UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                For the Quarterly Period Ended September 30, 2002
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

<TABLE>
<CAPTION>
Commission File           Name of Registrant; State of Incorporation; Address of        IRS Employer
Number                    Principal Executive Offices; and Telephone Number             Identification Number
---------------------     ----------------------------------------------------------    ------------------------
<S>                       <C>                                                           <C>
1-16169                   EXELON CORPORATION                                            23-2990190
                          (a Pennsylvania corporation)
                          10 South Dearborn Street - 37th Floor
                          P.O. Box 805379
                          Chicago, Illinois 60680-5379
                          (312) 394-7398
1-1839                    COMMONWEALTH EDISON COMPANY                                   36-0938600
                          (an Illinois corporation)
                          10 South Dearborn Street - 37th Floor
                          P.O. Box 805379
                          Chicago, Illinois 60680-5379
                          (312) 394-4321
1-1401                    PECO ENERGY COMPANY                                           23-0970240
                          (a Pennsylvania corporation)
                          P.O. Box 8699 2301 Market Street
                          Philadelphia, Pennsylvania 19101-8699
                          (215) 841-4000
333-85496                 EXELON GENERATION COMPANY, LLC                                23-3064219
                          (a Pennsylvania limited liability company)
                          300 Exelon Way
                          Kennett Square, Pennsylvania 19348
                          (610) 765-8200
</TABLE>

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_].

         The number of shares  outstanding of each registrant's  common stock as
of October 15, 2002 was as follows:

    Exelon   Corporation   Common  Stock,   without  par  value      322,984,742
    Commonwealth  Edison Company Common Stock,  $12.50 par value     127,016,409
    PECO Energy Company Common Stock,  without par value             170,478,507
    Exelon Generation Company, LLC                                not applicable

<PAGE>


                                        TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                           Page No.
<S>                                                                                        <C>
  Filing Format                                                                               3
  Forward-Looking Statements                                                                  3

  PART I.   FINANCIAL INFORMATION                                                             4
  ITEM 1.   FINANCIAL STATEMENTS                                                              4
                  Exelon Corporation
                           Consolidated Statements of Income and Comprehensive Income         5
                           Consolidated Statements of Cash Flows                              6
                           Consolidated Balance Sheets                                        7
                  Commonwealth Edison Company
                           Consolidated Statements of Income and Comprehensive Income         9
                           Consolidated Statements of Cash Flows                             10
                           Consolidated Balance Sheets                                       11
                  PECO Energy Company
                           Consolidated Statements of Income and Comprehensive Income        13
                           Consolidated Statements of Cash Flows                             14
                           Consolidated Balance Sheets                                       15
                  Exelon Generation Company, LLC
                           Consolidated Statements of Income and Comprehensive Income        17
                           Consolidated Statements of Cash Flows                             18
                           Consolidated Balance Sheets                                       19
                  Combined Notes to Consolidated Financial Statements                        21

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS                                                         51
                  Exelon Corporation                                                         51
                  Commonwealth Edison Company                                                80
                  PECO Energy Company                                                        94
                  Exelon Generation Company, LLC                                            108

  ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                       121
  ITEM 4.   CONTROLS AND PROCEDURES                                                         124

  PART II.  OTHER INFORMATION                                                               126
  ITEM 1.   LEGAL PROCEEDINGS                                                               126
  ITEM 5.   OTHER INFORMATION                                                               126
  ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                                                128

SIGNATURES                                                                                  131
CERTIFICATIONS                                                                              133
</TABLE>


                                       2
<PAGE>


Filing Format

         This   combined   Form  10-Q  is  being  filed   separately  by  Exelon
Corporation,  Commonwealth  Edison  Company,  PECO  Energy  Company  and  Exelon
Generation Company, LLC (Registrants).  Information contained herein relating to
any individual  registrant has been filed by such  registrant on its own behalf.
No registrant makes any  representation as to information  relating to any other
registrant.

Forward-Looking Statements

         Except for the historical  information contained herein, certain of the
matters discussed in this Report are forward-looking statements that are subject
to risks and  uncertainties.  The  factors  that could cause  actual  results to
differ  materially  from the  forward-looking  statements  made by a  registrant
include  those  discussed  herein as well as those  listed in Note 8 of Notes to
Consolidated Financial Statements,  those discussed in "Management's  Discussion
and  Analysis of  Financial  Condition  and Results of  Operations--Outlook"  in
Exelon  Corporation's  2001 Annual Report,  those discussed in "Risk Factors" in
PECO Energy Company's  Registration  Statement on Form S-3, Reg. No.  333-99361,
those discussed in "Risk Factors" and  "Management's  Discussion and Analysis of
Financial  Condition and Results of  Operations" in Exelon  Generation  Company,
LLC's Registration Statement on Form S-4, Reg. No. 333-85496, those discussed in
"Risk Factors" in Commonwealth Edison Company's  Registration  Statement of Form
S-3,  Reg.  No.  333-99363  and other  factors  discussed  in  filings  with the
Securities and Exchange Commission by the Registrants. Readers are cautioned not
to place undue reliance on these forward-looking statements, which apply only as
of the date of this Report. None of the Registrants  undertake any obligation to
publicly  release any  revision  to its  forward-looking  statements  to reflect
events or circumstances after the date of this Report.



                                        3
<PAGE>


                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS






                                       4
<PAGE>

EXELON CORPORATION

<TABLE>
<CAPTION>
                                        EXELON CORPORATION AND SUBSIDIARY COMPANIES
                                 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                                        (Unaudited)

                                                                   Three Months Ended            Nine Months Ended
                                                                         September 30,                September 30,
(in millions, except per share data)                                   2002       2001           2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>        <C>            <C>        <C>
OPERATING REVENUES                                                   $4,370     $4,185         $  11,245  $  11,625

OPERATING EXPENSES
     Purchased Power                                                  1,233      1,249             2,543      2,634
     Purchased Power from Unconsolidated Affiliate                      104         26               220         48
     Fuel                                                               373        356             1,233      1,455
     Operating and Maintenance                                        1,114      1,101             3,252      3,293
     Depreciation and Amortization                                      345        369             1,012      1,109
     Taxes Other Than Income                                            201        172               568        493
---------------------------------------------------------------------------------------------------------------------
         Total Operating Expense                                      3,370      3,273             8,828      9,032
---------------------------------------------------------------------------------------------------------------------
OPERATING INCOME                                                      1,000        912             2,417      2,593
---------------------------------------------------------------------------------------------------------------------
OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                  (249)      (283)             (739)      (864)
     Distributions on Preferred Securities of Subsidiaries              (11)       (11)              (34)       (34)
     Equity in Earnings of Unconsolidated Affiliates, net                92         52               114         77
     Other, net                                                          16        (51)              239         48
---------------------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                             (152)      (293)             (420)      (773)
---------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
   EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES                           848        619             1,997      1,820
INCOME TAXES                                                            297        243               724        742
---------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN
   ACCOUNTING PRINCIPLES                                                551        376             1,273      1,078
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
   PRINCIPLES (net of income taxes of ($90) and $8 for the nine
   months ended September 30, 2002 and 2001, respectively)               --         --              (230)        12
---------------------------------------------------------------------------------------------------------------------
NET INCOME                                                              551        376             1,043      1,090
---------------------------------------------------------------------------------------------------------------------

OTHER COMPREHENSIVE INCOME (LOSS) (net of income taxes)
       SFAS 133 Transition Adjustment                                    --         --                --         44
       Cash Flow Hedge Fair Value Adjustment                            (28)        13              (109)       (17)
       Unrealized Gain (Loss) on Marketable Securities, net             (73)       (30)             (158)      (154)
       Interest in Other Comprehensive Income of
           Unconsolidated Affiliates                                    (20)        (3)              (21)        (1)
---------------------------------------------------------------------------------------------------------------------
         Total Other Comprehensive Income (Loss)                       (121)       (20)             (288)      (128)
---------------------------------------------------------------------------------------------------------------------

TOTAL COMPREHENSIVE INCOME                                           $  430     $  356         $     755    $   962
=====================================================================================================================

AVERAGE SHARES OF COMMON STOCK OUTSTANDING - Basic                      323        321               322        320
=====================================================================================================================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING - Diluted                    324        323               324        323
=====================================================================================================================

EARNINGS PER AVERAGE COMMON SHARE:
     BASIC:
     Income Before Cumulative Effect of Changes in Accounting
           Principles                                                $  1.71    $  1.17        $    3.95    $  3.36
     Cumulative Effect of Changes in Accounting Principles               --         --             (0.71)      0.04
---------------------------------------------------------------------------------------------------------------------
     Net Income                                                      $  1.71    $  1.17        $    3.24    $  3.40
=====================================================================================================================

     DILUTED:
     Income Before Cumulative Effect of Changes in Accounting
           Principles                                                $  1.70    $  1.16        $    3.93    $  3.33
     Cumulative Effect of Changes in Accounting Principles               --         --             (0.71)      0.04
---------------------------------------------------------------------------------------------------------------------
     Net Income                                                      $  1.70    $  1.16        $    3.22    $  3.37
=====================================================================================================================

DIVIDENDS PER COMMON SHARE                                           $  0.44    $  0.42        $    1.32    $  1.40
=====================================================================================================================

                                       See Notes to Consolidated Financial Statements
</TABLE>


                                                             5
<PAGE>

<TABLE>
<CAPTION>
                                      EXELON CORPORATION AND SUBSIDIARY COMPANIES
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                      (Unaudited)

                                                                                    Nine Months Ended September 30,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                     <C>                 <C>
     Net Income                                                                         $   1,043           $ 1,090
     Adjustments to Reconcile Net Income to Net Cash Flows
      Provided by Operating Activities:
       Depreciation and Amortization, including nuclear fuel                                1,284             1,481
       Cumulative Effect of a Change in Accounting Principle (net of income taxes)            230               (12)
       Net Gain on Sale of Investments (net of income taxes)                                 (199)               --
       Provision for Uncollectible Accounts                                                   107                95
       Deferred Income Taxes                                                                  293              (101)
       Deferred Energy Costs                                                                   50                21
       Equity in Earnings of Unconsolidated Affiliates, net                                  (114)              (77)
       Net Realized Losses on Nuclear Decommissioning Trust Funds                              32                90
       Other Operating Activities                                                             162               (76)
         Changes in Working Capital:
          Accounts Receivable                                                                (320)             (163)
          Inventories                                                                         (31)               41
          Accounts Payable, Accrued Expenses and Other Current Liabilities                     (6)              572
          Changes in Receivables and Payables to Unconsolidated Affiliates, net                46                --
          Other Current Assets                                                                 24                (4)
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows provided by Operating Activities                                             2,601             2,957
---------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Capital Expenditures                                                                  (1,534)           (1,352)
     Acquisition of Generating Plants                                                        (443)               --
     Enterprises Acquisitions, net of cash acquired                                            --               (39)
     Proceeds from the Sale of Investments                                                    287                --
     Proceeds from Nuclear Decommissioning Trust Funds                                      1,184             1,077
     Investment in Nuclear Decommissioning Trust Funds                                     (1,330)           (1,128)
     Note Receivable from Unconsolidated Affiliate                                            (42)               --
     Other Investing Activities                                                                81              (143)
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows used in Investing Activities                                                (1,797)           (1,585)
---------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Issuance of Long-Term Debt                                                               956             2,126
     Retirement of Long-Term Debt                                                          (1,946)           (1,433)
     Change in Short-Term Debt                                                                428              (957)
     Dividends on Common Stock                                                               (420)             (448)
     Change in Restricted Cash                                                                 81               125
     Proceeds from Employee Stock Plans                                                        64                52
     Contribution from Minority Interest of Consolidated Subsidiary                            43                --
     Redemption of Preferred Securities of Subsidiaries                                       (18)              (18)
     Other Financing Activities                                                               (16)               32
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows used in Financing Activities                                                  (828)             (521)
---------------------------------------------------------------------------------------------------------------------

INCREASE IN CASH AND CASH EQUIVALENTS                                                         (24)              851

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                              461               526
---------------------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                              $     490           $ 1,377
=====================================================================================================================

SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash Investing and Financing Activities:
Contribution of Land from Minority Interest of Consolidated Subsidiary                  $      12                --
Regulatory Asset Fair Value Adjustment                                                         --           $   347
Purchase Accounting Estimate Adjustments                                                       --           $    63


                                    See Notes to Consolidated Financial Statements
</TABLE>


                                                          6

<PAGE>

<TABLE>
<CAPTION>

                                      EXELON CORPORATION AND SUBSIDIARY COMPANIES
                                              CONSOLIDATED BALANCE SHEETS
                                                      (Unaudited)


                                                                                    September 30,      December 31,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
ASSETS

CURRENT ASSETS
<S>                                                                                     <C>               <C>
     Cash and Cash Equivalents                                                          $     461         $     485
     Restricted Cash                                                                          291               372
     Accounts Receivable, net
         Customer                                                                           2,007             1,687
         Other                                                                                210               428
     Receivable from Unconsolidated Affiliate                                                  40                44
     Inventories, at average cost
         Fossil Fuel                                                                          189               222
         Materials and Supplies                                                               312               249
     Deferred Income Taxes                                                                    101                23
     Other                                                                                    300               272
---------------------------------------------------------------------------------------------------------------------
         Total Current Assets                                                               3,911             3,782
---------------------------------------------------------------------------------------------------------------------

PROPERTY, PLANT AND EQUIPMENT, NET                                                         14,926            13,781

DEFERRED DEBITS AND OTHER ASSETS
     Regulatory Assets                                                                      6,111             6,423
     Nuclear Decommissioning Trust Funds                                                    2,997             3,165
     Investments                                                                            1,665             1,623
     Goodwill, net                                                                          4,964             5,335
     Other                                                                                    662               708
---------------------------------------------------------------------------------------------------------------------
         Total Deferred Debits and Other Assets                                            16,399            17,254
---------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                            $  35,236         $  34,817
=====================================================================================================================


                                    See Notes to Consolidated Financial Statements
</TABLE>


                                                           7

<PAGE>

<TABLE>
<CAPTION>
                                      EXELON CORPORATION AND SUBSIDIARY COMPANIES
                                              CONSOLIDATED BALANCE SHEETS
                                                      (Unaudited)


                                                                                    September 30,      December 31,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
<S>                                                                                     <C>               <C>
     Notes Payable                                                                      $     788         $     360
     Long-Term Debt Due within One Year                                                     1,501             1,406
     Accounts Payable                                                                       1,304               964
     Accrued Expenses                                                                         942             1,182
     Other                                                                                    495               505
---------------------------------------------------------------------------------------------------------------------
         Total Current Liabilities                                                          5,030             4,417
---------------------------------------------------------------------------------------------------------------------

LONG-TERM DEBT                                                                             11,904            12,879

DEFERRED CREDITS AND OTHER LIABILITIES
     Deferred Income Taxes                                                                  4,506             4,388
     Unamortized Investment Tax Credits                                                       305               316
     Nuclear Decommissioning Liability for Retired Plants                                   1,389             1,353
     Pension Obligation                                                                       315               334
     Non-Pension Postretirement Benefits Obligation                                           893               847
     Spent Nuclear Fuel Obligation                                                            854               843
     Other                                                                                    859               694
---------------------------------------------------------------------------------------------------------------------
         Total Deferred Credits and Other Liabilities                                       9,121             8,775
---------------------------------------------------------------------------------------------------------------------

PREFERRED SECURITIES OF SUBSIDIARIES                                                          595               613

MINORITY INTEREST OF CONSOLIDATED SUBSIDIARIES                                                 75                31

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
     Common Stock                                                                           6,995             6,930
     Deferred Compensation                                                                     (1)               (2)
     Retained Earnings                                                                      1,830             1,200
     Accumulated Other Comprehensive Income (Loss)                                           (313)              (26)
---------------------------------------------------------------------------------------------------------------------
         Total Shareholders' Equity                                                         8,511             8,102
---------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                              $  35,236         $  34,817
=====================================================================================================================


                                    See Notes to Consolidated Financial Statements
</TABLE>

                                                          8


<PAGE>


COMMONWEALTH EDISON COMPANY
<TABLE>
<CAPTION>
                                 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
                              CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                                      (Unaudited)

                                                                   Three Months Ended             Nine Months Ended
                                                                         September 30,                September 30,
(in millions)                                                          2002       2001              2002       2001
---------------------------------------------------------------------------------------------------------------------
OPERATING REVENUES
<S>                                                                  <C>        <C>              <C>        <C>
     Operating Revenues                                              $1,912     $1,905           $ 4,685    $ 4,826
     Operating Revenues from Affiliates                                  26         14                49         69
---------------------------------------------------------------------------------------------------------------------
         Total Operating Revenues                                     1,938      1,919             4,734      4,895
---------------------------------------------------------------------------------------------------------------------

OPERATING EXPENSES
     Purchased Power                                                      8          6                20          8
     Purchased Power from Affiliate                                     967        948             2,046      2,141
     Operating and Maintenance                                          234        229               620        625
     Operating and Maintenance from Affiliates                           33         36               104        106
     Depreciation and Amortization                                      129        178               397        512
     Taxes Other Than Income                                             77         82               223        223
---------------------------------------------------------------------------------------------------------------------
         Total Operating Expense                                      1,448      1,479             3,410      3,615
---------------------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                        490        440             1,324      1,280
---------------------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                  (122)      (137)             (374)      (423)
     Interest Expense from Affiliate                                     --        (10)               --        (10)
     Distributions on Company-Obligated
       Mandatorily Redeemable Preferred Securities of
       Subsidiary Trusts Holding Solely the Company's
       Subordinated Debt Securities                                      (7)        (7)              (22)       (22)
     Interest Income from Affiliates                                      8         24                23         70
     Other, net                                                          (8)         9                 6         24
---------------------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                             (129)      (121)             (367)      (361)
---------------------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                              361        319               957        919

INCOME TAXES                                                            146        141               381        412
---------------------------------------------------------------------------------------------------------------------

NET INCOME                                                              215        178               576        507
---------------------------------------------------------------------------------------------------------------------

OTHER COMPREHENSIVE INCOME (LOSS) (net of income taxes):
     Cash Flow Hedge Fair Value Adjustment                              (15)        --               (31)        --
     Unrealized Gain (Loss) on Marketable Securities                     (1)        (1)               (3)        (5)
---------------------------------------------------------------------------------------------------------------------
         Total Other Comprehensive Income (Loss)                        (16)        (1)              (34)        (5)
---------------------------------------------------------------------------------------------------------------------

TOTAL COMPREHENSIVE INCOME                                           $  199     $  177           $   542    $   502
=====================================================================================================================


                                    See Notes to Consolidated Financial Statements
</TABLE>



                                                          9
<PAGE>

<TABLE>
<CAPTION>
                                 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                      (Unaudited)

                                                                                    Nine Months Ended September 30,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                     <C>               <C>
     Net Income                                                                         $     576         $     507
     Adjustments to Reconcile Net Income to Net Cash Flows
      Provided by Operating Activities:
       Depreciation and Amortization                                                          397               512
       Provision for Uncollectible Accounts                                                    29                31
       Deferred Income Taxes                                                                   92                26
       Other Operating Activities                                                              86               (27)
        Changes in Working Capital:
           Accounts Receivable                                                               (198)              (80)
           Inventories                                                                         (4)               25
           Accounts Payable, Accrued Expenses and Other Current Liabilities                    64               324
           Changes in Receivables and Payables to Affiliates, net                             449              (279)
           Other Current Assets                                                                (2)                4
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows provided by Operating Activities                                             1,489             1,043
---------------------------------------------------------------------------------------------------------------------


CASH FLOWS FROM INVESTING ACTIVITIES
     Capital Expenditures                                                                    (549)             (631)
     Notes Receivable from Affiliate                                                           14               400
     Other Investing Activities                                                                 9                --
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows used in Investing Activities                                                  (526)             (231)
---------------------------------------------------------------------------------------------------------------------


CASH FLOWS FROM FINANCING ACTIVITIES
     Short-Term Borrowings                                                                     94                --
     Issuance of Long-Term Debt                                                               701                --
     Retirement of Long-Term Debt                                                          (1,365)             (260)
     Dividends on Common Stock                                                               (353)             (253)
     Change in Restricted Cash                                                                (37)               (5)
     Other Financing Activities                                                               (10)               --
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows used in Financing Activities                                                  (970)             (518)
---------------------------------------------------------------------------------------------------------------------


(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                               (7)              294
---------------------------------------------------------------------------------------------------------------------


CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                               23               141
---------------------------------------------------------------------------------------------------------------------


CASH AND CASH EQUIVALENTS AT END OF PERIOD                                              $      16         $     435
=====================================================================================================================

SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash Investing and Financing Activities:
     Net Assets Transferred as a result of Restructuring, net of Note Payable                  --         $   1,307
     Receivable from Parent                                                                    --         $   1,062
     Purchase Accounting Estimate Adjustment                                                   --         $      63
     Regulatory Asset Fair Value Adjustment                                                    --         $     347
     Retirement of Treasury Shares                                                      $   1,344         $   2,023

</TABLE>


                 See Notes to Consolidated Financial Statements

                                                          10

<PAGE>

<TABLE>
<CAPTION>
                                 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
                                              CONSOLIDATED BALANCE SHEETS
                                                      (Unaudited)



                                                                                    September 30,      December 31,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
ASSETS

CURRENT ASSETS
<S>                                                                                     <C>               <C>
     Cash and Cash Equivalents                                                          $      16         $      23
     Restricted Cash                                                                           78                41
     Accounts Receivable, net
         Customer                                                                             914               745
         Other                                                                                 89                87
     Receivables from Affiliates                                                                8                 6
     Inventories, at average cost                                                              60                56
     Deferred Income Taxes                                                                     40                52
     Other                                                                                     17                15
---------------------------------------------------------------------------------------------------------------------
         Total Current Assets                                                               1,222             1,025
---------------------------------------------------------------------------------------------------------------------

PROPERTY, PLANT AND EQUIPMENT, NET                                                          7,610             7,351

DEFERRED DEBITS AND OTHER ASSETS
     Regulatory Assets                                                                        583               667
     Investments                                                                               54                64
     Goodwill, net                                                                          4,888             4,902
     Notes Receivable from Affiliates                                                       1,300             1,314
     Other                                                                                    311               304
---------------------------------------------------------------------------------------------------------------------
         Total Deferred Debits and Other Assets                                             7,136             7,251
---------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                            $  15,968         $  15,627
=====================================================================================================================


                                    See Notes to Consolidated Financial Statements
</TABLE>



                                                          11

<PAGE>

<TABLE>
<CAPTION>
                                 COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
                                              CONSOLIDATED BALANCE SHEETS
                                                      (Unaudited)


                                                                                    September 30,      December 31,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
<S>                                                                                     <C>               <C>
     Short-Term Borrowings                                                              $      94         $      --
     Long-Term Debt Due within One Year                                                       798               849
     Accounts Payable                                                                         200               144
     Accrued Expenses                                                                         396               374
     Payables to Affiliates                                                                   615               218
     Other                                                                                    183               212
---------------------------------------------------------------------------------------------------------------------
         Total Current Liabilities                                                          2,286             1,797
---------------------------------------------------------------------------------------------------------------------

LONG-TERM DEBT                                                                              5,295             5,850

DEFERRED CREDITS AND OTHER LIABILITIES
     Deferred Income Taxes                                                                  1,749             1,671
     Unamortized Investment Tax Credits                                                        52                55
     Pension Obligation                                                                       167               151
     Non-Pension Postretirement Benefits Obligation                                           145               146
     Payables to Affiliates                                                                   251               297
     Other                                                                                    322               248
---------------------------------------------------------------------------------------------------------------------
         Total Deferred Credits and Other Liabilities                                       2,686             2,568
---------------------------------------------------------------------------------------------------------------------

COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
SECURITIES OF SUBSIDIARY TRUSTS HOLDING SOLELY THE COMPANY'S
SUBORDINATED DEBT SECURITIES                                                                  329               329

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
     Common Stock                                                                           1,588             2,048
     Preference Stock                                                                           7                 7
     Other Paid-in Capital                                                                  4,181             5,057
     Receivable from Parent                                                                  (845)             (937)
     Retained Earnings                                                                        480               257
     Treasury Stock, at cost                                                                   --            (1,344)
     Accumulated Other Comprehensive Income (Loss)                                            (39)               (5)
---------------------------------------------------------------------------------------------------------------------
         Total Shareholders' Equity                                                         5,372             5,083
---------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                              $  15,968         $  15,627
=====================================================================================================================


                                    See Notes to Consolidated Financial Statements

</TABLE>



                                                          12


<PAGE>

PECO ENERGY COMPANY

<TABLE>
<CAPTION>
                                     PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                              CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                                      (Unaudited)

                                                                    Three Months Ended            Nine Months Ended
                                                                         September 30,                September 30,
 (in millions)                                                         2002       2001              2002       2001
---------------------------------------------------------------------------------------------------------------------
OPERATING REVENUES
<S>                                                                  <C>         <C>             <C>        <C>
     Operating Revenues                                              $1,221      1,048           $ 3,230    $ 2,999
     Operating Revenues from Affiliates                                   3          3                 9          9
---------------------------------------------------------------------------------------------------------------------
         Total Operating Revenues                                     1,224      1,051             3,239      3,008
---------------------------------------------------------------------------------------------------------------------

OPERATING EXPENSES
     Purchased Power                                                     68         57               175        147
     Purchased Power from Affiliate                                     441        363             1,090        872
     Fuel                                                                40         51               228        335
     Operating and Maintenance                                          125        134               350        352
     Operating and Maintenance from Affiliates                           15         22                57         61
     Depreciation and Amortization                                      127        115               348        315
     Taxes Other Than Income                                             85         51               207        135
---------------------------------------------------------------------------------------------------------------------
         Total Operating Expense                                        901        793             2,455      2,217
---------------------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                        323        258               784        791
---------------------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                   (93)      (105)             (280)      (324)
     Interest Expense from Affiliate                                     --         --                --         (8)
     Company-Obligated Mandatorily Redeemable Preferred
       Securities of a Partnership, which holds Solely
       Subordinated Debentures of the Company                            (2)        (2)               (7)        (7)
     Interest Income from Affiliates                                     --          9                --         10
     Other, net                                                           5          3                 7         20
---------------------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                              (90)       (95)             (280)      (309)
---------------------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                              233        163               504        482

INCOME TAXES                                                             76         59               166        171
---------------------------------------------------------------------------------------------------------------------

NET INCOME                                                              157        104               338        311
     Preferred Stock Dividends                                           (2)        (2)               (6)        (7)
---------------------------------------------------------------------------------------------------------------------
NET INCOME ON COMMON STOCK                                           $  155     $  102           $   332    $   304
=====================================================================================================================


OTHER COMPREHENSIVE INCOME
     Net Income                                                      $  157     $  104           $   338    $   311
     Other Comprehensive Income (Loss) (net of income taxes):
       SFAS 133 Transition Adjustment                                    --         --                --         40
       Cash Flow Hedge Fair Value Adjustment                             (5)       (10)              (10)       (20)
       Unrealized Gain (Loss) on Marketable Securities                   (1)        --                --         --
---------------------------------------------------------------------------------------------------------------------

TOTAL COMPREHENSIVE INCOME                                           $  151     $   94           $   328    $   331
=====================================================================================================================


                                    See Notes to Consolidated Financial Statements


</TABLE>



                                                          13
<PAGE>

<TABLE>
<CAPTION>
                                     PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                      (Unaudited)

                                                                                   Nine Months Ended September 30,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                      <C>               <C>
     Net Income                                                                          $    338          $    311
     Adjustments to Reconcile Net Income to Net Cash Flows
      Provided by Operating Activities:
       Depreciation and Amortization                                                          348               315
       Provision for Uncollectible Accounts                                                    48                50
       Deferred Income Taxes                                                                  (64)              (49)
       Deferred Energy Costs                                                                   50                14
       Other Operating Activities                                                              15               (23)
        Changes in Working Capital:
           Accounts Receivable                                                                (69)              (64)
           Changes in Receivables and Payables to Affiliates, net                             (27)              154
           Inventories                                                                         (8)              (21)
           Accounts Payable, Accrued Expenses and Other Current Liabilities                  (107)               92
           Other Current Assets                                                               (51)              (35)
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows provided by Operating Activities                                               473               744
---------------------------------------------------------------------------------------------------------------------


CASH FLOWS FROM INVESTING ACTIVITIES
     Capital Expenditures                                                                    (180)             (153)
     Other Investing Activities                                                                 3                (1)
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows used in Investing Activities                                                  (177)             (154)
---------------------------------------------------------------------------------------------------------------------


CASH FLOWS FROM FINANCING ACTIVITIES
     Retirement of Long-Term Debt                                                            (571)           (1,167)
     Issuance of Long-Term Debt                                                               225               805
     Contribution from Parent                                                                  30               121
     Change in Short-Term Debt                                                                274              (161)
     Dividends on Preferred and Common Stock                                                 (261)             (176)
     Change in Restricted Cash                                                                113                98
     Change in Receivable and Payable to Affiliate, net                                        --               (41)
     Retirement of Mandatorily Redeemable Preferred Stock                                     (19)              (18)
     Settlement of Interest Rate Swap Agreements                                               (5)               31
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows used in Financing Activities                                                  (214)             (508)
---------------------------------------------------------------------------------------------------------------------


INCREASE IN CASH AND CASH EQUIVALENTS                                                          82                82

Cash Transferred in Restructuring                                                              --               (31)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                               32                49
---------------------------------------------------------------------------------------------------------------------


CASH AND CASH EQUIVALENTS AT END OF PERIOD                                               $    114          $    100
=====================================================================================================================

SUPPLEMENTAL CASH FLOW INFORMATION Non-cash Investing and Financing Activities:
     Net Assets Transferred as a result of Restructuring,
       net of Receivable from Affiliates                                                       --          $  1,577
     Contribution of Receivable from Parent                                                    --          $  1,983


                                    See Notes to Consolidated Financial Statements
</TABLE>



                                                          14


<PAGE>

<TABLE>
<CAPTION>
                                     PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                                              CONSOLIDATED BALANCE SHEETS
                                                      (Unaudited)


                                                                                    September 30,      December 31,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
ASSETS

CURRENT ASSETS
<S>                                                                                     <C>               <C>
     Cash and Cash Equivalents                                                          $     114         $     32
     Restricted Cash                                                                          210              323
     Accounts Receivable, net
         Customer                                                                             310              286
         Other                                                                                 30               33
     Receivables from Affiliates                                                               17                1
     Inventories, at average cost
         Fossil Fuel                                                                           79               72
         Materials and Supplies                                                                 7                7
     Prepaid Taxes                                                                             50                1
     Other                                                                                     10               58
---------------------------------------------------------------------------------------------------------------------
         Total Current Assets                                                                 827              813
---------------------------------------------------------------------------------------------------------------------

PROPERTY, PLANT AND EQUIPMENT, NET                                                          4,121            4,047

DEFERRED DEBITS AND OTHER ASSETS
     Regulatory Assets                                                                      5,527            5,756
     Investments                                                                               21               24
     Pension Asset                                                                             37               13
     Other                                                                                     83               85
---------------------------------------------------------------------------------------------------------------------
         Total Deferred Debits and Other Assets                                             5,668            5,878
---------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                            $  10,616         $ 10,738
=====================================================================================================================


                                    See Notes to Consolidated Financial Statements
</TABLE>

                                                          15
<PAGE>

<TABLE>
<CAPTION>
                                     PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
                                              CONSOLIDATED BALANCE SHEETS
                                                      (Unaudited)



                                                                                    September 30,      December 31,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
<S>                                                                                     <C>               <C>
     Notes Payable                                                                      $     375         $     101
     Payables to Affiliates                                                                   130               187
     Long-Term Debt Due within One Year                                                       689               548
     Accounts Payable                                                                          61                54
     Accrued Expenses                                                                         277               397
     Deferred Income Taxes                                                                     27                27
     Other                                                                                     37                21
---------------------------------------------------------------------------------------------------------------------
         Total Current Liabilities                                                          1,596             1,335
---------------------------------------------------------------------------------------------------------------------

LONG-TERM DEBT                                                                              4,950             5,438

DEFERRED CREDITS AND OTHER LIABILITIES
     Deferred Income Taxes                                                                  2,881             2,938
     Unamortized Investment Tax Credits                                                        25                27
     Non-Pension Postretirement Benefits Obligation                                           271               239
     Payable to Affiliate                                                                      --                44
     Other                                                                                    118               110
---------------------------------------------------------------------------------------------------------------------
         Total Deferred Credits and Other Liabilities                                       3,295             3,358
---------------------------------------------------------------------------------------------------------------------

COMPANY-OBLIGATED MANDATORILY REDEEMABLE
     PREFERRED SECURITIES OF A PARTNERSHIP,
     WHICH HOLDS SOLELY SUBORDINATED
     DEBENTURES OF THE COMPANY                                                                128               128
MANDATORILY REDEEMABLE PREFERRED STOCK                                                         --                19

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
     Common Stock                                                                           1,942             1,912
     Receivable from Parent                                                                (1,788)           (1,878)
     Preferred Stock                                                                          137               137
     Retained Earnings                                                                        347               270
     Accumulated Other Comprehensive Income                                                     9                19
---------------------------------------------------------------------------------------------------------------------
         Total Shareholders' Equity                                                           647               460
---------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                              $  10,616         $  10,738
=====================================================================================================================


                                    See Notes to Consolidated Financial Statements


</TABLE>

                                                          16


EXELON GENERATION COMPANY, LLC
<TABLE>
<CAPTION>
                                EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES
                              CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                                      (Unaudited)

                                                                    Three Months Ended            Nine Months Ended
                                                                         September 30,                September 30,
(in millions)                                                          2002       2001           2002          2001
---------------------------------------------------------------------------------------------------------------------
OPERATING REVENUES
<S>                                                                  <C>        <C>            <C>          <C>
     Operating Revenues                                              $  750     $  787         $1,924       $ 2,180
     Operating Revenues from Affiliates                               1,463      1,404          3,309         3,223
---------------------------------------------------------------------------------------------------------------------
         Total Operating Revenues                                     2,213      2,191          5,233         5,403
---------------------------------------------------------------------------------------------------------------------

OPERATING EXPENSES
     Purchased Power                                                  1,251      1,209          2,555         2,504
     Purchased Power from Affiliates                                      6         59             26            85
     Fuel                                                               273        242            706           691
     Operating and Maintenance                                          351        322          1,098         1,046
     Operating and Maintenance Expense from Affiliates                   40         42            136           127
     Depreciation and Amortization                                       68         57            197           224
     Taxes Other Than Income                                             37         36            126           121
---------------------------------------------------------------------------------------------------------------------
         Total Operating Expense                                      2,026      1,967          4,844         4,798
---------------------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                        187        224            389           605
---------------------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                   (22)       (27)           (48)          (62)
     Interest Expense from Affiliates                                    (1)       (14)            (3)          (38)
     Equity in Earnings of Unconsolidated Affiliates                     87         60            119            99
     Interest Income from Affiliates                                     --         10             --            10
     Other, net                                                          14        (35)            54           (17)
---------------------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                               78         (6)           122            (8)
---------------------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
   OF CHANGES IN ACCOUNTING PRINCIPLES                                  265        218            511           597

INCOME TAXES                                                            102         78            198           228
---------------------------------------------------------------------------------------------------------------------

INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN
   ACCOUNTING PRINCIPLES                                                163        140            313           369

CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
   PRINCIPLES                                                            --         --             13            12
---------------------------------------------------------------------------------------------------------------------

NET INCOME                                                              163        140            326           381
---------------------------------------------------------------------------------------------------------------------

OTHER COMPREHENSIVE INCOME (LOSS) (net of income taxes)

       Unrealized Gain (Loss) on Marketable Securities                  (69)       (54)          (151)         (134)
       SFAS 133 Transition Adjustment                                    --         --             --             4
       Cash Flow Hedge Fair Value Adjustment                            (11)        50            (79)           14
       Interest in Other Comprehensive Income of Unconsolidated
           Affiliates                                                   (20)        (3)           (21)           (1)
---------------------------------------------------------------------------------------------------------------------
         Total Other Comprehensive Income (Loss)                       (100)        (7)          (251)         (117)
---------------------------------------------------------------------------------------------------------------------

TOTAL COMPREHENSIVE INCOME                                           $   63     $  133         $   75       $   264
=====================================================================================================================


                                    See Notes to Consolidated Financial Statements
</TABLE>



                                                          17
<PAGE>

<TABLE>
<CAPTION>
                                EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                      (Unaudited)

                                                                                   Nine Months Ended September 30,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                      <C>               <C>
     Net Income                                                                          $    326          $    381
     Adjustments to Reconcile Net Income to Net Cash Flows
      Provided by Operating Activities:
       Depreciation and Amortization, including nuclear fuel                                  475               531
       Cumulative Effect of a Change in Accounting Principle (net of income taxes)            (13)              (12)
       Provision for Uncollectible Accounts                                                    20                 3
       Deferred Income Taxes                                                                  246               (84)
       Equity in (Earnings) Losses of Unconsolidated Affiliates                              (119)              (99)
       Net Realized Losses on Nuclear Decommissioning Trust Funds                              32                90
       Other Operating Activities                                                             109              (162)
          Changes in Working Capital:
           Accounts Receivable                                                                (90)               (4)
           Changes in Receivables and Payables to Affiliates, net                            (325)               13
           Inventories                                                                        (22)              (37)
           Accounts Payable, Accrued Expenses and Other Current Liabilities                   174               145
           Other Current Assets                                                               (42)               17
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows provided by Operating Activities                                               771               782
---------------------------------------------------------------------------------------------------------------------


CASH FLOWS FROM INVESTING ACTIVITIES
     Capital Expenditures                                                                    (715)             (497)
     Acquisition of Generating Plants                                                        (443)               --
     Proceeds from Nuclear Decommissioning Trust Funds                                      1,184             1,077
     Investment in Nuclear Decommissioning Trust Funds                                     (1,330)           (1,128)
     Note Receivable from Affiliate                                                           (42)               --
     Other Investing Activities                                                                 3                 6
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows used in Investing Activities                                                (1,343)             (542)


CASH FLOWS FROM FINANCING ACTIVITIES
     Change in Note Payable, Affiliate                                                        348              (696)
     Contribution from Minority Interest in Consolidated Subsidiary                            43                --
     Issuance of Long-Term Debt                                                                30               821
     Retirement of Long-Term Debt                                                              (4)               (3)
     Distribution to Member                                                                   (30)             (156)
---------------------------------------------------------------------------------------------------------------------
Net Cash Flows provided by (used in) Financing Activities                                     387               (34)


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                             (185)              206
---------------------------------------------------------------------------------------------------------------------


CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                              224                 4
---------------------------------------------------------------------------------------------------------------------


CASH AND CASH EQUIVALENTS AT END OF PERIOD                                               $     39          $    210
=====================================================================================================================

SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash Investing and Financing Activities:
     Contribution of Land from Minority Interest of Consolidated Subsidiary              $     12                --


                                    See Notes to Consolidated Financial Statements
</TABLE>


                                                          18
<PAGE>


<TABLE>
<CAPTION>
                                EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES
                                              CONSOLIDATED BALANCE SHEETS
                                                      (Unaudited)


                                                                                    September 30,      December 31,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
ASSETS

CURRENT ASSETS
<S>                                                                                     <C>               <C>
     Cash and Cash Equivalents                                                          $      39         $     224
     Accounts Receivable, net
         Customer                                                                             443               316
         Other                                                                                 63               150
     Receivables from Affiliates                                                              783               373
     Inventories, at average cost
         Fossil Fuel                                                                          101               105
         Materials and Supplies                                                               228               202
     Deferred Income Taxes                                                                      7                --
     Other                                                                                    113                65
---------------------------------------------------------------------------------------------------------------------
         Total Current Assets                                                               1,777             1,435
---------------------------------------------------------------------------------------------------------------------

PROPERTY, PLANT AND EQUIPMENT, NET                                                          2,796             2,003

DEFERRED DEBITS AND OTHER ASSETS
     Nuclear Decommissioning Trust Funds                                                    2,997             3,165
     Investments                                                                              922               816
     Note Receivable from Affiliate                                                           246               291
     Deferred Income Taxes                                                                    340               212
     Other                                                                                    202               223
---------------------------------------------------------------------------------------------------------------------
         Total Deferred Debits and Other Assets                                             4,707             4,707
---------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                            $   9,280         $   8,145
=====================================================================================================================


                                    See Notes to Consolidated Financial Statements
</TABLE>


                                                          19
<PAGE>

<TABLE>
<CAPTION>
                                EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES
                                              CONSOLIDATED BALANCE SHEETS
                                                      (Unaudited)



                                                                                    September 30,      December 31,
(in millions)                                                                                2002              2001
---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND MEMBER'S EQUITY

CURRENT LIABILITIES
<S>                                                                                     <C>               <C>
     Long-Term Debt Due within One Year                                                 $       6         $       4
     Accounts Payable                                                                         892               585
     Payables to Affiliates                                                                    33                34
     Note Payable to Affiliate                                                                348                --
     Accrued Expenses                                                                         257               303
     Deferred Income Taxes                                                                     --                 7
     Other                                                                                    194               171
---------------------------------------------------------------------------------------------------------------------
         Total Current Liabilities                                                          1,730             1,104
---------------------------------------------------------------------------------------------------------------------

LONG-TERM DEBT                                                                              1,096             1,021

DEFERRED CREDITS AND OTHER LIABILITIES
     Deferred Income Taxes                                                                    247                --
     Unamortized Investment Tax Credits                                                       228               234
     Nuclear Decommissioning Liability for Retired Plants                                   1,389             1,353
     Pension Obligation                                                                       100               118
     Non-Pension Postretirement Benefits Obligation                                           404               384
     Spent Nuclear Fuel Obligation                                                            854               843
     Other                                                                                    324               280
---------------------------------------------------------------------------------------------------------------------
         Total Deferred Credits and Other Liabilities                                       3,546             3,212
---------------------------------------------------------------------------------------------------------------------

MINORITY INTEREST OF CONSOLIDATED SUBSIDIARY                                                   55                --

COMMITMENTS AND CONTINGENCIES

MEMBER'S EQUITY
     Membership Interest                                                                    2,286             2,316
     Undistributed Earnings                                                                   850               523
     Accumulated Other Comprehensive Income (Loss)                                           (283)              (31)
---------------------------------------------------------------------------------------------------------------------
         Total Member's Equity                                                              2,853             2,808
---------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND MEMBER'S EQUITY                                                   $   9,280         $   8,145
=====================================================================================================================


                                    See Notes to Consolidated Financial Statements
</TABLE>


                                                          20




<PAGE>

                   EXELON CORPORATION AND SUBSIDIARY COMPANIES
              COMMONWEALTH EDISON COMPANY AND SUBSIDIARY COMPANIES
                  PECO ENERGY COMPANY AND SUBSIDIARY COMPANIES
             EXELON GENERATION COMPANY, LLC AND SUBSIDIARY COMPANIES
               COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      (Dollars in millions, except per share data, unless otherwise noted)

1. BASIS OF PRESENTATION (Exelon, ComEd, PECO and Generation)
         The accompanying  consolidated financial statements as of September 30,
2002 and for the three and nine months then ended are unaudited, but include all
adjustments  that  Exelon  Corporation  (Exelon),  Commonwealth  Edison  Company
(ComEd),   PECO  Energy  Company  (PECO)  and  Exelon  Generation  Company,  LLC
(Generation)  consider  necessary for a fair  presentation  of their  respective
financial statements.  All adjustments are of a normal, recurring nature, except
as otherwise  disclosed.  The December 31, 2001 consolidated balance sheets were
derived from audited  financial  statements  but do not include all  disclosures
required by generally accepted accounting principles (GAAP).  Certain prior-year
amounts have been reclassified for comparative purposes. These reclassifications
had no effect on net income or  shareholders'  or member's  equity.  These notes
should  be  read  in  conjunction  with  the  Notes  to  Consolidated  Financial
Statements of Exelon, ComEd and PECO included in or incorporated by reference in
Item 8 of their Annual Report on Form 10-K for the year ended  December 31, 2001
and the Notes to  Consolidated  Financial  Statements in  Generation's  Form S-4
registration statement No. 333-85496 declared effective on April 24, 2002 by the
Securities and Exchange  Commission (SEC),  (Generation's Form S-4). See ITEM 6.
Exhibits and Reports on Form 8-K.

         The  consolidated  financial  statements  contained  herein include the
accounts of  majority-owned  subsidiaries  after the elimination of intercompany
transactions.  Investments  and joint ventures in which a 20% to 50% interest is
owned and a significant  influence is exerted are accounted for under the equity
method of  accounting.  The  proportionate  interests in jointly owned  electric
utility plants are  consolidated.  Investments in which less than a 20% interest
is owned are accounted for under the cost method of accounting. Exelon owns 100%
of all  significant  consolidated  subsidiaries,  either directly or indirectly,
except for ComEd of which Exelon owns 99%,  InfraSource of which Exelon owns 95%
and  Southeast  Chicago  Energy  Project,  LLC of which  Exelon owns 70% through
Generation.  Exelon and Generation have reflected the  third-party  interests in
the above majority owned investments as minority interests in their Consolidated
Statements of Cash Flows,  Consolidated  Balance Sheets and in Other, Net on the
Consolidated Statements of Income and Comprehensive Income.


2.   ADOPTION OF NEW ACCOUNTING PRINCIPLES (Exelon, ComEd, PECO and Generation)
SFAS No. 141 and SFAS No. 142
         In  2001,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement of Accounting  Standard (SFAS) No. 141, "Business  Combinations" (SFAS
No. 141),  which requires that all business  combinations be accounted for under
the purchase  method of  accounting  and  establishes  criteria for the separate
recognition of intangible assets acquired in business combinations. SFAS No. 141
is  effective  for  business  combinations  initiated  after June 30,  2001.  In
addition,  SFAS No. 141 requires that unamortized  negative  goodwill related to



                                       21
<PAGE>

pre-July 1, 2001  purchases be recognized  as a change in  accounting  principle
concurrent  with the adoption of SFAS No. 142,  "Goodwill  and Other  Intangible
Assets"  (SFAS No. 142).  At December  31, 2001,  AmerGen  Energy  Company,  LLC
(AmerGen), an equity-method investee of Generation,  had $43 million of negative
goodwill, net of accumulated  amortization,  recorded on its balance sheet. Upon
AmerGen's  adoption of SFAS No. 141 in January 2002,  Generation  recognized its
proportionate share of income of $22 million ($13 million,  net of income taxes)
as a cumulative effect of a change in accounting principle.

         Exelon,  ComEd, PECO and Generation  adopted SFAS No. 142 as of January
1, 2002.  SFAS No. 142  establishes  new accounting and reporting  standards for
goodwill  and  intangible  assets.  Other than  goodwill,  Exelon  does not have
significant other intangible assets recorded on its consolidated balance sheets.
Under SFAS No. 142,  goodwill  is no longer  subject to  amortization,  however,
goodwill is subject to an assessment for impairment  using a two-step fair value
based test, the first step of which must be performed at least annually, or more
frequently if events or circumstances  indicate that goodwill might be impaired.
The first step  compares  the fair  value of a  reporting  unit to its  carrying
amount, including goodwill. If the carrying amount of the reporting unit exceeds
its fair value,  the second step is  performed.  The second  step  compares  the
carrying  amount of the goodwill to the fair value of the goodwill.  If the fair
value of  goodwill  is less than the  carrying  amount,  an  impairment  loss is
reported as a reduction to goodwill and a charge to operating expense, except at
the  transition  date,  when the loss is reflected  as a cumulative  effect of a
change in accounting principle.

         As of December 31, 2001, Exelon's Consolidated Balance Sheets reflected
approximately  $5.3  billion  in  goodwill  net  of  accumulated   amortization,
including $4.9 billion of net goodwill related to the October 20, 2000 merger of
Unicom  Corporation  (Unicom),  the former  parent  company  of ComEd,  and PECO
(Merger)  recorded on ComEd's  Consolidated  Balance Sheets,  with the remainder
related to acquisitions by Exelon Enterprises  Company,  LLC (Enterprises).  The
first  step of the  transitional  impairment  analysis  indicated  that  ComEd's
goodwill  was not  impaired  but that an  impairment  did exist with  respect to
goodwill  recorded in  Enterprises'  reporting  units.  Exelon's  infrastructure
services business (InfraSource),  the energy services business (Exelon Services)
and the competitive retail energy sales business (Exelon Energy) were determined
to be those reporting units of Enterprises that had goodwill  allocated to them.
The  second  step of the  analysis,  which  compared  the fair  value of each of
Enterprises'  reporting  units'  goodwill to the carrying  value at December 31,
2001,  indicated a total goodwill impairment of $357 million ($243 million,  net
of income  taxes and  minority  interest).  The fair  value of the  Enterprises'
reporting units was determined using discounted cash flow models  reflecting the
expected range of future cash flow outcomes  related to each of the  Enterprises
reporting  units  over  the  life  of the  investment.  These  cash  flows  were
discounted to 2002 using a  risk-adjusted  discount  rate.  The  impairment  was
recorded as a cumulative effect of a change in accounting principle in the first
quarter of 2002.



                                       22
<PAGE>

         The changes in the carrying  amount of goodwill by  reportable  segment
(see Note 6 for further  discussion of reportable  segments) for the nine months
ended September 30, 2002 are as follows:

<TABLE>
<CAPTION>
                                                                          Energy
                                                                        Delivery      Enterprises             Total
---------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>               <C>
Balance as of January 1, 2002                                          $   4,902        $     433         $   5,335
Impairment losses                                                             --             (357)             (357)
Settlement of pre-Merger income tax contingencies                             (7)              --                (7)
Merger severance adjustment                                                   (7)              --                (7)
---------------------------------------------------------------------------------------------------------------------
Balance as of September 30, 2002                                       $   4,888        $      76         $   4,964
=====================================================================================================================
</TABLE>

         The September 30, 2002,  Energy Delivery  goodwill relates to ComEd and
the  remaining  Enterprises  goodwill  relates  to the  InfraSource  and  Exelon
Services  reporting units.  Consistent with SFAS No. 142, the remaining goodwill
will be reviewed  for  impairment  on an annual  basis,  or more  frequently  if
significant  events occur that could  indicate an impairment  exists.  ComEd and
Enterprises plan to perform an impairment  review in the fourth quarter of 2002.
Such future review would be consistent with the review conducted  related to the
implementation of SFAS No. 142 (implementation review), which required estimates
of numerous items with varying degrees of  uncertainty,  such as discount rates,
terminal value earnings  multiples,  future revenue levels and estimated  future
expenditure levels for ComEd and Enterprises;  load growth and the resolution of
future rate proceedings for ComEd; and customer base and construction  back logs
for  Enterprises.   Significant   changes  from  the  assumptions  used  in  the
implementation  review could possibly  result in a future  impairment  loss. The
Illinois legislation provides that reductions to ComEd's common equity resulting
from goodwill  impairments  will not impact ComEd's  earnings through 2006 under
the earnings provisions of the legislation.

         The components of the net  transitional  impairment  loss recognized in
the first  quarter  of 2002 as a  cumulative  effect  of a change in  accounting
principle are as follows:

<TABLE>
<CAPTION>
Exelon
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                                    <C>
Enterprises goodwill impairment (net of income taxes of $103 million)                                   $      (254)
Minority interest (net of income taxes of $4 million)                                                            11
Elimination of AmerGen negative goodwill (net of income taxes of $9 million)                                     13
---------------------------------------------------------------------------------------------------------------------
Total cumulative effect of a change in accounting principle                                             $      (230)
=====================================================================================================================

Generation
---------------------------------------------------------------------------------------------------------------------
Elimination of AmerGen negative goodwill (net of income taxes of $9 million)
    recorded as cumulative effect of a change in accounting principle                                   $        13
---------------------------------------------------------------------------------------------------------------------
</TABLE>



                                       23



<PAGE>

         The  following  tables set forth  Exelon's  net income and earnings per
common  share  and  ComEd's  net  income  for the three  and nine  months  ended
September 30, 2002 and 2001, respectively, adjusted to exclude 2001 amortization
expense related to goodwill that is no longer being amortized.

Exelon
<TABLE>
<CAPTION>
                                                              Three Months Ended                  Nine Months Ended
                                                                   September 30,                      September 30,
                                                          2002              2001             2002              2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>             <C>                <C>
Reported income before cumulative effect
     of changes in accounting principles              $    551         $     376       $    1,273         $   1,078
Cumulative effect of changes in
     accounting principles                                  --                --             (230)               12
---------------------------------------------------------------------------------------------------------------------
Reported net income                                        551               376            1,043             1,090
Goodwill amortization                                       --                37               --               114
---------------------------------------------------------------------------------------------------------------------
Adjusted net income                                  $     551         $     413       $   1,043          $   1,204
---------------------------------------------------------------------------------------------------------------------

Basic earnings per common share:
    Reported income before cumulative effect
       of changes in accounting principles            $   1.71          $   1.17       $     3.95         $    3.36
    Cumulative effect of changes in
       accounting principles                                --                --            (0.71)             0.04
---------------------------------------------------------------------------------------------------------------------
    Reported net income                                   1.71              1.17             3.24              3.40
    Goodwill amortization                                   --              0.12               --              0.36
---------------------------------------------------------------------------------------------------------------------
    Adjusted net income                               $   1.71          $   1.29       $     3.24         $    3.76
---------------------------------------------------------------------------------------------------------------------

Diluted earnings per common share:
    Reported income before cumulative effect
       of changes in accounting principles            $   1.70          $   1.16       $     3.93         $    3.33
    Cumulative effect of changes in
       accounting principles                                --                --            (0.71)             0.04
---------------------------------------------------------------------------------------------------------------------
    Reported net income                                   1.70              1.16             3.22              3.37
    Goodwill amortization                                   --              0.11               --              0.35
---------------------------------------------------------------------------------------------------------------------
    Adjusted net income                               $ 1.70           $    1.27       $     3.22         $    3.72
---------------------------------------------------------------------------------------------------------------------

ComEd
                                                              Three Months Ended                  Nine Months Ended
                                                                   September 30,                      September 30,
                                                          2002              2001             2002              2001
---------------------------------------------------------------------------------------------------------------------
Reported net income                                   $   215           $  178         $      576         $     507
Goodwill amortization                                       --              32                 --                97
---------------------------------------------------------------------------------------------------------------------
Adjusted net income                                   $   215           $  210         $      576         $     604
---------------------------------------------------------------------------------------------------------------------
</TABLE>

Generation
         The cessation of the  amortization  of negative  goodwill of AmerGen on
January  1, 2002 did not have a material  impact on  Generation's  reported  net
income for the three or nine months ended September 30, 2002.




                                       24
<PAGE>

EITF Issue 02-3
         Exelon and  Generation  early adopted the provision of Emerging  Issues
Task Force  (EITF)  Issue 02-3  "Accounting  for  Contracts  Involved  in Energy
Trading and Risk Management  Activities"  (EITF 02-3) issued by the FASB EITF in
June 2002 that  requires  revenues  and energy costs  related to energy  trading
contracts to be presented on a net basis in the income  statement.  Prior to the
second quarter of 2002, revenues from trading activity were presented in Revenue
and the  energy  costs  related  to  energy  trading  were  presented  as either
Purchased  Power  or  Fuel  expense  on  Exelon  and  Generation's  Consolidated
Statements of Income. For comparative  purposes,  energy costs related to energy
trading have been reclassified in prior periods to revenue to conform to the net
basis of presentation required by EITF 02-3. For the three and nine months ended
September  30, 2001,  $93 million and $123 million of purchased  power  expense,
respectively,  and $7 million and $12 million of fuel expense, respectively, was
reclassified  and  reflected as a reduction  to revenue.  The three months ended
March 31, 2002 included  $504 million of purchased  power expense and $9 million
of fuel  expense  that has been  reclassified  and  reflected  as a reduction to
revenue in the nine months ended September 30, 2002.

SFAS No. 144
         In September  2001, the FASB issued SFAS No. 144,  "Accounting  for the
Impairment or Disposal of Long-Lived Assets" (SFAS No. 144). Exelon, ComEd, PECO
and Generation adopted SFAS No. 144 on January 1, 2002. SFAS No. 144 establishes
accounting  and  reporting  standards  for both the  impairment  and disposal of
long-lived  assets.  SFAS No. 144 is effective for fiscal years  beginning after
December 15, 2001 and its provisions are generally  applied  prospectively.  The
adoption of this statement had no effect on Exelon,  ComEd, PECO or Generation's
reported financial positions, results of operations or cash flows.

SFAS No. 145
         In April  2002,  the FASB  issued  SFAS No.  145,  "Rescission  of FASB
Statements  No. 4, 44 and 64,  Amendment of FASB Statement No. 13, and Technical
Corrections" (SFAS No. 145). SFAS No. 145 eliminates SFAS No. 4 "Reporting Gains
and Losses  from  Extinguishment  of Debt" (SFAS No. 4) and thus allows for only
those gains or losses on the  extinguishment  of debt that meet the  criteria of
extraordinary items to be treated as such in the financial statements.  SFAS No.
145 also amends Statement of Financial  Accounting Standards No. 13, "Accounting
for Leases" (SFAS No. 13) to require sale-leaseback accounting for certain lease
modifications  that have  economic  effects  that are similar to  sale-leaseback
transactions.  The adoption of SFAS No. 145 had no effect on Exelon, ComEd, PECO
or  Generation's  reported  financial  positions,  results of operations or cash
flows.

SFAS No. 133
         SFAS No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities"  (SFAS No. 133) applies to all derivative  instruments  and requires
that such  instruments  be recorded on the balance sheet either as an asset or a
liability measured at their fair value through earnings, with special accounting
permitted for certain  qualifying  hedges.  On January 1, 2001,  Exelon,  ComEd,
PECO, and Generation adopted SFAS No. 133. Generation recognized a non-cash gain
of $12 million, net of income taxes, in earnings and deferred a non-cash gain of
$4 million,  net of income taxes, in accumulated other comprehensive  income and




                                       25
<PAGE>

PECO  deferred  a  non-cash  gain  of $40  million,  net  of  income  taxes,  in
accumulated other comprehensive income.


3.  ACQUISITIONS  AND  DISPOSITIONS  (Exelon  and  Generation)   Acquisition  of
Generating Plants from TXU
         On April 25, 2002,  Generation  acquired two  natural-gas and oil-fired
plants from TXU Corp. (TXU) for an aggregate purchase price of $443 million. The
purchase  included the  893-megawatt  Mountain Creek Steam  Electric  Station in
Dallas and the 1,441-megawatt  Handley Steam Electric Station in Fort Worth. The
transaction  included a purchased  power  agreement  for TXU to  purchase  power
during the months of May through  September  from 2002 through 2006.  During the
periods covered by the purchased power  agreement,  TXU will make fixed capacity
payments,  variable expense payments,  and will provide fuel to Exelon in return
for  exclusive  rights to the  energy and  capacity  of the  generation  plants.
Substantially  all of the purchase price has been  allocated to property,  plant
and equipment.

Sale of AT&T Wireless
         On April 1, 2002,  Enterprises  sold its 49% interest in AT&T  Wireless
PCS of  Philadelphia,  LLC to a subsidiary  of AT&T  Wireless  Services for $285
million in cash.  Enterprises  recorded  an  after-tax  gain of $116  million in
other, net on the $84 million  investment,  which had been reflected in Deferred
Debits and Other Assets on Exelon's Consolidated Balance Sheets.

Sithe New England Holdings Acquisition
         On June 26,  2002,  Generation  agreed to  purchase  Sithe New  England
Holdings,  LLC (Sithe New England), a subsidiary of Sithe Energies Inc. (Sithe),
and related power  marketing  operations in exchange for a $543 million note. In
addition,  Generation will assume various Sithe guarantees  related to an equity
contribution  agreement  between  Sithe New England and Sithe Boston  Generation
(Boston  Generation),  a project  subsidiary  of Sithe New  England.  The equity
contribution  agreement  requires,  among other things,  that Sithe New England,
upon the  occurrence of certain  events,  contribute up to $38 million of equity
for the purpose of completing the  construction  of two  generating  facilities.
Boston Generation established a $1.2 billion credit facility in order to finance
the  construction of these two generating  facilities.  The  approximately  $1.1
billion expected to be outstanding under the facility at the transaction closing
date,  will be  reflected  on Exelon's  Consolidated  Balance  Sheet.  Sithe New
England  has  provided  security  interests  in and has pledged the stock of its
other project  subsidiaries to Boston Generation.  If the closing conditions are
satisfied, the transaction could be completed in November 2002.

         The purchase involves approximately 4,471 megawatts (MWs) of generation
capacity, consisting of 1,670 MWs in operation and 2,421 MWs under construction,
which would  increase  Generation's  net assets by  approximately  $1.6 billion.
Sithe  New   England's   generation   facilities   are  located   primarily   in
Massachusetts.

         Generation is a 49.9% owner of Sithe and accounts for the investment as
an unconsolidated  equity  investment.  The Sithe New England purchase would not
affect the accounting for Sithe as an equity investment. Separate from the Sithe
New England transaction, Generation is subject to a Put and Call Agreement (PCA)
that gives Generation the right to purchase (Call) the remaining 50.1% of Sithe,
and gives the other Sithe shareholders the right to sell (Put) their interest to





                                       26
<PAGE>

Generation.  If the Put option is exercised,  Generation  has the  obligation to
complete the  purchase.  The PCA provides  that the Put and Call options  become
exercisable  as of December 18, 2002 and expire in December  2005. The Sithe New
England  purchase is a separate  transaction from the PCA in that it is intended
to enable  Generation  to acquire  only the Sithe  assets that fit  Generation's
strategy, accelerate the realization of synergies, and reduce the amount of debt
needed to finance the transaction.

         See ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Exelon  Corporation - for further  discussion of the
PCA.


4. REGULATORY ISSUES (Exelon, ComEd and PECO)
        On June 1, 2001, ComEd filed with the Illinois Commerce Commission (ICC)
to establish  delivery service charges for residential  customers in preparation
for  residential  customer  choice,  which  began in May 2002.  The filing  also
updated delivery service charges for non-residential customers.

         On April 1, 2002,  the ICC issued an interim order in ComEd's  Delivery
Services Rate Case. The interim order is subject to an audit of test year (2000)
expenditures,  including  capital plant  expenditures,  with a final order to be
issued in 2003. The order sets delivery rates for residential customers choosing
a new retail electric supplier.  The new rates became effective May 1, 2002 when
residential  customers  became eligible to choose their supplier of electricity.
Traditional  bundled  rates  paid  by  customers  that  retain  ComEd  as  their
electricity  supplier are not affected by this order.  Bundled rates will remain
frozen through 2006, as a result of the June 6, 2002  amendments to the Illinois
Restructuring  Act that  extended the freeze on bundled  rates for an additional
two years. Delivery service rates for non-residential customers are not affected
by the order. The potential  revenue impact of the interim order is not expected
to be material in 2002.

         On October 10,  2002,  ComEd  received the audit report on the audit of
test year expenditures by the Liberty  Consulting Group (Liberty),  a consulting
firm engaged by the ICC in conjunction with the audit of test year expenditures.
Using  the  interim  order  as a  starting  point,  Liberty  recommends  certain
additional  disallowances to test year expenditures and rate base levels, which,
if  ultimately  approved by the ICC would result in lower  residential  delivery
service charges and higher  non-residential  delivery service  charges.  The ICC
will hold  hearings on the Liberty  audit  report and  responses  from ComEd and
other parties. A final decision is expected in the middle of 2003.

         ComEd  intends to contest the Liberty  audit  findings in the  reopened
hearings and cannot  currently  determine  what portion,  if any, of the Liberty
audit recommendations the ICC will accept. If the ICC ultimately determines that
all or some portion of ComEd's  distribution  plant is not  recoverable  through
rates,  ComEd may be  required  to  write-off  some or all of the  amount of its
investment that the ICC determines is not recoverable.  The estimated  potential
write-off, before income taxes, could be up to approximately $100 million if the
Liberty audit  recommendations were to be accepted by the ICC in their entirety.
ComEd recorded a charge to earnings,  before income taxes, of $12 million in the
third quarter of 2002,  representing the estimated  minimum  probable  write-off
exposure resulting from the audit findings.


                                       27
<PAGE>

         As  permitted  by  the  Pennsylvania   Electric  Competition  Act,  the
Pennsylvania   Department   of  Revenue   calculated  a  2002  Revenue   Neutral
Reconciliation  (RNR)  adjustment  to the  gross  receipts  tax rate in order to
neutralize the impact of electric  restructuring on its tax revenues. In January
2002,  the  Pennsylvania  Public  Utility  Commission  (PUC)  approved  the  RNR
adjustment to the gross receipts tax rate collected  from  customers.  Effective
January 1, 2002, PECO implemented the change in the gross receipts tax rate. The
RNR adjustment increases the gross receipts tax rate, which will increase PECO's
annual  revenues and tax obligations by  approximately  $50 million in 2002. The
RNR adjustment was under appeal.  The case was remanded to the PUC and in August
2002, the PUC ruled that PECO is properly authorized to recover these costs.


5.  EARNINGS PER SHARE (Exelon)
         Diluted earnings per share are calculated by dividing net income by the
weighted average number of shares of common stock outstanding,  including shares
issuable upon exercise of stock options  outstanding under Exelon's stock option
plans considered to be common stock  equivalents.  The following table shows the
effect  of  these  stock  options  on the  weighted  average  number  of  shares
outstanding used in calculating diluted earnings per share (in millions):
<TABLE>
<CAPTION>
                                                                         Three Months Ended        Nine Months Ended
                                                                               September 30,            September 30,
                                                                            2002        2001          2002       2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>         <C>           <C>        <C>
Average common shares outstanding                                            323         321           322        320
Assumed exercise of stock options                                              1           2             2          3
---------------------------------------------------------------------------------------------------------------------
Average diluted common shares outstanding                                    324         323           324        323
=====================================================================================================================
</TABLE>

         Stock options not included in average common shares used in calculating
diluted  earnings per share due to their  antidilutive  effect were five million
for the three and nine months ended  September 30, 2002 and four million and one
million for the three and nine months ended September 30, 2001, respectively.




                                       28
<PAGE>


6. SEGMENT INFORMATION (Exelon, ComEd and PECO)
         Exelon operates in three business segments: energy delivery, generation
and  enterprises.  Beginning in 2002,  Exelon  evaluates the  performance of its
business  segments  on the basis of net  income.  ComEd and PECO  operate in one
business segment,  Energy Delivery.  Exelon's segment  information for the three
months and nine months ended  September 30, 2002 as compared to the same periods
in 2001 and at September 30, 2002 and December 31, 2001 are as follows:

Three  Months  Ended  September  30,  2002 as  compared  to Three  Months  Ended
September 30, 2001

<TABLE>
<CAPTION>
                                                                                      Corporate and
                                             Energy                                    Intersegment
                                           Delivery     Generation     Enterprises     Eliminations   Consolidated
-------------------------------------------------------------------------------------------------------------------
Revenues(1):
<S>                                        <C>            <C>               <C>          <C>              <C>
    2002                                    $ 3,162        $ 2,213           $ 509        $ (1,514)        $ 4,370
    2001                                      2,970          2,191             529          (1,505)          4,185
Intersegment Revenues:
    2002                                      $  29        $ 1,463            $ 22        $ (1,514)         $   --
    2001                                         17          1,404              84          (1,505)             --
Operating Expenses(1):
    2002                                   $  2,350     $    2,026         $   494        $ (1,500)        $ 3,370
    2001                                      2,272          1,967             529          (1,495)          3,273
Net Income/(Loss)
    2002                                     $  370          $ 163            $ 15            $  3          $  551
    2001                                        280            140            (33)             (11)            376
-------------------------------------------------------------------------------------------------------------------
</TABLE>




                                       29
<PAGE>
<TABLE>
<CAPTION>

Nine Months Ended September 30, 2002 as compared to Nine Months Ended September 30, 2001

                                                                                      Corporate and
                                             Energy                                    Intersegment
                                           Delivery     Generation     Enterprises     Eliminations    Consolidated
--------------------------------------------------------------------------------------------------------------------
Revenues(2):
<S> <C>                                     <C>            <C>             <C>             <C>             <C>
    2002                                    $ 7,973        $ 5,233         $ 1,475         $(3,436)        $ 11,245
    2001                                      7,903          5,403           1,742          (3,423)          11,625
Intersegment Revenues:
    2002                                      $  59        $ 3,309           $  72         $(3,440)          $   --
    2001                                         78          3,223             124          (3,425)              --
Operating Expenses(2):
    2002                                    $ 5,865        $ 4,844         $ 1,510        $ (3,391)         $ 8,828
    2001                                      5,833          4,798           1,794          (3,393)           9,032
Net Income/(Loss):
    2002                                     $  908         $  326          $(174)          $  (17)          $1,043
    2001                                        810            381            (63)             (38)           1,090
--------------------------------------------------------------------------------------------------------------------

Total Assets:
    September 30, 2002                     $ 26,584         $9,280          $1,310         $(1,938)        $ 35,236
    December 31, 2001                        26,365          8,145           1,790          (1,483)          34,817
--------------------------------------------------------------------------------------------------------------------

<FN>
(1)  $59 million and $58 million in utility  taxes are  included in the Revenues
     and  Expenses  for the three  months  ended  September  30,  2002 and 2001,
     respectively,  for ComEd.  $64 million and $50 million in utility taxes are
     included in the Revenues and Expenses for the three months ended  September
     30, 2002 and 2001, respectively, for PECO.

(2)  $157 million and $156 million in utility taxes are included in the Revenues
     and  Expenses  for the nine  months  ended  September  30,  2002 and  2001,
     respectively, for ComEd. $157 million and $103 million in utility taxes are
     included in the Revenues  and Expenses for the nine months ended  September
     30, 2002 and 2001, respectively, for PECO.
</FN>
</TABLE>


7.   FAIR VALUE OF FINANCIAL  ASSETS AND LIABILITIES  (Exelon,  ComEd,  PECO and
     Generation)
         During the three and nine  months  ended  September  30, 2002 and 2001,
Exelon recorded pre-tax gains and losses in other comprehensive  income relating
to mark-to-market  (MTM) adjustments of contracts designated as cash flow hedges
as follows:

<TABLE>
<CAPTION>
                                                       ComEd         PECO     Generation     Enterprises    Exelon
---------------------------------------------------------------------------------------------------------------------
<S>                          <C> <C>               <C>           <C>             <C>           <C>        <C>
Three months ended September 30, 2002              $     (36)    $     --        $   (24)      $    4     $     (56)
Three months ended September 30, 2001                     --          (12)            84            9            81
Nine months ended September 30, 2002                     (42)          (1)          (132)          19          (156)
Nine months ended September 30, 2001                      --           (4)           (23)          11           (16)
---------------------------------------------------------------------------------------------------------------------
</TABLE>

         During the three months ended September 30, 2002 and 2001, and the nine
months ended September 30, 2002 and 2001, Generation recognized net MTM gains on
non-trading  energy derivative  contracts not designated as cash flow hedges, in
operating revenues as follows:

<TABLE>
<CAPTION>
                                                                                                 2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>        <C>
Three months ended September 30,                                                               $    1     $       7
Nine months ended September 30,                                                                    11            29
---------------------------------------------------------------------------------------------------------------------
</TABLE>




                                       30
<PAGE>


         During the three months ended September 30, 2002 and 2001, and the nine
months ended  September 30, 2002 and 2001,  Generation  recognized net MTM gains
and losses on energy trading contracts, in earnings as follows:

<TABLE>
<CAPTION>
                                                                                                 2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>        <C>
Three months ended September 30,                                                               $   --     $       4
Nine months ended September 30,                                                                   (13)           (2)
---------------------------------------------------------------------------------------------------------------------
</TABLE>

         During the three months ended  September 30, 2002 and 2001 and the nine
months ended September 30, 2002 and 2001, PECO reclassified  other income in the
Consolidated  Statements of Income and Comprehensive  Income, as a result of the
discontinuance  of cash flow  hedges  related  to certain  forecasted  financing
transactions that were no longer probable of occurring as follows:

<TABLE>
<CAPTION>
                                                                                                 2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>        <C>
Three months ended September 30,                                                               $   --     $      --
Nine months ended September 30,                                                                    --             6
---------------------------------------------------------------------------------------------------------------------
</TABLE>

         As of September  30, 2002,  deferred net  gains/(losses)  on derivative
instruments  accumulated  in  other  comprehensive  income  are  expected  to be
reclassified to earnings during the next twelve months are as follows:

<TABLE>
<CAPTION>
                                                             ComEd      PECO   Generation    Enterprises    Exelon
---------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>        <C>        <C>            <C>        <C>
Net Gains (Losses) Expected to be Reclassified              $   (1)    $  15      $   (48)       $     5    $   (29)
---------------------------------------------------------------------------------------------------------------------
</TABLE>

         Amounts in accumulated other  comprehensive  income related to interest
rate cash  flow  hedges  are  reclassified  into  earnings  when the  forecasted
interest  payment  occurs.  Amounts in accumulated  other  comprehensive  income
related to energy commodity cash flows are  reclassified  into earnings when the
forecasted purchase or sale of the energy commodity occurs.

         During the three months ended  September 30, 2002 and 2001 and the nine
months ended  September 30, 2002 and 2001,  Generation  did not  reclassify  any
amounts from accumulated other comprehensive income into earnings as a result of
forecasted energy commodity transactions no longer being probable.

         Generation   classifies   investments   in  the  trust   accounts   for
decommissioning nuclear plants as available-for-sale.  The following tables show
the fair values,  gross unrealized gains and losses and amortized cost bases for
the securities held in these trust accounts.




                                       31
<PAGE>

<TABLE>
<CAPTION>
                                                                                                 September 30, 2002
                                            -------------------------------------------------------------------------
                                                                           Gross            Gross
                                                     Amortized        Unrealized       Unrealized         Estimated
                                                          Cost             Gains           Losses        Fair Value
---------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>              <C>               <C>
Equity securities                                    $   1,754         $      59        $    (557)        $   1,256
Debt securities
    Government obligations                                 989                73               --             1,062
    Other debt securities                                  674                33              (28)              679
---------------------------------------------------------------------------------------------------------------------
Total debt securities                                    1,663               106              (28)            1,741
---------------------------------------------------------------------------------------------------------------------
Total available-for-sale securities                  $   3,417         $     165        $    (585)        $   2,997
=====================================================================================================================
</TABLE>

         Unrealized gains and losses are recognized in Accumulated  Depreciation
and Accumulated Other Comprehensive Income in Generation's  Consolidated Balance
Sheet.

         For the three months ended  September 30, 2002,  proceeds from the sale
of  decommissioning  trust  investments  and gross  realized gains and losses on
those sales were $295 million,  $12 million and $21 million,  respectively.  For
the  nine  months  ended   September  30,  2002,   proceeds  from  the  sale  of
decommissioning  trust  investments and gross realized gains and losses on those
sales were $1,184 million, $43 million and $77 million, respectively.

         For the nine months ended September 30, 2002, net realized losses of $2
million were recognized in Accumulated Depreciation in Generation's Consolidated
Balance Sheets and $32 million of net realized  losses were  recognized in Other
Income and  Deductions  in  Generation's  Consolidated  Statements of Income and
Comprehensive  Income. The  available-for-sale  securities held at September 30,
2002  have an  average  maturity  of  eight  to ten  years.  The  cost of  these
securities was determined on the basis of specific identification.


8. COMMITMENTS AND CONTINGENCIES (Exelon, ComEd, PECO and Generation)
         For information regarding capital commitments,  nuclear decommissioning
and spent  fuel  storage,  see the  Commitments  and  Contingencies  Note in the
Consolidated  Financial  Statements of Exelon, ComEd and PECO for the year ended
December 31, 2001 and Generation's S-4.

Environmental Liabilities
         Exelon has  identified  71 sites where  former  manufactured  gas plant
(MGP) activities have or may have resulted in actual site  contamination.  As of
September  30,  2002,   Exelon  had  accrued  $150  million  for   environmental
investigation and remediation costs that currently can be reasonably  estimated,
including $127 million for MGP investigation and remediation.

         As of September 30, 2002,  ComEd had accrued $107 million  (discounted)
for  environmental  investigation  and  remediation  costs that currently can be
reasonably  estimated.  This reserve included $103 million for MGP investigation
and  remediation.  The MGP  reserve  was  increased  by $17 million in the third
quarter of 2002 as the result of a delay in implementing the ongoing remediation
for a MGP site in Oak Park, Illinois.

         As of September 30, 2002,  PECO had accrued $34 million  (undiscounted)
for  environmental  investigation  and  remediation  costs that currently can be
reasonably   estimated,   including  $24  million  for  MGP   investigation  and
remediation.




                                       32
<PAGE>

         As  of  September   30,  2002,   Generation   had  accrued  $9  million
(undiscounted)  for  environmental  investigation  and remediation cost, none of
which relates to MGP investigation and remediation.

         Exelon,  ComEd,  PECO and Generation cannot predict the extent to which
they will incur other significant  liabilities for additional  investigation and
remediation  costs at these or  additional  sites  identified  by  environmental
agencies or others, or whether such costs may be recoverable from third parties.

Energy Commitments
         Exelon and  Generation  had long-term  commitments  relating to the net
purchase and sale of energy,  capacity and transmission rights from unaffiliated
utilities,  including Midwest Generation LLC (Midwest  Generation),  and others,
including AmerGen, as expressed in the following table:

<TABLE>
<CAPTION>
                             Net Capacity       Power Only           Power Only Purchases from  Transmission Rights
                            Purchases (1)            Sales            AmerGen  Non-Affiliates         Purchases (2)
---------------------------------------------------------------------------------------------------------------------
<S>                             <C>              <C>                 <C>            <C>                 <C>
2002                            $     191        $     850           $     47       $     796           $        32
2003                                  597            1,954                261           1,467                    75
2004                                  642              944                315             744                    93
2005                                  357              231                489             212                    84
2006                                  329               92                494             177                     3
Thereafter                          4,150               22              2,003             901                    --
---------------------------------------------------------------------------------------------------------------------
Total                           $   6,266        $   4,093           $  3,609       $   4,297           $       287
---------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Net  Capacity  Purchases  includes  Midwest  Generation  commitments  as of
     October 2, 2002. On October 2, 2002, Generation notified Midwest Generation
     of  its  exercise  of  termination   options  under  the  existing  Collins
     Generating  Station  (Collins) and Peaking Unit  (Peaking)  Purchase  Power
     Agreements.  Generation  exercised its termination  options on 1,727 MWs in
     2003 and 2004. In 2003,  Generation  will take 1,778 MWs of option capacity
     under the  Collins  and  Peaking  Unit  Agreements  as well as 1,265 MWs of
     option capacity under the Coal  Generation  Purchase Power  Agreement.  Net
     capacity  purchases in 2004  include  3,474 MWs of optional  capacity  from
     Midwest  Generation.  Net Capacity Purchases also include capacity sales to
     TXU under the purchase power agreement  entered into in connection with the
     purchase of two generating plants in April 2002, which states that TXU will
     purchase  the plant  output from May through  September  from 2002  through
     2006. The combined capacity of the two plants is 2,334 MWs.
(2)  Transmission  Rights Purchases  include  estimated  commitments in 2004 and
     2005 for  additional  transmission  rights that will be required to fulfill
     firm sales contracts.
</FN>
</TABLE>

         Additionally, Generation has the following commitments.

         In connection with the 2001 corporate restructuring, ComEd entered into
a purchase power  agreement  (PPA) with  Generation  under which  Generation has
agreed to supply all of ComEd's load requirements  through 2004. Prices for this
energy vary  depending  upon the time of day and month of delivery.  During 2005
and 2006, ComEd's PPA is a partial requirements agreement under which ComEd will
purchase all of its  required  energy and capacity  from  Generation,  up to the
available  capacity of the nuclear generating plants formerly owned by ComEd and
transferred to Generation. Under the terms of the PPA, Generation is responsible
for obtaining any required  transmission  service.  The PPA also  specifies that
prior to 2005,  ComEd  and  Generation  will  jointly  determine  and agree on a
market-based  price for energy delivered under the PPA for 2005 and 2006. In the
event that the parties  cannot  agree to  market-based  prices for 2005 and 2006
prior to July 1, 2004,  ComEd has the option of  terminating  the PPA  effective
December 31, 2004. ComEd will obtain any additional  supply required from market





                                       33
<PAGE>

sources in 2005 and 2006, and subsequent to 2006,  will obtain all of its supply
from market sources, which could include Generation.

         In connection with the 2001 corporate restructuring,  PECO entered into
a PPA with Generation under which PECO obtains substantially all of its electric
supply  from  Generation  through  2010.  Also,  under the  restructuring,  PECO
assigned  its  rights  and  obligations  under  various  PPAs  and  fuel  supply
agreements to Generation. Generation supplies power to PECO from the transferred
generation assets, assigned PPAs and other market sources.

         Under  terms of the  2001  corporate  restructuring,  ComEd  remits  to
Generation any amounts  collected  from  customers for nuclear  decommissioning.
Under an agreement  effective  September  2001,  PECO remits to  Generation  any
amounts collected from customers for nuclear decommissioning.

Litigation
Exelon
         Securities  Litigation.  Between May 8 and June 14, 2002, several class
action  lawsuits were filed in the Federal  District Court in Chicago  asserting
nearly  identical  securities  law  claims  on behalf  of  purchasers  of Exelon
securities  between April 24, 2001 and September  27, 2001 (Class  Period).  The
complaints  allege that Exelon  violated  Federal  securities  laws by issuing a
series  of  materially  false and  misleading  statements  relating  to its 2001
earnings  expectations  during  the Class  Period.  The court  consolidated  the
pending cases into one lawsuit and has appointed two lead  plaintiffs as well as
lead counsel.

         On  October  1,  2002,  the  plaintiffs  filed a  consolidated  amended
complaint.   In  addition  to  the  original  claims,  this  complaint  contains
allegations of new facts and contains several new theories of liability.  Exelon
believes the lawsuit is without merit and is vigorously contesting this matter.

ComEd
         Chicago Franchise.  In March 1999, ComEd reached a settlement agreement
with the City of Chicago  (Chicago) to end the  arbitration  proceeding  between
ComEd and Chicago regarding their January 1, 1992 franchise  agreement.  As part
of the settlement  agreement,  ComEd and Chicago agreed to a revised combination
of ongoing work under the  franchise  agreement  and new  initiatives  that will
result in defined transmission and distribution expenditures by ComEd to improve
electric services in Chicago. The settlement agreement provides that ComEd would
be subject to  liquidated  damages if the projects are not  completed by various
dates,  unless it was prevented  from doing so by events  beyond its  reasonable
control.  In addition,  ComEd and Chicago  established an Energy Reliability and
Capacity  Account,  into which ComEd paid $25  million  during each of the years
1999 through 2001 and has conditionally  agreed to pay $25 million at the end of
2002, to help ensure an adequate and reliable electric supply for Chicago.

         FERC Municipal Request for Refund. Three of ComEd's wholesale municipal
customers  filed a complaint  and request  for refund with FERC,  alleging  that
ComEd  failed to properly  adjust its rates,  as provided for under the terms of
the electric service contracts with the municipal customers and to track certain
refunds made to ComEd's retail  customers in the years 1992 through 1994. In the





                                       34
<PAGE>

third  quarter of 1998,  FERC granted the complaint and directed that refunds be
made,  with interest.  ComEd filed a request for  rehearing.  On April 30, 2001,
FERC issued an order  granting  rehearing in which it  determined  that its 1998
order  had been  erroneous  and  that no  refunds  were  due  from  ComEd to the
municipal  customers.  On June 29, 2001, FERC denied the customers' requests for
rehearing of the order  granting  rehearing.  In August 2001,  each of the three
wholesale  municipal  customers  appealed  the April 30,  2001 FERC order to the
Federal  circuit  court,  which  consolidated  the appeals  for the  purposes of
briefing and decision.

         Retail Rate Law. In 1996, several developers of non-utility  generating
facilities filed litigation against various Illinois officials claiming that the
enforcement  against  those  facilities of an amendment to Illinois law removing
the entitlement of those facilities to state-subsidized payments for electricity
sold to ComEd after March 15, 1996  violated  their rights under the Federal and
state  constitutions.  The  developers  also  filed  suit  against  ComEd  for a
declaratory judgment that their rights under their contracts with ComEd were not
affected by the amendment.  On August 4, 1999, the Illinois Appellate Court held
that the developers'  claims against the state were premature,  and the Illinois
Supreme Court denied leave to appeal that ruling.  Developers of both facilities
have since filed  amended  complaints  repeating  their  allegations  that ComEd
breached  the  contracts  in  question  and  requesting  damages for such breach
reflecting the  state-subsidized  rate to which the  developers  claim they were
entitled under their contracts.  These matters are in the discovery phase. ComEd
is contesting each case.

         Service Interruptions. In August 1999, three class action lawsuits were
filed against ComEd, and subsequently consolidated, in the Circuit Court of Cook
County,  Illinois  seeking  damages for personal  injuries,  property damage and
economic  losses related to a series of service  interruptions  that occurred in
the summer of 1999. The combined effect of these interruptions  resulted in over
168,000  customers  losing service for more than four hours.  Conditional  class
certification  was  approved  by the court  for the sole  purpose  of  exploring
settlement.  ComEd filed a motion to dismiss the complaints.  On April 24, 2001,
the  court  dismissed  four of the five  counts  of the  consolidated  complaint
without prejudice and the sole remaining count was dismissed in part. On June 1,
2001, the plaintiffs filed a second amended consolidated complaint and ComEd has
filed an  answer.  A portion  of any  settlement  or  verdict  may be covered by
insurance.

         Enron. As a result of Enron Corp.'s  bankruptcy  proceeding,  ComEd has
potential monetary exposure for 366 of its customer accounts that were served by
Enron Energy  Services (EES) as a billing agent.  EES has rejected its contracts
with these accounts,  with the exception of approximately 100 accounts for which
EES retains its billing  agency.  ComEd is working to ensure that customers know
what  amounts  are owed to ComEd on accounts  for which EES has been  removed as
billing agent,  and has obtained  updated billing  addresses for these accounts.
With regard to the  accounts for which EES retains its billing  agency,  ComEd's
total amount  outstanding is not material.  Because that amount is owed to ComEd
by individual customers,  it is not part of the bankrupt Enron's estate. The ICC
has rescinded EES's authority to act as an alternative retail energy supplier in
Illinois.  However,  EES never  served as a  supplier,  as  opposed to a billing
agent, to any of ComEd's retail accounts.




                                       35
<PAGE>

Generation
         Godley Park  District  Litigation.  On April 18, 2001,  the Godley Park
District  filed suit in Will County  Circuit Court against ComEd and  Generation
alleging  that oil  spills  at  Braidwood  Station  have  contaminated  the Park
District's water supply.  The complaint sought actual damages,  punitive damages
of $100 million and statutory penalties.  The court dismissed all counts seeking
punitive damages and statutory penalties, and the plaintiff has filed an amended
complaint  before  the court.  The  amended  complaint  added  counts  under the
Illinois  Public Utility Act (PUA),  which provides for statutory  penalties and
allows  recovery of attorney's  fees. On April 20, 2002,  the Court denied ComEd
and  Generation's  motion to dismiss the additional  counts under the PUA. ComEd
and Generation are contesting the liability and damages sought by the plaintiff.
As a result of the 2001 corporate  restructuring,  Generation has responsibility
for this matter.

         Cotter  Corporation  Litigation.  During  1989 and 1991,  actions  were
brought  in  Federal  and  state  courts  in  Colorado  against  ComEd  and  its
subsidiary,   Cotter  Corporation  (Cotter),  seeking  unspecified  damages  and
injunctive  relief based on allegations  that Cotter  permitted  radioactive and
other  hazardous  material  to be  released  from its mill into  areas  owned or
occupied by the plaintiffs,  resulting in property damage and potential  adverse
health effects. In 1994, a Federal jury returned nominal dollar verdicts against
Cotter on eight plaintiffs' claims in the 1989 cases, which verdicts were upheld
on appeal.  The remaining  claims in the 1989 actions were settled or dismissed.
In 1998,  a jury  verdict  was  rendered  against  Cotter  in favor of 14 of the
plaintiffs in the 1991 cases, totaling  approximately $6 million in compensatory
and punitive  damages,  interest and medical  monitoring.  On appeal,  the Tenth
Circuit Court of Appeals  reversed the jury  verdict,  and remanded the case for
new trial.  These  plaintiffs'  cases were  consolidated  with the  remaining 26
plaintiffs'  cases,  which  had not  been  tried.  The  consolidated  trial  was
completed  on June 28,  2001.  The jury  returned a verdict  against  Cotter and
awarded $16.3  million in various  damages.  On November 20, 2001,  the District
Court  entered  an  amended  final  judgment  that  included  an  award  of both
pre-judgment and post-judgment interests, costs, and medical monitoring expenses
that total $43.3  million.  This matter is being appealed by Cotter in the Tenth
Circuit Court of Appeals. Cotter is vigorously contesting the award.

         In November 2000,  another trial  involving a separate  sub-group of 13
plaintiffs,  seeking $19  million in damages  plus  interest  was  completed  in
Federal District Court in Denver. The jury awarded nominal damages of $42,500 to
11 of 13  plaintiffs,  but awarded no damages for any personal  injury or health
claims,  other than requiring Cotter to perform  periodic medical  monitoring at
minimal cost.  Cotter and the plaintiffs  both appealed the verdict to the Tenth
Circuit Court of Appeals.

         On February 18, 2000, ComEd sold Cotter to an unaffiliated third party.
As part of the sale, ComEd agreed to indemnify Cotter for any liability incurred
by Cotter as a result of these  actions,  as well as any  liability  arising  in
connection  with the West Lake  Landfill  discussed  in the next  paragraph.  In
connection with Exelon's 2001 corporate  restructuring,  the  responsibility  to
indemnify  Cotter for any liability  related to these matters was transferred by
ComEd to Generation.

                                       36
<PAGE>

         The United  States  Environmental  Protection  Agency (EPA) has advised
Cotter  that  it  is  potentially   liable  in  connection   with   radiological
contamination  at a site known as the West Lake Landfill in Missouri.  Cotter is
alleged to have disposed of approximately  39,000 tons of soils mixed with 8,700
tons of leached  barium  sulfate  at the site.  Cotter,  along with three  other
companies  identified by the EPA as potentially  responsible  parties (PRPs), is
reviewing a draft feasibility  study that recommends  capping the site. The PRPs
are also  engaged in  discussions  with the State of Missouri  and the EPA.  The
estimated costs of remediation for the site are $10 million to $15 million. Once
a final feasibility study is complete and a remedy selected, it is expected that
the PRPs will agree on an allocation of responsibility  for the costs.  Until an
agreement is reached, Generation cannot predict its share of the costs.

         Real  Estate  Tax  Appeals.  Generation  is  involved  in  tax  appeals
regarding  a number  of its  nuclear  facilities,  Limerick  Generating  Station
(Montgomery  County,  PA), Peach Bottom Atomic Power Station (York County,  PA),
Quad Cities Station (Rock Island County,  IL), and one of its fossil facilities,
Eddystone  (Delaware County,  PA). Generation is also involved in the tax appeal
for Three Mile Island (Dauphin County, PA) through AmerGen.  Generation does not
believe  the outcome of these  matters  will have a material  adverse  effect on
Generation's results of operations or financial condition.

General
         Exelon,  ComEd,  PECO and  Generation  are  involved  in various  other
litigation matters. The ultimate outcome of such matters, as well as the matters
discussed above,  while  uncertain,  are not expected to have a material adverse
effect on their respective financial condition or results of operations.

Credit Contingencies
Generation
         Generation is a counterparty to Dynegy Inc.  (Dynegy) in various energy
transactions.  In early July 2002, the credit ratings of Dynegy were  downgraded
by two credit rating  agencies to below  investment  grade.  As of September 30,
2002,  Generation had a net receivable from Dynegy of  approximately $7 million,
and consistent with the terms of the existing credit  arrangement,  has received
collateral  in  support of this  receivable.  Generation  also has  credit  risk
associated with Dynegy through Generation's equity investment in Sithe. Sithe is
a 60%  owner  of the  Independence  generating  station,  a 1,040  MW  gas-fired
qualified  facility that has an energy only long-term  tolling  arrangement with
Dynegy,  with a related  financial swap  arrangement.  As of September 30, 2002,
Sithe had  recognized an asset on its balance sheet related to the fair value of
the financial  swap  agreement  with Dynegy that is  marked-to-market  under the
terms of SFAS No.  133.  If  Dynegy  is  unable  to  fulfill  the  terms of this
agreement,  Sithe would be required to  write-off  the fair value  asset,  which
Generation estimates would result in an approximate $22 million reduction in its
equity  earnings from Sithe,  based on  Generation's  current  49.9%  investment
ownership  in  Sithe.  Additionally,   the  future  economic  value  of  Sithe's
investment in the Independence Station and AmerGen's purchased power arrangement
with Illinois Power, a subsidiary of Dynegy, could be impacted by events related
to Dynegy's financial condition.


                                       37
<PAGE>

9. MERGER-RELATED COSTS (Exelon, ComEd, PECO and Generation)
         In association  with the Merger,  Exelon recorded  certain reserves for
restructuring  costs. The reserves  associated with PECO were charged to expense
pursuant  to  EITF  Issue  94-3  "Liability  Recognition  for  Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs Incurred in a Restructuring)";  while the reserves  associated with Unicom
were  recorded as part of the  application  of purchase  accounting  and did not
affect results of operations,  consistent with EITF Issue 95-3,  "Recognition of
Liabilities in Connection with a Purchase Business Combination."

Exelon, PECO and Generation
         Merger costs charged to expense. PECO's merger-related costs charged to
expense in 2000 were $248 million,  consisting of $116 million for PECO employee
costs  and  $132  million  of  direct  incremental  costs  incurred  by  PECO in
conjunction  with the merger  transaction.  Direct  incremental  costs represent
expenses directly associated with completing the Merger,  including professional
fees,  regulatory  approval and settlement costs, and settlement of compensation
arrangements. Employee costs represent estimated severance costs and pension and
postretirement  benefits  provided under Exelon's  merger  separation  plans for
eligible  employees  who are  expected  to be  involuntarily  terminated  before
December 2002 due to integration activities of the merged companies.  Additional
employee  severance costs of $48 million,  primarily  related to PECO employees,
were charged to operating  and  maintenance  expense in 2001,  and a $10 million
reduction  in the  estimated  liability  related  to  Generation  employees  was
recorded in  operating  and  maintenance  expense in the first  quarter of 2002.
Employee  costs are being paid from the  Exelon's  pension  and  post-retirement
benefit  plans,  except for  certain  benefits  such as  outplacement  services,
continuation of health care coverage and educational  benefits.  As of September
30, 2002 a liability of $7 million is reflected  on Exelon's  balance  sheet for
payment of these  benefits,  of which $2 million is reflected on PECO's  balance
sheet and $3 million is reflected on Generation's balance sheet.

         A total of 960 PECO positions are expected to be eliminated as a result
of the merger, 274 of which related to generation,  230 of which related to PECO
energy  delivery and the remainder from the  enterprises  and corporate  support
areas of the company.  As of September  30, 2002,  788 of the positions had been
eliminated,  of which 162  related to PECO energy  delivery,  and 181 related to
generation and the remainder to enterprises and corporate support. The remaining
positions are expected to be eliminated in the fourth quarter of 2002.

         Additionally,  in the third quarter of 2000,  approximately $20 million
of closing  costs and $8 million of stock  compensation  costs  associated  with
Unicom were charged to expense.

Exelon, ComEd and Generation
         Merger Costs Included in Purchase Price Allocation.  The purchase price
allocation  as of December  31, 2000  included a liability  of $307  million for
Unicom employee costs and liabilities of approximately $39 million for estimated
costs of exiting various  business  activities of former Unicom  activities that
were not compatible with the strategic business direction of Exelon.


                                       38
<PAGE>

         During  2001,  Exelon,   ComEd  and  Generation   finalized  plans  for
consolidation  of  functions,  including  negotiation  of an agreement  with the
International  Brotherhood  of Electrical  Workers Local 15 regarding  severance
benefits to union  employees.  Also,  in January of 2001,  ComEd  transferred  a
portion of its employee  related  liabilities  to  Generation,  Enterprises  and
Business Services Company (BSC) as part of the corporate  restructuring.  In the
third  quarter of 2002,  Exelon  reduced  its  reserve by $12 million due to the
elimination  of identified  positions  through normal  attrition,  which did not
require  payments under Exelon's merger  separation  plans,  and a determination
that certain  positions would not be eliminated by the end of 2002 as originally
planned due to a change in certain  business plans. The reduction in the reserve
was recorded as a purchase  price  adjustment  to goodwill.  In 2001 and through
September 30, 2002,  Exelon,  ComEd and Generation  recorded  adjustments to the
purchase price allocation as follows:

Exelon

<TABLE>
<CAPTION>
                                                                   Original           Adjustments          Adjusted
                                                                   Estimate       2001       2002       Liabilities
-----------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>         <C>         <C>             <C>
Employee severance payments                                       $     128   $     33    $   (10)        $     151 (a)
Other benefits                                                           21          9         (2)               28 (a)
-----------------------------------------------------------------------------------------------------------------------
Employee severance payments and other benefits                          149         42        (12)              179
Actuarially determined pension and postretirement costs                 158        (11)        --               147 (b)
-----------------------------------------------------------------------------------------------------------------------
Total Unicom employee cost                                        $     307     $   31    $   (12)        $     326
=======================================================================================================================
<FN>
(a)   The  increase  is a result  of the  identification  in 2001 of  additional
      positions to be eliminated,  partially  offset by the 2002  elimination of
      identified  positions  through  normal  attrition  and  changes in certain
      business plans.
(b)   The reduction  results from lower  estimated  pension and post  retirement
      welfare benefits reflecting revised actuarial estimates.
</FN>
</TABLE>

         The  following  table  provides a  reconciliation  of the  reserve  for
employee severance and other benefits associated with the Merger:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                                       <C>
Adjusted employee severance and other benefits reserve                                                    $     179
Payments to employees (October 2000-June 2002)                                                                 (125)
Payments to employees (July 2002-September 2002)                                                                (10)
---------------------------------------------------------------------------------------------------------------------
Employee severance and other benefits reserve as of September 30, 2002                                    $      44
=====================================================================================================================
</TABLE>

ComEd
<TABLE>
<CAPTION>
                                                Original                              Adjustments          Adjusted
                                                Estimate          Transfer          2001     2002         Liabilities
------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                 <C>          <C>       <C>               <C>
Employee severance payments                    $     128           $   (68)     $     17  $    (7)          $    70 (a)
Other benefits                                        21               (14)            8       (2)               13 (a)
------------------------------------------------------------------------------------------------------------------------
Employee severance payments
   and other benefits                                149               (82)           25       (9)               83
Actuarially determined pension
   and postretirement costs                          158               (82)           10       --                86 (b)
------------------------------------------------------------------------------------------------------------------------
Unicom employee cost - ComEd                   $     307           $  (164)     $     35  $    (9)          $   169
========================================================================================================================
<FN>
(a)  The  increase  is a  result  of the  identification  in 2001 of  additional
     positions to be  eliminated,  partially  offset by the 2002  elimination of
     identified  positions  through  normal  attrition  and  changes  in certain
     business plans.
(b)  The  reduction  results from lower  estimated  pension and post  retirement
     welfare benefits reflecting revised actuarial estimates.
</FN>
</TABLE>



                                       39
<PAGE>

         The following  table provides a  reconciliation  of ComEd's reserve for
employee severance and other benefits associated with the Merger:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                                       <C>
Adjusted employee severance and other benefits reserve                                                    $      83
Payments to employees (October 2000-June 2002)                                                                  (54)
Payments to employees (July 2002-September 2002)                                                                 (5)
---------------------------------------------------------------------------------------------------------------------
Employee severance and other benefits reserve as of September 30, 2002                                    $      24
=====================================================================================================================
</TABLE>

Generation

<TABLE>
<CAPTION>
                                                                   Original           Adjustments          Adjusted
                                                                   Estimate       2001       2002       Liabilities
------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>         <C>         <C>             <C>
Employee severance payments                                       $      45   $    (12)   $    (2)        $      31 (a)
Other benefits                                                            5          2         --                 7 (a)
------------------------------------------------------------------------------------------------------------------------
Employee severance payments and other benefits                           50        (10)        (2)               38
Actuarially determined pension and postretirement costs                  71        (25)        --                46 (b)
------------------------------------------------------------------------------------------------------------------------
Unicom employee cost - Generation                                 $     121     $  (35)   $    (2)        $      84
========================================================================================================================
<FN>
(a)  The  increase  is a  result  of the  identification  in 2001 of  additional
     positions to be  eliminated,  partially  offset by the 2002  elimination of
     identified  positions  through  normal  attrition  and  changes  in certain
     business plans.

(b)  The  reduction  results from lower  estimated  pension and post  retirement
     welfare benefits reflecting revised actuarial estimates.
</FN>
</TABLE>

         The  following  table  provides a  reconciliation  of the  reserve  for
employee severance and other benefits associated with the Merger:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                                       <C>
Adjusted employee severance and other benefits reserve                                                    $      38
Payments to employees (October 2000-June 2002)                                                                  (26)
Payments to employees (July 2002-September 2002)                                                                 (3)
---------------------------------------------------------------------------------------------------------------------
Employee severance and other benefits reserve as of September 30, 2002                                    $       9
=====================================================================================================================
</TABLE>

Exelon, ComEd and Generation
         The following table provides the status of the former Unicom  positions
identified to be eliminated as a result of the Merger:
<TABLE>
<CAPTION>
                                                                 Corporate
                                                                   & Other         ComEd     Generation       Total
---------------------------------------------------------------------------------------------------------------------
<S>                 <C> <C>                                            <C>         <C>            <C>         <C>
Estimate at October 20, 2000                                           180         1,022          1,073       2,275
2001 adjustments (a)                                                   109           206           (197)        118
Total estimated positions to be eliminated                             289         1,228            876       2,393
Terminated employees (October 2000-June 2002)                         (241)         (648)          (699)     (1,588)
Terminated employees (July 2002-September 2002)                         (9)          (49)           (13)        (71)
Normal attrition                                                        (9)         (148)           (75)       (232)
Business plan changes (b)                                               (2)          (99)           (49)       (150)
---------------------------------------------------------------------------------------------------------------------
Remaining positions to be eliminated by the end of 2002                 28           284             40         352
=====================================================================================================================
<FN>
(a)  The increase is a result of the  identification of additional  positions to
     be eliminated in 2001.
(b)  The reduction is due to a determination  in the third quarter of 2002, that
     certain  positions would not be eliminated by the end of 2002 as originally
     planned due to a change in certain business plans.
</FN>
</TABLE>

                                       40
<PAGE>


10.  LONG-TERM DEBT (Exelon, ComEd and PECO) ComEd
         On September 30, 2002,  ComEd paid on maturity $200 million of variable
rate senior notes due September 30, 2002.

         On September  16, 2002,  ComEd paid on maturity  $200 million of 7.375%
First Mortgage Bonds,  Series 85, due September 15, 2002. On September 16, 2002,
ComEd also redeemed $200 million of 8.375% First Mortgage Bonds, Series 86, at a
redemption price of 103.425% of the principal amount. These bonds had a maturity
date of September 15, 2022.

         On June 13, 2002,  ComEd  issued $200  million of 6.15% First  Mortgage
Bonds,  Series 98, due March 15,  2012.  The $200  million  bond  issuance was a
refinancing of the $200 million of 8.5% First Mortgage Bonds, Series 84 redeemed
on July 15, 2002 at a  redemption  price of 103.915%  of the  principal  amount.
These redeemed bonds had a maturity date of July 15, 2022.

         In connection  with the issuance of the $200 million of First  Mortgage
Bonds,  ComEd  settled a forward  starting  interest  rate swap in the  notional
amount of $75 million  resulting in a $1 million  pre-tax loss recorded in other
comprehensive  income, which is being amortized over the expected remaining life
of the related debt.

         On June 4, 2002,  ComEd  issued $100  million of  Illinois  Development
Finance  Authority  floating-rate  Pollution  Control Revenue  Refunding  Bonds,
Series 2002 due April 15,  2013.  The $100  million  bond  issuance  was used to
redeem $100 million of 7.25% Illinois  Development  Finance Authority  Pollution
Control  Revenue  Refunding  Bonds,  Series  1991.  These  redeemed  bonds had a
maturity date of June 1, 2011.

         On March 21, 2002, ComEd redeemed $200 million of 8.625% First Mortgage
Bonds,  Series 81, at a  redemption  price of 103.84% of the  principal  amount.
These bonds had a maturity date of February 1, 2022.

         On March 13, 2002,  ComEd  issued $400 million of 6.15% First  Mortgage
Bonds, Series 98, due March 15, 2012. This $400 million bond issuance refinanced
other First Mortgage Bonds. In connection with the bond issuance,  ComEd settled
forward  starting  interest rate swaps in the aggregate  notional amount of $375
million,  resulting in a $9 million pre-tax loss recorded in other comprehensive
income, which is being amortized over the expected remaining life of the related
debt.

         During  the nine  months  ended  September  30,  2002,  ComEd  recorded
prepayment premiums of $24 million and net unamortized  premiums,  discounts and
debt issuance  expenses of $3 million,  associated with the early  retirement of
debt in 2002 that have been deferred by ComEd in  regulatory  assets and will be
amortized  to interest  expense  over the life of the related new debt  issuance
consistent with regulatory recovery.

PECO
         On  September  23,  2002,  PECO issued $225  million of 4.75% First and
Refunding  Mortgage  Bonds,  due  October 1,  2012.  This bond  issuance  repaid
commercial  paper  that was used to pay at  maturity  $222  million of First and
Refunding  Mortgage  Bonds with a weighted  average  interest rate of 7.30%.  In



                                       41
<PAGE>

connection  with the issuance of the First and Refunding  Mortgage  Bonds,  PECO
settled forward starting interest rate swaps in the aggregate notional amount of
$200  million  resulting  in  a  $5  million  pre-tax  loss  recorded  in  other
comprehensive  income, which is being amortized over the expected remaining life
of the related debt.


11. SALE OF ACCOUNTS RECEIVABLE (Exelon and PECO)
         PECO is party to an agreement,  which expires in November 2005,  with a
financial  institution  under which it can sell or finance with limited recourse
an undivided  interest,  adjusted  daily,  in up to $225  million of  designated
accounts  receivable.  As of September  30,  2002,  PECO had sold a $225 million
interest  in  accounts  receivable,  consisting  of a $164  million  interest in
accounts  receivable  that PECO  accounted  for as a sale  under  SFAS No.  140,
"Accounting for Transfers and Servicing of Financial Assets and  Extinguishments
of  Liabilities,  a  Replacement  of FASB  Statement  No. 125" and a $61 million
interest in special-agreement  accounts receivable which were accounted for as a
long-term  note  payable.  PECO retains the servicing  responsibility  for these
receivables.  The agreement requires PECO to maintain the $225 million interest,
which,  if not met,  requires  cash,  which would  otherwise be received by PECO
under  this  program,  to be held in escrow  until the  requirement  is met.  At
September 30, 2002, PECO met this requirement.


12. RELATED-PARTY  TRANSACTIONS (Exelon,  ComEd, PECO and Generation) Exelon and
Generation
         Exelon and  Generation's  financial  statements  reflect  related-party
transactions with unconsolidated affiliates as reflected in the tables below.

<TABLE>
<CAPTION>
                                                                            Three Months               Nine Months
                                                                     Ended September 30,       Ended September 30,
                                                                       2002         2001         2002          2001
---------------------------------------------------------------------------------------------------------------------
<S>                          <C>                                  <C>           <C>          <C>          <C>
Purchased Power from AmerGen (1)                                  $     104     $     26     $    220     $      48
Interest Income from AmerGen (2)                                          1           --            2            --
Services Provided to AmerGen (3)                                         16           18           46            50
Services Provided to Sithe (4)                                           --           --            1            --
Services Provided by Sithe (5)                                            3           --            5            --
---------------------------------------------------------------------------------------------------------------------




                                       42
<PAGE>

                                                                      September 30, 2002          December 31, 2001
---------------------------------------------------------------------------------------------------------------------
Net Receivable from AmerGen (1,2,3)                                             $     42                  $      44
Net Payable to Sithe (4,5)                                                             3                         --
---------------------------------------------------------------------------------------------------------------------
<FN>
(1)    Generation has entered into PPAs dated December 18, 2001 and November 22,
       1999 with AmerGen.  Under the 2001 PPA, Generation has agreed to purchase
       from AmerGen all the energy from Unit No. 1 at Three Mile Island  Nuclear
       Station from January 1, 2002  through  December 31, 2014.  Under the 1999
       PPA,  Generation  has agreed to purchase from AmerGen all of the residual
       energy from Clinton Nuclear Power Station (Clinton), through December 31,
       2002. Currently, the residual output approximates 29% of the total output
       of  Clinton.  In  accordance  with the terms of the  AmerGen  partnership
       agreement,  the 1999 PPA will be extended  through the end of the AmerGen
       partnership agreement.
 (2)   In February 2002, Generation entered into an agreement to loan AmerGen up
       to $75 million at an interest rate equal to the 1-month London  Interbank
       Offering Rate plus 2.25%.  In July 2002,  the limit of the loan agreement
       was  increased to $100 million and the maturity date was extended to July
       1, 2003. As of September 30 2002, the  outstanding  principal  balance of
       the loan was $42 million.
 (3)   Under a  service  agreement  dated  March 1,  1999,  Generation  provides
       AmerGen  with  certain  operation  and  support  services  to the nuclear
       facilities  owned by AmerGen.  This service  agreement  has an indefinite
       term and may be  terminated  by  Generation or AmerGen on 90 days notice.
       Generation is  compensated  for these  services in an amount agreed to in
       the work order,  which is not less than the higher of its fully allocated
       cost for performing each service or the market price for such service.
(4)    Under a service  agreement dated December 18, 2000,  Generation  provides
       certain   engineering  and   environmental   services  for  fossil  fuels
       facilities  owned  by  Sithe  and  for  certain  developmental  projects.
       Generation is  compensated  for these services in the amount agreed to in
       the work order, but not less than the higher of fully allocated costs for
       performing such services or the market price.
(5)    Under a  service  agreement  dated  December  18,  2000,  Sithe  provides
       Generation  certain  fuel  and  project  development  services.  Sithe is
       compensated for these services in the amount agreed to in the work order,
       but not less than the higher of fully allocated costs for performing such
       services or the market price.
</FN>
</TABLE>

         Generation's additional related-party transactions are discussed in the
"Generation" section of this note.



                                       43
<PAGE>

ComEd
         ComEd's  financial  statements  reflect  related-party  transactions as
reflected in the tables below.

<TABLE>
<CAPTION>
                                                       Three Months                                     Nine Months
                                                Ended September 30,                             Ended September 30,
                                               2002            2001                            2002            2001
---------------------------------------------------------------------------------------------------------------------
Operating Revenues from Affiliates
<S>                                         <C>               <C>                           <C>             <C>
   Generation (1)                           $    22           $   9                         $    41         $    30
   Enterprises (1)                                4               5                               8              39
Purchased Power from Affiliate
   PPA with Generation (2)                      967             948                           2,046           2,141
O&M from Affiliates
   BSC (3)                                       29              32                              94              90
   Exelon Services (4)                            3               4                               9              16
   InfraSource (7)                                1              --                               1              --
Interest Income from Affiliates
   UII (5)                                        8              14                              23              51
   PECO (6)                                      --              --                              --               8
   Generation (8)                                --               9                              --               9
   Other                                         --               1                              --               2
Interest Expense from Affiliate
   Generation (12)                               --              10                              --              10
Capitalized costs
   BSC (3)                                        3               1                               6               6
   InfraSource (7)                                3               3                              16              21
Cash Dividends Paid to Parent                   118             105                             353             253
---------------------------------------------------------------------------------------------------------------------


                                       44
<PAGE>

                                                    September 30,2002                             December 31, 2001
---------------------------------------------------------------------------------------------------------------------
Receivables from Affiliates
   UII (5)                                                    $     8                                       $    --
   BSC (3,8)                                                       --                                             6
Notes Receivable from Affiliates
   UII (5)                                                      1,284                                         1,297
   Other                                                           16                                            17
Payables to Affiliates
   Generation Decommissioning (9)                                  59                                            59
   Generation (1,2,8)                                             544                                           136
   BSC (3,8)                                                       12                                            --
   Exelon Corporate (11)                                           --                                            13
   Other                                                           --                                            10
Deferred Credits and Other Liabilities
   Generation Decommissioning obligation (9)                      244                                           291
   Other                                                            7                                             6
Shareholders' Equity - Receivable from Parent (10)                845                                           937
---------------------------------------------------------------------------------------------------------------------
<FN>
(1)    ComEd provides  electric,  transmission,  and other ancillary services to
       Generation and Enterprises.
(2)    Effective January 1, 2001, ComEd entered into a PPA with Generation.  See
       Note 8 of Combined Notes to Consolidated Financial Statements for further
       information  regarding the PPA. The Generation payable primarily consists
       of services related to the PPA.
(3)    ComEd  receives a variety  of  corporate  support  services  from  Exelon
       Business  Services  Company  (BSC),  including  legal,  human  resources,
       financial  and  information   technology  services.  A  portion  of  such
       services, provided at cost including applicable overhead, is capitalized.
(4)    ComEd has contracted with Exelon Services to provide energy  conservation
       services to ComEd customers.
(5)    ComEd has a note and interest  receivable  from Unicom  Investments  Inc.
       (UII)  relating to the December  1999 fossil plant sale.  (6) At December
       31, 2000, ComEd had a $400 million receivable from PECO, which was repaid
       in the  second  quarter  of  2001.  (7)  ComEd  receives  substation  and
       transmission  engineering and construction  services under contracts with
       InfraSource. A portion
       of such services is capitalized.
(8)    In order to benefit from  economies  of scale,  ComEd  processes  certain
       invoice  payments on behalf of  Generation  and BSC.  During 2001,  ComEd
       earned interest from Generation relating to these invoice payments.
(9)    ComEd had a short-term  and long-term  payable to  Generation,  primarily
       representing  ComEd's legal  requirements to remit collections of nuclear
       decommissioning costs from customers to Generation.
(10)   ComEd has a non-interest  bearing  receivable  from Exelon related to the
       2001  corporate  restructuring.  The receivable is expected to be settled
       over the years 2002 through 2008.
(11)   ComEd  pays  Exelon  for  a  variety  of  corporate   expenses  including
       allocations under a tax sharing agreement and stock options.
(12)   In consideration for the net assets  transferred as part of the corporate
       restructuring  effective  January  1, 2001,  ComEd had a note  payable to
       affiliates of $463 million. This note payable was repaid during 2001.
</FN>
</TABLE>


                                       45
<PAGE>

PECO
         PECO's   financial   statements   reflect  a  number  of  related-party
transactions as reflected in the table below.

<TABLE>
<CAPTION>
                                                       Three Months                                    Nine Months
                                                Ended September 30,                            Ended September 30,
                                               2002            2001                        2002               2001
---------------------------------------------------------------------------------------------------------------------
<S>                                        <C>              <C>                         <C>                <C>
Operating Revenues from Affiliate
   Generation (1)                           $     3          $    3                      $    9             $     9
Purchased Power from Affiliate
   Generation (2)                               441             363                       1,090                 872
O&M from Affiliates
   BSC (3)                                       10              15                          36                  47
   Enterprises (4)                                5               7                          21                  14
Interest Expense from Affiliates
   ComEd (5)                                     --              --                          --                   8
Interest Income from Affiliates
   Generation (7)                                --               5                          --                   6
   Other                                         --               4                          --                   4
Cash Dividends Paid to Parent                    85              69                         255                 169
---------------------------------------------------------------------------------------------------------------------

                                                 September 30, 2002                               December 31, 2001
---------------------------------------------------------------------------------------------------------------------
Receivables from Affiliates
   BSC (3)                                                   $   17                                         $    --
   Other                                                         --                                               1
Payables to Affiliates
   Generation (2)                                               122                                             117
   BSC (3)                                                       --                                              61
   Enterprises (4)                                                8                                               9
Deferred Credits and Other Liabilities
   BSC                                                           --                                              44
Capitalized Costs
   Enterprises (4)                                               16                                              29
Shareholders' Equity - Receivable from Parent (6)             1,788                                           1,878
---------------------------------------------------------------------------------------------------------------------
<FN>
(1)    PECO provides energy to Generation for Generation's own use.
(2)    Effective  January 1, 2001, PECO entered into a PPA with Generation.  See
       Note 8 of Combined Notes to Consolidated Financial Statements for further
       information regarding the PPA.
(3)    PECO  provides  services  to BSC  related  to  invoice  processing.  PECO
       receives a variety of  corporate  support  services  from BSC,  including
       legal, human resources,  financial and information  technology  services.
       Such services are provided at cost, including applicable overhead.
 (4)   PECO  receives  services from  Enterprises  for  construction,  which are
       capitalized,  and the deployment of automated  meter reading  technology,
       which is expensed.
(5)    At December 31, 2000, PECO had a $400 million payable to ComEd, which was
       repaid in the second quarter of 2001. The average annual interest rate on
       this payable for the period outstanding was 6.5%.
(6)    PECO has a  non-interest  bearing  receivable  from Exelon related to the
       2001  corporate  restructuring.  The receivable is expected to be settled
       over the years 2001 through 2010.
(7)    PECO received interest income from Generation in 2001 related to a loan.
</FN>
</TABLE>

                                       46
<PAGE>


Generation
         In  addition  to  the   transactions   described  in  the  "Exelon  and
Generation" section of this footnote,  Generation's financial statements reflect
a number of related-party transactions as reflected in the tables below.

<TABLE>
<CAPTION>
                                                                Three Months                           Nine Months
                                                         Ended September 30,                   Ended September 30,
                                                         2002           2001                 2002              2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>                <C>               <C>
Operating Revenues from Affiliates
   PPA with ComEd (1)                                $    946        $   945            $   2,021         $   2,133
   PPA with PECO (1)                                      441            363                1,090               872
   PPA with Exelon Energy (2)                              73             93                  190               210
   Decommissioning with ComEd                               3              3                    8                 8
Purchased Power from Affiliates
   ComEd (3)                                               --              7                   13                20
   PECO(3)                                                 --              2                    1                 4
   Exelon Energy (3)                                        6             50                   12                61
O&M from Affiliates
   ComEd (3)                                                4              2                   11                10
   PECO (3)                                                 3              1                    8                 5
   BSC (3)                                                 33             39                  117               112
Interest Expense from Affiliates
   Exelon (5,6)                                             1             --                    3                23
   ComEd (8)                                               --              9                   --                 9
   PECO (9)                                                --              5                   --                 6
Interest Income from Affiliate
   ComEd (10)                                              --             10                   --                10
---------------------------------------------------------------------------------------------------------------------

<PAGE>

                                                          September 30, 2002                      December 31, 2001
---------------------------------------------------------------------------------------------------------------------
Receivables from Affiliates
   ComEd  (1,3,8)                                                  $     544                                $   136
   PECO (1)                                                              122                                    117
   Exelon Energy (2)                                                      19                                     17
Note Receivable from Affiliate
   ComEd (7)                                                              59                                     59
Long-term Notes Receivable from Affiliates
   ComEd (7)                                                             244                                    291
   Other                                                                   2                                     --
Accounts Payable
   Exelon (6)                                                             14                                     23
   BSC (4)                                                                19                                     11
Note Payable-Exelon (5)                                                  348                                     --
---------------------------------------------------------------------------------------------------------------------
<FN>
(1)     Effective January 1, 2001,  Generation  entered into PPAs with ComEd and
        PECO. See Note 8 of Combined Notes to Consolidated  Financial Statements
        for further information on the PPAs.
(2)     Generation sells power to Exelon Energy.
(3)     Generation  purchases  power from AmerGen under PPAs as discussed in the
        Exelon and  Generation  section of this note.  Additionally,  Generation
        purchases  power from PECO for  Generation's  own use,  buys back excess
        power  from  Exelon  Energy and  purchases  transmission  and  ancillary
        services from ComEd.
(4)     Generation  receives a variety of corporate  support  services from BSC,
        including legal, human resources,  financial and information  technology
        services.  Such  services  are  provided at cost,  including  applicable
        overhead.
(5)     Generation  had a $348 million  payable to Exelon at September 30, 2002,
        which includes $331 million related to the acquisition of two generating
        plants in April of 2002.
(6)     In  relation to the  December  18,  2001  acquisition  of 49.9% of Sithe
        common stock, Generation had a $700 million payable to Exelon, which was
        repaid in the second quarter of 2001.
(7)     Generation  had a  short-term  and a  long-term  receivable  from ComEd,
        primarily  representing  ComEd's legal requirements to remit collections
        of nuclear  decommissioning costs from customers to Generation resulting
        from the 2001 corporate restructuring.
(8)     In order to  facilitate  payment  processing,  ComEd  processes  certain
        invoice  payments on behalf of Generation.
(9)     Generation paid interest to PECO in 2001 related to a loan.
(10)    In  consideration  for  the  net  assets  transferred  as a part  of the
        corporate restructuring effective January 1, 2001, Generation had a note
        receivable from ComEd. This note was repaid in 2001.
</FN>
</TABLE>


13.   NEW ACCOUNTING PRONOUNCEMENTS (Exelon, ComEd, PECO and Generation)

         In  June  2001,  the  FASB  issued  SFAS  No.  143,  "Asset  Retirement
Obligations"  (SFAS No.  143).  In July  2002,  the FASB  issued  SFAS No.  146,
"Accounting  for Costs  Associated with Exit or Disposal  Activities"  (SFAS No.
146).

         SFAS  No.  143  provides   accounting   requirements   for   retirement
obligations  associated with tangible long-lived assets. Exelon expects to adopt
SFAS  No.  143 on  January  1,  2003.  Retirement  obligations  associated  with
long-lived  assets included within the scope of SFAS No. 143 are those for which
there is a legal  obligation to settle under  existing or enacted law,  statute,
written  or oral  contract  or by  legal  construction  under  the  doctrine  of
promissory estoppel. Adoption of SFAS No. 143 will change the accounting for the
decommissioning  of Generation's  nuclear  generating  plants as well as certain
other long-lived assets.

                                       48

<PAGE>

         As it relates to nuclear decommissioning, the effect of this cumulative
adjustment will be to change the  decommissioning  liability to reflect the fair
value of the decommissioning obligation at the balance sheet date. Additionally,
the standard will require the accrual of an asset related to the decommissioning
obligation,  which will be amortized over the remaining lives of the plants. The
net  difference  between the asset  recognized  and the liability  recorded upon
adoption  of SFAS No.  143 will be  charged  to  earnings  and  recognized  as a
cumulative  effect  of  a  change  in  accounting  principle,  net  of  expected
regulatory recovery. The decommissioning  liability to be recorded represents an
obligation  for the  future  decommissioning  of the  plants  and,  as a result,
accretion  expense  will be  accrued  on this  liability  until such time as the
obligation is satisfied.

         Currently,   Generation  records  the  obligation  for  decommissioning
ratably over the lives of the plants.  Exelon, ComEd, PECO and Generation are in
the process of  evaluating  the impact of adopting  SFAS 143 on their  financial
condition.  Based on the current  information and assumptions,  Exelon estimates
that the non-cash impact on 2003 earnings per share (EPS) to be up to a negative
ten cents.  However,  if economic  conditions  change the  assumptions,  the EPS
impact  could be more or less  than  ten  cents  per  share.  Additionally,  the
adoption of the  standard is  expected  to result in a large  non-cash  one-time
cumulative  effect of a change in  accounting  principle  gain of at least  $1.5
billion, after tax. Like the EPS impact, the one-time impact could change with a
change in the assumptions or economic conditions.  The final determination is in
part a function  of the  Treasury  bond rate at the time of the  adoption of the
standard.  Additionally,  although  over the life of the  plant the  charges  to
earnings for the  depreciation  of the asset and the  interest on the  liability
will be equal to the amounts that would have been recognized as  decommissioning
expense  under the current  accounting,  the timing of those charges will change
and in the near-term  period  subsequent to adoption,  the  depreciation  of the
asset and the interest on the  liability is expected to result in an increase in
expense.

         SFAS No. 146 requires that the liability for costs associated with exit
or disposal activities be recognized when incurred, rather than at the date of a
commitment  to an  exit  or  disposal  plan.  SFAS  No.  146  is  to be  applied
prospectively to exit or disposal activities initiated after December 31, 2002.


14. CHANGE IN ACCOUNTING ESTIMATE (Exelon, ComEd and Generation) Generation
         Effective April 1, 2001,  Generation  changed its accounting  estimates
related to the depreciation and decommissioning of certain generating  stations.
The  estimated  service  lives  were  extended  by 20 years  for  three  nuclear
stations,  by periods of up to 20 years for certain  fossil  stations  and by 50
years for a pumped  storage  station.  Effective  July 1,  2001,  the  estimated
service lives were extended by 20 years for the remainder of Exelon's  operating
nuclear  stations.   These  changes  were  based  on  engineering  and  economic
feasibility  studies  performed by Generation  considering,  among other things,
future capital and maintenance  expenditures  at these plants.  The service life
extension  is subject to Nuclear  Regulatory  Commission  (NRC)  approval  of an
extension of existing NRC operating licenses,  which are generally 40 years. The
estimated  annualized  reduction in expense from the change is $132 million ($79
million,  net of income  taxes).  As a result of the change,  net income for the
three months and nine months ended  September 30, 2002  increased  approximately

                                       49
<PAGE>

$37 million ($22  million,  net of income taxes) and  approximately  $96 million
($58 million, net of income taxes), respectively.

ComEd
         Effective April 1, 2002, ComEd changed its accounting  estimate related
to the  allowance  for  uncollectible  accounts.  This  change  was  based on an
independently  prepared  evaluation  of the risk  profile  of  ComEd's  customer
accounts  receivable.  As a result  of the new  evaluation,  the  allowance  for
uncollectible  accounts reserve was reduced by $11 million in the second quarter
of 2002.

         Effective July 1, 2002, ComEd has lowered its depreciation  rates based
on a new depreciation study reflecting its significant  construction  program in
recent years,  changes in and  development of new  technologies,  and changes in
estimated plant service lives since the last depreciation  study. The annualized
reduction in depreciation expense, based on December 31, 2001 plant balances, is
estimated to be approximately  $100 million ($60 million,  net of income taxes).
As a result of the change, net income for the three months and nine months ended
September 30, 2002  increased  approximately  $24 million ($14  million,  net of
income taxes).


15.  SUBSEQUENT EVENTS
ComEd
         On October  15,  2002,  ComEd paid at  maturity  $100  million of 9.17%
medium-term notes due October 15, 2002.

PECO
         On October 9, 2002,  PECO  exchanged  $250  million of 5.95%  First and
Refunding  Mortgage Bonds, due November 1, 2011, for $250 million of 5.95% First
and Refunding  Mortgage Bonds,  due November 1, 2011, which are registered under
the Securities  Act. The exchange bonds are identical to the  outstanding  bonds
except for the elimination of certain  transfer  restrictions  and  registration
rights  pertaining  to the  outstanding  bonds.  PECO did not  receive  any cash
proceeds from issuance of the exchange bonds.



                                       50
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

(Dollars in millions, unless otherwise noted)

EXELON CORPORATION

GENERAL

         Exelon  Corporation  (Exelon),  through its  subsidiaries,  operates in
three business segments:

o        Energy Delivery,  consisting of the retail electricity distribution and
         transmission  businesses  of  Commonwealth  Edison  Company  (ComEd) in
         northern  Illinois  and PECO  Energy  Company  (PECO)  in  southeastern
         Pennsylvania and the natural gas  distribution  business of PECO in the
         Pennsylvania counties surrounding the City of Philadelphia.
o        Generation, consisting of Exelon Generation Company, LLC's (Generation)
         electric generating facilities,  energy marketing operations and equity
         interests in Sithe Energies,  Inc.  (Sithe) and AmerGen Energy Company,
         LLC (AmerGen).
o        Enterprises,   consisting   of  Exelon   Enterprises   Company,   LLC's
         (Enterprises)    competitive   retail   energy   sales,    energy   and
         infrastructure services,  communications and other investments weighted
         towards  the  communications,   energy  services  and  retail  services
         industries.

         See Note 6 of the Combined Notes to Consolidated  Financial  Statements
for further segment information.

         Generation  early adopted the  provision of Emerging  Issues Task Force
(EITF) Issue 02-3 "Accounting for Contracts  Involved in Energy Trading and Risk
Management  Activities" (EITF 02-3) issued by the Financial Accounting Standards
Board (FASB) EITF in June 2002 that  requires  revenues and energy costs related
to  energy  trading  contracts  to be  presented  on a net  basis in the  income
statement. For comparative purposes, energy costs related to energy trading have
been  reclassified  in prior  periods  to revenue to conform to the net basis of
presentation required by EITF 02-3.


RESULTS OF OPERATIONS

Three Months Ended  September 30, 2002 Compared To Three Months Ended  September
30, 2001

Net Income and Earnings Per Share

         Net income  increased $175 million,  or 47%, for the three months ended
September 30, 2002. Diluted earnings per common share increased $0.54 per share,
or 47%. The increase in net income reflects higher earnings in Energy  Delivery,




                                       51
<PAGE>

primarily  related to an increase in retail sales due to warmer summer  weather,
the discontinuation of goodwill  amortization at Energy Delivery and Enterprises
required by the adoption of FASB  Statement of  Financial  Accounting  Standards
(SFAS) No.  142,  "Goodwill  and Other  Intangible  Assets"  (SFAS No.  142) and
certain other factors affecting net income, which are discussed in the remainder
of the results of operations section.

         Exelon  evaluates its  performance  on a business  segment  basis.  The
analysis below presents the operating  results for each of its business segments
for the three months ended September 30, 2002 compared to the three months ended
September 30, 2001.

         Corporate  provides its business segments a variety of support services
including legal, human resources, financial and information technology services.
These costs are  allocated to the  business  segments.  Additionally,  Corporate
costs reflect  costs for  strategic  long-term  planning,  certain  governmental
affairs,  and interest  costs and income from various  investment  and financing
activities.

Net Income by Business Segment

<TABLE>
<CAPTION>
                                                Three Months Ended September 30,
                                                --------------------------------
                                                          2002              2001         Variance          % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>               <C>              <C>                <C>
Energy Delivery                                       $    370          $    280         $     90           32.1%
Generation                                                 163               140               23           16.4%
Enterprises                                                 15               (33)              48         (145.5%)
Corporate                                                    3               (11)              14         (127.3%)
--------------------------------------------------------------------------------------------------
Total                                                 $    551          $    376         $    175           46.5%
==================================================================================================
</TABLE>



                                       52
<PAGE>


Results of Operations - Energy Delivery Business Segment

<TABLE>
<CAPTION>
                                                        Three Months Ended September 30,
                                                        --------------------------------
                                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>          <C>           <C>
OPERATING REVENUES                                                $   3,162       $2,970       $  192        6.5%
OPERATING EXPENSES
     Purchased Power                                                  1,485        1,374          111        8.1%
     Fuel                                                                40           51          (11)     (21.6%)
     Operating and Maintenance                                          407          421          (14)      (3.3%)
     Depreciation and Amortization                                      256          293          (37)     (12.6%)
     Taxes Other Than Income                                            162          133           29       21.8%
-------------------------------------------------------------------------------------------------------
         Total Operating Expense                                      2,350        2,272           78        3.4%
-------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                        812          698          114       16.3%
-------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                  (215)        (253)          38      (15.0%)
     Distributions on Preferred Securities of Subsidiaries              (11)         (11)          --         --
     Other, net                                                           5           46          (41)     (89.1%)
-------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                             (221)        (218)          (3)       1.4%
-------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                              591          480          111       23.1%

INCOME TAXES                                                            221          200           21       10.5%
-------------------------------------------------------------------------------------------------------
NET INCOME                                                        $     370        $ 280       $   90       32.1%
=======================================================================================================
</TABLE>

         Energy  Delivery's  gross margin  (revenue  net of purchased  power and
fuel)  increased $92 million,  $81 million of which was  attributable  to warmer
summer  weather in the third quarter of 2002 as compared to the third quarter of
2001, which increased retail electric volume.

         Lower operating and maintenance expense reflects operating productivity
improvements  and  lower  storm  restoration  costs,  partially  offset by costs
associated  with the  deployment  of  automated  meter  reading  technology  and
increased  corporate  allocations,  a $17  million  increase  in the reserve for
manufactured gas plant (MGP) investigation and remediation.

         Energy  Delivery's  depreciation and amortization  expense decreased by
$37  million  reflecting  $32  million  for  the   discontinuation  of  goodwill
amortization due to the adoption of SFAS No. 142 as of January 1, 2002 and a $24
million  decrease due to lower  depreciation  rates at ComEd  effective  July 1,
2002, partially offset by $6 million of higher regulatory asset amortization and
higher depreciation expense related to higher plant in service balances.

         ComEd completed a depreciation study and implemented lower depreciation
rates  effective  July 1,  2002.  The new  depreciation  rates  reflect  ComEd's
significant  construction program in recent years, changes in and development of
new  technologies,  and changes in estimated  plant service lives since the last
depreciation study. The annual reduction in depreciation expense is estimated to
be approximately $100 million based on December 31, 2001 plant balances.

         Lower interest  expense  reflects a reduction in debt  outstanding  and
lower  interest  rates due to debt  refinancing.  The  reduction in other,  net,
primarily reflects lower intercompany  interest income reflecting lower interest



                                       53
<PAGE>

rates from Generation and from Unicom Investment, Inc. and a $12 million reserve
for a potential plant  disallowance  from an audit performed in conjunction with
ComEd's delivery services rate case.

         Energy  Delivery's  effective  income  tax rate was 37.4% for the three
months ended  September  30, 2002,  compared to 41.7% for the three months ended
September  30,  2001.  The  decrease  in the  effective  tax rate was  primarily
attributable to the  discontinuation  of goodwill  amortization as of January 1,
2002, which was not deductible for income tax purposes, and a reduction in state
income taxes.


Energy Delivery Operating Statistics and Revenue Detail

         Energy  Delivery's  electric sales statistics and revenue detail are as
follows:

<TABLE>
<CAPTION>
                                                        Three Months Ended September 30,
                                                        --------------------------------
Retail Deliveries - (in gigawatthours (GWh))                           2002         2001     Variance      % Change
-------------------------------------------------------------------------------------------------------------------
Bundled Deliveries (1)
<S>                                                                  <C>          <C>           <C>        <C>
Residential                                                          12,543       10,573        1,970      18.6%
Small Commercial & Industrial                                         8,095        8,298        (203)      (2.4%)
Large Commercial & Industrial                                         6,079        6,341        (262)      (4.1%)
Public Authorities & Electric Railroads                               1,836        2,299        (463)     (20.1%)
-------------------------------------------------------------------------------------------------------
                                                                     28,553       27,511        1,042       3.8%
-------------------------------------------------------------------------------------------------------
Unbundled Deliveries (2)
Alternative Energy Suppliers
Residential                                                             371          990        (619)     (62.5%)
Small Commercial & Industrial                                         1,794          998          796      79.8%
Large Commercial & Industrial                                         2,428        1,796          632      35.2%
Public Authorities & Electric Railroads                                 299           92          207       n.m.
-------------------------------------------------------------------------------------------------------
                                                                      4,892        3,876        1,016      26.2%
-------------------------------------------------------------------------------------------------------
PPO (ComEd Only)
Small Commercial & Industrial                                           782          827         (45)      (5.4%)
Large Commercial & Industrial                                         1,249        1,447        (198)     (13.7%)
Public Authorities & Electric Railroads                                 345          150          195     130.0%
-------------------------------------------------------------------------------------------------------
                                                                      2,376        2,424         (48)      (2.0%)
-------------------------------------------------------------------------------------------------------
Total Unbundled Deliveries                                            7,268        6,300          968      15.4%
-------------------------------------------------------------------------------------------------------
Total Retail Deliveries                                              35,821       33,811        2,010       5.9%
=======================================================================================================
<FN>
(1)  Bundled service  reflects  deliveries to customers  taking electric service
     under  tariffed  rates,  which  include the cost of energy and the delivery
     cost  of the  transmission  and  the  distribution  of the  energy.  PECO's
     tariffed rates also include a Competitive Transition Charge (CTC).
(2)  Unbundled   service  reflects   customers   electing  to  receive  electric
     generation  service from an  alternative  energy  supplier or ComEd's Power
     Purchase Option (PPO).
n.m. - not meaningful
</FN>
</TABLE>

                                       54
<PAGE>

<TABLE>
<CAPTION>
                                                        Three Months Ended September 30,
                                                        --------------------------------
Electric Revenue                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
Bundled Revenues (1)
<S>                                                               <C>           <C>          <C>           <C>
Residential                                                       $   1,318     $  1,120     $    198      17.7%
Small Commercial & Industrial                                           757          767          (10)     (1.3%)
Large Commercial & Industrial                                           402          408           (6)     (1.5%)
Public Authorities & Electric Railroads                                 125          138          (13)     (9.4%)
-------------------------------------------------------------------------------------------------------
                                                                      2,602        2,433          169       7.0%
-------------------------------------------------------------------------------------------------------
Unbundled Revenues (2)
Alternative Energy Suppliers
Residential                                                              32           81          (49)    (60.5%)
Small Commercial & Industrial                                            60           16           44       n.m.
Large Commercial & Industrial                                            67           19           48       n.m.
Public Authorities & Electric Railroads                                  10            1            9       n.m.
-------------------------------------------------------------------------------------------------------
                                                                        169          117           52      44.4%
-------------------------------------------------------------------------------------------------------
PPO (ComEd Only)
Small Commercial & Industrial                                            57           77          (20)    (25.9%)
Large Commercial & Industrial                                            74          120          (46)    (38.3%)
Public Authorities & Electric Railroads                                  19           13            6      46.2%
-------------------------------------------------------------------------------------------------------
                                                                        150          210          (60)    (28.6%)
-------------------------------------------------------------------------------------------------------
    Total Unbundled Revenues                                            319          327           (8)     (2.4%)
-------------------------------------------------------------------------------------------------------
Total Electric Retail Revenues                                        2,921        2,760          161       5.8%
-------------------------------------------------------------------------------------------------------
    Wholesale and Miscellaneous Revenue (3)                             174          134           40      29.9%
-------------------------------------------------------------------------------------------------------
Total Electric Revenue                                            $   3,095     $  2,894     $    201       6.9%
=======================================================================================================
<FN>
(1)  Bundled revenue  reflects  deliveries to customers  taking electric service
     under  tariffed  rates,  which  include the cost of energy and the delivery
     cost  of the  transmission  and  the  distribution  of the  energy.  PECO's
     tariffed rates also include a CTC charge.
(2)  Unbundled  revenue  reflects  revenue  from  customers  electing to receive
     electric  generation service from an alternative energy supplier or ComEd's
     PPO.  Revenues  from  customers  choosing an  alternative  energy  supplier
     include a distribution  charge and a CTC. Revenues from customers  choosing
     ComEd's PPO includes an energy  charge at market rates,  transmission,  and
     distribution  charges  and  a  CTC.   Transmission  charges  received  from
     alternative  energy  suppliers are included in wholesale and  miscellaneous
     revenue.
(3)  Wholesale and  miscellaneous  revenues include sales to alternative  energy
     suppliers,   transmission  revenue,   sales  to  municipalities  and  other
     wholesale energy sales.
</FN>
</TABLE>

         The changes in electric  retail  revenues  for the three  months  ended
September 30, 2002, as compared to the same period in 2001 are  attributable  to
the following:

<TABLE>
<CAPTION>
                                                                                 Variance
-------------------------------------------------------------------------------------------------
<S>                                                                             <C>
Weather                                                                         $     146
Rate Changes                                                                          (29)
Customer Choice                                                                        (3)
Other Effects                                                                          47
-------------------------------------------------------------------------------------------------
Electric Retail Revenue                                                         $     161
=================================================================================================
</TABLE>

o    Weather.  The  demand  for  electricity  services  is  impacted  by weather
     conditions.  Very warm  weather in summer  months and very cold  weather in
     other  months is referred to as  "favorable  weather  conditions,"  because
     these  weather   conditions  result  in  increased  sales  of  electricity.
     Conversely, mild weather reduces demand.



                                       55
<PAGE>

              The weather  impact was favorable  compared to the prior year as a
     result of warmer summer weather  during the third quarter of 2002.  Cooling
     degree  days in the ComEd  and PECO  service  territories  were 26% and 20%
     higher, respectively, in the third quarter of 2002 as compared to the third
     quarter of 2001.
o    Rate  Changes.  The  decrease  in  revenues  attributable  to rate  changes
     reflects the 5% ComEd  residential  rate  reduction,  effective  October 1,
     2001, required by the Illinois  restructuring  legislation partially offset
     by $13 million  resulting  from an increase in PECO's  gross  receipts  tax
     rate.  The  increase  in PECO's  gross  receipts  tax rate is  expected  to
     increase  PECO's annual  revenue and tax  obligation by  approximately  $50
     million in 2002.
o    Customer  Choice.  All ComEd and PECO customers have the choice to purchase
     energy  from other  suppliers.  This choice  generally  does not impact kWh
     deliveries,  but affects revenue collected from customers related to energy
     supplied  by  Energy  Delivery.  On  May 1,  2002,  all  ComEd  residential
     customers became eligible to choose their supplier of electricity; however,
     as of  September  30, 2002,  no  alternative  electric  supplier has sought
     approval  from the  Illinois  Commerce  Commission  (ICC)  and no  electric
     utilities have chosen to enter the ComEd residential  market for the supply
     of electricity.
              The  customer  choice  effect is  attributable  to a  decrease  in
     revenues of $43 million  from  customers  in Illinois  electing to purchase
     energy from an  Alternative  Retail  Electric  Supplier  (ARES) or the PPO,
     under which customers can purchase power from ComEd at a market-based  rate
     (ComEd and PECO continue to collect  delivery charges from these customers)
     offset by increased  revenues of $40 million from customers in Pennsylvania
     selecting or returning to PECO as their electric generation supplier.
o    Other  Effects.  Exclusive  of  weather  effects,  higher  delivery  volume
     affected Energy Delivery's revenue compared to the same 2001 period.

         The increase in wholesale  revenue for the three months ended September
30,  2002 as  compared  to the three  months  ended  September  30, 2001 was due
primarily  to  reimbursement  to  ComEd  from  Generation  of  $12  million  for
third-party energy reconciliations.

         Energy  Delivery's  gas sales  statistics  and  revenue  detail  are as
follows:

<TABLE>
<CAPTION>
                                                                   Three Months Ended September 30,
                                                                   --------------------------------
                                                                                   2002         2001       Variance
--------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>          <C>               <C>
Deliveries in million cubic feet (mmcf)                                          11,347       10,525            822
Revenue                                                                             $67         $ 75          $ (8)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       56
<PAGE>

         The changes in gas revenue for the quarter ended September 30, 2002, as
compared to the same 2001 period, are as follows:

<TABLE>
<CAPTION>
(in millions)                                                                    Variance
-------------------------------------------------------------------------------------------------
<S>                                                                             <C>
Rate Changes                                                                    $      (4)
Weather                                                                                (3)
Volume                                                                                 (1)
-------------------------------------------------------------------------------------------------
Gas Revenue                                                                     $      (8)
=================================================================================================
</TABLE>

o    Rate  Changes.  The  unfavorable  variance in rates is  attributable  to an
     adjustment  of the  purchased  gas cost  recovery by the PUC  effective  in
     December  2001.  The average  rate per  million  cubic feet for the quarter
     ended  September  30, 2002 was 17% lower than the same 2001 period.  PECO's
     gas rates are  subject  to  periodic  adjustments  by the PUC  designed  to
     recover or refund the  difference  between actual cost of purchased gas and
     the amount  included  in base rates and to recover or refund  increases  or
     decreases in certain state taxes not recovered in base rates.
o    Weather. The demand for gas service is impacted by weather conditions. Very
     cold  weather  in winter  months is  referred  to as a  "favorable  weather
     condition,"  because this weather  condition  results in increased sales of
     gas. Conversely, mild weather reduces demand. Heating degree-days decreased
     92% in the  quarter  ended  September  30,  2002  compared to the same 2001
     period.
o    Volume. Exclusive of weather impact, delivery volume was consistent for the
     quarter ended September 30, 2002 compared to the same 2001 period.



                                       57
<PAGE>



Results of Operations - Generation Business Segment

<TABLE>
<CAPTION>
                                                        Three Months Ended September 30,
                                                        --------------------------------
                                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>          <C>           <C>
OPERATING REVENUES                                                $   2,213       $2,191       $   22        1.0%

OPERATING EXPENSES
     Purchased Power                                                  1,257        1,268          (11)      (0.9%)
     Fuel                                                               273          242           31       12.8%
     Operating and Maintenance                                          391          364           27        7.4%
     Depreciation and Amortization                                       68           57           11       19.3%
     Taxes Other Than Income                                             37           36            1        2.8%
-------------------------------------------------------------------------------------------------------
         Total Operating Expense                                      2,026        1,967           59        3.0%
-------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                        187          224          (37)     (16.5%)
-------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                   (23)         (41)          18      (43.9%)
     Equity in Earnings (Losses) of Unconsolidated Affiliates, net       87           60           27       45.0%
     Other, net                                                          14          (25)          39      156.0%
-------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                               78           (6)          84        n.m.
-------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                              265          218           47       21.6%

INCOME TAXES                                                            102           78           24       30.8%
-------------------------------------------------------------------------------------------------------

NET INCOME                                                        $     163       $  140       $   23       16.4%
=======================================================================================================
</TABLE>

         Net income for the three months ended September 30, 2002 was positively
impacted by  increased  revenue  from  affiliates,  increased  revenue  from the
acquisition of two generating  plants in April 2002,  reduced interest  expense,
increased equity in earnings of unconsolidated  subsidiaries and lower losses on
nuclear  decommissioning  trust funds,  partially offset by depressed  wholesale
market  prices  for  energy,   increased  depreciation  expense,  and  increased
operating  and  maintenance  expenses.  Operating  revenues,  net  of  fuel  and
purchased  power,  increased by $2 million  reflecting a $59 million increase in
revenue from Generation's retail affiliates driven by a weather-driven  increase
in sales volume to these affiliates  partially offset by the impact of depressed
wholesale market prices for energy. Generation's revenues include $8 million due
to the net effect of the energy  reconciliation of certain  third-party sales in
ComEd's  service  territory  and the  impact of that  energy  reconciliation  on
Generation's PPA with ComEd.  Operating and maintenance expense increased by $27
million due to $10 million  arising  from an increased  number of nuclear  plant
refueling  outage days, $3 million related to increased fossil plant outage work
and $7 million  related to the two  generating  plants  acquired  in April 2002.
These  increases  were  partially  offset  by other  operating  cost  reductions
including cost reductions  related to Exelon's Cost Management  Initiative.  The
increase in depreciation  expense reflects  additional  depreciation  expense on
routine capital additions,  the acquisition of two generating plants acquired in
April 2002 and Southeast  Chicago  Energy  Project,  LLC's  (Southeast  Chicago)
peaking facility  (Southeast  Chicago Energy Project).  The decrease in interest
expense is due to a lower interest rate on the spent nuclear fuel obligation and
lower  affiliate   interest  expense.   Equity  in  earnings  of  unconsolidated
affiliates  increased  primarily  due  to  a  Sithe  mark-to-market  adjustment,
partially  offset by an  impairment  adjustment  recorded at Sithe.  Other,  net
increased $39 million for the three months ended  September 30, 2002 compared to





                                       58
<PAGE>

the  same  period  in  the  prior  year   primarily   due  to  lower  losses  on
decommissioning  trust investments during 2002 as compared to the same period in
2001.  Additionally,  revenue  for the three  months  ended  September  30, 2002
includes  a net  trading  portfolio  loss of $12  million  compared  to a net $5
million gain for the three months ended September 30, 2001.

Generation Operating Statistics:

         For the three months ended  September  30, 2002 and 2001,  Generation's
sales and the supply of these sales  exclusive of the trading  portfolio were as
follows:

<TABLE>
<CAPTION>
                                                                 Three Months Ended September 30,
                                                                 --------------------------------
Sales (in GWhs)                                                             2002             2001          % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>                 <C>
Energy Delivery                                                           34,535           32,692              5.6%
Exelon Energy                                                              1,461            2,038          (28.3%)
Market Sales                                                              21,177           17,781             19.1%
-------------------------------------------------------------------------------------------------------
Total Sales                                                               57,173           52,511              8.9%
=======================================================================================================

                                                                 Three Months Ended September 30,
                                                                 --------------------------------
Supply of Sales (in GWhs)                                                   2002             2001          % Change
---------------------------------------------------------------------------------------------------------------------
Nuclear Generation                                                        29,817           28,456              4.8%
Purchases - non-trading portfolio                                         23,425           20,505             14.2%
Fossil and Hydro Generation                                                3,931            3,550             10.7%
-------------------------------------------------------------------------------------------------------
Total Supply                                                              57,173           52,511              8.9%
=======================================================================================================
</TABLE>

         Trading volume of 28,455 GWhs and 1,832 GWhs for the three months ended
September 30, 2002 and 2001, respectively, is not included in the table above.

         Generation's  average margin data for the three months ended  September
30, 2002 and 2001 were as follows:
<TABLE>
<CAPTION>
                                                                 Three Months Ended September 30,
                                                                 --------------------------------
($/MWh)                                                                     2002             2001          % Change
---------------------------------------------------------------------------------------------------------------------
Average Realized Revenue
<S>                                                                  <C>             <C>                      <C>
     Energy Delivery                                                 $    40.18      $      40.01             0.4%
     Exelon Energy                                                        49.72             46.67             6.5%
     Market Sales                                                         35.50             42.55          (16.6%)
     Total Sales - excluding the trading portfolio                        38.69             41.13           (5.9%)

Average Supply Cost (1) - excluding trading portfolio                $    26.66      $      28.70           (7.1%)

Average Margin - excluding the trading portfolio                     $    12.04      $      12.43           (3.1%)
---------------------------------------------------------------------------------------------------------------------
<FN>
(1) Average Supply costs represent purchased power and fuel costs.
</FN>
</TABLE>

         Generation's nuclear fleet, including AmerGen,  performed at a capacity
factor of 93.9% for the three months ended  September 30, 2002 compared to 93.0%
for the same  period in 2001.  Generation's  nuclear  units'  production  costs,
including AmerGen, for the three months ended September 30, 2002 were $12.40 per
MWh  compared  to  $12.52  per MWh for the same  period  in 2001.  Reduced  unit
production costs reflect additional  generation due to power uprates,  headcount
reductions  and  Exelon's  Cost  Management  Initiative.   Generation's  average
purchased power costs for wholesale operations were $53.75 per MWh for the three




                                       59
<PAGE>

months ended September 30, 2002,  compared to $62.18 per MWh for the same period
in 2001.  The decrease in purchased  power costs was  primarily due to depressed
wholesale power market prices.


Results of Operations - Enterprises Business Segment

<TABLE>
<CAPTION>
                                                        Three Months Ended September 30,
                                                        --------------------------------
                                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>          <C>          <C>          <C>
OPERATING REVENUES                                                   $  509       $  529       $  (20)      (3.8%)

OPERATING EXPENSES
     Purchased Power                                                     73           88          (15)     (17.0%)
     Fuel                                                                60           63           (3)      (4.8%)
     Operating and Maintenance                                          349          361          (12)      (3.3%)
     Depreciation and Amortization                                       11           16           (5)     (31.3%)
     Taxes Other Than Income                                              1            1           --         --
-------------------------------------------------------------------------------------------------------
         Total Operating Expense                                        494          529          (35)      (6.6%)
-------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                         15           --           15        n.m.
-------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                    (3)          (9)           6      (66.7%)
     Equity in Earnings (Losses) of Unconsolidated Affiliates, net        8           (8)          16     (200.0%)
     Other, net                                                          --          (34)          34     (100.0%)
-------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                                5          (51)          56     (109.8%)
-------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                               20          (51)          71     (139.2%)

INCOME TAXES                                                              5          (18)          23     (127.8%)
-------------------------------------------------------------------------------------------------------

NET INCOME                                                           $   15       $  (33)      $   48     (145.4%)
=======================================================================================================
</TABLE>

         Enterprises'  net income  increased  $48 million  for the three  months
ended  September 30, 2002  compared to the same period in 2001.  The increase in
net  income is  primarily  attributable  to  increased  operating  income of $15
million,  higher equity in earnings of unconsolidated  affiliates of $11 million
due to the  discontinuance  of losses on AT&T Wireless PCS of Philadelphia,  LLC
(AT&T  Wireless)  as a result of the sale of  Enterprises'  49% interest in AT&T
Wireless to a subsidiary  of AT&T  Wireless  Services,  $10 million of equity in
earnings from a  communications  joint venture relating to its recovery of trade
receivables  previously considered  uncollectible and a $36 million loss in 2001
from a write-down of a communications investment.

         Operating revenues decreased $20 million, or 3.8%, for the three months
ended  September 30, 2002,  compared to the same period in 2001. The decrease in
operating revenues was primarily  attributable to reduced retail energy sales of
$50 million from Exelon Energy,  Inc.  (Exelon Energy) due to exiting the retail
energy business in the Pennsylvania,  New Jersey and Maryland area (PJM market).
This decrease was partially  offset by higher  electric  revenues of $22 million
primarily  resulting from higher  electric prices in Illinois for Exelon Energy,
higher revenues of $4 million from Exelon Services,  Inc. (Exelon Services) from
increased  construction  project revenues and higher revenues of $4 million from
InfraSource,  Inc.  (InfraSource)  primarily from increased  infrastructure  and
construction services in the electric line of business.




                                       60
<PAGE>

         Enterprises'  operating and other  expenses,  net decreased $91 million
for the three months  ended  September  30, 2002  compared to the same period in
2001.  The  decrease  was  primarily  attributable  to lower  power costs of $34
million  resulting  from reduced  operations  of retail energy sales from Exelon
Energy  exiting  the PJM market,  reduced  costs at  InfraSource  of $10 million
relating to  construction  services in the electric line of business in addition
to overall reductions in administrative  expenses,  higher equity in earnings of
unconsolidated  affiliates of $11 million as a result of the  discontinuance  of
losses on AT&T  Wireless as a result of the AT&T Wireless  sale,  $10 million of
equity in earnings from a communications  joint venture relating to its recovery
of trade receivables previously considered uncollectible, lower depreciation and
amortization  of $5 million from the  discontinuance  of goodwill  amortization,
lower  interest  expense of $6  million  and a $36  million  loss in 2001 from a
write-down of a communications investment. These decreases were partially offset
by  higher  electric  purchased  power  costs in  Illinois  of $19  million  and
increased  costs  relating to  construction  projects  at Exelon  Services of $5
million.

         The  effective  income  tax rate was 25.0% for the three  months  ended
September 30, 2002,  compared to 35.3% for the three months ended  September 30,
2001. The decrease in the effective tax rate was primarily  attributable to a $5
million  reduction in estimated  state income taxes recorded  during the quarter
and the discontinuation of goodwill amortization as of January 1, 2002, that was
not deductible for income tax purposes.


Nine Months Ended September 30, 2002 Compared To Nine Months Ended September 30,
2001

Net Income and Earnings Per Share
         Exelon's  income before the cumulative  effect of changes in accounting
principles  increased $195 million,  or 18%, for the nine months ended September
30, 2002.  Diluted  earnings per common share on the same basis  increased $0.60
per share,  or 18%.  The  increase  in income  before the  cumulative  effect of
changes in accounting  principles  reflects  higher  earnings due to the sale of
AT&T Wireless,  a 1.6% increase in retail sales reflecting warmer summer weather
partially offset by mild winter weather,  the extension of the estimated service
lives  of  generating  stations  in 2001  and the  discontinuation  of  goodwill
amortization required by the adoption of SFAS No. 142, partially offset by lower
wholesale energy prices,  increased  nuclear  refueling  outage costs,  employee
severance  costs and certain  other  factors  affecting  net  income,  which are
discussed in the  remainder  of the results of  operations  section.  Net income
included  net  pre-tax  charges of $10 million for  severance  costs,  primarily
related to executive severance.

         Net income  decreased  $47  million,  or 4%, for the nine months  ended
September 30, 2002. Diluted earnings per common share decreased $0.15 per share,
or 4%. Net income for the nine months ended  September  30, 2002 included a $230
million  charge for the cumulative  effect of changes in accounting  principles,
reflecting goodwill impairment upon the adoption of SFAS No. 142. Net income for
the nine months ended  September 30, 2001 included $12 million of income for the
cumulative  effect  of  adopting  SFAS  No.  133,   "Accounting  for  Derivative
Instruments and Hedging  Activities"  (SFAS No. 133). See Note 2 of the Combined
Notes to Consolidated Financial Statements for further information regarding the
adoption of SFAS No. 133.




                                       61
<PAGE>

         The analysis below presents the operating  results for each of Exelon's
business  segments for the nine months ended  September 30, 2002 compared to the
nine months ended September 30, 2001.

<TABLE>
<CAPTION>
Income Before Cumulative Effect of Changes in Accounting Principles by Business Segment

                                                 Nine Months Ended September 30,
                                                 -------------------------------
                                                          2002              2001         Variance          % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>               <C>                <C>
Energy Delivery                                      $     908         $     810         $     98           12.1%
Generation                                                 313               369              (56)         (15.2%)
Enterprises                                                 69               (63)             132         (209.5%)
Corporate                                                  (17)              (38)              21           55.3%
-------------------------------------------------------------------------------------------------------
Total                                                $   1,273         $   1,078         $    195           18.1%
=======================================================================================================
</TABLE>




Results of Operations - Energy Delivery Business Segment
<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                         -------------------------------
                                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>          <C>           <C>
OPERATING REVENUES                                                $   7,973       $7,903       $   70        0.9%

OPERATING EXPENSES
     Purchased Power                                                  3,331        3,167          164        5.2%
     Fuel                                                               228          335         (107)     (31.9%)
     Operating and Maintenance                                        1,131        1,145          (14)      (1.2%)
     Depreciation and Amortization                                      745          828          (83)     (10.0%)
     Taxes Other Than Income                                            430          358           72       20.1%
-------------------------------------------------------------------------------------------------------
         Total Operating Expense                                      5,865        5,833           32        0.5%
-------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                      2,108        2,070           38        1.8%
-------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                  (654)        (759)         105       (13.8%)
     Distributions on Preferred Securities of Subsidiaries              (34)         (34)          --         --
     Other, net                                                          35          117          (82)      (70.1%)
-------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                             (653)        (676)          23       (3.4%)
-------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                            1,455        1,394           61        4.4%

INCOME TAXES                                                            547          584          (37)      (6.3%)
-------------------------------------------------------------------------------------------------------

NET INCOME                                                        $     908       $  810       $   98       12.1%
=======================================================================================================
</TABLE>

         Energy  Delivery's  gross margin  (revenue  net of purchased  power and
fuel) increased $13 million, $55 million of which was attributable  primarily to
warmer  summer  weather,  which  increased  retail  electric  and  gas  volumes,
partially offset by a warmer winter.

         Lower operating and maintenance expense reflects operating productivity
improvements and lower storm restoration costs, a decrease in the provisions for
bad debt  expense  and a  decrease  in the  provision  for  obsolete  inventory,
partially  offset by  increased  pension and  postretirement  benefit  costs and
increased  corporate  allocations,  including a portion of  executive  severance



                                       62
<PAGE>

charges,  an increase in the  provision for injuries and damages and an increase
in reserves for MGP investigation and remediation.

         Energy  Delivery's  depreciation and amortization  expense decreased by
$83  million  reflecting  $97  million  from  the  discontinuation  of  goodwill
amortization due to the adoption of SFAS No. 142 as of January 1, 2002 and a $24
million  decrease due to lower  depreciation  rates at ComEd  effective  July 1,
2002,  partially offset by $14 million of higher  regulatory asset  amortization
and higher depreciation expense related to higher plant in service balances.

         Lower  interest  expense  reflects  reductions  in the  amount  of debt
outstanding  as well as  lower  interest  rates  due to  debt  refinancing.  The
reduction in other, net primarily  reflects lower  intercompany  interest income
reflecting  lower interest rates and a $12 million reserve for a potential plant
disallowance  resulting  from an audit  performed  in  conjunction  with ComEd's
delivery service rate case.

         Energy  Delivery's  effective  income  tax rate was  37.6% for the nine
months ended  September  30,  2002,  compared to 41.9% for the nine months ended
September  30,  2001.  The  decrease  in the  effective  tax rate was  primarily
attributable to the  discontinuation  of goodwill  amortization as of January 1,
2002, which was not deductible for income tax purposes, and a reduction in state
income taxes.


                                       63
<PAGE>

Energy Delivery Operating Statistics and Revenue Detail

         Energy  Delivery's  electric sales statistics and revenue detail are as
follows:

<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                         -------------------------------
Retail Deliveries - (in GWhs)                                          2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
Bundled Deliveries (1)
<S>                                                                  <C>          <C>           <C>       <C>
Residential                                                          28,984       26,243        2,741     10.4%
Small Commercial & Industrial                                        22,782       22,289          493      2.2%
Large Commercial & Industrial                                        17,436       17,682         (246)    (1.4%)
Public Authorities & Electric Railroads                               5,715        6,574         (859)   (13.1%)
-------------------------------------------------------------------------------------------------------
                                                                     74,917       72,788        2,129      2.9%
-------------------------------------------------------------------------------------------------------
Unbundled Deliveries (2)
Alternative Energy Suppliers
Residential                                                           1,720        2,365         (645)   (27.3%)
Small Commercial & Industrial                                         4,075        3,521          554     15.7%
Large Commercial & Industrial                                         5,551        6,131         (580)    (9.5%)
Public Authorities & Electric Railroads                                 618          235          383    163.0%
-------------------------------------------------------------------------------------------------------
                                                                     11,964       12,252         (288)    (2.4%)
-------------------------------------------------------------------------------------------------------
PPO (ComEd Only)
Small Commercial & Industrial                                         2,384        2,448          (64)    (2.6%)
Large Commercial & Industrial                                         3,952        4,324         (372)    (8.6%)
Public Authorities & Electric Railroads                                 861          734          127     17.3%
-------------------------------------------------------------------------------------------------------
                                                                      7,197        7,506         (309)    (4.1%)
-------------------------------------------------------------------------------------------------------
Total Unbundled Deliveries                                           19,161       19,758         (597)    (3.0%)
-------------------------------------------------------------------------------------------------------
Total Retail Deliveries                                              94,078       92,546        1,532      1.7%
=======================================================================================================
<FN>
(1)  Bundled service  reflects  deliveries to customers  taking electric service
     under  tariffed  rates,  which  include the cost of energy and the delivery
     cost  of the  transmission  and  the  distribution  of the  energy.  PECO's
     tariffed rates also include a CTC charge.
(2)  Unbundled   service  reflects   customers   electing  to  receive  electric
     generation service from an alternative energy supplier or ComEd's PPO.
</FN>
</TABLE>


                                       64
<PAGE>

<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                         -------------------------------
Electric Revenue                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
Bundled Revenues (1)
<S>                                                               <C>           <C>          <C>            <C>
Residential                                                       $   2,880     $  2,659     $    221       8.3%
Small Commercial & Industrial                                         2,007        1,910           97       5.1%
Large Commercial & Industrial                                         1,152        1,095           57       5.2%
Public Authorities & Electric Railroads                                 356          388          (32)     (8.3%)
-------------------------------------------------------------------------------------------------------
                                                                      6,395        6,052          343       5.7%
-------------------------------------------------------------------------------------------------------
Unbundled Revenues (2)
Alternative Energy Suppliers
Residential                                                             129          184          (55)    (30.0%)
Small Commercial & Industrial                                           107          110           (3)     (2.8%)
Large Commercial & Industrial                                           111          121          (10)     (8.3%)
Public Authorities & Electric Railroads                                  18            4           14         n.m.
-------------------------------------------------------------------------------------------------------
                                                                        365          419          (54)    (12.9%)
-------------------------------------------------------------------------------------------------------
PPO (ComEd Only)
Small Commercial & Industrial                                           155          167          (12)     (7.2%)
Large Commercial & Industrial                                           214          267          (53)    (19.9%)
Public Authorities & Electric Railroads                                  48           44            4       9.1%
-------------------------------------------------------------------------------------------------------
                                                                        417          478          (61)    (12.8%)
-------------------------------------------------------------------------------------------------------
    Total Unbundled Revenues                                            782          897         (115)    (12.8%)
-------------------------------------------------------------------------------------------------------
Total Electric Retail Revenues                                        7,177        6,949          228       3.3%
-------------------------------------------------------------------------------------------------------
    Wholesale and Miscellaneous Revenue (3)                             438          472          (34)     (7.2%)
-------------------------------------------------------------------------------------------------------
Total Electric Revenue                                            $   7,615     $  7,421     $    194       2.6%
=======================================================================================================
<FN>
(1)  Bundled revenue  reflects  deliveries to customers  taking electric service
     under  tariffed  rates,  which  include the cost of energy and the delivery
     cost  of the  transmission  and  the  distribution  of the  energy.  PECO's
     tariffed rates also include a CTC charge.
(2)  Unbundled  revenue  reflects  revenue  from  customers  electing to receive
     electric  generation service from an alternative energy supplier or ComEd's
     PPO.  Revenue  from  customers  choosing  an  alternative  energy  supplier
     includes a distribution  charge and a CTC. Revenues from customers choosing
     ComEd's PPO includes an energy  charge at market rates,  transmission,  and
     distribution  charges  and  a  CTC.   Transmission  charges  received  from
     alternative  energy  suppliers are included in wholesale and  miscellaneous
     revenue.
(3)  Wholesale and  miscellaneous  revenues include sales to alternative  energy
     suppliers,   transmission  revenue,   sales  to  municipalities  and  other
     wholesale energy sales.
</FN>
</TABLE>

         The  changes in electric  retail  revenues  for the nine  months  ended
September 30, 2002, as compared to the same period in 2001 are  attributable  to
the following:

<TABLE>
<CAPTION>
                                                                                 Variance
-------------------------------------------------------------------------------------------------
<S>                                                                             <C>
Weather                                                                         $     115
Customer Choice                                                                        84
Rate Changes                                                                          (54)
Other Effects                                                                          83
-------------------------------------------------------------------------------------------------
Electric Retail Revenue                                                         $     228
=================================================================================================
</TABLE>

o    Weather.  The weather impact was favorable  compared to the prior year as a
     result of warmer  summer  weather  in ComEd  and PECO  service  territories
     partially  offset by warmer  winter  weather in the ComEd and PECO  service
     territories.  Cooling degree days in the ComEd and PECO service territories
     were 27% and 14% higher,  respectively,  in the nine months ended September
     30, 2002 as compared to the same period in 2001. Heating degree days in the





                                       65
<PAGE>

     ComEd and PECO service territories were 7% and 16% lower, respectively,  in
     the nine months ended  September 30, 2002 as compared to the same period in
     2001.
o    Customer  Choice.  The increase in electric retail revenues due to customer
     choice  results from  increased  revenues of $205 million from customers in
     Pennsylvania  selecting or returning to PECO as their  electric  generation
     supplier,  partially  offset by a decrease in revenues of $121 million from
     customers in Illinois  electing to purchase energy from an ARES or the PPO,
     under which customers can purchase power from ComEd at a market-based rate.
     ComEd and PECO continue to collect delivery charges from these customers.
o    Rate  Changes.  The  decrease  in  revenues  attributable  to rate  changes
     reflects the 5% ComEd  residential  rate  reduction,  effective  October 1,
     2001, required by the Illinois restructuring  legislation and the timing of
     a $60 million PECO rate  reduction  in effect for 2001 and 2002,  offset by
     $39 million due to an increase in PECO's gross  receipts tax rate effective
     January 1, 2002 and the expiration of a 6% reduction in PECO's rates during
     the first quarter of 2001.
o    Other Effects.  For ComEd,  other items impacting revenues were primarily a
     strong  housing   construction  market  in  Chicago  which  contributed  to
     residential and small  commercial and industrial  customer volume growth in
     the early portion of the year,  partially offset by the unfavorable  impact
     of a slower economy on large commercial and industrial customers. For PECO,
     other  items  impacting  revenues  were $53 million  from  higher  delivery
     volume,  exclusive of weather  impacts,  partially offset by an $11 million
     settlement of CTCs by a large customer in the first quarter of 2001.

         The reduction in wholesale  revenue for the nine months ended September
30,  2002 as  compared  to the nine  months  ended  September  30,  2001 was due
primarily to a decrease in off-system  sales due to the  expiration of wholesale
contracts  that were  offered by ComEd from June 2000 to May 2001 to support the
open  access  program in  Illinois,  and a 2001  reversal of reserve for revenue
refunds  related  to certain of  ComEd's  municipal  customers  as a result of a
favorable  FERC  ruling,  partially  offset by an  increase  of $12  million due
primarily   to   reimbursement    from   Generation   for   third-party   energy
reconciliations.

         Energy  Delivery's  gas sales  statistics  and  revenue  detail  are as
follows:
<TABLE>
<CAPTION>
                                                                     Nine Months Ended September 30,
                                                                     -------------------------------
                                                                                   2002         2001        Variance
---------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>          <C>            <C>
Deliveries in mmcf                                                               56,990       58,536         (1,546)
Revenue                                                                            $358         $482         $ (124)
---------------------------------------------------------------------------------------------------------------------
</TABLE>



                                       66
<PAGE>

         The  changes in gas revenue for the nine  months  ended  September  30,
2002, as compared to the same 2001 period, are as follows:

<TABLE>
<CAPTION>
                                                                                 Variance
-------------------------------------------------------------------------------------------------
<S>                                                                             <C>
Rate Changes                                                                    $     (67)
Weather                                                                               (33)
Volume                                                                                (23)
Other                                                                                  (1)
-------------------------------------------------------------------------------------------------
Gas Revenue                                                                     $    (124)
=================================================================================================
</TABLE>

o    Rate  Changes.  The  unfavorable  variance in rates is  attributable  to an
     adjustment  of the  purchased  gas cost  recovery by the PUC  effective  in
     December  2001. The average rate per million cubic feet for the nine months
     ended September 30, 2002 was 23% lower than the same 2001 period.
o    Weather.  The  unfavorable  weather impact is attributable to warmer winter
     weather during the nine months ended  September 30, 2002 as compared to the
     same 2001  period.  Heating  degree-days  decreased  16% in the nine months
     ended September 30, 2002 compared to the same 2001 period.
o    Volume. Exclusive of weather impacts, lower delivery volume reduced revenue
     by $23 million in the nine months ended  September 30, 2002 compared to the
     same 2001 period.  Total  deliveries to customers  decreased 3% in the nine
     months ended September 30, 2002 compared to the same 2001 period, primarily
     as a result of  slower  economic  conditions  in 2002  offset by  increased
     customer growth.


                                       67
<PAGE>


Results of Operations - Generation Business Segment

<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                         -------------------------------

                                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>          <C>           <C>
OPERATING REVENUES                                                $   5,233       $5,403       $ (170)       (3.1%)

OPERATING EXPENSES
     Purchased Power                                                  2,581        2,589           (8)       (0.3)%
     Fuel                                                               706          691           15         2.2%
     Operating and Maintenance                                        1,234        1,173           61         5.2%
     Depreciation and Amortization                                      197          224          (27)      (12.1%)
     Taxes Other Than Income                                            126          121            5         4.1%
-------------------------------------------------------------------------------------------------------
         Total Operating Expense                                      4,844        4,798           46         1.0%
-------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                        389          605         (216)      (35.7%)
-------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                   (51)        (100)          49       (49.0%)
     Equity in Earnings of Unconsolidated Affiliates, net               119           99           20        20.2%
     Other, net                                                          54           (7)          61         n.m.
-------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                              122           (8)         130         n.m.
-------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES AND CUMULATIVE
   EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES                           511          597          (86)      (14.4%)

INCOME TAXES                                                            198          228          (30)      (13.2%)
-------------------------------------------------------------------------------------------------------

INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN
   ACCOUNTING PRINCIPLES                                                313          369          (56)      (15.2%)

CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
   PRINCIPLES                                                            13           12            1         8.3%
-------------------------------------------------------------------------------------------------------

NET INCOME                                                        $     326       $  381       $  (55)      (14.4%)
=======================================================================================================
</TABLE>

         Net income for the nine months ended  September  30, 2002 was adversely
impacted by a lower  margin on wholesale  energy  sales due to depressed  market
prices  for  energy,  a  reduced  supply of  low-cost  nuclear  generation,  and
increased operating and maintenance expense,  partially offset by an increase in
revenue  from  affiliates,   increased  revenue  from  the  acquisition  of  two
generating   plants  in  April  2002,   increased   interest  income   decreased
depreciation and interest expense and lower nuclear  decommissioning  trust fund
losses.  Operating revenues,  net of fuel and purchased power, decreased by $177
million  reflecting a decrease in margin on market sales  attributable  to lower
margin  from  market  sales,  offset by weather  related  increases  in sales to
affiliates and a decrease trading margins.  Market sales margins were negatively
impacted by lower  average  market sales  prices.  The effect of the lower sales
prices were partially  offset by lower average supply costs and increased market
sales volumes.  The decrease in trading  margins was  principally  attributed to
lower  purchase  power  costs  associated  with lower  wholesale  market  prices
realized and reduced  transmission  costs.  Operating  and  maintenance  expense
increased,  primarily  due to $65 million of costs  incurred for the  additional
refueling outages during the nine months ended September 30, 2002 as compared to
the same  period  in  2001,  as well as  additional  allocated  corporate  costs
including executive  severance.  These additional expenses were partially offset
by other operating cost  reductions,  including $11 million related to headcount
reductions,  a $10 million reduction in Generation's  severance accrual and cost




                                       68
<PAGE>

reductions  related to  Exelon's  Cost  Management  Initiative.  The  decline in
depreciation  expense  reflects  extension  of the  estimated  service  lives of
generating  stations,  partially  offset by additional  depreciation  expense on
plant placed in service,  including two generating  plants in April 2002 and the
Southeast  Chicago Energy Project.  Lower interest expense is due to capitalized
interest  and a  lower  interest  rate on the  spent  nuclear  fuel  obligation,
partially  offset by an increase in interest  expense on long-term debt.  Other,
net increased $61 million for the nine months ended  September 30, 2002 compared
to the same period in the prior year primarily due to substantial  market losses
on decommissioning  trust investments during 2001 as compared to the same period
in 2002. Additionally,  trading activities were initiated in April 2001. Revenue
for the nine months ended  September 30, 2002  includes a net trading  portfolio
loss of $27 million  compared to a net $1 million  loss in the nine months ended
September 30, 2001.

Generation Operating Statistics:

         For the nine months  ended  September  30, 2002 and 2001,  Generation's
sales and the supply of these sales,  excluding the trading  portfolio,  were as
follows:

<TABLE>
<CAPTION>
                                                                  Nine Months Ended September 30,
                                                                  -------------------------------
Sales (in GWhs)                                                             2002             2001          % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>                 <C>
Energy Delivery                                                           90,579           90,001              0.6%
Exelon Energy                                                              4,067            5,044            (19.4%)
Market Sales                                                              61,089           53,787             13.6%
-------------------------------------------------------------------------------------------------------
Total Sales                                                              155,735          148,832              4.6%
=======================================================================================================

                                                                  Nine Months Ended September 30,
Supply of Sales (in GWhs)                                                   2002             2001          % Change
---------------------------------------------------------------------------------------------------------------------
Nuclear Generation                                                        86,127           87,397             (1.5%)
Purchases - non-trading portfolio                                         59,496           52,459             13.4%
Fossil and Hydro Generation                                               10,112            8,976             12.7%
-------------------------------------------------------------------------------------------------------
Total Supply                                                             155,735          148,832              4.6%
=======================================================================================================
</TABLE>

         Trading  volume of 51,260 GWhs and 2,286 GWhs for the nine months ended
September 30, 2002 and 2001, respectively, is not included in the table above.


                                       69
<PAGE>

         Generation's  average  margin data for the nine months ended  September
30, 2002 and 2001 were as follows:
<TABLE>
<CAPTION>
                                                                   Nine Months Ended September 30,
                                                                   -------------------------------
($/MWh)                                                                     2002              2001         % Change
---------------------------------------------------------------------------------------------------------------------
Average Realized Revenue
<S>                                                                  <C>              <C>                      <C>
     Energy Delivery                                                 $    34.33       $      33.37             2.9%
     Exelon Energy                                                        46.75              42.28            10.6%
     Market Sales                                                         31.55              39.95           (21.0%)
     Total Sales - excluding the trading portfolio                        33.56              36.05            (6.9%)

Average Supply Cost (1) - excluding trading portfolio                $    21.04       $      21.72            (3.1%)

Average Margin - excluding the trading portfolio                     $    12.52       $      14.18           (11.7%)
---------------------------------------------------------------------------------------------------------------------
<FN>
(1) Average supply cost includes purchase power and fuel cost.
</FN>
</TABLE>



         Generation's nuclear fleet, including AmerGen,  performed at a capacity
factor of 92.1% for the nine months ended  September  30, 2002 compared to 95.1%
the  same  period  in  2001.  Generation's  nuclear  fleet's  production  costs,
including AmerGen,  for the nine months ended September 30, 2002 were $13.05 per
MWh compared to $12.40 per MWh for the same period in 2001.  The lower  capacity
factor and  increased  unit  production  costs are  primarily due to 186 days of
planned outage time in the nine months ended  September 30, 2002 versus 55, days
in the same period in 2001. Increased unit production costs are partially offset
by headcount reductions and Exelon's Cost Management  Initiatives.  Generation's
average  purchased power costs for wholesale  operations were $43.60 per MWh for
the nine months ended  September  30,  2002,  compared to $49.77 per MWh for the
same period in 2001. The decrease in purchased  power costs was primarily due to
depressed wholesale power market prices.



                                       70
<PAGE>


Results of Operations - Enterprises Business Segment

<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                         -------------------------------
                                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>          <C>          <C>         <C>
OPERATING REVENUES                                                   $1,475       $1,742       $ (267)     (15.3%)

OPERATING EXPENSES
     Purchased Power                                                    181          244          (63)     (25.8%)
     Fuel                                                               294          429         (135)     (31.5%)
     Operating and Maintenance                                          983        1,066          (83)      (7.8%)
     Depreciation and Amortization                                       46           47           (1)      (2.1%)
     Taxes Other Than Income                                              6            8           (2)     (25.0%)
-------------------------------------------------------------------------------------------------------
         Total Operating Expense                                      1,510        1,794         (284)     (15.8%)
-------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                        (35)         (52)          17      (32.7%)
--------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                   (11)         (31)          20      (64.5%)
     Equity in Earnings (Losses) of Unconsolidated Affiliates, net        3          (22)          25     (113.6%)
     Other, net                                                         158            4          154        n.m.
-------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                              150          (49)         199        n.m.
-------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES AND CUMULATIVE
   EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                             115         (101)         216     (213.9%)
INCOME TAXES                                                             46          (38)          84     (221.1%)
-------------------------------------------------------------------------------------------------------

INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
   ACCOUNTING PRINCIPLE                                                  69          (63)         132     (209.5%)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
   PRINCIPLE                                                           (243)          --         (243)       n.m.
-------------------------------------------------------------------------------------------------------

NET INCOME                                                           $ (174)      $  (63)      $ (111)     176.2%
=======================================================================================================
</TABLE>

         Enterprises'  net income  increased  $132  million  for the nine months
ended  September  30, 2002  compared to the same period in 2001,  excluding  the
cumulative  effect of a change in  accounting  principle.  The  increase  in net
income is primarily  attributable  to the AT&T Wireless sale that resulted in an
after-tax  gain of $116  million,  increased  operating  income of $17  million,
higher equity in earnings of unconsolidated affiliates of $18 million due to the
discontinuation  of losses  on AT&T  Wireless  as a result of the AT&T  Wireless
sale,  $10 million of equity in earnings  from a  communications  joint  venture
relating  to  its   recovery   of  trade   receivables   previously   considered
uncollectible  and a $26  million  net  loss in 2001  from the  write-down  of a
communications investment.  These increases were partially offset by $40 million
of investment write-downs and $4 million of net asset write-downs in 2002 and an
$18  million  gain  in  2001  from  the  sale  of a  communications  investment.
Enterprises'  net loss  increased  $111 million after  reflecting the cumulative
effect of a change in accounting  principle  resulting from the adoption of SFAS
No. 142, which no longer allows  amortization  of goodwill but requires  testing
goodwill for  impairment on an annual basis.  The  impairment  booked during the
first quarter, as a result of transitional  impairment testing, was $243 million
net of income taxes and minority interest.

         Operating  revenues  decreased  $267  million for the nine months ended
September  30,  2002,  compared  to the same  period in 2001.  The  decrease  in
operating revenues was attributable to lower gas sales of $110 million primarily




                                       71
<PAGE>

resulting  from lower gas prices,  reduced  retail  energy sales of $141 million
from Exelon Energy  exiting the PJM market,  lower  revenues of $52 million from
Exelon  Services from reduced  construction  projects and lower  revenues of $24
million from  InfraSource from the continued  decline in the  telecommunications
industry and reduced  construction  services in that industry.  These  decreases
were  partially  offset by higher  electric  revenues of $60  million  primarily
resulting from higher electric prices in Illinois for Exelon Energy.

         Enterprises'  operating and other expenses,  net decreased $483 million
for the nine months  ended  September  30,  2002  compared to the same period in
2001. The decrease is primarily  attributable  to a pre-tax gain of $198 million
recorded on the AT&T Wireless  sale,  lower gas costs of $109 million  primarily
resulting  from lower gas prices,  lower power costs of $154  million  resulting
from reduced  operations of retail  energy sales from Exelon Energy  exiting the
PJM market,  reduced costs relating to construction  projects at Exelon Services
of  $41  million,  reduced  costs  relating  to  construction  services  in  the
telecommunications industry and overall reductions in administrative expenses at
InfraSource of $35 million, lower interest expense of $20 million, higher equity
in  earnings  of  unconsolidated  affiliates  of $18  million as a result of the
discontinuance of losses on AT&T Wireless as a result of the AT&T Wireless sale,
$10 million of equity in earnings from a  communications  joint venture relating
to its recovery of trade receivables  previously considered  uncollectible and a
$26 million net loss in 2001 from the write-down of a communications investment.
These decreases were partially  offset by higher electric  purchased power costs
in  Illinois  of $68 million for Exelon  Energy,  write-down  of  communications
investments  of $29 million,  write-down of energy  related  investments  of $11
million,  a net  write-down  of other  assets  of $4  million  in 2002 and a $18
million gain in 2001 from the sale of a communications investment.

         The  effective  income  tax rate was  40.0% for the nine  months  ended
September  30, 2002,  compared to 37.6% for the nine months ended  September 30,
2001. The increase in the effective tax rate was primarily  attributable  to the
AT&T Wireless sale offset by the discontinuation of goodwill  amortization as of
January 1, 2002, that was not deductible for income tax purposes.


LIQUIDITY AND CAPITAL RESOURCES

         Exelon's  businesses  are capital  intensive  and require  considerable
capital  resources.   Exelon's  capital  resources  are  primarily  provided  by
internally  generated cash flows from operations  and, to the extent  necessary,
external financings including the issuance of commercial paper.  Exelon's access
to external  financing at reasonable terms is dependent on the credit ratings of
Exelon and its subsidiaries and the general business condition of Exelon and the
utility industry.  Capital resources are used primarily to fund Exelon's capital
requirements, including construction,  investments in new and existing ventures,
repayments of maturing debt and preferred securities of subsidiaries and payment
of common stock  dividends.  Any  potential  future  acquisitions  could require
external financing, including the issuance by Exelon of common stock.





                                       72
<PAGE>

Cash Flows from Operating Activities
         Cash flows provided by operations  for the nine months ended  September
30, 2002 were $2.6  billion  compared to $3.0  billion in the nine months  ended
September 30, 2001.  Approximately 70% of 2002 cash flows provided by operations
for the nine months ended  September 30, 2002 were  provided by Energy  Delivery
and approximately 30% were provided by Generation.  Enterprises' cash flows from
operations  were  immaterial  to Exelon for the nine months ended  September 30,
2002.  Energy Delivery's cash flows from operating  activities  primarily result
from  sales  of  electricity  and gas to a stable  and  diverse  base of  retail
customers and are weighted toward the third quarter.  Energy  Delivery's  future
cash flows will depend upon the ability to achieve  operating  cost  reductions,
and the impact of the  economy,  weather and  customer  choice on its  revenues.
Generation's cash flows from operating activities primarily result from the sale
of  electric  energy to  wholesale  customers,  including  Energy  Delivery  and
Enterprises. Generation's future cash flow from operating activities will depend
upon future  demand and market  prices for energy and the ability to continue to
produce and supply  power at  competitive  costs.  Although the amounts may vary
from period to period as a result of the  uncertainties  inherent  in  business,
Exelon expects that Energy  Delivery and  Generation  will continue to provide a
reliable  and  steady  source of  internal  cash flow  from  operations  for the
foreseeable future.

Cash Flows from Investing Activities
         Cash flows  used in  investing  activities  for the nine  months  ended
September  30, 2002 were $1.8  billion,  compared  to $1.6  billion for the nine
months ended September 30, 2001. The increase was primarily  attributable to the
$443  million  acquisition  of two  generating  plants from TXU Corp.  (TXU) and
increased capital expenditures partially offset by $285 million of proceeds from
the AT&T Wireless sale. Capital expenditures, other than the TXU acquisition, by
business  segment for the nine months ended  September  30, 2002 and 2001 are as
follows:

<TABLE>
<CAPTION>
                                                                                    Nine Months Ended September 30,
                                                                                    -------------------------------
                                                                                             2002              2001
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>               <C>
Energy Delivery                                                                         $     729         $     784
Generation                                                                                    715               497
Enterprises                                                                                    34                53
Corporate and Other                                                                            56                18
---------------------------------------------------------------------------------------------------------------------
Total Capital Expenditures                                                              $   1,534         $   1,352
=====================================================================================================================
</TABLE>

         Energy   Delivery's   capital   expenditures   for  2002   reflect  the
continuation of efforts to further  improve the reliability of its  distribution
system.  Energy  Delivery's  investing  activities were funded primarily through
operating activities.

         Generation's  capital  expenditures  for 2002 are for  additions to and
upgrades of existing facilities  (including nuclear refueling outages),  nuclear
fuel,  and  increases  in capacity at existing  plants.  Generation's  investing
activities were funded from operating activities, borrowings from Exelon and the
use of available cash.

         Generation  closed the purchase of the two  natural-gas  and  oil-fired
generating  plants from TXU on April 25,  2002.  The $443  million  purchase was
funded with Exelon  commercial  paper.  Exelon  expects to repay the  commercial
paper utilizing Generation's internal cash flows.




                                       73
<PAGE>

         Capital expenditures have increased for the nine months ended September
30, 2002 as compared to 2001 due to higher nuclear fuel expenditures, growth and
an increase in the number of planned refueling outages, during which significant
work is performed on additions to or upgrades of existing facilities.

         In February 2002,  Generation entered into an agreement to loan AmerGen
up to $75 million at an interest  rate of  one-month  LIBOR plus 2.25%.  In July
2002,  the loan  agreement  and the loan were  increased to $100 million and the
maturity  date was  extended to July 1, 2003.  As of  September  30,  2002,  the
balance of the loan to AmerGen was $42 million.

         Enterprises'  capital expenditures for 2002 are primarily for additions
to or upgrades  of existing  facilities.  On April 1, 2002,  Exelon  Enterprises
closed on the sale of its 49%  interest  in AT&T  Wireless  for $285  million in
cash.

Cash Flows from Financing Activities
         Cash flows used in financing  activities  were $828 million in the nine
months ended  September 30, 2002 compared to $521 million for the same period in
2001 due to higher levels of net reductions in short-term and long-term debt and
payments of dividends on common stock of $420 million. Debt financing activities
during the nine months ended September 30, 2002 are discussed in the Contractual
Obligations and Commercial  Commitments  section of Management's  Discussion and
Analysis of Financial Condition and Results of Operations.

Credit Issues
         Exelon meets its short-term  liquidity  requirements  primarily through
the issuance of commercial paper by Exelon, at the holding company level, and by
ComEd,  PECO and  Generation.  Exelon,  along with ComEd,  PECO and  Generation,
participates in a $1.5 billion  unsecured 364-day revolving credit facility with
a group of banks  effective  December 12,  2001.  Under the terms of this credit
facility,  Exelon has the  flexibility  to increase or decrease the sublimits of
each of the  participants  upon  written  notification  to  these  banks.  As of
September  30, 2002,  Exelon's  sublimit is $700 million at the holding  company
level.  This credit  facility is used  principally  to support the $700  million
commercial  paper program at the Exelon holding  company level. At September 30,
2002,  Exelon had $319 million of commercial  paper  outstanding  at the holding
company  level.  At September 30, 2002,  the Exelon  Consolidated  Balance Sheet
reflects the $788 million total amount of commercial  paper  outstanding for all
participants in the credit facility.

         To  provide  an  additional   short-term  borrowing  option  that  will
generally  be more  favorable  to the  borrowing  participants  than the cost of
external financing, Exelon operates an intercompany money pool. Participation in
the money pool is subject to authorization  by the Exelon  Corporate  Treasurer.
Exelon,  ComEd and its subsidiary  Commonwealth  Edison of Indiana,  Inc., PECO,
Generation and Business  Services Company currently may participate in the money
pool.  Funding of, and borrowings from, the money pool are predicated on whether
such funding  results in mutual economic  benefits to each of the  participants,
although Exelon is not permitted to be a net borrower from the fund. Interest on
borrowings  is  based  on  short-term  market  rates of  interest,  or  specific
borrowing rates if the funds are provided by external financing. There have been
no material money pool transactions in 2002.



                                       74
<PAGE>

         At September  30, 2002,  Exelon had  outstanding  $788 million of notes
payable  consisting  principally of commercial  paper. For the nine months ended
September 30, 2002, the average interest rate on notes payable was approximately
1.91%.  Certain  of the  credit  agreements  to which  Exelon,  ComEd,  PECO and
Generation  are a  party  require  each  of them  to  maintain  a debt to  total
capitalization ratio of 65% or less (excluding securitization debt and for PECO,
excluding the receivable from parent recorded in PECO's  shareholders'  equity).
At September 30, 2002, the debt to total capitalization ratios on that basis for
Exelon, ComEd, PECO and Generation were 46%, 42%, 41% and 34%, respectively.

         At September 30, 2002,  Exelon's capital structure  consisted of 58% of
long-term debt, 37% common stock,  3% notes payable and 2% preferred  securities
of  subsidiaries.  Total  debt  included  $6.3  billion of  securitization  debt
constituting  obligations  of certain  consolidated  special  purpose  entities,
representing 27% of capitalization.

         Exelon and its subsidiaries'  access to the capital markets,  including
the  commercial  paper market,  and their  financing  costs in those markets are
dependent  on  their  respective  credit  ratings.   None  of  Exelon's  or  its
subsidiaries'  borrowings  are subject to default or prepayment as a result of a
downgrading  of  credit  ratings  although  such a  downgrading  could  increase
interest   charges  under  Exelon's  bank  credit   facility.   Exelon  and  its
subsidiaries  from time to time enter into energy commodity and other derivative
transactions  that require the maintenance of investment grade ratings.  Failure
to maintain  investment  grade ratings would allow the counterparty to terminate
the derivative and settle the transaction on a net present value basis.

         Under the Public  Utility  Holding  Company Act of 1935 (PUHCA) and the
Federal Power Act,  Exelon,  ComEd,  PECO and  Generation can pay dividends only
from retained,  undistributed or current earnings: however, an SEC order granted
permission  to Exelon and ComEd to pay up to $500  million in  dividends  out of
additional paid-in capital, provided that Exelon agreed not to pay dividends out
of paid-in capital after December 31, 2002 if its common equity is less than 30%
of its total capitalization. At September 30, 2002, Exelon had retained earnings
of $1.8 billion,  which includes ComEd retained  earnings of $480 million,  PECO
retained  earnings of $347  million  and  Generation  retained  earnings of $850
million.

Contractual Obligations and Commercial Commitments
         Contractual  obligations represent cash obligations that are considered
to  be  firm  commitments  and  commercial   commitments  represent  commitments
triggered by future  events.  Exelon's  contractual  obligations  and commercial
commitments as of September 30, 2002 were  materially  unchanged,  other than in
the normal  course of  business,  from the amounts set forth in the December 31,
2001 Form 10-K except for the following:

o    ComEd  issued $600  million of 6.15% First  Mortgage  Bonds,  Series 98 due
     March 15,  2012,  issued  $100  million  of  Illinois  Development  Finance
     Authority  floating-rate  Pollution Control Revenue Refunding Bonds, Series
     2002  due  April  15,  2013,   redeemed  $100  million  of  7.25%  Illinois
     Development  Finance  Authority  Pollution Control Revenue Refunding Bonds,
     Series  1991,  due June 1, 2011,  redeemed  $200  million  of 8.625%  First
     Mortgage  Bonds,  Series 81 due February 1, 2022,  redeemed $200 million of
     8.5% First Mortgage  Bonds,  Series 84 due July 15, 2022,  paid at maturity
     $200 million of 7.375% First  Mortgage  Bonds,  Series 85 due September 15,
     2002,  redeemed $200 million of 8.375% First Mortgage Bonds,  Series 86 due




                                       75
<PAGE>

     September  15, 2022,  paid at maturity $200 million of variable rate senior
     notes due  September  30,  2002,  paid at  maturity  $100  million of 9.17%
     medium-term  notes due  October  15,  2002,  and  retired  $254  million of
     transitional  trust notes. At September 30, 2002,  ComEd had $94 million in
     short-term borrowings.
o    PECO issued $225 million of 4.75% First and  Refunding  Mortgage  Bonds due
     October 1, 2012. This bond issuance repaid  commercial  paper that was used
     to pay at maturity $222 million of First and Refunding Mortgage Bonds. PECO
     made  principal  payments  of $326  million  on  transition  bonds and made
     additional borrowings of commercial paper of $274 million.
o    Guarantees  increased  approximately  $280 million,  primarily related to a
     $410 million  increase in the amount of  performance  bonds,  bid bonds and
     surety bonds required by Enterprises,  partially  offset by $120 million in
     letters of credit on pollution  control bonds at  Generation  being renewed
     and no longer required to be guaranteed.
o    Insured  long-term debt increased $100 million related to ComEd's  issuance
     of $100 million in variable rate debt that has been credit enhanced through
     the purchase of insurance coverage.
o    On April 25, 2002 Generation  closed the purchase of two generating  plants
     from TXU. The $443 million  purchase was funded  primarily with  commercial
     paper issued by Exelon.
o    On June 26, 2002, Generation agreed to purchase Sithe New England Holdings,
     LLC (Sithe New England), a subsidiary of Sithe, and related power marketing
     operations  for a $543 million  note. In addition,  Generation  will assume
     various  Sithe  guarantees  related  to an  equity  contribution  agreement
     between Sithe New England and Sithe Boston Generation (Boston  Generation),
     a  project  subsidiary  of  Sithe  New  England.  The  equity  contribution
     agreement  requires, among other things,  that Sithe New England,  upon the
     occurrence  of certain  events,  contribute up to $38 million of equity for
     the purpose of completing the  construction  of two generating  facilities.
     Boston  Generation  established a $1.2 billion credit  facility in order to
     finance  the   construction  of  these  two  generating   facilities.   The
     approximately $1.1 billion expected to be outstanding under the facility at
     the transaction  closing date,  will be reflected on Exelon's  Consolidated
     Balance Sheet. Sithe New England has provided security interests in and has
     pledged the stock of its other project  subsidiaries to Boston  Generation.
     If the closing conditions are satisfied, the purchase could be completed in
     November 2002.
o    At  September  30,  2002,   Southeast  Chicago,  a  company  70%  owned  by
     Generation,  was obligated to make equity distributions of $55 million over
     the next 20 years to the unaffiliated  third party owning the remaining 30%
     of Southeast  Chicago.  This amount reflects a return of such third party's
     investment  in  Southeast  Chicago's  peaking  facility  in  Chicago,   IL.
     Generation  has the right to  purchase,  generally  at a premium,  and this
     third party has the right to require Generation to purchase, generally at a
     discount,  its  remaining  investment in Southeast  Chicago.  Additionally,
     Generation  may  be  required  to  purchase  the  third  party's  remaining
     investment  in Southeast  Chicago upon the  occurrence  of certain  events,
     including  upon a failure by  Generation  to maintain an  investment  grade
     rating.
o    Purchase  obligations  increased  by  $2.3  billion,  primarily  due  to an
     increase  of $3.8  billion  in  power  only  purchases  and a $0.1  billion
     increase  in  transmission  rights  purchases  partially  offset  by a $1.6
     billion  decrease in net capacity  purchase  commitments.  Approximately $2
     billion of the  increase  in power only  purchases  is due to  Generation's
     agreement  to purchase  all the energy from Unit No. 1 at Three Mile Island
     after  December 31, 2001 through  December 31, 2014 and the remaining  $1.8
     billion  increase is primarily  due to purchase  contracts  entered into in
     lieu of a portion of the Midwest Generation options contracts. The increase
     in transmission rights purchases is primarily due to estimated  commitments
     in 2004 and 2005 for additional  transmission  rights that will be required
     to fulfill firm sales  contracts.  The  decrease in net  capacity  purchase




                                       76
<PAGE>

     commitments  is due  primarily to the  decision not to exercise  options to
     purchase 4,411 MWs of capacity from Midwest Generation in 2002 through 2004
     as well as the increase in capacity sales under the TXU tolling agreement.

Off Balance Sheet Obligations
         Generation owns 49.9% of the outstanding  common stock of Sithe and has
an option,  beginning  on  December  18, 2002 and  expiring in December  2005 to
purchase the remaining common stock outstanding  (Remaining  Interest) in Sithe.
The  purchase  option  expires on December  18,  2005.  In  addition,  the Sithe
stockholders  who own in the aggregate the Remaining  Interest have the right to
require  Generation to purchase the Remaining  Interest (Put Rights)  during the
same period in which Generation can exercise its purchase option.  At the end of
this exercise  period,  if Generation has not exercised its purchase  option and
the other Sithe  stockholders  have not exercised  their Put Rights,  Generation
will have an  additional  one-time  option  to  purchase  shares  from the other
stockholders in Sithe to bring Generation's  ownership in Sithe from the current
49.9% to 50.1% of Sithe's total outstanding common stock.

         If Generation  exercises its option to acquire the Remaining  Interest,
or if all the other Sithe  stockholders  exercise their Put Rights, the purchase
price for 70% of the Remaining Interest will be set at fair market value subject
to a floor of $430  million  and a ceiling of $650  million.  The balance of the
Remaining  Interest  will be valued at fair market  value  subject to a floor of
$141 million and a ceiling of $330 million.  In either  instance,  the floor and
ceiling will accrue interest from the beginning of the exercise period.

         If Generation  increases its ownership in Sithe to 50.1% or more, Sithe
will become a  consolidated  subsidiary  and  Exelon's  financial  results  will
include Sithe's  financial  results from the date of purchase.  At September 30,
2002,  Sithe had total  assets of $4.2  billion and total debt of $2.1  billion,
including $1.6 billion of subsidiary  debt incurred to finance the  construction
of two new generating  facilities of which $1.1 billion is associated with Sithe
New England,  $0.4 billion of subordinated debt, $47 million of short-term debt,
$33  million of capital  leases,  and  excluding  $430  million of  non-recourse
project debt  associated  with Sithe's equity  investments.  For the nine months
ended  September 30, 2002,  Sithe had revenues of $0.9 billion.  As of September
30, 2002, Generation had a $722 million equity investment in Sithe.

         On June 26, 2002,  Generation  agreed to purchase Sithe New England,  a
subsidiary of Sithe,  and related power  marketing  operations in exchange for a
$543 million note. In addition,  Generation will assume various Sithe guarantees
related to an equity contribution agreement between Sithe New England and Boston
Generation,  a project subsidiary of Sithe New England.  The equity contribution
agreement  requires,  among  other  things,  that  Sithe New  England,  upon the
occurrence  of certain  events,  contribute  up to $38 million of equity for the
purpose of completing  the  construction  of two generating  facilities.  Boston
Generation  established a $1.2 billion  credit  facility in order to finance the
construction of these two generating facilities.  The approximately $1.1 billion
expected to be outstanding  under the facility at the transaction  closing date,
will be reflected on Exelon's  Consolidated Balance Sheet. Sithe New England has
provided  security  interests in and has pledged the stock of its other  project
subsidiaries to Boston Generation.  If the closing conditions are satisfied, the
transaction  could be completed in November  2002.

         Additionally,  the debt on the books of Exelon's  unconsolidated equity
investments and joint ventures is not reflected on Exelon's Consolidated Balance




                                       77
<PAGE>

Sheets.  Total investee debt, at September 30, 2002, including the debt of Sithe
described in the preceding paragraph,  is currently estimated to be $2.2 billion
($1.1 billion based on Exelon's ownership interest of the investments).

         Generation and British Energy plc (British Energy),  Generation's joint
venture  partner in AmerGen,  have each agreed to provide up to $100  million to
AmerGen at any time that the Management  Committee of AmerGen determines that in
order to protect  the public  health and safety  and/or to comply  with  Nuclear
Regulatory  Commission  (NRC)  requirements,  such funds are  necessary  to meet
ongoing operating expenses or to safely maintain any AmerGen plant.

Other Factors
         Exelon's costs of providing  pension and  postretirement  benefit plans
are dependent  upon a number of factors,  such as the rates of return on pension
plan assets,  discount rate, and the rate of increase in health care costs.  The
market  value of plan assets has been  affected by sharp  declines in the equity
market  since the third  quarter of 2000.  As a result,  at December  31,  2002,
Exelon  could be  required to  recognize  an  additional  minimum  liability  as
prescribed by SFAS No. 87 "Employers'  Accounting for Pensions" and SFAS No. 132
"Employers'  Disclosures  about  Pensions  and  Postretirement   Benefits."  The
liability  would be  recorded as a reduction  to common  equity,  and the equity
would be restored to the balance sheet in future  periods when the fair value of
plan assets exceeds the accumulated benefit  obligations.  Based upon the market
value of plan assets at September 30, 2002 and estimated market  performance for
the  remainder of 2002,  the amount of the  reduction  to common  equity (net of
income  taxes) is estimated to be in the range of $500 million to $1.0  billion.
This  estimate  could  increase  or  decrease  as  a  result  of  actual  market
performance in the fourth quarter of 2002. The recording of this reduction would
not affect net income or cash flow in 2002 or  compliance  with debt  covenants;
however,  pension cost and cash funding  requirements  could  increase in future
years without a substantial recovery in the equity markets.

         Approximately  $33 million was  included in operating  and  maintenance
expense in 2001 for the cost of  Exelon's  pension and  post-retirement  benefit
plans,  exclusive  of the 2001 charges for employee  severance  programs.  These
costs are  expected  to  increase  in 2002 by  approximately  $55 million as the
result of the effects of the decline in market value of plan assets and discount
rates,  and  increases  in health care costs.  Further  increases in pension and
postretirement  expense are  expected  for the year 2003 as a result of the same
factors.  Although the 2003  increase will depend on market  conditions,  Exelon
preliminarily  estimates  that  pension and  postretirement  benefit  costs will
increase by approximately $70 million in 2003 from 2002 cost levels.

         Exelon's  defined  benefit  pension  plans  currently  meet the minimum
funding  requirements of the Employment  Retirement Income Security Act of 1974;
however,  Exelon currently expects to make a discretionary  plan contribution in
the fourth  quarter of 2002 of $100 million to $200 million and a  discretionary
plan contribution in 2003 of $300 million to $350 million.  These  contributions
are expected to be funded  primarily  by  internally  generated  cash flows from
operations or through external sources.



                                       78
<PAGE>

         Generation is a counterparty to Dynegy Inc.  (Dynegy) in various energy
transactions.  In early July 2002, the credit ratings of Dynegy were  downgraded
by two credit rating  agencies to below  investment  grade.  As of September 30,
2002,  Generation had a net receivable from Dynegy of  approximately $7 million,
and consistent with the terms of the existing credit  arrangement,  has received
collateral  in  support of this  receivable.  Generation  also has  credit  risk
associated with Dynegy through Generation's equity investment in Sithe. Sithe is
a 60%  owner  of the  Independence  generating  station,  a 1,040  MW  gas-fired
qualified  facility that has an energy only long-term  tolling  arrangement with
Dynegy,  with a related  financial swap  arrangement.  As of September 30, 2002,
Sithe had  recognized an asset on its balance sheet related to the fair value of
the financial  swap  agreement  with Dynegy that is  marked-to-market  under the
terms of SFAS No.  133.  If  Dynegy  is  unable  to  fulfill  the  terms of this
agreement,  Sithe would be required to  write-off  the fair value  asset,  which
Generation estimates would result in an approximate $22 million reduction in its
equity  earnings from Sithe,  based on  Generation's  current  49.9%  investment
ownership  in  Sithe.  The fair  value  of this  asset  may  change  over  time.
Additionally,   the  future   economic  value  of  Sithe's   investment  in  the
Independence  Station and AmerGen's  purchased power  arrangement  with Illinois
Power,  a subsidiary of Dynegy,  could be impacted by events related to Dynegy's
financial condition.


                                       79
<PAGE>


COMMONWEALTH EDISON COMPANY

GENERAL

         ComEd operates in a single business segment,  Energy Delivery,  and its
operations  consist  of its retail  electricity  distribution  and  transmission
business in northern Illinois.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001

Significant Operating Trends - ComEd

                                                        Three Months Ended September 30,
                                                        --------------------------------
                                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>          <C>           <C>
OPERATING REVENUES                                                $   1,938       $1,919       $   19        1.0%

OPERATING EXPENSES
     Purchased Power                                                    975          954           21        2.2%
     Operating and Maintenance                                          267          265            2        0.8%
     Depreciation and Amortization                                      129          178          (49)     (27.5%)
     Taxes Other Than Income                                             77           82           (5)      (6.1%)
-------------------------------------------------------------------------------------------------------
         Total Operating Expense                                      1,448        1,479          (31)      (2.1%)
-------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                        490          440           50       11.4%
-------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                  (122)        (147)          25      (17.0%)
     Distributions on Company-Obligated Mandatorily
       Redeemable Preferred Securities of Subsidiary Trusts
       Holding Solely the Company's Subordinated Debt Securities         (7)          (7)          --          --
     Other, net                                                          --           33          (33)     (100.0%)
-------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                             (129)        (121)          (8)      (6.6%)
-------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                              361          319           42       13.2%

INCOME TAXES                                                            146          141            5        3.5%
-------------------------------------------------------------------------------------------------------

NET INCOME                                                        $     215       $  178       $   37       20.8%
=======================================================================================================
</TABLE>

Net Income
         Net income  increased  $37  million,  or 21% for the three months ended
September 30, 2002.  Net income was impacted by the  favorable  effect of warmer
than normal summer weather,  lower  depreciation  rates, the  discontinuation of
goodwill amortization and a lower effective income tax rate, partially offset by
the  effects of a 5%  residential  rate  reduction  and  customers  electing  to
purchase energy from an ARES or the PPO.




                                       80
<PAGE>

Operating Revenues
         ComEd's electric sales statistics are as follows:

<TABLE>
<CAPTION>
                                                        Three Months Ended September 30,
                                                        --------------------------------
Retail Deliveries - (in GWh)                                           2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
Bundled Deliveries (1)
<S>                                                                   <C>          <C>           <C>        <C>
Residential                                                           9,121        8,398         723        8.6%
Small Commercial & Industrial                                         6,029        6,308        (279)      (4.4%)
Large Commercial & Industrial                                         2,073        2,506        (433)     (17.3%)
Public Authorities & Electric Railroads                               1,612        2,105        (493)     (23.4%)
-------------------------------------------------------------------------------------------------------
                                                                     18,835       19,317        (482)      (2.5%)
-------------------------------------------------------------------------------------------------------
Unbundled Deliveries (2)
ARES
Small Commercial & Industrial                                         1,640          898          742      82.6%
Large Commercial & Industrial                                         2,192        1,548          644      41.6%
Public Authorities & Electric Railroads                                 299           91          208       n.m.
-------------------------------------------------------------------------------------------------------
                                                                      4,131        2,537        1,594      62.8%
-------------------------------------------------------------------------------------------------------
PPO
Small Commercial & Industrial                                           782          827          (45)     (5.4%)
Large Commercial & Industrial                                         1,249        1,448         (199)    (13.7%)
Public Authorities & Electric Railroads                                 345          150          195    (130.0%)
-------------------------------------------------------------------------------------------------------
                                                                      2,376        2,425          (49)     (2.0%)
-------------------------------------------------------------------------------------------------------
     Total Unbundled Deliveries                                       6,507        4,962        1,545      31.1%
-------------------------------------------------------------------------------------------------------
Total Retail Deliveries                                              25,342       24,279        1,063       4.4%
=======================================================================================================
<FN>
(1)  Bundled service  reflects  deliveries to customers  taking electric service
     under  tariffed  rates,  which  include the cost of energy and the delivery
     cost of the transmission and the distribution of the energy.
(2)  Unbundled   service  reflects   customers   electing  to  receive  electric
     generation service from an ARES or the PPO.
n.m. - not meaningful
</FN>
</TABLE>



                                       81
<PAGE>

<TABLE>
<CAPTION>
                                                        Three Months Ended September 30,
                                                        --------------------------------
Electric Revenue                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
Bundled Revenues (1)
<S>                                                               <C>           <C>          <C>            <C>
Residential                                                       $     840     $    816     $     24       2.9%
Small Commercial & Industrial                                           506          531          (25)     (4.7%)
Large Commercial & Industrial                                           106          126          (20)    (15.9%)
Public Authorities & Electric Railroads                                 104          119          (15)    (12.6%)
-------------------------------------------------------------------------------------------------------
                                                                      1,556        1,592     $    (36)     (2.3%)
-------------------------------------------------------------------------------------------------------
Unbundled Revenues (2)
ARES
Small Commercial & Industrial                                            51           10           41       n.m.
Large Commercial & Industrial                                            60           12           48       n.m.
Public Authorities & Electric Railroads                                  10            1            9       n.m.
-------------------------------------------------------------------------------------------------------
                                                                        121           23           98       n.m.
-------------------------------------------------------------------------------------------------------
PPO
Small Commercial & Industrial                                            57           77          (20)    (25.9%)
Large Commercial & Industrial                                            74          120          (46)    (38.3%)
Public Authorities & Electric Railroads                                  19           13            6      46.2%
-------------------------------------------------------------------------------------------------------
                                                                        150          210          (60)    (28.6%)
-------------------------------------------------------------------------------------------------------
Total Unbundled Revenues                                                271          233           38      16.3%
-------------------------------------------------------------------------------------------------------
Total Electric Retail Revenues                                        1,827        1,825            2       0.1%
Wholesale and Miscellaneous Revenue (3)                                 111           94           17      18.1%
-------------------------------------------------------------------------------------------------------
Total Electric Revenue                                            $   1,938     $  1,919     $     19       1.0%
=======================================================================================================
<FN>
(1)  Bundled revenue  reflects  deliveries to customers  taking electric service
     under  tariffed  rates,  which  include the cost of energy and the delivery
     cost of the transmission and the distribution of the energy.
(2)  Revenue from customers choosing an ARES includes a distribution  charge and
     a CTC  charge.  Transmission  charges  received  from ARES are  included in
     wholesale and miscellaneous  revenue.  Revenues from customers choosing the
     PPO  includes  an  energy  charge  at  market  rates,   transmission,   and
     distribution charges and a CTC charge.
(3)  Wholesale and  miscellaneous  revenues include sales to ARES,  transmission
     revenue, sales to municipalities and other wholesale energy sales.
</FN>
</TABLE>

         The changes in electric  retail  revenues  for the three  months  ended
September  30, 2002,  as compared to the three months ended  September 30, 2001,
are attributable to the following:

<TABLE>
<CAPTION>
                                                                                  Variance
-------------------------------------------------------------------------------------------------
<S>                                                                                    <C>
Weather                                                                         $       86
Rate Changes                                                                           (45)
Customer Choice                                                                        (43)
Other Effects                                                                            4
-------------------------------------------------------------------------------------------------
Electric Retail Revenue                                                         $        2
=================================================================================================
</TABLE>

o    Weather. The demand for electricity is impacted by weather conditions. Very
     warm  weather  in summer  months and very cold  weather in other  months is
     referred  to as  "favorable  weather  conditions,"  because  these  weather
     conditions  result in  increased  sales of  electricity.  Conversely,  mild
     weather reduces demand.
              The weather  impact for the three months ended  September 30, 2002
     was  favorable  compared to the three months ended  September 30, 2001 as a
     result of warmer summer weather in the third quarter of 2002 as compared to
     the third quarter of 2001. Cooling  degree-days  increased 26% in the three




                                       82
<PAGE>

     months  ended  September  30,  2002  compared  to the  three  months  ended
     September 30, 2001.
o    Rate  Changes.  The decrease  attributable  to rate  changes  reflects a 5%
     residential  rate  reduction,  effective  October 1, 2001,  required by the
     Illinois restructuring legislation.
o    Customer  Choice.  All ComEd  customers have the choice to purchase  energy
     from other  suppliers.  This choice generally does not impact the volume of
     deliveries,  but affects revenue collected from customers related to energy
     supplied by ComEd. On May 1, 2002, all ComEd  residential  customers became
     eligible to choose their supplier of electricity.  However, as of September
     30, 2002, no alternative electric supplier has sought approval from the ICC
     and no electric utilities have chosen to enter the ComEd residential market
     for the supply of electricity.
              The decrease in revenues  reflects  customers in Illinois electing
     to  purchase  energy  from an ARES or the PPO. As of  September  30,  2002,
     approximately  22,700 retail  customers had elected to purchase energy from
     an ARES or the ComEd PPO, an increase  from 15,400  customers  at September
     30, 2001. The MWhs delivered to such customers increased from approximately
     5.0 million for the three  months ended  September  30, 2001 to 6.5 million
     for the three months ended  September  30, 2002, or a 31% increase from the
     previous year.
o    Other  Effects.  The slowing  economy both  nationally  and  regionally has
     yielded minimal  quarterly gains as business  uncertainty and  unemployment
     concerns limit customer activity and electricity sales.

         The  increase  in  wholesale  and  miscellaneous  revenue for the three
months ended  September 30, 2002 as compared to the three months ended September
30, 2001 was due primarily to  reimbursement  from Generation of $12 million for
the third-party energy reconciliations.

Purchased Power Expense
         Purchased  power  expense  increased  $21 million,  or 2% for the three
months ended  September  30, 2002.  The increase in purchased  power expense was
primarily  attributable  to a $38 million  increase  associated  with additional
increased weather related on-peak sales volume, a $22 million increase due to an
increase in the weighted average  on-peak/off-peak  cost per MWh and $20 million
in additional expense resulting from additional energy billed under the PPA with
Generation as a result of the third-party  energy  reconciliations  discussed in
the operating revenue section above,  partially offset by a $62 million decrease
as a result of customers choosing to purchase energy from an ARES.

Operating and Maintenance Expense
         Operating and maintenance  (O&M) expense  increased $2 million,  or 1%,
for the three  months  ended  September  30,  2002.  The increase in O&M expense
reflects  a $17  million  increase  in the  reserve  for MGP  investigation  and
remediation as a result of increased  costs due to delays in the  implementation
of ongoing  remediation of a MGP site in Oak Park,  Illinois partially offset by
operating  productivity  improvements  and a $7  million  decrease  in other O&M
items.


                                       83
<PAGE>


Depreciation and Amortization Expense
         Depreciation and amortization  expense  decreased $49 million,  or 28%,
for the three months ended September 30, 2002 as follows:

<TABLE>
<CAPTION>
                                                Three Months Ended September 30,
                                                --------------------------------
                                                          2002              2001         Variance          % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>              <C>                 <C>
Depreciation Expense                                 $      75         $      87        $     (12)          (13.8%)
Recoverable Transition Costs Amortization                   33                35               (2)           (5.7%)
Other Amortization Expense                                  21                56              (35)          (62.5%)
-------------------------------------------------------------------------------------------------------
Total Depreciation and Amortization                  $     129         $     178        $     (49)          (27.5%)
=======================================================================================================
</TABLE>

         The  decrease  in  depreciation  expense  is  primarily  due  to  lower
depreciation rates effective July 1, 2002,  partially offset by higher property,
plant  and  equipment  balances.   ComEd  completed  a  depreciation  study  and
implemented   lower   depreciation   rates  effective  July  1,  2002.  The  new
depreciation rates reflect ComEd's  significant  construction  program in recent
years, changing in and development of new technologies, and changes in estimated
plant service lives since the last  depreciation  study. The annual reduction in
depreciation expense is estimated to be approximately $100 million ($60 million,
net of income taxes) based on December 31, 2001 plant  balances.  As a result of
the change,  depreciation  expense  decreased $24 million ($14  million,  net of
income taxes) for the three month period ended September 30, 2002.

         The  decrease  in other  amortization  expense  is  primarily  due to a
decrease  of $32  million due to the  discontinuation  of goodwill  amortization
effective January 1, 2002 upon the adoption of SFAS No. 142.

         Recoverable  transition costs  amortization was consistent in the three
months  ended  September  30, 2002  compared  to the same period in 2001.  ComEd
expects to fully  recover its  recoverable  transition  costs  regulatory  asset
balance of $202 million by 2004.  Consistent  with the provision of the Illinois
legislation, regulatory assets may be recovered at amounts that provide ComEd an
earned  return  on  common  equity  within  the  Illinois  legislation  earnings
threshold.

Taxes Other Than Income
         Taxes other than  income  decreased  $5  million,  or 6%, for the three
months  ended  September  30,  2002.  Taxes other than  income  were  positively
affected  in 2002 as a result of a real  estate  tax  refund in the amount of $5
million.

Interest Charges
         Interest  charges  consist of  interest  expense and  distributions  on
Company-Obligated  Mandatorily  Redeemable  Preferred  Securities  of Subsidiary
Trusts.  Interest  charges  decreased $25 million,  or 17%, for the three months
ended  September  30,  2002.  The  decrease  in interest  charges was  primarily
attributable  to the impact of lower  interest  rates for the three months ended
September 30, 2002 as compared to the three months ended September 30, 2001, the
early retirement of the $196 million of First Mortgage Bonds in November of 2001
and the retirement of $340 million in  transitional  trust notes since September
2001 and $10  million of  intercompany  interest  expense in 2001  relating to a
payable to Generation, which was repaid during 2001.



                                       84
<PAGE>

Other Income and Deductions
         Other income and deductions,  excluding interest charges, decreased $33
million,  or 100%,  for the three months ended  September 30, 2002. The decrease
was primarily  attributable to $9 million in  intercompany  interest income from
Generation in 2001 on the  processing of certain  invoice  payments on behalf of
Generation,  a $6 million reduction in intercompany  interest income from Unicom
Investment Inc.,  reflecting lower interest rates, a $12 million accrual in 2002
for estimated  minimum probable  write-off  exposure  resulting from the Liberty
audit findings related to ComEd's  delivery  services rate case and a $6 million
decrease in various other income and deductions items.

Income Taxes
         The  effective  income  tax rate was 40.4% for the three  months  ended
September 30, 2002,  compared to 44.2% for the three months ended  September 30,
2001. The decrease in the effective tax rate was primarily  attributable  to the
discontinuation  of goodwill  amortization as of January 1, 2002,  which was not
deductible for income tax purposes.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001

Significant Operating Trends - ComEd

<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                         -------------------------------
                                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>           <C>            <C>          <C>
OPERATING REVENUES                                                $   4,734     $  4,895       $ (161)      (3.3%)

OPERATING EXPENSES
     Purchased Power                                                  2,066        2,149          (83)      (3.9%)
     Operating and Maintenance                                          724          731           (7)      (1.0%)
     Depreciation and Amortization                                      397          512         (115)     (22.5%)
     Taxes Other Than Income                                            223          223           --       --
-------------------------------------------------------------------------------------------------------
         Total Operating Expense                                      3,410        3,615         (205)      (5.7%)
-------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                      1,324        1,280           44        3.4%
-------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                  (374)        (433)          59      (13.6%)
     Distributions on Company-Obligated Mandatorily
       Redeemable Preferred Securities of Subsidiary Trusts
       Holding Solely the Company's Subordinated Debt Securities        (22)         (22)          --         --
     Other, net                                                          29           94          (65)     (69.1%)
-------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                             (367)        (361)          (6)       1.7%
-------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                              957          919           38        4.1%

INCOME TAXES                                                            381          412          (31)      (7.5%)
-------------------------------------------------------------------------------------------------------

NET INCOME                                                        $     576     $    507       $   69       13.6%
=======================================================================================================
</TABLE>

Net Income
         Net income  increased  $69  million,  or 14% for the nine months  ended
September 30, 2002. Net income was primarily impacted by the  discontinuation of
goodwill  amortization and a lower effective income tax rate partially offset by



                                       85
<PAGE>

the  effects of a 5%  residential  rate  reduction  and  customers  electing  to
purchase energy from an ARES or the PPO.

Operating Revenues
         ComEd's electric sales statistics are as follows:

<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                         -------------------------------
Retail Deliveries - (in GWh)                                           2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
Bundled Deliveries (1)
<S>                                                                  <C>          <C>           <C>         <C>
Residential                                                          21,392       19,936        1,456       7.3%
Small Commercial & Industrial                                        17,078       17,986         (908)     (5. 1%)
Large Commercial & Industrial                                         6,151        8,144       (1,993)    (24.5%)
Public Authorities & Electric Railroads                               5,097        6,007         (910)    (15.1%)
-------------------------------------------------------------------------------------------------------
                                                                     49,718       52,073       (2,355)     (4.5%)
-------------------------------------------------------------------------------------------------------
Unbundled Deliveries (2)
ARES
Small Commercial & Industrial                                         3,822        2,005        1,817      90.6%
Large Commercial & Industrial                                         5,200        3,962        1,238      31.2%
Public Authorities & Electric Railroads                                 618          227          391     172.2%
-------------------------------------------------------------------------------------------------------
                                                                      9,640        6,194        3,446      55.6%
-------------------------------------------------------------------------------------------------------
PPO
Small Commercial & Industrial                                         2,384        2,448          (64)     (2.6%)
Large Commercial & Industrial                                         3,952        4,324         (372)     (8.6%)
Public Authorities & Electric Railroads                                 861          734          127      17.3%
-------------------------------------------------------------------------------------------------------
                                                                      7,197        7,506         (309)     (4.1%)
-------------------------------------------------------------------------------------------------------
     Total Unbundled Deliveries                                      16,837       13,700        3,137      22.9%
-------------------------------------------------------------------------------------------------------
Total Retail Deliveries                                              66,555       65,773          782       1.2%
=======================================================================================================
<FN>
(1)  Bundled service  reflects  deliveries to customers  taking electric service
     under  tariffed  rates,  which  include the cost of energy and the delivery
     cost of the transmission and the distribution of the energy.
(2)  Unbundled   service  reflects   customers   electing  to  receive  electric
     generation service from an ARES or the PPO.
</FN>
</TABLE>




                                       86
<PAGE>


<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                         -------------------------------
Electric Revenue                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
Bundled Revenues (1)
<S>                                                               <C>           <C>          <C>            <C>
Residential                                                       $   1,881     $  1,852     $     29       1.6%
Small Commercial & Industrial                                         1,343        1,410          (67)     (4.8%)
Large Commercial & Industrial                                           324          406          (82)    (20.2%)
Public Authorities & Electric Railroads                                 297          335          (38)    (11.3%)
-------------------------------------------------------------------------------------------------------
                                                                      3,845        4,003         (158)     (3.9%)
-------------------------------------------------------------------------------------------------------
Unbundled Revenues (2)
ARES
Small Commercial & Industrial                                            94           36           58     161.1%
Large Commercial & Industrial                                           101           60           41      68.3%
Public Authorities & Electric Railroads                                  18            3           15    n.m.
-------------------------------------------------------------------------------------------------------
                                                                        213           99          114     115.2%
-------------------------------------------------------------------------------------------------------
PPO
Small Commercial & Industrial                                           155          167          (12)     (7.2%)
Large Commercial & Industrial                                           214          267          (53)    (19.9%)
Public Authorities & Electric Railroads                                  48           44            4       9.1%
-------------------------------------------------------------------------------------------------------
                                                                        417          478          (61)    (12.8%)
-------------------------------------------------------------------------------------------------------
Total Unbundled Revenues                                                630          577           53       9.2%
-------------------------------------------------------------------------------------------------------
Total Electric Retail Revenues                                        4,475        4,580         (105)     (2.3%)
Wholesale and Miscellaneous Revenue (3)                                 259          315          (56)    (17.8%)
-------------------------------------------------------------------------------------------------------
Total Electric Revenue                                            $   4,734     $  4,895     $   (161)     (3.3%)
=======================================================================================================
<FN>
(1)  Bundled revenue  reflects  deliveries to customers  taking electric service
     under  tariffed  rates,  which  include the cost of energy and the delivery
     cost of the transmission and the distribution of the energy.
(2)  Revenue from customers choosing an ARES includes a distribution  charge and
     a CTC  charge.  Transmission  charges  received  from ARES are  included in
     wholesale and miscellaneous  revenue.  Revenues from customers choosing the
     PPO  includes  an  energy  charge  at  market  rates,   transmission,   and
     distribution charges and a CTC charge.
(3)  Wholesale and  miscellaneous  revenues include sales to ARES,  transmission
     revenue, sales to municipalities and other wholesale energy sales.
</FN>
</TABLE>

         The  changes in electric  retail  revenues  for the nine  months  ended
September 30, 2002, as compared to the nine months ended September 30, 2001, are
attributable to the following:

<TABLE>
<CAPTION>
                                                                                  Variance
-------------------------------------------------------------------------------------------------
<S>                                                                             <C>
Customer Choice                                                                 $     (121)
Rate Changes                                                                           (99)
Weather                                                                                 73
Other Effects                                                                           42
-------------------------------------------------------------------------------------------------
Retail Revenue                                                                  $     (105)
-------------------------------------------------------------------------------------------------
</TABLE>

o    Customer Choice.  The decrease in revenues  reflects  customers in Illinois
     electing to purchase  energy from an ARES or the PPO. As of  September  30,
     2002,  approximately 22,700 retail customers had elected to purchase energy
     from an ARES or the  ComEd  PPO,  an  increase  from  15,400  customers  at
     September 30, 2001.  The MWhs  delivered to such  customers  increased from
     approximately  13.7 million for the nine months ended September 30, 2001 to
     16.8 million for the nine months ended  September  30, 2002, a 23% increase
     from the previous year.



                                       87
<PAGE>

o    Rate  Changes.  The decrease  attributable  to rate  changes  reflects a 5%
     residential  rate  reduction,  effective  October 1, 2001,  required by the
     Illinois restructuring legislation.
o    Weather.  The weather  impact for the nine months ended  September 30, 2002
     was  favorable  compared to the nine months ended  September  30, 2001 as a
     result of warmer summer weather  partially  offset by warmer winter weather
     in 2002  compared  to  2001.  Cooling  degree-days  increased  27% and were
     partially offset by a 7% decrease in heating degree-days in the nine months
     ended  September 30, 2002  compared to the nine months ended  September 30,
     2001.
o    Other Effects. A strong housing  construction market in Chicago contributed
     to residential and small  commercial and industrial  customer volume growth
     in the early  portion  of the  year,  partially  offset by the  unfavorable
     impact of a slower economy on large commercial and industrial customers.

         The  reduction  in  wholesale  and  miscellaneous  revenue for the nine
months ended  September 30, 2002 as compared to the nine months ended  September
30, 2001 was due primarily to a $38 million  decrease in off-system sales due to
the expiration of wholesale  contracts that were offered by ComEd from June 2000
to May 2001 to support  the open  access  program  in  Illinois,  a $15  million
reversal of reserve for  revenue  refunds in 2001  related to certain of ComEd's
municipal  customers as a result of a favorable FERC ruling,  and $15 million of
other miscellaneous  revenue partially offset by a reimbursement from Generation
of $12 million for third-party energy reconciliations.

Purchased Power Expense
         Purchased  power  expense  decreased  $83  million,  or 4% for the nine
months ended  September  30, 2002.  The decrease in purchased  power expense was
primarily  attributable  to a $124  million  decrease  as a result of  customers
choosing to purchase  energy from an ARES and a $34 million  decrease due to the
expiration  of the  wholesale  contracts  offered by ComEd to  support  the open
access program in Illinois  partially  offset by a $33 million  associated  with
increased  retail  demand  due to  favorable  weather  conditions,  a $5 million
increase due to the effects of a strong housing  construction  market in Chicago
for residential  and small  commercial and industrial  customers,  a $17 million
increase due to an increase in the weighted  average  on-peak/off-peak  cost per
MWh, and $20 million in  additional  expense as a result of  third-party  energy
reconciliations.

Operating and Maintenance Expense
         The $7 million  decrease in O&M expense was  primarily due to operating
productivity  improvements  and the $11 million  reduction in the  allowance for
uncollectible accounts recorded in the second quarter, partially offset by a $17
million  increase  in the  provision  for  injury and  damages  claims and a $16
million increase in environmental investigation and remediation expense.



                                       88
<PAGE>

Depreciation and Amortization Expense
         Depreciation and amortization  expense decreased $115 million,  or 23%,
for the nine months ended September 30, 2002 as follows:

<TABLE>
<CAPTION>
                                                 Nine Months Ended September 30,
                                                 -------------------------------
                                                          2002              2001         Variance          % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>              <C>                  <C>
Depreciation Expense                                 $     258         $     263        $      (5)           (1.9)%
Recoverable Transition Costs Amortization                   75                89              (14)          (15.7%)
Other Amortization Expense                                  64               160              (96)          (60.0)%
-------------------------------------------------------------------------------------------------------
Total Depreciation and Amortization                  $     397         $     512        $    (115)          (22.5)%
=======================================================================================================
</TABLE>

         The decrease in  depreciation  expense is due to $24 million related to
lower  depreciation  rates  partially  offset by the effect of higher  property,
plant and equipment balances.

         Recoverable  transition costs amortization  expense is determined using
the expected  period of the rate freeze and the expected  returns in the periods
under the rate freeze.  The reduction in amortization  expense in 2002 is due to
the second quarter of 2002 extension of the rate freeze  partially  offset by an
increase due to a third  quarter of 2002 change in the expected  returns  during
the rate freeze period.

         The  decrease  in other  amortization  expense  is  primarily  due to a
decrease  of  $97  million  due  to  discontinuation  of  goodwill  amortization
effective January 1, 2002 upon the adoption of SFAS No. 142.

Taxes Other Than Income
         Taxes other than income remained consistent from period to period.

Interest Charges
         Interest  charges  decreased  $59 million,  or 14%, for the nine months
ended  September  30,  2002.  The  decrease  in interest  charges was  primarily
attributable  to the impact of lower  interest  rates for the nine months  ended
September 30, 2002 as compared to the nine months ended  September 30, 2001, the
early  retirement  of the $196  million of First  Mortgage  Bonds in November of
2001, the retirement of $340 million in transitional trust notes since September
2001,  and $10 million of  intercompany  interest  expense in 2001 relating to a
payable in Generation, which was repaid during 2001.

Other Income and Deductions
         Other income and deductions,  excluding interest charges, decreased $65
million,  or 69%, for the nine months ended September 30, 2002. The decrease was
primarily attributable to $8 million in intercompany interest income relating to
the $400 million receivable from PECO which was repaid during the second quarter
of 2001, a $28 million  reduction in  intercompany  interest  income from Unicom
Investment  Inc.,  reflecting  lower interest  rates, $9 million in intercompany
interest  income from  Generation in 2001 on the  processing of certain  invoice
payments on behalf of Generation,  a $12 million  reserve for a potential  plant
disallowance  resulting  from an audit  performed  in  conjunction  with ComEd's
delivery  services rate case, and an $8 million decrease in various other income
and deductions items.


                                       89
<PAGE>

Income Taxes
         The  effective  income  tax rate was  39.8% for the nine  months  ended
September  30, 2002,  compared to 44.8% for the nine months ended  September 30,
2001. The decrease in the effective tax rate was primarily  attributable  to the
discontinuation  of goodwill  amortization as of January 1, 2002,  which was not
deductible for income tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

         ComEd's business is capital intensive and requires considerable capital
resources.  ComEd's  capital  resources  are  primarily  provided by  internally
generated  cash flows from  operations  and, to the extent  necessary,  external
financing including the issuance of commercial paper. ComEd's access to external
financing at reasonable terms is dependent on its credit ratings and the general
business condition of ComEd and the utility industry. Capital resources are used
primarily  to  fund  ComEd's  capital  requirements,   including   construction,
repayments of maturing debt and the payment of dividends.

Cash Flows from Operating Activities
         Cash flows provided by operations  for the nine months ended  September
30, 2002 were $1.5 billion as compared to $1.0 billion for the nine months ended
September  30,  2001.   The  increase  in  cash  flows  in  2002  was  primarily
attributable to a $69 million increase in net income, a $113 million increase in
other  operating  activities,  and a $315  million  increase in working  capital
partially offset by a decrease of $115 million in depreciation and amortization.
ComEd's future cash flows will depend upon the ability to achieve  reductions in
operating costs, the impact of the economy,  weather, and customer choice on its
revenues.  Although  the  amounts  may vary from period to period as a result of
uncertainties  inherent in the business,  ComEd expects to continue to provide a
reliable  and  steady  source of  internal  cash flow  from  operations  for the
foreseeable future.

Cash Flows from Investing Activities
         Cash flows used in investing  activities were $526 million for the nine
months  ended  September  30, 2002  compared to $231 million for the nine months
ended  September  30,  2001.  The  increase  in cash  flows  used  in  investing
activities in 2002 was primarily attributable to the paydown of the $400 million
outstanding  receivable with PECO in the second quarter of 2001 partially offset
by an $82 million decrease in capital expenditures. ComEd's investing activities
for the nine months  ended  September  30, 2002 were  funded  primarily  through
operating activities.

         ComEd estimated that it will spend  approximately $781 million in total
capital  expenditures  for 2002.  Approximately  two thirds of the budgeted 2002
expenditures  are for continuing  efforts to further  improve the reliability of
its  transmission  and  distribution  systems.  The  remaining  one third is for
capital additions to support new business and customer growth. ComEd anticipates
that it will obtain financing, when necessary,  through borrowings, the issuance
of preferred securities,  or capital contributions from Exelon. ComEd's proposed
capital  expenditures  and other  investments are subject to periodic review and
revision to reflect changes in economic conditions and other factors.




                                       90
<PAGE>

Cash Flows from Financing Activities
         Cash flows  used in  financing  activities  for the nine  months  ended
September  30, 2002 were $970  million as compared to $518  million for the nine
months ended  September 30, 2001.  Cash flows used in financing  activities were
primarily  attributable  to debt  service and  payments of  dividends to Exelon.
ComEd's debt financing  activities for the nine months ended  September 30, 2002
reflected the issuance of $600 million of First Mortgage Bonds,  the issuance of
$100 million of Illinois Development Finance Authority  floating-rate  Pollution
Control Revenue  Refunding Bonds, the retirement of $254 million of transitional
trust notes,  the early  retirement of $600 million in First Mortgage Bonds with
available cash, the payment at maturity of $200 million in First Mortgage Bonds,
the payment at maturity of $200 million in variable rate senior  notes,  and the
redemption  of $100  million of 7.25%  Illinois  Development  Finance  Authority
Pollution  Control Revenue  Refunding Bonds. As of September 30, 2002, ComEd had
$94 million in short-term  borrowings.  For the nine months ended  September 30,
2001, ComEd's debt financing activities reflected the retirement of $254 million
of transitional trust notes. ComEd paid a $353 million dividend to Exelon during
the nine months ended September 30, 2002 compared to a $253 million dividend for
the nine months ended September 30, 2001.

Credit Issues
         ComEd meets its short-term liquidity requirements primarily through the
issuance  of  commercial  paper,  borrowings  under a bank credit  facility  and
borrowings  from Exelon's  intercompany  money pool.  ComEd,  along with Exelon,
PECO, and Generation, participates in a $1.5 billion unsecured 364-day revolving
credit  facility with a group of banks  effective  December 12, 2001.  Under the
terms of this  credit  facility,  Exelon  has the  flexibility  to  increase  or
decrease the sublimits of each of the participants upon written  notification to
these  banks.  As of  September  30, 2002,  ComEd's  sublimit  under this credit
facility is $200 million.  ComEd expects to use the credit facility  principally
to support its commercial paper program.  This credit facility requires ComEd to
maintain  a debt  to  total  capitalization  ratio  of 65%  or  less,  excluding
securitization debt. At September 30, 2002, ComEd's debt to total capitalization
ratio on that basis was 42%. At  September  30,  2002,  ComEd has $94 million in
commercial paper outstanding.

         To  provide  an  additional   short-term  borrowing  option  that  will
generally  be more  favorable  to the  borrowing  participants  than the cost of
external financing, Exelon operates an intercompany money pool. Participation in
the money pool is subject to authorization  by the Exelon  Corporate  Treasurer.
Exelon,  ComEd and its subsidiary  Commonwealth  Edison of Indiana,  Inc., PECO,
Generation and Business  Services Company currently may participate in the money
pool.  Funding of, and borrowings from, the money pool are predicated on whether
such funding  results in mutual economic  benefits to each of the  participants,
although Exelon is not permitted to be a net borrower from the fund. Interest on
borrowings  is  based  on  short-term  market  rates of  interest,  or  specific
borrowing rates if the funds are provided by external financing. There have been
no material money pool transactions in 2002.

         ComEd's access to the capital  markets,  including the commercial paper
market, and its financing costs in those markets are dependent on its securities
ratings.  None of ComEd's  borrowings  are subject to default or prepayment as a
result of a downgrading  of credit  ratings  although  such a downgrading  could
increase interest charges under certain bank credit facilities.


                                       91
<PAGE>

         At  September  30,  2002,  ComEd's  capital  structure,  excluding  the
deduction from shareholders'  equity of the $845 million receivable from Exelon,
consisted of 48% long-term debt, 49% of common stock, 3% of preferred securities
of subsidiaries,  and 1% of notes payable.  Long-term debt included $2.1 billion
of transitional  trust notes  constituting  obligations of certain  consolidated
special purpose entities representing 16% of capitalization.

         Under PUHCA and the  Federal  Power Act,  ComEd can only pay  dividends
from retained or current earnings:  however, the SEC has authorized ComEd to pay
up to $500 million in dividends  out of  additional  paid-in  capital,  provided
ComEd may not pay  dividends out of paid-in  capital after  December 31, 2002 if
its  common  equity  is less  than 30% of its  total  capitalization  (including
transitional trust notes). At September 30, 2002, ComEd had retained earnings of
$480 million.

Contractual Obligations and Commercial Commitments
         Contractual  obligations represent cash obligations that are considered
to  be  firm  commitments  and  commercial   commitments  represent  commitments
triggered by future  events.  ComEd's  contractual  obligations  and  commercial
commitments as of September 30, 2002 were  materially  unchanged,  other than in
the normal course of business, from the amounts as set forth in the December 31,
2001 Form 10-K except for the issuance of $600  million of 6.15% First  Mortgage
Bonds,  Series 98, due March 15, 2012,  the issuance of $100 million of Illinois
Development Finance Authority  floating-rate Pollution Control Revenue Refunding
Bonds,  Series 2002 due April 15, 2013,  the redemption of $100 million of 7.25%
Illinois  Development  Finance  Authority  Pollution  Control Revenue  Refunding
Bonds,  Series 1991 due June 1, 2011,  the  redemption of $200 million of 8.625%
First  Mortgage  Bonds,  Series 81, due February 1, 2022, the redemption of $200
million of 8.5% First Mortgage  Bonds,  Series 84 due July 15, 2022, the payment
at maturity  of $200  million of 7.375%  First  Mortgage  Bonds,  Series 85, due
September  15, 2002,  the  redemption  of $200 million of 8.375% First  Mortgage
Bonds,  Series 86, due  September  15,  2022,  the  payment at  maturity of $200
million of variable  rate senior notes due  September  30, 2002,  the payment at
maturity of $100 million of 9.17%  medium-term  notes due October 15, 2002,  and
the  retirement of $254 million in  transitional  trust notes.  At September 30,
2002,  ComEd had $94 million in short-term  borrowings.  Insured  long-term debt
increased $100 million  related to the issuance of $100 million in variable rate
debt that has been credit enhanced through the purchase of insurance coverage.


Other Factors
         ComEd is a participant in Exelon's pension and  postretirement  benefit
plans.  ComEd's costs of providing  pension and  postretirement  benefits to its
retirees are dependent a number of factors,  such as the discount rate, rates of
return on plan  assets,  and the assumed  rate of increase in health care costs.
Approximately  $17 million was included in operating and maintenance  expense in
2001 for the cost of pension and post-retirement benefit plans, exclusive of the
2001 charges for employee severance programs. These costs are expected to remain
consistent in 2002 but are  preliminarily  expected to increase by approximately
$25 million in 2003 as a result of the effects of the decline in market value of
plan assets and discount rates,  and increases in health care costs.  The actual
amount of the 2003 increase will depend on market conditions.


                                       92
<PAGE>

         Exelon's   defined   benefit   pension  plans,  of  which  ComEd  is  a
participant,  currently meet the minimum funding  requirements of the Employment
Retirement  Income Security Act of 1974;  however,  Exelon currently  expects to
make a  discretionary  plan  contribution  in the fourth quarter of 2002 of $100
million to $200 million and a  discretionary  plan  contribution in 2003 of $300
million to $350 million. These contributions are expected to be funded primarily
by Exelon's internally  generated cash flows from operations or through external
sources.





                                       93
<PAGE>


PECO ENERGY COMPANY

GENERAL

         PECO operates in a single business  segment,  Energy Delivery,  and its
operations  consist  of its retail  electricity  distribution  and  transmission
business in southeastern  Pennsylvania and its natural gas distribution business
in the Pennsylvania counties surrounding the City of Philadelphia.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001


Significant Operating Trends - PECO                     Three Months Ended September 30,
                                                        --------------------------------
                                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>          <C>          <C>
OPERATING REVENUES                                                $   1,224       $1,051       $  173       16.5%

OPERATING EXPENSES
     Purchased Power                                                    509          420           89       21.2%
     Fuel                                                                40           51          (11)     (21.6%)
     Operating and Maintenance                                          140          156          (16)     (10.3%)
     Depreciation and Amortization                                      127          115           12       10.4%
     Taxes Other Than Income                                             85           51           34       66.7%
-------------------------------------------------------------------------------------------------------
         Total Operating Expense                                        901          793          108       13.6%
-------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                        323          258           65       25.2%
-------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                   (93)        (105)          12      (11.4%)
     Distributions on Company-Obligated Mandatorily
       Redeemable Preferred Securities of a Partnership
       which holds Solely Subordinated Debentures of
       the Company                                                       (2)          (2)          --         --
     Other, net                                                           5           12           (7)     (58.3%)
-------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                              (90)         (95)           5       (5.3%)
-------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                              233          163           70       42.9%

INCOME TAXES                                                             76           59           17       28.8%
-------------------------------------------------------------------------------------------------------

NET INCOME                                                              157          104           53       51.0%
Preferred Stock Dividends                                                (2)          (2)          --       --
-------------------------------------------------------------------------------------------------------

NET INCOME ON COMMON STOCK                                        $     155       $  102       $   53       52.0%
=======================================================================================================
</TABLE>

Net Income
         Net  income on  common  stock  increased  $53  million,  or 52% for the
quarter  ended  September  30,  2002 as compared  to the same 2001  period.  The
increase was a result of higher sales volume, favorable rate adjustments,  lower
operating and maintenance  expense  related to employee  severance costs in 2001
associated with the Merger,  and lower interest expense on debt partially offset
by increased depreciation and amortization expense.


                                       94
<PAGE>

Operating Revenues
         PECO's electric sales statistics are as follows:

<TABLE>
<CAPTION>
                                                         Three Months Ended September 30,
                                                        --------------------------------
Deliveries - (in GWh)                                                  2002          2001    Variance      % Change
---------------------------------------------------------------------------------------------------------------------
Bundled Deliveries (1)
<S>                                                                   <C>           <C>         <C>        <C>
Residential                                                           3,422         2,175       1,247      57.3%
Small Commercial & Industrial                                         2,066         1,990          76       3.8%
Large Commercial & Industrial                                         4,006         3,835         171       4.5%
Public Authorities & Electric Railroads                                 224           193          31      16.1%
-------------------------------------------------------------------------------------------------------
                                                                      9,718         8,193       1,525      18.6%
-------------------------------------------------------------------------------------------------------
Unbundled Deliveries (2)
Residential                                                             371           990       (619)     (62.5%)
Small Commercial & Industrial                                           154           100          54      54.0%
Large Commercial & Industrial                                           236           249        (13)      (5.2%)
Public Authorities & Electric Railroads                                  --            --          --      --
-------------------------------------------------------------------------------------------------------
                                                                        761         1,339       (578)     (43.2%)
Total Retail Deliveries                                              10,479         9,532         947       9.9%
=======================================================================================================
<FN>
(1)  Bundled service  reflects  deliveries to customers  taking electric service
     under tariffed rates,  which include the cost of energy,  the delivery cost
     of the transmission and distribution of the energy and a CTC charge.
(2)  Unbundled   service  reflects   customers   electing  to  receive  electric
     generation service from an alternative energy supplier.
</FN>
</TABLE>


<TABLE>
<CAPTION>
                                                        Three Months Ended September 30,
                                                        --------------------------------
Electric Revenue                                                       2002         2001     Variance     %Change
---------------------------------------------------------------------------------------------------------------------
Bundled Revenue (1)
<S>                                                               <C>           <C>          <C>           <C>
Residential                                                       $     478     $    304     $    174      57.2%
Small Commercial & Industrial                                           251          236           15       6.4%
Large Commercial & Industrial                                           296          282           14       5.0%
Public Authorities & Electric Railroads                                  21           19            2      10.5%
-------------------------------------------------------------------------------------------------------
                                                                      1,046          841          205      24.4%
-------------------------------------------------------------------------------------------------------
Unbundled Revenue (2)
Residential                                                              32           81          (49)    (60.5%)
Small Commercial & Industrial                                             9            5            4      80.0%
Large Commercial & Industrial                                             7            7           --        --
Public Authorities & Electric Railroads                                  --           --           --        --
-------------------------------------------------------------------------------------------------------
                                                                         48           93          (45)    (48.4%)
-------------------------------------------------------------------------------------------------------
Total Electric Retail Revenues                                        1,094          934          160      17.1%
Wholesale and Miscellaneous Revenue (3)                                  63           42           21      50.0%
-------------------------------------------------------------------------------------------------------
Total Electric Revenue                                            $   1,157     $    976     $    181      18.5%
=======================================================================================================
<FN>
(1)  Bundled revenue  reflects  revenue from customers  taking electric  service
     under tariffed rates,  which includes the cost of energy, the delivery cost
     of the transmission and distribution of the energy and a CTC charge.
(2)  Unbundled  revenue  reflects  revenue  from  customers  electing to receive
     generation from an alternate supplier,  which include a distribution charge
     and a CTC charge.
(3)  Wholesale and miscellaneous revenues include transmission revenue, sales to
     municipalities and other wholesale energy sales.
</FN>
</TABLE>



                                       95
<PAGE>

         The changes in electric retail revenues for the quarter ended September
30, 2002, as compared to the same 2001 period, are as follows:

<TABLE>
<CAPTION>
                                                                                Variance
------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>
Weather                                                                          $    60
Customer Choice                                                                       40
Rate Changes                                                                          16
Other Effects                                                                         44
------------------------------------------------------------------------------------------------------------
Electric Retail Revenue                                                          $   160
------------------------------------------------------------------------------------------------------------
</TABLE>

o    Weather.  The  demand  for  electricity  services  is  impacted  by weather
     conditions.  Very warm  weather in summer  months and very cold  weather in
     other months is referred to as "favorable weather conditions",  relative to
     revenue  because  these  weather  conditions  result in increased  sales of
     electricity. Conversely, mild weather reduces demand.
              The weather  impact was favorable  compared to the prior year as a
     result of warmer summer weather.  Cooling degree-days increased 20% for the
     quarter ended September 30, 2002 compared to the same 2001 period.

o    Customer Choice. All PECO customers have the choice to purchase energy from
     other suppliers. This choice generally does not impact kWh deliveries,  but
     reduces  revenue  collected from  customers  because they are not obtaining
     generation supply from PECO.
              As of September  30, 2002,  the customer  load served by alternate
     suppliers  was 973 MW or  12.5%  as  compared  to  1,042  MW or 13.6% as of
     September 30, 2001.  For the quarter ended  September 30, 2002, the percent
     of PECO's total retail  deliveries for which PECO was the electric supplier
     was 92.8% in 2002,  a 6.8%  increase as  compared  to 86.0% in 2001.  As of
     September 30, 2002, the number of customers  served by alternate  suppliers
     was 285,549 or 18.7% as compared to September 30, 2001 of 397,396 or 26.1%.
     The  increases in the  customer  load and the  percentage  of MWh served by
     PECO,  and the  decrease in the number of customers  served by  alternative
     suppliers  primarily resulted from customers selecting or returning to PECO
     as their electric generation supplier.
              In February 2002,  New Power Company (New Power)  notified PECO of
     its intent to withdraw from providing  Competitive Default Service (CDS) to
     approximately   180,000  residential   customers.   As  a  result  of  that
     withdrawal, those CDS customers were returned to PECO in the second quarter
     of 2002.  Pursuant to a tariff filing approved by the  Pennsylvania  Public
     Utility  Commission (PUC), PECO is serving those returned  customers at the
     discount  energy  rates on  generation  provided for under the original New
     Power CDS Agreement for the remaining term of that contract.  Subsequently,
     in the second  quarter of 2002,  New Power also  advised PECO it planned to
     withdraw  from  serving all of its  customers  in  Pennsylvania,  including
     approximately 15,000 non-CDS PECO customers.  These customers were returned
     to PECO during the third quarter of 2002.

o    Rate  Changes.  The  increase  in  revenues  attributable  to rate  changes
     primarily  reflects a $13 million  increase due to an increase in the gross
     receipts tax rate effective January 1, 2002.
              As permitted by the  Pennsylvania  Electric  Competition  Act, the
     Pennsylvania  Department of Revenue has  calculated a 2002 Revenue  Neutral
     Reconciliation  (RNR) adjustment to the gross receipts tax rate in order to
     neutralize  the impact of electric  restructuring  on its tax revenues.  In
     January 2002, the Pennsylvania Public Utility Commission (PUC) approved the




                                       96
<PAGE>

     RNR adjustment to the gross  receipts tax rate  collected  from  customers.
     Effective  January  1,  2002,  PECO  implemented  the  change  in the gross
     receipts tax rate.  The RNR  adjustment  increases  the gross  receipts tax
     rate,  which is estimated to increase both PECO's  annual  revenues and tax
     obligations  by  approximately  $50 million in 2002. The RNR adjustment was
     under appeal.  The case was remanded to the PUC and in August 2002, the PUC
     ruled that PECO is properly authorized to recover these costs.
o    Other  Effects.  Other items  affecting  revenue  during the quarter  ended
     September 30, 2002 include:
     o    Volume. Exclusive of weather impacts, higher delivery volume increased
          PECO's revenue by $44 million compared to the same 2001 period.
     o    Other. A payment of $7 million during the quarter ended  September 30,
          2002 as compared to a payment of $21 million  during the quarter ended
          September  30, 2001 to Generation  related to nuclear  decommissioning
          cost recovery under an agreement effective September 2001.

         PECO's gas sales statistics for the quarter ended September 30, 2002 as
compared to the same 2001 period are as follows:

<TABLE>
<CAPTION>
                                                                   Three Months Ended September 30,
                                                                   --------------------------------

                                                                                   2002         2001       Variance
--------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>          <C>               <C>
Deliveries in mmcf                                                               11,347       10,525            822
Revenue                                                                             $67         $ 75          $ (8)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

         The changes in gas revenue for the quarter ended September 30, 2002, as
compared to the same 2001 period, are as follows:

<TABLE>
<CAPTION>
(in millions)                                                                    Variance
-------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>
Rate Changes                                                                    $      (4)
Weather                                                                                (3)
Volume                                                                                 (1)
-------------------------------------------------------------------------------------------------------------
Gas Revenue                                                                     $      (8)
-------------------------------------------------------------------------------------------------------------
</TABLE>

o    Rate  Changes.  The  unfavorable  variance in rates is  attributable  to an
     adjustment  of the  purchased  gas cost  recovery by the PUC  effective  in
     December  2001.  The average  rate per  million  cubic feet for the quarter
     ended  September  30, 2002 was 17% lower than the same 2001 period.  PECO's
     gas rates are  subject  to  periodic  adjustments  by the PUC  designed  to
     recover or refund the  difference  between actual cost of purchased gas and
     the amount  included  in base rates and to recover or refund  increases  or
     decreases in certain state taxes not recovered in base rates.
o    Weather. The demand for gas service is impacted by weather conditions. Very
     cold  weather  in winter  months is  referred  to as a  "favorable  weather
     condition,"  because this weather  condition  results in increased sales of
     gas. Conversely, mild weather reduces demand. Heating degree-days decreased
     92% in the  quarter  ended  September  30,  2002  compared to the same 2001
     period.
o    Volume. Exclusive of weather impact, delivery volume was consistent for the
     quarter ended September 30, 2002 compared to the same 2001 period.



                                       97
<PAGE>

Purchased Power and Fuel Expense
         Purchased  power and fuel expense for the quarter  ended  September 30,
2002 increased $78 million as compared to the same 2001 period.  The increase in
fuel and purchased power expense was primarily  attributable to $38 million from
customers in  Pennsylvania  selecting  or  returning  to PECO as their  electric
generation  supplier,  $24 million as a result of favorable weather  conditions,
$13 million  primarily  attributable  to higher  delivery  volume and higher PJM
ancillary  charges of $11 million.  These increases were partially  offset by $4
million from lower gas prices.

Operating and Maintenance Expense
         O&M expense for the quarter  ended  September  30, 2002  decreased  $16
million,  or 10%,  as  compared  to the same 2001  period.  The  decrease in O&M
expense was primarily  attributable  to $18 million of employee  severance costs
associated  with the Merger and $6 million  of  incremental  costs  related to a
storm,  both of which  occurred in the third quarter of 2001.  The decreases are
partially  offset by $7 million related to an increased  allocation of corporate
expense and $3 million  related to the  deployment  of automated  meter  reading
technology.

Depreciation and Amortization Expense
         Depreciation and  amortization  expense for the quarter ended September
30, 2002  increased $12 million,  or 10%, as compared to the same 2001 period as
follows:

<TABLE>
<CAPTION>
                                                Three Months Ended September 30,
                                                --------------------------------
                                                          2002              2001         Variance          % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>              <C>                    <C>
Depreciation Expense                                 $      31         $      30        $       1              3.3%
Competitive Transition Charge Amortization                  90                78               12             15.4%
Other Amortization Expense                                   6                 7               (1)           (14.3%)
-------------------------------------------------------------------------------------------------------
Total Depreciation and Amortization                  $     127         $     115        $      12             10.4%
=======================================================================================================
</TABLE>

         The increase was  primarily  attributable  to $12 million of additional
amortization of PECO's CTC and an increase of $1 million related to depreciation
expense associated with additional plant in service. The additional amortization
of  the  CTC  is  in  accordance  with  PECO's  original  settlement  under  the
Pennsylvania Competition Act.

Taxes Other Than Income
         Taxes  other than  income for the  quarter  ended  September  30,  2002
increased $34 million, or 67%, as compared to the same 2001 period. The increase
was  primarily  attributable  to $14 million of  additional  gross  receipts tax
related to additional revenues and an increase in the gross receipts tax rate on
electric revenue  effective  January 1, 2002. The increase was also attributable
to a  reduction  of $9  million  in the  state use tax  accruals  in 2001 and $7
million  related to an  additional  assessment of real estate taxes in the third
quarter of 2002.




                                       98
<PAGE>

Interest Charges
         Interest  charges  consist of  interest  expense and  distributions  on
Company-Obligated  Mandatorily  Redeemable Preferred Securities of a Partnership
(COMRPS).  Interest charges decreased $12 million,  or 11%, in the quarter ended
September  30,  2002 as  compared  to the same 2001  period.  The  decrease  was
primarily  attributable  to lower  interest  expense  on  long-term  debt of $15
million as a result of principal payments and lower interest rates.

Other Income and Deductions
         Other income and deductions  excluding interest charges for the quarter
ended  September 30, 2002 decreased $7 million,  or 58%, as compared to the same
2001  period.  The  decrease  in  other  income  and  deductions  was  primarily
attributable to intercompany  interest income of $9 million in the third quarter
of 2001.

Income Taxes
         The effective tax rate was at 32.6% for the quarter ended September 30,
2002 as  compared  to 36.2%  for the  same  2001  period.  The  decrease  in the
effective tax rate was primarily attributable to a favorable adjustment to prior
period income taxes in connection with the completion of the 2001 tax return.

Preferred Stock Dividends
         Preferred stock dividends for the quarter ended September 30, 2002 were
consistent as compared to the same 2001 period.



                                       99
<PAGE>



Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001

<TABLE>
<CAPTION>
Significant Operating Trends - PECO
                                                         Nine Months Ended September 30,
                                                        --------------------------------
                                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>          <C>           <C>
OPERATING REVENUES                                                $   3,239       $3,008       $  231        7.7%

OPERATING EXPENSES
     Purchased Power                                                  1,265        1,019          246       24.1%
     Fuel                                                               228          335         (107)     (31.9%)
     Operating and Maintenance                                          407          413           (6)      (1.5%)
     Depreciation and Amortization                                      348          315           33       10.5%
     Taxes Other Than Income                                            207          135           72       53.3%
-------------------------------------------------------------------------------------------------------
         Total Operating Expense                                      2,455        2,217          238       10.7%
-------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                        784          791           (7)      (0.9%)
-------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
     Interest Expense                                                  (280)        (332)          52      (15.7%)
     Distributions on Company-Obligated Mandatorily
       Redeemable Preferred Securities of a Partnership
       which holds Solely Subordinated Debentures of
       the Company                                                       (7)          (7)          --         --
     Other, net                                                           7           30          (23)     (76.7%)
-------------------------------------------------------------------------------------------------------
         Total Other Income and Deductions                             (280)        (309)          29       (9.4%)
-------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                              504          482           22        4.6%

INCOME TAXES                                                            166          171           (5)      (2.9%)
-------------------------------------------------------------------------------------------------------
NET INCOME                                                              338          311           27        8.7%
Preferred Stock Dividends                                                (6)          (7)           1      (14.3%)
-------------------------------------------------------------------------------------------------------

NET INCOME ON COMMON STOCK                                        $     332       $  304       $   28        9.2%
=======================================================================================================
</TABLE>

Net Income
         Net income on common stock  increased $28 million,  or 9%, for the nine
months  ended  September  30,  2002 as  compared  to the same 2001  period.  The
increase was a result of higher sales volume, favorable rate adjustments,  lower
operating and maintenance  expense  related to employee  severance costs in 2001
associated with the Merger,  and lower interest expense on debt partially offset
by increased depreciation and amortization expense.


                                      100
<PAGE>

Operating Revenue
         PECO's electric sales statistics are as follows:

<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                        --------------------------------
Deliveries - (in GWh)                                                  2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
Bundled Deliveries (1)
<S>                                                                   <C>          <C>          <C>        <C>
Residential                                                           7,592        6,307        1,285      20.4%
Small Commercial & Industrial                                         5,704        4,303        1,401      32.6%
Large Commercial & Industrial                                        11,285        9,538        1,747      18.3%
Public Authorities & Electric Railroads                                 617          567           50       8.8%
-------------------------------------------------------------------------------------------------------
                                                                     25,198       20,715        4,483      21.6%
-------------------------------------------------------------------------------------------------------
Unbundled Deliveries (2)
Residential                                                           1,720        2,365         (645)    (27.3%)
Small Commercial & Industrial                                           253        1,516       (1,263)    (83.3%)
Large Commercial & Industrial                                           351        2,170       (1,819)    (83.8%)
Public Authorities & Electric Railroads                                  --            7           (7)   (100.0%)
-------------------------------------------------------------------------------------------------------
                                                                      2,324        6,058       (3,734)    (61.6%)
-------------------------------------------------------------------------------------------------------
Total Retail Deliveries                                              27,522       26,773          749       2.8%
-------------------------------------------------------------------------------------------------------
<FN>
(1)  Bundled service  reflects  deliveries to customers  taking electric service
     under tariffed rates,  which include the cost of energy,  the delivery cost
     of the transmission and distribution of the energy and a CTC charge.
(2)  Unbundled   service  reflects   customers   electing  to  receive  electric
     generation service from an alternative energy supplier.
</FN>
</TABLE>


<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                        --------------------------------
Electric Revenue                                                       2002         2001     Variance      % Change
---------------------------------------------------------------------------------------------------------------------
Bundled Revenue (1)
<S>                                                               <C>           <C>          <C>           <C>
Residential                                                       $     999     $    807     $    192      23.8%
Small Commercial & Industrial                                           664          500          164      32.8%
Large Commercial & Industrial                                           829          689          140      20.3%
Public Authorities & Electric Railroads                                  58           53            5       9.4%
-------------------------------------------------------------------------------------------------------
                                                                      2,550        2,049          501      24.5%
-------------------------------------------------------------------------------------------------------
Unbundled Revenue (2)
Residential                                                             129          184          (55)    (29.9%)
Small Commercial & Industrial                                            13           73          (60)    (82.2%)
Large Commercial & Industrial                                            10           61          (51)    (83.6%)
Public Authorities & Electric Railroads                                  --            1           (1)   (100.0%)
-------------------------------------------------------------------------------------------------------
                                                                        152          319         (167)    (52.4%)
-------------------------------------------------------------------------------------------------------
Total Electric Retail Revenues                                        2,702        2,368          334      14.1%
Wholesale and Miscellaneous Revenue (3)                                 179          158           21      13.3%
-------------------------------------------------------------------------------------------------------
Total Electric Revenue                                            $   2,881     $  2,526     $    355      14.1%
=======================================================================================================
<FN>
(1)  Bundled revenue  reflects  revenue from customers  taking electric  service
     under tariffed rates,  which includes the cost of energy, the delivery cost
     of the transmission and distribution of the energy and a CTC charge.
(2)  Unbundled  revenue  reflects  revenue  from  customers  electing to receive
     generation from an alternate supplier,  which include a distribution charge
     and a CTC charge.
(3)  Wholesale and miscellaneous revenues include transmission revenue, sales to
     municipalities and other wholesale energy sales.
</FN>
</TABLE>


                                      101
<PAGE>

         The  changes in electric  retail  revenues  for the nine  months  ended
September 30, 2002, as compared to the same 2001 period, are as follows:

<TABLE>
<CAPTION>
                                                                                 Variance
-----------------------------------------------------------------------------------------------------
<S>                                                                              <C>
Customer Choice                                                                  $    205
Rate Changes                                                                           45
Weather                                                                                42
Other Effects                                                                          42
-----------------------------------------------------------------------------------------------------
Electric Retail Revenue                                                          $    334
=====================================================================================================
</TABLE>

o    Customer  Choice.  As of September  30, 2002,  the customer  load served by
     alternate suppliers was 973 MW or 12.5% as compared to 1,042 MW or 13.6% as
     of September 30, 2001.  For the nine months ended  September 30, 2002,  the
     percent of PECO's total retail  deliveries  for which PECO was the electric
     supplier was 91.6% in 2002, a 14.1%  increase as compared to 77.4% in 2001.
     As of  September  30,  2002,  the number of  customers  served by alternate
     suppliers was 285,549 or 18.7% as compared to September 30, 2001 of 397,396
     or 26.1%.  This  increase in the customer  load and the  percentage  of MWh
     served by PECO,  and the  decrease  in the  number of  customers  served by
     alternative  suppliers  primarily  resulted  from  customers  selecting  or
     returning to PECO as their electric generation supplier.
o    Rate  Changes.  The  increase  in  revenues  attributable  to rate  changes
     primarily  reflects the  expiration  of a 6%  reduction in PECO's  electric
     rates  during the first  quarter of 2001 and a $39  million  increase  as a
     result of the increase in the gross receipts tax rate effective  January 1,
     2002.  These increases are partially  offset by the timing of a $60 million
     rate reduction in effect for 2001 and 2002.
o    Weather.  The weather impact was favorable  compared to the prior year as a
     result of warmer summer weather  partially offset by warmer winter weather.
     Cooling  degree-days  increased 14% for the nine months ended September 30,
     2002 compared to the same 2001 period.  Heating  degree-days  decreased 16%
     for the nine months  ended  September  30,  2002  compared to the same 2001
     period.
o    Other Effects.  Other items affecting  revenue during the nine months ended
     September 30, 2002 include:
     o    Volume. Exclusive of weather impacts, higher delivery volume increased
          PECO's revenue by $53 million compared to the same 2001 period.
     o    Other.  An $11 million  settlement of CTCs by a large  customer in the
          first quarter of 2001.

         PECO's gas sales  statistics  for the nine months ended  September  30,
2002 as compared to the same 2001 period are as
follows:
<TABLE>
<CAPTION>
                                                                    Nine Months Ended September 30,
                                                                    --------------------------------
                                                                                   2002         2001        Variance
---------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>          <C>            <C>
Deliveries in mmcf                                                               56,990       58,536         (1,546)
Revenue                                                                            $358         $482         $ (124)
---------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      102
<PAGE>

         The  changes in gas revenue for the nine  months  ended  September  30,
2002, as compared to the same 2001 period, are as follows:

<TABLE>
<CAPTION>
                                                                                  Variance
-----------------------------------------------------------------------------------------------------
<S>                                                                              <C>
Rate Changes                                                                     $     (67)
Weather                                                                                (33)
Volume                                                                                 (23)
Other                                                                                   (1)
-----------------------------------------------------------------------------------------------------
Gas Revenue                                                                      $    (124)
=====================================================================================================
</TABLE>

o    Rate  Changes.  The  unfavorable  variance in rates is  attributable  to an
     adjustment  of the  purchased  gas cost  recovery by the PUC  effective  in
     December  2001. The average rate per million cubic feet for the nine months
     ended September 30, 2002 was 23% lower than the same 2001 period.
o    Weather.  The  unfavorable  weather impact is attributable to warmer winter
     weather during the nine months ended  September 30, 2002 as compared to the
     same 2001  period.  Heating  degree-days  decreased  16% in the nine months
     ended September 30, 2002 compared to the same 2001 period.
o    Volume. Exclusive of weather impacts, lower delivery volume reduced revenue
     by $23 million in the nine months ended  September 30, 2002 compared to the
     same 2001 period.  Total  deliveries to customers  decreased 3% in the nine
     months ended September 30, 2002 compared to the same 2001 period, primarily
     as a result of  slower  economic  conditions  in 2002  partially  offset by
     increased customer growth.

Purchased Power and Fuel Expense
         Purchased  power and fuel expense for the nine months  ended  September
30,  2002  increased  $139  million as  compared  to the same 2001  period.  The
increase in fuel and purchased power expense was primarily  attributable to $187
million from customers in  Pennsylvania  selecting or returning to PECO as their
electric  generation  supplier and higher PJM ancillary  charges of $28 million.
These increases were partially  offset by $67 million from lower gas prices,  $8
million from lower delivery volume primarily  related to gas and $6 million as a
result of unfavorable weather conditions.

Operating and Maintenance Expense
         O&M expense for the nine months ended  September 30, 2002  decreased $6
million, or 2%, as compared to the same 2001 period. The decrease in O&M expense
was primarily attributable to $18 million of employee severance costs associated
with the Merger,  $12 million of incremental  costs related to two storms and $5
million  associated  with a write-off of excess and obsolete  inventory,  all of
which  occurred in 2001.  These  decreases are  partially  offset by $16 million
related to an increased  allocation of corporate expense and $15 million related
to the deployment of automated meter reading technology.



                                      103
<PAGE>

Depreciation and Amortization Expense
         Depreciation  and  amortization  expense  for  the  nine  months  ended
September 30, 2002  increased $33 million,  or 11%, as compared to the same 2001
period as follows:

<TABLE>
<CAPTION>
                                                 Nine Months Ended September 30,
                                                --------------------------------
                                                          2002              2001         Variance          % Change
---------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>               <C>              <C>                    <C>
Depreciation Expense                                 $      94         $      89        $       5              5.6%
Competitive Transition Charge Amortization                 236               207               29             14.0%
Other Amortization Expense                                  18                19               (1)           (5.3%)
-------------------------------------------------------------------------------------------------------
Total Depreciation and Amortization                  $     348         $     315        $      33             10.5%
=======================================================================================================
</TABLE>

         The increase was  primarily  attributable  to $29 million of additional
amortization of PECO's CTC and an increase of $5 million related to depreciation
expense associated with additional plant in service. The additional amortization
of  the  CTC  is  in  accordance  with  PECO's  original  settlement  under  the
Pennsylvania Competition Act.

Taxes Other Than Income
         Taxes other than income for the nine months  ended  September  30, 2002
increased $72 million, or 53%, as compared to the same 2001 period. The increase
was  primarily  attributable  to $54 million of  additional  gross  receipts tax
related to additional revenues and an increase in the gross receipts tax rate on
electric revenue  effective  January 1, 2002. The increase was also attributable
to a  reduction  of $9  million  in the  state use tax  accruals  in 2001 and $7
million  related to an  additional  assessment of real estate taxes in the third
quarter of 2002.

Interest Charges
         Interest  charges  decreased  $52 million,  or 16%, for the nine months
ended  September 30, 2002 as compared to the same 2001 period.  The decrease was
primarily  attributable  to lower  interest  expense  on  long-term  debt of $40
million as a result of  principal  payments  and lower  interest  rates,  and $8
million in interest expense on a loan from ComEd in 2001.

Other Income and Deductions
         Other income and deductions  excluding  interest charges  decreased $23
million, or 77%, for the nine months ended September 30, 2002 as compared to the
same 2001  period.  The decrease in other income and  deductions  was  primarily
attributable  to lower  interest  income of $7 million in 2002. The decrease was
also attributable to intercompany  interest income of $10 million, a gain on the
settlement of an interest  rate swap of $6 million and the favorable  settlement
of a customer contract of $3 million, all of which occurred in 2001.

Income Taxes
         The  effective  tax rate was 32.9% for the nine months ended  September
30,  2002 as  compared to 35.5% for the same 2001  period.  The  decrease in the
effective tax rate was primarily attributable to a favorable adjustment to prior
period income taxes in connection with the completion of the 2001 tax return.

Preferred Stock Dividends
         Preferred stock dividends for the quarter ended September 30, 2002 were
consistent as compared to the same 2001 period.



                                      104
<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

         PECO's business is capital intensive and requires  considerable capital
resources.  PECO's  capital  resources  are  primarily  provided  by  internally
generated  cash flows from  operations  and, to the extent  necessary,  external
financing  including the issuance of commercial paper. PECO's access to external
financing at reasonable terms is dependent on its credit ratings and the general
business condition of PECO and the utility industry.  Capital resources are used
primarily  to  fund  PECO's  capital   requirements,   including   construction,
repayments of maturing debt and payment of dividends.

Cash Flows from Operating Activities
         Cash flows provided by operations  for the nine months ended  September
30, 2002 were $473  million  compared to $744  million for the nine months ended
September 30, 2001.  The decrease in cash flows from  operating  activities  was
primarily  attributable to higher payments  related to accrued  expenses of $255
million and changes in  intercompany  receivables  and payables of $181 million.
These  decreases  were partially  offset by lower  payments  related to accounts
payable of $54 million,  higher  collection of deferred energy costs as a result
of a change in gas rates of $36 million, higher CTC amortization of $29 million,
higher net income of $27 million and changes in material and supply  inventories
of $13 million.  PECO's cash flow from operating  activities  primarily  results
from  sales  of  electricity  and gas to a stable  and  diverse  base of  retail
customers at fixed prices. PECO's future cash flows will depend upon the ability
to achieve operating cost reductions, and the impact of the economy, weather and
customer  choice on its  revenues.  Although the amounts may vary from period to
period as a result of the uncertainties  inherent in its business,  PECO expects
that it will  continue to provide a reliable and steady  source of internal cash
flow from operations for the foreseeable future.

Cash Flows from Investing Activities
         Cash flows  used in  investing  activities  for the nine  months  ended
September  30,  2002 were $177  million  compared  to $154  million for the nine
months ended  September  30, 2001.  The increase in cash flows used in investing
activities was primarily  attributable  to an increase in capital  expenditures.
PECO's investing activities during the nine months ended September 30, 2002 were
funded primarily by operating activities.

         PECO's  projected  capital  expenditures  for 2002  are  $279  million.
Approximately  one  half of the  budgeted  2002  expenditures  are  for  capital
additions to support  customer and load growth and the  remainder  for additions
and  upgrades  to  existing  facilities.  PECO  anticipates  that it will obtain
financing,  when  necessary,  through  borrowings,  the  issuance  of  preferred
securities,  or capital  contributions  from  Exelon.  PECO's  proposed  capital
expenditures  and other  investments are subject to periodic review and revision
to reflect changes in economic conditions and other factors.

Cash Flows from Financing Activities
         Cash flows  used in  financing  activities  for the nine  months  ended
September  30,  2002 were $214  million  compared  to $508  million for the nine
months ended  September 30, 2001.  Cash flows used in financing  activities  are
primarily  attributable to debt service and payment of dividends to Exelon.  The
decrease in cash flows used in financing activities is primarily attributable to
a  change  in  commercial  paper  borrowings  of  $435  million,   a  change  in




                                      105
<PAGE>

intercompany payable of $41 million, lower debt service of $16 million partially
offset by lower contributions from Exelon of $91 million,  additional  dividends
paid to Exelon in 2002 of $86 million,  and the change in settlement of interest
rate swap agreements of $36 million. PECO paid a $255 million dividend to Exelon
during the nine  months  ended  September  30, 2002  compared to a $169  million
dividend for the nine months ended September 30, 2001.

Credit Issues
         PECO meets its short-term liquidity  requirements primarily through the
issuance  of  commercial  paper,  borrowings  under a bank credit  facility  and
borrowings from Exelon's intercompany money pool. PECO, along with Exelon, ComEd
and  Generation,  participates  in a $1.5 billion  unsecured  364-day  revolving
credit  facility with a group of banks  effective  December 12, 2001.  Under the
terms of this  credit  facility,  Exelon  has the  flexibility  to  increase  or
decrease the sublimits of each of the participants upon written  notification to
these banks. As of September 30, 2002, PECO's sublimit under the credit facility
is $600 million.  PECO expects to use the credit facility principally to support
its commercial paper program.  This credit facility  requires PECO to maintain a
debt to total capitalization ratio of 65% or less, excluding securitization debt
and  excluding  the  receivable  from parent  recorded  in PECO's  shareholders'
equity. At September 30, 2002, PECO's debt to total capitalization ratio on that
basis was 41%. At September 30, 2002, PECO has $375 million in commercial  paper
outstanding.

         To  provide  an  additional   short-term  borrowing  option  that  will
generally  be more  favorable  to the  borrowing  participants  than the cost of
external financing, Exelon operates an intercompany money pool. Participation in
the money pool is subject to authorization  by the Exelon  Corporate  Treasurer.
Exelon,  ComEd and its subsidiary  Commonwealth  Edison of Indiana,  Inc., PECO,
Generation and Business  Services Company currently may participate in the money
pool.  Funding of, and borrowings from, the money pool are predicated on whether
such funding  results in mutual economic  benefits to each of the  participants,
although Exelon is not permitted to be a net borrower from the fund. Interest on
borrowings  is  based  on  short-term  market  rates of  interest,  or  specific
borrowing rates if the funds are provided by external financing. There have been
no material money pool transactions in 2002.

         PECO's access to the capital  markets,  including the commercial  paper
market,  and its  financing  costs in those  markets are dependent on its credit
ratings.  None of PECO's  borrowings  are subject to default or  prepayment as a
result of a downgrading  of credit  ratings  although  such a downgrading  could
increase interest charges under certain bank credit facilities.

         At  September  30,  2002,  PECO's  capital  structure,   excluding  the
deduction from shareholders'  equity of the $1.8 billion receivable from Exelon,
consisted of 27% common stock,  4% notes  payable,  3% preferred  securities and
COMRPS (which comprised 2% of PECO's total  capitalization  structure),  and 66%
long-term  debt  including  transition  bonds  issued by PECO Energy  Transition
Trust. Long-term debt included $4.3 billion of transition bonds representing 50%
of capitalization.

         Under PUHCA and the Federal Power Act, PECO can pay dividends only from
retained or current earnings.  At September 30, 2002, PECO had retained earnings
of $347 million.

                                      106
<PAGE>


Contractual Obligations and Commercial Commitments
         Contractual  obligations represent cash obligations that are considered
to  be  firm  commitments  and  commercial   commitments  represent  commitments
triggered  by future  events.  PECO's  contractual  obligations  and  commercial
commitments as of September 30, 2002 were  materially  unchanged,  other than in
the normal course of business, from the amounts as set forth in the December 31,
2001 Form 10-K  except for  principal  payments  of $326  million on  transition
bonds,  additional  borrowings of commercial paper of $274 million, the issuance
of $225 million of 4.75% First and Refunding Mortgage Bonds, due October 1, 2012
and the  payment at  maturity of $222  million of First and  Refunding  Mortgage
Bonds.

Other Factors
         PECO is a participant in Exelon's  pension and  postretirement  benefit
plans.  PECO's costs of  providing  pension and  postretirement  benefits to its
retirees is dependent on a number of factors,  such as the discount rate,  rates
of return on plan assets, and the assumed rate of increase in health care costs.
A credit of  approximately  $2 million was  included as a reduction to operating
and   maintenance   expense  in  2001  for  the  cost  of  PECO's   pension  and
post-retirement  benefit  plans,  exclusive  of the 2001  charges for  employees
severance   programs.   These  costs  are   expected  to  increase  in  2002  by
approximately  $23 million as the result of the effects of the decline in market
value of plan assets and  discount  rates,  and  increases in health care costs.
Further  increases  in pension and  postretirement  expense are expected for the
year 2003.  Although the 2003  increase  will depend on market  conditions  PECO
preliminarily  estimates  that  pension and  postretirement  benefit  costs will
increase by approximately $15 million in 2003 from 2002 cost levels.

         Exelon's defined benefit pension plans, of which PECO is a participant,
currently meet the minimum  funding  requirements  of the Employment  Retirement
Income  Security  Act of  1974,  however  Exelon  currently  expects  to  make a
discretionary plan contribution in the fourth quarter of 2002 of $100 million to
$200 million and a  discretionary  plan  contribution in 2003 of $300 million to
$350  million.  These  contributions  are  expected  to be funded  primarily  by
Exelon's  internally  generated cash flows from  operations or through  external
sources.

                                      107
<PAGE>

EXELON GENERATION COMPANY, LLC

GENERAL

         The operations of Generation consist of electric generating facilities,
energy marketing operations and equity interests in Sithe and AmerGen.

         Generation  early  adopted  the  provision  of EITF 02-3 that  requires
revenues and energy costs related to energy trading contracts to be presented on
a net basis in the income  statement.  For  comparative  purposes,  energy costs
related to energy trading have been  reclassified in prior periods to revenue to
conform to the net basis of presentation required by EITF 02-3.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001

Significant Operating Trends - Generation
                                                        Three Months Ended September 30,
                                                        --------------------------------
                                                                       2002         2001              Variance          % Change
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>               <C>                   <C>
OPERATING REVENUES                                                $ 2,213           $ 2,191           $    22               1.0%

OPERATING EXPENSES
   Purchased Power                                                  1,257             1,268               (11)             (0.9%)
   Fuel                                                               273               242                31              12.8%
   Operating and Maintenance                                          391               364                27               7.4%
   Depreciation                                                        68                57                11              19.3%
   Taxes Other Than Income                                             37                36                 1               2.8%
-------------------------------------------------------------------------------------------------------------------
     Total Operating Expense                                        2,026             1,967                59               3.0%
-------------------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                      187               224               (37)            (16.5%)
-------------------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
   Interest Expense                                                   (23)              (41)               18              43.9%
   Equity in Earnings (Losses) of Unconsolidated Affiliates, net       87                60                27              45.0%
   Other, net                                                          14               (25)               39             156.0%
-------------------------------------------------------------------------------------------------------------------
     Total Other Income and Deductions                                 78                (6)               84           n.m.
-------------------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES                                            265               218                47              21.6%

INCOME TAXES                                                          102                78                24              30.8%
-------------------------------------------------------------------------------------------------------------------

NET INCOME                                                        $   163           $   140           $    23              16.4%
===================================================================================================================
<FN>
n.m. - not meaningful
</FN>
</TABLE>

Net Income
         Generation's net income increased by $23 million, or 16%, for the three
months ended  September  30, 2002 compared to the same period in the prior year.
Net income  was  positively  impacted  by  increased  revenue  from  affiliates,
increased  revenue from two generating  plants  acquired in April 2002,  reduced
interest   expense  and   increased   equity  in   earnings  of   unconsolidated
subsidiaries,  partially offset by depressed wholesale market prices for energy,
increased depreciation and increased operating and maintenance expenses.

                                      108
<PAGE>

Operating Revenues, Net of Purchased Power and Fuel Expenses
         Operating  revenues,  net of purchased power and fuel were $683 million
for the three months ended  September  30, 2002 compared to $681 million for the
same  period  in  2001.  Excluding  the  impact  of a $16  million  decrease  in
decommissioning  revenues  in 2002 due to the timing of those  revenues in 2001,
marketing and trading margin increased by $18 million. The increase in marketing
and trading margins was due to increased margin from sales to affiliates  offset
by lower  margin on market  sales  and  trading  losses.  Margin  from  sales to
affiliates  increased by $94 million.  This increase was attributable to weather
related increased  deliveries to PECO and ComEd, lower average supply costs, and
$8 million for the effects of certain  third-party energy  reconciliations.  The
margin gains from sales to  affiliates  were offset by $59 million  lower margin
from market  sales and a $17 million  decrease in trading  margin.  Market sales
margins  were  negatively  impacted  by lower  average  market  sales  prices of
$7.05/MWh.  Excluding the benefit of $58 million of margin  associated  with the
Texas plant  acquisition,  average  market prices  realized for the three months
ended  September 30, 2002 were  $9.79/MWh  lower than the same 2001 period.  The
effect of the lower sales prices were  partially  offset by lower average supply
costs and increased  market sales volumes.  The $17 million  decrease in trading
margin  reflects a $12 million net loss for the period ended  September 30, 2002
as  compared to a $5 million net gain in the same 2001  period.  Average  supply
costs  decreased  by  $2.04/MWh  for the period  ending  September  30,  2002 as
compared to the same 2001 period.  This decrease was  principally  attributed to
lower  purchase  power  costs  associated  with lower  wholesale  market  prices
realized and reduced transmission costs.

         For the three months ended  September  30, 2002 and 2001,  Generation's
sales and the supply of these sales  excluding  the trading  portfolio,  were as
follows:

<TABLE>
<CAPTION>
                                                                 Three Months Ended September 30,
                                                                 --------------------------------
Sales (in GWhs)                                                             2002             2001          % Change
----------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>                 <C>
Energy Delivery                                                           34,535           32,692              5.6%
Exelon Energy                                                              1,461            2,038          (28.3%)
Market Sales                                                              21,177           17,781             19.1%
-------------------------------------------------------------------------------------------------------
Total Sales                                                               57,173           52,511              8.9%
=======================================================================================================

                                                                 Three Months Ended September 30,
                                                                 --------------------------------
Supply of Sales (in GWhs)                                                   2002             2001          % Change
----------------------------------------------------------------------------------------------------------------------
Nuclear Generation                                                        29,817           28,456              4.8%
Purchases - non-trading portfolio                                         23,425           20,505             14.2%
Fossil and Hydro Generation                                                3,931            3,550             10.7%
-------------------------------------------------------------------------------------------------------
Total Supply                                                              57,173           52,511              8.9%
=======================================================================================================
</TABLE>



                                      109
<PAGE>

         Trading volume of 28,455 GWhs and 1,832 GWhs for the three months ended
September 30, 2002 and 2001, respectively, is not included in the table above.

         Generation's average margins on energy sales for the three months ended
<TABLE>
<CAPTION>
September 30, 2002 and 2001 are as follows:
                                                                 Three Months Ended September 30,
                                                                 --------------------------------
($/MWh)                                                                     2002             2001          % Change
---------------------------------------------------------------------------------------------------------------------
Average Realized Revenue
<S>                                                                  <C>             <C>                       <C>
     Energy Delivery                                                 $    40.18      $      40.01              0.4%
     Exelon Energy                                                        49.72             46.67              6.5%
     Market Sales                                                         35.50             42.55          (16.6%)
     Total Sales - excluding the trading portfolio                        38.69             41.13           (5.9%)

Average Supply Cost (1) - excluding trading portfolio                $    26.66      $      28.70           (7.1%)

Average Margin - excluding the trading portfolio                     $    12.04      $      12.43           (3.1%)
---------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Average supply cost includes purchase power and fuel cost.
</FN>
</TABLE>

         Generation's nuclear fleet, including AmerGen,  performed at a capacity
factor of 93.9% for the three months ended  September 30, 2002 compared to 93.0%
for the same period in 2001.  Generation's  nuclear  fleet's  production  costs,
including AmerGen, for the three months ended September 30, 2002 were $12.40 per
MWh  compared  to  $12.52  per MWh for the same  period  in 2001.  Reduced  unit
production  costs  reflect  additional  generation  due  to  power  uprates  and
headcount  reductions  and Exelon's  Cost  Management  Initiative.  Generation's
average  purchased power costs for wholesale  operations were $53.75 per MWh for
the three months ended  September  30, 2002,  compared to $62.18 per MWh for the
same period in 2001.  The decrease in purchase  power costs was primarily due to
depressed wholesale power market prices.

Operating and Maintenance Expense
         Operating and maintenance  expenses  increased $27 million,  or 7%, for
the three months ended  September  30, 2002 compared to the same period in 2001.
The increase was primarily due to additional  operating and maintenance expenses
of $10 million  arising  from an  increased  number of nuclear  plant  refueling
outage days during the three months  ended  September  30, 2002  compared to the
same period in 2001,  additional operating costs of $3 million related to fossil
plant outage work and $7 million  related to the two generating  plants acquired
in April 2002.  These  increases were partially  offset by other  operating cost
reductions, including reductions from Exelon's Cost Management Initiative.

Depreciation Expense
         Depreciation  expense  increased  $11  million,  or 19%,  for the three
months ended  September  30, 2002 compared to the same period in the prior year.
This  increase  is due to a $7 million  of  additional  depreciation  expense on
routine capital  additions,  $2 million related to the Southeast  Chicago Energy
Project, and $2 million related to two generating plants acquired in April 2002.

Taxes Other Than Income
         Taxes  other than  income  was  substantially  unchanged  for the three
months ended September 30, 2002 compared to the same period in the prior year.




                                      110
<PAGE>

Interest Expense
         Interest  expense  decreased $18 million,  or 44%, for the three months
ended  September  30, 2002,  compared to the same period in the prior year.  The
decrease is  primarily  due to $4 million of lower  interest  related to a lower
rate on the spent  nuclear fuel  obligation  and $13 million of lower  affiliate
interest expense.

Equity in Earnings of Unconsolidated Affiliates
         Equity in earnings of unconsolidated  affiliates increased $27 million,
or 45%,  for the three  months  ended  September  30, 2002  compared to the same
period in the prior year.  This  increase was due to an $18 million  increase in
Generation's  equity  earnings  in  Sithe  primarily  due  to  a  mark-to-market
adjustment  related  to the  Dynegy  tolling  agreement  with  the  Independence
Generating  station,  partially  offset by an impairment  adjustment for the New
Boston 1 Generating  station.  The increase is also due to a $9 million increase
in  Generation's  equity  earnings in AmerGen,  primarily due to better  station
capacity performance and the power uprate at TMI conducted in the fourth quarter
of 2001.

Other, net
         Other,  net increased $39 million for the three months ended  September
30,  2002  compared  to the same  period  in the  prior  year  primarily  due to
substantial  market losses on  decommissioning  trust investments during 2001 as
compared to the same period in 2002, partially offset by a decrease in affiliate
interest income.

Income Taxes
         The  effective  income tax rate was 38.50% for the three  months  ended
September 30, 2002 and 35.78% for the three months ended September 30, 2001. The
higher effective tax rate was the result of realized losses in 2001 on qualified
decommissioning trust investments that are tax effected at a higher rate.




                                      111
<PAGE>




Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001

Significant Operating Trends - Generation
<TABLE>
<CAPTION>
                                                         Nine Months Ended September 30,
                                                        --------------------------------
                                                                       2002               2001          Variance      % Change
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>             <C>             <C>               <C>
OPERATING REVENUES                                                      $ 5,233         $ 5,403         $  (170)          (3.1%)

OPERATING EXPENSES
   Purchased Power                                                        2,581           2,589              (8)          (0.3%)
   Fuel                                                                     706             691              15            2.2%
   Operating and Maintenance                                              1,234           1,173              61            5.2%
   Depreciation                                                             197             224             (27)         (12.1%)
   Taxes Other Than Income                                                  126             121               5            4.1%
-------------------------------------------------------------------------------------------------------------------
     Total Operating Expense                                              4,844           4,798              46            1.0%
-------------------------------------------------------------------------------------------------------------------

OPERATING INCOME                                                            389             605            (216)         (35.7%)
-------------------------------------------------------------------------------------------------------------------

OTHER INCOME AND DEDUCTIONS
   Interest Expense                                                         (51)           (100)             49           49.0%
   Equity in Earnings (Losses) of Unconsolidated Affiliates, net            119              99              20           20.2%
   Other, net                                                                54              (7)             61         n.m.
-------------------------------------------------------------------------------------------------------------------
     Total Other Income and Deductions                                      122              (8)            130         n.m.
-------------------------------------------------------------------------------------------------------------------

INCOME BEFORE INCOME TAXES AND CUMULATIVE
    EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES                              511             597             (86)         (14.4%)

INCOME TAXES                                                                198             228             (30)         (13.2%)
-------------------------------------------------------------------------------------------------------------------

INCOME BEFORE CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES                                                    313             369             (56)         (15.2%)

CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
    PRINCIPLES, NET OF INCOME TAXES                                          13              12               1            8.3%
-------------------------------------------------------------------------------------------------------------------

NET INCOME                                                              $   326         $   381         $   (55)         (14.4%)
===================================================================================================================
</TABLE>

Net Income
         Generation's net income decreased by $55 million,  or 14%, for the nine
months ended  September 30, 2002 compared to the same period in 2001. Net income
was  adversely  impacted  by a lower  margin on  wholesale  energy  sales due to
depressed  market  prices  for  energy,  a reduced  supply of  low-cost  nuclear
generation,  and increased operating and maintenance  expense.  The decrease was
partially offset by increased  revenue from affiliates,  increased  revenue from
the  acquisition  of two  generating  plants in April 2002,  increased  interest
income, decreased depreciation expense, and decreased interest expense.


Operating Revenues, Net of Purchased Power and Fuel Expenses
         Operating revenues, net of purchased power and fuel were $1,946 million
for the nine months ended  September 30, 2002 compared to $2,123 million for the
same period in the prior year.  Marketing and trading  margin  decreased by $169
million,  which was due to lower margin on market  sales and trading  losses but
partially offset by increased margin from sales to affiliates. Margin from sales
to affiliates  increased by $181  million.  This  increase was  attributable  to
weather-related  increased  deliveries to PECO and ComEd,  lower average  supply
costs, and $8 million for third-party energy  reconciliations.  The margin gains




                                      112
<PAGE>

from sales to  affiliates  were offset by $324 million  lower margin from market
sales and a $26 million  decrease in trading  margin.  Market sales margins were
negatively impacted by lower average market sales prices of $8.40/MWh. Excluding
the  benefit  of  $99  million  of  margin   associated  with  the  Texas  plant
acquisition, average market prices realized for the three months ended September
30,  2002 were  $10.02/MWh  lower than the same 2001  period.  The effect of the
lower sales  prices were  partially  offset by lower  average  supply  costs and
increased  market  sales  volumes.  The $26 million  decrease in trading  margin
reflects a $27 million loss for  nine-month  period ended  September 30, 2002 as
compared to a $1 million  loss in the same 2001  period.  Average  supply  costs
decreased by $1.14/MWh for the period  ending  September 30, 2002 as compared to
the same 2001 period. This decrease was principally attributed to lower purchase
power costs  associated with lower wholesale  market prices realized and reduced
transmission costs.

         For the nine months  ended  September  30, 2002 and 2001,  Generation's
sales and the supply of these  sales  excluding  the trading  portfolio  were as
follows:

<TABLE>
<CAPTION>
                                                                  Nine Months Ended September 30,
                                                                 --------------------------------
Sales (in GWhs)                                                             2002             2001          % Change
----------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>                 <C>
Energy Delivery                                                           90,579           90,001              0.6%
Exelon Energy                                                              4,067            5,044          (19.4%)
Market Sales                                                              61,089           53,787             13.6%
-------------------------------------------------------------------------------------------------------
Total Sales                                                              155,735          148,832              4.6%
=======================================================================================================


                                                                  Nine Months Ended September 30,
                                                                 --------------------------------
Supply of Sales (in GWhs)                                                   2002             2001          % Change
----------------------------------------------------------------------------------------------------------------------
Nuclear Generation                                                        86,127           87,397           (1.5%)
Purchases - non-trading portfolio                                         59,496           52,459             13.4%
Fossil and Hydro Generation                                               10,112            8,976             12.7%
-------------------------------------------------------------------------------------------------------
Total Supply                                                             155,735          148,832              4.6%
=======================================================================================================
</TABLE>

         Trading  volume of 51,260 GWhs and 2,286 GWhs for the nine months ended
September 30, 2002 and 2001, respectively, is not included in the table above.




                                      113
<PAGE>

         Generation's  average margins on energy sales for the nine months ended
September 30, 2002 and 2001 are as follows:
<TABLE>
<CAPTION>
                                                                 Nine Months Ended September 30,
                                                                --------------------------------
($/MWh)                                                                     2002            2001           % Change
---------------------------------------------------------------------------------------------------------------------
Average Realized Revenue
<S>                                                              <C>                 <C>                       <C>
     Energy Delivery                                             $        34.33      $     33.37               2.9%
     Exelon Energy                                                        46.75            42.28              10.6%
     Market Sales                                                         31.55            39.95           (21.0%)
     Total Sales - excluding the trading portfolio                        33.56            36.05            (6.9%)

Average Supply Cost (1) - excluding trading portfolio            $        21.04      $     21.72            (3.1%)

Average Margin - excluding the trading portfolio                 $        12.52      $     14.18           (11.7%)
---------------------------------------------------------------------------------------------------------------------
<FN>
(1) Average supply cost includes purchase power and fuel cost.
</FN>
</TABLE>

         Generation's nuclear fleet, including AmerGen,  performed at a capacity
factor 92.1% for the nine months ended  September 30, 2002 compared to 95.1% for
the  same  period  in  2001.  Generation's  nuclear  fleet's  production  costs,
including AmerGen,  for the nine months ended September 30, 2002 were $13.05 per
MWh compared to $12.40 per MWh for the same period in 2001.  The lower  capacity
factor and  increased  unit  production  costs are  primarily due to 186 planned
outage days in the nine months ended  September 30, 2002,  versus 55 days in the
same period in 2001,  including  AmerGen.  Increased unit  production  costs are
partially   offset  by  headcount   reductions  and  Exelon's  Cost   Management
Initiatives. Generation's average purchased power costs for wholesale operations
were $43.60 per MWh for the nine months ended  September  30, 2002,  compared to
$49.77 per MWh for the same period in 2001. The decrease in purchase power costs
was primarily due to depressed wholesale power market prices.

Operating and Maintenance Expense
         Operating and maintenance expense increased $61 million, or 5%, for the
nine months ended  September 30, 2002  compared to the same period in 2001.  The
increase was due to the  additional  operating  and  maintenance  expense of $65
million  arising from an increased  number of nuclear  plant  refueling  outages
during the nine months ended  September  30, 2002 compared to the same period in
2001,  as well as  additional  allocated  corporate  costs  including  executive
severance.  These  additional  expenses  were  offset  by other  operating  cost
reductions, including $11 million related to headcount reductions, a $10 million
reduction in  Generation's  severance  accrual and cost reductions from Exelon's
Cost Management  Initiative.  The severance  reduction  represents a reversal of
costs previously charged to operating expense.

Depreciation Expense
         Depreciation  expenses  decreased  $27  million,  or 12%,  for the nine
months  ended  September  30, 2002  compared  to the same  period in 2001.  This
decrease is due to a $46 million reduction in depreciation  expense arising from
the extension of the useful lives on certain  generation  facilities,  partially
offset by $14 million of additional  depreciation  expense on capital  additions
placed in service,  including the Southeast Chicago Energy Project in July 2002,
and two generating plants acquired in April 2002.



                                      114
<PAGE>

Taxes Other Than Income
         Taxes  other than  income  increased  $5  million,  or 4%, for the nine
months  ended  September  30,  2002  compared  to the  same  period  in 2001 due
primarily to the Texas franchise taxes related to two generating plants acquired
in April 2002 and an increase in property taxes.

Interest Expense
         Interest  expense  decreased  $49 million,  or 49%, for the nine months
ended  September 30, 2002,  compared to the same period in 2001. The decrease is
due to $16  million of  capitalized  interest,  $17  million  of lower  interest
related to a lower rate on the spent nuclear fuel obligation, and $35 million of
lower affiliate  interest  expense.  This decrease is partially offset by an $18
million increase in interest expense on long-term debt.

Equity in Earnings of Unconsolidated Affiliates
         Equity in earnings of unconsolidated  affiliates increased $20 million,
or 20%, for the nine months ended September 30, 2002 compared to the same period
in 2001. This increase was due to a $23 million increase in Generation's  equity
earnings in Sithe primarily due to a  mark-to-market  adjustment  related to the
Dynegy tolling  agreement with the Independence  Generating  station,  partially
offset by an impairment adjustment for the New Boston 1 Generating station. This
increase was partially offset by a decrease of $3 million in Generation's equity
earnings in AmerGen.

Other, net
         Other,  net increased  $61 million for the nine months ended  September
30,  2002  compared  to the same period in 2001,  primarily  due to  substantial
market losses on  decommissioning  trust investments  during 2001 as compared to
the same period in 2002,  partially  offset by a decrease in affiliate  interest
income.

Income Taxes
         The effective income tax rate was substantially  unchanged at 38.7% for
the nine months ended  September  30, 2002 compared to 38.2% for the same period
in 2001.

Cumulative Effect of Changes in Accounting Principles
         On January 1, 2002,  Generation  adopted  SFAS No. 141  resulting  in a
benefit of $13 million (net of income taxes of $9 million).

         On  January 1, 2001,  Generation  adopted  SFAS No.  133,  as  amended,
resulting in a benefit of $12 million (net of income taxes of $7 million).


LIQUIDITY AND CAPITAL RESOURCES

         Generation's  business is capital  intensive and requires  considerable
capital  resources.  Generation's  capital  resources are primarily  provided by
internally  generated cash flows from operations  and, to the extent  necessary,
external financings including the issuance of commercial paper and borrowings or
capital contributions from Exelon.  Generation's access to external financing at
reasonable  terms is  dependent on its credit  ratings and its general  business
condition,  as well as the general business  condition of the industry.  Capital




                                      115
<PAGE>

resources  are  used  primarily  to  fund  Generation's  capital   requirements,
including construction, investments in new and existing ventures, and repayments
of maturing debt. Any future  acquisitions  could require external  financing or
borrowings or capital contributions from Exelon.

Cash Flows from Operating Activities
         Cash flows provided by operations were $771 million for the nine months
ended September 30, 2002,  compared to $782 million for the same period in 2001.
Generation's cash flows from operating activities primarily result from the sale
of electric energy to wholesale  customers,  including  Generation's  affiliated
companies,  as well as settlements arising from Generation's trading activities.
Generation's future cash flow from operating  activities will depend upon future
demand and market  prices for energy and the  ability to continue to produce and
supply power at competitive costs.

Cash Flows from Investing Activities
         Cash flows used in  investing  activities  were $1,343  million for the
nine months  ended  September  30,  2002,  compared to $542 million for the same
period in 2001.  Capital  expenditures  were $363 million and the  investment in
nuclear  fuel was $352  million in the nine  months  ended  September  30,  2002
compared to capital  expenditures of $282 million and investment in nuclear fuel
of $215  million  in the same  period in 2001.  An  increased  number of nuclear
generating  station  refueling  outages  occurred  during the nine months  ended
September  30, 2002 compared to the same period in 2001. In addition to the 2002
capital  expenditures,  Generation  purchased two generating  plants from TXU on
April 25, 2002.  The $443 million  purchase was funded with  available  cash and
borrowings  from  Exelon.  Generation's  investing  activities  were funded from
operating activities, borrowings from Exelon and the use of available cash.

         In February 2002,  Generation entered into an agreement to loan AmerGen
up to $75 million at an interest  rate of  one-month  LIBOR plus 2.25%.  In July
2002,  the loan  agreement  and the loan were  increased to $100 million and the
maturity  date was  extended to July 1, 2003.  As of  September  30,  2002,  the
balance of the loan to AmerGen was $42 million.

Cash Flows from Financing Activities
         Cash flows provided by financing  activities  were $387 million for the
nine months ended  September 30, 2002,  compared to cash used of $34 million for
the same  period in the prior  year.  During  2002,  Generation  obtained a $348
million loan from Exelon, which included $331 million for the acquisition of two
generating  plants.  The prior year amount represented net distributions of $156
million to Exelon and the issuance of long-term  debt of $821 million.  Also, in
2001,  Generation repaid $696 million it had borrowed from Exelon related to the
acquisition of a 49.9% interest in Sithe.

Credit Issues
         Generation  meets  its  short-term  liquidity   requirements  primarily
through  the  issuance  of  commercial  paper,  borrowings  under a bank  credit
facility and borrowings from Exelon's intercompany money pool. Generation, along
with Exelon,  ComEd and PECO,  participates in a $1.5 billion  unsecured 364-day
revolving  credit  facility with a group of banks  effective  December 12, 2001.
Under the terms of this credit facility,  Exelon has the flexibility to increase
or decrease the sublimits of each of the participants upon written  notification
to these banks.  As of  September  30, 2002,  Generation's  sublimit  under this
credit facility is zero. This credit facility requires  Generation to maintain a




                                      116
<PAGE>

debt to total  capitalization  ratio  of 65% or less.  At  September  30,  2002,
Generation's debt to total capitalization ratio was 34%.

         To  provide  an  additional   short-term  borrowing  option  that  will
generally  be more  favorable  to the  borrowing  participants  than the cost of
external financing, Exelon operates an intercompany money pool. Participation in
the money pool is subject to authorization  by the Exelon  Corporate  Treasurer.
Exelon,  ComEd and its subsidiary  Commonwealth  Edison of Indiana,  Inc., PECO,
Generation and Business  Services Company currently may participate in the money
pool.  Funding of, and borrowings from, the money pool are predicated on whether
such funding  results in mutual economic  benefits to each of the  participants,
although Exelon is not permitted to be a net borrower from the fund. Interest on
borrowings  is  based  on  short-term  market  rates of  interest,  or  specific
borrowing rates if the funds are provided by external financing. There have been
no material money pool transactions in 2002.

         Generation's  access to the capital  markets and its financing costs in
those  markets  are  dependent  on its  credit  ratings.  None  of  Generation's
borrowings  are subject to default or prepayment as a result of a downgrading of
credit ratings although such a downgrading could increase interest charges under
certain bank credit facilities.

         At September 30, 2002,  Generation's capital structure consisted of 66%
common stock, 8% notes payable, and 26% long-term debt.

         From time to time  Generation  enters into energy  commodity  and other
derivative  transactions  that  require  the  maintenance  of  investment  grade
ratings.   Failure  to  maintain   investment  grade  ratings  would  allow  the
counterparty  to terminate the  derivative  and settle the  transaction on a net
present value basis.

         Under  PUHCA  and the  Federal  Power  Act,  Generation  can  only  pay
dividends  from  undistributed  or current  earnings.  At  September  30,  2002,
Generation had undistributed earnings of $850 million.

Contractual Obligations and Commercial Commitments
         Contractual  obligations represent cash obligations that are considered
to  be  firm  commitments  and  commercial   commitments  represent  commitments
triggered by future events.  Generation's contractual obligations and commercial
commitments as of September 30, 2002 were  materially  unchanged,  other than in
the normal  course of  business,  from the amounts set forth in the December 31,
2001 Form10-K except for the following:

o    On April 25, 2002, Generation purchased two generating plants from TXU. The
     $443 million purchase was funded primarily with borrowings from Exelon.

o    On June 26,  2002,  Generation  agreed to  purchase  Sithe New  England and
     related power marketing  operations,  for a $543 million note. In addition,
     Generation  will  assume  various  Sithe  guarantees  related  to an equity
     contribution  agreement between Sithe New England and Boston Generation,  a
     project subsidiary of Sithe New England. The equity contribution  agreement
     requires,  among other things, that Sithe New England,  upon the occurrence
     of certain  events,  contribute up to $38 million of equity for the purpose
     of  completing  the  construction  of  two  generating  facilities.  Boston
     Generation  established a $1.2 billion credit  facility in order to finance
     the construction of these two generating facilities. The approximately $1.1
     billion  expected to be outstanding  under the facility at the  transaction
     closing date,  will be reflected on Exelon's  Consolidated  Balance  Sheet.
     Sithe New England has  provided  security  interests in and has pledged the
     stock of its  other  project  subsidiaries  to  Boston  Generation.  If the
     closing  conditions are satisfied,  the  transaction  could be completed in
     November 2002.


                                      117
<PAGE>

o    Purchase  obligations  increased  by  $2.3  billion,  primarily  due  to an
     increase  of $3.8  billion  in  power  only  purchases  and a $0.1  billion
     increase  in  transmission  rights  purchases  partially  offset  by a $1.6
     billion  decrease in net capacity  purchase  commitments.  Approximately $2
     billion of the  increase  in power only  purchases  is due to  Generation's
     agreement  to purchase  all the energy from Unit No. 1 at Three Mile Island
     after  December 31, 2001 through  December 31, 2014 and the remaining  $1.8
     billion  increase is primarily  due to purchase  contracts  entered into in
     lieu of a portion of the Midwest Generation options contracts. The increase
     in transmission rights purchases is primarily due to estimated  commitments
     in 2004 and 2005 for additional  transmission  rights that will be required
     to fulfill firm sales  contracts.  The  decrease in net  capacity  purchase
     commitments  is due  primarily to the  decision not to exercise  options to
     purchase 4,411 MWs of capacity from Midwest Generation in 2002 through 2004
     as well as the increase in capacity sales under the TXU tolling agreement.

o    At  September  30,  2002,   Southeast  Chicago,  a  company  70%  owned  by
     Generation,  was obligated to make equity distributions of $55 million over
     the next 20 years to the unaffiliated  third party owning the remaining 30%
     of Southeast  Chicago.  This amount reflects a return of such third party's
     investment  in  Southeast  Chicago's  peaking  facility  in  Chicago,   IL.
     Generation  has the right to  purchase,  generally  at a premium,  and this
     third party has the right to require Generation to purchase, generally at a
     discount,  its  remaining  investment in Southeast  Chicago.  Additionally,
     Generation  may  be  required  to  purchase  the  third  party's  remaining
     investment  in Southeast  Chicago upon the  occurrence  of certain  events,
     including  upon a failure by  Generation  to maintain an  investment  grade
     rating.

o    Guarantees decreased by approximately $80 million primarily related to $120
     million of letters of credit on pollution  control  bonds being renewed and
     no longer required to be guaranteed.

Off Balance Sheet Obligations
         Generation owns 49.9% of the outstanding  common stock of Sithe and has
an option,  beginning  on  December  18, 2002 and  expiring in December  2005 to
purchase the remaining common stock outstanding  (Remaining  Interest) in Sithe.
The  purchase  option  expires on December  18,  2005.  In  addition,  the Sithe
stockholders  who own in the aggregate the Remaining  Interest have the right to
require  Generation to purchase the Remaining  Interest (Put Rights)  during the
same period in which Generation can exercise its purchase option.  At the end of
this exercise  period,  if Generation has not exercised its purchase  option and
the other Sithe  stockholders  have not exercised  their Put Rights,  Generation
will have an  additional  one-time  option  to  purchase  shares  from the other
stockholders in Sithe to bring Generation's  ownership in Sithe from the current
49.9% to 50.1% of Sithe's total outstanding common stock.

         If Generation  exercises its option to acquire the Remaining  Interest,
or if all the other Sithe  stockholders  exercise their Put Rights, the purchase
price for 70% of the Remaining Interest will be set at fair market value subject
to a floor of $430  million  and a ceiling of $650  million.  The balance of the
Remaining  Interest  will be valued at fair market  value  subject to a floor of
$141 million and a ceiling of $330 million.  In either  instance,  the floor and
ceiling will accrue interest from the beginning of the exercise period.


                                      118
<PAGE>

         If Generation  increases its ownership in Sithe to 50.1% or more, Sithe
will become a  consolidated  subsidiary  and  Exelon's  financial  results  will
include Sithe's  financial  results from the date of purchase.  At September 30,
2002,  Sithe had total  assets of $4.2  billion and total debt of $2.1  billion,
including $1.6 billion of subsidiary debt,  incurred to finance the construction
of two new generating  facilities of which $1.1 billion is associated with Sithe
New England,  $0.4 billion of subordinated debt, $47 million of short-term debt,
$33  million of capital  leases,  and  excluding  $430  million of  non-recourse
project debt  associated  with Sithe's equity  investments.  For the nine months
ended  September 30, 2002,  Sithe had revenues of $0.9 billion.  As of September
30, 2002, Generation had a $722 million equity investment in Sithe.

         On June 26, 2002,  Generation  agreed to purchase Sithe New England and
related  power  marketing  operations,  for a $543  million  note.  In addition,
Generation   will  assume  various  Sithe   guarantees   related  to  an  equity
contribution  agreement  between  Sithe New  England  and Boston  Generation,  a
project  subsidiary  of Sithe New  England.  The equity  contribution  agreement
requires,  among other things,  that Sithe New England,  upon the  occurrence of
certain  events,  contribute  up to $38  million  of equity  for the  purpose of
completing the  construction  of two generating  facilities.  Boston  Generation
established a $1.2 billion credit facility in order to finance the  construction
of these two generating  facilities.  The approximately $1.1 billion expected to
be  outstanding  under the facility at the  transaction  closing  date,  will be
reflected on Exelon's Consolidated Balance Sheet. Sithe New England has provided
security   interests  in  and  has  pledged  the  stock  of  its  other  project
subsidiaries to Boston Generation.  If the closing conditions are satisfied, the
transaction  could be completed in November  2002.

         Additionally,  the debt on the books of Exelon's  unconsolidated equity
investments and joint ventures is not reflected on Exelon's Consolidated Balance
Sheets.  Total  investee debt, at September 30, 2002 including the debt of Sithe
described in the preceding paragraph,  is currently estimated to be $2.2 billion
($1.1 billion based on Exelon's ownership interest of the investments).

         Generation and British  Energy,  Generation's  joint venture partner in
AmerGen,  have each agreed to provide up to $100  million to AmerGen at any time
that the Management  Committee of AmerGen  determines  that, in order to protect
the public health and safety and/or to comply with NRC requirements,  such funds
are  necessary  to meet  ongoing  operating  expenses or to safely  maintain any
AmerGen plant.

Other Factors
         Generation is a counterparty to Dynegy in various energy  transactions.
In early July 2002, the credit  ratings of Dynegy were  downgraded by two credit
rating agencies to below investment grade. As of September 30, 2002,  Generation
had a net receivable  from Dynegy of  approximately  $7 million,  and consistent
with the terms of the existing credit  arrangement,  has received  collateral in
support of this  receivable.  Generation  also has credit risk  associated  with
Dynegy through  Generation's equity investment in Sithe. Sithe is a 60% owner of
the Independence  generating  station,  a 1,040 MW gas-fired  qualified facility
that has an energy  only  long-term  tolling  arrangement  with  Dynegy,  with a
related  financial  swap  arrangement.  As of  September  30,  2002,  Sithe  had
recognized  an asset  on its  balance  sheet  related  to the fair  value of the
financial swap agreement with Dynegy that is marked-to-market under the terms of
SFAS No. 133. If Dynegy is unable to fulfill the terms of this agreement,  Sithe
would be required to write-off the fair value asset, which Generation  estimates
would result in an approximate $22 million reduction in its equity earnings from
Sithe,  based on  Generation's  current  49.9%  investment  ownership  in Sithe.
Additionally,   the  future   economic  value  of  Sithe's   investment  in  the



                                      119
<PAGE>

Independence  Station and AmerGen's  purchased power  arrangement  with Illinois
Power,  a subsidiary of Dynegy,  could be impacted by events related to Dynegy's
financial condition.

         Generation  is a  participant  in Exelon's  pension and  postretirement
benefit  plans.  Generation's  costs of  providing  pension  and  postretirement
benefits  to its  retirees  is  dependent  up a number of  factors,  such as the
discount rate, rates of return on plan assets,  and the assumed rate of increase
in health care costs.  Approximately  $13 million was included as a reduction to
operating and maintenance  expense in 2001 for the cost of Generation's  pension
and post-retirement  benefit plans,  exclusive of the 2001 charges for employees
severance   programs.   These  costs  are   expected  to  increase  in  2002  by
approximately  $24 million as the result of the effects of the decline in market
value of plan assets and  discount  rates,  and  increases in health care costs.
Further  increases  in pension and  postretirement  expense are expected for the
year  2003.  Although  the 2003  increase  will  depend  on  market  conditions,
Generation preliminarily estimates that pension and postretirement benefit costs
will increase by approximately $30 million in 2003 from 2002 cost levels.

         Exelon's  defined  benefit  pension  plans,  of which  Generation  is a
participant,  currently meet the minimum funding  requirements of the Employment
Retirement  Income Security Act of 1974;  however,  Exelon currently  expects to
make a  discretionary  plan  contribution  in the fourth quarter of 2002 of $100
million to $200 million and a  discretionary  plan  contribution in 2003 of $300
million to $350 million. These contributions are expected to be funded primarily
by Exelon's internally  generated cash flows from operations or through external
sources.





                                      120
<PAGE>






ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Commodity Price Risk
Generation
         Generation's  energy  contracts  are  accounted for under SFAS No. 133.
Most  non-trading  contracts  qualify for a normal  purchases  and normal  sales
exception.  Those  that do not are  recorded  as  assets or  liabilities  on the
balance sheet at fair value.  Changes in the fair value of qualifying  cash-flow
hedge  contracts are recorded in accumulated  other  comprehensive  income,  and
gains and losses are  recognized  in earnings  when the  underlying  transaction
matures.  Mark-to-market  gains and losses on other derivative contracts that do
not meet hedge criteria under SFAS No. 133 and the ineffective  portion of hedge
contracts are recognized in earnings on a current basis.  Amounts  recognized in
earnings  related to energy  contracts for the three months ended  September 30,
2002 and 2001  include  $8 million  of  realized  losses  from  cash-flow  hedge
contract  settlements and $1 million in non-cash  mark-to-market  gains on other
derivative  contracts,  and for the nine months ended September 30, 2002 include
$47 million of realized gains from cash-flow  hedge contract  settlements and $1
million in non-cash mark-to market losses on other derivative contracts.

         Outlined  below is a summary  of the  changes  in fair  value for those
contracts  included  as  assets  and  liabilities  in  Exelon  and  Generation's
Consolidated  Balance Sheet for the three months and nine months ended September
30, 2002:

<TABLE>
<CAPTION>
                                                                              Three Months Ended September 30, 2002
                                                                              -------------------------------------
                                                                               Normal Operations        Proprietary
(in millions)                                                              and Hedging Activities           Trading
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>               <C>
Fair value of contracts outstanding as of July 1, 2002                                 $      (19)       $        1
    Change in fair value during the three months ended September 30, 2002:
        Contracts settled during period                                                         4                13
        Mark-to-market gain/(loss) on contracts settled during the period                      12               (10)
        Mark-to-market gain/(loss) on other contracts                                         (39)               (3)
        Changes in fair value attributable to changes in valuation techniques and
          assumptions                                                                          --                --
---------------------------------------------------------------------------------------------------------------------
    Total change in fair value                                                                (23)               --
---------------------------------------------------------------------------------------------------------------------
Fair value of contracts outstanding at September 30, 2002                              $      (42)       $        1
=====================================================================================================================

         The total change in fair value during the three months ended  September
30, 2002 is reflected in the 2002 financial statements as follows:
                                                                                  Normal Operations       Proprietary
                                                                             and Hedging Activities          Trading
---------------------------------------------------------------------------------------------------------------------
Mark-to-market gain/(loss) on trading activities and non-qualifying hedge
    contracts or hedge ineffectiveness reflected in earnings                           $        1        $       --
Mark-to-market gain/(loss) on cash-flow hedge contracts reflected in
    Other Comprehensive Income                                                                (24)               --
---------------------------------------------------------------------------------------------------------------------
Total change in fair value                                                             $      (23)       $       --
=====================================================================================================================
</TABLE>

                                      121
<PAGE>

<TABLE>
<CAPTION>
                                                                              Nine Months Ended September 30, 2002
                                                                              -------------------------------------
                                                                               Normal Operations        Proprietary
(in millions)                                                              and Hedging Activities           Trading
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>               <C>
Fair value of contracts outstanding as of January 1, 2002                              $       78        $       14
    Change in fair value during the nine months ended September 30, 2002:
        Contracts settled during period                                                       (60)               15
        Mark-to-market gain/(loss) on contracts settled during the period                      33               (17)
        Mark-to-market gain/(loss) on other contracts                                         (93)              (11)
        Changes in fair value attributable to changes in valuation techniques and
          assumptions                                                                          --                --
---------------------------------------------------------------------------------------------------------------------
    Total change in fair value                                                               (120)              (13)
---------------------------------------------------------------------------------------------------------------------
Fair value of contracts outstanding at September 30, 2002                              $      (42)       $        1
=====================================================================================================================

         The total change in fair value  during the nine months ended  September
30, 2002 is reflected in the 2002 financial statements as follows:
                                                                                Normal Operations        Proprietary
                                                                           and Hedging Activities           Trading
---------------------------------------------------------------------------------------------------------------------
Mark-to-market gain/(loss) on trading activities and non-qualifying hedge
    contracts or hedge ineffectiveness reflected in earnings                           $       12        $      (13)
Mark-to-market gain/(loss) on cash-flow hedge contracts reflected in
    Other Comprehensive Income                                                               (132)               --
---------------------------------------------------------------------------------------------------------------------
Total change in fair value                                                             $     (120)       $      (13)
=====================================================================================================================
</TABLE>

         The  majority  of  Generation's   contracts  are  non-exchange   traded
contracts  valued using prices  provided by external  sources,  which  primarily
represent  price  quotations  available  through  brokers  or  over-the-counter,
on-line  exchanges.  Prices reflect the average of the bid-ask  midpoint  prices
obtained  from all  sources  that  Generation  believes  provide the most liquid
market  for the  commodity.  The terms  for  which  such  price  information  is
available  varies by commodity,  by region and by product.  The remainder of the
assets  represent  contracts for which  external  valuations  are not available,
primarily option contracts. These contracts are valued using the Black model, an
industry standard option valuation model, and other valuation techniques and are
discounted  using a risk-free  interest  rate.  The fair values in each category
reflect the level of forward prices and  volatility  factors as of September 30,
2002 and may change as a result of future changes in these factors.

                                      122
<PAGE>

         Mark-to market gains and losses on qualifying cash-flow hedge contracts
are recorded in accumulated other comprehensive income, and will be reclassified
into  earnings  when the contract  settles.  Mark-to-market  gains and losses on
derivative  contracts that do not meet hedge criteria under SFAS No. 133 and the
ineffective  portion of hedge  contracts  have been  recognized in earnings on a
current basis. The maturities,  or expected  settlement dates, of the qualifying
cash flow hedge contracts  recorded in accumulated other  comprehensive  income,
and the other non-trading and trading  derivative  contracts and sources of fair
value as of September 30, 2002 are as follows:
<TABLE>
<CAPTION>
                                                                                       Maturities within
                                                            --------------------------------------------
                                                                                                2007 and   Total Fair
(in millions)                                               2002    2003    2004   2005   2006    Beyond      Value
---------------------------------------------------------------------------------------------------------------------
Normal Operations, qualifying cash flow hedge contracts (1):
<S>                                                        <C>    <C>     <C>     <C>    <C>        <C>       <C>
   Prices provided by other external sources               $  (4) $  (31) $  (16) $  (2) $   (1)      --     $  (54)
---------------------------------------------------------------------------------------------------------------------
  Total                                                    $  (4) $  (31) $  (16) $  (2) $   (1)      --     $  (54)
=====================================================================================================================

Normal operations, other derivative contracts (2):
   Actively quoted prices                                  $   1      --      --     --      --       --     $    1
   Prices provided by other external sources                  11      20       4    (10)      2       --         27
   Prices based on model or other valuation methods           --      --      (5)    (4)     (7)      --        (16)
---------------------------------------------------------------------------------------------------------------------
  Total                                                    $  12  $   20  $   (1)  $(14)   $ (5)      --    $     12
=====================================================================================================================

Proprietary Trading, other derivative contracts (3):
   Actively quoted prices                                  $   2      --      --     --      --       --     $    2
   Prices provided by other external sources                 (10)      3      (3)    --      --       --        (10)
   Prices based on model or other valuation methods            4       4       1     --      --       --          9
---------------------------------------------------------------------------------------------------------------------
  Total                                                    $  (4) $    7  $   (2)    --      --       --     $    1
=====================================================================================================================
<FN>
(1)  Mark-to-market  gains and losses on  contracts  that  qualify as  cash-flow
     hedges are recorded in other comprehensive income.

(2)  Mark-to-market  gains and losses on other non-trading  derivative contracts
     that do not qualify as cash-flow hedges are recorded in earnings.

(3)  Mark-to-market  gains and  losses on  trading  contracts  are  recorded  in
     earnings.
</FN>
</TABLE>

Credit Risk
Exelon and Generation
         Generation is a counterparty to Dynegy in various energy  transactions.
In early July 2002, the credit  ratings of Dynegy were  downgraded by two credit
rating agencies to below investment grade. As of September 30, 2002,  Generation
had a net receivable  from Dynegy of  approximately  $7 million,  and consistent
with the terms of the existing credit  arrangement,  has received  collateral in
support of this  receivable.  Generation  also has credit risk  associated  with
Dynegy through  Generation's equity investment in Sithe. Sithe is a 60% owner of
the Independence  generating  station,  a 1,040 MW gas-fired  qualified facility
that has an energy  only  long-term  tolling  arrangement  with  Dynegy,  with a
related  financial  swap  arrangement.  As of  September  30,  2002,  Sithe  had
recognized  an asset  on its  balance  sheet  related  to the fair  value of the
financial swap agreement with Dynegy that is marked-to-market under the terms of
SFAS No. 133. If Dynegy is unable to fulfill the terms of this agreement,  Sithe
would be required to write-off the fair value asset, which Generation  estimates
would result in an approximate $22 million reduction in its equity earnings from
Sithe,  based on  Generation's  current  49.9%  investment  ownership  in Sithe.
Additionally,   the  future   economic  value  of  Sithe's   investment  in  the
Independence  Station and AmerGen's  purchased power  arrangement  with Illinois
Power,  a subsidiary of Dynegy,  could be impacted by events related to Dynegy's
financial condition.


                                      123
<PAGE>

Interest Rate Risk
ComEd
         ComEd has fixed-to-floating interest rate swaps to manage interest rate
exposure  associated with  fixed-rate debt issuances in the aggregate  amount of
$485 million.  At September 30, 2002,  these interest rate swaps,  designated as
fair value  hedges,  had a fair market value of $40 million based on the present
value  difference  between the contract and market rates at September  30, 2002.
ComEd has forward  starting  interest rate swaps in the aggregate amount of $550
million to lock in interest rate levels in anticipation of future financing.  At
September 30, 2002,  these interest rate swaps,  designated as cash flow hedges,
had a fair market value exposure of $43 million.

         The aggregate fair value exposure of the interest rate swaps designated
as fair value hedges that would have resulted from a hypothetical 50 basis point
decrease in the spot yield at September 30, 2002 is estimated to be $49 million.
If the derivative  instruments  had been  terminated at September 30, 2002, this
estimated fair value represents the amount to be paid by the  counterparties  to
ComEd.

         The aggregate fair value of the interest rate swaps  designated as fair
value  hedges  that would  have  resulted  from a  hypothetical  50 basis  point
increase in the spot yield at September 30, 2002 is estimated to be $32 million.
If the derivative  instruments  had been  terminated at September 30, 2002, this
estimated fair value represents the amount to be paid by the  counterparties  to
ComEd.

         The aggregate fair value exposure of the interest rate swaps designated
as cash flow hedges that would have resulted from a hypothetical  50 basis point
decrease in the spot yield at September 30, 2002 is estimated to be $57 million.
If the derivative  instruments  had been  terminated at September 30, 2002, this
estimated  fair  value  represents  the  amount  to be  paid  by  ComEd  to  the
counterparties.

         The aggregate fair value of the interest rate swaps  designated as cash
flow hedges that would have resulted from a hypothetical 50 basis point increase
in the spot yield at September  30, 2002 is estimated to be $30 million.  If the
derivative instruments had been terminated at September 30, 2002, this estimated
fair value represents the amount to be paid by ComEd to the counterparties.


ITEM 4.           CONTROLS AND PROCEDURES

Exelon
         Over several  days ending  October 29, 2002,  the  principal  executive
officer and principal  financial officer of Exelon evaluated Exelon's disclosure
controls and procedures related to the recording, processing,  summarization and
reporting of  information  in Exelon's  periodic  reports that it files with the
Securities  and  Exchange   Commission  (SEC).  These  disclosure  controls  and
procedures have been designed to ensure that (a) material  information  relating
to Exelon,  including its consolidated  subsidiaries,  is made known to Exelon's
management,  including  these  officers,  by other  employees  of Exelon and its
subsidiaries,  and (b) this  information  is  recorded,  processed,  summarized,
evaluated and reported, as applicable,  within the time periods specified in the
SEC's rules and forms. As of October 29, 2002, these officers concluded that the
design of the  disclosure  controls and  procedures  is sufficient to accomplish
their purposes. In view of the restatement that was required in order to correct
the Other Comprehensive  Income portion of Exelon's  Consolidated  Statements of
Comprehensive  Income for the year ended  December  31,  2001 and  Exelon's  and
Generation's  Consolidated Statements of Income and Comprehensive Income for the
quarters ended March 31, 2002 and June 30, 2002,  these  officers  directed that
steps be taken to enhance the understanding and  implementation of the company's
controls and procedures.  Exelon  continually  strives to improve its disclosure
controls and procedures to enhance the quality of its financial reporting.




                                      124
<PAGE>

         There have been no significant changes in Exelon's internal controls or
in other factors that could  significantly  affect these controls  subsequent to
the date of their evaluation.

ComEd
         Over several  days ending  October 29, 2002,  the  principal  executive
officer and principal  financial officer of ComEd evaluated  ComEd's  disclosure
controls and procedures related to the recording, processing,  summarization and
reporting of  information  in Exelon's  periodic  reports that it files with the
SEC. These disclosure  controls and procedures have been designed to ensure that
(a)  material  information   relating  to  ComEd,   including  its  consolidated
subsidiaries, is made known to ComEd's management,  including these officers, by
other  employees  of ComEd and its  subsidiaries,  and (b) this  information  is
recorded, processed,  summarized,  evaluated and reported, as applicable, within
the time periods specified in the SEC's rules and forms. As of October 29, 2002,
these  officers  concluded  that  the  design  of the  disclosure  controls  and
procedures  is  sufficient  to  accomplish  their  purposes.   In  view  of  the
restatement that was required in order to correct the Other Comprehensive Income
portion of Exelon's Consolidated Statements of Comprehensive Income for the year
ended December 31, 2001 and Exelon's and Generation's Consolidated Statements of
Income and  Comprehensive  Income for the quarters ended March 31, 2002 and June
30,  2002,  these  officers   directed  that  steps  be  taken  to  enhance  the
understanding and implementation of the company's controls and procedures. ComEd
continually strives to improve its disclosure controls and procedures to enhance
the quality of its financial reporting.

         There have been no significant  changes in ComEd's internal controls or
in other factors that could  significantly  affect these controls  subsequent to
the date of their evaluation.

PECO
         Over several  days ending  October 29, 2002,  the  principal  executive
officer and principal  financial  officer of PECO  evaluated  PECO's  disclosure
controls and procedures related to the recording, processing,  summarization and
reporting  of  information  in PECO's  periodic  reports  that it files with the
Securities  and  Exchange   Commission  (SEC).  These  disclosure  controls  and
procedures have been designed to ensure that (a) material  information  relating
to Exelon,  including its consolidated  subsidiaries,  is made known to Exelon's
management,  including  these  officers,  by  other  employees  of PECO  and its
subsidiaries,  and (b) this  information  is  recorded,  processed,  summarized,
evaluated and reported, as applicable,  within the time periods specified in the
SEC's rules and forms. As of October 29, 2002, these officers concluded that the
design of the  disclosure  controls and  procedures  is sufficient to accomplish
their purposes. In view of the restatement that was required in order to correct
the Other Comprehensive  Income portion of Exelon's  Consolidated  Statements of
Comprehensive  Income for the year ended  December  31,  2001 and  Exelon's  and
Generation's  Consolidated Statements of Income and Comprehensive Income for the
quarters ended March 31, 2002 and June 30, 2002,  these  officers  directed that
steps be taken to enhance the understanding and  implementation of the company's
controls and  procedures.  PECO  continually  strives to improve its  disclosure
controls and procedures to enhance the quality of its financial reporting.

         There have been no significant  changes in PECO's internal  controls or
in other factors that could  significantly  affect these controls  subsequent to
the date of their evaluation.

Generation
         Over several  days ending  October 29, 2002,  the  principal  executive
officer and principal  financial  officer of Generation  evaluated  Generation's
disclosure  controls  and  procedures  related  to  the  recording,  processing,
summarization and reporting of information in Generation's periodic reports that
it files with the Securities and Exchange  Commission  (SEC).  These  disclosure
controls  and  procedures  have  been  designed  to  ensure  that  (a)  material
information relating to Generation,  including its consolidated subsidiaries, is
made  known to  Generation's  management,  including  these  officers,  by other
employees  of  Generation  and its  subsidiaries,  and (b) this  information  is
recorded, processed,  summarized,  evaluated and reported, as applicable, within
the time periods specified in the SEC's rules and forms. As of October 29, 2002,
these  officers  concluded  that  the  design  of the  disclosure  controls  and
procedures  is  sufficient  to  accomplish  their  purposes.   In  view  of  the
restatement that was required in order to correct the Other Comprehensive Income
portion of Exelon's Consolidated Statements of Comprehensive Income for the year
ended December 31, 2001 and Exelon's and Generation's Consolidated Statements of
Income and  Comprehensive  Income for the quarters ended March 31, 2002 and June
30,  2002,  these  officers   directed  that  steps  be  taken  to  enhance  the
understanding  and  implementation  of the  company's  controls and  procedures.
Generation continually strives to improve its disclosure controls and procedures
to enhance the quality of its financial reporting.

         There  have  been  no  significant  changes  in  Generation's  internal
controls or in other  factors that could  significantly  affect  these  controls
subsequent to the date of their evaluation.




                                      125
<PAGE>




PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

         As previously  reported in Exelon's June 2002 Form 10-Q,  between May 8
and June 14,  2002,  several  class  action  lawsuits  were filed in the Federal
District Court in Chicago  asserting nearly  identical  securities law claims on
behalf of purchasers of Exelon  securities  between April 24, 2001 and September
27, 2001 (Class  Period).  The complaints  allege that Exelon  violated  Federal
securities  laws  by  issuing  a  series  of  materially  false  and  misleading
statements  relating to its 2001 earnings  expectations during the Class Period.
The Court  consolidated the pending cases into one lawsuit and has appointed two
lead plaintiffs as well as lead counsel.

         On  October  1,  2002,  the  plaintiffs  filed a  consolidated  amended
complaint.   In  addition  to  the  original  claims,  this  complaint  contains
allegations of new facts and contains several new theories of liability.  Exelon
believes the lawsuit is without merit and is vigorously contesting this matter.


ITEM 5.  OTHER INFORMATION

Exelon, ComEd, PECO and Generation
         FERC issued its standard  market design  notice of proposed  rulemaking
(NOPR) on July 31,  2002 that  proposes  numerous  changes to current  wholesale
electric  transmission  arrangements  and energy  markets.  The NOPR  includes a
requirement  that  all  jurisdictional  transmission  facilities  be  under  the
operational  control  of an  independent  transmission  provider,  creates a new
transmission tariff that would provide a single form of transmission  service to
all transmission  customers,  requires energy markets to operate similar to PJM,
and recognizes needs of load-serving entities.

ComEd
         As previously reported in the 2001 Form 10-K, on December 20, 2000, the
ICC  issued an order  permitting  ComEd to  recover  decommissioning  costs from
customers  through  2006.  The ICC order was  appealed.  On August 7, 2002,  the
Illinois  Appellate Court for the Second District issued an opinion affirming in
all  respects  the ICC's order  allowing  ComEd to collect  from  customers  $73
million in decommissioning  costs through 2004 and up to that amount in 2005 and
2006.  Several parties have asked the Illinois Supreme Court to review the case.
The  petition  for  review  has been fully  briefed  and is  pending  before the
Illinois Supreme Court.

         As  previously  reported in the June 2002 Form 10-Q,  on May 28,  2002,
ComEd  filed  a  notice  with  FERC   indicating   its  intention  to  join  PJM
Interconnection,  LLC (PJM) by placing its transmission assets under the control
of an independent transmission company (ITC) that would operate within PJM West.
FERC  conditionally  approved  ComEd's  decision  to join PJM in late July 2002.
Among other conditions,  FERC ordered the applicable  parties to file agreements
relating to the formation of the ITC under PJM. ComEd,  American  Electric Power
East (AEP),  Dayton Power & Light (Dayton) and National Grid USA (National Grid)




                                      126
<PAGE>

subsequently  filed a  non-binding  letter of intent  and  detailed  term  sheet
relating to the formation of the ITC.  National Grid is a subsidiary of National
Grid plc, a company that owns and operates transmission assets in Great Britain.
National  Grid and PJM continue to negotiate  the  allocation of functions to an
ITC operating under PJM.

         Effective as of September  30, 2002,  ComEd,  AEP,  Dayton and National
Grid  entered  into a  Project  Implementation  Agreement  with PJM  (Agreement)
providing for the funding and allocation of responsibilities with respect to the
integration  of the parties  into PJM West,  either  directly or through an ITC.
ComEd's share of PJM's  expansion  expenses under this Agreement is estimated to
be approximately  $10 million.  This Agreement  contemplates that Illinois Power
Company (IP) and Dominion  Virginia  Power Company  (Dominion)  would enter into
similar  agreements  providing  for the  integration  of IP into  PJM  West  and
Dominion  into PJM South.  By  coordinating  these  projects,  PJM  expected  to
generate  synergies and overall savings.  As a result, if any of these companies
fails to join or withdraws  from PJM,  the costs to all of the other  companies,
including ComEd, may increase.  ComEd also faces significant additional expenses
under this Agreement if it withdraws from PJM.

         On August  1,  2002,  ComEd  set a new  record  for  highest  peak load
experienced to date of 21,804 MWs.

PECO
         In August 2002,  Exelon's Audit  Committee  pre-approved  the non-audit
services  of its  independent  accountant,  PricewaterhouseCoopers  LLP,  to:
          o    Provide a fact witness in a  Pennsylvania  Department  of Revenue
               tax matter that is being litigated in the Commonwealth Court.
          o    Perform  tax  compliance  services  related to PECO for state and
               local income and  franchise tax returns The cost of such services
               is estimated to be $67,000.

         On August 15, 2002, the International Brotherhood of Electrical Workers
filed a petition to conduct a unionization vote of certain of PECO's employees.

         On  August  14,  2002,  PECO set a new  record  for  highest  peak load
experienced to date of 8,164 MWs.

Generation
         As previously  reported in the 2001 Form 10-K, in November 2000,  eight
utilities  with nuclear power plants filed a Joint  Petition for Review with the
U.S. Court of Appeals for the Eleventh  Circuit  seeking to invalidate a portion
of PECO's  agreement  with the U.S.  Department  of Energy (DOE)  providing  for
credits  against  Nuclear  Waste Fund  (NWF)  payments  on the ground  that such
provision is a violation of the Nuclear Waste Policy Act of 1982. To date, Peach
Bottom has been credited  approximately $38 million, of which Exelon's share was
approximately  $19 million,  which was used to offset the cost to construct  and
operate  an  on-site  storage  facility.  Credits  of  approximately  $6 million
annually are expected in the future,  which  Generation will recognize its share
of  approximately  $3 million  when  received.  (The  agreement  was assigned to
Generation in connection  with  Exelon's 2001  restructuring.)  On September 24,




                                      127
<PAGE>

2002,  the United  States  Court of Appeals for the  Eleventh  Circuit  issued a
ruling in which it held  that DOE is not  authorized  to fund the  Peach  Bottom
credits  out of the NWF.  The ruling does not address  whether  Generation  must
repay the NWF the amount of the credits it has received; it only invalidates the
source of funding for the Peach Bottom settlement agreement.  The court's ruling
does not purport to affect the validity of the Peach Bottom settlement agreement
as a whole or the  ability to enter into the  agreement.  Under the terms of the
agreement,  DOE and  Generation  are  required to meet and  discuss  alternative
funding sources for the settlement  credits.  The court's opinion  suggests that
the federal  judgment  fund should be  available  as an  alternate  source.  The
agreement  provides that if such  negotiations are  unsuccessful,  the agreement
will be null and void.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
(a)      Exhibits:

       4.1 -      Ninety-Ninth  Supplemental Indenture dated as of September 15,
                  2002 to PECO Energy Company's First and Refunding Mortgage.

       4.2 -      Ninety-Eighth  Supplemental  Indenture  dated as of October 1,
                  2002 to PECO Energy Company's First and Refunding Mortgage.


       10.1 -     Employment  Agreement by and among Exelon Corporation,  Exelon
                  Generation Company,  LLC and Oliver D. Kingsley,  Jr. dated as
                  of September 5, 2002.

       Certifications  Pursuant to Section 1350 of Chapter 63 of Title 18 United
       States Code (Sarbanes - Oxley Act of 2002) as to the Quarterly  Report on
       Form 10-Q for the quarterly  period ended September 30, 2002 filed by the
       following officers for the following companies:
--------------------------------------------------------------------------------
       99.1 -     Filed by John W. Rowe for Exelon Corporation
       99.2 -     Filed by Ruth Ann M. Gillis for Exelon Corporation
       99.3 -     Filed by Frank M. Clark for Commonwealth Edison Company
       99.4 -     Filed by Robert E. Berdelle for Commonwealth Edison Company
       99.5 -     Filed by Kenneth G. Lawrence for PECO Energy Company
       99.6 -     Filed by Frank F. Frankowski for PECO Energy Company
       99.7 -     Filed by Oliver D. Kingsley for Exelon Generation Company, LLC
       99.8 -     Filed by Ruth Ann M. Gillis for Exelon Generation Company, LLC

       99.9 -     Management's  Discussion  and Analysis of Financial  Condition
                  and Results of Operations and Index to Financial Statements of
                  Exelon  Generation  Company,  LLC, filed by Exelon  Generation
                  Company,  LLC with the Securities Exchange Commission on April
                  24,  2002  on  Registration   Statement  Form  S-4  (File  No.
                  333-85496).



                                       128
<PAGE>

(b) Reports on Form 8-K:

                  Exelon, ComEd, PECO and/or Generation filed Current Reports on
         Form 8-K during the three months ended September 30, 2002 as follows:

<TABLE>
<CAPTION>
   Date of Earliest
   Event Reported             Description of Item Reported
---------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>
   July 1, 2002               "ITEM 5. OTHER EVENTS"  filed by Exelon and  Generation,  regarding  Generation's  notification  to
                              Midwest Generation, LLC of its exercise of Generation's call option.

   July 16, 2002              "ITEM 5. OTHER EVENTS" filed by Exelon, ComEd, PECO and Generation,  reporting that Exelon's second
                              quarter 2002 earnings results were expected to be higher than estimates.

   July 31, 2002              "ITEM 5. OTHER EVENTS" filed by Exelon,  ComEd,  PECO and  Generation,  reporting  Exelon's  second
                              quarter 2002 earnings results and "ITEM 9. REGULATION FD DISCLOSURE"  filed by Exelon,  ComEd, PECO
                              and Generation, regarding highlights of the Exelon Second Quarter Earnings Conference Call.

   August 6, 2002             "ITEM 9. REGULATION FD DISCLOSURE" filed by Exelon,  regarding  certifications of Exelon's principal
                              executive officer and principal financial officer, as required by SEC Order No. 4-460.

   August 27, 2002            "ITEM 5. OTHER EVENTS" filed by Exelon and ComEd,  regarding a letter order from the Federal Energy
                              Regulatory  Commission  (FERC) related to the treatment of goodwill  associated with the generating
                              assets  and power  marketing  business  that it  transferred  in January  2001 as part of  Exelon's
                              corporate restructuring.

   September 3, 2002          "ITEM 5. OTHER  EVENTS" filed by Exelon and ComEd,  announcing  that ComEd will seek a rehearing of
                              the  order  by  FERC  related  to the  treatment  of  goodwill  as a  part  of  Exelon's  corporate
                              restructuring in January 2001.

   September 3, 2002          "ITEM 9. REGULATION FD DISCLOSURE" filed by Exelon,  ComEd and PECO, regarding Exelon's anticipated
                              savings from its Cost Management Initiative at Energy Delivery.

   September 4, 2002          "ITEM 9.  REGULATION  FD  DISCLOSURE"  filed by  Exelon,  ComEd,  PECO and  Generation,  Oliver  D.
                              Kingsley,  Jr.,  Senior  Executive  Vice  President,  made a  presentation  at the Lehman  Brothers
                              Conference.  The exhibits  include the  presentation  slides and other  materials made available at
                              the conference.


                                      129
<PAGE>

   September 4, 2002          "ITEM 5. OTHER EVENTS" filed by Exelon and Generation,  regarding Exelon's  announcement that it is
                              in the  preliminary  stages of exploring  the  possibility  of selling its share of AmerGen  Energy
                              Company, LLC and "ITEM 9. REGULATION FD DISCLOSURE" filed by Exelon and Generation,  reporting that
                              Exelon does not intend, as part of its strategy, to own the international assets of Sithe.

   September 18, 2002         "ITEM 9.  REGULATION FD  DISCLOSURE"  filed by Exelon,  ComEd,  PECO and  Generation,  John W. Rowe,
                              Chairman and CEO, made a presentation at Merrill Lynch Global Power and Gas Leaders Conference.  The
                              exhibits include the presentation slides and other materials made available at the conference.

   September 18, 2002         "ITEM 9. REGULATION FD DISCLOSURE" filed by Exelon, ComEd, PECO and Generation, during the Power and
                              Gas Leaders Conference,  John W. Rowe commented on the third quarter earnings outlook,  the range of
                              guidance for 2003 earnings and the status of Exelon's discussion with FERC and the SEC regarding the
                              allocation of goodwill to ComEd's transmission and distribution business.

   September 19,  2002        "ITEM 5. OTHER EVENTS" filed by Exelon and ComEd,  related to their understanding that the Office of
                              the Chief Accountant of the SEC will not object to the accounting treatment for goodwill.


   September 26,  2002        "ITEM 5. OTHER EVENTS" filed by Exelon and ComEd, related the letter received from FERC which states
                              that FERC has no objection to ComEd's  determination that none of the goodwill was related to assets
                              transferred to Generation.



------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      130
<PAGE>




                                   SIGNATURES
--------------------------------------------------------------------------------

         Pursuant to  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                               EXELON CORPORATION

/s/ John W. Rowe                                     /s/ Ruth Ann M. Gillis
-----------------------------                        ---------------------------
JOHN W. ROWE                                         RUTH ANN M. GILLIS
Chairman of the Board and                            Senior Vice President and
Chief Executive Officer                              Chief Financial Officer

/s/ Matthew F. Hilzinger
-----------------------------
MATTHEW F. HILZINGER
Vice President and Corporate Controller
(Principal Accounting Officer)

October 31, 2002

--------------------------------------------------------------------------------

         Pursuant to  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                           COMMONWEALTH EDISON COMPANY

/s/ Pamela B. Strobel                                /s/ Frank M. Clark
-----------------------------                        ---------------------------
PAMELA B. STROBEL                                    FRANK M. CLARK
Chair                                                President


/s/ Robert E. Berdelle
-----------------------------
ROBERT E. BERDELLE
Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer)

October 31, 2002



                                      131
<PAGE>


         Pursuant to  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                              PECO ENERGY COMPANY

/s/ Pamela B. Strobel                                /s/ Kenneth G. Lawrence
-----------------------------                        ---------------------------
PAMELA B. STROBEL                                    KENNETH G. LAWRENCE
Chair                                                President

/s/ Frank F. Frankowski
-----------------------------
FRANK F. FRANKOWSKI
Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer)

October 31, 2002

--------------------------------------------------------------------------------

         Pursuant to  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                         EXELON GENERATION COMPANY, LLC

/s/ Oliver D. Kingsley Jr.                        /s/ Ruth Ann M. Gillis
-----------------------------                     ---------------------------
OLIVER D. KINGSLEY JR.                            RUTH ANN M. GILLIS
Chief Executive Officer and                       Senior Vice President and
President                                         Chief Financial Officer
                                                  Exelon Corporation
                                                  (Principal Financial Officer)

/s/ Thomas Weir III
-----------------------------
THOMAS WEIR III
Controller

October 31, 2002


                                      132
<PAGE>

                                 CERTIFICATIONS
--------------------------------------------------------------------------------

       Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities
                            and Exchange Act of 1934

I, John W. Rowe certify that:

1. I have reviewed this quarterly report on Form 10-Q of Exelon Corporation;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: October 31, 2002

                                /s/ John W. Rowe
                        -------------------------------
                                  John W. Rowe
                Chairman of the Board and Chief Executive Officer



                                      133
<PAGE>

       Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities
                            and Exchange Act of 1934
--------------------------------------------------------------------------------

I, Ruth Ann M. Gillis certify that:

1. I have reviewed this quarterly report on Form 10-Q of Exelon Corporation;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: October 31, 2002


                             /s/ Ruth Ann M. Gillis
                        -------------------------------
                               Ruth Ann M. Gillis
                Senior Vice President and Chief Financial Officer




                                      134
<PAGE>

       Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities
                            and Exchange Act of 1934
--------------------------------------------------------------------------------

I, Frank M. Clark certify that:

1. I have reviewed this  quarterly  report on Form 10-Q of  Commonwealth  Edison
Company;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: October 31, 2002

                               /s/ Frank M. Clark
                        -------------------------------
                                 Frank M. Clark
                                    President



                                      135
<PAGE>


       Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities
                            and Exchange Act of 1934
--------------------------------------------------------------------------------

I, Robert E. Berdelle certify that:

1. I have reviewed this  quarterly  report on Form 10-Q of  Commonwealth  Edison

Company;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.



Date: October 31, 2002

                             /s/ Robert E. Berdelle
                        -------------------------------
                               Robert E. Berdelle
               Vice President, Finance and Chief Financial Officer



                                      136
<PAGE>

       Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities
                            and Exchange Act of 1934
--------------------------------------------------------------------------------

I, Kenneth G. Lawrence certify that:

1. I have reviewed this quarterly report on Form 10-Q of PECO Energy Company;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: October 31, 2002


                            /s/ Kenneth G. Lawrence
                        -------------------------------
                               Kenneth G. Lawrence
                                    President



                                      137
<PAGE>

        Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities
                            and Exchange Act of 1934
--------------------------------------------------------------------------------

I, Frank F. Frankowski certify that:

1. I have reviewed this quarterly report on Form 10-Q of PECO Energy Company;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: October 31, 2002

                            /s/ Frank F. Frankowski
                        -------------------------------
                               Frank F. Frankowski
               Vice President, Finance and Chief Financial Officer



                                      138
<PAGE>

        Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities
                            and Exchange Act of 1934
--------------------------------------------------------------------------------

I, Oliver D. Kingsley Jr. certify that:

1. I have  reviewed  this  quarterly  report on Form  10-Q of Exelon  Generation
Company, LLC;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: October 31, 2002

                             /s/ Oliver D. Kingsley
                        -------------------------------
                             Oliver D. Kingsley Jr.
                      Chief Executive Officer and President



                                      139
<PAGE>

       Certification Pursuant to Rule 13a-14 and 15d-14 of the Securities
                            and Exchange Act of 1934
--------------------------------------------------------------------------------

I, Ruth Ann M. Gillis certify that:

1. I have  reviewed  this  quarterly  report on Form  10-Q of Exelon  Generation
Company, LLC;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: October 31, 2002

                             /s/ Ruth Ann M. Gillis
                        -------------------------------
                               Ruth Ann M. Gillis
                Senior Vice President and Chief Financial Officer
                               Exelon Corporation