 expense in rates, to externall y fund tax deductible contributions and internally fund any balance ofSFAS No. 106 cost recovered in rates that exceeds the amount that can be funded on a tax deductible basis. See Nore 13 to rhe Consolidated Financial Statements for additional information concerning SFAS No. 106. In rhe first quarter of 1993, rhe Company will adopt the new accounting principles of SFAS No. 109 , " Accounting for Income Taxes ," which requires use of rhe l iability method of accounting for income taxes. The main impact ofSFAS No. 109 on the Company's financial statements will be a $7 8 million net increase in deferred tax liabilities and an offsetting regulatory asset senting rhe probable future recovery of the liability through utility revenues. SFAS No. 109 will not have a material impact on the Company's results of operations. See Note 3 to the Consolidated Financial Statements for additional informat i on concerning SFAS No. 109. D elmarva Power & Light Com p a ny @

Repor t of Management Management is responsible for the information and tions contained in the Company's financial statements.

Our financial statements have been prepared in conformity with ally accepted accounting principles, based upon currently available facts and circumstances and management

's best estimates and judgments of the expected effects of events and transactions.

Delmarva Power & Light Company maintains a system of nal controls designed to provide reasonable, bur not absolute, assurance of the reliability of the financial records and the tion of assets. The internal control system is supported by written administrative policies, a program of internal audits, and dures to assure the selection and training of qualified personnel.

Coopers & Lybrand, independent accountants, are engaged to audit the financial statements and express their opinion thereon. Their audits are conducted in accordance with generally accepted auditing standards which include a review of selected internal controls to determine the nature, timing, and extent of audit tests to be applied. The Audit Committee of the Board of Directors, composed of outside directors only, meets with management, internal auditors, and independent accountants to review accounting, auditing, and financial reporting matters. The independent accountants are appointed by the Board on recommendation of the Audit Committee, subject to stockholder approval.

Howard E. Cosgrove Chairman, President and Chief Executive Officer @ Delmarva Power & Light Company Barbara S. Graham Vice President and Chief Financial Officer Report of Independent Accounta n ts To the Board of Directors and Stockholders Delmarva Power & Light Company Wilmington, Delaware We have audited the accompanying consolidated balance sheets and statements of capitalization of Delmarva Power & Light Company and Subsidiary Companies as of December 31, 1992 and 1991, and the related consolidated statements of income, changes in common stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1992. These financial statements are the responsibility of the Company's agement. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards.

Those standards require that we plan and form the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes examining, on a test basis , evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting princip l es used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We believe that our audits vide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects , the consolidated financial position of Delmarva Power & Light Company and Subsidiary Companies as of December 31, 1992 and 1991, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1992 in conformity with ally accepted accounting principles.

As discussed in Note 1 to the Consolidated Financial Statements, the Company changed its method of accounting for unbilled revenues in 1991. 2400 Eleven Penn Center Philadelphia, Pennsylvania February 5, 1993 *

• I CONSOLIDATED STATEMENTS OF (Dollars in Thousands)

Operating Revenues Electric Gas Operating Expenses Electric fuel and purchased power Gas purchased Operation and ma int enance Depreciation Taxes other than income taxes Income taxes Operating Income Other Income Nonuri l ity Subsidiaries Revenues and gains Expenses including interest and income taxes Write-off of joint venture investments Ner earnings of nonurility subsidiaries Allowance for equity funds used during construc t ion

• Other income, n er of income taxes Income Before Utility Interest Charges Utility Interest Charges Debt Other Allowance for borrowed funds used during construction Earnings Income before cumulative effect of a change in accounting principle Cumulative effect of a change in accounting for unbilled revenues Net income Dividends on preferred stock Earnings applicable to common stock Average Shares of Common Stock Outstanding (000) Earnings Per Average Share of Common Stock Before c umulati ve effect of a change in accounting principle Cum ul ative effect of a change in accounting for unbilled revenues T oral earnings per share Dividends Declared Per Share

• Pro Forma Amounts Assuming Retroactive Application of New Accounting Method for Unbilled Revenues Ner income Earnings per average share See accompanying Notes to Consolidated Financial Statements. INCOME -1992 $780,175 83,869 864,044 261,784 43,797 233,038 95,285 37,037 49,392 720,333 143,711 14,040 (13,551) -489 5,631 1 2,855 18,975 162,686 65,667 2,570 (4,077) 64,160 98,526 -98,526 8,349 $ 90,177 53,456 $1.69 -$1.69 $1.54 $ 98,526 $1.69 I Year Ended December 31, 1991 $784,599 7 1 ,222 855,821 285,595 38,140 226,240 88,610 34,918 45,908 719,411 136,410 16,388 (15,110) -1,2 78 4,199 4,042 9,519 145 ,929 66,952 1,907 (3,436) 65,423 80,506 12 ,73 0 93,236 7,977 $ 85,259 50,581 $1.44 0.25 $1.69 $1.54 $ 80,506 $1.44 1990 $732,381 79,836 812,217 251,522 46,576 204,963 82,153 34,447 48,083 667,744 144,473 1 7, 104 (6,856) (62,534) (52,286) 2,845 4,600 (44,841) 99,632 62,764 2,183 (2,626) 62,321 37,311 -37,311 8,784 $ 28,527 47,534 $0.60 -$0.60 $1.54 $ 35,152 $0.55 Delmarva Power & Light Company @

I CONSOLIDATED BALANCE SHEETS I I (Dollars in Thousands)

As of December 31, 1992 1991 Assets

• Utility Plant-At Original Cost Electric $2,345,869

$2,264,200 Gas 163, 139 146,264 Common 127,852 129,721 2,636,860 2,540,185 Less: Accumulated depreciation 929,869 849,852 Net utility plant in service 1,706,991 1,690,333 Construction work-in-progress 187,844 86,699 Leased nuclear fuel, at amortized cost 36,782 39,885 1,931,617 1,816,917 Other Property and Investments Investment in leveraged leases 72,858 78 , 77 1 Other investments 5,481 6,511 Other property, net 53,682 53,425 Funds held by trustee 15,274 1 7,800 147,295 156,507 Current Assets 1 Cash and cash equivalents 21,888 46,841 Accounts receivable Customers 65,929 62,407 Accrued unbilled revenues 22,570 21,371 Other 12,527 12,864 Inventories, at average cost Fuel (coal, oil , and gas) 32,624 44,425

• Materials and supplies 39,055 36,435 Prepayments 7,907 7,290 Deferred income taxes , net 8,236 7,762 210,736 239,395 Deferred Charges and Other Assets Unamortized debt expense 11,219 9,954 Deferred debt refinancing costs 22,510 9,351 Deferred recoverable plant costs 15,019 10,225 Other 36,397 21,369 85,145 50,899 Total $2,374,793

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

• @ Delmarva Power & Light Company I CONSOLIDATED BALANCE SHEETS I I (Dollars in Thousands)

As of December 31, 1992 1991 Capitalization and Liabilities Capitalization (See Statements of Capitalization)

Common stock $ 121,824 $ 118,505 Additional paid-in capital 374,789 346,509 Retained earnings 249,176 241,569 Total common stockholders' equiry 745,789 706,583 Preferred stock 176,365 136,365 Long-term debt 787,387 77 0,146 1,709,541 1,613,094 Current Liabilities Short-term debt 17,000 11,050 Long-term debt due within one year 946 2,079 Variable rate demand bonds 41,500 41,500 Accounts payable 56,389 53,155 Taxes accrued 11,593 13,170 Interest accrued 15, 190 14,101 Dividends declared 20,900 20,459 Current cap ital lease obligation 12,709 12,747 Deferred energy costs 7,933 3,026 Other 25,265 31,324 209,425 202,611 Deferred Credits and Other Liabilities Deferred income taxes, net 352,474 341,276 Deferre d investment tax credits 51,990 54,407 Long-term ca pit al lease obl i ga ti on 26,081 29,337 Other 25,282 22,993 455,827 448,013 Commitments and Contingencies (Notes 14, 15, and 16) --Total $2,374,793

$2,263,718 See accompanying Notes to Consolidated F i nancial Statements .

• Delmarva Power & Light Company @

I CONSOLIDATED STATEMENTS OF CASH FL 0 W S I I (Dollars in Thousands)

Year Ended December 31, 1992 Cash Flows from Operating Activities Net income $98,526 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 105,624 Allowance for equity funds used during construction (5,631) Investment tax credit adjustments, net (2,417) Deferred income taxes, net 10,749 Net change in Accrued unbilled revenues (1, 199) Accounts receivable (3,185) Inventories 9,696 Accounts payable 8,779 Other current assets & liabilities*

(680) Equity in losses of joint ventures -Write-off of joint venture investments

-Other, net 491 Net cash provided by operating activities 220,753 Cash Flows from Investing Activities Construction expenditures, excluding AFUDC (207,439)

Allowance for borrowed funds used during construction (4,077) Change in working capital for construction (9,823) Proceeds from sales of ownership interests in Utility plant and inventory

-Nuclear fuel-Salem

-Cash flows from leveraged leases Insurance proceeds for casualty loss 4,115 Sale of purchase options -Other 1,858 Investment in subsidiary projects and operations (7,013) Decrease in marketable securities

-Net (increase)/decrease in bond proceeds held in trust funds 6,076 Deposits to nuclear decommissioning trust funds (3,770) Other, net (2,677) Net cash used by investing activities (222,750)

Cash Flows from Financing Activities Dividends:

Common (81,986) Preferred (8,492) Issues: Long-term debt 273,335 Common stock 32,200 Preferred stock 40,000 Redemptions:

Long-term debt (257,178)

Common stock (259) Preferred stock -Principal portion of capital lease payments (10,339) Net change in short-term debt 5,950 Other, net (16, 187) Net cash provided/(used) by financing activities (22,956) Net change in cash and cash equivalents (24,953) Beginning of year cash and cash equivalents 46,841 End of year cash and cash equivalents

$21,888 *O ther than debt classified as current , preferred stock redeemable within one yea r , and current deferred income taxes. See accompanying Notes to Consolidated Financial Statements.

@ Delmarva Power & Light Company 1991 $93,236 99,313 (4,199) (2,844) 12,870 (21,371) (5, 157) (171) (12,428) 22,338 --(462) 181 , 125 (181,820)

(3,436) 14 , 538 4,733 --5,375 4,750 (4,504) -(205) (1 , 831) (1,332) (163,732)

(77,097) (7,947) 117,000 87,900 -(86,794) --(10,593) (12,250) (7,900) 2,319 19,712 27,129 $46,841 1990 $37,311 93 , 118 (2,845) (3, 199) (128) -(1,629) (16,255) 8,190 6,449 12,772 62,534 (1,862) 194,456 (187,823)

(2,626) 389 -* 18,706 --(l,649) (20,495) 14,808 (7,030) (1,944) 521 (187,143)

(72,881) (9,024) 94, 111 16,792 -(15,573) -(877) (8,495) (6,200) (2,331) (4,478) 2,835

• 24,294 $27,129

• I CONSOLIDATED STATEMENTS 0 F CAPITALIZATION (Dollars in Thousands)

Common Stockholders' Equity Total Commo n Stockholders' Equity 0> Cumulative Preferred Stock Par value $1 per s h are, 10,000,000 shares authorized, none issued Par value $25 per share, 3,000,000 shares authorized, 7 %% Series, 1 ,600,000 shares issued Par value $100 per share, 1,800,000 shares authorized Series Shares outstanding Call price per share (1992 and 1991) 3.70%-4.56%

240,000 and 240,000 $103-$105 5.00%-7.88%

512,800 and 512,800 $103-$104 Adjustable-5.83%, c 2> 6.28% c 2> 160,850 and 160 ,850 $103 A u ction rate-3.05%, C2> 4.86% C 2> 450,000 and 450,000 $100 Long-Term Debt First Mortgage Bonds: 1992 1991 Maturity Interest Rates Interest Rates 1994 4%% 4 %% 199 7 6%% 6%% 1998 7% 7% 2000 -8 %%-8 %% 2001-2002 6.95%-7 %% 7 Yi o/o-7 %% 2003-2004 6.6%-8% 6.6%-8% 2008 -9 %% 2014-2015 7.30%-8.15%

7.30%-10 Yso/o 2018-2022 6.75%-10% 7.15%-10% Other Bonds, due 2011-2017, 7.15%-7.50%

Pollution Control Notes: Series 1973, due 1993-1998, 5.60%-5.75%

Series 1976, due 1993-2006, 7 Y.%-7 )4% Medium Term Notes, due 1999, 7 Y, o/o Medium Term Notes, due 2002-2004, 8.40% Medium Term Notes, due 2007, 8 Y.% Medium Term Notes , due 2020-2021, 9.68% First Mortgage Notes, 9.65% c 3> Other Obligations, due 1993-1999, 8.56% Unamortized premium and discount, n et Current Maturities of Long-Term Debt Total Long-Term Debt Total Capitalization Variable Rate Demand Bonds c*> Total Capitalization with Variable Rate Demand Bonds (I) Refer to Consolidated Staremenc s of Changes in Common Stockholders' Equity for additional information.

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

(3) Repaid through monthly payments of principal and interest over 15 years ending November 2002. (4) Classified under current li abi litie s as discussed in Nore 11 to the Conso lidated Financial Statements.

See accompanying Notes to Consolida t ed F inan cial Statements. I I As of December 31, 1992 1991 $ 745,789 $ 706,583 40,000 -24,000 24,000 51,280 51,280 16,085 16,085 45,000 45,000 176,365 136 ,365 25,000 25,000 25 , 000 25,000 25,000 25,000 -60,000 95,000 65,000 43,200 43,200 -50,000 81,000 129,500 240,000 144,000 534 , 200 566,700 54,500 54,500 6,650 6,800 3,400 34,500 30,000 -39,000 39,000 50,000 -61,000 61,000 8,809 9,322 1.497 971 (723) (568) (946) (2,079) 787,387 770,146 1,709,541 1,613,094 41,500 $1,751,041

$1,654,594 Delmarva Power & light Company @

CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY (Dollars in Thousands)

Balance as of January 1, 1990 Nee income Cash dividends declared Common stock ($1.54) Preferred stock Issuance of common stock DRIP'2 i Srock options Expenses Redemption of preferred stock Balance as of December 31 , 1990 Nee income Cash dividends declared Common stock ($1.54) Preferred stock Issuance of common stock Public offering DRIP'2 i Srock options Ocher issuance Expenses Balance as of December 31, 1991 Nee income Cash dividends declared Common stock ($1.54) Preferred stock Issuance of common stock DRIP'2 i Srock options Ocher issuance Expenses of common and preferred stock issuances Ocher Balance as of December 31 , 1992 Common Shares Outstanding 46,994,430 891,328 3,600 47,889,358 3,500,000 l, 126,802 150,450 2,354 52,668,964 1,336,871 129,500 8,518 54,143,853 Par c i i Value $105,737 2,006 8 107,751 7,875 2,535 339 5 118,505 3,008 292 19 $121,824 (I) The Company's common stock has a par value of $2.25 per share and 90,000,000 shares are authorized.

Additional Paid-in Capital $256,951 14,723 55 (29) (6) 271,694 56,000 18,640 2,471 35 (2,331) 346,509 26,471 2 ,2 56 154 (414) (187) $374,789 Retained Earnings $279,953 37,311 (73,225) (8,784) (8) 235 , 247 93,236 (78,937) (7 , 977) 241,569 98,526 (82,570) (8,349) $249,176 Total $642,641 37,311 (73,225) (8,784) 16,729 63 (29) (14) 614,692 93,236 (78,937) (7,977) 63,875 21,175 2,810 40 (2,331) 706,583 98,526 (82,570) (8,349) 29,479 2,548 173 (414) (187) $745,789 (2) Dividend Reinvesrment and Common Share Purchase Plan (DRIP}-As of December 31, 1992 , 4,064 , 916 shares were reserved for issuance through the DRIP. See accompanying Nores ro Consolidared Financial Sraremenrs.

@ Delmarva Power & Light Company * *

1. SIGNIFICANT ACCOUNTING POLICIES Nature of Bus i ne s s J'he Company is predominantly a public utility that provides elec-ric service on the Delmarva Peninsula in an area consisting of about 5,700 square miles with a population of approximately one million. The Company also provides gas service in an area ing of about 275 square miles with a population of approximately 450,000 in northern Delaware, including the City of Wilmington.

In addition, the Company has wholly-owned subsidiaries engaged in nonutility activities.

Regu l ation of Utility Operations The Company is subject to regulation with respect to its retail utility sales by the Delaware and Maryland Public Service Commissions (DPSC and MPSC , respectively) and the Virginia State Corporation Commission (VSCC), which have broad powers over rate matters, accounting, and terms of service. Gas sales are subject to regulation by the DPSC. The Federal Energy Regulatory Commission (FERC) exercises jurisdiction with respect to the Company's accounting systems and policies, and the transmission and sale at wholesale (resale) of electric energy. FERC a l so regulates the price and other terms of transportation of natural gas purchased by the Company. The percentage of utility operating revenues regulated by each Commission for the year ended December 31, 1992 was as follows: DPSC 64%, MPSC 22%, VSCC 3%, and FERC 11 %.

• conformity with generally accepted accounting principles, the ompany's accounting policies reflect the financial effects of rate regulation and decisions issued by regulatory commissions having jurisdiction over the Company's utility business.

In accordance with the provisions of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation

," the Company defers expense recognition of certain costs ("deferred charges").

Deferred charges are subsequently amortized to expense over the period that the cost is recovered through customer rates. Reporting of Subs i d i aries The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries-Delmarva

• Energy Company; Delmarva Industries, Inc.; Delmarva Services Company; and Delmarva Capital Investments, Inc. and its sidiaries.

The results of operations of the Company's nonutiliry subsidiaries are reported in the Consolidated Statements of Income as "Other income." Refer to Note 18 to the Consolidated Financial Statements for financial information about the Company's subsidiaries .

• Financial Statement Reclassificat i ons The Company earns revenues from the sale of electric power to the Pennsylvania-New Jersey-Maryland (PJM) Interconnection and certain utilities

("interchange delivery revenues").

The Company has retroactively reclassified interchange delivery enues from operating expenses to electric operating revenues to CO!Jlply with a change in the accounting policies of the FERC. In addition , the revenues and expenses of the Company's steam ness, which is not subject to rate regulation, have been tively reclassified from steam operating revenues and operating expenses to other income. These reclassifications did not affect net income. Certain other reclassifications, which were immaterial and did not affect net income, were made to amounts reported in prior years to conform to the presentations used in 1992. Unbilled Revenues Prior to 1991, the Company recorded revenues as billed to its tomers on a monthly cycle billing basis. At the end of each month, there was an amount of unbilled electric and gas service that had been rendered from the last meter reading to the month-end.

Effective as of January I, 1991, the Company began recording non-fuel revenues for services provided but not yet billed to more closely match revenues with expenses.

The effect of the change on 1991 income before the cumulative effect of a change in ing principle was not material. The cumulative effect of the time change in accounting for unbilled revenues increased 1991 net income by $12 , 730,000 ($0.25 per share). Fuel Expense Fuel costs charged to the Company's results of operations are erally adjusted to-match fuel costs included in customer billings (fuel revenues).

The difference berween fuel revenues and actual fuel costs incurred is reported on the balance sheet as " deferred energy costs." The deferred balance is subsequently recovered from or returned to utility customers.

The Company's share of nuclear fuel costs relating to owned nuclear generating stations is charged to fuel expense on a unit of production basis, which includes a factor for spent nuclear fuel disposal costs. Such estimated disposal costs are paid quarterly to the United States Department of Energy. The Company's share of nuclear fuel at the Peach Bottom Atomic Power Station (Peach Bottom) and the Salem Nuclear Generating Station (Salem) is financed through a nuclear fuel energy contract which is accounted for as a capital lease. D elmarva Po w e r & Light Company @

Depreciation Expense The annual provision for depreciation on utility property is computed on the straight-line basis using composite rates by classes of depreciable property.

The relationship of the annual provision for depreciation for financial accounting purposes to average depreciable property was 3.6% for 1992, 3.7% for 1991, and 3.6% for 1990. The Company's share of the mated cost of decommissioning (decontaminating and ing) nuclear plant is included in depreciation expense. Refer to Note 6 to the Consolidated Financial Statements for tion about nuclear decommissioning.

Income Taxes The Company and its wholly-owned subsidiaries file a dated federal income tax return. Income taxes are allocated to the Company's utility business and subsidiaries based upon their respective taxable incomes, tax credits, and effects of the alternative minimum tax, if any. Deferred income taxes are vided on timing differences berween the tax and financial accounting recognition of certain income and expenses.

Investment tax credits from regulated opera t ions uti l ize d to reduce federal income taxes are deferred and generally amortized over the useful lives of the related utility plant. Investment tax credits of the Company's nonregulated operations (excluding leveraged leases) are accounted for by the flow-through method. Refer to Note 3 to the Conso l idated Financiai Statemenrs for information concerning the Company's adoption of Statemenr of Financial Accounring Standards (SFAS) No. 109, "Accounring for Income Taxes," in the first quarter of 1993. Interest Expense The amortization of debt discount, premium, and expense, including refinancing expenses, is included in other interest @ Delmarva Power & Light Company charges. On a consolidated basis, total inrerest charges incurred were $70,156,000 in 1992, $72 , 456,000 in 1991, and $68,542,000 in 1990. Allowance for Funds Used During Construction and Capitalized Interest Allowance for Funds Used During Construction (AFUDC) is included in the cost of utility planr and represents the cost of borrowed and equity funds used to finance construction of new utility facilities.

The amounr of AFUDC capitalized is also reported in the Consolidated Statemenrs of Income as a tion of inrerest charges for the borrowed funds componenr and as other income for the equity funds componenr.

AFUDC was capitalized on utility planr construction at the rates of9.7% in 1992, 9.9% in 1991, and 9.8% in 1990. The Company's nonutility subsidiaries capitalize inrerest on qualifying projects under construction.

Leveraged Leases The Company's investmenr in leveraged leases includes the aggregate of renrals receivable (net of principal and inrerest on nonrecourse indebtedness) and estimated residual values of the leased equipmenr less unearned and deferred income (including investment tax credits).

Unearned and deferred income is ognized at a level rate of return during the periods in which the net investment is positive. Funds Held by Trustee Funds held by trustee generally include deposits in the Company's external nuclear decommissioning trusts and pended restricted or tax exempt bond proceeds.

Earni n gs on such trust funds are also reflected in the balance. *

2. BASE RATE MATTERS On October 30, 1992, the Company filed applications for tric base rate increases, as follows: Jurisdiction Retail Electric Delaware Maryland Resale (FERC) Proposed Base Revenue Increase $41.6 million $14.6 million $ 5.6 million Proposed Effective Date 06101193 06101193 06/03/93 The above proposed base rate increases, as filed, reflect a requested 12.5% return on common equity and recovery of higher costs, including the cost of the new Hay Road Unit 4 combined-cycle power plant , inflation, and µie expense increase associated with the cost of postretirement benefits under SPAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The proposed base rate increases will be mitigated by fuel savings amibured to Hay Road cycle operations.

Net of the fuel savings , the proposed Delaware, Maryland, and resale rate increases would result in rate increases of approximately 8.5%, 7.2%, and 3.8% tively. Changes in base rates which became effective in 1992 are summarized below. Base Revenue Effective Jurisdiction Increase Dat e Retail electric Delaware<*> $18.5 million or 4.3% 01101192 Maryland<2l $ 5.5 million or 3.3% 01101192 Virginia<3l $ 1.5 million or 6.7% 0 7 101192 Resale (FERC)<<> $ 4.8 million or 5.1 % 02/19/92 Delaware gas<>> $ 4.8 million or 6.5% 02/02/92 (1) The rate increase is based upon a final decision b y the DPSC and it reflects a 12.5% return on equity. (2) The rate increase is based upon a final decision b y the MPSC. A specific return on equity was not stated in the settlement agreement approved by the MPSC. (3) The rate increase is subject to refund since the case is in process. (4) The Company and resale customers representing 99% of resale revenues have reached an agreement in principle which would provide for a $4.125 million increase.

The agreement is subject to approval by the FERC. (5) The rate increase is subject to refund since the case is in process. However, a 12.5% return on equity has been stipulated for the final decision.

Delmarva Power & light Company @

I 3. INCOME TAXES I I Components o f Consolida t ed In c ome Ta x Expense (Dollars in Thousands) 1992 1991 1990 Operation Federal: Current $30,819 $31,777 $29,930 Deferred 11,597 8,924 11,721 I State: Current 6,755 6,596 6,756 Deferred 2,638 1,455 2,875 Investment tax credit adjustments, net (2,417) (2,844) (3,199) Other income Federal: Current 7,559 (4,773) (9,054) Deferred (3,482) 2,336 (14,863) State: Current 1,369 (34) 251 Deferred (4) (188) 139 Income taxes on cumulative effect of a change in accounting for unbilled revenues -8,520 -Total income tax expense $54,834 $51,769 $24,556 Reconcil i ation of Effective Income Tax Rate The amount comp u ted by multiplying income before tax by the federal statutory rate is reconciled below to the total income tax expense: 1992 1991 1990 (Dollars in Thousands)

Amount Rate Amo u nt Rate *Amo u nt Rate Statutory federal income tax expense $52,142 34% $49,302 34% $21,035 34% Increase (decrease) due to Depreciation not normalized 1,959 1 2,103 I 509 1 ITC amortization/flow-through (2,780) (2) (3,456) (2) (4,229) (7) State income taxes, net of fe d eral tax benefit 7,099 5 6,120 4 6,614 11 ' Other, net (3,586) (2) (2,300) (1) 627 1 T oral i n come tax expe n se $54,834 36% $51,769 36% $24,556 40% Components of Deferred Income Taxes The tax effects of ti m ing differences between book and tax inco m e that comprise deferred tax expense are as follows: (Do ll ars in Thousands) 1992 1991 1990 Depreciation

$ (307) $ 3,119 $24,909 I Deferred energy costs (1,957) (4,790) 957 Capitalized over h ead costs (3,313) (2,871) (2,171) ADR repair al l owance 1,818 2,112 2,803 Un b ille d reve nu es 126 4,932 (1,707) I Alternative minim u m tax 2 , 205 3,848 (6, 146) Write-off of joint ve ntur e investments 2,644 6,170 (20,261) De b t refinancing costs 4,978 1,948 (15) Other, net 4,555 (l,598) 1,503 Total $10,749 $1 2,870 $ (128) In 1990, investment tax credits of $879,000 were utilize d to reduce federal income taxes payable. * @ Delmarva Power & Light Company -

• In the fi rst quarter of 1993, the Company w ill adopt SFAS No. 109 , "Acco untin g for Income Taxes," and change to the liability method from the deferred method of income tax accounting, which these financial statements are based on. Under the liability method, deferr e d income tax assets and liabilities r epresent che tax effects of temporary differences berween che financial statement and tax bases of existing assets and liabiliti es and are measured using pr ese ntly enacted tax rates. Deferred tax assets and ities are adjus t ed currently for the effects of changes in tax l aws or rates. T h e main impac t of SFAS No. 109 on the Compa n y's financial statements will be a $78 million net increase in deferred tax ties related to temporary differences principall y associated with the Company's utility plant. Prior to adoption of SFAS No. 109 , deferred taxes were not established on certain temporary ences because ratemaking practices allowed cost recovery from c u stomers as the taxes were p ai d. To establish the net liability , rather 4. OTHER INCOME I I T he components of "Other income , nee of income taxes" as sen ted in the Consolidated Statements ofincome are shown in the table below. Refer ro Note 18 to the Consolidated Financial (Dollars in Thousands) 1992 Revenue s and Income Steam an d other revenues $14,837 Pe ach Bottom lawsuit set tlement 18 , 538 Interest , divid e nds, other income 2,424 Expenses Steam operating and other expe nse s 15 , 326 In come tax expense 7,618 Net $12 , 855 On July 27, 1988 , the Company, Atlantic City E l ectric Company, and Public Service Electric and Gas Company filed l awsuits against Philadelphia Electric Company (PE) to recover ment power and other costs incurred as a result of the shutdown of Pe ac h Bottom by the Nuclear Regulatory Commiss i on (NRC) on March 31, 198 7. The Company's share of costs resulting from than record a charge to earnings, the Company w ill record a net regulatory asset representing the probab l e future recovery of the net liability through utility revenues over the li fe of the related utility plant. The major components of the adjustment to record the net regularory asset and net deferred tax liability include the follow ing: (1) Recognition of additional deferred tax li abilities for tax benefits previou sly flowed through ro customers

($100 million);

(2) Recognition of deferred tax liabilities not previously provided on a portion of AFUDC included in utility plant ($65 million); (3) Reduction of deferred tax liabilities on utili ty assets due to l ower federal income tax rates e n acted under the 1986 Tax Reform Act ($61 million);

(4) Other net temporary differences resulting in recognition of a deferred tax asset ily on deferred investment tax credits ($26 million).

The impact of SFAS No. 109 on the Company's subsidiary and other utility operations is expected to be immaterial to the Company's financial position and resu lt s of operations.

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

1991 1990 $22,509 $22,926 3,966 5,206 22,192 21,864 241 1 ,668 $ 4,042 $ 4,600 the s hutdown were charged against earnings during the period of the shutdown (March 1987 through November 1989). On March 31, 1992, the Peach Bottom co-owners reached a settlement ment under which PE paid $18,538,000 to the Company. The settlement increased 1992 net income by $11,397,000

($0.21 per share) . Delmarva Power & Light Company @

5. JOINTLY-OWNED PLANT The Company's balance sheet includes its proportionate share of assets and liabilities related to jointly-owned plant. The Company's share of operating and maintenance expenses of the jointly-owned plant is included in the corresponding expenses in the Consoli-Megawatt Ownership Capability (Dollars in Thousands)

Share Owned Nuclear Peach Bottom 7.51% 157MW Salem 7.4 1% 164MW Coal-Fired Keystone 3.7 0% 63MW Conemaugh 3.72% 63MW Transmission Facilities Variou s Total 6. NUCLEAR DECOMMISSIONING In compliance with regulations of the NRC, the Company has a plan to fund its share of the future costs of decommissioning (decontaminating and removing) the Peach Bottom and Salem nuclear reactors over the remaining lives of the plants. The Company has established external trust funds ($13.8 million ance at December 31, 1992) to begin to externally fund its share of future decommissioning costs. The trust fund balances are included in "Funds held by trustee" on the balance sheer. The Company's accrued liability for decommissioning the Peach @ Delmarva Power & Light Company dated Statements of Income. The Company is responsible for providing its share of financing for the jointly-owned facilities.

Information with respect to the Company's share of owned plant as of December 31, 1992 was as follows: Construction Plant in Accumulated Work in Service Depreciation Progress $121,446 $ 52,767 $ 4,727 195 ,37 5 7 6 ,422 5,888 15,650 6 , 516 15 7 15 ,7 34 7,325 3 , 914 4,554 1 , 834 $352,759 $144,864 $14,686 Bottom and Salem nuclear reactors, which is reflected in the accumulated reserve for depreciation, was $25.1 million as of December 31, 1992. The Company estimates its share of future decommissioning costs to be $53.7 million , which is the NRC minimum funding requirement.

The Company is currently lecting in rates a sufficient amount from its customers to satisfy the NRC minimum funding requirement.

However, the ultimate cost of decommissioning the Peach Bottom and Salem nuclear reactors may exceed the NRC minimum funding requirement. *

• 7. COMMON STOCK 1) The Company's Restated Certificate and Articles of Incorporation, as amended, and rhe Mortgage and Deed of Trust , as supplemented and amended, securing the Company's ing bonds contain restrictions on the payment of dividends on common stock. Such would become applicable if the Company's capital and retained earnings fall below certain specific levels or if preferred dividends are in arrears. Under the most restricti ve of these provisions , as of December 31 , 1992, approxi-1992 Number Option of Shares Price Beginning-of-year balance 274 , 050 $17 Yz-$21 y. Options granted 59,900 $20 Yz Options exercised 129,500 $17 Yz-$21 y. End-of-year balance 204,450 $17 Yz-$21 y. Exercisable 144,550 $17 Yz-$21 y. 8. PREFERRED STOCK 1) On August 4, 1992, the Company issued 1,600,000 shares of 7 %%, cumulative preferred stock-$25 par value for $40 million. The preferred stock is nor redeemable prior to September 30, 2002. On or after September 30, 2002 , the preferred stock is redeemable at the option of the Company, in whole or in part , at $25 per share plus unpaid accumulated dividends, if any. The marely $169.8 million was available for payment of common dividends.

2) The Company has a nonqualified stock option plan for certain employees.

Options are pric ed at the actual marker value on the grant dare. As of December 31, 1992, 262,000 shares were able to be granted under the nonqualified stock option plan. Changes in stock options are summarized below. 1991 1990 Number Option Number Oprion of Shares Price of Shares Price 306,750 $17 Yz-$21 J4 190,100 $17 Yz-$17 % 117,750 $18 y. 120,250 $21 J4 150,450 $17 Yz-$17 % 3,600 $17 Yz-$17 % 274,050 $17 Yz-$21 J4 306,750 $17 Yz-$21 J4 156 ,3 00 $17 Yz-$21 J4 186,500 $17 Yz-$17 % proceeds from the issue were used for financing the capital requirements of the Company and for other general corporate purposes relating to rhe Company's utility business, including the repa y ment of short-term borrowings.

2) The annual preferred dividend requirements on all outstanding preferred stock at December 31, 1992 are $10,138,000 . Delmarva Power & Light Company @

9. LONG-TERM DEBT 1) Annual sinking fund requirements for the First Mortgage Bonds may be reduced by an amount not exceeding sixty percent of the bondable value of property additions.

For the years 1990-1992, property additions satisfied the sinking fund requirements.

Substantially all utility plant of the Company now or hereafter owned is subject to the lien of the Mortgage and Deed of Trust. 2) On February 4, 1992, the Company issued $50 million of 8 Yi% First Mortgage Bonds which mature on February l, 2022. The proceeds were used on March 2, 1992 to redeem the ing $48.5 million of 10 Ys o/o First Mortgage Bonds ($60 million originally issued), due January l, 2016. 3) On April 22, 1992, the Company issued $50 million of 8 Ys o/o unsecured Medium Term Notes which mature on May l, 2007. The proceeds were used on May 20, 1992 to redeem $50 million of 9 Y.% First Mortgage Bonds, due July l , 2008. 4) On May 6, 1992, the Delaware Economic Development Authority issued on behalf of the Company $15 million of 6.85% tax-exempt Series A Bonds, due May l , 2022, and $31 million of 6. 75% tax-exempt Series B Bonds, due May 1 , 2019. The ceeds from the Series A Bonds were used to finance additions to the Company's gas system. On June 8, 1992 , the proceeds from the Series B Bonds were used to refund $31 million of 7 !4% lution Control Notes, due 1992-2001.

Both the Series A and B Bonds are collateralized by First Mortgage Bonds and are insured. 5) On May 19 , 1992, the Company issued $30 million of 7 Yi% unsecured Medium Term Notes which mature on May l, 10. SHORT-TERM DEBT As of December 31, 1992, the Company had unused bank lines of credit of $75 million. The Company is generally required to pay commitment fees for these lines. Such lines of credit are cally reviewed by the Company, at which time they may be renewed or cancelled.

1999. On June 15, 1992, the proceeds were used to redeem $30 million of 8 Mortgage Bonds, due January l, 2000. 6) On October 6, 1992, the Company issued $66 million of 8.15% First Mortgage Bonds which mature on October l, 2015 and issued $30 million of 6.95% First Mortgage Bonds which matur e on October 1, 2002. The proceeds from these two issues were used on November 2, 1992 to redeem $66 million of9 !4% First Mortgage Bonds due June l, 2015 and $30 million of 8 Y.% First Mortgage Bonds due December l, 2000. 7) As of December 31, 1992 , the fair market value of the Company's long-term debt was $822,494,000 in comparison to the book value of$787,387,000.

As of December 31, 1991, the fair market value of the Company's long-term debt was $806,721,000 in comparison to the book value of $770, 146 ,000. The fair market value of the Company's long-term debt was mated using discounted cash flow calculations, based on interest rates currently available to the Company for debt with similar terms, maturities, and credit worthiness.

8) Maturities of long-term debt and s inking fund requirements during the next five years are as follows: 1993-$4,356,000; 1994-$29,443,000

1995-$4 ,506,000; 1996-$4,583,000; 1997-$29,670,000. The Company expects that the annual ing fund requirements (discussed in item 1 above) of $3,410,000 will be satisfied by property additions during the next five years. 9) The annual interest requirements on long-term debt at December 31, 1992 are $61,547,000.

As of December 31, 1992 , the subsidiaries could borrow up to $7.8 million under a bank credit agreement which expires December 31, 1995. This agreement is collateralized by the leveraged lease portfolio and certain other subsidiary assets. 11. VARIABLE RATE DEMAND BONDS A total of $41.5 million of Variable Rate Demand Bonds were outstanding as of December 31, 1992 and 1991, re s pectively. Although Variable Rat e Demand Bonds are classified as current liabiliti es, the Company intends to use the Variable Rate Demand Bonds as a source of long-term financing by setting the bonds' @ Delmarva Power & Light Company interest rates at market rates and, if advantageous, by utilizing one of the fixed rate/fixed term conversion options of the bonds. The bonds are due on demand or at maturity in the years 2014 to 2017. Average annual interest rates on the Variable Rate Demand Bonds were 3.0% in 1992. *

• 12. PENSION PLAN I I The Company has a defined benefit pens i on plan covering a ll u l ar employees.

The benefits are based on years of service and the employee's compensation.

The Company's funding policy is to contribute each year the net periodic pension cost for that year. However, the contribution for any year will not be less than the minimum required contribution nor greater than the maximum Actuarial Present Value of Benefit Obligations (M i llions of Dollars) Accumulated benefit obligation Vested Non vested Effect of estimated furure compensation increase s Projected benefit obligation Plan assets ar fair value Excess of plan assets over projected benefit obligation Unrecognized prior service cost Unrecognized net gain Unrecognized net rransirion asset Prepaid pension cosr Components of Net Pension Co s t (Millions of Dollars) Service cost-benefits earned during period Interest cost on projected benefit obligation Actual return on plan assets Ner amorrizarion and deferral Net pension cost Assumptions Discount rates used to determine proj ecte d benefit obligation as of December 31 Rates of increase in compensation levels Expected long-rerm rates of return on assets tax deductible contribution.

There were no pension contributions in 1992, 1991 , or 1990. The following table reconciles the plan assets and liabilities to rhe funded status of rhe plan as of December 31, 1992 and 1991. Pension plan assets consist primarily of equity securities and pub-lie bond securities.

1992 1991 $218.8 $206.0 22.7 20.7 241.5 226.7 112.9 110.2 354.4 336.9 475.7 448.6 121.3 111.7 19.0 10.0 (93.4) (75.5) (39.8) (43.1) $ 7.1 $ 3.1 1992 1991 1990 $12.6 $ 9.8 $ 10.9 24.2 21.9 20.9 (39.1) (96.3) 7.2 (1.7) 64.5 (41.1) $ (4.0) $ (0.1) $ (2.1) 1992 1991 1990 7.25% 7.00% 7.75% 6.50% 6.50% 6.50% 8.25% 8.00% 8.00% 13. OTHER POSTRETIREMENT BENEFITS The Company provides health-care and life insurance benefits for retired employees.

Substantially all of the Company's employees ma y become eligible for these benefits if they reach normal ment age while still working for the Company. The Company has recognized the cost of providing these benefits by expensing the insurance claims as they are paid. These costs were $4,496,000, $4, 176,000 , and $3,386,000 in 1992, 1991 , and 1990, tively. In the first quarter of 1993 , rhe Company will adopt SFAS No . 106 , "Employers' Accounting for Posrretirement Benefits Other Than Pensions ," which requires employers, if obligated or mitted to provide posrretiremenr benefits other than pensions , to recognize their obligation on an accrual basis. The cost of the posrretirement benefit obligation will be attributed to the period of employee service ending on the date the employee becomes eligible for the postretirement benefits. The Company estimates its posrretirement benefit obligation, measured as of January 1 , 1993, to be $72 million and will D e l marva Po w er & Lig h t C omp any @

recognize chis obligation by accruing ir over a 20-year period. Before considering amounts capitalized, rhe annual expense of postrerirement benefits under SFAS No. 106 is esrimared to be $11.4 million, or approximately

$7 million higher rhan rhe expense currendy recorded.

Afrer considering amounts capiralized, rhe expense increase associated wirh SFAS No. 106 will be about $5.5 million. The Company's esrimared obligation and expense under SFAS No. 106 are based on a discount rare of7.75% and healrh-care cosr trend rate of 12% currendy, which decreases ually ro 5.5% by 2011. The Company's current filings for rare I 14. COMMITMENTS I The Company esrimares char approximately

$189.4 million, excluding AFUDC, will be expended for consrrucrion purposes in 1993. The Company has a 26-year agreement wirh Scar Enterprise, tive June l, 1992, ro purchase 48 MW of capacity supplied by rhe Delaware City Power Plane, which rhe Company sold ro Scar Enterprise in December 1991. Under rhe terms of rhe agreement, rhe maximum capacity charge for a 12-month period is $3.4 lion, if rhe unit's availability exceeds 85 percent. The Company has commitments for capacity payments under rwo recendy signed agreements which were submitted to rhe DPSC and MPSC for approval.

Under rhe first agreement, beginning at rhe Company's option in 1996 or 1997, the Company will chase 165 MW of capacity over 30 years from a cogeneration ity at a Delaware refinery.

Assuming the purchase begins in 1996, annual capacity charges are estimated to be $27 .8 million in 1996, $47.6 million 1997 rhrough 2012, $33.3 million in 2013 rhrough 2025, and $13.9 million in 2026. Under the second agreement, the Company plans to purchase 33 MW, beginning in 1997, from a nonurility generation facility ro be located in Delaware.

Capacity charges under this agreement are estimated to be $4.5 million in 1997, $7.8 million in 1998 through 2011, $6.4 million in 2012, $5.4 million in 2013 through 2016, $3.9 million in 2017, $2.7 million in 2018 through 2020, $1.9 million in 2021, and $1.4 million in 2022 through 2026. In order to ensure adequate supplies of fuel, rhe Company has R entals Charged to Operating Expenses The following amounts were charged ro operating expenses for rental payments under borh capital and operating leases: (Dollars in Thousands)

Interest on nuclear fuel capital lease Interest on ocher capital leases Amortization of nuclear fuel capital lease Amortization of other capital leases Operating leases @ Delmarva Power & Light Company 1992 $ 1,111 321 10,231 323 14,063 $26,049 increases (Nore 2 ro rhe Consolidated Financial Statements) include recovery of rhe ner SFAS No. 106 expense increase ated wirh rhe Company's utility business.

Until new rares become effective, chis expense increase will be deferred, due ro probable rare recovery.

Based on requested rare treatment, rhe Company expects ro amortize rhe deferral over five years. The impact of SFAS No. 106 on rhe Company's subsidiary and ocher non-utility operations is expected to be immaterial ro rhe Company's cial position and results of operations.

cerrain commitments under long-term fuel supply contracts.

Excluding nuclear fuel discussed below, the Company's ments under irs long-term fuel supply contracts are $76 million in 1993, $55 million in 1994, $50 million in 1995, $44 million in 1996, and $43 million in 1997. During 1990", the Company entered into a nuclear fuel energy contract in order to finance its share of nuclear fuel for the Peach Bottom and the Salem nuclear power plants. Payments under the nuclear fuel energy contract, which is accounted for as a capital lease, are based on the quantity of nuclear fuel burned by Peach Bottom and Salem. The Company's obligation under the tract is generally the net book value of the nuclear fuel financed.

The Company leases an 11.9% interest in the Merrill Creek Reservoir.

The lease is considered an operating lease and ments over rhe remaining lease term, which ends in 2032, are $169 .4 million in aggregate.

The Company also has long-rerm leases for certain other faciliries and equipment.

Minimum commitments as of December 31, 1992 under all non-cancellable lease agreements (excluding payments under the nuclear fuel energy contract, which cannot be reasonably estimated) are as follows: 1993-$6,836,000; 1994-$6,556,000; 1995-$6,526,000; 1996-$6,551,000; 1997-$5,462,000; afrer 1997-$155,520,000; roral-$187,451,000.

Approximately 90% of the minimum lease commitments shown above are ments due under the Company's lease of an 11. 9% interest in the Merrill Creek Reservoir.

1991 1990 $ 1,633 $ 1,550 345 405 10,242 7,832 351 663 14,507 10,575 $27,078 $21,025 * *

• 15. ENVIRONMENTAL MATTERS The Company is subject co regulation wich respect co che mental effects of ics operations, including air and wacer qualicy concrol, so lid wasce disposal, and limicacion on land use by various federal, regional, scare, and lo cal auchoricies.

The Company has incurred, and expects co concinue co incur, capital expendicures and operating coses because of environmencal considerations and requirements.

The disposal of Company-generated hazardous stances can resulc in coses co clean up facilicies found co be minaced due co pasc disposal praccices.

Federal and scare scacuces 16. CONTINGENCIES 11 Nuclear Insurance In che evenc of an incidenc ac any commercial nuclear power plane in che Uniced Scares, che Company could be assessed for a porcion of any chi rd parry claims associated wich che incidenc.

Under che provisions of che Price Anderson Act, if chird parry claims relating co such an incident exceed $200 million (che amounc of primacy insurance), che Company could be assessed up co $19.7 million for chird parry claims. In addition, Congress could impose a enue raising measure on che nuclear industry to pay such claims. The co-owners of Peach Botcom and Salem maintain nuclear property damage and decontamination insurance in the aggregace amounc of $2.590 billion for each station. The Company is insured, co the excenc of its ownership incerest, for its share of pro perry losses in excess of insurance coverages.

Under the terms of che various insurance agreemencs, che Company could be assessed up co $3.5 million in any policy year for losses incurred at nuclear planes insured by the insurance companies.

auchorize governmencal agencies co compel responsible parries co clean up certain abandoned or uncontrolled hazardous wasce sires. Alchough che Company is currencly a pocencially ible parry ac one such sire, and is alleged co be a chird parry concribucor ac cwo ocher such sires, che Company does nor expecc remediation and ocher pocencial coses relaced co che sires, eicher separately or cumulacively, co have a material effecc on che Company's financial position or resulcs of operations.

The Company is a member of an indusccy mucual insurance company, which provides replacement power cost coverage in che evenc of a major accidental oucage ac a nuclear power plane. The premium for this coverage is subject co retrospective assessment for adverse loss experience.

The Company's presenc maximum share of any assessment is $1.4 million per year. 21 Other The Company is involved in cercain ocher legal and tive proceedings before various courcs and governmental agencies concerning races, fuel concracts, cax filings, and ocher matcers. The Company expects that the ultimate disposition of these proceedings will not have a material effecc on the Company's financial position or resulcs of operacions.

17. SUPPLEMENTAL CASH FLOW INFORMATION (Dollars in Thousands)

Cash paid during the year for: Interest, net of capitalized amount Income taxes, net of refunds 1992 $62 , 127 $46,310 For purposes of the Statement of Cash Flows, the Company considers highly liquid marketable securicies and debc mencs purchased with a maturity of three monchs or less co be cash equivalencs.

1991 $65,788 $37,397 1990 $62,440

$21,635 During 1990, the Company incurred a capital lease obligation of $47,489,000 as a resulc of financing Peach Botcom and Salem nuclear fuel through a nuclear fuel energy contract.

The Company received $18, 706,000 of proceeds from che 1990 sale of its inceresc in the Salem nuclear fuel. Refer co Note 14 for additional informacion about che nuclear fuel energy contract . Delmarva Power & light Company @

18. NONUTILITY SUBSIDIARIES The following presenrs consolidared condensed financial rion of rhe Company's nonregulared wholly-owned De l marva Energy Company; Delmarva Indusrries, Inc.; and Delmarva Capiral Invesrmenrs, Inc. Delmarva Services, a sub-I I sidiary which leases real estate to the Company's urility business, is excluded from rhese statements since irs income is derived from inrercompany transactions which are eliminated in consolidation.

Consolidated Condensed Subsidiary Statements o f Income (Dollars In Thousands) 1992 1991 1990 Revenues and Gains ___________________________

_, Landfill and wasre hauling Operaring services Orher revenues Gain on sale of oprions on leveraged leases Orher invesrmenr income Costs and Expenses Operaring expenses Equiry in losses of joinr venrures Wrire-off of joinr venrure invesrmenrs Inreresr expense Capiralized inreresr Income rax (benefir)

Ner income (loss) Earnings (loss) per share of common srock arrribured ro subsidiaries

• Consolidated Condensed Subsidiary Balance Sheets (Dollars In Thousands)

Ar December 31 Assets 1992 1991 Currenr assers Cash and cash equivalenrs Orher Noncurrenr assers lnvesrmenr in Leveraged leases Orher Prope r ry, planr and equipmenr Landfill and wasre hauling Orher Other assers Total $ 6,033 2,477 8,510 72,858 5,481 28,488 2,089 1,225 $118,651 $14,601 4,639 19,240 78,771 6,511 24,555 6,032 2,969 $138,078 In 1991, the sale of purchase options on the residua l va l ues of assets owned through leveraged l ease arrangements increased net income by $3,685,000

($0.07 per share). $9,021 3,038 1, 101 880 14,040 15,408 550 (231) (2,176) 13,551 $ 489 $0.01 $6, 154 2,939 1,129 4,445 1,721 16,388 16,449 1,704 (143) (2,900) 15,110 $1,278 $0.03 Liabilities and Stockholder's Equity Currenr liabiliries Debt due wirhin one year Orher Noncurrenr liabilities Deferred income taxes Other Stockho l der's Equiry Total $ 3,066 4,968 4,457 4,613 17,104 17,932 12,772 62,534 1,720 (373) (25,195) 69,390 $(52,286)

$(1.10) Ar December 31 1992 1991 $ 181 9,!)89 9,870 65,604 3,196 68,800 39,981 $118,651 $ 11,211 11,729 22,940 70,110 5,535 75,645 39,493 $138,078 were wood-b u rning power planes with re l ated sawmill operations char incurred substanrial operating losses due to unfavorable ket conditions for timber and l umber. One of the projects, Burney Forest Products, is still operating under the management of the Company's s u bsidiaries.

The third joinr venture project that was written off, a planned trash-to-steam faciliry, was unable

• In December 1990, the Company wrote off$62,534,000 of investments

($42,497,000 after tax or $0.89 per share) in three joint venrure projects char, based on management's evaluat i on, wou l d nor generate sufficienr cash flows to recover the book value of rhe Company's investment.

Two of rhe joinr venrure projecrs to secure rhe env i ronmenral permits required for construction

• of the facil i ry. @ Delmarva Power & Light Company

19. SEGMENT INFORMATION Segment information with respect to e l ectric and gas operations was as follows: (Dollars in Thousands) 1992 Electric operat i ons Operating revenues $ 780,175 Operating income 134,260 Depreciation 89,421 Construction expenditures 192,493 Gas operat i ons Operating revenues 83,869 Operating income 9,451 Depreci a tion 5,864 Construction expenditures 14,888 Identifi a ble as s ets, net Electric 2,035,977 Gas 142,173 Assets not allocated 196,643 1991 1990 $ 784,599 $ 732,381 129,295 137,210 83,363 77,395 163,399 171 , 581 71,222 79,836 7, 115 7,263 5 ,247 4,758 18,302 16 , 176 1 ,892,24 1 1,789,426 130,624 116 ,9 58 240,853 219,331 20. QUARTERLY FINANCIAL INFORMATION I I The quarterly data presented below reflect all adjustments neces-sary in the opinion of the Company for a fair presentation of the interim results. Quarterly data normally vary seasonally with tern-Quarter Operating Operating Ended Revenue Income (Dollars in Thousands) 1992 March 31 $225,130 $ 38,058 June 30 193 ,797 29,279 September 30 237,717 48,080 December 31 207,400 28,294 $864,044 $143,711 1991 March 31 $216,315 $ 33,424 June 30 205,934 31,730 September 30 238,715 46,867 December 31 194,857 24,389 $855,821 $136,410 Quarterly amounts presented for 1992 and 1991 have been restated for changes in the method of reporting interchange enues and the Company's steam business.

As discussed under "F inancial Statement Reclassifications" in Note l to the Consolidated Financial Statements , these reclassifications did not affect net income. In the first quarter of 1992 , the Company recorded the results of the Peach Bottom lawsuit se ttlement (Note 4 to the Consolidated perarure variations, differences between summer and winter rates, the timing of rate orders, and the scheduled downtime and main-tenance of electric generating units. Earnings Earnings Applicable Average per Net to Common Shares Aver age Income Stock Outstanding Share (In Thousands)

$34,789 $32,988 52,876 $0.62 14,259 12,464 53,285 0.24 34,056 31,810 53,685 0.59 15,422 12,915 53,980 0.24 $98,526 $90,177 53.456 $1.69 $34,896 $32,815 48,149 $0.68 1 7,09 1 15,091 49,586 0.30 32,032 30,070 52,115 0.58 9,217 7,283 52,476 0.13 $93,236 $85,259 50,581 $1.69 Financial Statements) which increased 1992 net income by $11,397,000

($0.21 per share). Effective January l, 1991, the Company changed its method of accounting for unbilled revenues as discussed under "U nbilled Revenues" in Note 1 to the Consolidated Financial Statements.

The first quarter of 1991 includes an increase in net income of $12,730,000

($0.25 per share) for the one-time cumulative effect of the accounting change. D e l ma rv a Po wer & Li ght C om pany @

I CONSOLIDATED STATISTICS I I 1992 1991 1990 1989 1988 Electric Revenues Residential

$273,463 $275,888 $259,113 $251,490

$247,950 (Thousands)

Commercial 220,659 218,558 209,174 197,362 191 , 104 Industrial 144,094 144 , 272 140,288 133 ,4 51 130 , 094 Resale, etc. 102,690 104,819 93,179 90,206 90,220 Unbilled revenues, net 943 (73) ---Sales revenues 741,849 743,464 7 01 ,7 54 672,509 659,368 Interchange deliveries 1'1 30,606 33,523 23,905 31,476 41, 162 Miscellaneous revenues 7,720 7,612 6,722 5,887 8,185 Total electric revenues $780,175 $784,599 $732,381 $709,872 $708,715 Electric Sales Residential 3,228,237 3,236,616 3,081,943 3,049,882 2,944,477 and Interchange Commercial 3,140,149 3,098,599 2,979,738 2,875,681 2,734,069 Deliveries Industrial 3,115,677 3 , 105,338 3,142,439 3,025,653 2,729,409 (1,000 Kilowatt-Hours)

Resale, etc. 2,038,844 2,000,913 1,877,091 1,877,623 1,817,088 Unbilled sales, net (2,096) 18,814 ---Total electric sales 11,520,811 11,460,280 11,081,211 10,828,839 10,225,043 Interchange deliveries 01 998,679 1,113,423 726,090 894,402 Electric Customers Residential 336,076 330,632 326,175 319,696 (End of Period) Commercial 42,427 41,539 40,766 40 , 104 Industrial 726 753 774 798 Resale, etc. 590 578 562 562 Total electric customers 379,819 373,502 368,277 361,160 Gas Revenues Residential

$43,147 $35,636 $38,487 $42,908 (T h ousands) Commercial 20,175 16,370 16,939 18,816 Industrial 15,365 14,395 16,498 17,546 Interruptible and other 3,520 3,552 6,819 6,806 Unbilled revenues, net 255 194 --Gas transported 1,032 710 602 174 Misce ll aneous revenues 375 365 491 492 Total gas revenues $83,869 $7 1 ,222 $79,836 $86,742 Gas Sales Residential 7,264 6,410 6 , 484 6,795 and Gas Transported Commercial 4,286 3,653 3 , 452 3,562 (Million Cubic Feet) Industrial 4,358 4,398 4,418 4,245 Interruptible and other 1,090 1,058 1,715 2,043 Unbilled sales, net 15 55 --Total gas sales 17,013 15,574 16,069 16,645 Gas transported 3,155 2,610 2,194 677 Total gas sales and gas transported 20,168 18,184 18,263 17,322 Gas Customers Residential 82,996 80 , 874 78,893 77,021 (End of Period) Commercial 6,500 6 , 313 5,983 5,689 Industrial 152 154 154 159 Interruptible and other 11 10 14 14 Total gas customers 89,659 87,351 85,044 82,883 (1) Interchange delivery revenues have been retroactively reclassified from operating expenses to electric operating revenues.

See "Financial Statement Reclassifications" under Note I to the Consolidated Financial Statements for additional information.

@ Delmarva Power & Light Company 1,413,150 311,577 38,629 825 547 351,578 $40,303 16,404 12,208 8,375 -2 494 $77,786 6,797 3,333 3,229 2,795 -16,154 2 16,156 74,762 5,322 162 17 80,263

• COMMITTEES AND OFFICERS

• Aud i t Committee John R. Cooper, Chairperson; James C. Johnson III; James T. McKinstry

• Compensation Comm i ttee Elwood P. B l anchard Jr., Chairperson; David D. Wakefield, Vice Chairperson; Sarah I. Gore; Donald W. Mabe Executive Committee Nevius M. Curtis, Chairperson; Howard E. Cosgrove, Vice Chairperson; Elwood P. Blanchard Jr.; James T. McKinstry; David D. Wakefield Investment Committee David D. Wakefield, Chairperson; E l wood P. Blanchard Jr.; Howard E. Cosgrove; Nevius M. Curtis; Donald W. Mabe Nominating Committee Audrey K. Doberstein, Chairperson; Nevius M. Curtis; Donald W. Mabe Nuclear Oversight Committee James T. McKinstry, Chairperson; John R. Cooper; Howard E. Cosgrove Officers As Of January 1, 1993 Howard E. Cosgrove, Chairman of the Board, President a n d Chief Executive Officer H. Ray Landon, Executive Vice President Ralph E. Klesius, Senior Vice President Thomas S. Shaw, Senior Vice President/President, Delmarva Capital Investments, Inc. Barbara S. Graham, Vice President and Chief Financial Officer Donald E. Cain, Vice President, Administration Paul S. Gerritsen, Vice President Kenneth K. Jones, Vice President, Planning Wayne A. Lyons, Vice President, Division Operations Frank]. Perry Jr., Vice President, Production Dale G. Stoodley, Vice President and General Counsel Jack Urban, Vice President, Gas Division W. Douglas Boyce, Vice President, Central Division Donald P. Connelly, Secretary Richard H. Evans, Vice President, Corporate Communications Richard T. J ohnson, Vice President, Southern Division James P. Lavin, Comptro ll er-Corporate and Chief Acco u nt i ng Officer Den n is R. McDowe ll , Comptro ll e r-Operating Philip S. Reese, Treasurer D u ane C. Taylor, Vice President, Information Systems D. Wayne Yerkes, Vice President, Northern Division DIVIDEND REINVESTMENT AND COMMON SHARE PURCHASE PLAN More than 30 percent of the Company's common shareholders of recor d are now participating in the Dividend Reinvestment and Common Share Purchase Plan. If you are no t participating, you may want to consider the benefits of joining this plan. Under the plan, yo u can invest your cas h dividends and also invest additional cash, up to $100,000 per calendar year, to purchase additional s h ares of common stock without a service fee. S h ares of common stock to be purchased under the plan may be either newly issued shares or shares purchased in the open market, depending on the financing needs of the Company. You may obtain a prospectus with the plan description and an enro ll ment authorization card by wr i ting to: Delmarva Power & Light Company Shareho l der Services 800 King Street P.O. Box 231 W il mington, DE 19899 DUPLICATE MAILINGS You may be receiving more than one copy of the Annual Report because of multiple accounts within your household. The Company is required to ma i l an Annual Report to each name on the shareho ld er list unless t h e sha r eho l der requests that duplicate maili n gs be el i minated. To eliminate duplicate mailings, please se nd a written r eq u est to S h a r eho l der Services and e n close the mailing labels from the extra copies. D e lmarv a Powe r & Light Company @

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

The Company had 56,334 holders of common stock as of December 31 , 1992. Dividend 1992 Declared First Quarter $.38% Second Quarter .38% Third Quarter .38 y, Fourth Quarter .38 y, SHAREHOLDER SERVICES Carol C Conrad, Assistant Secretary Delmarva Power & Light Company 800 King Street, P.O. Box 231 Wilmington , Delaware 19899 Telephone (302) 429-3355 or toll free (800) 365-6495 STOCK SYMBOL Common Stock , DEW-listed on the New York and Philadelphia Stock Exchanges.

ANNUAL MEETING The Annual Meeting will be held on May 27, 1993 , at 11 :00 a.m. in the Clayton Hall, University of Delaware , Newark, Delaware. REGULATORY COMMISSIONS Federal Energy Regulatory Commission Martin L Allday-Chairperson 825 North Capitol Street, N.E. Washington, D.C 20426 Delaware Public Service Comm i ssion Nancy M. Norling-Chairperson 1560 S. duPont Highwa y P.O. Box 457 Dover , Delaware 19903-0457 Maryland Pub l ic Service Commission Frank 0. Heintz-Chairperson American Building 231 East Baltimore Street Baltimore, Maryland 21202-3486 Virginia State Corporation Commission Preston C Shannon-Chairperson P.O. Box 1197 Richmond , Virginia 23209 @ Delmarva Power & Light Company Price High Low $21 y, $20 s22 Ya $20 y, $23 '% $22 y, $23 Ya $22 'la Dividend 1991 Declared High First Quarter $.38 y, $19 y. Second Quarter .38 y, 19 !4 Third Quarter .38 y, 20 y. Fourth Quarter .38 y, 21 Ys TRANSFER AGENTS AND REGISTRARS First Mortgage Bond Trustee Chemical Bank 55 Water Street, Suite 1820 New York, New York 10041 Preferred Stock Wilmington Trust Company Corporate Trust Division Rodney Square North Wilmington , Delaware 19890 Common Stock Wilmington Trust Company Corporate Trust Division Rodney Square North Wilmington, Delaware 19890 Chemical Bank Stock Transfer Department P.O. Box 24935 Church Street Station New York , New York 10249 ADDITIONAL REPORTS To supplement information in this Annual Report , a Financial and Statistical Review (1982-1992) and the Form I 0-K are available upon request. Please write to: Delmarva Power & Light Company Shareholder Services 800 King Street P.O. Box 231 Wilmington, Delaware 19899 Price Low $16 Ys 17 Ys 18 !4 19

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