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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


FORM 10-Q

|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|   |  | For the Quarterly Period Ended
    September 30, 2004                                       
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

|            |           |                                             |  |                                                                                                                                                                             |  |  |            | 
|----------- | --------- | ------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ---------- | 
|            |           | Name of Registrant; State of Incorporation; |  | IRS Employer                                                                                                                                                               
|Commission  |           | Address of Principal Executive Offices; and |  | Identification                                                                                                                                                             
|File Number |           | Telephone Number                            |  | Number                                                                                                                                                                     
|            |           |                                             |  |                                                                                                                                                                            
|            | 1-16169   |                                             |  | EXELON CORPORATION
    (a Pennsylvania corporation)
    10 South Dearborn Street  37th Floor
    P.O. Box 805379
    Chicago, Illinois 60680-5379
    (312) 394-7398       |  |  | 23-2990190 | 
|            | 1-1839    |                                             |  | COMMONWEALTH EDISON COMPANY
    (an Illinois corporation)
    10 South Dearborn Street  37th Floor
    P.O. Box 805379
    Chicago, Illinois 60680-5379
    (312) 394-4321 |  |  | 36-0938600 | 
|            | 1-1401    |                                             |  | PECO ENERGY COMPANY
    (a Pennsylvania corporation)
    P.O. Box 8699
    2301 Market Street
    Philadelphia, Pennsylvania 19101-8699
    (215) 841-4000                  |  |  | 23-0970240 | 
|            | 333-85496 |                                             |  | EXELON GENERATION COMPANY, LLC
    (a Pennsylvania limited liability company)
    300 Exelon Way
    Kennett Square, Pennsylvania 19348
    (610) 765-6900                  |  |  | 23-3064219 | 

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 þ          No o.

The number of shares outstanding of each
registrants common stock as of September 30, 2004 was:

|                                                               |  |               
|-------------------------------------------------------------- |  | --------------
|Exelon Corporation Common Stock, without par value             |  | 662,549,435   
|Commonwealth Edison Company Common Stock,
    $12.50 par value |  | 127,016,488   
|PECO Energy Company Common Stock, without par
    value        |  | 170,478,507   
|Exelon Generation Company, LLC                                 |  | not applicable

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the Act).
Exelon
Corporation     Yes þ          No o     Commonwealth
Edison Company, PECO Energy Company and Exelon Generation
Company,
LLC     Yes o          No þ.



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TABLE OF CONTENTS

|                                   |  |                                                                                               |   |          |     | 
|---------------------------------- |  | --------------------------------------------------------------------------------------------- | - | -------- | --- | 
|                                   |  |                                                                                               |   | Page No.
|                                   |  |                                                                                               |   |         
|FILING
    FORMAT                  |  |                                                                                               | 3 |         
|FORWARD-LOOKING
    STATEMENTS     |  |                                                                                               | 3 |         
|WHERE TO FIND MORE
    INFORMATION |  |                                                                                               | 3 |         
|                                  
|PART I.                            |  | FINANCIAL
    INFORMATION                                                                     |   |          | 5   | 
|Item 1.                            |  | Financial
    Statements                                                                      |   |          | 5   | 
|                                   |  | Exelon Corporation                                                                            |   |          |     | 
|                                   |  | Consolidated
    Statements of Income and Comprehensive Income                                |   |          | 6   | 
|                                   |  | Consolidated
    Statements of Cash Flows                                                     |   |          | 7   | 
|                                   |  | Consolidated
    Balance Sheets                                                               |   |          | 8   | 
|                                   |  | Commonwealth Edison Company                                                                   |   |          |     | 
|                                   |  | Consolidated
    Statements of Income and Comprehensive Income                                |   |          | 10  | 
|                                   |  | Consolidated
    Statements of Cash Flows                                                     |   |          | 11  | 
|                                   |  | Consolidated
    Balance Sheets                                                               |   |          | 12  | 
|                                   |  | PECO Energy Company                                                                           |   |          |     | 
|                                   |  | Consolidated
    Statements of Income and Comprehensive Income                                |   |          | 14  | 
|                                   |  | Consolidated
    Statements of Cash Flows                                                     |   |          | 15  | 
|                                   |  | Consolidated
    Balance Sheets                                                               |   |          | 16  | 
|                                   |  | Exelon Generation Company, LLC                                                                |   |          |     | 
|                                   |  | Consolidated
    Statements of Income and Comprehensive Income                                |   |          | 18  | 
|                                   |  | Consolidated
    Statements of Cash Flows                                                     |   |          | 19  | 
|                                   |  | Consolidated
    Balance Sheets                                                               |   |          | 20  | 
|                                   |  | Combined Notes to
    Consolidated Financial Statements                                       |   |          | 22  | 
|Item 2.                            |  | Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations |   |          | 77  | 
|                                   |  | Exelon Corporation                                                                            |   |          | 78  | 
|                                   |  | Commonwealth Edison
    Company                                                               |   |          | 117 | 
|                                   |  | PECO Energy Company                                                                           |   |          | 134 | 
|                                   |  | Exelon Generation Company,
    LLC                                                            |   |          | 148 | 
|Item 3.                            |  | Quantitative and
    Qualitative Disclosure About Market Risk                                 |   |          | 163 | 
|Item 4.                            |  | Controls and
    Procedures                                                                   |   |          | 171 | 
|                                  
|PART II.                           |  | OTHER
    INFORMATION                                                                         |   |          | 172 | 
|Item 1.                            |  | Legal
    Proceedings                                                                         |   |          | 172 | 
|Item 2.                            |  | Unregistered Sales of
    Equity Securities and Use of Proceeds                               |   |          | 172 | 
|                                   |  | Exelon Corporation                                                                            |   |          | 172 | 
|Item 5.                            |  | Other
    Information                                                                         |   |          | 173 | 
|                                   |  | Commonwealth Edison
    Company                                                               |   |          | 173 | 
|                                   |  | PECO Energy Company                                                                           |   |          | 173 | 
|                                   |  | Generation Company, LLC                                                                       |   |          | 173 | 
|Item 6.                            |  | Exhibits                                                                                      |   |          | 174 | 

1



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|                           |  |                                    |     |          |     | 
|-------------------------- |  | ---------------------------------- | --- | -------- | --- | 
|                           |  |                                    |     | Page No.
|                           |  |                                    |     |         
|SIGNATURES                 |  |                                    | 178 |         
|                           |  | Exelon Corporation                 |     |          | 178 | 
|                           |  | Commonwealth Edison
    Company    |     |          | 178 | 
|                           |  | PECO Energy Company                |     |          | 179 | 
|                           |  | Exelon Generation Company,
    LLC |     |          | 179 | 
|CERTIFICATION
    EXHIBITS |  |                                    | 180 |         

2



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FILING FORMAT

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




FORWARD-LOOKING STATEMENTS

Certain of the matters discussed in this Report
are forward-looking statements, within the meaning of the
Private Securities Litigation Reform Act of 1995, 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 factors discussed
herein, as well as the items discussed in (a) the
Registrants 2004 Annual Report on
Form 10-K  ITEM 7. Managements Discussion
and Analysis of Financial Condition and Results of
Operations  Business Outlook and the Challenges in
Managing Our Business for each of Exelon, ComEd, PECO and
Generation, (b) the Registrants 2004 Annual Report on
Form 10-K  ITEM 8. Financial Statements and
Supplementary Data: Exelon  Note 19,
ComEd  Note 15, PECO  Note 14
and Generation  Note 13 and (c) other
factors discussed in filings with the United States Securities
and Exchange Commission (SEC) 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 undertakes any obligation
to publicly release any revision to its forward-looking
statements to reflect events or circumstances after the date of
this Report.




WHERE TO FIND MORE INFORMATION

The public may read and copy any reports or other
information that the Registrants file with the SEC at the
SECs public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC
at 1-800-SEC-0330. These documents are also available to the
public from commercial document retrieval services, the web site
maintained by the SEC at www.sec.gov and Exelons website
at www.exeloncorp.com.

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4



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PART I. FINANCIAL INFORMATION



Item 1.     Financial
Statements

5



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##### 



EXELON CORPORATION



EXELON CORPORATION AND SUBSIDIARY
COMPANIES


CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |       |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------------------------------------ | ----- | ------------- | ----- | ---- | ----- | ----- | ----- | - | ------ | ----- | ----- | - | ------ | ----- | ------ | -
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |              
|                                                                                                                                                                                                                                      |                                                                                | Three Months                                                                   |       | Nine Months  
|                                                                                                                                                                                                                                      |                                                                                | Ended                                                                          |       | Ended        
|                                                                                                                                                                                                                                      |                                                                                | September 30,                                                                  |       | September 30,
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |              
|(In millions, except per share data)                                                                                                                                                                                                  |                                                                                | 2004                                                                           |       | 2003          |       | 2004 |       | 2003 
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |      
|Operating revenues                                                                                                                                                                                                                    |                                                                                | $                                                                              | 3,865 |               |       | $    | 4,441 |       |       | $ | 11,137 |       |       | $ | 12,236 |      
|Operating expenses                                                                                                                                                                                                                    |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|                                                                                                                                                                                                                                      | Purchased power                                                                |                                                                                |       | 873           |       |      |       | 1,179 |       |   |        | 2,107 |       |   |        | 2,765 |       
|                                                                                                                                                                                                                                      | Purchased power from AmerGen Energy Company, LLC                               |                                                                                |       |              |       |      |       | 133   |       |   |        |      |       |   |        | 310   |       
|                                                                                                                                                                                                                                      | Fuel                                                                           |                                                                                |       | 407           |       |      |       | 551   |       |   |        | 1,781 |       |   |        | 1,908 |       
|                                                                                                                                                                                                                                      | Impairment of Boston Generating, LLC long-lived
    assets                     |                                                                                |       |              |       |      |       | 945   |       |   |        |      |       |   |        | 945   |       
|                                                                                                                                                                                                                                      | Operating and maintenance                                                      |                                                                                |       | 815           |       |      |       | 1,203 |       |   |        | 2,921 |       |   |        | 3,362 |       
|                                                                                                                                                                                                                                      | Depreciation and amortization                                                  |                                                                                |       | 364           |       |      |       | 293   |       |   |        | 980   |       |   |        | 842   |       
|                                                                                                                                                                                                                                      | Taxes other than income                                                        |                                                                                |       | 178           |       |      |       | 131   |       |   |        | 556   |       |   |        | 489   |       
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|                                                                                                                                                                                                                                      |                                                                                | Total operating expenses                                                       |       |               | 2,637 |      |       |       | 4,435 |   |        |       | 8,345 |   |        |       | 10,621 |  
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Operating income                                                                                                                                                                                                                      |                                                                                |                                                                                | 1,228 |               |       |      | 6     |       |       |   | 2,792  |       |       |   | 1,615  |      
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Other income and deductions                                                                                                                                                                                                           |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|                                                                                                                                                                                                                                      | Interest expense                                                               |                                                                                |       | (132          | )     |      |       | (213  | )     |   |        | (418  | )     |   |        | (652  | )     
|                                                                                                                                                                                                                                      | Interest expense to affiliates                                                 |                                                                                |       | (88           | )     |      |       | (4    | )     |   |        | (271  | )     |   |        | (9    | )     
|                                                                                                                                                                                                                                      | Distributions on preferred securities of
    subsidiaries                      |                                                                                |       | (1            | )     |      |       | (8    | )     |   |        | (3    | )     |   |        | (30   | )     
|                                                                                                                                                                                                                                      | Equity in earnings (losses) of unconsolidated
    affiliates                   |                                                                                |       | (42           | )     |      |       | 49    |       |   |        | (97   | )     |   |        | 82    |       
|                                                                                                                                                                                                                                      | Other, net                                                                     |                                                                                |       | (107          | )     |      |       | (44   | )     |   |        | 121   |       |   |        | (226  | )     
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|                                                                                                                                                                                                                                      |                                                                                | Total other income and deductions                                              |       |               | (370  | )    |       |       | (220  | ) |        |       | (668  | ) |        |       | (835   | )
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Income (loss) before income taxes, minority
    interest and cumulative effect of changes in accounting
    principles                                                                                                                |                                                                                |                                                                                | 858   |               |       |      | (214  | )     |       |   | 2,124  |       |       |   | 780    |      
|Income taxes                                                                                                                                                                                                                          |                                                                                |                                                                                | 280   |               |       |      | (112  | )     |       |   | 656    |       |       |   | 258    |      
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Income (loss) before minority interest and
    cumulative effect of changes in accounting principles                                                                                                                                  |                                                                                |                                                                                | 578   |               |       |      | (102  | )     |       |   | 1,468  |       |       |   | 522    |      
|Minority interest                                                                                                                                                                                                                     |                                                                                |                                                                                | (1    | )             |       |      |      |       |       |   | 10     |       |       |   | (3     | )    
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Income (loss) before cumulative effect of
    changes in accounting principles                                                                                                                                                        |                                                                                |                                                                                | 577   |               |       |      | (102  | )     |       |   | 1,478  |       |       |   | 519    |      
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Cumulative effect of changes in accounting
    principles (net of income taxes of $(5) for the three months
    ended September 30, 2004 and $17 and $69 for the nine
    months ended September 30, 2004 and 2003,
    respectively) |                                                                                |                                                                                | (9    | )             |       |      |      |       |       |   | 23     |       |       |   | 112    |      
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Net income (loss)                                                                                                                                                                                                                     |                                                                                |                                                                                | 568   |               |       |      | (102  | )     |       |   | 1,501  |       |       |   | 631    |      
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Other comprehensive income (loss), net of
    income taxes                                                                                                                                                                            |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|                                                                                                                                                                                                                                      | Minimum pension liability                                                      |                                                                                |       |              |       |      |       | 9     |       |   |        |      |       |   |        | 9     |       
|                                                                                                                                                                                                                                      | Change in net unrealized gain (loss) on cash-flow
    hedges                   |                                                                                |       | 77            |       |      |       | 142   |       |   |        | (68   | )     |   |        | 58    |       
|                                                                                                                                                                                                                                      | Foreign currency translation adjustment                                        |                                                                                |       |              |       |      |       |      |       |   |        | (4    | )     |   |        | 2     |       
|                                                                                                                                                                                                                                      | Unrealized gain on marketable securities                                       |                                                                                |       | 7             |       |      |       | 5     |       |   |        | 18    |       |   |        | 3     |       
|                                                                                                                                                                                                                                      | SFAS No. 143 transition adjustment                                             |                                                                                |       |              |       |      |       |      |       |   |        |      |       |   |        | 168   |       
|                                                                                                                                                                                                                                      | Interest in other comprehensive income of
    unconsolidated affiliates        |                                                                                |       |              |       |      |       | 1     |       |   |        | 2     |       |   |        | 9     |       
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|                                                                                                                                                                                                                                      |                                                                                | Total other comprehensive income (loss)                                        |       |               | 84    |      |       |       | 157   |   |        |       | (52   | ) |        |       | 249    |  
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Total comprehensive income                                                                                                                                                                                                            |                                                                                | $                                                                              | 652   |               |       | $    | 55    |       |       | $ | 1,449  |       |       | $ | 880    |      
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Average shares of common stock
    outstanding  Basic                                                                                                                                                                                |                                                                                |                                                                                | 661   |               |       |      | 652   |       |       |   | 660    |       |       |   | 650    |      
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Average shares of common stock
    outstanding  Diluted                                                                                                                                                                              |                                                                                |                                                                                | 669   |               |       |      | 652   |       |       |   | 668    |       |       |   | 655    |      
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Earnings (loss) per average common
    share  Basic:                                                                                                                                                                                 |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|                                                                                                                                                                                                                                      | Income (loss) before cumulative effect of changes
    in accounting principles |                                                                                | $     | 0.87          |       |      | $     | (0.16 | )     |   | $      | 2.23  |       |   | $      | 0.80  |       
|                                                                                                                                                                                                                                      | Cumulative effect of changes in accounting
    principles                      |                                                                                |       | (0.01         | )     |      |       |      |       |   |        | 0.04  |       |   |        | .17   |       
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|                                                                                                                                                                                                                                      | Net income (loss)                                                              |                                                                                | $     | 0.86          |       |      | $     | (0.16 | )     |   | $      | 2.27  |       |   | $      | 0.97  |       
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Earnings (loss) per average common
    share  Diluted:                                                                                                                                                                               |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|                                                                                                                                                                                                                                      |                                                                                | Income (loss) before cumulative effect of changes
    in accounting principles |       | $             | 0.86  |      |       | $     | (0.16 | ) |        | $     | 2.21  |   |        | $     | 0.79   |  
|                                                                                                                                                                                                                                      | Cumulative effect of changes in accounting
    principles                      |                                                                                |       | (0.01         | )     |      |       |      |       |   |        | 0.04  |       |   |        | 0.17  |       
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|                                                                                                                                                                                                                                      | Net income (loss)                                                              |                                                                                | $     | 0.85          |       |      | $     | (0.16 | )     |   | $      | 2.25  |       |   | $      | 0.96  |       
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      
|Dividends per common share                                                                                                                                                                                                            |                                                                                | $                                                                              | 0.31  |               |       | $    | 0.25  |       |       | $ | 0.86   |       |       | $ | 0.71   |      
|                                                                                                                                                                                                                                      |                                                                                |                                                                                |       |               |       |      |       |       |       |   |        |       |       |   |        |      

See Combined Notes to Consolidated Financial
Statements

6



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EXELON CORPORATION AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |        |       |      |  
|------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------ | ----- | ---- | ------ | ------ | ----- | ---- | -
|                                                                          |                                                                                                                                       |                                                                                
|                                                                          |                                                                                                                                       | Nine Months                                                                    
|                                                                          |                                                                                                                                       | Ended                                                                          
|                                                                          |                                                                                                                                       | September 30,                                                                  
|                                                                          |                                                                                                                                       |                                                                                
|                                                                          |                                                                                                                                       | 2004                                                                            |                                                                         | 2003  
|(In millions)                                                             |                                                                                                                                       |                                                                                 |                                                                         |       
|Cash flows from operating activities                                      |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|                                                                          | Net income                                                                                                                            |                                                                                 | $                                                                       | 1,501  |       |      | $      | 631    |      
|                                                                          | Adjustments to reconcile net income to net cash
    flows provided by operating activities:                                           |                                                                                 |                                                                         |        |       |      |        |        |      
|                                                                          |                                                                                                                                       | Depreciation, amortization and accretion,
    including nuclear fuel            |                                                                         |        | 1,507 |      |        |        | 1,290 |     
|                                                                          |                                                                                                                                       | Cumulative effect of changes in accounting
    principles (net of income taxes) |                                                                         |        | (23   | )    |        |        | (112  | )   
|                                                                          |                                                                                                                                       | Impairment of investments                                                       |                                                                         |        | 10    |      |        |        | 295   |     
|                                                                          |                                                                                                                                       | Impairment of goodwill and other long-lived assets                              |                                                                         |        | 1     |      |        |        | 950   |     
|                                                                          |                                                                                                                                       | Deferred income taxes and amortization of
    investment tax credits            |                                                                         |        | 314   |      |        |        | (363  | )   
|                                                                          |                                                                                                                                       | Provision for uncollectible accounts                                            |                                                                         |        | 59    |      |        |        | 72    |     
|                                                                          |                                                                                                                                       | Equity in losses (earnings) of
    unconsolidated affiliates                    |                                                                         |        | 97    |      |        |        | (82   | )   
|                                                                          |                                                                                                                                       | Gains on sales of investments and wholly owned
    subsidiaries                 |                                                                         |        | (154  | )    |        |        |      |     
|                                                                          |                                                                                                                                       | Net realized gains on nuclear decommissioning
    trust funds                   |                                                                         |        | (2    | )    |        |        | (9    | )   
|                                                                          |                                                                                                                                       | Other operating activities                                                      |                                                                         |        | (35   | )    |        |        | 62    |     
|                                                                          |                                                                                                                                       | Changes in assets and liabilities:                                              |                                                                         |        |       |      |        |        |       |     
|                                                                          |                                                                                                                                       |                                                                                 | Receivables                                                             |        |       | 245  |        |        |       | 24   |  
|                                                                          |                                                                                                                                       |                                                                                 | Inventories                                                             |        |       | (20  | )      |        |       | (55  | )
|                                                                          |                                                                                                                                       |                                                                                 | Other current assets                                                    |        |       | 82   |        |        |       | (93  | )
|                                                                          |                                                                                                                                       |                                                                                 | Accounts payable, accrued expenses and other
    current liabilities    |        |       | (165 | )      |        |       | 113  |  
|                                                                          |                                                                                                                                       |                                                                                 | Changes in receivables and payables to
    unconsolidated affiliates    |        |       | (6   | )      |        |       | 18   |  
|                                                                          |                                                                                                                                       |                                                                                 | Net realized and unrealized mark-to-market and
    hedging transactions |        |       | (5   | )      |        |       | 2    |  
|                                                                          |                                                                                                                                       |                                                                                 | Pension and non-pension postretirement benefits
    obligations         |        |       | (259 | )      |        |       | (161 | )
|                                                                          |                                                                                                                                       |                                                                                 | Other noncurrent assets and liabilities                                 |        |       | 7    |        |        |       | (29  | )
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|Net cash flows provided by operating activities                           |                                                                                                                                       |                                                                                 | 3,154                                                                   |        |       |      | 2,553  |       
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|Cash flows from investing activities                                      |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|                                                                          | Capital expenditures                                                                                                                  |                                                                                 |                                                                         | (1,295 | )     |      |        | (1,501 | )    
|                                                                          | Proceeds from liquidated damages                                                                                                      |                                                                                 |                                                                         |       |       |      |        | 92     |      
|                                                                          | Proceeds from nuclear decommissioning trust fund
    sales                                                                            |                                                                                 |                                                                         | 1,422  |       |      |        | 1,880  |      
|                                                                          | Investment in nuclear decommissioning trust funds                                                                                     |                                                                                 |                                                                         | (1,624 | )     |      |        | (2,043 | )    
|                                                                          | Note receivable from unconsolidated affiliate                                                                                         |                                                                                 |                                                                         |       |       |      |        | 35     |      
|                                                                          | Collection of other notes receivable                                                                                                  |                                                                                 |                                                                         | 58     |       |      |        |       |      
|                                                                          | Proceeds from sales of investments and wholly
    owned subsidiaries                                                                  |                                                                                 |                                                                         | 238    |       |      |        | 186    |      
|                                                                          | Proceeds from sales of long-lived assets                                                                                              |                                                                                 |                                                                         | 50     |       |      |        | 5      |      
|                                                                          | Investment in synthetic fuel-producing facilities                                                                                     |                                                                                 |                                                                         | (48    | )     |      |        |       |      
|                                                                          | Change in restricted cash                                                                                                             |                                                                                 |                                                                         | 11     |       |      |        | 78     |      
|                                                                          | Net cash increase from consolidation of Sithe
    Energies, Inc.                                                                      |                                                                                 |                                                                         | 19     |       |      |        |       |      
|                                                                          | Other investing activities                                                                                                            |                                                                                 |                                                                         | (9     | )     |      |        | 45     |      
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|Net cash flows used in investing activities                               |                                                                                                                                       |                                                                                 | (1,178                                                                  | )      |       |      | (1,223 | )     
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|Cash flows from financing activities                                      |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|                                                                          | Issuance of long-term debt                                                                                                            |                                                                                 |                                                                         | 75     |       |      |        | 2,105  |      
|                                                                          | Retirement of long-term debt                                                                                                          |                                                                                 |                                                                         | (973   | )     |      |        | (2,075 | )    
|                                                                          | Issuance of long-term debt to financing affiliate                                                                                     |                                                                                 |                                                                         |       |       |      |        | 103    |      
|                                                                          | Retirement of long-term debt to financing
    affiliates                                                                              |                                                                                 |                                                                         | (547   | )     |      |        |       |      
|                                                                          | Change in short-term debt                                                                                                             |                                                                                 |                                                                         | (1     | )     |      |        | (599   | )    
|                                                                          | Issuance of mandatorily redeemable preferred
    securities                                                                           |                                                                                 |                                                                         |       |       |      |        | 200    |      
|                                                                          | Retirement of mandatorily redeemable preferred
    securities                                                                         |                                                                                 |                                                                         |       |       |      |        | (250   | )    
|                                                                          | Retirement of preferred stock of subsidiaries                                                                                         |                                                                                 |                                                                         |       |       |      |        | (50    | )    
|                                                                          | Payment on acquisition note payable to Sithe
    Energies, Inc.                                                                       |                                                                                 |                                                                         | (27    | )     |      |        | (210   | )    
|                                                                          | Dividends paid on common stock                                                                                                        |                                                                                 |                                                                         | (565   | )     |      |        | (461   | )    
|                                                                          | Proceeds from employee stock plans                                                                                                    |                                                                                 |                                                                         | 192    |       |      |        | 139    |      
|                                                                          | Purchase of treasury stock                                                                                                            |                                                                                 |                                                                         | (75    | )     |      |        |       |      
|                                                                          | Other financing activities                                                                                                            |                                                                                 |                                                                         | 36     |       |      |        | (85    | )    
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|Net cash flows used in financing activities                               |                                                                                                                                       |                                                                                 | (1,885                                                                  | )      |       |      | (1,183 | )     
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|Increase in cash and cash
    equivalents                                 |                                                                                                                                       |                                                                                 | 91                                                                      |        |       |      | 147    |       
|Cash and cash equivalents at beginning of
    period                      |                                                                                                                                       |                                                                                 | 493                                                                     |        |       |      | 469    |       
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|Cash and cash equivalents, including cash
    classified as held for sale |                                                                                                                                       |                                                                                 | 584                                                                     |        |       |      | 616    |       
|Cash classified as held for sale on the
    consolidated balance sheet    |                                                                                                                                       |                                                                                 |                                                                        |        |       |      | (12    | )     
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|Cash and cash equivalents at end of
    period                            |                                                                                                                                       | $                                                                               | 584                                                                     |        |       | $    | 604    |       
|                                                                          |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|Supplemental cash flow information                                        |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|Noncash investing and financing activities:                               |                                                                                                                                       |                                                                                 |                                                                         |        |       |      |        |       
|                                                                          | Consolidation of Sithe Energies, Inc. pursuant to
    FASB Interpretation No. 46-R, Consolidation of
    Variable Interest Entities |                                                                                 | $                                                                       | 85     |       |      | $      |       |      
|                                                                          | Adoption of SFAS No. 143 
    Adjustment to other paid in capital                                                                    |                                                                                 |                                                                         |       |       |      |        | 210    |      
|                                                                          | Note payable issued for investment in synthetic
    fuel-producing facilities                                                         |                                                                                 |                                                                         | 22     |       |      |        |       |      

See Combined Notes to Consolidated Financial
Statements

7



---



##### 






EXELON CORPORATION AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                                     |                                        |        |              |        |   |        |       |        | 
|---------------------------------- | ----------------------------------- | -------------------------------------- | ------ | ------------ | ------ | - | ------ | ----- | ------ | 
|                                   |                                     | September 30,                          |        | December 31,
|                                   |                                     | 2004                                   |        | 2003        
|(In millions)                      |                                     |                                        |        |             
|ASSETS                            
|Current assets                     |                                     |                                        |        |              |        |   |        |      
|                                   | Cash and cash equivalents           |                                        | $      | 584          |        |   | $      | 493   |       
|                                   | Restricted cash and investments     |                                        |        | 166          |        |   |        | 97    |       
|                                   | Accounts receivable, net            |                                        |        |              |        |   |        |       |       
|                                   |                                     | Customer                               |        |              | 1,613  |   |        |       | 1,567  | 
|                                   |                                     | Other                                  |        |              | 414    |   |        |       | 676    | 
|                                   | Mark-to-market derivative assets    |                                        |        | 403          |        |   |        | 337   |       
|                                   | Inventories, at average cost        |                                        |        |              |        |   |        |       |       
|                                   |                                     | Fossil fuel                            |        |              | 191    |   |        |       | 212    | 
|                                   |                                     | Materials and supplies                 |        |              | 326    |   |        |       | 310    | 
|                                   | Notes receivable from affiliate     |                                        |        |             |        |   |        | 92    |       
|                                   | Deferred income taxes               |                                        |        | 49           |        |   |        | 122   |       
|                                   | Assets held for sale                |                                        |        |             |        |   |        | 242   |       
|                                   | Other                               |                                        |        | 308          |        |   |        | 413   |       
|                                   |                                     |                                        |        |              |        |   |        |      
|                                   |                                     | Total current assets                   |        |              | 4,054  |   |        |       | 4,561  | 
|                                   |                                     |                                        |        |              |        |   |        |      
|Property, plant and equipment, net |                                     |                                        | 20,724 |              |        |   | 20,630 |      
|Deferred debits and other assets   |                                     |                                        |        |              |        |   |        |      
|                                   | Regulatory assets                   |                                        |        | 4,931        |        |   |        | 5,226 |       
|                                   | Nuclear decommissioning trust funds |                                        |        | 4,943        |        |   |        | 4,721 |       
|                                   | Investments                         |                                        |        | 895          |        |   |        | 955   |       
|                                   | Goodwill                            |                                        |        | 4,707        |        |   |        | 4,719 |       
|                                   | Mark-to-market derivative assets    |                                        |        | 432          |        |   |        | 133   |       
|                                   | Other                               |                                        |        | 1,373        |        |   |        | 991   |       
|                                   |                                     |                                        |        |              |        |   |        |      
|                                   |                                     | Total deferred debits and other assets |        |              | 17,281 |   |        |       | 16,745 | 
|                                   |                                     |                                        |        |              |        |   |        |      
|Total assets                       |                                     | $                                      | 42,059 |              |        | $ | 41,936 |      
|                                   |                                     |                                        |        |              |        |   |        |      

See Combined Notes to Consolidated Financial
Statements

8



---



##### 



EXELON CORPORATION AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |        |        | 
|--------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------ | ------------ | ------ | - | ------ | ------ | ------ | 
|                                                                                        |                                                                                                             | September 30,                                |        | December 31,
|                                                                                        |                                                                                                             | 2004                                         |        | 2003        
|(In millions)                                                                           |                                                                                                             |                                              |        |             
|LIABILITIES AND SHAREHOLDERS
    EQUITY                                               
|Current liabilities                                                                     |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        | Commercial paper                                                                                            |                                              | $      | 325          |        |   | $      | 326    |       
|                                                                                        | Note payable to Sithe Energies, Inc.                                                                        |                                              |        |             |        |   |        | 90     |       
|                                                                                        | Long-term debt due within one year                                                                          |                                              |        | 410          |        |   |        | 1,385  |       
|                                                                                        | Long-term debt to ComEd Transitional Funding
    Trust and PECO Energy Transition Trust due within one year |                                              |        | 581          |        |   |        | 470    |       
|                                                                                        | Accounts payable                                                                                            |                                              |        | 1,136        |        |   |        | 1,238  |       
|                                                                                        | Mark-to-market derivative liabilities                                                                       |                                              |        | 655          |        |   |        | 584    |       
|                                                                                        | Accrued expenses                                                                                            |                                              |        | 1,097        |        |   |        | 1,260  |       
|                                                                                        | Liabilities held for sale                                                                                   |                                              |        |             |        |   |        | 61     |       
|                                                                                        | Other                                                                                                       |                                              |        | 301          |        |   |        | 306    |       
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total current liabilities                    |        |              | 4,505  |   |        |        | 5,720  | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|Long-term debt                                                                          |                                                                                                             |                                              | 7,814  |              |        |   | 7,889  |       
|Long-term debt to ComEd Transitional Funding
    Trust and PECO Energy Transition Trust |                                                                                                             |                                              | 4,397  |              |        |   | 5,055  |       
|Long-term debt to other financing
    trusts                                            |                                                                                                             |                                              | 545    |              |        |   | 545    |       
|Deferred credits and other
    liabilities                                              |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        | Deferred income taxes                                                                                       |                                              |        | 4,735        |        |   |        | 4,320  |       
|                                                                                        | Unamortized investment tax credits                                                                          |                                              |        | 278          |        |   |        | 288    |       
|                                                                                        | Asset retirement obligation                                                                                 |                                              |        | 3,473        |        |   |        | 2,997  |       
|                                                                                        | Pension obligations                                                                                         |                                              |        | 1,344        |        |   |        | 1,668  |       
|                                                                                        | Non-pension postretirement benefits obligations                                                             |                                              |        | 1,119        |        |   |        | 1,053  |       
|                                                                                        | Spent nuclear fuel obligation                                                                               |                                              |        | 875          |        |   |        | 867    |       
|                                                                                        | Regulatory liabilities                                                                                      |                                              |        | 2,009        |        |   |        | 1,891  |       
|                                                                                        | Mark-to-market derivative liabilities                                                                       |                                              |        | 391          |        |   |        | 141    |       
|                                                                                        | Other                                                                                                       |                                              |        | 888          |        |   |        | 912    |       
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total deferred credits and other liabilities |        |              | 15,112 |   |        |        | 14,137 | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total liabilities                            |        |              | 32,373 |   |        |        | 33,346 | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|Commitments and contingencies                                                           |                                                                                                             |                                              |        |              |        |   |        |       
|Minority interest of consolidated
    subsidiaries                                      |                                                                                                             |                                              | 53     |              |        |   |       |       
|Preferred securities of subsidiaries                                                    |                                                                                                             |                                              | 87     |              |        |   | 87     |       
|Shareholders equity                                                                    |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        | Common stock                                                                                                |                                              |        | 7,532        |        |   |        | 7,292  |       
|                                                                                        | Treasury stock, at cost                                                                                     |                                              |        | (75          | )      |   |        |       |       
|                                                                                        | Retained earnings                                                                                           |                                              |        | 3,256        |        |   |        | 2,320  |       
|                                                                                        | Accumulated other comprehensive loss                                                                        |                                              |        | (1,167       | )      |   |        | (1,109 | )     
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|                                                                                        |                                                                                                             | Total shareholders equity                   |        |              | 9,546  |   |        |        | 8,503  | 
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       
|Total liabilities and shareholders
    equity                                          |                                                                                                             | $                                            | 42,059 |              |        | $ | 41,936 |       
|                                                                                        |                                                                                                             |                                              |        |              |        |   |        |       

See Combined Notes to Consolidated Financial
Statements

9



---



##### 



COMMONWEALTH EDISON COMPANY



COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES


CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |       |       |  
|---------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | --------------------------------------- | --- | ------------- | ----- | ---- | --- | ----- | ----- | - | ----- | ----- | ----- | - | ----- | ----- | ----- | -
|                                                                                         |                                                                  |                                         |     |              
|                                                                                         |                                                                  | Three Months                            |     | Nine Months  
|                                                                                         |                                                                  | Ended                                   |     | Ended        
|                                                                                         |                                                                  | September 30,                           |     | September 30,
|                                                                                         |                                                                  |                                         |     |              
|                                                                                         |                                                                  | 2004                                    |     | 2003          |       | 2004 |     | 2003 
|(In millions)                                                                            |                                                                  |                                         |     |               |       |      |     |      
|Operating revenues                                                                       |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|                                                                                         | Operating revenues                                               |                                         | $   | 1,720         |       |      | $   | 1,717 |       |   | $     | 4,441 |       |   | $     | 4,473 |      
|                                                                                         | Operating revenues from affiliates                               |                                         |     |              |       |      |     | 20    |       |   |       | 17    |       |   |       | 49    |      
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|                                                                                         |                                                                  | Total operating revenues                |     |               | 1,720 |      |     |       | 1,737 |   |       |       | 4,458 |   |       |       | 4,522 |  
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|Operating expenses                                                                       |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|                                                                                         | Purchased power                                                  |                                         |     | 80            |       |      |     | 6     |       |   |       | 144   |       |   |       | 17    |      
|                                                                                         | Purchased power from affiliate                                   |                                         |     | 827           |       |      |     | 885   |       |   |       | 1,870 |       |   |       | 1,984 |      
|                                                                                         | Operating and maintenance                                        |                                         |     | 185           |       |      |     | 261   |       |   |       | 533   |       |   |       | 691   |      
|                                                                                         | Operating and maintenance from affiliates                        |                                         |     | 46            |       |      |     | 38    |       |   |       | 136   |       |   |       | 90    |      
|                                                                                         | Depreciation and amortization                                    |                                         |     | 104           |       |      |     | 97    |       |   |       | 309   |       |   |       | 287   |      
|                                                                                         | Taxes other than income                                          |                                         |     | 68            |       |      |     | 87    |       |   |       | 219   |       |   |       | 235   |      
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|                                                                                         |                                                                  | Total operating expenses                |     |               | 1,310 |      |     |       | 1,374 |   |       |       | 3,211 |   |       |       | 3,304 |  
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|Operating income                                                                         |                                                                  |                                         | 410 |               |       |      | 363 |       |       |   | 1,247 |       |       |   | 1,218 |      
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|Other income and deductions                                                              |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|                                                                                         | Interest expense                                                 |                                         |     | (59           | )     |      |     | (107  | )     |   |       | (203  | )     |   |       | (322  | )    
|                                                                                         | Interest expense to affiliates                                   |                                         |     | (27           | )     |      |     |      |       |   |       | (85   | )     |   |       |      |      
|                                                                                         | Distributions on mandatorily redeemable preferred
    securities |                                         |     |              |       |      |     | (6    | )     |   |       |      |       |   |       | (20   | )    
|                                                                                         | Equity in (losses) of unconsolidated affiliates                  |                                         |     | (4            | )     |      |     |      |       |   |       | (13   | )     |   |       |      |      
|                                                                                         | Interest income from affiliates                                  |                                         |     | 6             |       |      |     | 6     |       |   |       | 16    |       |   |       | 20    |      
|                                                                                         | Net loss on extinguishment of long-term debt                     |                                         |     | (106          | )     |      |     |      |       |   |       | (106  | )     |   |       |      |      
|                                                                                         | Other, net                                                       |                                         |     | (1            | )     |      |     | 9     |       |   |       | 6     |       |   |       | 28    |      
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|                                                                                         |                                                                  | Total other income and deductions       |     |               | (191  | )    |     |       | (98   | ) |       |       | (385  | ) |       |       | (294  | )
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|Income before income taxes and cumulative
    effect of a change in accounting principle |                                                                  |                                         | 219 |               |       |      | 265 |       |       |   | 862   |       |       |   | 924   |      
|Income taxes                                                                             |                                                                  |                                         | 95  |               |       |      | 102 |       |       |   | 351   |       |       |   | 365   |      
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|Income before cumulative effect of a change in
    accounting principle                  |                                                                  |                                         | 124 |               |       |      | 163 |       |       |   | 511   |       |       |   | 559   |      
|Cumulative effect of a change in accounting
    principle (net of income taxes of $0)    |                                                                  |                                         |    |               |       |      |    |       |       |   |      |       |       |   | 5     |      
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|Net income                                                                               |                                                                  |                                         | 124 |               |       |      | 163 |       |       |   | 511   |       |       |   | 564   |      
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|Other comprehensive income (loss), net of
    income taxes                               |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|                                                                                         | Change in net unrealized gain (loss) on cash-flow
    hedges     |                                         |     |              |       |      |     | 3     |       |   |       |      |       |   |       | 31    |      
|                                                                                         | Unrealized gain on marketable securities                         |                                         |     |              |       |      |     | 2     |       |   |       |      |       |   |       | 3     |      
|                                                                                         | Foreign currency translation adjustment                          |                                         |     | (1            | )     |      |     |      |       |   |       | (1    | )     |   |       | 2     |      
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|                                                                                         |                                                                  | Total other comprehensive income (loss) |     |               | (1    | )    |     |       | 5     |   |       |       | (1    | ) |       |       | 36    |  
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      
|Total comprehensive income                                                               |                                                                  | $                                       | 123 |               |       | $    | 168 |       |       | $ | 510   |       |       | $ | 600   |      
|                                                                                         |                                                                  |                                         |     |               |       |      |     |       |       |   |       |       |       |   |       |      

See Combined Notes to Consolidated Financial
Statements

10



---



##### 






COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |      |      |        |     |      |  
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ---- | --- | ---- | ---- | ------ | --- | ---- | -
|                                                              |                                                                                             |                                                                                
|                                                              |                                                                                             | Nine Months Ended                                                              
|                                                              |                                                                                             | September 30,                                                                  
|                                                              |                                                                                             |                                                                                
|                                                              |                                                                                             | 2004                                                                            |                                                                      | 2003
|(In millions)                                                 |                                                                                             |                                                                                 |                                                                      |     
|Cash flows from operating activities                          |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|                                                              | Net income                                                                                  |                                                                                 | $                                                                    | 511  |     |      | $    | 564    |    
|                                                              | Adjustments to reconcile net income to net cash
    flows provided by operating activities: |                                                                                 |                                                                      |      |     |      |      |        |    
|                                                              |                                                                                             | Depreciation and amortization                                                   |                                                                      |      | 309 |      |      |        | 287 |     
|                                                              |                                                                                             | Cumulative effect of a change in accounting
    principle (net of income taxes) |                                                                      |      |    |      |      |        | (5  | )   
|                                                              |                                                                                             | Deferred income taxes and amortization of
    investment tax credits            |                                                                      |      | 157 |      |      |        | 92  |     
|                                                              |                                                                                             | Provision for uncollectible accounts                                            |                                                                      |      | 25  |      |      |        | 31  |     
|                                                              |                                                                                             | Equity in losses of unconsolidated affiliates                                   |                                                                      |      | 13  |      |      |        |    |     
|                                                              |                                                                                             | Other operating activities                                                      |                                                                      |      | 80  |      |      |        | 46  |     
|                                                              |                                                                                             | Changes in assets and liabilities:                                              |                                                                      |      |     |      |      |        |     |     
|                                                              |                                                                                             |                                                                                 | Receivables                                                          |      |     | (101 | )    |        |     | (55  | )
|                                                              |                                                                                             |                                                                                 | Inventories                                                          |      |     | (5   | )    |        |     | 7    |  
|                                                              |                                                                                             |                                                                                 | Accounts payable, accrued expenses and other
    current liabilities |      |     | 10   |      |        |     | (44  | )
|                                                              |                                                                                             |                                                                                 | Receivables and payables to affiliates                               |      |     | 24   |      |        |     | (151 | )
|                                                              |                                                                                             |                                                                                 | Other current assets                                                 |      |     | 5    |      |        |     | (12  | )
|                                                              |                                                                                             |                                                                                 | Pension and non-pension postretirement benefits
    obligations      |      |     | (141 | )    |        |     | (110 | )
|                                                              |                                                                                             |                                                                                 | Other noncurrent assets and liabilities                              |      |     | (20  | )    |        |     | (14  | )
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|Net cash flows provided by operating activities               |                                                                                             |                                                                                 | 867                                                                  |      |     |      | 636  |       
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|Cash flows from investing activities                          |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|                                                              | Capital expenditures                                                                        |                                                                                 |                                                                      | (518 | )   |      |      | (537   | )  
|                                                              | Changes in Exelon intercompany money pool
    investment                                    |                                                                                 |                                                                      | 405  |     |      |      | (147   | )  
|                                                              | Change in restricted cash                                                                   |                                                                                 |                                                                      | 20   |     |      |      | (17    | )  
|                                                              | Notes receivable from affiliates                                                            |                                                                                 |                                                                      | 436  |     |      |      | 213    |    
|                                                              | Other investing activities                                                                  |                                                                                 |                                                                      | 12   |     |      |      | 21     |    
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|Net cash flows provided by (used in) investing
    activities |                                                                                             |                                                                                 | 355                                                                  |      |     |      | (467 | )     
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|Cash flows from financing activities                          |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|                                                              | Issuance of long-term debt                                                                  |                                                                                 |                                                                      |     |     |      |      | 1,427  |    
|                                                              | Retirement of long-term debt                                                                |                                                                                 |                                                                      | (798 | )   |      |      | (1,139 | )  
|                                                              | Retirement of long-term debt to ComEd
    Transitional Funding Trust                        |                                                                                 |                                                                      | (261 | )   |      |      |       |    
|                                                              | Issuance of mandatorily redeemable preferred
    securities                                 |                                                                                 |                                                                      |     |     |      |      | 200    |    
|                                                              | Retirement of mandatorily redeemable preferred
    securities                               |                                                                                 |                                                                      |     |     |      |      | (200   | )  
|                                                              | Changes in Exelon intercompany money pool
    borrowings                                    |                                                                                 |                                                                      | 17   |     |      |      |       |    
|                                                              | Change in short-term debt                                                                   |                                                                                 |                                                                      |     |     |      |      | (71    | )  
|                                                              | Dividends paid on common stock                                                              |                                                                                 |                                                                      | (320 | )   |      |      | (305   | )  
|                                                              | Contributions from parent                                                                   |                                                                                 |                                                                      | 94   |     |      |      | 106    |    
|                                                              | Settlement of cash-flow and fair-value hedges                                               |                                                                                 |                                                                      | 26   |     |      |      | (45    | )  
|                                                              | Other financing activities                                                                  |                                                                                 |                                                                      | 2    |     |      |      | (36    | )  
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|Net cash flows used in financing activities                   |                                                                                             |                                                                                 | (1,240                                                               | )    |     |      | (63  | )     
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|(Decrease) increase in cash and cash
    equivalents          |                                                                                             |                                                                                 | (18                                                                  | )    |     |      | 106  |       
|Cash and cash equivalents at beginning of
    period          |                                                                                             |                                                                                 | 34                                                                   |      |     |      | 16   |       
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|Cash and cash equivalents at end of
    period                |                                                                                             | $                                                                               | 16                                                                   |      |     | $    | 122  |       
|                                                              |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|Supplemental cash flow information                            |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|Noncash investing and financing activities:                   |                                                                                             |                                                                                 |                                                                      |      |     |      |      |       
|                                                              | Adoption of SFAS No. 143 
    adjustment to other paid in capital and goodwill             |                                                                                 | $                                                                    |     |     |      | $    | 210    |    

See Combined Notes to Consolidated Financial
Statements

11



---



##### 






COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                                              |                                        |        |              |       |   |        |       |       | 
|---------------------------------- | -------------------------------------------- | -------------------------------------- | ------ | ------------ | ----- | - | ------ | ----- | ----- | 
|                                   |                                              | September 30,                          |        | December 31,
|                                   |                                              | 2004                                   |        | 2003        
|(In millions)                      |                                              |                                        |        |             
|ASSETS                            
|Current assets                     |                                              |                                        |        |              |       |   |        |      
|                                   | Cash and cash equivalents                    |                                        | $      | 16           |       |   | $      | 34    |      
|                                   | Restricted cash                              |                                        |        |             |       |   |        | 20    |      
|                                   | Accounts receivable, net                     |                                        |        |              |       |   |        |       |      
|                                   |                                              | Customer                               |        |              | 784   |   |        |       | 683   | 
|                                   |                                              | Other                                  |        |              | 43    |   |        |       | 68    | 
|                                   | Inventories, at average cost                 |                                        |        | 49           |       |   |        | 43    |      
|                                   | Deferred income taxes                        |                                        |        |             |       |   |        | 6     |      
|                                   | Receivables from affiliates                  |                                        |        | 19           |       |   |        | 23    |      
|                                   | Investment in Exelon intercompany money pool |                                        |        |             |       |   |        | 405   |      
|                                   | Other                                        |                                        |        | 26           |       |   |        | 31    |      
|                                   |                                              |                                        |        |              |       |   |        |      
|                                   |                                              | Total current assets                   |        |              | 937   |   |        |       | 1,313 | 
|                                   |                                              |                                        |        |              |       |   |        |      
|Property, plant and equipment, net |                                              |                                        | 9,349  |              |       |   | 9,096  |      
|Deferred debits and other assets   |                                              |                                        |        |              |       |   |        |      
|                                   | Investments                                  |                                        |        | 36           |       |   |        | 36    |      
|                                   | Investment in affiliates                     |                                        |        | 59           |       |   |        | 73    |      
|                                   | Goodwill                                     |                                        |        | 4,707        |       |   |        | 4,719 |      
|                                   | Receivables from affiliates                  |                                        |        | 1,906        |       |   |        | 2,271 |      
|                                   | Pension asset                                |                                        |        | 172          |       |   |        | 4     |      
|                                   | Other                                        |                                        |        | 383          |       |   |        | 453   |      
|                                   |                                              |                                        |        |              |       |   |        |      
|                                   |                                              | Total deferred debits and other assets |        |              | 7,263 |   |        |       | 7,556 | 
|                                   |                                              |                                        |        |              |       |   |        |      
|Total assets                       |                                              | $                                      | 17,549 |              |       | $ | 17,965 |      
|                                   |                                              |                                        |        |              |       |   |        |      

See Combined Notes to Consolidated Financial
Statements

12



---



##### 



COMMONWEALTH EDISON COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                       |                                                                            |                                              |        |              |        |   |        |       |        | 
|------------------------------------------------------ | -------------------------------------------------------------------------- | -------------------------------------------- | ------ | ------------ | ------ | - | ------ | ----- | ------ | 
|                                                       |                                                                            | September 30,                                |        | December 31,
|                                                       |                                                                            | 2004                                         |        | 2003        
|(In millions)                                          |                                                                            |                                              |        |             
|LIABILITIES AND SHAREHOLDERS
    EQUITY              
|Current liabilities                                    |                                                                            |                                              |        |              |        |   |        |      
|                                                       | Long-term debt due within one year                                         |                                              | $      | 284          |        |   | $      | 236   |       
|                                                       | Long-term debt to ComEd Transitional Funding
    Trust due within one year |                                              |        | 309          |        |   |        | 317   |       
|                                                       | Accounts payable                                                           |                                              |        | 157          |        |   |        | 170   |       
|                                                       | Accrued expenses                                                           |                                              |        | 529          |        |   |        | 540   |       
|                                                       | Payables to affiliates                                                     |                                              |        | 222          |        |   |        | 207   |       
|                                                       | Payable to Exelon intercompany money pool                                  |                                              |        | 17           |        |   |        |      |       
|                                                       | Customer deposits                                                          |                                              |        | 86           |        |   |        | 78    |       
|                                                       | Deferred income taxes                                                      |                                              |        | 27           |        |   |        |      |       
|                                                       | Other                                                                      |                                              |        | 18           |        |   |        | 9     |       
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total current liabilities                    |        |              | 1,649  |   |        |       | 1,557  | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|Long-term debt                                         |                                                                            |                                              | 3,327  |              |        |   | 4,167  |      
|Long-term debt to ComEd Transitional Funding
    Trust |                                                                            |                                              | 1,106  |              |        |   | 1,359  |      
|Long-term debt to other affiliates                     |                                                                            |                                              | 361    |              |        |   | 361    |      
|Deferred credits and other
    liabilities             |                                                                            |                                              |        |              |        |   |        |      
|                                                       | Deferred income taxes                                                      |                                              |        | 1,882        |        |   |        | 1,686 |       
|                                                       | Unamortized investment tax credits                                         |                                              |        | 46           |        |   |        | 48    |       
|                                                       | Non-pension postretirement benefits obligation                             |                                              |        | 217          |        |   |        | 190   |       
|                                                       | Payables to affiliates                                                     |                                              |        | 28           |        |   |        | 28    |       
|                                                       | Regulatory liabilities                                                     |                                              |        | 2,009        |        |   |        | 1,891 |       
|                                                       | Other                                                                      |                                              |        | 297          |        |   |        | 336   |       
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total deferred credits and other liabilities |        |              | 4,479  |   |        |       | 4,179  | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total liabilities                            |        |              | 10,922 |   |        |       | 11,623 | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|Commitments and contingencies                          |                                                                            |                                              |        |              |        |   |        |      
|Shareholders equity                                   |                                                                            |                                              |        |              |        |   |        |      
|                                                       | Common stock                                                               |                                              |        | 1,588        |        |   |        | 1,588 |       
|                                                       | Preference stock                                                           |                                              |        | 7            |        |   |        | 7     |       
|                                                       | Other paid in capital                                                      |                                              |        | 4,115        |        |   |        | 4,115 |       
|                                                       | Receivable from parent                                                     |                                              |        | (156         | )      |   |        | (250  | )     
|                                                       | Retained earnings                                                          |                                              |        | 1,075        |        |   |        | 883   |       
|                                                       | Accumulated other comprehensive income (loss)                              |                                              |        | (2           | )      |   |        | (1    | )     
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|                                                       |                                                                            | Total shareholders equity                   |        |              | 6,627  |   |        |       | 6,342  | 
|                                                       |                                                                            |                                              |        |              |        |   |        |      
|Total liabilities and shareholders
    equity         |                                                                            | $                                            | 17,549 |              |        | $ | 17,965 |      
|                                                       |                                                                            |                                              |        |              |        |   |        |      

See Combined Notes to Consolidated Financial
Statements

13



---



##### 



PECO ENERGY COMPANY



PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES


CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |       |   |       |  
|--------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------------------- | --------------------------------- | ------------- | - | ----- | --- | ----- | - | ----- | --- | ----- | - | ----- | --- | ----- | - | ----- | -
|                                                    |                                                                  |                                                   |                                   |              
|                                                    |                                                                  | Three Months                                      |                                   | Nine Months  
|                                                    |                                                                  | Ended                                             |                                   | Ended        
|                                                    |                                                                  | September 30,                                     |                                   | September 30,
|                                                    |                                                                  |                                                   |                                   |              
|                                                    |                                                                  | 2004                                              |                                   | 2003          |   | 2004  |     | 2003 
|(In millions)                                       |                                                                  |                                                   |                                   |               |   |       |     |      
|Operating revenues                                  |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|                                                    | Operating revenues                                               |                                                   | $                                 | 1,119         |   |       | $   | 1,146 |   |       | $   | 3,381 |   |       | $   | 3,319 |  
|                                                    | Operating revenues from affiliates                               |                                                   |                                   | 5             |   |       |     | 3     |   |       |     | 14    |   |       |     | 9     |  
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|                                                    |                                                                  |                                                   | Total operating revenues          |               |   | 1,124 |     |       |   | 1,149 |     |       |   | 3,395 |     |       |   | 3,328 |  
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|Operating expenses                                  |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|                                                    | Purchased power                                                  |                                                   |                                   | 49            |   |       |     | 61    |   |       |     | 149   |   |       |     | 189   |  
|                                                    | Purchased power from affiliate                                   |                                                   |                                   | 409           |   |       |     | 421   |   |       |     | 1,108 |   |       |     | 1,101 |  
|                                                    | Fuel                                                             |                                                   |                                   | 28            |   |       |     | 28    |   |       |     | 354   |   |       |     | 285   |  
|                                                    | Fuel from affiliate                                              |                                                   |                                   | 7             |   |       |     |      |   |       |     | 14    |   |       |     |      |  
|                                                    | Operating and maintenance                                        |                                                   |                                   | 96            |   |       |     | 178   |   |       |     | 310   |   |       |     | 414   |  
|                                                    | Operating and maintenance from affiliates                        |                                                   |                                   | 26            |   |       |     | 14    |   |       |     | 77    |   |       |     | 39    |  
|                                                    | Depreciation and amortization                                    |                                                   |                                   | 144           |   |       |     | 134   |   |       |     | 395   |   |       |     | 370   |  
|                                                    | Taxes other than income                                          |                                                   |                                   | 64            |   |       |     | 12    |   |       |     | 181   |   |       |     | 123   |  
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|                                                    |                                                                  |                                                   | Total operating expenses          |               |   | 823   |     |       |   | 848   |     |       |   | 2,588 |     |       |   | 2,521 |  
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|Operating income                                    |                                                                  |                                                   | 301                               |               |   |       | 301 |       |   |       | 807 |       |   |       | 807 |      
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|Other income and deductions                         |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|                                                    | Interest expense                                                 |                                                   |                                   | (15           | ) |       |     | (73   | ) |       |     | (42   | ) |       |     | (241  | )
|                                                    | Interest expense to affiliates                                   |                                                   |                                   | (61           | ) |       |     | (2    | ) |       |     | (187  | ) |       |     | (2    | )
|                                                    | Distributions on mandatorily redeemable preferred
    securities |                                                   |                                   |              |   |       |     | (1    | ) |       |     |      |   |       |     | (6    | )
|                                                    | Equity in losses of unconsolidated affiliates                    |                                                   |                                   | (6            | ) |       |     |      |   |       |     | (19   | ) |       |     |      |  
|                                                    | Other, net                                                       |                                                   |                                   | 3             |   |       |     | (10   | ) |       |     | 8     |   |       |     |      |  
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|                                                    |                                                                  |                                                   | Total other income and deductions |               |   | (79   | )   |       |   | (86   | )   |       |   | (240  | )   |       |   | (249  | )
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|Income before income taxes                          |                                                                  |                                                   | 222                               |               |   |       | 215 |       |   |       | 567 |       |   |       | 558 |      
|Income taxes                                        |                                                                  |                                                   | 83                                |               |   |       | 74  |       |   |       | 195 |       |   |       | 193 |      
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|Net income                                          |                                                                  |                                                   | 139                               |               |   |       | 141 |       |   |       | 372 |       |   |       | 365 |      
|Preferred stock dividends                           |                                                                  |                                                   | (1                                | )             |   |       | (1  | )     |   |       | (3  | )     |   |       | (4  | )    
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|Net income on common stock                          |                                                                  | $                                                 | 138                               |               |   | $     | 140 |       |   | $     | 369 |       |   | $     | 361 |      
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|Other comprehensive income, net of income
    taxes |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|                                                    | Net income                                                       |                                                   | $                                 | 139           |   |       | $   | 141   |   |       | $   | 372   |   |       | $   | 365   |  
|                                                    | Other comprehensive income (net of income taxes):                |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |       |  
|                                                    |                                                                  | Change in net unrealized gain on cash-flow hedges |                                   |               |  |       |     |       | 2 |       |     |       | 2 |       |     |       | 2 |      
|                                                    |                                                                  | Unrealized gain on marketable securities          |                                   |               |  |       |     |       | 1 |       |     |       | 2 |       |     |       | 1 |      
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|                                                    |                                                                  |                                                   | Total other comprehensive income  |               |   |      |     |       |   | 3     |     |       |   | 4     |     |       |   | 3     |  
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      
|Total comprehensive income                          |                                                                  | $                                                 | 139                               |               |   | $     | 144 |       |   | $     | 376 |       |   | $     | 368 |      
|                                                    |                                                                  |                                                   |                                   |               |   |       |     |       |   |       |     |       |   |       |     |      

See Combined Notes to Consolidated Financial
Statements

14



---



##### 






PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                     |                                                                                             |                                                                      |                                                                      |      |     |     |      |      |     |     |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | -------------------------------------------------------------------- | ---- | --- | --- | ---- | ---- | --- | --- | -
|                                                     |                                                                                             |                                                                     
|                                                     |                                                                                             | Nine Months                                                         
|                                                     |                                                                                             | Ended                                                               
|                                                     |                                                                                             | September 30,                                                       
|                                                     |                                                                                             |                                                                     
|                                                     |                                                                                             | 2004                                                                 |                                                                      | 2003
|(In millions)                                        |                                                                                             |                                                                      |                                                                      |     
|Cash flows from operating activities                 |                                                                                             |                                                                      |                                                                      |      |     |     |      |     
|                                                     | Net income                                                                                  |                                                                      | $                                                                    | 372  |     |     | $    | 365  |    
|                                                     | Adjustments to reconcile net income to net cash
    flows provided by operating activities: |                                                                      |                                                                      |      |     |     |      |      |    
|                                                     |                                                                                             | Depreciation and amortization                                        |                                                                      |      | 395 |     |      |      | 370 |    
|                                                     |                                                                                             | Deferred income taxes and amortization of
    investment tax credits |                                                                      |      | (72 | )   |      |      | (76 | )  
|                                                     |                                                                                             | Provision for uncollectible accounts                                 |                                                                      |      | 30  |     |      |      | 38  |    
|                                                     |                                                                                             | Equity in losses of unconsolidated affiliates                        |                                                                      |      | 19  |     |      |      |    |    
|                                                     |                                                                                             | Other operating activities                                           |                                                                      |      | 4   |     |      |      | (2  | )  
|                                                     |                                                                                             | Changes in assets and liabilities:                                   |                                                                      |      |     |     |      |      |     |    
|                                                     |                                                                                             |                                                                      | Receivables                                                          |      |     | 4   |      |      |     | 25  |  
|                                                     |                                                                                             |                                                                      | Inventories                                                          |      |     | (15 | )    |      |     | (44 | )
|                                                     |                                                                                             |                                                                      | Deferred energy costs                                                |      |     | 52  |      |      |     | (33 | )
|                                                     |                                                                                             |                                                                      | Prepaid taxes                                                        |      |     | (49 | )    |      |     | (46 | )
|                                                     |                                                                                             |                                                                      | Other current assets                                                 |      |     | (2  | )    |      |     | (4  | )
|                                                     |                                                                                             |                                                                      | Accounts payable, accrued expenses and other
    current liabilities |      |     | 35  |      |      |     | 52  |  
|                                                     |                                                                                             |                                                                      | Receivables and payables to affiliates                               |      |     | 9   |      |      |     | 68  |  
|                                                     |                                                                                             |                                                                      | Pension and non-pension postretirement benefits
    obligations      |      |     | 20  |      |      |     | 45  |  
|                                                     |                                                                                             |                                                                      | Other noncurrent assets and liabilities                              |      |     | (12 | )    |      |     | (1  | )
|                                                     |                                                                                             |                                                                      |                                                                      |      |     |     |      |     
|Net cash flows provided by operating activities      |                                                                                             |                                                                      | 790                                                                  |      |     |     | 757  |     
|                                                     |                                                                                             |                                                                      |                                                                      |      |     |     |      |     
|Cash flows from investing activities                 |                                                                                             |                                                                      |                                                                      |      |     |     |      |     
|                                                     | Capital expenditures                                                                        |                                                                      |                                                                      | (162 | )   |     |      | (191 | )  
|                                                     | Changes in Exelon intercompany money pool
    investment                                    |                                                                      |                                                                      | (26  | )   |     |      |     |    
|                                                     | Change in restricted cash                                                                   |                                                                      |                                                                      |     |     |     |      | 132  |    
|                                                     | Other investing activities                                                                  |                                                                      |                                                                      | 2    |     |     |      | (2   | )  
|                                                     |                                                                                             |                                                                      |                                                                      |      |     |     |      |     
|Net cash flows used in investing activities          |                                                                                             |                                                                      | (186                                                                 | )    |     |     | (61  | )   
|                                                     |                                                                                             |                                                                      |                                                                      |      |     |     |      |     
|Cash flows from financing activities                 |                                                                                             |                                                                      |                                                                      |      |     |     |      |     
|                                                     | Issuance of long-term debt                                                                  |                                                                      |                                                                      | 75   |     |     |      | 450  |    
|                                                     | Retirement of long-term debt                                                                |                                                                      |                                                                      | (75  | )   |     |      | (709 | )  
|                                                     | Issuance of long-term debt to affiliate                                                     |                                                                      |                                                                      |     |     |     |      | 103  |    
|                                                     | Retirement of long-term debt to PECO Energy
    Transition Trust                            |                                                                      |                                                                      | (286 | )   |     |      |     |    
|                                                     | Change in short-term debt                                                                   |                                                                      |                                                                      | (46  | )   |     |      | (188 | )  
|                                                     | Retirement of mandatorily redeemable preferred
    securities                               |                                                                      |                                                                      |     |     |     |      | (50  | )  
|                                                     | Retirement of preferred stock                                                               |                                                                      |                                                                      |     |     |     |      | (50  | )  
|                                                     | Dividends paid on preferred and common stock                                                |                                                                      |                                                                      | (279 | )   |     |      | (248 | )  
|                                                     | Contribution from parent                                                                    |                                                                      |                                                                      | 106  |     |     |      | 17   |    
|                                                     | Other financing activities                                                                  |                                                                      |                                                                      | 2    |     |     |      | (2   | )  
|                                                     |                                                                                             |                                                                      |                                                                      |      |     |     |      |     
|Net cash flows used in financing activities          |                                                                                             |                                                                      | (503                                                                 | )    |     |     | (677 | )   
|                                                     |                                                                                             |                                                                      |                                                                      |      |     |     |      |     
|Increase in cash and cash
    equivalents            |                                                                                             |                                                                      | 101                                                                  |      |     |     | 19   |     
|Cash and cash equivalents at beginning of
    period |                                                                                             |                                                                      | 44                                                                   |      |     |     | 63   |     
|                                                     |                                                                                             |                                                                      |                                                                      |      |     |     |      |     
|Cash and cash equivalents at end of
    period       |                                                                                             | $                                                                    | 145                                                                  |      |     | $   | 82   |     
|                                                     |                                                                                             |                                                                      |                                                                      |      |     |     |      |     

See Combined Notes to Consolidated Financial
Statements

15



---



##### 






PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                                              |                                        |        |              |       |   |        |       |       | 
|---------------------------------- | -------------------------------------------- | -------------------------------------- | ------ | ------------ | ----- | - | ------ | ----- | ----- | 
|                                   |                                              | September 30,                          |        | December 31,
|(In millions)                      |                                              | 2004                                   |        | 2003        
|                                   |                                              |                                        |        |             
|ASSETS                            
|Current assets                     |                                              |                                        |        |              |       |   |        |      
|                                   | Cash and cash equivalents                    |                                        | $      | 145          |       |   | $      | 44    |      
|                                   | Accounts receivable, net                     |                                        |        |              |       |   |        |       |      
|                                   |                                              | Customer                               |        |              | 325   |   |        |       | 363   | 
|                                   |                                              | Other                                  |        |              | 35    |   |        |       | 27    | 
|                                   | Inventories, at average cost                 |                                        |        |              |       |   |        |       |      
|                                   |                                              | Gas                                    |        |              | 112   |   |        |       | 99    | 
|                                   |                                              | Materials and supplies                 |        |              | 9     |   |        |       | 7     | 
|                                   | Investment in Exelon intercompany money pool |                                        |        | 26           |       |   |        |      |      
|                                   | Deferred income taxes                        |                                        |        | 32           |       |   |        | 64    |      
|                                   | Deferred energy costs                        |                                        |        | 29           |       |   |        | 81    |      
|                                   | Prepaid taxes                                |                                        |        | 50           |       |   |        | 1     |      
|                                   | Other                                        |                                        |        | 12           |       |   |        | 10    |      
|                                   |                                              |                                        |        |              |       |   |        |      
|                                   |                                              | Total current assets                   |        |              | 775   |   |        |       | 696   | 
|                                   |                                              |                                        |        |              |       |   |        |      
|Property, plant and equipment, net |                                              |                                        | 4,305  |              |       |   | 4,256  |      
|Deferred debits and other assets   |                                              |                                        |        |              |       |   |        |      
|                                   | Regulatory assets                            |                                        |        | 4,931        |       |   |        | 5,226 |      
|                                   | Investments                                  |                                        |        | 19           |       |   |        | 20    |      
|                                   | Investment in affiliates                     |                                        |        | 108          |       |   |        | 123   |      
|                                   | Receivables from affiliates                  |                                        |        | 15           |       |   |        | 13    |      
|                                   | Pension asset                                |                                        |        | 78           |       |   |        | 68    |      
|                                   | Other                                        |                                        |        | 14           |       |   |        | 8     |      
|                                   |                                              |                                        |        |              |       |   |        |      
|                                   |                                              | Total deferred debits and other assets |        |              | 5,165 |   |        |       | 5,458 | 
|                                   |                                              |                                        |        |              |       |   |        |      
|Total assets                       |                                              | $                                      | 10,245 |              |       | $ | 10,410 |      
|                                   |                                              |                                        |        |              |       |   |        |      

See Combined Notes to Consolidated Financial
Statements

16



---



##### 



PECO ENERGY COMPANY AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                   |                                                                        |                                              |        |              |       |   |        |        |       | 
|-------------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------------------- | ------ | ------------ | ----- | - | ------ | ------ | ----- | 
|                                                   |                                                                        | September 30,                                |        | December 31,
|                                                   |                                                                        | 2004                                         |        | 2003        
|(In millions)                                      |                                                                        |                                              |        |             
|LIABILITIES AND SHAREHOLDERS
    EQUITY          
|Current liabilities                                |                                                                        |                                              |        |              |       |   |        |       
|                                                   | Commercial paper                                                       |                                              | $      |             |       |   | $      | 46     |      
|                                                   | Payables to affiliates                                                 |                                              |        | 161          |       |   |        | 150    |      
|                                                   | Long-term debt to PECO Energy Transition Trust
    due within one year |                                              |        | 272          |       |   |        | 153    |      
|                                                   | Accounts payable                                                       |                                              |        | 64           |       |   |        | 92     |      
|                                                   | Accrued expenses                                                       |                                              |        | 293          |       |   |        | 237    |      
|                                                   | Other                                                                  |                                              |        | 42           |       |   |        | 35     |      
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total current liabilities                    |        |              | 832   |   |        |        | 713   | 
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|Long-term debt                                     |                                                                        |                                              | 1,356  |              |       |   | 1,359  |       
|Long-term debt to PECO Energy Transition
    Trust |                                                                        |                                              | 3,291  |              |       |   | 3,696  |       
|Long-term debt to other affiliates                 |                                                                        |                                              | 184    |              |       |   | 184    |       
|Deferred credits and other
    liabilities         |                                                                        |                                              |        |              |       |   |        |       
|                                                   | Deferred income taxes                                                  |                                              |        | 2,886        |       |   |        | 2,986  |      
|                                                   | Unamortized investment tax credits                                     |                                              |        | 20           |       |   |        | 22     |      
|                                                   | Non-pension postretirement benefits obligation                         |                                              |        | 317          |       |   |        | 287    |      
|                                                   | Other                                                                  |                                              |        | 140          |       |   |        | 147    |      
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total deferred credits and other liabilities |        |              | 3,363 |   |        |        | 3,442 | 
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total liabilities                            |        |              | 9,026 |   |        |        | 9,394 | 
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|Commitments and contingencies                      |                                                                        |                                              |        |              |       |   |        |       
|Shareholders equity                               |                                                                        |                                              |        |              |       |   |        |       
|                                                   | Common stock                                                           |                                              |        | 2,000        |       |   |        | 1,999  |      
|                                                   | Receivable from parent                                                 |                                              |        | (1,518       | )     |   |        | (1,623 | )    
|                                                   | Preferred stock                                                        |                                              |        | 87           |       |   |        | 87     |      
|                                                   | Retained earnings                                                      |                                              |        | 639          |       |   |        | 546    |      
|                                                   | Accumulated other comprehensive income                                 |                                              |        | 11           |       |   |        | 7      |      
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|                                                   |                                                                        | Total shareholders equity                   |        |              | 1,219 |   |        |        | 1,016 | 
|                                                   |                                                                        |                                              |        |              |       |   |        |       
|Total liabilities and shareholders
    equity     |                                                                        | $                                            | 10,245 |              |       | $ | 10,410 |       
|                                                   |                                                                        |                                              |        |              |       |   |        |       

See Combined Notes to Consolidated Financial
Statements

17



---



##### 



EXELON GENERATION COMPANY, LLC




EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME


(Unaudited)


|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |       |       |     | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ----------------------------------------------------------------------- | --------------------------------------- | ------------- | ----- | ---- | ---- | ----- | ----- | --- | --- | ----- | ----- | --- | ---- | ----- | ----- | --- | 
|                                                                                                                                                                           |                                                              |                                                                         |                                         |              
|                                                                                                                                                                           |                                                              | Three Months                                                            |                                         | Nine Months  
|                                                                                                                                                                           |                                                              | Ended                                                                   |                                         | Ended        
|                                                                                                                                                                           |                                                              | September 30,                                                           |                                         | September 30,
|                                                                                                                                                                           |                                                              |                                                                         |                                         |              
|                                                                                                                                                                           |                                                              | 2004                                                                    |                                         | 2003          |       | 2004 |      | 2003 
|(In millions)                                                                                                                                                              |                                                              |                                                                         |                                         |               |       |      |      |      
|Operating revenues                                                                                                                                                         |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|                                                                                                                                                                           | Operating revenues                                           |                                                                         | $                                       | 1,009         |       |      | $    | 1,180 |       |     | $   | 3,159 |       |     | $    | 3,055 |      
|                                                                                                                                                                           | Operating revenues from affiliates                           |                                                                         |                                         | 1,244         |       |      |      | 1,357 |       |     |     | 2,994 |       |     |      | 3,246 |      
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|                                                                                                                                                                           |                                                              | Total operating revenues                                                |                                         |               | 2,253 |      |      |       | 2,537 |     |     |       | 6,153 |     |      |       | 6,301 |    
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|Operating expenses                                                                                                                                                         |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|                                                                                                                                                                           | Purchased power                                              |                                                                         |                                         | 743           |       |      |      | 1,096 |       |     |     | 1,814 |       |     |      | 2,531 |      
|                                                                                                                                                                           | Purchased power from affiliates                              |                                                                         |                                         |              |       |      |      | 144   |       |     |     | 11    |       |     |      | 350   |      
|                                                                                                                                                                           | Fuel                                                         |                                                                         |                                         | 379           |       |      |      | 449   |       |     |     | 1,427 |       |     |      | 1,156 |      
|                                                                                                                                                                           | Impairment of Boston Generating, LLC long-lived
    assets   |                                                                         |                                         |              |       |      |      | 945   |       |     |     |      |       |     |      | 945   |      
|                                                                                                                                                                           | Operating and maintenance                                    |                                                                         |                                         | 366           |       |      |      | 453   |       |     |     | 1,445 |       |     |      | 1,261 |      
|                                                                                                                                                                           | Operating and maintenance from affiliates                    |                                                                         |                                         | 66            |       |      |      | 54    |       |     |     | 200   |       |     |      | 136   |      
|                                                                                                                                                                           | Depreciation and amortization                                |                                                                         |                                         | 95            |       |      |      | 51    |       |     |     | 218   |       |     |      | 142   |      
|                                                                                                                                                                           | Taxes other than income                                      |                                                                         |                                         | 42            |       |      |      | 28    |       |     |     | 137   |       |     |      | 115   |      
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|                                                                                                                                                                           |                                                              | Total operating expenses                                                |                                         |               | 1,691 |      |      |       | 3,220 |     |     |       | 5,252 |     |      |       | 6,636 |    
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|Operating income (loss)                                                                                                                                                    |                                                              |                                                                         | 562                                     |               |       |      | (683 | )     |       |     | 901 |       |       |     | (335 | )    
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|Other income and deductions                                                                                                                                                |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|                                                                                                                                                                           | Interest expense                                             |                                                                         |                                         | (44           | )     |      |      | (22   | )     |     |     | (120  | )     |     |      | (52   | )    
|                                                                                                                                                                           | Interest expense to affiliates                               |                                                                         |                                         | (1            | )     |      |      | (3    | )     |     |     | (3    | )     |     |      | (11   | )    
|                                                                                                                                                                           | Equity in earnings (losses) of unconsolidated
    affiliates |                                                                         |                                         | (5            | )     |      |      | 53    |       |     |     | (7    | )     |     |      | 90    |      
|                                                                                                                                                                           | Other, net                                                   |                                                                         |                                         | 5             |       |      |      | (53   | )     |     |     | 129   |       |     |      | (238  | )    
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|                                                                                                                                                                           |                                                              | Total other income and deductions                                       |                                         |               | (45   | )    |      |       | (25   | )   |     |       | (1    | )   |      |       | (211  | )  
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|Income (loss) before income taxes, minority
    interest and cumulative effect of changes in accounting
    principles                                                     |                                                              |                                                                         | 517                                     |               |       |      | (708 | )     |       |     | 900 |       |       |     | (546 | )    
|Income taxes                                                                                                                                                               |                                                              |                                                                         | 198                                     |               |       |      | (280 | )     |       |     | 343 |       |       |     | (209 | )    
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|Income (loss) before minority interest and
    cumulative effect of changes in accounting principles                                                                       |                                                              |                                                                         | 319                                     |               |       |      | (428 | )     |       |     | 557 |       |       |     | (337 | )    
|Minority interest                                                                                                                                                          |                                                              |                                                                         |                                        |               |       |      |     |       |       |     | 10  |       |       |     | (2   | )    
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|Income (loss) before cumulative effect of
    changes in accounting principles                                                                                             |                                                              |                                                                         | 319                                     |               |       |      | (428 | )     |       |     | 567 |       |       |     | (339 | )    
|Cumulative effect of changes in accounting
    principles (net of income taxes of $22 and $70 for the nine
    months ended September 30, 2004 and 2003,
    respectively) |                                                              |                                                                         |                                        |               |       |      |     |       |       |     | 32  |       |       |     | 108  |      
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|Net income (loss)                                                                                                                                                          |                                                              |                                                                         | 319                                     |               |       |      | (428 | )     |       |     | 599 |       |       |     | (231 | )    
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|                                                                                                                                                                           | Other comprehensive income (loss), net of
    income taxes   |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |       |      
|                                                                                                                                                                           |                                                              | Change in net unrealized gain (loss) on cash-flow
    hedges            |                                         |               | 77    |      |      |       | 147   |     |     |       | (70   | )   |      |       | 30    |    
|                                                                                                                                                                           |                                                              | Unrealized gain (loss) on marketable securities                         |                                         |               | 7     |      |      |       | 1     |     |     |       | 15    |     |      |       | (1    | )  
|                                                                                                                                                                           |                                                              | Foreign currency translation adjustment                                 |                                         |               | 1     |      |      |       |      |     |     |       | (3    | )   |      |       |      |    
|                                                                                                                                                                           |                                                              | SFAS No. 143 transition adjustment                                      |                                         |               |      |      |      |       |      |     |     |       |      |     |      |       | 168   |    
|                                                                                                                                                                           |                                                              | Interest in other comprehensive income of
    unconsolidated affiliates |                                         |               |      |      |      |       | 1     |     |     |       | 2     |     |      |       | 9     |    
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|                                                                                                                                                                           |                                                              |                                                                         | Total other comprehensive income (loss) |               |       | 85   |      |       |       | 149 |     |       |       | (56 | )    |       |       | 206 | 
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      
|Total comprehensive income (loss)                                                                                                                                          |                                                              | $                                                                       | 404                                     |               |       | $    | (279 | )     |       | $   | 543 |       |       | $   | (25  | )    
|                                                                                                                                                                           |                                                              |                                                                         |                                         |               |       |      |      |       |       |     |     |       |       |     |      |      

See Combined Notes to Consolidated Financial
Statements

18



---



##### 






EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Unaudited)


|                                                     |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |        |      |     |  
|---------------------------------------------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------ | --- | --- | ----- | ------ | ---- | --- | -
|                                                     |                                                                                                    |                                                                                                                                      
|                                                     |                                                                                                    | Nine Months                                                                                                                          
|                                                     |                                                                                                    | Ended                                                                                                                                
|                                                     |                                                                                                    | September 30,                                                                                                                        
|                                                     |                                                                                                    |                                                                                                                                      
|                                                     |                                                                                                    | 2004                                                                                                                                  |                                                                         | 2003  
|(In millions)                                        |                                                                                                    |                                                                                                                                       |                                                                         |       
|Cash flows from operating activities                 |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|                                                     | Net income (loss)                                                                                  |                                                                                                                                       | $                                                                       | 599    |     |     | $     | (231   | )   
|                                                     | Adjustments to reconcile net income (loss) to net
    cash flows provided by operating activities: |                                                                                                                                       |                                                                         |        |     |     |       |        |     
|                                                     |                                                                                                    | Depreciation, amortization and accretion,
    including nuclear fuel                                                                  |                                                                         |        | 745 |     |       |        | 594  |    
|                                                     |                                                                                                    | Cumulative effect of changes in accounting
    principles (net of income taxes)                                                       |                                                                         |        | (32 | )   |       |        | (108 | )  
|                                                     |                                                                                                    | Gain on sale of investments                                                                                                           |                                                                         |        | (91 | )   |       |        | (2   | )  
|                                                     |                                                                                                    | Impairment of investment                                                                                                              |                                                                         |        |    |     |       |        | 255  |    
|                                                     |                                                                                                    | Impairment of long-lived assets                                                                                                       |                                                                         |        |    |     |       |        | 950  |    
|                                                     |                                                                                                    | Deferred income taxes and amortization of
    investment tax credits                                                                  |                                                                         |        | 159 |     |       |        | (393 | )  
|                                                     |                                                                                                    | Provision for uncollectible accounts                                                                                                  |                                                                         |        | 3   |     |       |        | 1    |    
|                                                     |                                                                                                    | Equity in (earnings) losses of
    unconsolidated affiliates                                                                          |                                                                         |        | 7   |     |       |        | (90  | )  
|                                                     |                                                                                                    | Net realized gains on nuclear decommissioning
    trust funds                                                                         |                                                                         |        | (2  | )   |       |        | (9   | )  
|                                                     |                                                                                                    | Other operating activities                                                                                                            |                                                                         |        | (69 | )   |       |        | 8    |    
|                                                     |                                                                                                    | Changes in assets and liabilities:                                                                                                    |                                                                         |        |     |     |       |        |      |    
|                                                     |                                                                                                    |                                                                                                                                       | Receivables                                                             |        |     | 298 |       |        |      | (81 | )
|                                                     |                                                                                                    |                                                                                                                                       | Receivables and payables to affiliates, net                             |        |     | (5  | )     |        |      | 254 |  
|                                                     |                                                                                                    |                                                                                                                                       | Inventories                                                             |        |     |    |       |        |      | (10 | )
|                                                     |                                                                                                    |                                                                                                                                       | Accounts payable, accrued expenses and other
    current liabilities    |        |     | (46 | )     |        |      | 69  |  
|                                                     |                                                                                                    |                                                                                                                                       | Other current assets                                                    |        |     | 66  |       |        |      | (16 | )
|                                                     |                                                                                                    |                                                                                                                                       | Net realized and unrealized mark-to-market and
    hedging transactions |        |     | (18 | )     |        |      | 1   |  
|                                                     |                                                                                                    |                                                                                                                                       | Pension and non-pension postretirement benefits
    obligations         |        |     | (89 | )     |        |      | (65 | )
|                                                     |                                                                                                    |                                                                                                                                       | Other noncurrent assets and liabilities                                 |        |     | (17 | )     |        |      | 14  |  
|                                                     |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|Net cash flows provided by operating activities      |                                                                                                    |                                                                                                                                       | 1,508                                                                   |        |     |     | 1,141 |       
|                                                     |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|Cash flows from investing activities                 |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|                                                     | Capital expenditures                                                                               |                                                                                                                                       |                                                                         | (608   | )   |     |       | (733   | )   
|                                                     | Proceeds from liquidated damages                                                                   |                                                                                                                                       |                                                                         |       |     |     |       | 92     |     
|                                                     | Proceeds from nuclear decommissioning trust fund
    sales                                         |                                                                                                                                       |                                                                         | 1,485  |     |     |       | 1,880  |     
|                                                     | Investment in nuclear decommissioning trust funds                                                  |                                                                                                                                       |                                                                         | (1,687 | )   |     |       | (2,043 | )   
|                                                     | Investment in Exelon intercompany money pool                                                       |                                                                                                                                       |                                                                         | (17    | )   |     |       |       |     
|                                                     | Note receivable from affiliate                                                                     |                                                                                                                                       |                                                                         |       |     |     |       | 20     |     
|                                                     | Net cash increase from consolidation of Sithe
    Energies, Inc. and Exelon Energy Company         |                                                                                                                                       |                                                                         | 24     |     |     |       |       |     
|                                                     | Change in restricted cash                                                                          |                                                                                                                                       |                                                                         | (8     | )   |     |       | (25    | )   
|                                                     | Proceeds from sale of long-lived assets                                                            |                                                                                                                                       |                                                                         | 42     |     |     |       |       |     
|                                                     | Proceeds from sale of subsidiaries                                                                 |                                                                                                                                       |                                                                         | 24     |     |     |       |       |     
|                                                     | Other investing activities                                                                         |                                                                                                                                       |                                                                         | 13     |     |     |       | 12     |     
|                                                     |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|Net cash flows used in investing activities          |                                                                                                    |                                                                                                                                       | (732                                                                    | )      |     |     | (797  | )     
|                                                     |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|Cash flows from financing activities                 |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|                                                     | Issuance of long-term debt                                                                         |                                                                                                                                       |                                                                         |       |     |     |       | 211    |     
|                                                     | Retirement of long-term debt                                                                       |                                                                                                                                       |                                                                         | (29    | )   |     |       | (4     | )   
|                                                     | Payment on acquisition note payable to Sithe
    Energies, Inc.                                    |                                                                                                                                       |                                                                         | (27    | )   |     |       | (210   | )   
|                                                     | Changes in Exelon intercompany money pool
    borrowings                                           |                                                                                                                                       |                                                                         | (445   | )   |     |       | (178   | )   
|                                                     | Distribution to member                                                                             |                                                                                                                                       |                                                                         | (170   | )   |     |       | (116   | )   
|                                                     | Other financing activities                                                                         |                                                                                                                                       |                                                                         | 7      |     |     |       | (2     | )   
|                                                     |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|Net cash flows used in financing activities          |                                                                                                    |                                                                                                                                       | (664                                                                    | )      |     |     | (299  | )     
|                                                     |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|Increase in cash and cash
    equivalents            |                                                                                                    |                                                                                                                                       | 112                                                                     |        |     |     | 45    |       
|Cash and cash equivalents at beginning of
    period |                                                                                                    |                                                                                                                                       | 158                                                                     |        |     |     | 58    |       
|                                                     |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|Cash and cash equivalents at end of
    period       |                                                                                                    | $                                                                                                                                     | 270                                                                     |        |     | $   | 103   |       
|                                                     |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|Supplemental cash flow information                   |                                                                                                    |                                                                                                                                       |                                                                         |        |     |     |       |       
|                                                     | Noncash investing and financing activities:                                                        |                                                                                                                                       |                                                                         |        |     |     |       |        |     
|                                                     |                                                                                                    | Consolidation of Sithe Energies, Inc. pursuant to
    FASB Interpretation No. 46-R, Consolidation of
    Variable Interest Entities |                                                                         | $      | 85  |     |       | $      |     |    
|                                                     |                                                                                                    | Contribution of Exelon Energy Company from Exelon
    Corporation                                                                     |                                                                         |        | (9  | )   |       |        |     |    
|                                                     |                                                                                                    | Distribution to member                                                                                                                |                                                                         |        |    |     |       |        | 17   |    

See Combined Notes to Consolidated Financial
Statements

19



---



##### 






EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                   |                                     |                                        |        |              |       |   |        |       |       | 
|---------------------------------- | ----------------------------------- | -------------------------------------- | ------ | ------------ | ----- | - | ------ | ----- | ----- | 
|                                   |                                     | September 30,                          |        | December 31,
|                                   |                                     | 2004                                   |        | 2003        
|(In millions)                      |                                     |                                        |        |             
|ASSETS                            
|Current assets                     |                                     |                                        |        |              |       |   |        |      
|                                   | Cash and cash equivalents           |                                        | $      | 270          |       |   | $      | 158   |      
|                                   | Restricted cash and investments     |                                        |        | 163          |       |   |        | 75    |      
|                                   | Accounts receivable, net            |                                        |        |              |       |   |        |       |      
|                                   |                                     | Customer                               |        |              | 477   |   |        |       | 389   | 
|                                   |                                     | Other                                  |        |              | 119   |   |        |       | 402   | 
|                                   | Mark-to-market derivative assets    |                                        |        | 403          |       |   |        | 322   |      
|                                   | Receivables from affiliates         |                                        |        | 333          |       |   |        | 421   |      
|                                   | Inventories, at average cost        |                                        |        |              |       |   |        |       |      
|                                   |                                     | Fossil fuel                            |        |              | 79    |   |        |       | 98    | 
|                                   |                                     | Materials and supplies                 |        |              | 268   |   |        |       | 259   | 
|                                   | Notes receivable                    |                                        |        | 23           |       |   |        | 5     |      
|                                   | Deferred income taxes               |                                        |        | 34           |       |   |        | 40    |      
|                                   | Assets held for sale                |                                        |        |             |       |   |        | 36    |      
|                                   | Other                               |                                        |        | 141          |       |   |        | 233   |      
|                                   |                                     |                                        |        |              |       |   |        |      
|                                   |                                     | Total current assets                   |        |              | 2,310 |   |        |       | 2,438 | 
|                                   |                                     |                                        |        |              |       |   |        |      
|Property, plant and equipment, net |                                     |                                        | 6,914  |              |       |   | 7,106  |      
|Deferred debits and other assets   |                                     |                                        |        |              |       |   |        |      
|                                   | Nuclear decommissioning trust funds |                                        |        | 4,943        |       |   |        | 4,721 |      
|                                   | Investments                         |                                        |        | 103          |       |   |        | 65    |      
|                                   | Receivable from affiliate           |                                        |        | 22           |       |   |        | 22    |      
|                                   | Pension asset                       |                                        |        | 216          |       |   |        | 79    |      
|                                   | Mark-to-market derivative assets    |                                        |        | 422          |       |   |        | 100   |      
|                                   | Other                               |                                        |        | 554          |       |   |        | 118   |      
|                                   |                                     |                                        |        |              |       |   |        |      
|                                   |                                     | Total deferred debits and other assets |        |              | 6,260 |   |        |       | 5,105 | 
|                                   |                                     |                                        |        |              |       |   |        |      
|Total assets                       |                                     | $                                      | 15,484 |              |       | $ | 14,649 |      
|                                   |                                     |                                        |        |              |       |   |        |      

See Combined Notes to Consolidated Financial
Statements

20



---



##### 



EXELON GENERATION COMPANY, LLC AND SUBSIDIARY
COMPANIES

CONSOLIDATED BALANCE SHEETS


(Unaudited)


|                                                 |                                                |                                              |        |              |        |   |        |       |        | 
|------------------------------------------------ | ---------------------------------------------- | -------------------------------------------- | ------ | ------------ | ------ | - | ------ | ----- | ------ | 
|                                                 |                                                | September 30,                                |        | December 31,
|                                                 |                                                | 2004                                         |        | 2003        
|(In millions)                                    |                                                |                                              |        |             
|Liabilities and members equity                  |                                                |                                              |        |              |        |   |        |      
|Current liabilities                              |                                                |                                              |        |              |        |   |        |      
|                                                 | Long-term debt due within one year             |                                              | $      | 61           |        |   | $      | 1,068 |       
|                                                 | Accounts payable                               |                                              |        | 853          |        |   |        | 848   |       
|                                                 | Mark-to-market derivative liabilities          |                                              |        | 655          |        |   |        | 581   |       
|                                                 | Payables to affiliates                         |                                              |        | 31           |        |   |        | 1     |       
|                                                 | Notes payable to affiliates                    |                                              |        |             |        |   |        | 506   |       
|                                                 | Accrued expenses                               |                                              |        | 375          |        |   |        | 423   |       
|                                                 | Other                                          |                                              |        | 100          |        |   |        | 126   |       
|                                                 |                                                |                                              |        |              |        |   |        |      
|                                                 |                                                | Total current liabilities                    |        |              | 2,075  |   |        |       | 3,553  | 
|                                                 |                                                |                                              |        |              |        |   |        |      
|Long-term debt                                   |                                                |                                              | 2,444  |              |        |   | 1,649  |      
|Deferred credits and other
    liabilities       |                                                |                                              |        |              |        |   |        |      
|                                                 | Deferred income taxes                          |                                              |        | 429          |        |   |        | 195   |       
|                                                 | Unamortized investment tax credits             |                                              |        | 212          |        |   |        | 218   |       
|                                                 | Asset retirement obligation                    |                                              |        | 3,472        |        |   |        | 2,996 |       
|                                                 | Pension obligation                             |                                              |        | 21           |        |   |        | 21    |       
|                                                 | Non-pension postretirement benefits obligation |                                              |        | 604          |        |   |        | 555   |       
|                                                 | Spent nuclear fuel obligation                  |                                              |        | 875          |        |   |        | 867   |       
|                                                 | Payable to affiliates                          |                                              |        | 1,274        |        |   |        | 1,195 |       
|                                                 | Mark-to-market derivative liabilities          |                                              |        | 391          |        |   |        | 133   |       
|                                                 | Other                                          |                                              |        | 302          |        |   |        | 308   |       
|                                                 |                                                |                                              |        |              |        |   |        |      
|                                                 |                                                | Total deferred credits and other liabilities |        |              | 7,580  |   |        |       | 6,488  | 
|                                                 |                                                |                                              |        |              |        |   |        |      
|                                                 |                                                | Total liabilities                            |        |              | 12,099 |   |        |       | 11,690 | 
|                                                 |                                                |                                              |        |              |        |   |        |      
|Commitments and contingencies                    |                                                |                                              |        |              |        |   |        |      
|Minority interest of consolidated
    subsidiary |                                                |                                              | 55     |              |        |   | 3      |      
|Members equity                                  |                                                |                                              |        |              |        |   |        |      
|                                                 | Membership interest                            |                                              |        | 2,495        |        |   |        | 2,490 |       
|                                                 | Undistributed earnings                         |                                              |        | 1,031        |        |   |        | 602   |       
|                                                 | Accumulated other comprehensive loss           |                                              |        | (196         | )      |   |        | (136  | )     
|                                                 |                                                |                                              |        |              |        |   |        |      
|                                                 |                                                | Total members equity                        |        |              | 3,330  |   |        |       | 2,956  | 
|                                                 |                                                |                                              |        |              |        |   |        |      
|Total liabilities and members
    equity        |                                                | $                                            | 15,484 |              |        | $ | 14,649 |      
|                                                 |                                                |                                              |        |              |        |   |        |      

See Combined Notes to Consolidated Financial
Statements

21



---



##### 



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)

Exelon Corporation (Exelon) is a utility services
holding company engaged, through its subsidiaries, in the energy
delivery, wholesale generation and other businesses discussed
below (see Note 17  Segment Information). The
energy delivery businesses (Energy Delivery) include the
purchase and sale of electricity and distribution and
transmission services by Commonwealth Edison Company (ComEd) in
northern Illinois and PECO Energy Company (PECO) in
southeastern Pennsylvania and the purchase and sale of natural
gas and related distribution services by PECO in the
Pennsylvania counties surrounding the City of Philadelphia. The
generation business consists of the electric generating
facilities and energy marketing operations of Exelon Generation
Company, LLC (Generation), the competitive retail sales business
of Exelon Energy Company, equity interests in Sithe Energies
Inc. (Sithe) and certain generation projects. The enterprises
business segment consists of the remaining infrastructure and
electrical contracting services of Exelon Enterprises Company,
LLC (Enterprises) and other investments weighted towards the
communications and energy services industries. Effective
January 1, 2004, Enterprises competitive retail sales
business, Exelon Energy Company, became part of Generation. See
Note 3  Acquisitions and Dispositions for
information regarding the disposition of businesses within the
enterprises segment.

The consolidated financial statements of Exelon,
ComEd, PECO and Generation each include the accounts of entities
in which it has a controlling financial interest, other than
certain financing trusts of ComEd and PECO described below,
after the elimination of intercompany transactions. A
controlling financial interest is evidenced by either a voting
interest greater than 50% or a risk and rewards model that
identifies the registrant as the primary beneficiary of the
variable interest entity. Investments and joint ventures in
which Exelon, ComEd, PECO and Generation do not have a
controlling financial interest and certain financing trusts of
ComEd and PECO are accounted for under the equity or cost
methods of accounting.

In accordance with Financial Accounting Standards
Board (FASB) Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities (FIN
No. 46-R), Sithe, a 50% owned subsidiary of Generation, was
consolidated in the financial statements of Exelon and
Generation as of March 31, 2004. Certain trusts and limited
partnerships that are financing subsidiaries of ComEd and PECO
have issued debt or mandatorily redeemable preferred securities.
Due to the adoption of FIN No. 46-R, these trusts and
limited partnerships are no longer consolidated within the
financial statements of Exelon, ComEd or PECO as of
December 31, 2003, or as of July 1, 2003 for PECO
Energy Capital Trust IV (PECO Trust IV). See
Note 2  New Accounting Principles for further
discussion of the adoption of FIN 46-R and the resulting
consolidation of Sithe and the deconsolidation of these
financing entities.

The accompanying consolidated financial
statements as of September 30, 2004 and for the three and
nine months then ended are unaudited but, in the opinion of the
management of each of Exelon, ComEd, PECO and Generation,
include all adjustments that are considered necessary for a fair
presentation of its respective financial statements in
accordance with accounting principles generally accepted in the
United States of America (GAAP). All adjustments are of a
normal, recurring nature, except as otherwise disclosed. The
share and per-share amounts included in Exelons
consolidated financial statements and combined notes to
consolidated financial statements have been adjusted for all
periods presented to reflect a 2-for-1 stock split of
Exelons common stock. See Note 14 
Earnings Per Share and Shareholders Equity for additional
information regarding the stock split. The December 31,
2003 Consolidated Balance Sheets were derived from audited
financial statements. These combined notes to consolidated
financial statements do not include all disclosures required by
GAAP. Certain prior-year amounts have been reclassified for
comparative purposes.

22



---



##### 



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  (Continued)

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, PECO and
Generation included in or incorporated by reference in ITEM 8 of
their Annual Reports on Form 10-K for the year ended
December 31, 2003.



|   |                                                                   
|-- | ------------------------------------------------------------------
|2. | New Accounting Principles (Exelon, ComEd, PECO
    and Generation)



| |                                                                     
| | --------------------------------------------------------------------
| | New Accounting Principles with a Cumulative
    Effect upon Adoption



| |                                
| | -------------------------------
| | FIN No. 46 and FIN
    No. 46-R

The FASB issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities (FIN
No. 46), in January 2003 and subsequently issued its
revision in FIN No. 46-R in December 2003, which addressed
the requirements for consolidating certain variable interest
entities. FIN No. 46 was effective for Exelons
variable interest entities created after January 31, 2003
and FIN No. 46-R was effective December 31, 2003 for
Exelons other variable interest entities that were
considered to be special-purpose entities. FIN No. 46-R
applied to all other variable interest entities as of
March 31, 2004.

Exelon and Generation consolidated Sithe as of
March 31, 2004 pursuant to the provisions of FIN
No. 46-R and recorded income of $32 million (net of
income taxes) as a result of the elimination of a guarantee of
Sithes commitments previously recorded by Generation. This
income was reported as a cumulative effect of a change in
accounting principle in the first quarter of 2004. Generation is
a 50% owner of Sithe, and Exelon and Generation had accounted
for Sithe as an unconsolidated equity method investment prior to
March 31, 2004. Sithe owns and operates power-generating
facilities. See Note 4  Sithe for additional
information on the consolidation of Sithe.

PECO Trust IV, a financing subsidiary of
PECO created in May 2003, was deconsolidated from the financial
statements of Exelon and PECO pursuant to the provisions of FIN
No. 46 as of July 1, 2003. Pursuant to the provisions
of FIN No. 46-R, as of December 31, 2003, the
financing trusts of ComEd, namely ComEd Financing II, ComEd
Financing III, ComEd Funding LLC and ComEd Transitional
Funding Trust, were deconsolidated from the financial statements
of Exelon and ComEd, and the other financing trusts of PECO,
namely PECO Energy Capital Trust III (PECO Trust III)
and PECO Energy Transition Trust (PETT), were deconsolidated
from the financial statements of Exelon and PECO. Amounts owed
to these financing trusts were recorded as debt to financing
trusts or affiliates within the Consolidated Balance Sheets at
September 30, 2004 and December 31, 2003 as follows:

|       |  |                    |       |                   |  |   |       | 
|------ |  | ------------------ | ----- | ----------------- |  | - | ----- | 
|       |  | September 30, 2004 |       | December 31, 2003
|       |  |                    |       |                  
|Exelon |  | $                  | 5,523 |                   |  | $ | 6,070 | 
|ComEd  |  |                    | 1,776 |                   |  |   | 2,037 | 
|PECO   |  |                    | 3,747 |                   |  |   | 4,033 | 

This change in presentation had no effect on the
net income of Exelon, ComEd or PECO. In accordance with FIN
No. 46-R, prior periods were not reclassified.



| |             
| | ------------
| | SFAS No. 143

FASB Statement of Financial Accounting Standards
(SFAS) No. 143, Accounting for Asset Retirement
Obligations (SFAS No. 143), provides accounting
requirements for retirement obligations (whether statutory,
contractual or as a result of principles of promissory estoppel)
associated with tangible long-lived assets. Exelon, ComEd, PECO
and Generation were required to adopt SFAS No. 143 as
of January 1, 2003.

23



---



##### 



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  (Continued)

A significant retirement obligation is
Generations obligation to decommission its nuclear plants
at the end of their license lives. See Note 13 
Asset Retirement Obligations and Nuclear Decommissioning Trust
Fund Investments for additional information.

Exelon recorded income of $112 million (net
of income taxes) as a cumulative effect of a change in
accounting principle in connection with its adoption of
SFAS No. 143 in the first quarter of 2003. The
components of the cumulative effect of a change in accounting
principle, net of income taxes, were as follows:

|                                                                                                   |  |   |     |  
|-------------------------------------------------------------------------------------------------- |  | - | --- | -
|Generation (net of income taxes of $52)                                                            |  | $ | 80  |  
|Generations investments in AmerGen Energy
    Company, LLC and Sithe (net of income taxes of $18) |  |   | 28  |  
|ComEd (net of income taxes of $0)                                                                  |  |   | 5   |  
|Enterprises (net of income taxes of $(1))                                                          |  |   | (1  | )
|                                                                                                   |  |   |     |  
|Total                                                                                              |  | $ | 112 |  
|                                                                                                   |  |   |     |  

The cumulative effect of the change in accounting
principle in adopting SFAS No. 143 had no effect on
PECOs income statement.



| |                                    
| | -----------------------------------
| | Other New Accounting
    Principles



| |           
| | ----------
| | EITF 03-11

In July 2003, the Emerging Issues Task Force
(EITF) of the FASB reached a consensus on EITF Issue
No. 03-11, Reporting Realized Gains and Losses on
Derivative Instruments That Are Subject to FASB Statement
No. 133, Accounting for Derivative Instruments and
Hedging Activities, and Not Held for Trading
Purposes as Defined in EITF Issue No. 02-3,
Issues Involved in Accounting for Derivative Contracts
Held for Trading Purposes and Contracts Involved in Energy
Trading and Risk Management Activities 
(EITF 03-11), which was ratified by the FASB in August
2003. The EITF concluded that determining whether realized gains
and losses on physically settled derivative contracts not
held for trading purposes should be reported in the
income statement on a gross or net basis is a matter of judgment
that depends on the relevant facts and circumstances. Exelon and
Generation adopted EITF 03-11 as of January 1, 2004
and presented $272 million of revenue, $271 million of
purchased power and $1 million of fuel expense net within
revenues during the three months ended September 30, 2004
and $724 million of revenue, $715 million of purchased
power and $9 million of fuel expense net within revenues
during the nine months ended September 30, 2004. Prior
periods were not reclassified. The adoption of EITF 03-11
had no effect on the net income of Exelon or Generation. Had
EITF 03-11 been retroactively applied to 2003, operating
revenues, purchased power and fuel expense would have been
affected as follows:



| |       
| | ------
| | Exelon

|                                              |  |             |        |            |  |           |      |   |  |  |        | 
|--------------------------------------------- |  | ----------- | ------ | ---------- |  | --------- | ---- | - |  |  | ------ | 
|                                              |  |             |        | EITF 03-11 |  |          
|For the Three Months Ended September 30, 2003 |  | As Reported |        | Impact     |  | Pro Forma
|                                              |  |             |        |            |  |          
|Operating revenues                            |  |             | $4,441 |            |  | $         | (344 | ) |  |  | $4,097 | 
|Purchased power                               |  |             | 1,312  |            |  |           | (330 | ) |  |  | 982    | 
|Fuel expense                                  |  |             | 551    |            |  |           | (14  | ) |  |  | 537    | 

24



---



##### 



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  (Continued)

|                                             |  |             |        |            |  |           |      |   |  |   |        | 
|-------------------------------------------- |  | ----------- | ------ | ---------- |  | --------- | ---- | - |  | - | ------ | 
|                                             |  |             |        | EITF 03-11 |  |          
|For the Nine Months Ended September 30, 2003 |  | As Reported |        | Impact     |  | Pro Forma
|                                             |  |             |        |            |  |          
|Operating revenues                           |  | $           | 12,236 |            |  | $         | (829 | ) |  | $ | 11,407 | 
|Purchased power                              |  |             | 3,075  |            |  |           | (778 | ) |  |   | 2,297  | 
|Fuel expense                                 |  |             | 1,908  |            |  |           | (51  | ) |  |   | 1,857  | 



| |           
| | ----------
| | Generation

|                                              |  |             |        |            |  |           |      |   |  |  |        | 
|--------------------------------------------- |  | ----------- | ------ | ---------- |  | --------- | ---- | - |  |  | ------ | 
|                                              |  |             |        | EITF 03-11 |  |          
|For the Three Months Ended September 30, 2003 |  | As Reported |        | Impact     |  | Pro Forma
|                                              |  |             |        |            |  |          
|Operating revenues                            |  |             | $2,537 |            |  | $         | (344 | ) |  |  | $2,193 | 
|Purchased power                               |  |             | 1,240  |            |  |           | (330 | ) |  |  | 910    | 
|Fuel expense                                  |  |             | 449    |            |  |           | (14  | ) |  |  | 435    | 

|                                             |  |             |        |            |  |           |      |   |  |  |        | 
|-------------------------------------------- |  | ----------- | ------ | ---------- |  | --------- | ---- | - |  |  | ------ | 
|                                             |  |             |        | EITF 03-11 |  |          
|For the Nine Months Ended September 30, 2003 |  | As Reported |        | Impact     |  | Pro Forma
|                                             |  |             |        |            |  |          
|Operating revenues                           |  |             | $6,301 |            |  | $         | (829 | ) |  |  | $5,472 | 
|Purchased power                              |  |             | 2,881  |            |  |           | (778 | ) |  |  | 2,103  | 
|Fuel expense                                 |  |             | 1,156  |            |  |           | (51  | ) |  |  | 1,105  | 



| |              
| | -------------
| | FSP FAS 106-2

Through its postretirement benefit plans, Exelon
provides retirees with prescription drug coverage. The Medicare
Prescription Drug, Improvement and Modernization Act of 2003
(Prescription Drug Act) was enacted on December 8, 2003.
The Prescription Drug Act introduced a prescription drug benefit
under Medicare as well as a Federal subsidy to sponsors of
retiree health care benefit plans that provide a benefit that is
at least actuarially equivalent to the Medicare prescription
drug benefit. Actuarial equivalence has not yet been formally
defined by the U.S. Department of Health and Human Services and
thus is a matter of judgment by the plan sponsor and its
actuaries. Management believes the prescription drug benefit
provided under Exelons postretirement benefit plans is at
least actuarially equivalent to the Medicare prescription drug
benefit. In response to the enactment of the Prescription Drug
Act, in May 2004, the FASB issued FASB Staff Position (FSP)
FAS 106-2, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (FSP FAS 106-2), which
provides transition guidance for accounting for the effects of
the Prescription Drug Act and supersedes FSP FAS 106-1,
which had been issued in January 2004. FSP FAS 106-1
permitted a plan sponsor of a postretirement health care plan
that provides a prescription drug benefit to make a one-time
election to defer the accounting for the effects of the
Prescription Drug Act. Exelon made the one-time election allowed
by FSP FAS 106-1 during the first quarter of 2004.

During the second quarter of 2004, Exelon early
adopted the provisions of FSP FAS 106-2, resulting in a
re-measurement of its postretirement benefit plans assets
and accumulated postretirement benefit obligations
(APBO) as of December 31, 2003. Upon adoption, the
effect of the subsidy on benefits attributable to past service
was accounted for as an actuarial experience gain, resulting in
a decrease of the APBO of approximately $177 million. The
annualized reduction in the net periodic postretirement benefit
cost is estimated to be approximately $32 million compared
to the annual cost calculated without considering the effects of
the Prescription Drug Act. The effect of the subsidy on the
components of net periodic

25



---



##### 



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  (Continued)

postretirement benefit cost for the three and
nine months ended September 30, 2004 included in the
consolidated financial statements and Note 11 
Retirement Benefits was as follows:

|                                              |  |                    |   |                    |  |   |    | 
|--------------------------------------------- |  | ------------------ | - | ------------------ |  | - | -- | 
|                                              |  | Three Months       |   | Nine Months       
|                                              |  | Ended              |   | Ended             
|                                              |  | September 30, 2004 |   | September 30, 2004
|                                              |  |                    |   |                   
|Amortization of the actuarial experience gain |  | $                  | 3 |                    |  | $ | 11 | 
|Reduction in current period service cost      |  |                    | 2 |                    |  |   | 4  | 
|Reduction in interest cost on the APBO        |  |                    | 3 |                    |  |   | 9  | 

The following table presents Exelons net
income and earnings per share for the three months ended
March 31, 2004 as if FSP FAS 106-2 had been adopted as
of January 1, 2004. Previously reported historical
financial information for the three months ended March 31,
2004 has been adjusted in the table below and will be adjusted
when presented for comparative purposes in future periods to
reflect a reduction in net periodic postretirement benefit cost
due to the adoption of FSP FAS 106-2.

|                                                                |                       |                |     |      | 
|--------------------------------------------------------------- | --------------------- | -------------- | --- | ---- | 
|                                                                |                       | Three Months  
|                                                                |                       | Ended         
|                                                                |                       | March 31, 2004
|                                                                |                       |               
|Net income  as reported                                        |                       | $              | 406 |     
|Reduction in net periodic postretirement benefit
    expense(a) |                       |                | 6   |     
|                                                                |                       |                |     |     
|Adjusted net income                                             |                       | $              | 412 |     
|                                                                |                       |                |     |     
|Earnings per share:                                             |                       |                |     |     
|                                                                | Basic  as reported   |                | $   | 0.62 | 
|                                                                | Basic  as adjusted   |                | $   | 0.63 | 
|                                                                | Diluted  as reported |                | $   | 0.61 | 
|                                                                | Diluted  as adjusted |                | $   | 0.62 | 



---



|    |                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | A portion of the net periodic postretirement
    benefit cost is capitalized within Exelons Consolidated
    Balance Sheets. The reduction in net periodic postretirement
    benefit expense due to the Prescription Drug Act is not taxable
    to Exelon.

The following table presents net income of ComEd
and Generation and net income on common stock of PECO for the
three months ended March 31, 2004 as if FSP FAS 106-2
was adopted as of January 1, 2004. Historical financial
information for the three months ended March 31, 2004 has
been adjusted in the table below and will be adjusted when
presented for comparative purposes in future periods to reflect
a reduction in net periodic postretirement benefit cost due to
the adoption of FSP FAS 106-2.

|                                                                |  |       |     |      |  |            |     |     |  |   |     | 
|--------------------------------------------------------------- |  | ----- | --- | ---- |  | ---------- | --- | --- |  | - | --- | 
|Three Months Ended March 31, 2004                               |  | ComEd |     | PECO |  | Generation
|                                                                |  |       |     |      |  |           
|Net income  as reported                                        |  | $     | 182 |      |  | $          | 130 | (a) |  | $ | 99  | 
|Reduction in net periodic postretirement benefit
    expense(b) |  |       | 2   |      |  |            | 1   |     |  |   | 3   | 
|                                                                |  |       |     |      |  |            |     |     |  |   |     | 
|Adjusted net income                                             |  | $     | 184 |      |  | $          | 131 |     |  | $ | 102 | 
|                                                                |  |       |     |      |  |            |     |     |  |   |     | 



---



|    |                                              
|--- | ---------------------------------------------
|(a) | Represents PECOs net income on common stock.



|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(b) | A portion of the net periodic postretirement
    benefit cost is capitalized within the Consolidated Balance
    Sheets.

26



---



##### 



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  (Continued)



| |          
| | ---------
| | EITF 03-1

In March 2004, the EITF reached a consensus on
and the FASB ratified EITF Issue No. 03-1, The
Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments (EITF 03-1). EITF 03-1
provides guidance for evaluating whether an investment is
other-than-temporarily impaired. Exelon adopted the disclosure
requirements of EITF 03-1 for investments accounted for
under SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, within its
financial statements for the year ended December 31, 2003.
On September 30, 2004, the FASB issued FSP
EITF 03-1-1, Effective Date of Paragraphs 10-20
of EITF Issue No. 03-1, The Meaning of
Other-Than-Temporary Impairment and its Application to Certain
Investments,  which delayed the effective date
of the application guidance on impairment of securities included
within EITF 03-1. Exelon, ComEd, PECO and Generation are
still evaluating the potential impact of the adoption of
EITF 03-1.



| |           
| | ----------
| | EITF 03-16

In March 2004, the EITF reached a consensus on
and the FASB ratified EITF Issue No. 03-16,
Accounting for Investments in Limited Liability
Companies (EITF 03-16). The EITF concluded that if
investors in a limited liability company have specific ownership
accounts, they should follow the guidance prescribed in
Statement of Position 78-9, Accounting for Investments in
Real Estate Ventures, and EITF Topic No. D-46,
Accounting for Limited Partnership Investments.
Otherwise, investors should follow the significant influence
model prescribed in Accounting Principles Board Opinion
No. 18, The Equity Method of Accounting for
Investments in Common Stock. EITF 03-16 was effective
for Exelon, ComEd, PECO and Generation during the third quarter
of 2004. Exelon recorded a charge of $9 million (net of an
income tax benefit of $5 million) as a cumulative effect of
a change in accounting principle in connection with its adoption
of this standard as of July 1, 2004. This charge related to
certain investments in limited liability partnerships held by
Enterprises. The adoption of this standard had no effect on the
financial statements of ComEd, PECO or Generation.



|   |                                                          
|-- | ---------------------------------------------------------
|3. | Acquisitions and Dispositions (Exelon and
    Generation)



| |                                                                                 
| | --------------------------------------------------------------------------------
| | Sale of Ownership Interest in Boston
    Generating, LLC (Exelon and Generation)

On May 25, 2004, Exelon and Generation
completed the sale, transfer and assignment of ownership of
their indirect wholly owned subsidiary, Boston Generating, LLC
(Boston Generating), which owns the companies that own the
Mystic 4-7, Mystic 8 and 9 and Fore River generating facilities,
to a special purpose entity owned by the lenders under Boston
Generatings $1.25 billion credit facility (Boston
Generating Credit Facility).

The sale was pursuant to a settlement agreement
reached with Boston Generatings lenders on
February 23, 2004. The Federal Energy Regulatory Commission
(FERC) approved the sale of Boston Generating in May 2004.
Responsibility for plant operations and power marketing
activities were transferred to the lenders special purpose
entity and its contractors in a separate transaction on
September 1, 2004.

In connection with the settlement reached on
February 23, 2004, Exelon, Generation, the lenders and
Raytheon Company (Raytheon), the guarantor of the obligations of
the turnkey contractor under the projects engineering,
procurement and construction agreements, entered into a global
settlement of all disputes relating to the construction of the
Mystic 8 and 9 and Fore River generating facilities. See
Note 15  Commitments and Contingencies for
information regarding the settlement of litigation associated
with the projects.

27



---



##### 



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  (Continued)

In connection with the decision to transition out
of Boston Generating and the generating units, Generation
recorded during the third quarter of 2003 an impairment charge
of its long-lived assets pursuant to SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS No. 144), of $945 million
($573 million net of income taxes) in operating expenses
within its Consolidated Statements of Income and Comprehensive
Income. As a result of Boston Generatings liabilities
being greater than its assets at the time of the sale, transfer
and assignment of ownership, Exelon and Generation recorded a
gain of $85 million ($52 million net of income taxes)
in other income and deductions within the Consolidated
Statements of Income and Comprehensive Income in the second
quarter of 2004. In connection with the sale, Exelon and
Generation recorded a liability associated with an existing
guarantee by their subsidiary Exelon New England Holdings, LLC
(Exelon New England) of fuel purchase obligations of Boston
Generating. Due to Generations ongoing involvement through
the continued existence of this guarantee and in accordance with
SFAS No. 144, the results of Boston Generating have
not been classified as a discontinued operation within the
Consolidated Statements of Income and Comprehensive Income of
Exelon and Generation. See Note 15  Commitments
and Contingencies for further information regarding the
guarantee.

Boston Generating was reported in the Generation
segment of Exelons consolidated financial statements prior
to its sale. At the date of the sale, Boston Generating had
approximately $1.2 billion in assets, primarily consisting
of property, plant and equipment, and approximately
$1.3 billion of liabilities of which approximately
$1.0 billion was debt outstanding under the Boston
Generating Credit Facility. As of the date of transfer, these
amounts were eliminated from the Consolidated Balance Sheets of
both Exelon and Generation. Exelons and Generations
Consolidated Statements of Income and Comprehensive Income for
the three and nine months ended September 30, 2004 and 2003
include the following financial results related to Boston
Generating:

|                     |  |               |   |               |  |      |      |      |  |   |     |   |  |   |      |  
|-------------------- |  | ------------- | - | ------------- |  | ---- | ---- | ---- |  | - | --- | - |  | - | ---- | -
|                     |  |               |   |              
|                     |  | Three Months  |   | Nine Months  
|                     |  | Ended         |   | Ended        
|                     |  | September 30, |   | September 30,
|                     |  |               |   |              
|                     |  | 2004          |   | 2003          |  | 2004 |      | 2003
|                     |  |               |   |               |  |      |      |     
|Operating revenues   |  | $             |  |               |  | $    | 224  |      |  | $ | 248 |   |  | $ | 407  |  
|Operating loss       |  |               |  |               |  |      | (962 | )    |  |   | (47 | ) |  |   | (944 | )
|Net income (loss)(a) |  |               |  |               |  |      | (581 | )    |  |   | 24  |   |  |   | (572 | )



---



|    |                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Net income for the nine months ended
    September 30, 2004 included an after-tax gain of
    $52 million related to the sale of Boston Generating in the
    second quarter of 2004.



| |                                                 
| | ------------------------------------------------
| | Disposition of Enterprises Entities
    (Exelon)

Exelon Thermal Holdings,
Inc.On June 30, 2004,
Enterprises sold its Chicago business of Exelon Thermal
Holdings, Inc. (Thermal) for net cash proceeds of
$134 million, resulting in a pre-tax gain of
$45 million. Enterprises repaid $37 million of debt
outstanding of the Chicago thermal operations prior to closing,
resulting in prepayment penalties of $9 million. On
September 29, 2004, Enterprises sold ETT Nevada, Inc., the
holding company for its investment in Northwind Aladdin, LLC,
for a net cash outflow of $1 million, resulting in a
pre-tax loss of $3 million.

Exelon Services,
Inc.During the nine months ended
September 30, 2004, Enterprises disposed of substantially
all of the operating components of Exelon Services, Inc.
(Services), including Exelon Solutions, most mechanical services
businesses and the Integrated Technology Group. Total expected
proceeds (subject to post-closing adjustments) and the net gain
on sale (before income taxes) recorded during 2004 related to
the disposition of these businesses of Services were
$35 million and $9 million, respectively. As of

28



---



##### 



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  (Continued)

September 30, 2004, Services had remaining
assets and liabilities of $66 million and $14 million,
respectively, which primarily represented the corporate center
operations.

PECO TelCove.On
June 30, 2004, Enterprises sold its investment in PECO
TelCove, a communications joint venture, along with certain
telecommunications assets, for proceeds of $49 million. A
pre-tax gain of $9 million was recorded in other income and
deductions on Exelons Consolidated Statements of Income
and Comprehensive Income. An impairment charge of
$5 million (before income taxes) related to the
telecommunications assets had been recorded in the fourth
quarter of 2003.

InfraSource, Inc.On
September 24, 2003, Enterprises sold the electric
construction and services, underground and telecom businesses of
InfraSource, Inc. (InfraSource). See the Notes to Consolidated
Financial Statements in Exelons 2003 Form 10-K for
further information regarding this sale. A $30 million
subordinated note receivable that was received as part of the
sale proceeds at closing was collected in full prior to its
maturity during the second quarter of 2004, resulting in income
of $18 million. Enterprises results of operations for
the three and nine months ended September 30, 2004 compared
to the same periods in 2003 were significantly affected by the
sale of InfraSource. In connection with the transaction,
Enterprises entered into an agreement that may result in certain
payments to InfraSource if the amount of services Exelon
purchases from InfraSource during the period from closing
through 2006 is below specified thresholds. Due to Exelons
ongoing involvement with InfraSource through the continued
existence of this agreement and in accordance with
SFAS No. 144, the results of InfraSource have not been
classified as a discontinued operation within Exelons
Consolidated Statements of Income and Comprehensive Income.

The results of Thermal and Services have been
included in income from continuing operations within
Exelons Consolidated Statements of Income and
Comprehensive Income (as opposed to discontinued operations) as
the impact of these entities on Exelons consolidated
financial statements was not significant.



| |                                       
| | --------------------------------------
| | Exelon Energy Company
    (Generation)

Effective January 1, 2004, Exelon
contributed its interest in Exelon Energy Company to Generation.
The transaction had no effect on the assets and liabilities of
Exelon Energy Company, which were previously reported as a part
of the Enterprises segment. Beginning in 2004, Exelon Energy
Companys assets and liabilities and results of operations
are included in Generations financial statements.
Generation and Enterprises 2003 segment information has
been adjusted to reflect this transfer in
Note 17  Segment Information.

The following summary represents the assets,
liabilities, and equity of Exelon Energy Company, before
intercompany eliminations, that were transferred to Generation
as of January 1, 2004:

|                                              |  |   |     |  
|--------------------------------------------- |  | - | --- | -
|Current assets (including $5 million of cash) |  | $ | 119 |  
|Property, plant and equipment                 |  |   | 2   |  
|Deferred debits and other assets              |  |   | 13  |  
|                                              |  |   |     |  
|Total assets                                  |  | $ | 134 |  
|                                              |  |   |     |  
|Current liabilities                           |  | $ | 126 |  
|Deferred credits and other liabilities        |  |   | 10  |  
|Members equity                               |  |   | (2  | )
|                                              |  |   |     |  
|Total liabilities and members equity         |  | $ | 134 |  
|                                              |  |   |     |  

29



---



##### 



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  (Continued)

See Note 5  Selected Pro Forma
and Consolidating Financial Information for the effect of the
transfer of Exelon Energy Company to Generation as if the
transaction had occurred on January 1, 2003 and was
included in Generations results from that date.



| |                                                        
| | -------------------------------------------------------
| | AmerGen Energy Company, LLC (Exelon and
    Generation)

On December 22, 2003, Generation purchased
British Energy plcs (British Energy) 50% interest in
AmerGen Energy Company, LLC (AmerGen) for $277 million. The
allocation of fair value of long-lived assets will be affected
by the finalization of the purchase price based on the
completion of the review of the closing balances of AmerGen and
the British Energy holding companies that were acquired in this
transaction. Generation and British Energy are currently
negotiating the finalization of the purchase price adjustments
and anticipate completion of these negotiations by the end of
the fourth quarter of 2004.

Prior to the purchase, Generation was a 50% owner
of AmerGen and had accounted for the investment as an
unconsolidated equity method investment. For the three and nine
months ended September 30, 2003, Generation recorded equity
in earnings of unconsolidated affiliates related to its
investment in AmerGen of $47 million and $131 million,
respectively, including income of $47 million
($28 million, net of tax) for the cumulative effect of the
adoption of SFAS 143 on January 1, 2003. Generation
recorded $133 million and $310 million, respectively,
of purchased power from AmerGen for the three and nine months
ended September 30, 2003, respectively. The book value of
Generations investment in AmerGen prior to the purchase
was $311 million. For the three and nine months ended
September 30, 2004, AmerGens assets and liabilities
and results of operations are included in Generations
financial statements.

See Note 5  Selected Pro Forma
and Consolidating Financial Information for the effect of the
acquisition of the remaining 50% interest in AmerGen by
Generation as if the transaction had occurred on January 1,
2003 and was included in Exelon and Generations results
from that date.



| |                                                 
| | ------------------------------------------------
| | Synthetic Fuel-Producing Facilities
    (Exelon)

Synthetic fuel-producing facilities chemically
change coal, including waste and marginal coal, into a fuel used
at power plants. In November 2003, Exelon purchased interests in
two synthetic fuel-producing facilities. The purchase price for
these facilities included a combination of cash, notes payable
and contingent consideration dependent upon the production level
of the facilities. The notes payable recorded for the purchase
of the facilities were $238 million. Exelons right to
acquire its share of tax credits generated by the facilities was
recorded as an intangible asset which is amortized as the tax
credits are earned. In April 2004, the Internal Revenue Service
(IRS) issued two private letter rulings that affirmed that the
process used by the facilities will produce a solid synthetic
fuel that qualifies for tax credits under Section 29 of the
Internal Revenue Code.

In July 2004, Exelon purchased an interest in a
limited partnership that indirectly owns four synthetic
fuel-producing facilities. Exelons purchase price for
these facilities included a combination of cash, a note payable
and contingent consideration dependent upon the production
levels of the facilities. The note payable recorded for the
purchase of the facilities was $22 million. Exelons
right to acquire its share of tax credits generated by the
facilities was recorded as an intangible asset which is
amortized as the tax credits are earned. Private letter rulings
have been received by the partnership that affirm that the
process used by the facilities will produce a solid synthetic
fuel that qualifies for tax credits under Section 29 of the
Internal Revenue Code.

Tax credits generated by the production of
synthetic fuel are subject to a phase-out provision that
gradually reduces tax credits as the annual average wellhead
price per barrel of domestic crude oil increases

30



---



##### 



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  (Continued)

into an inflation-adjusted phase-out range. For
2003, the tax credit would have begun to phase-out when the
annual average wellhead price per barrel of domestic crude oil
exceeded $50.14 per barrel and would have been completely
phased out when the annual average wellhead price per barrel of
domestic crude oil reached $62.94 per barrel. The 2004 and
2005 phase-out range will be calculated using inflation rates
published in 2005 and 2006, respectively, by the Internal
Revenue Service.

Due to the low price of domestic crude oil during
the first part of 2004, the phase-out is not expected to affect
Exelons tax credits or net income from the facilities for
2004. If domestic crude oil prices remain high in 2005, the tax
credits and net income generated by the investments may be
reduced substantially. In addition, Exelon has recorded an
intangible asset related to its investments in these facilities
that could become impaired if domestic crude oil prices continue
to increase in the future. See Note 8 
Intangible Assets for additional information regarding this
intangible asset.

Exelons investments in synthetic
fuel-producing facilities are not consolidated within
Exelons financial statements as Exelon does not have a
controlling financial interest in these facilities. See
Note 12  Income Taxes for information regarding
the effect of these investments in synthetic fuel-producing
facilities on Exelons effective income tax rate.



| |                                                                              
| | -----------------------------------------------------------------------------
| | Assets and Liabilities Held for Sale
    (Exelon, Generation and Enterprises)

During the third quarter of 2004, the remainder
of Sithe assets and liabilities classified as held for sale at
June 30, 2004 were sold. During the second quarter of 2004,
Sithe completed the sale of certain of its gas, hydroelectric,
and the Australian businesses, which represented an aggregate of
$160 million and $143 million of assets and
liabilities held for sale, respectively, at March 31, 2004,
recognizing a gain on the sale of these businesses of
$6 million during the period.

During 2004, Enterprises sold the assets and
liabilities of Thermal and Services that were classified as held
for sale at December 31, 2003. See Disposition of
Enterprises Entities above for additional information
regarding these dispositions.



|   |                              
|-- | -----------------------------
|4. | Sithe (Exelon and Generation)

Sithe is primarily engaged in the ownership and
operation of electric wholesale generating facilities in North
America. At September 30, 2004, Sithe operated nine power
units with total average net capacity of 1,323 megawatts (MW).
Sithe also has a 49.5% interest in TEG, consisting of two 230-MW
projects in Mexico, which commenced commercial operations during
the second quarter of 2004. See Note 19 
Subsequent Events for information on the transfer of
Sithes interests in the two generating facilities in
Mexico to Generation.

On November 25, 2003, Generation, Reservoir
Capital Group (Reservoir) and Sithe completed a series of
transactions resulting in Generation and Reservoir each
indirectly owning a 50% interest in Sithe (Generation owned
49.9% prior to November 25, 2003). See the 2003
Form 10-K for further details regarding these transactions.
Both Generation and Reservoirs 50% interests in Sithe were
subject to put and call options that could result in either
party owning 100% of Sithe.

On September 29, 2004, Generation exercised
its call option to acquire Reservoirs 50% interest in
Sithe for $97 million. The closing of the call is subject
to the receipt of state and Federal regulatory approvals.

31



---



##### 



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  (Continued)

Generations intent is to fully divest its
interest in Sithe, and it is actively pursuing opportunities to
dispose of Sithe. Generation believes that exercising its call
option will provide it with greater certainty of a timely exit
from Sithe on favorable terms and conditions.

Exelon and Generation had accounted for the
investment in Sithe as an unconsolidated equity method
investment prior to its consolidation on March 31, 2004
pursuant to FIN No. 46-R. See Note 2  New
Accounting Principles for further discussion.

As a result of the series of transactions in
November 2003 referred to above, the consolidation of Sithe at
March 31, 2004 was accounted for as a step acquisition
pursuant to purchase accounting policies. Under the provisions
of FIN No. 46-R, the operating results of Sithe were
included in Exelon and Generations results of operations
beginning April 1, 2004.

Sithe has entered into tolling arrangements
(Tolling Agreement) with Dynegy Power Marketing and its
affiliates with respect to Sithes Independence Station.
The Tolling Agreement commenced on July 1, 2001 and runs
through 2014. Additionally, Sithe has entered into an energy
purchase agreement (Energy Purchase Agreement) with Consolidated
Edison Company relating to the Independence Station, which
continues through 2014. As a result of the acquisition
accounting described above, values were assigned to the Tolling
Agreement and the Energy Purchase Agreement on March 31,
2004 of approximately $91 million and $282 million,
respectively, which have been recorded as intangible assets on
Exelons and Generations Consolidated Balance Sheets
in deferred debits and other assets. These amounts were
determined based on fair value techniques utilizing the contract
terms and various other estimates including forward power
prices, discount rates and option pricing models.

The intangible assets representing the Tolling
Agreement and the Energy Purchase Agreement are being amortized
on a straight-line basis over the lives of the associated
agreements. The allocation of fair value related to the
valuation of long-lived assets is preliminary and is anticipated
to be finalized in the fourth quarter of 2004. Sithes
intangible assets are included in other non-current assets on
Generations Consolidated Balance Sheet. See
Note 8  Intangible Assets for further
information regarding Sithes intangible assets as of
September 30, 2004.

In connection with the consolidation of Sithe,
certain indemnification guarantees previously recorded in
accordance with the provisions of FASB Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN No. 45), were reversed in
accordance with FIN No. 45, as Generation can no longer
record liabilities associated with guarantees for the
performance of a consolidated entity. The reversal of the
guarantees resulted in Exelon and Generation recording income of
$32 million (net of $22 million of income taxes) as a
cumulative effect of a change in accounting principle. The
condensed consolidating financial information included in
Note 5  Selected Pro Forma and Consolidating
Financial Information presents the financial position of Exelon,
Generation and Sithe, as well as consolidating entries related
primarily to acquisition notes payable and receivables between
Generation and Sithe.

The book value of Generations investment in
Sithe immediately prior to its consolidation on March 31,
2004 was $49 million. For the three months ended
September 30, 2004, Generation recorded no equity method
income or loss as Sithe is consolidated in Generations
results. Generation recorded $2 million of equity method
losses in the first quarter of 2004 prior to the consolidation
of Sithes results of operations. Generation recorded
equity method income related to Sithe of $6 million for the
three and nine months ended September 30, 2003,
respectively.

32



---



##### 



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  (Continued)

Substantially all of Sithes property, plant
and equipment and project agreements secure Sithes
outstanding long-term debt, which consists primarily of project
debt. During 2003, Sithe entered into an agreement with Exelon
and Generation under which Exelon would obtain letters of credit
to support contractual obligations of Sithe and its
subsidiaries. As of September 30, 2004, Exelon has obtained
$59 million of letters of credit in support of Sithes
obligations not including the $50 million letter of credit
that is not guaranteed by Exelon. With the exception of the
issuance of letters of credit to support contractual
obligations, the creditors of Sithe have no recourse against the
general credit of Exelon or Generation.

The following table details the Sithe balance
sheet classification of mark-to-market energy contract net
assets recorded as of September 30, 2004:

|                                                |                                                  |   |      |      |  
|----------------------------------------------- | ------------------------------------------------ | - | ---- | ---- | -
|Current assets                                  |                                                  | $ | 25   |     
|Non-current assets                              |                                                  |   | 238  |     
|                                                |                                                  |   |      |     
|                                                | Total mark-to-market energy contract assets      |   |      | 263  |  
|                                                |                                                  |   |      |     
|Current liabilities                             |                                                  |   | (13  | )   
|Non-current liabilities                         |                                                  |   | (141 | )   
|                                                |                                                  |   |      |     
|                                                | Total mark-to-market energy contract liabilities |   |      | (154 | )
|                                                |                                                  |   |      |     
|Total mark-to-market energy contract net assets |                                                  | $ | 109  |     
|                                                |                                                  |   |      |     

The financial statements of Sithes foreign
subsidiaries were prepared in their respective local currencies
and translated into U.S. dollars based on the current
exchange rates at the end of the periods for the Consolidated
Balance Sheets and on weighted-average rates for the periods for
the Consolidated Statements of Income and Comprehensive Income.
Foreign currency translation adjustments, net of deferred income
tax benefits, are reflected as a component of other
comprehensive income on the Consolidated Statements of Income
and Comprehensive Income and accordingly have no effect on net
income.



|   |                                                               
|-- | --------------------------------------------------------------
|5. | Selected Pro Forma and Consolidating Financial
    Information



| |       
| | ------
| | Exelon

The following unaudited pro forma financial
information gives effect to the acquisition of the remaining 50%
interest in AmerGen by Generation and the sale of Boston
Generating by Generation, in each case, as if the transaction
had occurred on January 1, 2003 and was included in or
excluded from Exelons results from that date.

|                                                                               |  |             |        |             |  |            |     |             |  |              |      |   |  |   |      |   |  |  |        | 
|------------------------------------------------------------------------------ |  | ----------- | ------ | ----------- |  | ---------- | --- | ----------- |  | ------------ | ---- | - |  | - | ---- | - |  |  | ------ | 
|                                                                               |  |             |        | Acquisition |  | Sale of    |     |             |  | Pro Forma   
|                                                                               |  | Exelon      |        | of 50% of   |  | Boston     |     | Eliminating |  | Exelon      
|Three Months Ended September 30, 2003                                          |  | As Reported |        | AmerGen     |  | Generating |     | Entries(a)  |  | Consolidated
|                                                                               |  |             |        |             |  |            |     |             |  |             
|Total operating revenues                                                       |  |             | $4,441 |             |  | $          | 222 |             |  | $            | 224  |   |  | $ | (133 | ) |  |  | $4,306 | 
|Operating income (loss)                                                        |  |             | 6      |             |  |            | 87  |             |  |              | (962 | ) |  |   |     |   |  |  | 1,055  | 
|Income (loss) before cumulative effect of changes
    in accounting principles |  |             | (102   | )           |  |            | 96  |             |  |              | (581 | ) |  |   | (47  | ) |  |  | 528    | 



---



|    |                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------
|(a) | Represents the elimination of intercompany
    revenues at AmerGen and equity in earnings from AmerGen in 2003.

33



---



##### 



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  (Continued)

|                                                                        |  |             |        |             |  |            |     |             |  |              |      |   |  |   |      |   |  |   |        | 
|----------------------------------------------------------------------- |  | ----------- | ------ | ----------- |  | ---------- | --- | ----------- |  | ------------ | ---- | - |  | - | ---- | - |  | - | ------ | 
|                                                                        |  |             |        | Acquisition |  | Sale of    |     |             |  | Pro Forma   
|                                                                        |  | Exelon      |        | of 50% of   |  | Boston     |     | Eliminating |  | Exelon      
|Nine Months Ended September 30, 2003                                    |  | As Reported |        | AmerGen     |  | Generating |     | Entries(a)  |  | Consolidated
|                                                                        |  |             |        |             |  |            |     |             |  |             
|Total operating revenues                                                |  | $           | 12,236 |             |  | $          | 529 |             |  | $            | 407  |   |  | $ | (310 | ) |  | $ | 12,048 | 
|Operating income (loss)                                                 |  |             | 1,615  |             |  |            | 146 |             |  |              | (944 | ) |  |   |     |   |  |   | 2,705  | 
|Income before cumulative effect of changes in
    accounting principles |  |             | 519    |             |  |            | 168 |             |  |              | (572 | ) |  |   | (84  | ) |  |   | 1,175  | 



---



|    |                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------
|(a) | Represents the elimination of intercompany
    revenues at AmerGen and equity in earnings from AmerGen in 2003.

The above unaudited pro-forma financial
information should not be relied upon as being indicative of the
historical results that would have been obtained if the
transactions had actually occurred on January 1, 2003, nor
of the results that might be obtained in the future.



| |                                                                       
| | ----------------------------------------------------------------------
| | Exelon Condensed Consolidating Balance
    Sheet at September 30, 2004

The following condensed consolidating financial
information presents the financial position of Exelon and Sithe,
as well as eliminating entries, related primarily to acquisition
notes payable and receivables between Generation and Sithe.

|                                           |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|------------------------------------------ |  | ------ | ------ | ----- |  | ----------- | ----- | ------------- |  | - | ---- | - |  | - | ------ | 
|                                           |  |        |        |       |  |             |       | Exelon       
|                                           |  |        |        |       |  | Eliminating |       | Consolidated 
|September 30, 2004                         |  | Exelon |        | Sithe |  | Entries     |       | (As Reported)
|                                           |  |        |        |       |  |             |       |              
|Assets                                     |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|Current assets                             |  | $      | 3,933  |       |  | $           | 282   |               |  | $ | (161 | ) |  | $ | 4,054  | 
|Property, plant and equipment, net         |  |        | 20,452 |       |  |             | 272   |               |  |   |     |   |  |   | 20,724 | 
|Other non-current assets                   |  |        | 16,553 |       |  |             | 770   |               |  |   | (42  | ) |  |   | 17,281 | 
|                                           |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|Total assets                               |  | $      | 40,938 |       |  | $           | 1,324 |               |  | $ | (203 | ) |  | $ | 42,059 | 
|                                           |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|                                          
|Liabilities and shareholders
    equity   |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|Current liabilities                        |  | $      | 4,418  |       |  | $           | 248   |               |  | $ | (161 | ) |  | $ | 4,505  | 
|Long-term debt                             |  |        | 11,953 |       |  |             | 803   |               |  |   |     |   |  |   | 12,756 | 
|Other long-term liabilities(a)             |  |        | 14,934 |       |  |             | 179   |               |  |   | 52   |   |  |   | 15,165 | 
|Shareholders equity(b)                    |  |        | 9,633  |       |  |             | 94    |               |  |   | (94  | ) |  |   | 9,633  | 
|                                           |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 
|Total liabilities and shareholders equity |  | $      | 40,938 |       |  | $           | 1,324 |               |  | $ | (203 | ) |  | $ | 42,059 | 
|                                           |  |        |        |       |  |             |       |               |  |   |      |   |  |   |        | 



---



|    |                                                             
|--- | ------------------------------------------------------------
|(a) | Includes minority interest in consolidated
    subsidiaries.



|    |                                               
|--- | ----------------------------------------------
|(b) | Includes preferred securities of subsidiaries.

34



---



##### 



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  (Continued)



| |           
| | ----------
| | Generation

The following unaudited pro forma financial
information gives effect to the acquisition of the remaining 50%
interest in AmerGen, the transfer of Exelon Energy Company to
Generation and the sale of Boston Generating, in each case, as
if the transaction had occurred on January 1, 2003 and was
included in or excluded from Generations results from that
date.

|                                                                               |  |             |       |             |  |             |     |             |  |              |      |   |  |   |      |   |  |   |       | 
|------------------------------------------------------------------------------ |  | ----------- | ----- | ----------- |  | ----------- | --- | ----------- |  | ------------ | ---- | - |  | - | ---- | - |  | - | ----- | 
|                                                                               |  |             |       |             |  |             |     |             |  | Pro Forma   
|                                                                               |  | Generation  |       | Businesses  |  | Businesses  |     | Eliminating |  | Generation  
|Three Months Ended September 30, 2003                                          |  | As Reported |       | Acquired(a) |  | Disposed(b) |     | Entries(c)  |  | Consolidated
|                                                                               |  |             |       |             |  |             |     |             |  |             
|Total operating revenue                                                        |  | $           | 2,537 |             |  | $           | 368 |             |  | $            | 224  |   |  | $ | (186 | ) |  | $ | 2,495 | 
|Operating income (loss)                                                        |  |             | (683  | )           |  |             | 82  |             |  |              | (962 | ) |  |   |     |   |  |   | 361   | 
|Income (loss) before cumulative effect of changes
    in accounting principles |  |             | (428  | )           |  |             | 93  |             |  |              | (581 | ) |  |   | (47  | ) |  |   | 199   | 



---



|    |                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|(a) | Consists of the acquisition of the remaining 50%
    interest in AmerGen and the transfer of Exelon Energy Company to
    Generation.



|    |                                           
|--- | ------------------------------------------
|(b) | Consists of the sale of Boston Generating.



|    |                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|(c) | Represents the elimination of intercompany
    revenues at AmerGen and Exelon Energy and equity in earnings
    from AmerGen in 2003.

|                                                                               |  |             |       |             |  |             |       |             |  |              |      |   |  |   |      |   |  |   |       | 
|------------------------------------------------------------------------------ |  | ----------- | ----- | ----------- |  | ----------- | ----- | ----------- |  | ------------ | ---- | - |  | - | ---- | - |  | - | ----- | 
|                                                                               |  |             |       |             |  |             |       |             |  | Pro Forma   
|                                                                               |  | Generation  |       | Businesses  |  | Businesses  |       | Eliminating |  | Generation  
|Nine Months Ended September 30, 2003                                           |  | As Reported |       | Acquired(a) |  | Disposed(b) |       | Entries(c)  |  | Consolidated
|                                                                               |  |             |       |             |  |             |       |             |  |             
|Total operating revenue                                                        |  | $           | 6,301 |             |  | $           | 1,180 |             |  | $            | 407  |   |  | $ | (472 | ) |  | $ | 6,602 | 
|Operating income (loss)                                                        |  |             | (335  | )           |  |             | 128   |             |  |              | (944 | ) |  |   |     |   |  |   | 737   | 
|Income (loss) before cumulative effect of changes
    in accounting principles |  |             | (339  | )           |  |             | 156   |             |  |              | (572 | ) |  |   | (84  | ) |  |   | 305   | 



---



|    |                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|(a) | Consists of the acquisition of the remaining 50%
    interest in AmerGen and the transfer of Exelon Energy Company to
    Generation.



|    |                                           
|--- | ------------------------------------------
|(b) | Consists of the sale of Boston Generating.



|    |                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|(c) | Represents the elimination of intercompany
    revenues at AmerGen and Exelon Energy and equity in earnings
    from AmerGen in 2003.

The above unaudited, pro forma financial
information should not be relied upon as being indicative of the
historical results that would have been obtained if these
transactions had actually occurred on January 1, 2003, nor
of the results that might be obtained in the future.

35



---



##### 



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  (Continued)



| |                                                                           
| | --------------------------------------------------------------------------
| | Generation Condensed Consolidating Balance
    Sheet at September 30, 2004

The following condensed consolidating financial
information presents the financial position of Generation, Sithe
and Exelon Energy, as well as eliminating entries related
primarily to acquisition notes payable and receivables between
Generation and Sithe.

|                                      |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|------------------------------------- |  | ---------- | ------ | ----- |  | ------ | ----- | ----------- |  | ------------- | -- |  |  | - | ---- | - |  | - | ------ | 
|                                      |  |            |        |       |  |        |       |             |  | Generation   
|                                      |  |            |        |       |  | Exelon |       | Eliminating |  | Consolidated 
|September 30, 2004                    |  | Generation |        | Sithe |  | Energy |       | Entries     |  | (As Reported)
|                                      |  |            |        |       |  |        |       |             |  |              
|Assets                                |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|Current assets                        |  | $          | 2,129  |       |  | $      | 282   |             |  | $             | 75 |  |  | $ | (176 | ) |  | $ | 2,310  | 
|Property, plant and equipment, net    |  |            | 6,641  |       |  |        | 272   |             |  |               | 1  |  |  |   |     |   |  |   | 6,914  | 
|Other non-current assets              |  |            | 5,521  |       |  |        | 770   |             |  |               | 11 |  |  |   | (42  | ) |  |   | 6,260  | 
|                                      |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|Total assets                          |  | $          | 14,291 |       |  | $      | 1,324 |             |  | $             | 87 |  |  | $ | (218 | ) |  | $ | 15,484 | 
|                                      |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|                                     
|Liabilities and members equity       |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|Current liabilities                   |  | $          | 1,934  |       |  | $      | 248   |             |  | $             | 69 |  |  | $ | (176 | ) |  | $ | 2,075  | 
|Long-term debt                        |  |            | 1,641  |       |  |        | 803   |             |  |               |   |  |  |   |     |   |  |   | 2,444  | 
|Other long-term liabilities(a)        |  |            | 7,399  |       |  |        | 179   |             |  |               | 5  |  |  |   | 52   |   |  |   | 7,635  | 
|Members equity                       |  |            | 3,317  |       |  |        | 94    |             |  |               | 13 |  |  |   | (94  | ) |  |   | 3,330  | 
|                                      |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 
|Total liabilities and members equity |  | $          | 14,291 |       |  | $      | 1,324 |             |  | $             | 87 |  |  | $ | (218 | ) |  | $ | 15,484 | 
|                                      |  |            |        |       |  |        |       |             |  |               |    |  |  |   |      |   |  |   |        | 



---



|    |                                                             
|--- | ------------------------------------------------------------
|(a) | Includes minority interest in consolidated
    subsidiaries.

36



---



##### 



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  (Continued)



|   |                                                                   
|-- | ------------------------------------------------------------------
|6. | Stock-Based Compensation (Exelon, ComEd, PECO,
    and Generation)

Exelon accounts for its stock-based compensation
plans under the intrinsic method prescribed by Accounting
Principles Board No. 25, Accounting for Stock Issued
to Employees and related interpretations and follows the
disclosure requirements of SFAS No. 123,
Accounting for Stock-Based Compensation
(SFAS No. 123), and SFAS No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure  an amendment of FASB
Statement No. 123. Accordingly, no compensation
expense for stock options has been recognized within the
Consolidated Statements of Income and Comprehensive Income. The
tables below show the effect on net income and earnings per
share for Exelon had Exelon elected to account for its
stock-based compensation plans using the fair-value method under
SFAS No. 123 for the three and nine months ended
September 30, 2004 and 2003:



| |       
| | ------
| | Exelon

|                                                                                                                              |                                       |               |     |      |  |   |      |       |  
|----------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | ------------- | --- | ---- |  | - | ---- | ----- | -
|                                                                                                                              |                                       |              
|                                                                                                                              |                                       | Three Months 
|                                                                                                                              |                                       | Ended        
|                                                                                                                              |                                       | September 30,
|                                                                                                                              |                                       |              
|                                                                                                                              |                                       | 2004          |     | 2003
|                                                                                                                              |                                       |               |     |     
|Net income (loss)  as reported                                                                                               |                                       | $             | 568 |      |  | $ | (102 | )    
|Deduct: Total stock-based compensation expense
    determined under fair-value method for all awards, net of income
    taxes |                                       |               | (5  | )    |  |   | (5   | )    
|                                                                                                                              |                                       |               |     |      |  |   |      |      
|Pro forma net income (loss)                                                                                                   |                                       | $             | 563 |      |  | $ | (107 | )    
|                                                                                                                              |                                       |               |     |      |  |   |      |      
|Earnings per share:                                                                                                           |                                       |               |     |      |  |   |      |      
|                                                                                                                              | Basic earnings (loss)  as reported   |               | $   | 0.86 |  |   | $    | (0.16 | )
|                                                                                                                              | Basic earnings (loss)  pro forma     |               | $   | 0.85 |  |   | $    | (0.16 | )
|                                                                                                                              | Diluted earnings (loss)  as reported |               | $   | 0.85 |  |   | $    | (0.16 | )
|                                                                                                                              | Diluted earnings (loss)  pro forma   |               | $   | 0.84 |  |   | $    | (0.16 | )

|                                                                                                                              |                       |               |       |      |  |   |     |      | 
|----------------------------------------------------------------------------------------------------------------------------- | --------------------- | ------------- | ----- | ---- |  | - | --- | ---- | 
|                                                                                                                              |                       |              
|                                                                                                                              |                       | Nine Months  
|                                                                                                                              |                       | Ended        
|                                                                                                                              |                       | September 30,
|                                                                                                                              |                       |              
|                                                                                                                              |                       | 2004          |       | 2003
|                                                                                                                              |                       |               |       |     
|Net income  as reported                                                                                                      |                       | $             | 1,501 |      |  | $ | 631 |     
|Deduct: Total stock-based compensation expense
    determined under fair-value method for all awards, net of income
    taxes |                       |               | (15   | )    |  |   | (16 | )   
|                                                                                                                              |                       |               |       |      |  |   |     |     
|Pro forma net income                                                                                                          |                       | $             | 1,486 |      |  | $ | 615 |     
|                                                                                                                              |                       |               |       |      |  |   |     |     
|Earnings per share:                                                                                                           |                       |               |       |      |  |   |     |     
|                                                                                                                              | Basic  as reported   |               | $     | 2.27 |  |   | $   | 0.97 | 
|                                                                                                                              | Basic  pro forma     |               | $     | 2.25 |  |   | $   | 0.95 | 
|                                                                                                                              | Diluted  as reported |               | $     | 2.25 |  |   | $   | 0.96 | 
|                                                                                                                              | Diluted  pro forma   |               | $     | 2.23 |  |   | $   | 0.94 | 

The net income (loss) of ComEd, PECO and
Generation for the three and nine months ended
September 30, 2004 and 2003 would not have been
significantly affected had Exelon elected to account for its
stock-based compensation plans using the fair-value method under
SFAS No. 123.

37



---



##### 



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  (Continued)



|   |                                                     
|-- | ----------------------------------------------------
|7. | Regulatory Issues (Exelon, ComEd and
    Generation)



| |                 
| | ----------------
| | Exelon and ComEd

PJM Integration.On
June 2, 2003, ComEd began receiving electric transmission
reservation services from PJM and transferred control of
ComEds Open Access Same Time Information System to PJM. On
April 27, 2004, the FERC issued its order approving
ComEds application to complete its integration into PJM,
subject to certain stipulations, including a provision to hold
certain utilities in Michigan and Wisconsin harmless from the
impacts of ComEd joining PJM. ComEd agreed to these stipulations
and fully integrated into PJM on May 1, 2004. In October
2004, ComEd entered into settlement agreements with nearly all
the Michigan parties calling for a payment of approximately
$2 million by ComEd. The agreements have been filed with
the FERC and are awaiting approval. Settlement talks continue
between ComEd and the remaining Wisconsin parties.

Open Access Transmission
Tariff.On November 10, 2003, the
FERC issued an order allowing ComEd to put into effect, subject
to refund and hearing, new transmission rates designed to
reflect nearly $500 million of infrastructure investments
made since 1998. During the third quarter of 2004, a settlement
agreement was reached and approved by the FERC, on an interim
basis, which established new wholesale rates that became
effective May 1, 2004. The FERC has allowed the proposed
rates in the settlement agreement pending its final approval.
However, because of the Illinois retail rate freeze and the
method for calculating competitive transition charges, the
increase is not expected to have a significant effect on
operating revenues until after December 31, 2006.

Competitive Service
Declaration.On November 14,
2002, the Illinois Commerce Commission (ICC) allowed ComEd,
by operation of law, to revise its provider of last resort
obligation to be the back-up energy supplier at market-based
rates for customers with energy demands of at least three
megawatts. About 370 of ComEds largest energy customers
are affected, representing an aggregate supply obligation or
load of approximately 2,500 megawatts. These customers accounted
for 10% of ComEds 2003 MWh deliveries. These
customers will not have a right to take bundled service after
June 2006 or to come back to bundled rates if they choose an
alternative supplier prior to June 2006. The parties to the
March 2003 Agreement have committed, if specified market
conditions exist, not to oppose a process for achieving a
similar competitive declaration for customers having energy
demands of one to three megawatts. To date, ComEd has not
requested the competitive declaration for this second set of
customers but continues to evaluate its options.

On March 28, 2003, the ICC approved changes
to ComEds real-time pricing tariff, to be available to
customers who choose not to go to the competitive market to
procure their electric power and energy. An appeal to each of
the ICCs orders was filed. On March 24, 2004, the
Illinois Appellate Court issued its opinion affirming the
ICCs orders in both cases. The Court found that the ICC
properly allowed ComEds competitive declaration for
customers with loads of more than three megawatts to go into
effect and that the ICCs order approving the hourly rate
was lawful.



| |                      
| | ---------------------
| | Exelon and Generation

Service Life
Extension.Upon the acquisition of
AmerGen, Generation changed the accounting estimates related to
the depreciation of certain AmerGen generating facilities to
conform with Generations depreciation policies. The
estimated service lives were extended by 20 years for the
three AmerGen stations. These changes were based on engineering
and economic feasibility analyses performed by Generation. The
service life extensions are subject to approval by the Nuclear
Regulatory Commission (NRC) of extensions of the existing
NRC operating licenses. Generation has not applied for license
extensions at the AmerGen

38



---



##### 



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  (Continued)

facilities, but has announced its plan to file an
extension request for the Oyster Creek Nuclear Generating
Station (Oyster Creek), and is planning on filing for license
extensions at Unit 1 at the Three Mile Island Nuclear Station
(TMI) and the Clinton Nuclear Power Station (Clinton) on a
timeline consistent and integrated with the other planned
extension filings for the Generation nuclear fleet.



|   |                                                     
|-- | ----------------------------------------------------
|8. | Intangible Assets (Exelon, ComEd and
    Generation)



| |       
| | ------
| | Exelon

Goodwill.As of
September 30, 2004 and December 31, 2003, Exelon had
recorded goodwill of approximately $4.7 billion. Under the
provisions of SFAS No. 142, goodwill is tested for
impairment at least annually, or more frequently if events or
circumstances indicate that goodwill might be impaired. Exelon
will perform its annual goodwill impairment assessment in the
fourth quarter of 2004. The changes in the carrying amount of
goodwill by reportable segment (see Note 17 
Segment Information for further information regarding
Exelons segments) for the periods ended September 30,
2004 and December 31, 2003 were as follows:

|                                  |                                                         |          |       |             |   |       |     |   |  |   |       |      |  
|--------------------------------- | ------------------------------------------------------- | -------- | ----- | ----------- | - | ----- | --- | - |  | - | ----- | ---- | -
|                                  |                                                         | Energy   |       |             |   |      
|                                  |                                                         | Delivery |       | Enterprises |   | Total
|                                  |                                                         |          |       |             |   |      
|Balances as of January 1, 2003    |                                                         | $        | 4,916 |             |   | $     | 76  |   |  | $ | 4,992 |     
|Impairment losses                 |                                                         |          |      |             |   |       | (72 | ) |  |   | (72   | )   
|Adoption of SFAS No. 143:(a)      |                                                         |          |       |             |   |       |     |   |  |   |       |     
|                                  | Reduction of asset retirement obligation                |          |       | (210        | ) |       |     |  |  |   |       | (210 | )
|                                  | Cumulative effect of change in accounting
    principle |          |       | 5           |   |       |     |  |  |   |       | 5    |  
|Resolution of certain tax matters |                                                         |          | 8     |             |   |       |    |   |  |   | 8     |     
|Other                             |                                                         |          |      |             |   |       | (4  | ) |  |   | (4    | )   
|                                  |                                                         |          |       |             |   |       |     |   |  |   |       |     
|Balances as of December 31, 2003  |                                                         |          | 4,719 |             |   |       |    |   |  |   | 4,719 |     
|Resolution of certain tax matters |                                                         |          | (9    | )           |   |       |    |   |  |   | (9    | )   
|Other                             |                                                         |          | (3    | )           |   |       |    |   |  |   | (3    | )   
|                                  |                                                         |          |       |             |   |       |     |   |  |   |       |     
|Balances as of September 30, 2004 |                                                         | $        | 4,707 |             |   | $     |    |   |  | $ | 4,707 |     
|                                  |                                                         |          |       |             |   |       |     |   |  |   |       |     



---



|    |  |                                                                                                                                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | See Notes to Consolidated Financial Statements of
    Exelon in the 2003 Form 10-K for information regarding the
    adoption of SFAS No. 143.

39



---



##### 



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  (Continued)

Other Intangible
Assets.Exelons other intangible
assets, included in deferred debits and other assets, other,
consisted of the following:

|                                  |                               |                    |     |                   |  |     |     |       |   |              |     |     |  |   |     |     |  |   |    |    |   |   |     |     | 
|--------------------------------- | ----------------------------- | ------------------ | --- | ----------------- |  | --- | --- | ----- | - | ------------ | --- | --- |  | - | --- | --- |  | - | -- | -- | - | - | --- | --- | 
|                                  |                               |                    |     |                  
|                                  |                               | September 30, 2004 |     | December 31, 2003
|                                  |                               |                    |     |                  
|                                  |                               |                    |     | Accumulated       |  |     |     |       |   | Accumulated  |     |    
|                                  |                               | Gross              |     | Amortization      |  | Net |     | Gross |   | Amortization |     | Net
|                                  |                               |                    |     |                   |  |     |     |       |   |              |     |    
|Amortized intangible assets:      |                               |                    |     |                   |  |     |     |       |   |              |     |     |  |   |     |     |  |   |    |    |   |   |     |    
|                                  | Energy purchase agreement(a)  |                    | $   | 384               |  |     | $   | (18   | ) |              | $   | 366 |  |   | $   |    |  |   | $  |   |   |   | $   |    | 
|                                  | Tolling agreement(a)          |                    |     | 73                |  |     |     | (3    | ) |              |     | 70  |  |   |     |    |  |   |    |   |   |   |     |    | 
|                                  | Synthetic fuel investments(b) |                    |     | 264               |  |     |     | (40   | ) |              |     | 224 |  |   |     | 241 |  |   |    | (4 | ) |   |     | 237 | 
|                                  | Other                         |                    |     | 6                 |  |     |     | (5    | ) |              |     | 1   |  |   |     | 6   |  |   |    |   |   |   |     | 6   | 
|                                  |                               |                    |     |                   |  |     |     |       |   |              |     |     |  |   |     |     |  |   |    |    |   |   |     |    
|Total amortized intangible assets |                               |                    | 727 |                   |  |     | (66 | )     |   |              | 661 |     |  |   | 247 |     |  |   | (4 | )  |   |   | 243 |    
|                                  |                               |                    |     |                   |  |     |     |       |   |              |     |     |  |   |     |     |  |   |    |    |   |   |     |    
|Other intangible assets:          |                               |                    |     |                   |  |     |     |       |   |              |     |     |  |   |     |     |  |   |    |    |   |   |     |    
|                                  | Intangible pension asset      |                    |     | 186               |  |     |     |      |   |              |     | 186 |  |   |     | 186 |  |   |    |   |   |   |     | 186 | 
|                                  |                               |                    |     |                   |  |     |     |       |   |              |     |     |  |   |     |     |  |   |    |    |   |   |     |    
|Total                             |                               | $                  | 913 |                   |  | $   | (66 | )     |   | $            | 847 |     |  | $ | 433 |     |  | $ | (4 | )  |   | $ | 429 |    
|                                  |                               |                    |     |                   |  |     |     |       |   |              |     |     |  |   |     |     |  |   |    |    |   |   |     |    



---



|    |  |                                                                                                                                                                              
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | See Note 4  Sithe for a
    description of Sithes intangible assets.                                                                                                       
|   
|(b) |  | See Note 3  Acquisitions and
    Dispositions for a description of Exelons right to acquire
    tax credits through investments in synthetic fuel-producing
    facilities.

Amortization expense related to these intangible
assets was $21 million and $62 million for the three
and nine months ended September 30, 2004, respectively, of
which $8 million and $26 million for the three and
nine months ended September 30, 2004, respectively, have
been reflected as a reduction in revenues related to the energy
purchase agreement and the tolling agreement. Amortization
expense was not significant in 2003. Amortization expense
related to these intangible assets is expected to be in the
range of $100 million to $120 million annually from
2005 through 2007 and approximately $50 million in 2008.



| |      
| | -----
| | ComEd

Goodwill.As of
September 30, 2004 and December 31, 2003, ComEd had
recorded goodwill of approximately $4.7 billion. Under the
provisions of SFAS No. 142, goodwill is tested for
impairment at least annually, or more frequently if events or
circumstances indicate that goodwill might be impaired. ComEd
will perform its annual goodwill impairment assessment in the
fourth quarter of 2004. The changes in the carrying amount of
goodwill for the periods ended September 30, 2004 and
December 31, 2003 were as follows:

|                                  |                                                         |   |       |      |  
|--------------------------------- | ------------------------------------------------------- | - | ----- | ---- | -
|Balance as of January 1, 2003     |                                                         | $ | 4,916 |     
|Adoption of SFAS No. 143:(a)      |                                                         |   |       |     
|                                  | Reduction of asset retirement obligation                |   |       | (210 | )
|                                  | Cumulative effect of change in accounting
    principle |   |       | 5    |  
|Resolution of certain tax matters |                                                         |   | 8     |     
|                                  |                                                         |   |       |     
|Balance as of December 31, 2003   |                                                         |   | 4,719 |     
|Resolution of certain tax matters |                                                         |   | (9    | )   
|Other                             |                                                         |   | (3    | )   
|                                  |                                                         |   |       |     
|Balance as of September 30, 2004  |                                                         | $ | 4,707 |     
|                                  |                                                         |   |       |     

40



---



##### 



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  (Continued)



---



|    |  |                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | See Notes to Consolidated Financial Statements of
    ComEd in the 2003 Form 10-K for information regarding the
    adoption of SFAS No. 143.



| |           
| | ----------
| | Generation

Other Intangible
Assets.Generations other
intangible assets consisted of the following:

|                                  |                              |                    |     |                   |  |     |     |       |   |              |     |     |  |   |   |   |  |   |   |   |  |   |   |   | 
|--------------------------------- | ---------------------------- | ------------------ | --- | ----------------- |  | --- | --- | ----- | - | ------------ | --- | --- |  | - | - | - |  | - | - | - |  | - | - | - | 
|                                  |                              |                    |     |                  
|                                  |                              | September 30, 2004 |     | December 31, 2003
|                                  |                              |                    |     |                  
|                                  |                              |                    |     | Accumulated       |  |     |     |       |   | Accumulated  |     |    
|                                  |                              | Gross              |     | Amortization      |  | Net |     | Gross |   | Amortization |     | Net
|                                  |                              |                    |     |                   |  |     |     |       |   |              |     |    
|Amortized intangible assets:      |                              |                    |     |                   |  |     |     |       |   |              |     |     |  |   |   |   |  |   |   |   |  |   |   |  
|                                  | Energy purchase agreement(a) |                    | $   | 384               |  |     | $   | (18   | ) |              | $   | 366 |  |   | $ |  |  |   | $ |  |  |   | $ |  | 
|                                  | Tolling agreement(a)         |                    |     | 73                |  |     |     | (3    | ) |              |     | 70  |  |   |   |  |  |   |   |  |  |   |   |  | 
|                                  | Other                        |                    |     | 6                 |  |     |     | (5    | ) |              |     | 1   |  |   |   | 6 |  |   |   |  |  |   |   | 6 | 
|                                  |                              |                    |     |                   |  |     |     |       |   |              |     |     |  |   |   |   |  |   |   |   |  |   |   |  
|Total amortized intangible assets |                              | $                  | 463 |                   |  | $   | (26 | )     |   | $            | 437 |     |  | $ | 6 |   |  | $ |  |   |  | $ | 6 |  
|                                  |                              |                    |     |                   |  |     |     |       |   |              |     |     |  |   |   |   |  |   |   |   |  |   |   |  



---



|    |  |                                                                       
|--- |  | ----------------------------------------------------------------------
|(a) |  | See Note 4  Sithe for a
    description of Sithes intangible assets.

Amortization expense related to Generations
intangible assets was $8 million and $26 million for
the three and nine months ended September 30, 2004, which
has been reflected as a reduction in revenue. Amortization
expense was not significant in 2003. Amortization expense
related to these intangible assets is expected to be
$43 million annually from 2005 through 2009.



|   |                                                        
|-- | -------------------------------------------------------
|9. | Long-Term Debt (Exelon, ComEd, PECO and
    Generation)



| |                                                         
| | --------------------------------------------------------
| | Credit Facility (Exelon, ComEd, PECO and
    Generation)

At December 31, 2003, Exelon Corporate,
along with ComEd, PECO and Generation, participated in a
$750 million 364-day unsecured revolving credit agreement
and a $750 million three-year unsecured revolving credit
agreement with a group of banks. On July 16, 2004, the
$750 million 364-day facility was replaced with a
$1 billion five-year facility and the $750 million
three-year facility was reduced to $500 million. The terms
of the new facilities are consistent with the previous
facilities. Both revolving credit agreements are used
principally to support the commercial paper programs at Exelon
Corporate, ComEd, PECO and Generation and to issue letters of
credit.



| |                                      
| | -------------------------------------
| | Boston Generating Credit
    Facility

Approximately $1.0 billion of debt was
outstanding under the non-recourse Boston Generating Credit
Facility at December 31, 2003, all of which was reflected
in the Consolidated Balance Sheets of Exelon and Generation as a
current liability due to certain events of default under the
Boston Generating Credit Facility.

The outstanding debt under the Boston Generating
Credit Facility was eliminated from the financial statements of
Exelon and Generation upon the sale of Generations
ownership interest in Boston Generating in May 2004. See
Note 3  Acquisitions and Dispositions for
additional information regarding the sale.

41



---



##### 



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  (Continued)



| |               
| | --------------
| | Long-Term Debt

Issuance of Long-Term
Debt.During the nine months ended
September 30, 2004, the following long-term debt was issued:

|        |                 |                      |  |          |       |          |  |        |                  |  |  |   |    |  | 
|------- | --------------- | -------------------- |  | -------- | ----- | -------- |  | ------ | ---------------- |  |  | - | -- |  | 
|        |                 |                      |  | Interest |       |          |  |       
|Company |                 | Type                 |  | Rate     |       | Maturity |  | Amount
|        |                 |                      |  |          |       |          |  |       
|PECO    |                 | First Mortgage Bonds |  |          | 5.90% |          |  |        | May 1, 2034      |  |  | $ | 75 | 
|Exelon  |                 | Note                 |  |          | 6.00% |          |  |        | January 15, 2008 |  |  |   | 22 | 
|        |                 |                      |  |          |       |          |  |        |                  |  |  |   |    | 
|        | Total issuances |                      |  |          | $     | 97       | 
|        |                 |                      |  |          |       |         

Debt Retirements.During the nine months ended September 30, 2004, the
following debt was retired, either through redemption or payment
at maturity:

|                  |  |      |                                    |               |  |          |       |        |  |  |                  |  |  |   |     | 
|----------------- |  | ---- | ---------------------------------- | ------------- |  | -------- | ----- | ------ |  |  | ---------------- |  |  | - | --- | 
|Company           |  | Type |                                    | Interest Rate |  | Maturity |       | Amount
|                  |  |      |                                    |               |  |          |       |       
|ComEd             |  |      | Note                               |               |  |          | 7.375 | %      |  |  | January 15, 2004 |  |  | $ | 150 | 
|ComEd             |  |      | Note                               |               |  |          | 7.625 | %      |  |  | January 15, 2007 |  |  |   | 5   | 
|ComEd             |  |      | Note                               |               |  |          | 6.95  | %      |  |  | July 15, 2018    |  |  |   | 85  | 
|ComEd             |  |      | Pollution Control Revenue Bonds    |               |  |          | 5.30  | %      |  |  | January 15, 2004 |  |  |   | 26  | 
|ComEd             |  |      | Pollution Control Revenue Bonds    |               |  |          | 5.70  | %      |  |  | January 15, 2009 |  |  |   | 4   | 
|ComEd             |  |      | Pollution Control Revenue Bonds    |               |  |          | 5.85  | %      |  |  | January 15, 2014 |  |  |   | 3   | 
|ComEd             |  |      | Sinking Fund Debentures            |               |  |          | 3.125 | %      |  |  | April 1, 2004    |  |  |   | 1   | 
|ComEd             |  |      | Sinking Fund Debentures            |               |  |          | 3.875 | %      |  |  | July 1, 2004     |  |  |   | 1   | 
|ComEd             |  |      | Sinking Fund Debentures            |               |  |          | 4.625 | %      |  |  | July 1, 2004     |  |  |   | 1   | 
|ComEd             |  |      | Sinking Fund Debentures            |               |  |          | 4.75  | %      |  |  | June 1, 2004     |  |  |   | 1   | 
|ComEd             |  |      | First Mortgage Bonds               |               |  |          | 5.875 | %      |  |  | February 1, 2033 |  |  |   | 96  | 
|ComEd             |  |      | First Mortgage Bonds               |               |  |          | 8.00  | %      |  |  | May 15, 2008     |  |  |   | 20  | 
|ComEd             |  |      | First Mortgage Bonds               |               |  |          | 6.15  | %      |  |  | March 15, 2012   |  |  |   | 150 | 
|ComEd             |  |      | First Mortgage Bonds               |               |  |          | 4.70  | %      |  |  | April 15, 2015   |  |  |   | 135 | 
|ComEd             |  |      | First Mortgage Bonds               |               |  |          | 7.625 | %      |  |  | April 15, 2013   |  |  |   | 65  | 
|ComEd             |  |      | First Mortgage Bonds               |               |  |          | 7.50  | %      |  |  | July 1, 2013     |  |  |   | 20  | 
|ComEd             |  |      | First Mortgage Bonds               |               |  |          | 4.74  | %      |  |  | August 15, 2010  |  |  |   | 35  | 
|PECO              |  |      | First and Refunding Mortgage Bonds |               |  |          | 6.375 | %      |  |  | August 15, 2005  |  |  |   | 75  | 
|Enterprises       |  |      | Note                               |               |  |          | 7.68  | %      |  |  | June 30, 2023    |  |  |   | 11  | 
|Enterprises       |  |      | Note                               |               |  |          | 9.09  | %      |  |  | January 31, 2020 |  |  |   | 26  | 
|AmerGen           |  |      | Note                               |               |  |          | 6.33  | %      |  |  | August 8, 2009   |  |  |   | 10  | 
|Sithe             |  |      | Note                               |               |  |          | 8.50  | %      |  |  | June 30, 2007    |  |  |   | 15  | 
|Exelon            |  |      | Note                               |               |  |          | 8.00  | %      |  |  | January 20, 2008 |  |  |   | 26  | 
|Other             |  |      | 12                                 |              
|                  |  |      |                                    |              
|Total retirements |  | $    | 973                                |              
|                  |  |      |                                    |              

During the three and nine months ended
September 30, 2004, ComEd made scheduled payments of
$82 million and $261 million, respectively, related to
its obligation to the ComEd Transitional Funding Trust,

42



---



##### 



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  (Continued)

and PECO made scheduled payments of
$120 million and $286 million, respectively, related
to its obligation to the PETT.

During the nine months ending September 30,
2004, ComEd retired $768 million of long-term debt pursuant
to Exelons accelerated liability management plan. ComEd
funded the retirements through cash from operations, a return of
investments in the intercompany money pool and collections on an
intercompany note receivable from Unicom Investments, Inc.
Exelon and ComEd recorded a charge of $106 million
associated with the retirement of debt under the plan for the
three and nine months ended September 30, 2004. This charge
is included within other, net within Exelons Consolidated
Statements of Income and Comprehensive Income. The components of
this charge included the following: $63 million related to
prepayment premiums; $11 million related to net unamortized
premiums, discounts and debt issuance costs; $23 million of
losses on reacquired debt previously deferred as regulatory
assets; and $9 million related to settled cash-flow
interest-rate swaps previously deferred as regulatory assets.

Sithe Long-Term
Debt.At September 30, 2004, the
following long-term debt of Sithe was consolidated in
Exelons and Generations Consolidated Balance Sheets
as a result of the adoption of FIN No. 46-R. See
Note 2  New Accounting Principles and
Note 4  Sithe for further information regarding
the consolidation of Sithe.

|                           |                                                              |                                                                                   |  |          |       |             |  |  |      |   |     |      |     | 
|-------------------------- | ------------------------------------------------------------ | --------------------------------------------------------------------------------- |  | -------- | ----- | ----------- |  |  | ---- | - | --- | ---- | --- | 
|                           |                                                              | Stated Interest                                                                   |  |          |       | Face Amount
|                           |                                                              | Rate                                                                              |  | Maturity |       | of Debt    
|                           |                                                              |                                                                                   |  |          |       |            
|Non-recourse project debt: |                                                              |                                                                                   |  |          |       |             |  |  |      |   |     |     
|                           | Independence notes and bonds:                                |                                                                                   |  |          |       |             |  |  |      |   |     |      |    
|                           |                                                              | Secured bonds payable in semiannual installments
    commencing June 2003         |  |          | 8.50  | %(a)        |  |  | 2007 |   |     | $    | 107 | 
|                           |                                                              | Secured bonds payable in semiannual installments
    commencing December 2007     |  |          | 9.00  | %(a)        |  |  | 2013 |   |     |      | 409 | 
|                           | Term loan repayable primarily in quarterly
    installments: |                                                                                   |  |          |       |             |  |  |      |   |     |      |    
|                           |                                                              | Batavia                                                                           |  |          | 18.00 | %           |  |  | 2007 |   |     |      | 1   | 
|Subordinated debt:         |                                                              |                                                                                   |  |          |       |             |  |  |      |   |     |     
|                           |                                                              | Tracking account loan payable in semiannual
    installments commencing June 2015 |  |          | 7.00  | %(a)        |  |  | 2035 |   |     |      | 419 | 
|                           |                                                              |                                                                                   |  |          |       |             |  |  |      |   |     |     
|Total face amount of debt  |                                                              |                                                                                   |  |          |       |             |  |  |      | $ | 936 |     
|                           | Unamortized debt discount and premium, net                   |                                                                                   |  |          |       |             |  |  |      |   |     | (100 | )  
|                           | Long-term debt due within one year                           |                                                                                   |  |          |       |             |  |  |      |   |     | (33  | )  
|                           |                                                              |                                                                                   |  |          |       |             |  |  |      |   |     |     
|Total long-term debt       |                                                              |                                                                                   |  |          |       |             |  |  |      | $ | 803 |     
|                           |                                                              |                                                                                   |  |          |       |             |  |  |      |   |     |     



---



|    |  |                                                                                                                                                                                                                                                                                                                                                         
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In addition to the stated interest rate, an
    additional 1.97% and 0.99% of interest on the carrying amount of
    the secured bonds payable is being credited due to debt premiums
    and 1.63% of interest on the carrying amount of the subordinated
    debt is being incurred due to the debt discount recorded at the
    time of the purchase.

43



---



##### 



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  (Continued)

Aggregate maturities of Sithes debt are as
follows:

|                                                          |  |   |      |  
|--------------------------------------------------------- |  | - | ---- | -
|2004                                                      |  | $ | 16   |  
|2005                                                      |  |   | 34   |  
|2006                                                      |  |   | 37   |  
|2007                                                      |  |   | 40   |  
|2008                                                      |  |   | 44   |  
|2009 and thereafter                                       |  |   | 765  |  
|                                                          |  |   |      |  
|Total minimum payments                                    |  |   | 936  |  
|Net debt discount to be amortized to interest
    expense |  |   | (100 | )
|                                                          |  |   |      |  
|Present value of minimum payments                         |  | $ | 836  |  
|                                                          |  |   |      |  

Interest-Rate Swaps.In September 2004, Exelon entered into forward-starting
interest-rate swaps in the aggregate amount of $160 million
to lock in interest rate levels in anticipation of a future
financing. The debt issuance that these swaps are hedging was
considered probable as of September 30, 2004; therefore,
Exelon accounted for these interest-rate swaps as cash-flow
hedges. At September 30, 2004, these interest-rate swaps,
designated as cash-flow hedges, had an aggregate fair market
value of less than $1 million based on the present value
difference between the contract and market rates at
September 30, 2004. If these derivative instruments had
been terminated at September 30, 2004, this estimated fair
value represents the amount that would be paid by the
counterparties to Exelon.

In 2004, ComEd entered into fixed-to-floating
interest-rate swaps in order to maintain its targeted percentage
of variable-rate debt associated with fixed-rate debt issuances
in the aggregate amount of $240 million. At
September 30, 2004, these interest-rate swaps, designated
as fair-value hedges, had an aggregate fair market value of
$9 million based on the present value difference between
the contract and market rates at September 30, 2004. If
these derivative instruments had been terminated at
September 30, 2004, this estimated fair value represents
the amount that would be paid by the counterparties to ComEd.



|    |                                                            
|--- | -----------------------------------------------------------
|10. | Severance Benefits (Exelon, ComEd, PECO and
    Generation)

Exelon, ComEd, PECO and Generation provide
severance and health and welfare benefits to terminated
employees pursuant to pre-existing severance plans primarily
based upon each employees years of service with Exelon and
compensation level. The registrants account for their ongoing
severance plans in accordance with SFAS No. 112,
Employers Accounting for Postemployment Benefits, an
amendment of FASB Statements No. 5 and 43, and
SFAS No. 88, Employers Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits, and accrue amounts
associated with severance benefits that are considered probable
and that can be reasonably estimated.

In conjunction with The Exelon Way, a
company-wide effort to define how Exelon will conduct business
in years to come, Exelon, ComEd, PECO and Generation have
collectively identified 1,850 positions for elimination as
of September 30, 2004. Exelon, ComEd, PECO and Generation
based their estimates of the number of positions to be
eliminated on managements current plans and ability to
determine the appropriate staffing levels to effectively operate
the businesses. Exelon, ComEd, PECO and Generation may incur
further severance costs associated with The Exelon Way if
additional positions are identified for elimination. These costs
will be recorded in the period in which the costs can be first
reasonably estimated.

44



---



##### 



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  (Continued)

The following tables present, by segment,
Exelons total salary continuance severance costs for the
three and nine months ended September 30, 2004 and 2003.
These tables include charges for new positions identified in
addition to revised estimates to reflect specific individuals
instead of positions previously identified under The Exelon Way.

|                                                               |  |          |    |            |  |             |   |           |  |              |   |  |  |   |   |  |  |   |    | 
|-------------------------------------------------------------- |  | -------- | -- | ---------- |  | ----------- | - | --------- |  | ------------ | - |  |  | - | - |  |  | - | -- | 
|                                                               |  | Energy   |    |            |  |             |   |           |  | Exelon      
|Salary Continuance Severance                                   |  | Delivery |    | Generation |  | Enterprises |   | Corporate |  | Consolidated
|                                                               |  |          |    |            |  |             |   |           |  |             
|Expense recorded for three months ended
    September 30, 2004 |  | $        | 10 |            |  | $           | 6 |           |  | $            |  |  |  | $ | 3 |  |  | $ | 19 | 
|Expense recorded for nine months ended
    September 30, 2004  |  |          | 14 |            |  |             | 1 |           |  |              |  |  |  |   | 8 |  |  |   | 23 | 

|                                                               |  |          |    |            |  |             |    |           |  |              |   |  |  |   |    |  |  |   |    | 
|-------------------------------------------------------------- |  | -------- | -- | ---------- |  | ----------- | -- | --------- |  | ------------ | - |  |  | - | -- |  |  | - | -- | 
|                                                               |  | Energy   |    |            |  |             |    |           |  | Exelon      
|Salary Continuance Severance                                   |  | Delivery |    | Generation |  | Enterprises |    | Corporate |  | Consolidated
|                                                               |  |          |    |            |  |             |    |           |  |             
|Expense recorded for three months ended
    September 30, 2003 |  | $        | 50 |            |  | $           | 20 |           |  | $            | 7 |  |  | $ | 10 |  |  | $ | 87 | 
|Expense recorded for nine months ended
    September 30, 2003  |  |          | 53 |            |  |             | 24 |           |  |              | 7 |  |  |   | 11 |  |  |   | 95 | 

The following tables provide total salary
continuance severance costs for ComEd, PECO and Generation for
the three and nine months ended September 30, 2004 and 2003.

|                                                                        |  |       |    |      |  |            |    |   |  |   |   | 
|----------------------------------------------------------------------- |  | ----- | -- | ---- |  | ---------- | -- | - |  | - | - | 
|Salary Continuance Severance                                            |  | ComEd |    | PECO |  | Generation
|                                                                        |  |       |    |      |  |           
|Expense (income) recorded for three months ended
    September 30, 2004 |  | $     | 11 |      |  | $          | (1 | ) |  | $ | 6 | 
|Expense recorded for nine months ended
    September 30, 2004           |  |       | 11 |      |  |            | 3  |   |  |   | 1 | 

|                                                               |  |       |    |      |  |            |    |  |  |   |    | 
|-------------------------------------------------------------- |  | ----- | -- | ---- |  | ---------- | -- |  |  | - | -- | 
|Salary Continuance Severance                                   |  | ComEd |    | PECO |  | Generation
|                                                               |  |       |    |      |  |           
|Expense recorded for three months ended
    September 30, 2003 |  | $     | 37 |      |  | $          | 13 |  |  | $ | 20 | 
|Expense recorded for nine months ended
    September 30, 2003  |  |       | 37 |      |  |            | 16 |  |  |   | 24 | 

The following tables provide a roll forward of
the salary continuance severance obligations from
January 1, 2003 through September 30, 2004 for Exelon,
ComEd, PECO and Generation:

|                               |  |              |     |       |  |      |     |            |  |   |    |   |  |   |     |  
|------------------------------ |  | ------------ | --- | ----- |  | ---- | --- | ---------- |  | - | -- | - |  | - | --- | -
|                               |  | Exelon       |     |       |  |      |     |           
|Salary Continuance Obligations |  | Consolidated |     | ComEd |  | PECO |     | Generation
|                               |  |              |     |       |  |      |     |           
|Balance at January 1, 2003     |  | $            | 39  |       |  | $    | 15  |            |  | $ |   |   |  | $ | 11  |  
|Additions                      |  |              | 135 |       |  |      | 61  |            |  |   | 16 |   |  |   | 38  |  
|Payments                       |  |              | (39 | )     |  |      | (21 | )          |  |   | (2 | ) |  |   | (9  | )
|Other adjustments              |  |              | 4   |       |  |      |    |            |  |   |   |   |  |   | 3   |  
|                               |  |              |     |       |  |      |     |            |  |   |    |   |  |   |     |  
|Balance at January 1, 2004     |  |              | 139 |       |  |      | 55  |            |  |   | 14 |   |  |   | 43  |  
|Additions                      |  |              | 23  |       |  |      | 11  |            |  |   | 3  |   |  |   | 1   |  
|Payments                       |  |              | (64 | )     |  |      | (21 | )          |  |   | (8 | ) |  |   | (23 | )
|Other adjustments(a)           |  |              | (6  | )     |  |      | (3  | )          |  |   |   |   |  |   |    |  
|                               |  |              |     |       |  |      |     |            |  |   |    |   |  |   |     |  
|Balance at September 30, 2004  |  | $            | 92  |       |  | $    | 42  |            |  | $ | 9  |   |  | $ | 21  |  
|                               |  |              |     |       |  |      |     |            |  |   |    |   |  |   |     |  

45



---



##### 



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  (Continued)



---



|    |  |                                                                                                                                                                                                                                                                                         
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In 2004, Generation increased the reserve for
    liabilities acquired upon the transfer of the operations of
    Exelon Energy Company to Generation on January 1, 2004, and
    reduced the reserve for liabilities associated with Boston
    Generating, which was sold in May 2004.



|    |                                                             
|--- | ------------------------------------------------------------
|11. | Retirement Benefits (Exelon, ComEd, PECO and
    Generation)

Exelon sponsors defined benefit pension plans and
postretirement welfare benefit plans applicable to essentially
all ComEd, PECO, Generation and Exelon Business Services Company
(BSC) employees and certain employees of Enterprises.
Substantially all non-union employees and electing union
employees hired on or after January 1, 2001 participate in
Exelon-sponsored cash balance pension plans. Substantially all
non-union employees hired prior to January 1, 2001 were
offered a choice to remain in Exelons traditional pension
plan or transfer to a cash balance pension plan for management
employees. Employees of AmerGen participate in separate defined
benefit pension plans and postretirement welfare benefit plans
sponsored by AmerGen.

The defined benefit pension plans and
postretirement welfare benefit plans are accounted for in
accordance with SFAS No. 87, Employers
Accounting for Pensions, and SFAS No. 106,
Employers Accounting for Postretirement Benefits
Other than Pensions, and are disclosed in accordance with
SFAS No. 132, Employers Disclosures about
Pensions and Other Postretirement Benefits  an
Amendment of FASB Statements No. 87, 88, and 106
(revised 2003). The costs of providing benefits under these
plans are dependent on historical information, such as employee
age, length of service and level of compensation, and the actual
rate of return on plan assets, in addition to assumptions about
the future, including the expected rate of return on plan
assets, the discount rate applied to benefit obligations, rate
of compensation increase and the anticipated rate of increase in
health care costs. The effects of changes in these factors on
pension and other postretirement welfare benefit obligations are
generally recognized over the expected remaining service life of
the employees rather than immediately recognized in the income
statement. Exelon uses a December 31 measurement date for
the majority of its plans.

Exelons traditional and cash balance
pension plans are intended to be tax-qualified defined benefit
plans, and Exelon has submitted applications to the IRS for
rulings on the tax-qualification of the form of each plan. By
letters dated April 21, 2004, the IRS notified Exelon that
the rulings on its applications for the traditional and
management cash balance plans were delayed pending advice from
the IRSs National Office, pursuant to a previously
announced moratorium on rulings with respect to plans involved
in so called cash balance conversions. On
June 1, 2004, the IRS issued a favorable ruling on the
union cash balance plan.

On June 15, 2004, the U.S. Treasury
Department announced the withdrawal of its proposed regulations
covering cash balance plans in order to provide Congress an
opportunity to consider proposed legislation. In addition,
various methods used by other employers to accrue and calculate
benefits under cash balance plans have been challenged in recent
lawsuits. The design of Exelons cash balance plans differs
in certain material respects from the cash balance plans
involved in the cases decided to date, and the courts have not
reached uniform decisions on certain issues. As a result,
considerable uncertainty remains regarding the application of
the Employee Retirement Income Security Act of 1974, the
Internal Revenue Code and Federal employment laws to cash
balance plans. Exelon does not know how the current uncertainty
will be resolved and cannot determine at this time what impact,
if any, future developments in this area will have on its
pension plans or the funding of its pension obligations.

46



---



##### 



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  (Continued)

During the second quarter of 2004, Exelon early
adopted FSP FAS 106-2. See Note 2  New
Accounting Principles for information regarding the adoption of
FSP FAS 106-2 and the effect on the net periodic benefit
cost of the other postretirement benefits plans included in the
tables below.

During the third quarter of 2004, Exelon
announced changes to the benefit provisions of its
postretirement welfare benefit plans. The changes will be
effective January 1, 2005 and triggered a remeasurement of
the plan assets and obligations as of August 1, 2004. The
plan change resulted in a reduction in the accumulated
postretirement benefit obligation of $106 million and a
reduction of projected other postretirement benefit costs in
2004 of $6 million that will be recognized in the third and
fourth quarters of 2004.

The following tables present the components of
Exelons net periodic benefit costs recognized for the
three and nine months ended September 30, 2004 and 2003,
including the net periodic benefit costs of AmerGens
pension and postretirement plans for 2004. These tables reflect
an annualized reduction in net periodic postretirement benefit
cost of $32 million related to a Federal subsidy provided
under the Prescription Drug Act. This subsidy has been accounted
for under FSP FAS 106-2, as described in
Footnote 2  New Accounting Principles. The
expected long-term rate of return on plan assets used to
estimate 2004 pension benefit costs was 9.00%. Prior to the
August 1, 2004 remeasurement, the expected long-term rate
of return on plan assets used to estimate 2004 other
postretirement benefit costs was 8.33%. The expected long-term
rate of return on plan assets used for the August 1, 2004
remeasurement of the other postretirement benefit obligation was
8.35%. A portion of the net periodic benefit cost is capitalized
within the Consolidated Balance Sheets.

|                                    |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    |  
|----------------------------------- | ----------------------------- | ---------------- | ---- | -------------- | - | ----- | ---- | ---- | - | - | --- | --- | - | - | --- | -- | -
|                                    |                               |                  |      |                |   |      
|                                    |                               |                  |      |                |   | Other
|                                    |                               |                  |      | Postretirement
|                                    |                               | Pension Benefits |      | Benefits      
|                                    |                               |                  |      |               
|                                    |                               |                  |      |               
|                                    |                               | Three Months     |      | Three Months  
|                                    |                               | Ended            |      | Ended         
|                                    |                               | September 30,    |      | September 30, 
|                                    |                               |                  |      |               
|                                    |                               | 2004             |      | 2003           |   | 2004  |      | 2003
|                                    |                               |                  |      |                |   |       |      |     
|Service cost                        |                               | $                | 31   |                |   | $     | 27   |      |   | $ | 19  |     |   | $ | 18  |   
|Interest cost                       |                               |                  | 139  |                |   |       | 130  |      |   |   | 38  |     |   |   | 45  |   
|Expected return on assets           |                               |                  | (152 | )              |   |       | (143 | )    |   |   | (22 | )   |   |   | (18 | ) 
|Amortization of:                    |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |   
|                                    | Transition obligation (asset) |                  |      | (1             | ) |       |      | (7   | ) |   |     | 3   |   |   |     | 3  |  
|                                    | Prior service cost            |                  |      | 3              |   |       |      | 9    |   |   |     | (22 | ) |   |     | (8 | )
|                                    | Actuarial loss                |                  |      | 22             |   |       |      |     |   |   |     | 7   |   |   |     | 12 |  
|Curtailment charge                  |                               |                  |     |                |   |       | 11   |      |   |   |    |     |   |   | 15  |   
|Special termination benefits charge |                               |                  |     |                |   |       |     |      |   |   | 8   |     |   |   | 54  |   
|                                    |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |   
|Net periodic benefit cost           |                               | $                | 42   |                |   | $     | 27   |      |   | $ | 31  |     |   | $ | 121 |   
|                                    |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |   

47



---



##### 



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  (Continued)

|                                    |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |     |  
|----------------------------------- | ----------------------------- | ---------------- | ---- | -------------- | - | ----- | ---- | ---- | - | - | --- | --- | - | - | --- | --- | -
|                                    |                               |                  |      |                |   |      
|                                    |                               |                  |      |                |   | Other
|                                    |                               |                  |      | Postretirement
|                                    |                               | Pension Benefits |      | Benefits      
|                                    |                               |                  |      |               
|                                    |                               |                  |      |               
|                                    |                               | Nine Months      |      | Nine Months   
|                                    |                               | Ended            |      | Ended         
|                                    |                               | September 30,    |      | September 30, 
|                                    |                               |                  |      |               
|                                    |                               | 2004             |      | 2003           |   | 2004  |      | 2003
|                                    |                               |                  |      |                |   |       |      |     
|Service cost                        |                               | $                | 97   |                |   | $     | 81   |      |   | $ | 59  |     |   | $ | 52  |    
|Interest cost                       |                               |                  | 407  |                |   |       | 390  |      |   |   | 127 |     |   |   | 128 |    
|Expected return on assets           |                               |                  | (459 | )              |   |       | (435 | )    |   |   | (68 | )   |   |   | (56 | )  
|Amortization of:                    |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    
|                                    | Transition obligation (asset) |                  |      | (3             | ) |       |      | (9   | ) |   |     | 7   |   |   |     | 8   |  
|                                    | Prior service cost            |                  |      | 11             |   |       |      | 17   |   |   |     | (60 | ) |   |     | (35 | )
|                                    | Actuarial loss                |                  |      | 52             |   |       |      | 11   |   |   |     | 37  |   |   |     | 36  |  
|Curtailment charge                  |                               |                  | 5    |                |   |       | 11   |      |   |   | 3   |     |   |   | 15  |    
|Special termination benefits charge |                               |                  |     |                |   |       |     |      |   |   | 16  |     |   |   | 54  |    
|                                    |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    
|Net periodic benefit cost           |                               | $                | 110  |                |   | $     | 66   |      |   | $ | 121 |     |   | $ | 202 |    
|                                    |                               |                  |      |                |   |       |      |      |   |   |     |     |   |   |     |    

The following table presents the allocation by
registrant of Exelons pension and post-retirement benefit
costs, excluding curtailment and special termination benefits
costs, during the three and nine months ended September 30,
2004 and 2003. These amounts include a reduction in net periodic
postretirement benefit cost resulting from the adoption of FSP
FAS 106-2.

|                                         |  |               |    |               |  |      |    |      |  |   |    |  |  |   |    | 
|---------------------------------------- |  | ------------- | -- | ------------- |  | ---- | -- | ---- |  | - | -- |  |  | - | -- | 
|                                         |  |               |    |              
|                                         |  | Three Months  |    | Nine Months  
|                                         |  | Ended         |    | Ended        
|                                         |  | September 30, |    | September 30,
|                                         |  |               |    |              
|Pension and Postretirement Benefit Costs |  | 2004          |    | 2003          |  | 2004 |    | 2003
|                                         |  |               |    |               |  |      |    |     
|ComEd                                    |  | $             | 20 |               |  | $    | 20 |      |  | $ | 67 |  |  | $ | 66 | 
|PECO                                     |  |               | 8  |               |  |      | 9  |      |  |   | 25 |  |  |   | 41 | 
|Generation                               |  |               | 30 |               |  |      | 21 |      |  |   | 89 |  |  |   | 69 | 

The following tables present the allocation by
registrant of Exelons curtailment and special termination
benefit charges during the three and nine months ended
September 30, 2004 and 2003:

|                    |  |               |   |               |  |      |    |      |  |   |   |  |  |   |    | 
|------------------- |  | ------------- | - | ------------- |  | ---- | -- | ---- |  | - | - |  |  | - | -- | 
|                    |  |               |   |              
|                    |  | Three Months  |   | Nine Months  
|                    |  | Ended         |   | Ended        
|                    |  | September 30, |   | September 30,
|                    |  |               |   |              
|Curtailment Charges |  | 2004          |   | 2003          |  | 2004 |    | 2003
|                    |  |               |   |               |  |      |    |     
|ComEd               |  | $             |  |               |  | $    | 2  |      |  | $ | 3 |  |  | $ | 2  | 
|PECO                |  |               |  |               |  |      | 16 |      |  |   | 2 |  |  |   | 16 | 
|Generation          |  |               |  |               |  |      | 7  |      |  |   | 3 |  |  |   | 7  | 

|                                    |  |               |   |               |  |      |    |      |  |   |   |  |  |   |    | 
|----------------------------------- |  | ------------- | - | ------------- |  | ---- | -- | ---- |  | - | - |  |  | - | -- | 
|                                    |  |               |   |              
|                                    |  | Three Months  |   | Nine Months  
|                                    |  | Ended         |   | Ended        
|                                    |  | September 30, |   | September 30,
|                                    |  |               |   |              
|Special Termination Benefit Charges |  | 2004          |   | 2003          |  | 2004 |    | 2003
|                                    |  |               |   |               |  |      |    |     
|ComEd                               |  | $             | 6 |               |  | $    | 20 |      |  | $ | 8 |  |  | $ | 20 | 
|PECO                                |  |               |  |               |  |      | 12 |      |  |   | 2 |  |  |   | 12 | 
|Generation                          |  |               | 2 |               |  |      | 20 |      |  |   | 4 |  |  |   | 20 | 

48



---



##### 



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  (Continued)

Exelon sponsors savings plans for the majority of
its employees. The plans allow employees to contribute a portion
of their pre-tax income in accordance with specified guidelines.
Exelon matches a percentage of the employee contribution up to
certain limits. The following table presents, by registrant, the
matching contribution to the savings plans during the three and
nine months ended September 30, 2004 and 2003:

|                                    |  |               |    |               |  |      |    |      |  |   |    |  |  |   |    | 
|----------------------------------- |  | ------------- | -- | ------------- |  | ---- | -- | ---- |  | - | -- |  |  | - | -- | 
|                                    |  |               |    |              
|                                    |  | Three Months  |    | Nine Months  
|                                    |  | Ended         |    | Ended        
|                                    |  | September 30, |    | September 30,
|                                    |  |               |    |              
|Savings Plan Matching Contributions |  | 2004          |    | 2003          |  | 2004 |    | 2003
|                                    |  |               |    |               |  |      |    |     
|Exelon                              |  | $             | 15 |               |  | $    | 15 |      |  | $ | 43 |  |  | $ | 42 | 
|ComEd                               |  |               | 4  |               |  |      | 5  |      |  |   | 12 |  |  |   | 14 | 
|PECO                                |  |               | 2  |               |  |      | 2  |      |  |   | 5  |  |  |   | 6  | 
|Generation                          |  |               | 7  |               |  |      | 6  |      |  |   | 20 |  |  |   | 18 | 



|    |                                                      
|--- | -----------------------------------------------------
|12. | Income Taxes (Exelon, ComEd, PECO and
    Generation)



| |       
| | ------
| | Exelon

Exelons effective income tax rate varied
from the U.S. Federal statutory rate principally due to the
following:

|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |      |  
|--------------------------- | --------------------------------------------------------- | ------------- | ---- | ------------- | - | ---- | ---- | ---- | - |  | ---- | ---- | - |  | ---- | ---- | -
|                            |                                                           |               |      |              
|                            |                                                           | Three Months  |      | Nine Months  
|                            |                                                           | Ended         |      | Ended        
|                            |                                                           | September 30, |      | September 30,
|                            |                                                           |               |      |              
|                            |                                                           | 2004          |      | 2003          |   | 2004 |      | 2003
|                            |                                                           |               |      |               |   |      |      |     
|U.S. Federal statutory rate |                                                           |               | 35.0 | %             |   |      | 35.0 | %    |   |  | 35.0 | %    |   |  | 35.0 | %   
|Increase (decrease) due to: |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     
|                            | Synthetic fuel-producing facilities credit(a)             |               |      | (6.6          | ) |      |      |     |   |  |      | (6.9 | ) |  |      |     |  
|                            | Low income housing credit                                 |               |      | (0.4          | ) |      |      | 1.6  |   |  |      | (0.5 | ) |  |      | (1.3 | )
|                            | Nuclear decommissioning trust income                      |               |      | 0.4           |   |      |      | (1.2 | ) |  |      | 0.5  |   |  |      | 1.2  |  
|                            | Amortization of investment tax credit                     |               |      | (0.1          | ) |      |      | 1.3  |   |  |      | (0.3 | ) |  |      | (1.0 | )
|                            | Tax-exempt interest income                                |               |      | (0.3          | ) |      |      | 0.8  |   |  |      | (0.4 | ) |  |      | (0.7 | )
|                            | State income taxes, net of Federal income tax
    benefit |               |      | 3.3           |   |      |      | 13.1 |   |  |      | 2.9  |   |  |      | 1.0  |  
|                            | Nontaxable employee benefits                              |               |      | (0.2          | ) |      |      |     |   |  |      | (0.3 | ) |  |      |     |  
|                            | Other, net                                                |               |      | 1.5           |   |      |      | 1.7  |   |  |      | 0.9  |   |  |      | (1.1 | )
|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     
|Effective income tax rate   |                                                           |               | 32.6 | %             |   |      | 52.3 | %    |   |  | 30.9 | %    |   |  | 33.1 | %   
|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     



---



|    |  |                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------
|(a) |  | See Note 3  Acquisitions and
    Dispositions for further information regarding these investments.

49



---



##### 



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  (Continued)



| |      
| | -----
| | ComEd

ComEds effective income tax rate varied
from the U.S. Federal statutory rate principally due to the
following:

|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |      |  
|--------------------------- | --------------------------------------------------------- | ------------- | ---- | ------------- | - | ---- | ---- | ---- | - |  | ---- | ---- | - |  | ---- | ---- | -
|                            |                                                           |               |      |              
|                            |                                                           | Three Months  |      | Nine Months  
|                            |                                                           | Ended         |      | Ended        
|                            |                                                           | September 30, |      | September 30,
|                            |                                                           |               |      |              
|                            |                                                           | 2004          |      | 2003          |   | 2004 |      | 2003
|                            |                                                           |               |      |               |   |      |      |     
|U.S. Federal statutory rate |                                                           |               | 35.0 | %             |   |      | 35.0 | %    |   |  | 35.0 | %    |   |  | 35.0 | %   
|Increase (decrease) due to: |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     
|                            | State income taxes, net of Federal income tax
    benefit |               |      | 4.8           |   |      |      | 4.8  |   |  |      | 4.8  |   |  |      | 4.8  |  
|                            | Plant basis differences                                   |               |      | 2.4           |   |      |      |     |   |  |      | 0.6  |   |  |      |     |  
|                            | Amortization of regulatory asset                          |               |      | 0.6           |   |      |      | 0.6  |   |  |      | 0.6  |   |  |      | 0.6  |  
|                            | Amortization of investment tax credit                     |               |      | (0.3          | ) |      |      | (0.3 | ) |  |      | (0.3 | ) |  |      | (0.3 | )
|                            | Nontaxable employee benefits                              |               |      | (0.3          | ) |      |      |     |   |  |      | (0.3 | ) |  |      |     |  
|                            | Other                                                     |               |      | 1.2           |   |      |      | (1.6 | ) |  |      | 0.3  |   |  |      | (0.6 | )
|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     
|Effective income tax rate   |                                                           |               | 43.4 | %             |   |      | 38.5 | %    |   |  | 40.7 | %    |   |  | 39.5 | %   
|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     



| |     
| | ----
| | PECO

PECOs effective income tax rate varied from
the U.S. Federal statutory rate principally due to the
following:

|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |      |  
|--------------------------- | --------------------------------------------------------- | ------------- | ---- | ------------- | - | ---- | ---- | ---- | - |  | ---- | ---- | - |  | ---- | ---- | -
|                            |                                                           |               |      |              
|                            |                                                           | Three Months  |      | Nine Months  
|                            |                                                           | Ended         |      | Ended        
|                            |                                                           | September 30, |      | September 30,
|                            |                                                           |               |      |              
|                            |                                                           | 2004          |      | 2003          |   | 2004 |      | 2003
|                            |                                                           |               |      |               |   |      |      |     
|U.S. Federal statutory rate |                                                           |               | 35.0 | %             |   |      | 35.0 | %    |   |  | 35.0 | %    |   |  | 35.0 | %   
|Increase (decrease) due to: |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     
|                            | Plant basis differences                                   |               |      | 1.9           |   |      |      | (0.9 | ) |  |      |     |   |  |      | (1.0 | )
|                            | State income taxes, net of Federal income tax
    benefit |               |      | (0.2          | ) |      |      | 1.7  |   |  |      | (0.1 | ) |  |      | 1.2  |  
|                            | Amortization of investment tax credit                     |               |      | (0.3          | ) |      |      | (0.3 | ) |  |      | (0.3 | ) |  |      | (0.4 | )
|                            | Nontaxable employee benefits                              |               |      | (0.2          | ) |      |      |     |   |  |      | (0.2 | ) |  |      |     |  
|                            | Other                                                     |               |      | 1.2           |   |      |      | (1.0 | ) |  |      |     |   |  |      | (0.2 | )
|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     
|Effective income tax rate   |                                                           |               | 37.4 | %             |   |      | 34.5 | %    |   |  | 34.4 | %    |   |  | 34.6 | %   
|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     

50



---



##### 



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  (Continued)



| |           
| | ----------
| | Generation

Generations effective income tax rate
varied from the U.S. Federal statutory rate principally due
to the following:

|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |      |  
|--------------------------- | --------------------------------------------------------- | ------------- | ---- | ------------- | - | ---- | ---- | ---- | - |  | ---- | ---- | - |  | ---- | ---- | -
|                            |                                                           |               |      |              
|                            |                                                           | Three Months  |      | Nine Months  
|                            |                                                           | Ended         |      | Ended        
|                            |                                                           | September 30, |      | September 30,
|                            |                                                           |               |      |              
|                            |                                                           | 2004          |      | 2003          |   | 2004 |      | 2003
|                            |                                                           |               |      |               |   |      |      |     
|U.S. Federal statutory rate |                                                           |               | 35.0 | %             |   |      | 35.0 | %    |   |  | 35.0 | %    |   |  | 35.0 | %   
|Increase (decrease) due to: |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     
|                            | State income taxes, net of Federal income tax
    benefit |               |      | 3.7           |   |      |      | 4.1  |   |  |      | 3.6  |   |  |      | 3.0  |  
|                            | Tax exempt interest income                                |               |      | (0.5          | ) |      |      | 0.3  |   |  |      | (0.8 | ) |  |      | 1.0  |  
|                            | Dividend exclusion                                        |               |      |              |   |      |      |     |   |  |      | (0.3 | ) |  |      |     |  
|                            | Nontaxable employee benefits                              |               |      | (0.2          | ) |      |      |     |   |  |      | (0.3 | ) |  |      |     |  
|                            | Amortization of investment tax credit                     |               |      |              |   |      |      | 0.2  |   |  |      | (0.3 | ) |  |      | 0.7  |  
|                            | Nuclear decommissioning trust income                      |               |      | 0.7           |   |      |      | (0.4 | ) |  |      | 1.3  |   |  |      | (1.7 | )
|                            | Other                                                     |               |      | (0.4          | ) |      |      | 0.3  |   |  |      |     |   |  |      | 0.1  |  
|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     
|Effective income tax rate   |                                                           |               | 38.3 | %             |   |      | 39.5 | %    |   |  | 38.2 | %    |   |  | 38.1 | %   
|                            |                                                           |               |      |               |   |      |      |      |   |  |      |      |   |  |      |     



|    |                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------
|13. | Asset Retirement Obligations and Nuclear
    Decommissioning Trust Fund Investments (Exelon and
    Generation)

Please refer to Exelon Corporations 2003
Form 10-K for a full discussion on the accounting for
nuclear decommissioning and the fair value of financial assets
and liabilities.



| |                             
| | ----------------------------
| | Asset Retirement Obligations

SFAS No. 143 provides accounting
guidance for retirement obligations (whether statutory,
contractual or as a result of principles of promissory estoppel)
associated with tangible long-lived assets. Liabilities for
SFAS No. 143 asset retirement obligations (AROs) have
been recorded at Generation in connection with its obligation to
decommission its nuclear power plants as well as legal
obligations associated with the closing of its fossil power
plants. Based on the extended license lives of the nuclear
plants, decommissioning expenditures are expected to occur
primarily during the period 2029 through 2056. Exelon, through
its regulated subsidiary utility companies, ComEd and PECO,
currently recovers costs for decommissioning Generations
nuclear generating stations, excluding the three AmerGen plants,
through regulated rates. The amounts recovered from customers
are deposited into trust accounts and invested for funding the
future decommissioning costs of the nuclear generating stations.

51



---



##### 



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  (Continued)

The following table presents a rollforward of the
ARO reflected on the Exelon and Generation Consolidated Balance
Sheets from January 1, 2003 to September 30, 2004:

|                                                                       |  |            |       |        |  |   |       |  
|---------------------------------------------------------------------- |  | ---------- | ----- | ------ |  | - | ----- | -
|                                                                       |  | Generation |       | Exelon
|                                                                       |  |            |       |       
|Asset retirement obligation at January 1,
    2003                     |  | $          | 2,363 |        |  | $ | 2,366 |  
|Consolidation of AmerGen                                               |  |            | 487   |        |  |   | 487   |  
|Accretion expense                                                      |  |            | 160   |        |  |   | 161   |  
|Expenditures to decommission retired plants                            |  |            | (14   | )      |  |   | (14   | )
|Reclassification of Thermal ARO as held for
    sale(a)                |  |            |      |        |  |   | (3    | )
|                                                                       |  |            |       |        |  |   |       |  
|Asset retirement obligation at December 31,
    2003                   |  |            | 2,996 |        |  |   | 2,997 |  
|Net increase resulting from updates to estimated
    future cash flows |  |            | 325   |        |  |   | 325   |  
|Accretion expense for the nine months ended
    September 30, 2004     |  |            | 154   |        |  |   | 154   |  
|Additional liabilities incurred(b)                                     |  |            | 6     |        |  |   | 6     |  
|Expenditures to decommission retired plants                            |  |            | (9    | )      |  |   | (9    | )
|                                                                       |  |            |       |        |  |   |       |  
|Asset retirement obligation at September 30,
    2004                  |  | $          | 3,472 |        |  | $ | 3,473 |  
|                                                                       |  |            |       |        |  |   |       |  



---



|    |  |                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------
|(a) |  | The ARO of Thermal was removed from the balance
    sheet upon Thermals sale in the second quarter of 2004.
|   
|(b) |  | Additional liabilities incurred are primarily due
    to the consolidation of Sithe.                        

Exelon updates its ARO on a periodic basis. In
September 2004, Generation recorded a $325 million net
increase to the ARO resulting from updates to estimated future
expected nuclear decommissioning cash flows comprised of a
$374 million increase in the estimated ARO for certain
nuclear units, offset by a $49 million decrease in the
estimated ARO for another unit. Increases in the ARO resulted in
the establishment of a corresponding Asset Retirement Cost
(ARC) of $374 million, including approximately
$36 million related to retired units. The ARC associated
with three of the units was immediately impaired through
depreciation expense as it was associated with retired nuclear
units that do not have any remaining useful life. For the unit
with the estimated $49 million ARO decrease, and pursuant
to FAS 143, decreases in AROs are first offset by any
existing related ARCs for those units and, to the extent there
is no ARC, the amounts are included in operating income.
However, currently there is no impact to net income for the
decommissioning of the former ComEd and PECO units and, as such,
both the $36 million impairment charge and the
$49 million ARO decrease were equally offset by a charge of
$13 million in operating income.

The net increase in the ARO for the former ComEd
units, the former PECO units and the AmerGen units during the
third quarter of 2004 was $121 million, $147 million
and $57 million, respectively. The ARO balances at
September 30, 2004 for the former ComEd units, the former
PECO units and the AmerGen units were approximately
$1.875 billion, $1.015 billion and $575 million,
respectively.

The increase to the ARO recorded in the third
quarter of 2004 resulted primarily from updated decommissioning
cost studies provided by third-party providers and changes in
cost escalation factors used to estimate future undiscounted
costs. The adjustment did not have a significant impact on the
Consolidated Statements of Income and Comprehensive Income of
Exelon or Generation.

Generation expects additional cost estimate
updates from third-party providers in the fourth quarter of
2004. The change to the ARO in the fourth quarter cannot be
reasonably estimated at this time.

52



---



##### 



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  (Continued)



| |                                                   
| | --------------------------------------------------
| | Nuclear Decommissioning Trust
    Fund Investments

At December 31, 2003, Exelon had gross
unrealized gains of $394 million and gross unrealized
losses of $300 million related to the nuclear
decommissioning trust fund investments. With the exception of
the portion of these amounts primarily related to AmerGen, as a
result of its regulatory arrangements for decommissioning costs,
approximately $62 million of these net gains were recorded
as an increase to regulatory liabilities. At September 30,
2004, prior to its evaluation for other-than-temporary
impairments, Exelon had gross unrealized gains of
$480 million and gross unrealized losses of
$345 million. The gross unrealized losses were comprised of
$314 million related to trust accounts for the
decommissioning of the former ComEd and PECO plants and
$31 million primarily related to the trust accounts for the
decommissioning of the AmerGen plants.

Exelon has historically evaluated the
decommissioning trust fund investments for other-than-temporary
impairments by analyzing the historical performance, cost basis
and market value of its securities in unrealized loss positions
in comparison to related market indices. As of
September 30, 2004, Exelon concluded that certain trust
fund investments were other-than-temporarily impaired based on
various factors assessed in the aggregate, including the
duration and severity of the impairment, the anticipated
recovery of the securities and considerations of Exelons
ability and intent to hold the investments until the recovery of
their cost basis. This determination resulted in a
$7 million impairment charge recorded in other income and
deductions associated with the trust funds for the
decommissioning of the AmerGen plants. Also, Exelon realized
$260 million of the previously unrealized losses of
$314 million associated with the trust investments for the
decommissioning of the former ComEd and PECO plants. As both
realized and unrealized losses are included as a reduction in
the fair value of the investments and in the fair value of the
regulatory liability, this realization of these losses
associated with the former ComEd and PECO plants had no impact
on Exelons or Generations results of operations or
financial position.



|    |                                                         
|--- | --------------------------------------------------------
|14. | Earnings Per Share and Shareholders
    Equity (Exelon)



| |            
| | -----------
| | Stock Split

On January 27, 2004, the Board of Directors
of Exelon approved a 2-for-1 stock split of Exelons common
stock. The distribution date was May 5, 2004. The
authorized common stock was increased from
600,000,000 shares with no par value to
1,200,000,000 shares with no par value. The share and
per-share amounts included in Exelons consolidated
financial statements and combined notes to consolidated
financial statements have been adjusted for all periods
presented to reflect the stock split.

53



---



##### 



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  (Continued)



| |                   
| | ------------------
| | Earnings Per Share

Diluted earnings per share are calculated by
dividing net income by the weighted average number of shares of
common stock outstanding, including shares to be issued upon
exercise of stock options outstanding under Exelons stock
option plans considered to be common stock equivalents. The
following table sets forth the computation of basic and diluted
earnings per share and shows the effect of these stock options
on the weighted average number of shares outstanding used in
calculating diluted earnings per share:

|                                                                        |                                                                         |                    |     |                   |   |      |      |       |   |   |       |      |  |   |     |      | 
|----------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------ | --- | ----------------- | - | ---- | ---- | ----- | - | - | ----- | ---- |  | - | --- | ---- | 
|                                                                        |                                                                         |                    |     |                  
|                                                                        |                                                                         | Three Months Ended |     | Nine Months Ended
|                                                                        |                                                                         | September 30,      |     | September 30,    
|                                                                        |                                                                         |                    |     |                  
|                                                                        |                                                                         | 2004               |     | 2003              |   | 2004 |      | 2003 
|                                                                        |                                                                         |                    |     |                   |   |      |      |      
|Income before cumulative effect of changes in
    accounting principles |                                                                         | $                  | 577 |                   |   | $    | (102 | )     |   | $ | 1,478 |      |  | $ | 519 |     
|Cumulative effect of changes in accounting
    principles               |                                                                         |                    | (9  | )                 |   |      |     |       |   |   | 23    |      |  |   | 112 |     
|                                                                        |                                                                         |                    |     |                   |   |      |      |       |   |   |       |      |  |   |     |     
|Net income (loss)                                                       |                                                                         | $                  | 568 |                   |   | $    | (102 | )     |   | $ | 1,501 |      |  | $ | 631 |     
|                                                                        |                                                                         |                    |     |                   |   |      |      |       |   |   |       |      |  |   |     |     
|Average common shares outstanding 
    basic                           |                                                                         |                    | 661 |                   |   |      | 652  |       |   |   | 660   |      |  |   | 650 |     
|Assumed exercise of stock options                                       |                                                                         |                    | 8   |                   |   |      |     |       |   |   | 8     |      |  |   | 5   |     
|                                                                        |                                                                         |                    |     |                   |   |      |      |       |   |   |       |      |  |   |     |     
|Average common shares outstanding 
    diluted                         |                                                                         |                    | 669 |                   |   |      | 652  |       |   |   | 668   |      |  |   | 655 |     
|                                                                        |                                                                         |                    |     |                   |   |      |      |       |   |   |       |      |  |   |     |     
|Earnings (loss) per average common
    share  Basic:                   |                                                                         |                    |     |                   |   |      |      |       |   |   |       |      |  |   |     |     
|                                                                        | Income before cumulative effect of changes in
    accounting principles |                    | $   | 0.87              |   |      | $    | (0.16 | ) |   | $     | 2.23 |  |   | $   | 0.80 | 
|                                                                        | Cumulative effect of changes in accounting
    principles               |                    |     | (0.01             | ) |      |      |      |   |   |       | 0.04 |  |   |     | 0.17 | 
|                                                                        |                                                                         |                    |     |                   |   |      |      |       |   |   |       |      |  |   |     |     
|                                                                        | Net income (loss)                                                       |                    | $   | 0.86              |   |      | $    | (0.16 | ) |   | $     | 2.27 |  |   | $   | 0.97 | 
|                                                                        |                                                                         |                    |     |                   |   |      |      |       |   |   |       |      |  |   |     |     
|Earnings (loss) per average common
    share  Diluted:                 |                                                                         |                    |     |                   |   |      |      |       |   |   |       |      |  |   |     |     
|                                                                        | Income before cumulative effect of changes in
    accounting principles |                    | $   | 0.86              |   |      | $    | (0.16 | ) |   | $     | 2.21 |  |   | $   | 0.79 | 
|                                                                        | Cumulative effect of changes in accounting
    principles               |                    |     | (0.01             | ) |      |      |      |   |   |       | 0.04 |  |   |     | 0.17 | 
|                                                                        |                                                                         |                    |     |                   |   |      |      |       |   |   |       |      |  |   |     |     
|                                                                        | Net income (loss)                                                       |                    | $   | 0.85              |   |      | $    | (0.16 | ) |   | $     | 2.25 |  |   | $   | 0.96 | 
|                                                                        |                                                                         |                    |     |                   |   |      |      |       |   |   |       |      |  |   |     |     

The number of stock options not included in the
calculation of diluted common shares outstanding due to their
antidilutive effect was 30 million for the three months
ended September 30, 2003 and 50 thousand and
10 million for the nine months ended September 30,
2004 and 2003, respectively. There were no stock options
excluded for the three months ended September 30, 2004.



| |                         
| | ------------------------
| | Share Repurchase Program

In April 2004, Exelons Board of Directors
approved a discretionary share repurchase program that allows
Exelon to repurchase shares of its common stock on a periodic
basis in the open market. The share repurchase program is
intended to mitigate, in part, the dilutive effect of shares
issued under Exelons employee stock option plan and
Exelons Employee Stock Purchase Plan (ESPP). The aggregate
value of the shares of common stock repurchased pursuant to the
program cannot exceed the economic benefit received after

54



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##### 



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  (Continued)

January 1, 2004 due to stock option
exercises and share purchases pursuant to Exelons ESPP.
The economic benefit consists of the direct cash proceeds from
purchases of stock and the tax benefits associated with
exercises of stock options. The share repurchase program has no
specified limit on the number of shares that may be repurchased
and no specified termination date. Any shares repurchased are
held as treasury shares unless cancelled or reissued at the
discretion of Exelons management. Treasury shares are
recorded at cost. For the nine months ended September 30,
2004, 2.3 million shares of common stock were purchased
under the share repurchase program for $75 million.



| |                     
| | --------------------
| | Shareholders Equity

The following table summarizes the changes in
shareholders equity for the nine months ended
September 30, 2004:

|                                                                                            |  |        |         |        |  |          |       |          |  |               |     |               |  |   |       |   |  |   |        |   |  |   |       |  
|------------------------------------------------------------------------------------------- |  | ------ | ------- | ------ |  | -------- | ----- | -------- |  | ------------- | --- | ------------- |  | - | ----- | - |  | - | ------ | - |  | - | ----- | -
|                                                                                            |  |        |         |        |  |          |       |          |  | Accumulated   |     |              
|                                                                                            |  |        |         |        |  |          |       |          |  | Other         |     |              
|                                                                                            |  |        |         |        |  |          |       |          |  | Comprehensive |     | Total        
|                                                                                            |  | Issued |         | Common |  | Treasury |       | Retained |  | Income        |     | Shareholders
|Dollars in millions, shares in thousands                                                    |  | Shares |         | Stock  |  | Stock    |       | Earnings |  | (Loss)        |     | Equity       
|                                                                                            |  |        |         |        |  |          |       |          |  |               |     |              
|Balance, December 31, 2003                                                                  |  |        | 656,366 |        |  | $        | 7,292 |          |  | $             |    |               |  | $ | 2,320 |   |  | $ | (1,109 | ) |  | $ | 8,503 |  
|Net income                                                                                  |  |        |         |        |  |          |      |          |  |               |    |               |  |   | 1,501 |   |  |   |       |   |  |   | 1,501 |  
|Long-term incentive plan activity                                                           |  |        | 8,268   |        |  |          | 233   |          |  |               |    |               |  |   |      |   |  |   |       |   |  |   | 233   |  
|Employee stock purchase plan issuances                                                      |  |        | 243     |        |  |          | 7     |          |  |               |    |               |  |   |      |   |  |   |       |   |  |   | 7     |  
|Common stock purchases                                                                      |  |        |        |        |  |          |      |          |  |               | (75 | )             |  |   |      |   |  |   |       |   |  |   | (75   | )
|Common stock dividends declared                                                             |  |        |        |        |  |          |      |          |  |               |    |               |  |   | (565  | ) |  |   |       |   |  |   | (565  | )
|Adjustments to accumulated other comprehensive
    income due to the consolidation of Sithe |  |        |        |        |  |          |      |          |  |               |    |               |  |   |      |   |  |   | (6     | ) |  |   | (6    | )
|Other comprehensive loss                                                                    |  |        |        |        |  |          |      |          |  |               |    |               |  |   |      |   |  |   | (52    | ) |  |   | (52   | )
|                                                                                            |  |        |         |        |  |          |       |          |  |               |     |               |  |   |       |   |  |   |        |   |  |   |       |  
|Balance, September 30, 2004                                                                 |  |        | 664,877 |        |  | $        | 7,532 |          |  | $             | (75 | )             |  | $ | 3,256 |   |  | $ | (1,167 | ) |  | $ | 9,546 |  
|                                                                                            |  |        |         |        |  |          |       |          |  |               |     |               |  |   |       |   |  |   |        |   |  |   |       |  



|    |                                                                       
|--- | ----------------------------------------------------------------------
|15. | Commitments and Contingencies (Exelon, ComEd,
    PECO and Generation)

For information regarding capital commitments and
nuclear decommissioning at December 31, 2003, see the
Commitments and Contingencies and Nuclear Decommissioning and
Spent Fuel Storage notes in the Notes to Consolidated Financial
Statements of Exelon, ComEd, PECO and Generation in the 2003
Form 10-K.



| |                   
| | ------------------
| | Energy Commitments

At September 30, 2004, Generations
long-term commitments, relating to the purchase and sale of
energy, capacity and transmission rights from unaffiliated
utilities and others, including the Midwest Generation contract,
did not change significantly from December 31, 2003, except
for the following:



| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Sithe has power-only sales commitments of
    $42 million, transmission rights of $22 million and
    minimum fuel purchase commitments of $109 million.

55



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##### 



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  (Continued)



| |                       
| | ----------------------
| | Commercial Commitments

Exelon, ComEd, PECO and Generations
commercial commitments as of September 30, 2004,
representing commitments not recorded on the balance sheet but
potentially triggered by future events, including obligations to
make payments on behalf of other parties and financing
arrangements to secure obligations, did not change significantly
from December 31, 2003, except for the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Generation acquired a $50 million letter of
    credit to support the contractual obligations of Sithe and its
    subsidiaries and issued a $45 million of letter of credit
    for Power Team to cover collateral calls that had previously
    been met with cash collateral. Excluding the above items,
    Exelons net letters of credit decreased $24 million
    for the nine months ending September 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Mystic Development LLC (Mystic), a former
    affiliate of Exelon New England has a long-term agreement
    through January 2020 with Distrigas of Massachusetts Corporation
    (Distrigas) for gas supply, primarily for the Boston Generating
    units. Under the agreement, gas purchase prices from Distrigas
    are indexed to the New England gas markets. Exelon New England
    has guaranteed Mystics financial obligations to Distrigas
    under the long-term supply agreement. Exelon New Englands
    guarantee to Distrigas remained in effect following the transfer
    of ownership interest in Boston Generating in May 2004. Under
    FIN No. 45, approximately $17 million is included as a
    liability within the Consolidated Balance Sheets of Exelon and
    Generation as of September 30, 2004 related to this
    guarantee. The terms of the guarantee do not limit the potential
    future payments that Exelon New England could be required to
    make under the guarantee.
|
| |  | On September 29, 2004, Generation exercised
    its call option to acquire Reservoirs 50% interest in
    Sithe for $97 million. The closing of the call is subject
    to state and Federal regulatory approvals. See
    Note 4  Sithe for additional information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | In connection with the transfer of Exelon Energy
    Company to Generation effective January 1, 2004, Generation
    acquired $162 million in energy marketing contract
    guarantees. This transfer had no effect on the guarantees of
    Exelon.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



| |                          
| | -------------------------
| | Environmental Liabilities

Exelon, ComEd, PECO and Generation accrue amounts
for environmental investigation and remediation costs that can
be reasonably estimated, including amounts for manufactured gas
plant (MGP) investigation and remediation. Exelon has
identified 69 sites where former MGP activities have or may have
resulted in actual site contamination. Of these 69 sites, the
Illinois Environmental Protection Agency has approved the clean
up of 4 sites and the Pennsylvania Department of Environmental
Protection has approved the clean up of 8 sites. Pursuant to a
Pennsylvania Public Utility Commission (PUC) order, PECO is
currently recovering a provision for environmental costs
annually for the remediation of former MGP facility sites, for
which PECO has recorded a regulatory asset (see
Note 16  Supplemental Financial Information). As
of

56



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##### 



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  (Continued)

September 30, 2004 and December 31,
2003, Exelon, ComEd, PECO and Generation had accrued the
following amounts for environmental liabilities:

|                   |  |                   |     |                      |  |   |    | 
|------------------ |  | ----------------- | --- | -------------------- |  | - | -- | 
|                   |  | Total             |     |                     
|                   |  | Environmental     |     | Portion of Total    
|                   |  | Investigation and |     | Related             
|                   |  | Remediation       |     | to MGP Investigation
|September 30, 2004 |  | Reserve           |     | and Remediation(a)  
|                   |  |                   |     |                     
|Exelon             |  | $                 | 120 |                      |  | $ | 98 | 
|ComEd              |  |                   | 62  |                      |  |   | 56 | 
|PECO               |  |                   | 48  |                      |  |   | 42 | 
|Generation         |  |                   | 10  |                      |  |   |   | 



---



|    |  |            
|--- |  | -----------
|(a) |  | Discounted.

|                  |  |                   |     |                      |  |   |     | 
|----------------- |  | ----------------- | --- | -------------------- |  | - | --- | 
|                  |  | Total             |     |                     
|                  |  | Environmental     |     | Portion of Total    
|                  |  | Investigation and |     | Related             
|                  |  | Remediation       |     | to MGP Investigation
|December 31, 2003 |  | Reserve           |     | and Remediation(a)  
|                  |  |                   |     |                     
|Exelon            |  | $                 | 129 |                      |  | $ | 105 | 
|ComEd             |  |                   | 69  |                      |  |   | 64  | 
|PECO              |  |                   | 50  |                      |  |   | 41  | 
|Generation        |  |                   | 10  |                      |  |   |    | 



---



|    |  |            
|--- |  | -----------
|(a) |  | Discounted.

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.



| |                   
| | ------------------
| | Spent Fuel Storage

During the third quarter of 2004, Exelon and the
U.S. Department of Justice, in close consultation with the
Department of Energy (DOE), reached a settlement under which the
government will reimburse Exelon for costs associated with
storage of spent fuel at Generations nuclear stations
pending DOEs fulfillment of its obligations. Under the
agreement, Generation received $80 million immediately in
gross reimbursements for storage costs already incurred
($53 million net after considering amounts due from
Generation to co-owners of certain nuclear stations), with
additional amounts to be reimbursed annually for future costs.
In all cases, reimbursements will be made only after costs are
incurred and only for costs resulting from DOE delays in
accepting the fuel. As of September 30, 2004, the amount of
spent fuel storage costs for which reimbursement will be
requested in mid-2005 from the DOE under the settlement
agreement is $26 million net, which is recorded within
accounts receivable, other. This amount is comprised of
$12 million which has been recorded as a reduction to
operating and maintenance expense and $8 million which has
been recorded as a reduction to capital expenditures, both
recorded during the three months ended September 30, 2004.
The remaining $6 million represents amounts owed to the
co-owners of the Peach Bottom and Quad Cities generating
facilities.

57



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##### 



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  (Continued)



| |           
| | ----------
| | Litigation



| |      
| | -----
| | ComEd

Retail Rate Law.In
1996, three 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 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 and for
breach of contract. On November 25, 2002, the court granted
the developers motions for summary judgment. The judge
also entered a permanent injunction enjoining ComEd from
refusing to pay the retail rate on the grounds of the amendment
and Illinois from denying ComEd a tax credit on account of such
purchases. ComEd and Illinois each appealed the ruling. On
March 9, 2004, the Illinois Appellate Court reversed the
trial court. The Appellate Court held that the 1996 law does
apply to the developers facilities and, therefore, they
are not entitled to subsidized payments. The Court expressly
ruled that the breach of contract claims against ComEd are
dismissed with prejudice. Two of the developers sought review of
the Appellate Courts decision by the Illinois Supreme
Court. On May 26, 2004, the Supreme Court declined to hear
the earlier-filed of the two appeals. On October 6, 2004,
the Supreme Court declined to hear the final appeal.



| |                    
| | -------------------
| | PECO and Generation

Real Estate Tax
Appeals.PECO and Generation each have
been challenging real estate taxes assessed on nuclear plants.
PECO is involved in litigation in which it is contesting taxes
assessed in 1997 under the Pennsylvania Public Utility Realty
Tax Act of March 4, 1971, as amended (PURTA), and has
appealed local real estate assessments for 1998 and 1999 on the
Limerick Generating Station (Montgomery County, PA) (Limerick)
and Peach Bottom Atomic Power Station (York County, PA) (Peach
Bottom) plants. Generation is involved in real estate tax
appeals for 2000 through 2004, also regarding the valuation of
its Limerick and Peach Bottom plants, its Quad Cities Station
(Rock Island County, IL) and, through its wholly owned
subsidiary AmerGen, Three Mile Island Nuclear Station (Dauphin
County, PA) and Oyster Creek Nuclear Generating Station (Forked
River, NJ).

PECO and Generation believe their reserve
balances for exposures associated with the real estate taxes as
of September 30, 2004 reflect the probable expected outcome
of the litigation and appeals proceedings in accordance with
SFAS No. 5, Accounting for Contingencies.
The ultimate outcome of such matters, however, could result in
additional unfavorable or favorable adjustments to the
consolidated financial statements of Exelon, PECO and Generation
and such adjustments could be material.



| |           
| | ----------
| | Generation

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. Several of these actions
resulted in nominal jury verdicts or were settled or dismissed.
One action resulted in an award for the plaintiffs of a more
substantial amount, but was reversed on April 22, 2003 by
the Tenth Circuit Court of Appeals and remanded for retrial. An
appeal by the plaintiffs to the United States Supreme Court was
denied on November 10, 2003. See Note 19 
Subsequent Events for information regarding the settlement of
this litigation.

58



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##### 



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  (Continued)

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.

The U.S. 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), has submitted a draft feasibility
study addressing options for remediation of the site. The PRPs
are also engaged in discussions with the State of Missouri and
the EPA, which will determine the remedy. The estimated costs of
the anticipated remediation strategy for the site may range up
to $22 million. Once a remedy is selected, it is expected
that the PRPs will agree on an allocation of responsibility for
the costs. Generation has accrued what it believes to be an
adequate amount to cover its anticipated share of the liability.

Raytheon and Mitsubishi
Litigation.In connection with the
February 2004 settlement among Exelon, Generation and the
lenders under the Boston Generating Credit Facility more fully
described in Note 3  Acquisitions and
Dispositions, Exelon, Generation, and Raytheon, as the guarantor
of the obligations of the turnkey contractor under the
projects engineering, procurement and construction
agreements entered into a global settlement of all disputes
relating to the construction of the Mystic 8 and 9 and Fore
River generating facilities. Under the global settlement,
Generation agreed to pay approximately $31 million to
Raytheon and approximately $1 million to Boston Generating.
Raytheon released Exelon, Generation, their affiliates and the
lenders from construction claims related to the projects.
Raytheon also resolved all of the pending Mitsubishi Heavy
Industries, LTD (MHI) and Mitsubishi Heavy Industries of
America (MHIA) claims relating to work performed on the
projects prior to the settlement, and indemnified Exelon,
Generation, their affiliates and the lenders from certain
subcontractor claims relating to the projects. In return,
Exelon, Generation, their affiliates and the lenders released
all of their claims against Raytheon. All litigation by and
between Raytheon, MHI, MHIA and the project companies relating
to the projects has been dismissed.

Oyster Creek.On
April 7, 2004, AmerGen entered into settlements with the
State of New Jersey relating to an environmental incident on
September 23, 2002 at Oyster Creek. The incident resulted
in a fishkill from heated water discharged from the plant. The
State alleged that the plant had violated its water discharge
permit. The settlements with the State of New Jersey settled all
claims without any admission of liability for payments
aggregating $1 million.



| |                                   
| | ----------------------------------
| | Exelon, ComEd, PECO and Generation

Exelon, ComEd, PECO and Generation are involved
in various other litigation matters that are being defended and
handled in the ordinary course of business. Exelon, ComEd, PECO
and Generation maintain accruals for such costs that are
probable of being incurred and subject to reasonable estimation.
The ultimate outcomes of such matters, as well as the matters
discussed above, are uncertain and may have a material adverse
effect on their respective financial condition, results of
operations or cash flows.



| |                     
| | --------------------
| | Credit Contingencies

Dynegy.Generation
is counterparty to Dynegy, Inc. (Dynegy) in various energy
transactions. The credit ratings of Dynegy are below investment
grade. As of September 30, 2004, Generation has credit risk

59



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##### 



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  (Continued)

associated with Dynegy through Generations
investment in Sithe. Sithe is a 100% owner of the Independence
generating station, a 1,028-MW gas-fired facility that has an
energy-only long-term tolling agreement with Dynegy, with a
related financial swap arrangement. As of March 31, 2004,
Generation consolidated the assets and liabilities of Sithe in
accordance with the provisions of FIN No. 46-R. As a
result, Generation recorded an asset of $127 million on its
Consolidated Balance Sheets related to the fair market value of
the financial swap agreement with Dynegy that is
marked-to-market under the terms of SFAS No. 133,
Accounting for Derivatives and Hedging Activities.
If Dynegy were unable to fulfill the terms of the financial swap
agreement, Generation would be required to impair the related
asset. Exelon estimates, as a 50% owner of Sithe, that the
impairment would result in an after-tax reduction of its net
income by approximately $23 million. See
Note 4  Sithe for information regarding
Generations exercise of a call option to acquire the
remaining 50% of Sithe.

In addition to the asset impairment, if Dynegy
were unable to fulfill its obligations under the financial swap
agreement and the tolling agreement, Generation would likely
incur an impairment of the intangible asset associated with the
Independence plant tolling agreement. Depending upon the timing
of Dynegys failure to fulfill its obligations and the
outcome of any restructuring initiatives, Generation could
realize an after-tax charge of up to $50 million. In the
event of a sale of Generations investment in Sithe to a
third party, proceeds from the sale could be negatively affected
by up to $84 million, which would represent an after-tax
loss of up to $50 million.

Generation previously disclosed that the future
economic value of AmerGens purchased power arrangement
with Illinois Power Company (Illinois Power), a subsidiary of
Dynegy, could be affected by events related to Dynegys
financial condition. On September 30, 2004, Dynegy sold
Illinois Power to a third party, which reduced Generations
credit risk associated with Dynegy.



| |                         
| | ------------------------
| | Income Tax Refund Claims

ComEd and PECO have entered into several
agreements with a tax consultant related to the filing of refund
claims with the IRS. ComEd and PECO previously made refundable
prepayments to the tax consultant of $11 million and
$5 million, respectively. The fees for these agreements are
contingent upon a successful outcome of the claims and are based
upon a percentage of the refunds to be recovered from the IRS,
if any. The ultimate net cash outflow to ComEd and PECO related
to all the agreements will either be positive or neutral
depending upon the outcome of the refund claims with the IRS.
These potential tax benefits and associated fees could be
material to the financial position, results of operations and
cash flows of ComEd and PECO. A portion of ComEds tax
benefits, including any associated interest for periods prior to
the merger of Exelon, Unicom Corporation and PECO on
October 20, 2000 (Merger), would be recorded as a reduction
of goodwill pursuant to a reallocation of the Merger purchase
price. ComEd and PECO cannot predict the timing of the final
resolution of the refund claims.

During the second quarter of 2004, the IRS
granted preliminary approval for one of ComEds refund
claims. As such, ComEd believes that it is probable that a fee
will ultimately be paid to the tax consultant. Therefore, ComEd
has recorded an expense of $5 million (pretax), which
resulted in a decrease to the prepayment from $11 million
to $6 million. The charge represents an estimate of the fee
to the tax consultant which may be adjusted upward or downward
depending on the IRS final calculation of the tax and
interest benefit. ComEd has not reflected the tax benefit
associated with the refund claim pending final approval of the
IRS. However, as described above, the net income statement
impact for ComEd is not anticipated to be material.

60



---



##### 



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  (Continued)



| |                                         
| | ----------------------------------------
| | Jointly Owned Electric Utility
    Plant

On January 28, 2004, the NRC issued a letter
requesting Public Service Enterprise Group (PSEG) to
conduct a review of its Salem facility, of which Generation owns
42.59%, to assess the workplace environment for raising and
addressing safety issues. PSEG responded to the letter on
February 28, 2004, and had independent assessments of the
work environment at the facility performed. Assessment results
were provided to the NRC in May 2004. The assessments concluded
that Salem was safe for continued operation, but also identified
issues that needed to be addressed. At an NRC public meeting on
June 16, 2004, PSEG outlined its action plans to address
these issues, which focus on safety conscious work environment,
the corrective action program, and work management. A letter
documenting these plans and commitments was sent to the NRC on
June 25, 2004. PSEG will provide the NRC a report of its
progress and discuss the progress of its actions to resolve
identified issues at public meetings on December 2, 2004
and in 2005. PSEG will publish metrics to demonstrate
performance commencing in the fourth quarter of 2004.

In June 2001, the New Jersey Department of
Environmental Protection (NJDEP) issued a renewed
National Pollutant Discharge Elimination System permit for
Salem, expiring in July 2006, allowing for the continued
operation of Salem with its existing cooling water system. An
application for renewal of that permit, including a
demonstration of compliance with the requirements of the
recently published Federal Water Pollution Control Act
Section 316(b) regulations, must be submitted to NJDEP by
February 2, 2006 unless the agency grants additional time
to collect information to comply with the new regulations. NJDEP
advised PSEG in a letter dated July 12, 2004 that it
strongly recommends reducing cooling water intake flow
commensurate with closed-cycle cooling as a compliance option
for Salem. PSEG has not made a determination regarding how it
will demonstrate compliance with the Section 316(b)
regulations. If application of the Section 316(b)
regulations requires the retrofitting of Salems cooling
water intake structure to reduce cooling water intake flow
commensurate with closed-cycle cooling, the retrofit would
result in material costs of compliance to the owners of the
facility.

61



---



##### 



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  (Continued)



|    |                                                                            
|--- | ---------------------------------------------------------------------------
|16. | Supplemental Financial Information (Exelon,
    ComEd, PECO and Generation)



| |                                              
| | ---------------------------------------------
| | Supplemental Income Statement
    Information

The following tables provide additional
information regarding the components of other, net within the
Consolidated Statements of Income and Comprehensive Income of
Exelon, ComEd, PECO and Generation for the three and nine months
ended September 30, 2004 and 2003:

|                                                                    |  |               |      |               |  |      |     |      |  |   |      |   |  |   |      |  
|------------------------------------------------------------------- |  | ------------- | ---- | ------------- |  | ---- | --- | ---- |  | - | ---- | - |  | - | ---- | -
|                                                                    |  |               |      |              
|                                                                    |  | Three Months  |      | Nine Months  
|                                                                    |  | Ended         |      | Ended        
|                                                                    |  | September 30, |      | September 30,
|                                                                    |  |               |      |              
|Exelon                                                              |  | 2004          |      | 2003          |  | 2004 |     | 2003
|                                                                    |  |               |      |               |  |      |     |     
|Investment income                                                   |  | $             | 12   |               |  | $    | 7   |      |  | $ | 38   |   |  | $ | 27   |  
|Net loss on extinguishment of long-term debt                        |  |               | (106 | )             |  |      |    |      |  |   | (106 | ) |  |   |     |  
|Gain on sale of Boston Generating(a)                                |  |               |     |               |  |      |    |      |  |   | 85   |   |  |   |     |  
|Gain (loss) on disposition of other assets and
    investments, net |  |               | (2   | )             |  |      | 1   |      |  |   | 86   |   |  |   | 2    |  
|Impairment of investment in Sithe(b)                                |  |               |     |               |  |      | (55 | )    |  |   |     |   |  |   | (255 | )
|Write-down of other impaired assets and
    investments             |  |               | (7   | )             |  |      |    |      |  |   | (7   | ) |  |   | (42  | )
|AFUDC, equity                                                       |  |               | 1    |               |  |      | 5   |      |  |   | 3    |   |  |   | 11   |  
|Reversal of reserve for potential plant
    disallowance            |  |               |     |               |  |      |    |      |  |   |     |   |  |   | 12   |  
|Other                                                               |  |               | (5   | )             |  |      | (2  | )    |  |   | 22   |   |  |   | 19   |  
|                                                                    |  |               |      |               |  |      |     |      |  |   |      |   |  |   |      |  
|Other, net                                                          |  | $             | (107 | )             |  | $    | (44 | )    |  | $ | 121  |   |  | $ | (226 | )
|                                                                    |  |               |      |               |  |      |     |      |  |   |      |   |  |   |      |  



---



|    |  |                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------
|(a) |  | See Note 3  Acquisitions and
    Dispositions for further information regarding Generations
    sale of Boston Generating.  
|   
|(b) |  | See Note 4  Sithe for further
    information regarding impairments recorded related to
    Generations investment in Sithe.

|                                                              |  |               |    |               |  |      |   |      |  |   |   |  |  |   |    |  
|------------------------------------------------------------- |  | ------------- | -- | ------------- |  | ---- | - | ---- |  | - | - |  |  | - | -- | -
|                                                              |  |               |    |              
|                                                              |  | Three Months  |    | Nine Months  
|                                                              |  | Ended         |    | Ended        
|                                                              |  | September 30, |    | September 30,
|                                                              |  |               |    |              
|ComEd                                                         |  | 2004          |    | 2003          |  | 2004 |   | 2003
|                                                              |  |               |    |               |  |      |   |     
|Investment income                                             |  | $             | 1  |               |  | $    | 2 |      |  | $ | 2 |  |  | $ | 4  |  
|Gain (loss) on disposition of assets and
    investments, net |  |               | (1 | )             |  |      | 1 |      |  |   | 1 |  |  |   | 2  |  
|AFUDC, equity                                                 |  |               |   |               |  |      | 5 |      |  |   | 2 |  |  |   | 11 |  
|Reversal of reserve for potential plant
    disallowance      |  |               |   |               |  |      |  |      |  |   |  |  |  |   | 12 |  
|Other                                                         |  |               | (1 | )             |  |      | 1 |      |  |   | 1 |  |  |   | (1 | )
|                                                              |  |               |    |               |  |      |   |      |  |   |   |  |  |   |    |  
|Other, net                                                    |  | $             | (1 | )             |  | $    | 9 |      |  | $ | 6 |  |  | $ | 28 |  
|                                                              |  |               |    |               |  |      |   |      |  |   |   |  |  |   |    |  

62



---



##### 



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  (Continued)

|                                                   |  |               |   |               |  |      |     |      |  |   |   |  |  |   |     |  
|-------------------------------------------------- |  | ------------- | - | ------------- |  | ---- | --- | ---- |  | - | - |  |  | - | --- | -
|                                                   |  |               |   |              
|                                                   |  | Three Months  |   | Nine Months  
|                                                   |  | Ended         |   | Ended        
|                                                   |  | September 30, |   | September 30,
|                                                   |  |               |   |              
|PECO                                               |  | 2004          |   | 2003          |  | 2004 |     | 2003
|                                                   |  |               |   |               |  |      |     |     
|Investment income                                  |  | $             |  |               |  | $    | 3   |      |  | $ | 3 |  |  | $ | 8   |  
|Gain on disposition of assets and investments, net |  |               | 2 |               |  |      |    |      |  |   | 4 |  |  |   |    |  
|AFUDC, equity                                      |  |               | 1 |               |  |      |    |      |  |   | 1 |  |  |   |    |  
|Interest associated with Federal income taxes      |  |               |  |               |  |      | (14 | )    |  |   |  |  |  |   | (14 | )
|Other                                              |  |               |  |               |  |      | 1   |      |  |   |  |  |  |   | 6   |  
|                                                   |  |               |   |               |  |      |     |      |  |   |   |  |  |   |     |  
|Other, net                                         |  | $             | 3 |               |  | $    | (10 | )    |  | $ | 8 |  |  | $ |    |  
|                                                   |  |               |   |               |  |      |     |      |  |   |   |  |  |   |     |  

|                                         |  |               |    |               |  |      |     |      |  |   |     |  |  |   |      |  
|---------------------------------------- |  | ------------- | -- | ------------- |  | ---- | --- | ---- |  | - | --- |  |  | - | ---- | -
|                                         |  |               |    |              
|                                         |  | Three Months  |    | Nine Months  
|                                         |  | Ended         |    | Ended        
|                                         |  | September 30, |    | September 30,
|                                         |  |               |    |              
|Generation                               |  | 2004          |    | 2003          |  | 2004 |     | 2003
|                                         |  |               |    |               |  |      |     |     
|Decommissioning trust funds(a)           |  | $             | 1  |               |  | $    |    |      |  | $ |    |  |  | $ | 10   |  
|Decommissioning trust funds  AmerGen(a) |  |               | 9  |               |  |      |    |      |  |   | 30  |  |  |   |     |  
|Gain on sale of Boston Generating(b)     |  |               |   |               |  |      |    |      |  |   | 85  |  |  |   |     |  
|Impairment of investment in Sithe(c)     |  |               |   |               |  |      | (55 | )    |  |   |    |  |  |   | (255 | )
|Other                                    |  |               | (5 | )             |  |      | 2   |      |  |   | 14  |  |  |   | 7    |  
|                                         |  |               |    |               |  |      |     |      |  |   |     |  |  |   |      |  
|Other, net                               |  | $             | 5  |               |  | $    | (53 | )    |  | $ | 129 |  |  | $ | (238 | )
|                                         |  |               |    |               |  |      |     |      |  |   |     |  |  |   |      |  



---



|    |  |                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes investment income and realized
    gains/(losses).                                                                   
|   
|(b) |  | See Note 3  Acquisitions and
    Dispositions for further information regarding Generations
    sale of Boston Generating.  
|   
|(c) |  | See Note 4  Sithe for further
    information regarding impairments recorded related to
    Generations investment in Sithe.



| |                                           
| | ------------------------------------------
| | Supplemental Balance Sheet
    Information

The following tables provide additional
information regarding the regulatory assets and liabilities of
ComEd and PECO:

|                                                             |  |               |        |              |  |   |        |  
|------------------------------------------------------------ |  | ------------- | ------ | ------------ |  | - | ------ | -
|                                                             |  | September 30, |        | December 31,
|ComEd                                                        |  | 2004          |        | 2003        
|                                                             |  |               |        |             
|Regulatory Assets (Liabilities)                              |  |               |        |              |  |   |        |  
|Nuclear decommissioning                                      |  | $             | (1,259 | )            |  | $ | (1,183 | )
|Removal costs                                                |  |               | (1,002 | )            |  |   | (973   | )
|Recoverable transition costs                                 |  |               | 97     |              |  |   | 131    |  
|Reacquired debt costs and interest-rate swap
    settlements |  |               | 125    |              |  |   | 172    |  
|Deferred income taxes                                        |  |               | 3      |              |  |   | (61    | )
|Other                                                        |  |               | 27     |              |  |   | 23     |  
|                                                             |  |               |        |              |  |   |        |  
|Total                                                        |  | $             | (2,009 | )            |  | $ | (1,891 | )
|                                                             |  |               |        |              |  |   |        |  

63



---



##### 



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  (Continued)

|                                                                       |  |               |       |              |  |   |       |  
|---------------------------------------------------------------------- |  | ------------- | ----- | ------------ |  | - | ----- | -
|                                                                       |  | September 30, |       | December 31,
|PECO                                                                   |  | 2004          |       | 2003        
|                                                                       |  |               |       |             
|Regulatory Assets (Liabilities)                                        |  |               |       |              |  |   |       |  
|Competitive transition charge                                          |  | $             | 4,021 |              |  | $ | 4,303 |  
|Deferred income taxes                                                  |  |               | 766   |              |  |   | 762   |  
|Non-pension postretirement benefits                                    |  |               | 53    |              |  |   | 58    |  
|Reacquired debt costs                                                  |  |               | 43    |              |  |   | 49    |  
|MGP regulatory asset (see
    Note 15  Commitments and Contingencies) |  |               | 31    |              |  |   | 34    |  
|U.S. Department of Energy facility
    decommissioning                 |  |               | 21    |              |  |   | 26    |  
|Nuclear decommissioning                                                |  |               | (15   | )            |  |   | (12   | )
|Other                                                                  |  |               | 11    |              |  |   | 6     |  
|                                                                       |  |               |       |              |  |   |       |  
|Long-term regulatory assets                                            |  |               | 4,931 |              |  |   | 5,226 |  
|Deferred energy costs (current asset)                                  |  |               | 29    |              |  |   | 81    |  
|                                                                       |  |               |       |              |  |   |       |  
|Total                                                                  |  | $             | 4,960 |              |  | $ | 5,307 |  
|                                                                       |  |               |       |              |  |   |       |  

The following tables provide information
regarding accumulated depreciation and the allowance for
uncollectible accounts as of September 30, 2004 and
December 31, 2003:

|                               |                                      |        |   |       |  |      |   |            |  |  |   |       |  |  |   |       | 
|------------------------------ | ------------------------------------ | ------ | - | ----- |  | ---- | - | ---------- |  |  | - | ----- |  |  | - | ----- | 
|September 30, 2004             |                                      | Exelon |   | ComEd |  | PECO |   | Generation
|                               |                                      |        |   |       |  |      |   |           
|Property, plant and equipment: |                                      |        |   |       |  |      |   |            |  |  |   |       |  |  |   |      
|                               | Accumulated depreciation             |        | $ | 6,732 |  |      | $ | 940        |  |  | $ | 2,131 |  |  | $ | 3,553 | 
|Accounts receivable:           |                                      |        |   |       |  |      |   |            |  |  |   |       |  |  |   |      
|                               | Allowance for uncollectible accounts |        |   | 97    |  |      |   | 16         |  |  |   | 58    |  |  |   | 18    | 

|                               |                                      |        |   |       |  |      |   |            |  |  |   |       |  |  |   |       | 
|------------------------------ | ------------------------------------ | ------ | - | ----- |  | ---- | - | ---------- |  |  | - | ----- |  |  | - | ----- | 
|December 31, 2003              |                                      | Exelon |   | ComEd |  | PECO |   | Generation
|                               |                                      |        |   |       |  |      |   |           
|Property, plant and equipment: |                                      |        |   |       |  |      |   |            |  |  |   |       |  |  |   |      
|                               | Accumulated depreciation             |        | $ | 6,948 |  |      | $ | 771        |  |  | $ | 2,048 |  |  | $ | 4,025 | 
|Accounts receivable:           |                                      |        |   |       |  |      |   |            |  |  |   |       |  |  |   |      
|                               | Allowance for uncollectible accounts |        |   | 110   |  |      |   | 16         |  |  |   | 72    |  |  |   | 14    | 



|    |                                                             
|--- | ------------------------------------------------------------
|17. | Segment Information (Exelon, ComEd, PECO and
    Generation)

Exelon operates in three business segments:
Energy Delivery (ComEd and PECO), Generation and Enterprises.
Exelon evaluates the performance of its business segments on the
basis of net income.

ComEd, PECO and Generation each operate in a
single business segment; as such, no separate segment
information is provided for these registrants.

64



---



##### 



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  (Continued)



| |                                                   
| | --------------------------------------------------
| | Three Months Ended September 30, 2004 and
    2003

Exelons segment information for the three
months ended September 30, 2004 and 2003 is as follows:

|                                                                                                                        |  |          |       |            |  |             |       |               |  |              |     |     |  |   |        |   |  |   |       |  
|----------------------------------------------------------------------------------------------------------------------- |  | -------- | ----- | ---------- |  | ----------- | ----- | ------------- |  | ------------ | --- | --- |  | - | ------ | - |  | - | ----- | -
|                                                                                                                        |  |          |       |            |  |             |       | Corporate and |  |             
|                                                                                                                        |  | Energy   |       |            |  |             |       | Intersegment  |  |             
|                                                                                                                        |  | Delivery |       | Generation |  | Enterprises |       | Eliminations  |  | Consolidated
|                                                                                                                        |  |          |       |            |  |             |       |               |  |             
|Total revenues(a):                                                                                                      |  |          |       |            |  |             |       |               |  |              |     |     |  |   |        |   |  |   |       |  
|2004                                                                                                                    |  | $        | 2,844 |            |  | $           | 2,253 |               |  | $            | 15  |     |  | $ | (1,247 | ) |  | $ | 3,865 |  
|2003                                                                                                                    |  |          | 2,886 |            |  |             | 2,630 | (b)           |  |              | 291 | (b) |  |   | (1,366 | ) |  |   | 4,441 |  
|Intersegment revenues:                                                                                                  |  |          |       |            |  |             |       |               |  |              |     |     |  |   |        |   |  |   |       |  
|2004                                                                                                                    |  | $        | 3     |            |  | $           | 1,244 |               |  | $            |    |     |  | $ | (1,247 | ) |  | $ |      |  
|2003                                                                                                                    |  |          | 23    |            |  |             | 1,304 | (b)           |  |              | 38  | (b) |  |   | (1,365 | ) |  |   |      |  
|Income (loss) before income taxes, minority
    interest and cumulative effect of a change in accounting
    principle:
|2004                                                                                                                    |  | $        | 440   |            |  | $           | 517   |               |  | $            | (17 | )   |  | $ | (82    | ) |  | $ | 858   |  
|2003                                                                                                                    |  |          | 479   |            |  |             | (713  | )(b)          |  |              | 31  | (b) |  |   | (11    | ) |  |   | (214  | )
|Income taxes:                                                                                                           |  |          |       |            |  |             |       |               |  |              |     |     |  |   |        |   |  |   |       |  
|2004                                                                                                                    |  | $        | 178   |            |  | $           | 198   |               |  | $            | (6  | )   |  | $ | (90    | ) |  | $ | 280   |  
|2003                                                                                                                    |  |          | 176   |            |  |             | (282  | )(b)          |  |              | 12  | (b) |  |   | (18    | ) |  |   | (112  | )
|Cumulative effect of a change in accounting
    principle:                                                             
|2004                                                                                                                    |  | $        |      |            |  | $           |      |               |  | $            | (9  | )   |  | $ |       |   |  | $ | (9    | )
|2003                                                                                                                    |  |          |      |            |  |             |      |               |  |              |    |     |  |   |       |   |  |   |      |  
|Net income (loss):                                                                                                      |  |          |       |            |  |             |       |               |  |              |     |     |  |   |        |   |  |   |       |  
|2004                                                                                                                    |  | $        | 262   |            |  | $           | 319   |               |  | $            | (20 | )   |  | $ | 7      |   |  | $ | 568   |  
|2003                                                                                                                    |  |          | 303   |            |  |             | (431  | )(b)          |  |              | 19  | (b) |  |   | 7      |   |  |   | (102  | )



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | $55 million and $65 million in utility
    taxes are included in the revenues and expenses for the three
    months ended September 30, 2004 and 2003, respectively, for
    ComEd. $59 million and $61 million in utility taxes
    are included in the revenues and expenses for the three months
    ended September 30, 2004 and 2003, respectively, for PECO.                                                                           
|   
|(b) |  | Effective January 1, 2004, Enterprises
    competitive retail sales business, Exelon Energy Company, was
    transferred to Generation. Segment information for the three
    months ended September 30, 2003 included in the table above
    has been adjusted to reflect Exelon Energy Company as part of
    the Generation segment. For the three months ended
    September 30, 2003, Exelon Energy Company reported the
    following:

|                                                        |  |   |     |  
|------------------------------------------------------- |  | - | --- | -
|Total revenues                                          |  | $ | 146 |  
|Loss from continuing operations before income
    taxes |  | $ | (5  | )
|Income tax benefit                                      |  | $ | (2  | )
|Net loss                                                |  | $ | (3  | )

65



---



##### 



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  (Continued)



| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Nine Months Ended September 30, 2004 and
    2003, September 30, 2004 and December 31,
    2003

Exelons segment information for the nine
months ended September 30, 2004 and 2003 and at
September 30, 2004 and December 31, 2003 is as follows:

|                                                                                                                        |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|----------------------------------------------------------------------------------------------------------------------- |  | -------- | ------ | ---------- |  | ----------- | ------ | ------------- |  | ------------ | --- | ---- |  | - | ------ | - |  | - | ------ | 
|                                                                                                                        |  |          |        |            |  |             |        | Corporate and |  |             
|                                                                                                                        |  | Energy   |        |            |  |             |        | Intersegment  |  |             
|                                                                                                                        |  | Delivery |        | Generation |  | Enterprises |        | Eliminations  |  | Consolidated
|                                                                                                                        |  |          |        |            |  |             |        |               |  |             
|Total
    revenues(a):                                                                                                  |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|2004                                                                                                                    |  | $        | 7,853  |            |  | $           | 6,153  |               |  | $            | 148 |      |  | $ | (3,017 | ) |  | $ | 11,137 | 
|2003                                                                                                                    |  |          | 7,850  |            |  |             | 6,797  | (b)           |  |              | 808 | (b)  |  |   | (3,219 | ) |  |   | 12,236 | 
|Intersegment revenues:                                                                                                  |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|2004                                                                                                                    |  | $        | 24     |            |  | $           | 2,994  |               |  | $            |    |      |  | $ | (3,018 | ) |  | $ |       | 
|2003                                                                                                                    |  |          | 58     |            |  |             | 3,095  | (b)           |  |              | 69  | (b)  |  |   | (3,222 | ) |  |   |       | 
|Income (loss) before income taxes, minority
    interest and cumulative effect of changes in accounting
    principles:
|2004                                                                                                                    |  | $        | 1,426  |            |  | $           | 900    |               |  | $            | 9   |      |  | $ | (211   | ) |  | $ | 2,124  | 
|2003                                                                                                                    |  |          | 1,478  |            |  |             | (566   | )(b)          |  |              | (79 | )(b) |  |   | (53    | ) |  |   | 780    | 
|Income taxes:                                                                                                           |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|2004                                                                                                                    |  | $        | 546    |            |  | $           | 343    |               |  | $            | 9   |      |  | $ | (242   | ) |  | $ | 656    | 
|2003                                                                                                                    |  |          | 558    |            |  |             | (217   | )(b)          |  |              | (29 | )(b) |  |   | (54    | ) |  |   | 258    | 
|Cumulative effect of changes in accounting
    principles:                                                             
|2004                                                                                                                    |  | $        |       |            |  | $           | 32     |               |  | $            | (9  | )    |  | $ |       |   |  | $ | 23     | 
|2003                                                                                                                    |  |          | 5      |            |  |             | 108    |               |  |              | (1  | )    |  |   |       |   |  |   | 112    | 
|Net income (loss):                                                                                                      |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|2004                                                                                                                    |  | $        | 880    |            |  | $           | 599    |               |  | $            | (9  | )    |  | $ | 31     |   |  | $ | 1,501  | 
|2003                                                                                                                    |  |          | 925    |            |  |             | (243   | )(b)          |  |              | (51 | )(b) |  |   |       |   |  |   | 631    | 
|Total assets:                                                                                                           |  |          |        |            |  |             |        |               |  |              |     |      |  |   |        |   |  |   |        | 
|September 30, 2004                                                                                                      |  | $        | 27,794 |            |  | $           | 15,484 | (c)           |  | $            | 278 |      |  | $ | (1,497 | ) |  | $ | 42,059 | 
|December 31, 2003                                                                                                       |  |          | 28,369 |            |  |             | 14,765 | (b)           |  |              | 727 | (b)  |  |   | (1,925 | ) |  |   | 41,936 | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | $174 million and $178 million in
    utility taxes are included in the revenues and expenses for the
    nine months ended September 30, 2004 and 2003,
    respectively, for ComEd. $160 million and $159 million
    in utility taxes are included in the revenues and expenses for
    the nine months ended September 30, 2004 and 2003,
    respectively, for PECO.
|   
|(b) |  | Effective January 1, 2004, Enterprises
    competitive retail sales business, Exelon Energy Company, was
    transferred to Generation. Segment information for the nine
    months ended September 30, 2003 and as of December 31,
    2003 included in the table above has been adjusted to reflect
    Exelon Energy Company as part of the Generation segment.     
|   
|(c) |  | Includes $1,324 million of Sithe
    consolidated assets under the provisions of FIN No. 46-R.
    See Note 4  Sithe for further information
    regarding the consolidation of Sithe.                                                                                                                                                                                 

66



---



##### 



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  (Continued)

Exelon Energy Companys total assets as of
December 31, 2003 were $134 million and for the nine
months ended September 30, 2003, Exelon Energy Company
reported the following:

|                         |  |   |     |  
|------------------------ |  | - | --- | -
|Total revenues           |  | $ | 651 |  
|Loss before income taxes |  | $ | (20 | )
|Income tax benefit       |  | $ | (8  | )
|Net loss                 |  | $ | (12 | )



|    |                                                                    
|--- | -------------------------------------------------------------------
|18. | Related-Party Transactions (Exelon, ComEd,
    PECO and Generation)



| |                 
| | ----------------
| | Exelon and ComEd

Effective December 31, 2003, ComEd
Financing II, ComEd Financing III, ComEd Funding, LLC
and ComEd Transitional Funding Trust were deconsolidated from
the financial statements of Exelon and ComEd in conjunction with
the adoption of FIN No. 46-R. In accordance with FIN
No. 46-R, prior periods were not restated

The financial statements of Exelon and ComEd
include related-party transactions with its unconsolidated
affiliates as presented in the tables below.

|                                                |                                  |               |   |               |   |      |   |      |  |  |   |     |   |  |   |   | 
|----------------------------------------------- | -------------------------------- | ------------- | - | ------------- | - | ---- | - | ---- |  |  | - | --- | - |  | - | - | 
|                                                |                                  |               |   |               |   |     
|                                                |                                  | Three         |   |              
|                                                |                                  | Months        |   | Nine Months  
|                                                |                                  | Ended         |   | Ended        
|                                                |                                  | September 30, |   | September 30,
|                                                |                                  |               |   |              
|                                                |                                  | 2004          |   | 2003          |   | 2004 |   | 2003
|                                                |                                  |               |   |               |   |      |   |     
|Interest expense to affiliates                  |                                  |               |   |               |   |      |   |      |  |  |   |     |   |  |   |  
|                                                | ComEd Transitional Funding Trust |               | $ | 21            |   |      | $ |     |  |  | $ | 65  |   |  | $ |  | 
|                                                | ComEd Financing II               |               |   | 3             |   |      |   |     |  |  |   | 10  |   |  |   |  | 
|                                                | ComEd Financing III              |               |   | 3             |   |      |   |     |  |  |   | 10  |   |  |   |  | 
|Equity in losses from unconsolidated affiliates |                                  |               |   |               |   |      |   |      |  |  |   |     |   |  |   |  
|                                                | ComEd Funding LLC                |               |   | (4            | ) |      |   |     |  |  |   | (13 | ) |  |   |  | 

67



---



##### 



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  (Continued)

|                                                                 |                                  |               |   |              |  |  |   |       | 
|---------------------------------------------------------------- | -------------------------------- | ------------- | - | ------------ |  |  | - | ----- | 
|                                                                 |                                  | September 30, |   | December 31,
|                                                                 |                                  | 2004          |   | 2003        
|                                                                 |                                  |               |   |             
|Receivables from affiliates (current)                            |                                  |               |   |              |  |  |   |      
|                                                                 | ComEd Transitional Funding Trust |               | $ | 14           |  |  | $ | 9     | 
|Investment in affiliates                                         |                                  |               |   |              |  |  |   |      
|                                                                 | ComEd Funding, LLC               |               |   | 43           |  |  |   | 56    | 
|                                                                 | ComEd Financing II               |               |   | 10           |  |  |   | 11    | 
|                                                                 | ComEd Financing III              |               |   | 6            |  |  |   | 6     | 
|Receivable from affiliates (noncurrent)                          |                                  |               |   |              |  |  |   |      
|                                                                 | ComEd Transitional Funding Trust |               |   | 10           |  |  |   | 9     | 
|Payables to affiliates (current)                                 |                                  |               |   |              |  |  |   |      
|                                                                 | ComEd Financing II               |               |   | 3            |  |  |   | 6     | 
|                                                                 | ComEd Financing III              |               |   |             |  |  |   | 4     | 
|Long-term debt to affiliates (including due
    within one year) |                                  |               |   |              |  |  |   |      
|                                                                 | ComEd Transitional Funding Trust |               |   | 1,415        |  |  |   | 1,676 | 
|                                                                 | ComEd Financing II               |               |   | 155          |  |  |   | 155   | 
|                                                                 | ComEd Financing III              |               |   | 206          |  |  |   | 206   | 

In addition to the transactions described above,
ComEds financial statements include related-party
transactions as presented in the tables below.

|                                         |                                   |               |     |               |  |      |    |      |  |  |     |       |  |  |     |       | 
|---------------------------------------- | --------------------------------- | ------------- | --- | ------------- |  | ---- | -- | ---- |  |  | --- | ----- |  |  | --- | ----- | 
|                                         |                                   |               |     |              
|                                         |                                   | Three Months  |     | Nine Months  
|                                         |                                   | Ended         |     | Ended        
|                                         |                                   | September 30, |     | September 30,
|                                         |                                   |               |     |              
|                                         |                                   | 2004          |     | 2003          |  | 2004 |    | 2003
|                                         |                                   |               |     |               |  |      |    |     
|Operating revenues from affiliates       |                                   |               |     |               |  |      |    |      |  |  |     |       |  |  |     |      
|                                         | Generation(a)                     |               | $   |              |  |      | $  | 16   |  |  | $   | 16    |  |  | $   | 42    | 
|                                         | Enterprises(a)                    |               |     |              |  |      |    | 4    |  |  |     | 1     |  |  |     | 7     | 
|Purchased power from affiliate           |                                   |               |     |               |  |      |    |      |  |  |     |       |  |  |     |      
|                                         | PPA with Generation(b)            |               |     | 827           |  |      |    | 885  |  |  |     | 1,870 |  |  |     | 1,984 | 
|Operations & maintenance from affiliates |                                   |               |     |               |  |      |    |      |  |  |     |       |  |  |     |      
|                                         | BSC(c)                            |               |     | 46            |  |      |    | 30   |  |  |     | 136   |  |  |     | 76    | 
|                                         | Enterprises(d,e)                  |               |     |              |  |      |    | 8    |  |  |     |      |  |  |     | 14    | 
|Interest income from affiliates          |                                   |               |     |               |  |      |    |      |  |  |     |       |  |  |     |      
|                                         | UII(f)                            |               |     | 5             |  |      |    | 5    |  |  |     | 13    |  |  |     | 17    | 
|                                         | Exelon intercompany money pool(j) |               |     | 1             |  |      |    | 1    |  |  |     | 2     |  |  |     | 2     | 
|                                         | Other                             |               |     |              |  |      |    |     |  |  |     | 1     |  |  |     | 1     | 
|Capitalized costs                        |                                   |               |     |               |  |      |    |      |  |  |     |       |  |  |     |      
|                                         | BSC(c)                            |               |     | 17            |  |      |    | 3    |  |  |     | 45    |  |  |     | 11    | 
|                                         | Enterprises(e)                    |               |     |              |  |      |    | 10   |  |  |     |      |  |  |     | 21    | 
|Cash dividends paid to parent            |                                   |               | 112 |               |  |      | 94 |      |  |  | 320 |       |  |  | 305 |      

68



---



##### 



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  (Continued)

|                                                     |                                   |               |     |              |  |  |     |       | 
|---------------------------------------------------- | --------------------------------- | ------------- | --- | ------------ |  |  | --- | ----- | 
|                                                     |                                   | September 30, |     | December 31,
|                                                     |                                   | 2004          |     | 2003        
|                                                     |                                   |               |     |             
|Receivables from affiliates (current)                |                                   |               |     |              |  |  |     |      
|                                                     | UII(f)                            |               | $   | 4            |  |  | $   | 3     | 
|                                                     | PECO(h)                           |               |     |             |  |  |     | 6     | 
|                                                     | Exelon intercompany money pool(j) |               |     |             |  |  |     | 405   | 
|                                                     | Other                             |               |     | 1            |  |  |     | 5     | 
|Receivables from affiliates (noncurrent)             |                                   |               |     |              |  |  |     |      
|                                                     | UII(f)                            |               |     | 635          |  |  |     | 1,071 | 
|                                                     | Generation(k)                     |               |     | 1,259        |  |  |     | 1,183 | 
|                                                     | Other                             |               |     | 2            |  |  |     | 8     | 
|Payables to affiliates (current)                     |                                   |               |     |              |  |  |     |      
|                                                     | Generation decommissioning(g)     |               |     | 11           |  |  |     | 11    | 
|                                                     | Generation(a,b)                   |               |     | 188          |  |  |     | 171   | 
|                                                     | Exelon intercompany money pool(j) |               |     | 17           |  |  |     |      | 
|                                                     | BSC(c)                            |               |     | 20           |  |  |     | 13    | 
|                                                     | Other                             |               |     |             |  |  |     | 2     | 
|Payables to affiliates (noncurrent)                  |                                   |               |     |              |  |  |     |      
|                                                     | Generation decommissioning(g)     |               |     | 22           |  |  |     | 22    | 
|                                                     | Other                             |               |     | 6            |  |  |     | 6     | 
|Shareholders equity  receivable
    from parent(i) |                                   |               | 156 |              |  |  | 250 |      



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | ComEd provides electric and ancillary services to
    Generation. ComEd provided electric and ancillary services to
    certain Enterprises companies which were sold in 2004. Prior to
    joining PJM on May 1, 2004, ComEd also provided
    transmission services to Generation and Enterprises.                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(b) |  | Effective January 1, 2001, ComEd entered
    into a full-requirements purchase power agreement
    (PPA) with Generation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(c) |  | ComEd receives a variety of corporate support
    services from BSC, including legal, human resources, financial,
    information technology and supply management services.
    Additionally in 2004, due to the centralization of certain
    functions, certain employees were transferred from ComEd to BSC.
    As a result, ComEd now receives additional services from BSC
    including planning and engineering of delivery systems,
    management of construction, maintenance and operations of the
    transmission and delivery systems and management of other
    support services. A portion of such services, provided at cost
    including applicable overhead, is capitalized.
|   
|(d) |  | ComEd had contracted with an Enterprises company
    to provide energy conservation services to ComEd customers.
    Certain Enterprises companies were sold in 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(e) |  | ComEd received substation and transmission
    engineering and construction services under contracts with
    InfraSource, Inc. (InfraSource). A portion of such services is
    capitalized. Exelon sold InfraSource in September 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(f) |  | ComEd has a note and interest receivable with a
    variable rate of the one month forward LIBOR rate plus
    50 basis points from Unicom Investments Inc.
    (UII) relating to ComEds December 1999 fossil plant
    sale. This note matures in December 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(g) |  | ComEd has a short-term and long-term payable to
    Generation, primarily representing ComEds legal
    requirements to remit collections of nuclear decommissioning
    costs from its customers to Generation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(h) |  | In 2003, ComEd provided hurricane restoration
    assistance to PECO.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

69



---



##### 



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  (Continued)



|    |  |                                                                                                                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) |  | ComEd has a non-interest bearing receivable from
    Exelon related to a corporate restructuring in 2001. The
    receivable is expected to be settled over the years 2004 through
    2008.       
|   
|(j) |  | ComEd participates in Exelons intercompany
    money pool. ComEd earns interest on its investment in and pays
    interest on its borrowings from the money pool at a market rate
    of interest.
|   
|(k) |  | ComEd has a long-term receivable from Generation
    related to a regulatory liability as a result of the adoption of
    SFAS No. 143.                                                            



| |                
| | ---------------
| | Exelon and PECO

Effective July 1, 2003, PECO Trust IV,
a financing subsidiary created in May 2003, was deconsolidated
from the financial statements of Exelon and PECO in conjunction
with the adoption of FIN No. 46. Additionally, effective
December 31, 2003, PECO Trust III and the PETT were
deconsolidated from the financial statements of Exelon and PECO
in conjunction with the adoption of FIN No. 46-R. In
accordance with FIN No. 46-R, prior periods were not
restated.

The financial statements of Exelon and PECO
include related-party transactions with unconsolidated financing
subsidiaries as presented in the tables below.

|                                  |                |               |   |               |  |      |   |      |  |  |   |     |  |  |   |   | 
|--------------------------------- | -------------- | ------------- | - | ------------- |  | ---- | - | ---- |  |  | - | --- |  |  | - | - | 
|                                  |                |               |   |              
|                                  |                | Three Months  |   | Nine Months  
|                                  |                | Ended         |   | Ended        
|                                  |                | September 30, |   | September 30,
|                                  |                |               |   |              
|                                  |                | 2004          |   | 2003          |  | 2004 |   | 2003
|                                  |                |               |   |               |  |      |   |     
|Operating revenues from affiliate |                |               |   |               |  |      |   |      |  |  |   |     |  |  |   |  
|                                  | PETT(a)        |               | $ | 2             |  |      | $ |     |  |  | $ | 7   |  |  | $ |  | 
|Interest expense to affiliates    |                |               |   |               |  |      |   |      |  |  |   |     |  |  |   |  
|                                  | PETT           |               |   | 58            |  |      |   |     |  |  |   | 178 |  |  |   |  | 
|                                  | PECO Trust III |               |   | 2             |  |      |   |     |  |  |   | 5   |  |  |   |  | 
|                                  | PECO Trust IV  |               |   | 1             |  |      |   | 2    |  |  |   | 4   |  |  |   | 2 | 

|                                                                 |                          |               |   |              |  |  |   |       | 
|---------------------------------------------------------------- | ------------------------ | ------------- | - | ------------ |  |  | - | ----- | 
|                                                                 |                          | September 30, |   | December 31,
|                                                                 |                          | 2004          |   | 2003        
|                                                                 |                          |               |   |             
|Investment in affiliates                                         |                          |               |   |              |  |  |   |      
|                                                                 | PETT                     |               | $ | 88           |  |  | $ | 104   | 
|                                                                 | PECO Energy Capital Corp |               |   | 16           |  |  |   | 16    | 
|                                                                 | PECO Trust IV            |               |   | 4            |  |  |   | 3     | 
|Receivables from affiliates (non-current)                        |                          |               |   |              |  |  |   |      
|                                                                 | PECO Trust IV            |               |   |             |  |  |   | 1     | 
|Payables to affiliates                                           |                          |               |   |              |  |  |   |      
|                                                                 | PECO Trust III           |               |   | 12           |  |  |   | 10    | 
|                                                                 | PECO Trust IV            |               |   | 2            |  |  |   |      | 
|                                                                 | PECO Energy Capital Corp |               |   |             |  |  |   | 1     | 
|Long-term debt to affiliates (including due
    within one year) |                          |               |   |              |  |  |   |      
|                                                                 | PETT                     |               |   | 3,563        |  |  |   | 3,849 | 
|                                                                 | PECO Trust III           |               |   | 81           |  |  |   | 81    | 
|                                                                 | PECO Trust IV            |               |   | 103          |  |  |   | 103   | 



---



|    |  |                                                                                                                                          
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | PECO received a monthly service fee from PETT
    based on a percentage of the outstanding balance of all series
    of transition bonds.

70



---



##### 



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  (Continued)

In addition to the transactions described above,
PECOs financial statements include related-party
transactions as presented in the tables below.

|                                          |                |               |    |               |  |      |    |      |  |  |     |       |  |  |     |       | 
|----------------------------------------- | -------------- | ------------- | -- | ------------- |  | ---- | -- | ---- |  |  | --- | ----- |  |  | --- | ----- | 
|                                          |                |               |    |              
|                                          |                | Three Months  |    | Nine Months  
|                                          |                | Ended         |    | Ended        
|                                          |                | September 30, |    | September 30,
|                                          |                |               |    |              
|                                          |                | 2004          |    | 2003          |  | 2004 |    | 2003
|                                          |                |               |    |               |  |      |    |     
|Operating revenues from affiliate         |                |               |    |               |  |      |    |      |  |  |     |       |  |  |     |      
|                                          | Generation(a)  |               | $  | 3             |  |      | $  | 3    |  |  | $   | 7     |  |  | $   | 8     | 
|                                          | Other          |               |    |              |  |      |    |     |  |  |     |      |  |  |     | 1     | 
|Purchased power from affiliate            |                |               |    |               |  |      |    |      |  |  |     |       |  |  |     |      
|                                          | Generation(b)  |               |    | 409           |  |      |    | 421  |  |  |     | 1,108 |  |  |     | 1,101 | 
|Fuel from affiliate                       |                |               |    |               |  |      |    |      |  |  |     |       |  |  |     |      
|                                          | Generation(c)  |               |    | 7             |  |      |    |     |  |  |     | 14    |  |  |     |      | 
|Operating and maintenance from affiliates |                |               |    |               |  |      |    |      |  |  |     |       |  |  |     |      
|                                          | BSC(d)         |               |    | 26            |  |      |    | 14   |  |  |     | 77    |  |  |     | 36    | 
|                                          | Enterprises(e) |               |    |              |  |      |    |     |  |  |     |      |  |  |     | 3     | 
|Capitalized costs                         |                |               |    |               |  |      |    |      |  |  |     |       |  |  |     |      
|                                          | BSC(d)         |               |    | 6             |  |      |    | 1    |  |  |     | 15    |  |  |     | 6     | 
|                                          | Enterprises(e) |               |    |              |  |      |    | 10   |  |  |     |      |  |  |     | 23    | 
|Cash dividends paid to parent             |                |               | 96 |               |  |      | 79 |      |  |  | 276 |       |  |  | 244 |      

|                                                     |                                   |               |       |              |  |  |       |     | 
|---------------------------------------------------- | --------------------------------- | ------------- | ----- | ------------ |  |  | ----- | --- | 
|                                                     |                                   | September 30, |       | December 31,
|                                                     |                                   | 2004          |       | 2003        
|                                                     |                                   |               |       |             
|Receivable from affiliate (current)                  |                                   |               |       |              |  |  |       |    
|                                                     | Exelon intercompany money pool(f) |               | $     | 26           |  |  | $     |    | 
|Receivable from affiliate (non-current)              |                                   |               |       |              |  |  |       |    
|                                                     | Generation decommissioning(g)     |               |       | 15           |  |  |       | 12  | 
|Payables to affiliates (current)                     |                                   |               |       |              |  |  |       |    
|                                                     | Generation(b)                     |               |       | 127          |  |  |       | 115 | 
|                                                     | BSC(d)                            |               |       | 20           |  |  |       | 15  | 
|                                                     | ComEd(h)                          |               |       |             |  |  |       | 6   | 
|                                                     | Other                             |               |       |             |  |  |       | 3   | 
|Shareholders equity  receivable
    from parent(i) |                                   |               | 1,518 |              |  |  | 1,623 |    



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | PECO provides energy to Generation for
    Generations own use.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(b) |  | Effective January 1, 2001, PECO entered into
    a full-requirements PPA with Generation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(c) |  | Effective April 1, 2004, PECO entered into a
    one year gas procurement agreement with Generation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(d) |  | PECO receives a variety of corporate support
    services from BSC, including legal, human resources, financial,
    information technology and supply management services.
    Additionally in 2004, due to the centralization of certain
    functions, certain employees were transferred from PECO to BSC.
    As a result, PECO now receives additional services from BSC,
    including planning and engineering of delivery systems,
    management of construction, maintenance and operations of the
    transmission and delivery systems and management of other
    support services. Such services are provided at cost, including
    applicable overhead. Some of these costs are capitalized.

71



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##### 



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  (Continued)



|    |  |                                                                                                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(e) |  | Prior to 2004, PECO received services from
    Enterprises for construction, which were capitalized, and the
    deployment of automated meter reading technology, which were
    expensed.
|   
|(f) |  | PECO participates in Exelons intercompany
    money pool. PECO earns interest on its investment in the money
    pool at a market rate of interest.                                       
|   
|(g) |  | PECO has a long-term receivable from Generation
    related to a regulatory liability as a result of the adoption of
    SFAS No. 143.                                                     
|   
|(h) |  | In 2003, PECO received assistance from ComEd
    workers during Hurricane Isabel.                                                                                                          
|   
|(i) |  | 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 2004 through
    2010. 

72



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##### 



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  (Continued)



| |                      
| | ---------------------
| | Exelon and Generation

The financial statements of Exelon and Generation
include related-party transactions with unconsolidated
affiliates as presented in the tables below. Generation
accounted for its investment in AmerGen as an equity method
investment prior to the acquisition of British Energys 50%
interest in December 2003 and its investment in Sithe as an
equity method investment prior to its consolidation as of
March 31, 2004. Additionally, effective January 1,
2004, Enterprises competitive retail sales business,
Exelon Energy Company, was transferred to Generation.

|                                          |                                   |               |    |               |   |      |    |      |  |  |     |       |  |  |     |       | 
|----------------------------------------- | --------------------------------- | ------------- | -- | ------------- | - | ---- | -- | ---- |  |  | --- | ----- |  |  | --- | ----- | 
|                                          |                                   |               |    |              
|                                          |                                   | Three Months  |    | Nine Months  
|                                          |                                   | Ended         |    | Ended        
|                                          |                                   | September 30, |    | September 30,
|                                          |                                   |               |    |              
|                                          |                                   | 2004          |    | 2003          |   | 2004 |    | 2003
|                                          |                                   |               |    |               |   |      |    |     
|Operating revenues from affiliates        |                                   |               |    |               |   |      |    |      |  |  |     |       |  |  |     |      
|                                          | ComEd(a)                          |               | $  | 827           |   |      | $  | 885  |  |  | $   | 1,870 |  |  | $   | 1,984 | 
|                                          | PECO(a)                           |               |    | 416           |   |      |    | 421  |  |  |     | 1,122 |  |  |     | 1,101 | 
|                                          | Exelon Energy Company(b)          |               |    |              |   |      |    | 51   |  |  |     |      |  |  |     | 161   | 
|                                          | BSC                               |               |    | 1             |   |      |    |     |  |  |     | 2     |  |  |     |      | 
|Purchased power from affiliates           |                                   |               |    |               |   |      |    |      |  |  |     |       |  |  |     |      
|                                          | AmerGen(c)                        |               |    |              |   |      |    | 133  |  |  |     |      |  |  |     | 310   | 
|                                          | ComEd(a)                          |               |    | (2            | ) |      |    | 11   |  |  |     | 10    |  |  |     | 31    | 
|                                          | PECO                              |               |    | 1             |   |      |    |     |  |  |     | 1     |  |  |     |      | 
|                                          | Exelon Energy Company(b)          |               |    |              |   |      |    |     |  |  |     |      |  |  |     | 9     | 
|Operating and maintenance from affiliates |                                   |               |    |               |   |      |    |      |  |  |     |       |  |  |     |      
|                                          | Sithe(d)                          |               |    |              |   |      |    |     |  |  |     |      |  |  |     | 5     | 
|                                          | ComEd(a)                          |               |    | 2             |   |      |    | 5    |  |  |     | 6     |  |  |     | 11    | 
|                                          | PECO(a)                           |               |    | 2             |   |      |    | 3    |  |  |     | 6     |  |  |     | 8     | 
|                                          | BSC(e)                            |               |    | 62            |   |      |    | 46   |  |  |     | 188   |  |  |     | 117   | 
|Interest expense to affiliates            |                                   |               |    |               |   |      |    |      |  |  |     |       |  |  |     |      
|                                          | Sithe(d)                          |               |    |              |   |      |    | 2    |  |  |     |      |  |  |     | 7     | 
|                                          | Exelo(f)                          |               |    | 1             |   |      |    |     |  |  |     | 1     |  |  |     | 2     | 
|                                          | Exelon intercompany money pool(f) |               |    |              |   |      |    | 1    |  |  |     | 2     |  |  |     | 2     | 
|Services provided to affiliates           |                                   |               |    |               |   |      |    |      |  |  |     |       |  |  |     |      
|                                          | AmerGen(c)                        |               |    |              |   |      |    | 50   |  |  |     |      |  |  |     | 85    | 
|Cash distribution paid to member          |                                   |               | 61 |               |   |      | 71 |      |  |  | 170 |       |  |  | 116 |      

73



---



##### 



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  (Continued)

|                                     |                                   |               |   |              |  |  |   |       | 
|------------------------------------ | --------------------------------- | ------------- | - | ------------ |  |  | - | ----- | 
|                                     |                                   | September 30, |   | December 31,
|                                     |                                   | 2004          |   | 2003        
|                                     |                                   |               |   |             
|Receivables from affiliates          |                                   |               |   |              |  |  |   |      
|                                     | ComEd(a)                          |               | $ | 188          |  |  | $ | 171   | 
|                                     | ComEd decommissioning(g)          |               |   | 11           |  |  |   | 11    | 
|                                     | PECO(a)                           |               |   | 127          |  |  |   | 115   | 
|                                     | BSC(e)                            |               |   |             |  |  |   | 3     | 
|                                     | Exelon Energy Company(b)          |               |   |             |  |  |   | 18    | 
|                                     | Sithe(d)                          |               |   |             |  |  |   | 3     | 
|                                     | Other                             |               |   | 8            |  |  |   | 8     | 
|Note receivable from affiliate       |                                   |               |   |              |  |  |   |      
|                                     | Note receivable from Sithe(d)     |               |   |             |  |  |   | 92    | 
|                                     | Exelon intercompany money pool(f) |               |   | 17           |  |  |   |      | 
|                                     | Other                             |               |   | 1            |  |  |   |      | 
|Long-term receivable from affiliate  |                                   |               |   |              |  |  |   |      
|                                     | ComEd decommissioning(g)          |               |   | 22           |  |  |   | 22    | 
|Payables to affiliates               |                                   |               |   |              |  |  |   |      
|                                     | Exelon(f)                         |               |   |             |  |  |   | 1     | 
|                                     | BSC(e)                            |               |   | 28           |  |  |   |      | 
|                                     | Other                             |               |   | 3            |  |  |   |      | 
|Payables to affiliates (non-current) |                                   |               |   |              |  |  |   |      
|                                     | ComEd decommissioning(h)          |               |   | 1,259        |  |  |   | 1,183 | 
|                                     | PECO decommissioning(h)           |               |   | 15           |  |  |   | 12    | 
|Notes payable to affiliates          |                                   |               |   |              |  |  |   |      
|                                     | Exelon(f)                         |               |   |             |  |  |   | 115   | 
|                                     | Exelon intercompany money pool(f) |               |   |             |  |  |   | 301   | 
|                                     | Sithe(d)                          |               |   |             |  |  |   | 90    | 



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Effective January 1, 2001, Generation
    entered into full-requirements PPAs with ComEd and PECO.
    Generation purchases electric and ancillary services from ComEd
    and buys power from PECO for Generations own use. In order
    to facilitate payment processing, ComEd processes certain
    invoice payments on behalf of Generation. Prior to joining PJM
    on May 1, 2004, ComEd also provided transmission services
    to Generation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(b) |  | Generation sells power to Exelon Energy Company.
    Prior to May 1, 2004, Generation purchased excess power
    from Exelon Energy Company. Prior to the transfer of Exelon
    Energy Companys assets to Generation from Enterprises
    effective January 1, 2004, Exelon Energy Company was an
    intercompany affiliate of Generation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(c) |  | Prior to Generations purchase of British
    Energys 50% interest in AmerGen in December 2003, AmerGen
    was an unconsolidated affiliate of Exelon and Generation and was
    considered to be a related party of Exelon and Generation.
    Generation entered into PPAs dated June 26, 2003,
    December 18, 2001 and November 22, 1999 with AmerGen.
    Under the 2003 PPA, Generation agreed to purchase from AmerGen
    all the energy from Oyster Creek through April 9, 2009.
    Under the 2001 PPA, Generation agreed to purchase from AmerGen
    all the energy from TMI from January 1, 2002 through
    December 31, 2014. Under the 1999 PPA, Generation agreed to
    purchase from AmerGen all of the residual energy from Clinton
    through December 31, 2004. Currently, the residual output
    is approximately 31% of the total output of Clinton. Under a
    service agreement dated March 1, 1999, Generation provides
    AmerGen

74



---



##### 



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  (Continued)



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | 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 with 90 days notice. Generation is compensated for
    these services at cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(d) |  | Under a service agreement dated December 18,
    2000, Sithe provides Generation certain fuel and project
    development services. Sithe is compensated for these services at
    cost. In December 2003, Sithe received letter of credit proceeds
    of $3 million, which Generation was billed on behalf of
    Sithe. Under the terms of the agreement to acquire Exelon New
    England dated November 1, 2002, Generation issued a note to
    Sithe which was subsequently modified and increased to
    $536 million. During 2003, Generation repaid
    $446 million of this note. In the first quarter of 2004,
    Generation repaid $27 million prior to consolidation of
    Sithe in accordance with the provisions of FIN No. 46-R.
    The balance of the note is to be paid on the earlier of
    December 1, 2004, certain Sithe liquidity requirements, or
    upon a change of control of Generation. The note bears interest
    at the rate equal to LIBOR plus 0.875%. In connection with a
    series of transactions in November 2003 that restructured the
    ownership of Sithe (see Note 4  Sithe for
    additional information), Generation received a $92 million
    note receivable from EXRES SHC, Inc., which holds the common
    stock of Sithe. Generation owns 50% of EXRES SHC, Inc and
    consolidated its investment pursuant to FIN No. 46-R
    effective March 31, 2004. Prior to the consolidation of
    Sithe in connection with FIN No. 46-R, Sithe was an
    unconsolidated affiliate of Exelon and Generation and was
    considered to be a related party of Exelon and Generation.
|   
|(e) |  | Generation receives a variety of corporate
    support services from BSC, including legal, human resources,
    financial, information technology and supply management
    services. Such services are provided at cost, including
    applicable overhead. Some third party reimbursements due
    Generation are recovered through BSC. Additionally, in 2004, due
    to the centralization of certain functions, certain employees
    were transferred from Generation to BSC. As a result, Generation
    now receives additional services from BSC including for
    inventory and IT support and management of other support
    services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(f) |  | Represents the outstanding balance of amounts
    invested in or borrowed under the intercompany money pool and
    other short-term obligations payable to Exelon. In order to
    facilitate payment processing, Exelon processes certain invoice
    payments on behalf of Generation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(g) |  | Generation has a short-term and a long-term
    receivable from ComEd, primarily representing ComEds legal
    requirements to remit collections of nuclear decommissioning
    costs from its customers to Generation resulting from the 2001
    corporate restructuring.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(h) |  | Generation has long-term payables to ComEd and
    PECO as a result of the nuclear decommissioning contractual
    construct whereby, to the extent the assets associated with
    decommissioning are greater than the applicable ARO, such
    amounts are due back to ComEd and PECO, as applicable, for
    payment to the ratepayers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



|    |                                                           
|--- | ----------------------------------------------------------
|19. | Subsequent Events (Exelon, ComEd, PECO and
    Generation)

ComEd Debt
Retirements.In October 2004, ComEd
retired $25 million of 7.625% First Mortgage Bonds due
April 15, 2013 and $56 million of 9.20% medium term
notes.

PECO Debt
Retirements.In October 2004, PECO
retired $156 million of Pollution Control Revenue Refunding
Bonds due between April 2021 and October 2034.

Generation Debt
Issuances.In October 2004, Generation
issued $156 million of variable rate Pollution Control
Revenue Refunding Bonds, due between April 2021 and October 2034
through the Delaware County Industrial Development Authority
(Pennsylvania) and the Montgomery County Industrial Development
Authority (Pennsylvania).

Cotter Corporation Litigation
(Generation).In October 2004, a
settlement of the claims of all Cotter plaintiffs associated
with allegations that Cotter permitted radioactive and other
hazardous material to be released from its mill into areas owned
or occupied by the plaintiffs was reached and approved by the
Federal

75



---



##### 



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  (Continued)

District Court in Colorado. This settlement
amount approximated Generations reserve for this matter.
Settlements with the two primary Cotter insurers were also
concluded, under which they will pay Generation approximately
$20 million, which covers the amount previously reserved as
well as certain other costs incurred by Generation related to
this matter, by November 2004. Neither of these settlements
affect the environmental liability associated with the West Lake
Landfill as described in Note 15  Commitments
and Contingencies.

Generations Purchase of Sithe
International, Inc.On
October 13, 2004, Sithe transferred all the shares of Sithe
International, Inc. and its subsidiaries to a subsidiary of
Generation in exchange for cancellation of a $92 million
note and accrued interest which are currently eliminated as part
of the consolidation of Sithe. Sithe International, Inc.
indirectly owns a 49.5% interest in TEG, consisting of two
petcoke-fired plants in Mexico that commenced commercial
operations in the second quarter of 2004.

76



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##### 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of
    Financial Condition and Results of Operations

(Dollars in millions except per share data,
unless otherwise noted)

General

Exelon Corporation (Exelon), a registered public
utility holding company, through its subsidiaries, operates in
three business segments:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Energy Delivery,whose businesses include the regulated sale of electricity and
    distribution and transmission services by Commonwealth Edison
    Company (ComEd) in northern Illinois and PECO Energy Company
    (PECO) in southeastern Pennsylvania and the purchase and
    sale of natural gas and distribution services by PECO in the
    Pennsylvania counties surrounding the City of Philadelphia.                                                                                                                  
|
| |  | Generation,consisting of Exelon Generation Company, LLCs (Generation)
    owned and contracted for electric generating facilities, energy
    marketing operations, a 50% interest in EXRES SHC, Inc., the
    holding company of Sithe Energies, Inc. and its subsidiaries,
    hereafter referred to as Sithe, and, effective January 1,
    2004, the competitive retail sales business of Exelon Energy
    Company.                                                                                                        
|
| |  | Enterprises,consisting primarily of the remaining infrastructure and
    electrical contracting services of Exelon Enterprises Company,
    LLC and other investments weighted towards the communications
    and energy services industries. Effective January 1, 2004,
    Enterprises competitive retail sales business, Exelon
    Energy Company, became part of Generation. See
    Note 3  Acquisitions and Dispositions for
    information regarding the disposition of businesses within the
    Enterprises segment.

See Note 17 of the Combined Notes to
Consolidated Financial Statements for further segment
information. Exelons corporate operations, through its
business services subsidiary, Exelon Business Services Company
(BSC), provide Exelons business segments with a variety of
support services, including legal, human resources, financial,
information technology, supply management and corporate
governance services. Additionally, in 2004, due to the
centralization of certain functions, certain employees were
transferred from ComEd, PECO and Generation to BSC. As a result,
ComEd and PECO now receive additional services from BSC,
including planning and engineering of delivery systems,
management of construction, maintenance and operations of the
transmission and delivery systems, and management of other
support services. Generation now receives additional services
from BSC for inventory and information technology support and
management of other support services. These costs are allocated
to the applicable business segments. Additionally, the results
of Exelons corporate operations include costs for
corporate governance and interest costs and income from various
investment and financing activities.

Critical Accounting Policies and
Estimates

Management of each of the registrants makes a
number of significant estimates, assumptions and judgments in
the preparation of its financial statements. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Critical
Accounting Policies and Estimates in the 2003
Form 10-K for a discussion of the estimates and judgments
necessary in the registrants accounting for derivative
instruments, regulatory assets and liabilities, nuclear
decommissioning, depreciable lives of property, plant and
equipment, asset impairments, severance accounting, defined
benefit pension and other postretirement welfare benefits,
taxation, unbilled energy revenues and environmental costs. Set
forth below is an update to the 2003 Form 10-K.



| |                                                                                                              
| | -------------------------------------------------------------------------------------------------------------
| | Accounting for Ownership Interests in
    Variable Interest Entities (Exelon, ComEd, PECO and
    Generation)

As of September 30, 2004, Exelon, through
Generation, owns an indirect 50% interest in Sithe. In
accordance with Financial Accounting Standards Board
(FASB) Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities (FIN
No. 46-R), Exelon and Generation consolidated Sithe within
their financial statements as of March 31, 2004. The
determination that Sithe qualified as a variable interest entity
and that Generation was the primary beneficiary under FIN
No. 46-R required an

77



---



##### 



analysis supplemented by managements
judgment of the economic benefits accruing to all parties
pursuant to their ownership interests in Sithe. Sithes
total assets and total liabilities as of September 30, 2004
were $1,324 million and $1,230 million, respectively.
As required by FIN No. 46-R, upon the occurrence of a
future triggering event, such as a change in ownership,
management will reassess its investment in Sithe to determine if
Generation continues to qualify as the primary beneficiary. If
management determines in a future period that Sithe no longer
qualifies to be consolidated within the financial statements of
Exelon and Generation pursuant to FIN No. 46-R, the
resulting deconsolidation of Sithe could have a significant
effect on the Consolidated Balance Sheets of Exelon and
Generation and classifications within their Consolidated
Statements of Income and Comprehensive Income. The consolidation
of Sithe did not have an effect on Exelons and
Generations income before the cumulative effect of changes
in accounting principles for the nine months ended
September 30, 2004 and Exelon and Generation do not
anticipate that the consolidation will have a significant effect
on net income in future periods. See Note 4 of the Notes to
Consolidated Financial Statements for information regarding
Generations exercise of a call option to acquire the
remaining 50% of Sithe.


In addition to Sithe, management reviewed other
entities with which Exelon and its subsidiaries have business
relationships to determine if those entities were variable
interest entities that should be consolidated under FIN
No. 46-R and concluded that those entities should not be
consolidated within the financial statements of Exelon, ComEd,
PECO or Generation.

New Accounting Pronouncements

See Note 2 of the Combined Notes to
Consolidated Financial Statements for discussion of new
accounting pronouncements.

EXELON CORPORATION

Executive Overview

Financial Results.Exelons diluted earnings per average common share were
$0.85 for the three months ended September 30, 2004 as
compared to a net loss of $0.16 for the same period in 2003,
primarily as a result of an increase in net income at
Generation, reduced severance and severance-related charges
associated with The Exelon Way and favorable effects from
investments in synthetic fuel-producing facilities, which were
partially offset by decreased net income at Energy Delivery and
Enterprises. The increase in Generations net income
reflects a $945 million impairment charge (before income
taxes) recorded during the third quarter of 2003 related to the
long-lived assets of Boston Generating, LLC (Boston Generating)
and a $55 million impairment charge recorded in 2003
related to its investment in Sithe. Exelons investments in
synthetic fuel-producing facilities increased Exelons net
income for the three months ended September 30, 2004 by
$18 million. The decrease in net income at Energy Delivery
reflects charges of $106 million (before income taxes)
associated with ComEds extinguishment of debt and a
decrease in revenues primarily due to unfavorable weather
conditions in the ComEd and PECO service territories.
Enterprises 2003 income reflected a gain on the sale of
InfraSource, Inc. (InfraSource) of $44 million (before
income taxes).

Exelons diluted earnings per average common
share were $2.25 for the nine months ended September 30,
2004 as compared to $0.96 for the same period in 2003, primarily
as a result of increased income at Generation, a reduction in
severance and severance-related charges associated with The
Exelon Way, decreased losses at Enterprises and favorable
effects from investments in synthetic fuel-producing facilities,
partially offset by decreased net income at Energy Delivery. The
increase in Generations net income reflects 2003
impairment charges of $945 million and $255 million
(before income taxes) related to the long-lived assets of Boston
Generating and Generations investment in Sithe,
respectively. Generations 2004 income includes an
$85 million gain (before income taxes) on the sale of
Boston Generating during the second quarter of 2004. Enterprises
results reflect net gains recorded in 2004 related to the
dispositions of businesses and investments and investment
impairment charges recorded in 2003. Exelons investments
in synthetic fuel-producing facilities increased its 2004
after-tax earnings by $47 million. Energy Deliverys
net income was negatively affected by debt retirement costs of
$106 million (before income taxes).

78



---



##### 



In the first quarter of 2004, Exelon recorded an
after-tax gain of $32 million in accordance with
FIN No. 46-R and the resulting consolidation of Sithe.
In the third quarter of 2004, Exelon recorded an after-tax loss
of $9 million upon the adoption of EITF Issue
No. 03-16, Accounting for Investments in Limited
Liability Companies (EITF 03-16). In the first
quarter of 2003, Exelon recorded an after-tax gain of
$112 million upon the adoption of Statement of Financial
Accounting Standards (SFAS) No. 143, Asset
Retirement Obligations (SFAS No. 143).

The Exelon Way.See
Managements Discussion and Analysis of Financial
Condition and Results of Operations 
Exelon  Executive Summary in the 2003
Form 10-K for a discussion of Exelons implementation
of The Exelon Way.

Investment Strategy.Exelon continued to follow a disciplined approach in investing
to maximize the earnings and cash flows from its assets and
businesses and to divest those assets and businesses that do not
meet its goals. Highlights in the first nine months of 2004
include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On May 25, 2004, Generation completed the
    sale, transfer and assignment of ownership of its indirect
    wholly owned subsidiary Boston Generating, which owns the
    companies that own the Mystic 4-7, Mystic 8 and 9
    and Fore River generating facilities, to a special purpose
    entity owned by the lenders under Boston Generatings
    $1.25 billion credit facility. The resulting pre-tax gain
    of $85 million ($52 million after-tax) was recorded
    within Exelons Consolidated Statements of Income and
    Comprehensive Income during the second quarter of 2004. On
    September 1, 2004, Generation completed the transfer of
    plant operations and power marketing arrangements to the
    lenders special purpose entity and its contractors under
    Boston Generatings credit facility.                      
|
| |  | On September 29, 2004, Generation exercised
    its call option to acquire Reservoirs 50% interest in
    Sithe for $97 million. Generations intent is to fully
    divest its interest in Sithe, and Generation is actively
    pursuing opportunities to dispose of Sithe. Generation believes
    that exercising its call option will provide it with greater
    certainty of a timely exit from Sithe on favorable terms and
    conditions.                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Exelon continued to execute its divestiture
    strategy for Enterprises by selling substantially all components
    of Exelon Services, Inc. (Services) during the nine months ended
    September 30, 2004 for total expected proceeds of
    $35 million subject to post-closing adjustments, and by
    selling its investment in PECO TelCove, a communications joint
    venture, along with certain telecommunications assets, for
    proceeds of $49 million in June 2004. Exelon closed on the
    sale of Exelon Thermal Holding, Inc.s (Thermal) Chicago
    business during the second quarter of 2004 for net cash proceeds
    of $134 million and closed on the sale of ETT Nevada,
    Inc., the holding company for its investment in Northwind
    Aladdin, LLC (Aladdin), for a net cash outflow of
    $1 million in September 2004.

Enterprises continues to pursue the divestiture
of other businesses and investments; however, it may be unable
to fully divest certain businesses and investments for a number
of reasons, including an inability to locate appropriate buyers
or negotiate acceptable terms for the transactions. In addition,
the amount that Enterprises may realize from a divestiture is
subject to market conditions that may contribute to pricing and
other terms that are materially less than expected and could
result in a loss on the sale. Timing of any divestitures may
positively or negatively affect the results of operations. As of
September 30, 2004, Enterprises had total assets and
liabilities of $278 million and $82 million,
respectively.

Financing
Activities.Exelon met its capital
resource commitments primarily with internally generated cash.
When necessary, Exelon obtains funds from external sources,
including capital markets, and through bank borrowings. During
the nine months ended September 30, 2004, ComEd retired
$768 million of its outstanding debt pursuant to an
accelerated liability management plan. ComEd plans to retire
over $400 million of long-term debt in the fourth quarter
of 2004 to complete its accelerated liability management plan.
In addition to the accelerated liability management plan,
payments of approximately $547 million were made for the
purpose of retiring PECO and ComEd transition trust long-term
debt and approximately $107 million of other net long-term
debt during 2004. In January 2004, Exelon approved a 2-for-1
split of its common stock with a distribution date of
May 5, 2004. In the second quarter of 2004, Exelons
Board of Directors approved a discretionary share repurchase
program, and Exelon purchased common stock held as

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treasury shares totaling $75 million during
the nine months ended September 30, 2004. Exelon also
replaced its $750 million 364-day unsecured revolving
credit agreement with a $1 billion five-year facility and
reduced its $750 million three-year facility to
$500 million during the third quarter. In the third quarter
of 2004, Exelons Board of Directors approved a policy of
targeting a dividend payout ratio of 50% to 60% of ongoing
earnings and Exelon expects a dividend payout in that range for
the full year of 2005. The actual dividend payout rate depends
on Exelon achieving its objectives, including meeting planned
cash flow targets and strengthening its balance sheet. The Board
of Directors must approve the dividends each quarter after
review of Exelons financial condition at the time.


Regulatory Developments  PJM
Integration.On May 1, 2004,
ComEd fully integrated its transmission facilities into PJM
Interconnection (PJM). PECO and ComEds membership in
PJM supports Exelons commitment to competitive wholesale
electric markets and will provide Exelon the benefits of more
transparent, liquid and competitive markets for the sale and
purchase of electric energy and capacity. Upon joining PJM,
ComEd began incurring administrative fees, which are expected to
approximate $30 million annually. Exelon believes such
costs will ultimately be partially offset by the benefits of
full access to a wholesale competitive marketplace and increased
revenue requirements, particularly after ComEds regulatory
transition period ends in 2006; however, changes in market
dynamics could affect the ultimate financial impact on Exelon.

Through and Out
Proceeding.ComEd and PECO currently
recognize approximately $66 million and $4 million,
respectively, of annual revenue from through and out (T&O)
rates for energy flowing across ComEds and PECOs
transmission systems. On March 19, 2004, the Federal Energy
Regulatory Commission (FERC) issued an order to eliminate
these rates effective May 1, 2004, which was subsequently
deferred until December 1, 2004. The T&O rates are to
be replaced by a new long-term transmission pricing structure
that will eliminate seams in the PJM and Midwest ISO regions.
Transmission owners in PJM, the Midwest ISO and other parties
filed various pricing proposals with the FERC on or before
October 1, 2004, with an effective date of December 1,
2004. On October 1, 2004, ComEd and PECO participated in
the filing of a Regional Pricing Proposal which, if accepted by
the FERC, could minimize ComEds and PECOs losses of
T&O revenues. Depending upon which proposal is accepted by
the FERC, or if the FERC creates a new alternative, ComEds
and PECOs results of operations could be negatively
affected.

Rate Design
Proceeding.Additionally, certain PJM
transmission owners, including ComEd and PECO, are subject to a
rate design proceeding. One or more filings will be made in
January 2005 to address, among other items, how costs associated
with new investments should be recovered. Exelon is presently
evaluating the extent to which ComEd and PECO will participate
in this proceeding.

At this early stage, Exelon cannot predict the
outcome of either of the above proceedings; however, these
proceedings could lead to adverse impacts on Exelons
results of operations.

See ComEds Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Executive Overview for further
information regarding Regulatory Developments.

Operations.Generations nuclear fleet achieved a 94.1% capacity factor
for the nine months ended September 30, 2004 compared to
94.5% in the same period of 2003 primarily as a result of
increased planned outage days.

Outlook for the Remainder of 2004 and
Beyond.Through September 30,
2004, Exelon has purchased interests in three synthetic
fuel-producing facilities. Exelons purchase price for
these facilities included a combination of cash, notes payable
and contingent consideration dependent upon the production level
of the facilities. Synthetic fuel facilities produce fuel used
in power plants by chemically changing coal, including waste and
marginal coal. The production and sale of synthetic fuel
entitles the owner of the synthetic fuel facilities to tax
credits under Section 29 of the Internal Revenue Code.

Tax credits generated by the production of
synthetic fuel are subject to a phase-out provision that
gradually reduces tax credits as the annual average wellhead
price per barrel of domestic crude oil increases into an
inflation-adjusted phase-out range. For 2003, the tax credit
would have begun to phase-out when the annual average wellhead
price per barrel of domestic crude oil exceeded $50.14 per
barrel and would have

80



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##### 



been completely phased out when the annual
average wellhead price per barrel of domestic crude oil reached
$62.94 per barrel. The 2004 and 2005 phase-out range will
be calculated using inflation rates published in 2005 and 2006,
respectively, by the Internal Revenue Service.


Due to the low price of domestic crude oil during
the first part of 2004, the phase-out is not expected to affect
Exelons tax credits or net income from the facilities for
2004. If domestic crude oil prices remain high in 2005, the tax
credits and net income generated by the investments may be
reduced substantially. In addition, Exelon has recorded an
intangible asset related to its investments in these facilities
that could become impaired if domestic crude oil prices continue
to increase in the future.

Results of Operations  Exelon
Corporation



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Three Months Ended September 30, 2004
    Compared To Three Months Ended September 30, 2003

|                                                                                                                  |  |               |       |               |  |          |       |   |  |   |       |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------- | ----- | ------------- |  | -------- | ----- | - |  | - | ----- | -
|                                                                                                                  |  |               |       |              
|                                                                                                                  |  | Three Months  |       |              
|                                                                                                                  |  | Ended         |       |              
|                                                                                                                  |  | September 30, |       | Favorable    
|                                                                                                                  |  |               |       | (Unfavorable)
|                                                                                                                  |  | 2004          |       | 2003          |  | Variance
|                                                                                                                  |  |               |       |               |  |         
|Operating revenues                                                                                                |  | $             | 3,865 |               |  | $        | 4,441 |   |  | $ | (576  | )
|Purchased power and fuel expense                                                                                  |  |               | 1,280 |               |  |          | 1,863 |   |  |   | 583   |  
|Impairment of Boston Generating, LLC long-lived
    assets                                                        |  |               |      |               |  |          | 945   |   |  |   | 945   |  
|Operating and maintenance expense                                                                                 |  |               | 815   |               |  |          | 1,203 |   |  |   | 388   |  
|Depreciation and amortization                                                                                     |  |               | 364   |               |  |          | 293   |   |  |   | (71   | )
|Operating income                                                                                                  |  |               | 1,228 |               |  |          | 6     |   |  |   | 1,222 |  
|Other income and deductions                                                                                       |  |               | (370  | )             |  |          | (220  | ) |  |   | (150  | )
|Income (loss) before income taxes, minority
    interest and cumulative effect of changes in accounting principle |  |               | 858   |               |  |          | (214  | ) |  |   | 1,072 |  
|Income (loss) before cumulative effect of change
    in accounting principle                                      |  |               | 577   |               |  |          | (102  | ) |  |   | 679   |  
|Net income (loss)                                                                                                 |  |               | 568   |               |  |          | (102  | ) |  |   | 670   |  
|Diluted earnings (loss) per share                                                                                 |  |               | 0.85  |               |  |          | (0.16 | ) |  |   | 1.01  |  

Operating
Revenues.Operating revenues
decreased for the three months ended September 30, 2004 as
compared to the same period in 2003 primarily due to decreased
revenues at Enterprises due to the sale of the majority of its
businesses since the third quarter of 2003, Generations
adoption of Emerging Issues Task Force (EITF) Issue
No. 03-11, Reporting Realized Gains and Losses on
Derivative Instruments That Are Subject to FASB Statement
No. 133, Accounting for Derivative Instruments and
Hedging Activities, and Not Held for Trading
Purposes as Defined in EITF Issue No. 02-3,
Issues Involved in Accounting for Derivative Contracts
Held for Trading Purposes and Contracts Involved in Energy
Trading and Risk Management Activities 
(EITF 03-11) in 2004, Generations sale of Boston
Generating during the second quarter of 2004 and unfavorable
weather conditions at Energy Delivery. Generations
adoption of EITF 03-11 during 2004 changed the presentation
of certain power transactions and decreased operating revenues
by $272 million for the three months ended
September 30, 2004 but had no effect on net income, as the
decrease in revenue was offset by a comparable decrease in
purchased power and fuel costs. The decreases in operating
revenues were partially offset by an increase in market sales at
Generation due to the acquisition of the remaining 50% of
AmerGen Energy Company, LLC (AmerGen) and the consolidation of
Sithe and higher weather-normalized delivery volume at Energy
Delivery. See further discussion of operating revenues by
segment below.

Purchased Power and Fuel Expense.Purchased power and fuel expense
decreased during the three months ended September 30, 2004
as compared to the same period in 2003 primarily due to
Generations adoption of EITF 03-11 during 2004, which
resulted in a decrease in purchased power and fuel expense of
$272 million, the sale of Boston Generating during the
second quarter of 2004 and favorable mark-to-market adjustments.
In addition, purchased power decreased due to reduced capacity
payments to Midwest

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Generation and Generations acquisition of
the remaining 50% of AmerGen in December 2003, which was only
partially offset by an increase in fuel expense. Purchased power
represented 26% of Generations total supply for the three
months ended September 30, 2004 compared to 39% for the
same period in 2003. See further discussion of purchased power
and fuel expense by segment below.


Impairment of the Long-Lived Assets of
Boston Generating.Generation
recorded a $945 million charge (before income taxes) during
the third quarter of 2003 to impair the long-lived assets of
Boston Generating.

Operating and Maintenance
Expense.Operating and maintenance
expense decreased for the three months ended September 30,
2004 as compared to the same period in 2003 primarily due to a
decrease in severance and severance-related charges associated
with The Exelon Way, adjustments related to Generations
nuclear decommissioning accounting recorded during the third
quarter of 2004, decreased expenses at Enterprises due to the
sale of the majority of its businesses since the third quarter
of 2003 and a gain recorded in 2004 resulting from a settlement
with the Department of Energy (DOE) related to spent
nuclear fuel, partially offset by increased expenses at
Generation due to the acquisition of the remaining 50% of
AmerGen and the consolidation of Sithe and investments made by
Exelon in the fourth quarter of 2003 in synthetic fuel-producing
facilities. See further discussion of operating and maintenance
expenses by segment below.

Depreciation and Amortization
Expense.The increase in
depreciation and amortization expense is primarily due to
additional plant placed in service after the third quarter of
2003 at Energy Delivery and Generation, the recording and
subsequent impairment of an asset retirement cost asset (ARC) at
Generation in 2004 and increased amortization expense due to
investments made in the fourth quarter of 2003 in synthetic
fuel-producing facilities. The increase is also due to increased
competitive transition charge amortization at PECO.

Operating
Income.Exclusive of the changes
in operating revenues, purchased power and fuel expense,
operating and maintenance expense and depreciation and
amortization expense discussed above, the change in operating
income was primarily the result of increased taxes other than
income in 2004 as compared to 2003, primarily due to the
reversal of real estate tax accruals at PECO and Generation
during the third quarter of 2003.

Other Income and
Deductions.Other income and
deductions reflects debt retirement charges of $106 million
recorded at ComEd in 2004 associated with an accelerated
liability management plan and a $55 million impairment loss
recorded in 2003 related to Generations investment in
Sithe. Equity in earnings of unconsolidated affiliates decreased
due to the acquisition of the remaining 50% of AmerGen in
December 2003 and investments made in the fourth quarter of 2003
in synthetic fuel-producing facilities.

Effective Income Tax
Rate.Exelons effective
income tax rate decreased from 52% for the three months ended
September 30, 2003 to 33% for the same period in 2004,
primarily due to the impact on income before income taxes of the
impairment of Boston Generatings long-lived assets
recorded in 2003 and investments made in synthetic
fuel-producing facilities during the fourth quarter of 2003.
Also, the decrease in the rate is attributable to the state tax
benefits at Exelon Generation, which incurred losses for the
three months ended September 30, 2003, compared to the
state tax expense for the remainder of Exelon and its
subsidiaries. See Note 12 of the Combined Notes to the
Consolidated Financial Statements for further discussion of the
change in the effective income tax rate.

82



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| |                                              
| | ---------------------------------------------
| | Results of Operations by Business
    Segment

Exelon evaluates its performance on a business
segment basis. The comparisons of operating results and other
statistical information for the three months ended
September 30, 2004 and 2003 set forth below reflect
intercompany transactions, which are eliminated in Exelons
consolidated financial statements.

Effective January 1, 2004, Enterprises
competitive retail sales business, Exelon Energy Company, was
transferred to Generation. The information for the three months
ended September 30, 2003 related to the Generation and
Enterprises segments discussed below has been adjusted to
reflect the transfer of Exelon Energy Company from the
Enterprises segment to the Generation segment. Exelon Energy
Companys results for the three months ended
September 30, 2003 were as follows:

|                         |  |   |     |  
|------------------------ |  | - | --- | -
|Total revenues           |  | $ | 146 |  
|Intersegment revenues    |  |   |    |  
|Loss before income taxes |  |   | (5  | )
|Income tax benefit       |  |   | (2  | )
|Net loss                 |  |   | (3  | )



| |                                          
| | -----------------------------------------
| | Net Income (Loss) by Business
    Segment

|                |  |               |     |               |  |          |      |   |  |   |     |  
|--------------- |  | ------------- | --- | ------------- |  | -------- | ---- | - |  | - | --- | -
|                |  |               |     |              
|                |  | Three Months  |     |              
|                |  | Ended         |     |              
|                |  | September 30, |     | Favorable    
|                |  |               |     | (Unfavorable)
|                |  | 2004          |     | 2003          |  | Variance
|                |  |               |     |               |  |         
|Energy Delivery |  | $             | 262 |               |  | $        | 303  |   |  | $ | (41 | )
|Generation      |  |               | 319 |               |  |          | (431 | ) |  |   | 750 |  
|Enterprises     |  |               | (20 | )             |  |          | 19   |   |  |   | (39 | )
|Corporate       |  |               | 7   |               |  |          | 7    |   |  |   |    |  
|                |  |               |     |               |  |          |      |   |  |   |     |  
|Total           |  | $             | 568 |               |  | $        | (102 | ) |  | $ | 670 |  
|                |  |               |     |               |  |          |      |   |  |   |     |  



| |                                            
| | -------------------------------------------
| | Results of Operations  Energy
    Delivery

|                                      |  |               |       |               |  |          |       |  |  |   |      |  
|------------------------------------- |  | ------------- | ----- | ------------- |  | -------- | ----- |  |  | - | ---- | -
|                                      |  |               |       |              
|                                      |  | Three Months  |       |              
|                                      |  | Ended         |       |              
|                                      |  | September 30, |       | Favorable    
|                                      |  |               |       | (Unfavorable)
|                                      |  | 2004          |       | 2003          |  | Variance
|                                      |  |               |       |               |  |         
|Operating revenues                    |  | $             | 2,844 |               |  | $        | 2,886 |  |  | $ | (42  | )
|Purchased power and fuel expense      |  |               | 1,400 |               |  |          | 1,401 |  |  |   | 1    |  
|Operating and maintenance expense     |  |               | 353   |               |  |          | 491   |  |  |   | 138  |  
|Depreciation and amortization expense |  |               | 248   |               |  |          | 231   |  |  |   | (17  | )
|Operating income                      |  |               | 711   |               |  |          | 664   |  |  |   | 47   |  
|Interest expense                      |  |               | 162   |               |  |          | 182   |  |  |   | 20   |  
|Other, net                            |  |               | (98   | )             |  |          | 5     |  |  |   | (103 | )
|Income before income taxes            |  |               | 440   |               |  |          | 479   |  |  |   | (39  | )
|Income taxes                          |  |               | 178   |               |  |          | 176   |  |  |   | (2   | )
|Net income                            |  |               | 262   |               |  |          | 303   |  |  |   | (41  | )

83



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##### 



Operating Revenues.The changes in Energy
Deliverys operating revenues for the three months ended
September 30, 2004 compared to the same period in 2003
consisted of the following:

|                                          |  |          |      |     |  |            |   |  |  |   |      |  
|----------------------------------------- |  | -------- | ---- | --- |  | ---------- | - |  |  | - | ---- | -
|                                          |  |          |      |     |  | Total     
|                                          |  |          |      |     |  | Increase  
|                                          |  | Electric |      | Gas |  | (Decrease)
|                                          |  |          |      |     |  |           
|Weather                                   |  | $        | (188 | )   |  | $          |  |  |  | $ | (188 | )
|Customer choice                           |  |          | (27  | )   |  |            |  |  |  |   | (27  | )
|Volume                                    |  |          | 114  |     |  |            |  |  |  |   | 114  |  
|PJM transmission                          |  |          | 59   |     |  |            |  |  |  |   | 59   |  
|Rate changes and mix                      |  |          | 11   |     |  |            | 7 |  |  |   | 18   |  
|Other effects                             |  |          | (18  | )   |  |            |  |  |  |   | (18  | )
|                                          |  |          |      |     |  |            |   |  |  |   |      |  
|(Decrease) increase in operating revenues |  | $        | (49  | )   |  | $          | 7 |  |  | $ | (42  | )
|                                          |  |          |      |     |  |            |   |  |  |   |      |  

Weather.The demand
for electricity is affected by weather conditions. Very warm
weather in summer months and very cold weather in other months
are referred to as favorable weather conditions
because these weather conditions result in increased sales of
electricity. Conversely, mild weather reduces demand. Energy
Deliverys electric revenues were negatively affected by
unfavorable weather conditions. Cooling degree-days in the ComEd
and PECO service territories were 27% and 16% lower,
respectively, than the prior year period.

Customer Choice.For
the three months ended September 30, 2004 and 2003, 28% and
24%, respectively, of energy delivered to Energy Deliverys
retail customers was provided by alternative energy suppliers
(AES) or under the ComEd PPO. The decrease in electric
retail revenues attributable to customer choice included a
decrease in revenues of $6 million from customers in
Illinois electing to purchase energy from an AES or under the
ComEd PPO and a decrease in revenues of $21 million from
customers in Pennsylvania being assigned to or selecting an AES.

Volume.Both
ComEds and PECOs electric revenues increased as a
result of higher delivery volume, exclusive of the effect of
weather and customer choice, due to an increased number of
customers and increased usage per customer, primarily
residential and large and small commercial and industrial
customers for ComEd and across all customer classes for PECO.

PJM Transmission.Energy Deliverys operating revenues and purchased power
expense each increased by $63 million in the three months
ended September 30, 2004 relative to 2003 due to
ComEds May 1, 2004 entry into PJM partially offset by
$4 million of lower transmission revenues and expenses at
PECO. The increases related to the change in control of the
transmission assets from ComEd to PJM as a result of which ComEd
receives revenues for its proportionate share of the
transmission revenues generated by PJM, but also pays PJM for
the use of its transmission assets. This is consistent with how
PECO accounts for its PJM transmission revenues and expenses.
For 2004, ComEds operating revenues are estimated to
increase by approximately $180 million, offset by a
corresponding and equal increase in purchased power expense.
Starting in 2005, on an annual basis, ComEds operating
revenues and purchased power expense are estimated to increase
between $200 to $250 million. However, there is no expected
effect on revenues net of purchased power expense.

Rate Changes and
Mix.ComEds competitive
transition charge (CTC) is reset in the second quarter of
each year to reflect market price adjustments. As a result,
ComEds CTC revenues decreased $11 million for the
three months ended September 30, 2004 as compared to the
same period in 2003. This decrease was offset by increased
wholesale market prices that increased energy revenue received
under ComEds power purchase option (PPO) and by
increased average rates paid by small and large commercial and
industrial customers totaling $11 million.

Increased average rates paid by ComEds
residential customers resulted in a $10 million increase in
revenues. Although residential rates are frozen through 2006,
ComEds average effective residential rates fluctuate due
to the usage patterns of customers.

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Electric revenues were unchanged at PECO as a
result of a $7 million unfavorable rate mix due to changes
in monthly usage patterns in all customer classes, offset by a
$7 million increase related to a scheduled phase-out of
merger-related rate reductions. In connection with the
Pennsylvania Public Utility Commissions
(PUC) approval of the merger of PECO and Unicom Corporation
into Exelon in 2000, PECO entered into a settlement agreement
with intervening parties and agreed to $200 million in
aggregate rate reductions for all customers over the period
January 1, 2002 through December 31, 2005.
Consequently, rates were reduced from the levels that otherwise
would have been in effect pursuant to the PUC approved
restructuring settlement by $60 million annually until
January 1, 2004 when the reduction decreased to
$40 million annually, which will be in effect through
December 31, 2005.

Energy Deliverys gas revenues reflect
increases in rates through PUC approved changes to the purchased
gas adjustment clause that became effective March 1, 2004.
The average purchased gas cost rate per million cubic feet for
the three months ended September 30, 2004 was 22% higher
than the rate for the same period in 2003. PECOs purchased
gas cost rates are subject to periodic adjustments by the PUC
and are designed to recover from or refund to customers the
difference between the actual cost of purchased gas and the
amount included in rates. PECO anticipates that its purchased
gas cost rates will be reduced effective December 1, 2004
in connection with a settlement approved by the PUC in September
2004. This decrease will have no impact on PECOs operating
income.

Purchased Power and Fuel
Expense.The changes in Energy
Deliverys purchased power and fuel expense for the three
months ended September 30, 2004 compared to the same period
in 2003 consisted of the following:

|                                                            |  |          |     |     |  |            |   |  |  |   |     |  
|----------------------------------------------------------- |  | -------- | --- | --- |  | ---------- | - |  |  | - | --- | -
|                                                            |  |          |     |     |  | Total     
|                                                            |  |          |     |     |  | Increase  
|                                                            |  | Electric |     | Gas |  | (Decrease)
|                                                            |  |          |     |     |  |           
|Weather                                                     |  | $        | (87 | )   |  | $          |  |  |  | $ | (87 | )
|Customer choice                                             |  |          | (23 | )   |  |            |  |  |  |   | (23 | )
|Prices                                                      |  |          | (4  | )   |  |            | 7 |  |  |   | 3   |  
|Volume                                                      |  |          | 56  |     |  |            |  |  |  |   | 56  |  
|PJM transmission                                            |  |          | 59  |     |  |            |  |  |  |   | 59  |  
|Other                                                       |  |          | (9  | )   |  |            |  |  |  |   | (9  | )
|                                                            |  |          |     |     |  |            |   |  |  |   |     |  
|(Decrease) increase in purchased power and fuel
    expense |  | $        | (8  | )   |  | $          | 7 |  |  | $ | (1  | )
|                                                            |  |          |     |     |  |            |   |  |  |   |     |  

Weather.Energy
Deliverys purchased power and fuel expense decreased due
to the effect of unfavorable weather conditions.

Customer Choice.An
increase in customer switching resulted in a reduction of
purchased power expense, primarily due to ComEds
non-residential customers electing to purchase energy from an
AES or under the ComEd PPO and PECOs residential and small
commercial and industrial customers selecting or being assigned
to purchase energy from an AES.

Prices.Energy
Deliverys electric purchased power decreased primarily due
to the mix of average pricing related to ComEds PPA with
Generation. Fuel expense for gas increased due to higher gas
prices. See Operating Revenues above.

Volume.ComEds
purchased power and fuel expense increased due to increases,
exclusive of the effect of weather and customer choice, in the
number of customers and average usage per customer, primarily
residential and large and small commercial and industrial
customers. PECOs electric purchased power and fuel expense
increased as a result of higher delivery volume, exclusive of
the effect of weather and customer choice, due to an increased
number of customers and increased usage per customer across all
customer classes.

PJM Transmission.Energy Deliverys operating revenues and purchased power
expense each increased by $63 million in the three months
ended September 30, 2004 relative to 2003 due to
ComEds May 1, 2004

85



---



##### 



entry into PJM partially offset by
$4 million of lower transmission revenues and expenses at
PECO. See Operating Revenues above.


Operating and Maintenance
Expense.The changes in operating
and maintenance expense for the three months ended
September 30, 2004 compared to the same period in 2003
consisted of the following:

|                                                                                       |  |            |      |  
|-------------------------------------------------------------------------------------- |  | ---------- | ---- | -
|                                                                                       |  | Increase  
|                                                                                       |  | (Decrease)
|                                                                                       |  |           
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  | $          | (93  | )
|Incremental storm costs                                                                |  |            | (23  | )
|Automated meter reading system implementation
    costs at PECO in 2003                |  |            | (13  | )
|Decrease in payroll expense due to fewer
    employees(a)                              |  |            | (12  | )
|FERC annual fees(b)                                                                    |  |            | (11  | )
|Allowance for uncollectible accounts expense                                           |  |            | (9   | )
|Higher corporate allocations(c)                                                        |  |            | 20   |  
|Contractors                                                                            |  |            | 7    |  
|Other                                                                                  |  |            | (4   | )
|                                                                                       |  |            |      |  
|Decrease in operating and maintenance expense                                          |  | $          | (138 | )
|                                                                                       |  |            |      |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Energy Delivery has fewer employees as a result
    of The Exelon Way terminations.                                                                                                                                                                                                                                                                                                                                                 
|   
|(b) |  | After joining PJM on May 1, 2004, ComEd is
    no longer charged annual fees by the FERC. PJM pays the annual
    FERC fees. This represents the reversal of annual FERC fees.                                                                                                                                                                                                                                                      
|   
|(c) |  | Higher corporate allocations primarily result
    from higher corporate governance allocations and employee fringe
    benefits. Corporate governance allocations increased as a result
    of the 2004 sale of certain Enterprises companies resulting in
    Energy Delivery comprising a greater percentage of Exelon and an
    SEC-mandated change to the methodology used to allocate
    Exelons corporate governance costs.

Depreciation and Amortization
Expense.The increase in
depreciation and amortization expense was primarily due to
increased CTC amortization of $12 million at PECO and
increased depreciation of $5 million due to capital
additions across Energy Delivery.

Operating
Income.Operating income,
exclusive of the changes discussed above, decreased as a result
of increased taxes other than income. The increase in taxes
other than income was primarily attributable to $58 million
at PECO related to the reversal of real estate tax accruals
during 2003, partially offset by $8 million in additional
use tax payments in 2003 at ComEd and an $8 million refund
at ComEd in 2004 for Illinois Electricity Distribution Taxes.

Interest
Expense.The reduction in interest
expense was primarily due to scheduled principal payments, debt
retirements and prepayments, and refinancings at lower rates.

Other, net.In 2004, Exelon initiated an accelerated liability management
plan at ComEd that resulted in the retirement of approximately
$768 million of long-term debt. Exelon and ComEd recorded a
charge of $106 million associated with the retirement of
debt under the plan. The components of this charge included the
following: $63 million related to prepayment premiums;
$11 million related to net unamortized premiums, discounts
and debt issuance costs; $23 million of losses on
reacquired debt previously deferred as regulatory assets; and
$9 million related to settled cash-flow interest-rate swaps
previously deferred as regulatory assets. In 2003, PECO reversed
an accrual for interest income on Federal income taxes of
$14 million to reflect actual interest received.

Income taxes.At ComEd, the effective income tax rate was 43% for the three
months ended September 30, 2004, compared to 39% for the
three months ended September 30, 2003. At PECO, the
effective tax rate was 37% for the three months ended
September 30, 2004 as compared to 35% for the same period
in 2003. The increases in the effective tax rates were primarily
attributable to adjustments to prior period income taxes in
connection with the completion of the 2003 tax returns. See
Note 12 of the Combined

86



---



##### 



Notes to the Consolidated Financial Statements
for further discussion of the change in the effective income tax
rate.




| |                                                            
| | -----------------------------------------------------------
| | Energy Delivery Operating Statistics and
    Revenue Detail

Energy Deliverys electric sales statistics
and revenue detail were as follows:

|                                                 |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |      |   
|------------------------------------------------ | --------------------------- | ------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ------ | ------ | - |  | ----- | ---- | --
|                                                 |                             |               |        |        |  |         
|                                                 |                             | Three Months  |        |        |  |         
|                                                 |                             | Ended         |        |        |  |         
|                                                 |                             | September 30, |        |        |  |         
|                                                 |                             |               |        |        |  |         
|Retail Deliveries  (in gigawatthours (GWhs))(a) |                             | 2004          |        | 2003   |  | Variance |        | % Change
|                                                 |                             |               |        |        |  |          |        |         
|Full service(b)                                  |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Residential                                      |                             |               | 10,340 |        |  |          | 11,530 |          |  |  | (1,190 | )      |   |  | (10.3 | )%  
|Small commercial & industrial                    |                             |               | 7,099  |        |  |          | 7,502  |          |  |  | (403   | )      |   |  | (5.4  | )%  
|Large commercial & industrial                    |                             |               | 5,447  |        |  |          | 5,552  |          |  |  | (105   | )      |   |  | (1.9  | )%  
|Public authorities & electric railroads          |                             |               | 1,447  |        |  |          | 1,486  |          |  |  | (39    | )      |   |  | (2.6  | )%  
|                                                 |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                                 | Total full service          |               |        | 24,333 |  |          |        | 26,070   |  |  |        | (1,737 | ) |  |       | (6.7 | )%
|                                                 |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|PPO (ComEd only)                                 |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Small commercial & industrial                    |                             |               | 1,053  |        |  |          | 884    |          |  |  | 169    |        |   |  | 19.1  | %   
|Large commercial & industrial                    |                             |               | 1,160  |        |  |          | 896    |          |  |  | 264    |        |   |  | 29.5  | %   
|Public authorities & electric railroads          |                             |               | 562    |        |  |          | 428    |          |  |  | 134    |        |   |  | 31.3  | %   
|                                                 |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                                 |                             |               | 2,775  |        |  |          | 2,208  |          |  |  | 567    |        |   |  | 25.7  | %   
|                                                 |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Delivery only(c)                                 |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Residential                                      |                             |               | 636    |        |  |          | 258    |          |  |  | 378    |        |   |  | 146.5 | %   
|Small commercial & industrial                    |                             |               | 2,318  |        |  |          | 2,241  |          |  |  | 77     |        |   |  | 3.4   | %   
|Large commercial & industrial                    |                             |               | 3,315  |        |  |          | 3,142  |          |  |  | 173    |        |   |  | 5.5   | %   
|Public authorities & electric railroads          |                             |               | 371    |        |  |          | 426    |          |  |  | (55    | )      |   |  | (12.9 | )%  
|                                                 |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                                 |                             |               | 6,640  |        |  |          | 6,067  |          |  |  | 573    |        |   |  | 9.4   | %   
|                                                 |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                                 | Total PPO and delivery only |               |        | 9,415  |  |          |        | 8,275    |  |  |        | 1,140  |   |  |       | 13.8 | % 
|                                                 |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Total retail deliveries                          |                             |               | 33,748 |        |  |          | 34,345 |          |  |  | (597   | )      |   |  | (1.7  | )%  
|                                                 |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     



---



|    |  |                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------
|(a) |  | One GWh is the equivalent of one million
    kilowatthours (kWh).                                         
|   
|(b) |  | Full service reflects deliveries to customers
    taking electric generation service under tariffed rates.
|   
|(c) |  | Delivery only service reflects customers
    receiving electric generation service from an AES.           

87



---



##### 



|                                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |      |   
|--------------------------------------- | -------------------------------------- | ------------- | ----- | ----- |  | -------- | ----- | -------- |  | - | ---- | ---- | - |  | ----- | ---- | --
|                                        |                                        |               |       |       |  |         
|                                        |                                        | Three Months  |       |       |  |         
|                                        |                                        | Ended         |       |       |  |         
|                                        |                                        | September 30, |       |       |  |         
|                                        |                                        |               |       |       |  |         
|Electric Revenue                        |                                        | 2004          |       | 2003  |  | Variance |       | % Change
|                                        |                                        |               |       |       |  |          |       |         
|Full service(a)                         |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Residential                             |                                        | $             | 1,108 |       |  | $        | 1,226 |          |  | $ | (118 | )    |   |  | (9.6  | )%  
|Small commercial & industrial           |                                        |               | 676   |       |  |          | 698   |          |  |   | (22  | )    |   |  | (3.2  | )%  
|Large commercial & industrial           |                                        |               | 366   |       |  |          | 374   |          |  |   | (8   | )    |   |  | (2.1  | )%  
|Public authorities & electric railroads |                                        |               | 97    |       |  |          | 101   |          |  |   | (4   | )    |   |  | (4.0  | )%  
|                                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        | Total full service                     |               |       | 2,247 |  |          |       | 2,399    |  |   |      | (152 | ) |  |       | (6.3 | )%
|                                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|PPO (ComEd only)(b)                     |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Small commercial & industrial           |                                        |               | 76    |       |  |          | 65    |          |  |   | 11   |      |   |  | 16.9  | %   
|Large commercial & industrial           |                                        |               | 71    |       |  |          | 56    |          |  |   | 15   |      |   |  | 26.8  | %   
|Public authorities & electric railroads |                                        |               | 33    |       |  |          | 26    |          |  |   | 7    |      |   |  | 26.9  | %   
|                                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        |                                        |               | 180   |       |  |          | 147   |          |  |   | 33   |      |   |  | 22.4  | %   
|                                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Delivery only(c)                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Residential                             |                                        |               | 50    |       |  |          | 20    |          |  |   | 30   |      |   |  | 150.0 | %   
|Small commercial & industrial           |                                        |               | 59    |       |  |          | 62    |          |  |   | (3   | )    |   |  | (4.8  | )%  
|Large commercial & industrial           |                                        |               | 47    |       |  |          | 46    |          |  |   | 1    |      |   |  | 2.2   | %   
|Public authorities & electric railroads |                                        |               | 8     |       |  |          | 8     |          |  |   |     |      |   |  |      |     
|                                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        |                                        |               | 164   |       |  |          | 136   |          |  |   | 28   |      |   |  | 20.6  | %   
|                                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        | Total PPO and delivery only            |               |       | 344   |  |          |       | 283      |  |   |      | 61   |   |  |       | 21.6 | % 
|                                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Total electric retail revenues          |                                        |               | 2,591 |       |  |          | 2,682 |          |  |   | (91  | )    |   |  | (3.4  | )%  
|                                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        | Wholesale and miscellaneous revenue(d) |               |       | 193   |  |          |       | 151      |  |   |      | 42   |   |  |       | 27.8 | % 
|                                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Total electric revenue                  |                                        | $             | 2,784 |       |  | $        | 2,833 |          |  | $ | (49  | )    |   |  | (1.7  | )%  
|                                        |                                        |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Full service 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.                                                                                                        
|   
|(b) |  | Revenue from customers choosing the ComEd PPO
    includes an energy charge at market rates, transmission and
    distribution charges and a CTC.                                                                                                                                                                                                                                   
|   
|(c) |  | Delivery only revenue reflects revenue from
    customers receiving electric generation service from an AES.
    Revenue from customers choosing an AES includes a distribution
    charge and a CTC. Prior to ComEds full integration into
    PJM on May 1, 2004, ComEds transmission charges
    received from an AES were included in wholesale and
    miscellaneous revenue.
|   
|(d) |  | Wholesale and miscellaneous revenues include
    transmission revenue (including revenue from PJM), sales to
    municipalities and other wholesale energy sales.                                                                                                                                                                                                                   

Energy Deliverys gas sales statistics and
revenue detail were as follows:

|                                                       |  |               |        |      |  |          |       |          |  |  |     |  |  |  |      |  
|------------------------------------------------------ |  | ------------- | ------ | ---- |  | -------- | ----- | -------- |  |  | --- |  |  |  | ---- | -
|                                                       |  |               |        |      |  |         
|                                                       |  | Three Months  |        |      |  |         
|                                                       |  | Ended         |        |      |  |         
|                                                       |  | September 30, |        |      |  |         
|                                                       |  |               |        |      |  |         
|Deliveries to customers (in million cubic feet (mmcf)) |  | 2004          |        | 2003 |  | Variance |       | % Change
|                                                       |  |               |        |      |  |          |       |         
|Retail sales                                           |  |               | 3,866  |      |  |          | 3,498 |          |  |  | 368 |  |  |  | 10.5 | %
|Transportation                                         |  |               | 6,167  |      |  |          | 6,012 |          |  |  | 155 |  |  |  | 2.6  | %
|                                                       |  |               |        |      |  |          |       |          |  |  |     |  |  |  |      |  
|Total                                                  |  |               | 10,033 |      |  |          | 9,510 |          |  |  | 523 |  |  |  | 5.5  | %
|                                                       |  |               |        |      |  |          |       |          |  |  |     |  |  |  |      |  

88



---



##### 



|                  |  |               |    |      |  |          |    |          |  |   |    |   |  |  |       |   
|----------------- |  | ------------- | -- | ---- |  | -------- | -- | -------- |  | - | -- | - |  |  | ----- | --
|                  |  |               |    |      |  |         
|                  |  | Three Months  |    |      |  |         
|                  |  | Ended         |    |      |  |         
|                  |  | September 30, |    |      |  |         
|                  |  |               |    |      |  |         
|Revenue           |  | 2004          |    | 2003 |  | Variance |    | % Change
|                  |  |               |    |      |  |          |    |         
|Retail sales      |  | $             | 55 |      |  | $        | 47 |          |  | $ | 8  |   |  |  | 17.0  | % 
|Transportation    |  |               | 4  |      |  |          | 4  |          |  |   |   |   |  |  |      |   
|Resales and other |  |               | 1  |      |  |          | 2  |          |  |   | (1 | ) |  |  | (50.0 | )%
|                  |  |               |    |      |  |          |    |          |  |   |    |   |  |  |       |   
|Total             |  | $             | 60 |      |  | $        | 53 |          |  | $ | 7  |   |  |  | 13.2  | % 
|                  |  |               |    |      |  |          |    |          |  |   |    |   |  |  |       |   

Results of
Operations  Generation

As previously described, effective
January 1, 2004, Exelon contributed its interest in Exelon
Energy Company to Generation. Exelon Energy Company was
previously reported as a part of the Enterprises segment. For
comparative discussion within this segment analysis, Exelon
Energy Companys results of operations have been included
within Generations results of operations as if this
transfer had occurred on January 1, 2003.

|                                                           |  |               |       |               |  |          |       |   |  |   |       |  
|---------------------------------------------------------- |  | ------------- | ----- | ------------- |  | -------- | ----- | - |  | - | ----- | -
|                                                           |  |               |       |              
|                                                           |  | Three Months  |       |              
|                                                           |  | Ended         |       |              
|                                                           |  | September 30, |       | Favorable    
|                                                           |  |               |       | (Unfavorable)
|                                                           |  | 2004          |       | 2003          |  | Variance
|                                                           |  |               |       |               |  |         
|Operating revenues                                         |  | $             | 2,253 |               |  | $        | 2,630 |   |  | $ | (377  | )
|Purchased power and fuel expense                           |  |               | 1,122 |               |  |          | 1,780 |   |  |   | 658   |  
|Impairment of Boston Generating, LLC long-lived
    assets |  |               |      |               |  |          | 945   |   |  |   | 945   |  
|Operating and maintenance expense                          |  |               | 432   |               |  |          | 513   |   |  |   | 81    |  
|Depreciation and amortization expense                      |  |               | 95    |               |  |          | 52    |   |  |   | (43   | )
|Operating income                                           |  |               | 562   |               |  |          | (688  | ) |  |   | 1,250 |  
|Income before income taxes and minority interest           |  |               | 517   |               |  |          | (713  | ) |  |   | 1,230 |  
|Net income                                                 |  |               | 319   |               |  |          | (431  | ) |  |   | 750   |  

Operating
Revenues.For the three months
ended September 30, 2004 and 2003, Generations sales
were as follows:

|                                    |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|----------------------------------- |  | ------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ----- | --
|                                    |  |               |       |      |  |         
|                                    |  | Three Months  |       |      |  |         
|                                    |  | Ended         |       |      |  |         
|                                    |  | September 30, |       |      |  |         
|                                    |  |               |       |      |  |         
|Revenue                             |  | 2004          |       | 2003 |  | Variance |       | % Change
|                                    |  |               |       |      |  |          |       |         
|Electric sales to affiliates        |  | $             | 1,218 |      |  | $        | 1,286 |          |  | $ | (68  | ) |  |  | (5.3  | )%
|Wholesale and retail electric sales |  |               | 759   |      |  |          | 1,148 |          |  |   | (389 | ) |  |  | (33.9 | )%
|                                    |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Total energy sales revenue          |  |               | 1,977 |      |  |          | 2,434 |          |  |   | (457 | ) |  |  | (18.8 | )%
|                                    |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Retail gas sales                    |  |               | 55    |      |  |          | 78    |          |  |   | (23  | ) |  |  | (29.5 | )%
|Trading portfolio                   |  |               | 1     |      |  |          | 1     |          |  |   |     |   |  |  |      |   
|Other revenue(a)                    |  |               | 220   |      |  |          | 117   |          |  |   | 103  |   |  |  | 88.0  | % 
|                                    |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Total revenue                       |  | $             | 2,253 |      |  | $        | 2,630 |          |  | $ | (377 | ) |  |  | 14.3  | % 
|                                    |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   



---



|    |  |                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------
|(a) |  | Includes sales related to tolling agreements,
    including Sithe in 2004, and fossil fuel sales.

89



---



##### 



|                                    |  |               |        |      |  |          |        |          |  |  |         |   |  |  |       |   
|----------------------------------- |  | ------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------- | - |  |  | ----- | --
|                                    |  |               |        |      |  |         
|                                    |  | Three Months  |        |      |  |         
|                                    |  | Ended         |        |      |  |         
|                                    |  | September 30, |        |      |  |         
|                                    |  |               |        |      |  |         
|Sales (in GWhs)                     |  | 2004(a)       |        | 2003 |  | Variance |        | % Change
|                                    |  |               |        |      |  |          |        |         
|Electric sales to affiliates        |  |               | 30,040 |      |  |          | 31,113 |          |  |  | (1,073  | ) |  |  | (3.4  | )%
|Wholesale and retail electric sales |  |               | 21,894 |      |  |          | 31,177 |          |  |  | (9,283  | ) |  |  | (29.8 | )%
|                                    |  |               |        |      |  |          |        |          |  |  |         |   |  |  |       |   
|Total sales                         |  |               | 51,934 |      |  |          | 62,290 |          |  |  | (10,356 | ) |  |  | (16.6 | )%
|                                    |  |               |        |      |  |          |        |          |  |  |         |   |  |  |       |   



---



|    |  |                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Sales in 2004 do not include 6,919 GWhs, which
    were netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11.

Trading volumes of 7,132 GWhs and 11,086 GWhs for
the three months ended September 30, 2004 and 2003,
respectively, are not included in the table above. The decrease
in trading volume is a result of reduced proprietary trading
activity.

Generations average margin (operating
revenue, less purchased power and fuel expenses) and other
operating data for the three months ended September 30,
2004 and 2003 were as follows:

|                                                             |                                         |               |       |       |  |          |       |       |  |  |       |      |   
|------------------------------------------------------------ | --------------------------------------- | ------------- | ----- | ----- |  | -------- | ----- | ----- |  |  | ----- | ---- | --
|                                                             |                                         |               |       |      
|                                                             |                                         | Three Months  |       |      
|                                                             |                                         | Ended         |       |      
|                                                             |                                         | September 30, |       |      
|                                                             |                                         |               |       |      
|($/MWh)                                                      |                                         | 2004          |       | 2003  |  | % Change
|                                                             |                                         |               |       |       |  |         
|Average revenue                                              |                                         |               |       |       |  |          |       |       |  |  |       |     
|                                                             | Electric sales to affiliates            |               | $     | 40.55 |  |          | $     | 41.33 |  |  |       | (1.9 | )%
|                                                             | Wholesale and retail electric sales     |               |       | 34.67 |  |          |       | 36.82 |  |  |       | (5.8 | )%
|                                                             | Total  excluding the trading portfolio |               |       | 38.07 |  |          |       | 39.08 |  |  |       | (2.6 | )%
|Average supply cost(a)  excluding the
    trading portfolio |                                         | $             | 21.60 |       |  | $        | 28.58 |       |  |  | (24.4 | )%  
|Average margin  excluding the trading
    portfolio         |                                         | $             | 16.47 |       |  | $        | 10.50 |       |  |  | 56.9  | %   



---



|    |  |                                                                                            
|--- |  | -------------------------------------------------------------------------------------------
|(a) |  | Average supply cost includes purchased power,
    fuel costs and PPAs with AmerGen in 2003.

Wholesale and Retail Electric
Sales.The changes in
Generations wholesale and retail electric sales for the
three months ended September 30, 2004 compared to the same
period in 2003 consisted of the following:

|                                                |  |            |      |  
|----------------------------------------------- |  | ---------- | ---- | -
|                                                |  | Increase  
|                                                |  | (Decrease)
|                                                |  |           
|Effects of the adoption of EITF 03-11           |  | $          | (272 | )
|Sale of Boston Generating                       |  |            | (213 | )
|AmerGen operations                              |  |            | 77   |  
|Other                                           |  |            | 19   |  
|                                                |  |            |      |  
|Decrease in wholesale and retail electric sales |  | $          | (389 | )
|                                                |  |            |      |  

The adoption of EITF 03-11 on
January 1, 2004 resulted in the netting of certain revenues
and the associated purchase power and fuel expense in 2004. See
Note 2 of the Combined Notes to Consolidated Financial
Statements for further discussion of EITF 03-11. The sale
of Boston Generating in May 2004 decreased wholesale and retail
sales, which was partially offset by the increase from the
acquisition of the remaining 50% of AmerGen in 2003.

The increase in other wholesale and retail
electric sales was primarily due to higher demand in the forward
wholesale market as a result of forward hedging and fuel prices,
and higher average market prices driven by coal prices in the
Midwest, and higher oil and gas prices in the Mid-Atlantic
region contributed to higher revenues.

Electric Sales to
Affiliates.The decrease in revenue
from sales to affiliates was due to lower sales to Energy
Delivery. The lower sales to Energy Delivery were primarily due
to customers purchasing energy from

90



---



##### 



an AES and unfavorable weather conditions in the
ComEd and PECO service territories compared to the prior year.


Retail Gas Sales.Retail gas sales decreased $23 million as a result of the
wind down of Exelon Energys Northeast business.

Other.Certain other
revenues increased for the three months ended September 30,
2004 as compared to the same period in 2003, primarily due to
the consolidation of Sithes operations beginning
April 1, 2004.

Purchased Power and Fuel
Expense.Generations supply
source is summarized below:

|                                       |  |               |        |      |  |          |        |          |  |  |         |   |  |  |       |   
|-------------------------------------- |  | ------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------- | - |  |  | ----- | --
|                                       |  |               |        |      |  |         
|                                       |  | Three Months  |        |      |  |         
|                                       |  | Ended         |        |      |  |         
|                                       |  | September 30, |        |      |  |         
|                                       |  |               |        |      |  |         
|Supply Source (in GWhs)                |  | 2004          |        | 2003 |  | Variance |        | % Change
|                                       |  |               |        |      |  |          |        |         
|Nuclear generation(a)                  |  |               | 35,303 |      |  |          | 30,152 |          |  |  | 5,151   |   |  |  | 17.1  | % 
|Purchases  non-trading portfolio(b)   |  |               | 13,563 |      |  |          | 24,502 |          |  |  | (10,939 | ) |  |  | (44.6 | )%
|Fossil and hydroelectric generation(c) |  |               | 3,068  |      |  |          | 7,636  |          |  |  | (4,568  | ) |  |  | (59.8 | )%
|                                       |  |               |        |      |  |          |        |          |  |  |         |   |  |  |       |   
|Total supply                           |  |               | 51,934 |      |  |          | 62,290 |          |  |  | (10,356 | ) |  |  | (16.6 | )%
|                                       |  |               |        |      |  |          |        |          |  |  |         |   |  |  |       |   



---



|    |  |                                                                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes AmerGen in 2003. AmerGen generated 5,151
    GWhs during the three months ended September 30, 2004.                                                                                                                   
|   
|(b) |  | 6,919 GWhs were netted with purchased power GWhs
    as a result of the reclassification of certain hedging
    activities in accordance with EITF 03-11. Includes PPAs
    with AmerGen, which represented 3,725 GWhs in 2003.
|   
|(c) |  | Fossil generation associated with the Boston
    Generating units represented 3,570 GWhs during the three months
    ended September 30, 2003.                                                                                 

The changes in Generations purchased power
and fuel expense for the three months ended September 30,
2004 compared to the same period in 2003 consisted of the
following:

|                                               |  |            |      |  
|---------------------------------------------- |  | ---------- | ---- | -
|                                               |  | Increase  
|                                               |  | (Decrease)
|                                               |  |           
|Effects of the adoption of EITF 03-11          |  | $          | (272 | )
|Boston Generating                              |  |            | (178 | )
|AmerGen operations                             |  |            | (124 | )
|Mark-to-market adjustments on hedging activity |  |            | (78  | )
|Midwest Generation                             |  |            | (62  | )
|Sithe                                          |  |            | 52   |  
|Volume                                         |  |            | 17   |  
|Price                                          |  |            | 42   |  
|Other                                          |  |            | (55  | )
|                                               |  |            |      |  
|Decrease in purchased power and fuel expense   |  | $          | (658 | )
|                                               |  |            |      |  

Adoption of
EITF 03-11.The adoption of
EITF 03-11 resulted in a decrease in reported purchased
power and fuel expense of $272 million.

Boston Generating.The decrease in fuel and purchased power expense for Boston
Generating is due to the sale of the business in May 2004.

AmerGen.As result
of Generations acquisition of the remaining 50% interest
in AmerGen in December 2003, purchased power decreased
$124 million, which had a significant impact on
Generations average supply cost decrease for the same
period. In prior periods, Generation reported energy purchased
from AmerGen as purchased power expense.

Hedging Activity.Mark-to-market gains on hedging activities were $57 million
for the three months ended September 30, 2004 compared to
losses of $21 million for the same period of 2003.

91



---



##### 



Midwest Generation.The volume of purchased power acquired from Midwest Generation
declined in 2004 as a result of Generation exercising its option
to reduce the capacity purchased from Midwest Generation.

Sithe.Under the
provisions of FIN No. 46-R, the operating results of Sithe
were included in Generations results of operations
beginning April 1, 2004. See Note 4 of the Combined
Notes to Consolidated Financial Statements for further
discussion of Sithe.

Volume.Generation
experienced increases in purchased power and fuel expense due to
increased market and retail electric sales throughout its
various sales regions. The increase in purchased power was
partially offset by decreased purchased power from Midwest
Generation (see Midwest Generation above for further
information).

Price.The increase
reflects higher market energy prices due to higher natural gas,
oil and coal prices.

Other.Other
decreases in purchased power and fuel expense were primarily due
to $20 million of lower fuel expense due to the wind down
of Exelon Energys northeast business and $20 million
of lower transmission expense resulting from reduced
inter-region transmission charges, primarily associated with
ComEds integration into PJM during the second quarter of
2004.

Impairment of the Long-Lived Assets of
Boston Generating.In connection
with the decision to transition out of the ownership of Boston
Generating and the projects during the third quarter of 2003,
Generation recorded a long-lived asset impairment charge of
$945 million ($573 million net of income taxes). See
Note 3 of the Combined Notes to Consolidated Financial
Statements for further discussion of the sale of
Generations ownership interest in Boston Generating.

Operating and Maintenance
Expense.The changes in operating
and maintenance expense for the three months ended
September 30, 2004 compared to the same period in 2003
consisted of the following:

|                                                                                 |  |            |     |  
|-------------------------------------------------------------------------------- |  | ---------- | --- | -
|                                                                                 |  | Increase  
|                                                                                 |  | (Decrease)
|                                                                                 |  |           
|Pension, payroll and benefit costs, primarily
    associated with The Exelon Way |  | $          | (51 | )
|DOE settlement(a)                                                                |  |            | (52 | )
|Boston Generating                                                                |  |            | (21 | )
|AmerGen                                                                          |  |            | 77  |  
|Sithe                                                                            |  |            | 18  |  
|Other                                                                            |  |            | (52 | )
|                                                                                 |  |            |     |  
|Decrease in operating and maintenance expense                                    |  | $          | (81 | )
|                                                                                 |  |            |     |  



---



|    |  |                                                                                                                                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | See Note 15 of the Combined Notes to
    consolidated Financial Statements for further discussion of the
    spent nuclear fuel storage settlement agreement reached with the
    DOE.

The decrease in operating and maintenance expense
was primarily due to reductions in payroll-related costs
associated with the implementation of the programs associated
with The Exelon Way, a reduction in operating and maintenance
expense resulting from the settlement with the DOE to reimburse
Generation for costs associated with storage of spent nuclear
fuel, the sale of Boston Generating in May 2004, and a
$36 million reduction in the contractual obligation that
Generation has to ComEd related to decommissioning obligations.
Generation is required to refund ComEd the amount of
decommissioning trust fund assets in excess of the asset
retirement obligation (ARO), if any, at the completion of the
decommissioning of the former ComEd nuclear units. In the third
quarter of 2004, Generation updated the ARO for the former ComEd
plants and was required to impair an asset established during
this process (see Depreciation and Amortization discussion
below). The obligation to ComEd was reduced due to this
impairment charge and as such, operating expense was reduced by
an equal amount. These decreases in operating and maintenance
expense were partially offset by the inclusion of AmerGen and
Sithes operating results in Generations consolidated
results for 2004.

92



---



##### 



Nuclear fleet operating data and purchased power
cost data for the three months ended September 30, 2004 and
2003 were as follows:

|                                                                     |  |               |       |      |  |   |       |  
|-------------------------------------------------------------------- |  | ------------- | ----- | ---- |  | - | ----- | -
|                                                                     |  |              
|                                                                     |  | Three Months 
|                                                                     |  | Ended        
|                                                                     |  | September 30,
|                                                                     |  |              
|                                                                     |  | 2004          |       | 2003
|                                                                     |  |               |       |     
|Nuclear fleet capacity factor(a)                                     |  |               | 95.8  | %    |  |   | 95.3  | %
|Nuclear fleet production cost per MWh(a)                             |  | $             | 10.92 |      |  | $ | 11.69 |  
|Average purchased power cost for wholesale
    operations per MWh(b) |  | $             | 54.78 |      |  | $ | 51.53 |  



---



|    |  |                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes AmerGen and excludes Salem, which is
    operated by Public Service Enterprise Group Incorporated
    (PSE&G).
|   
|(b) |  | Includes PPAs with AmerGen in 2003.                                                                                    

Higher nuclear capacity factors were primarily
due to four fewer planned refueling outage days. The four fewer
outage days resulted in a $12 million decrease in planned
outage costs for the three months ended September 30, 2004
as compared to the same period in 2003. There was one planned
outage during the three months ended September 30, 2004,
compared to two planned outages during the same period in 2003.
The three months ended September 30, 2004 included four
unplanned outages compared to nine unplanned outages during the
same period in 2003.

Lower nuclear production costs were primarily due
to higher nuclear fuel capacity and the spent fuel storage cost
settlement agreement with the DOE which resulted in the
reimbursement of $40 million in spent fuel storage costs
incurred as operating and maintenance expenses prior to
September 30, 2003, and the recording of $12 million
of spent fuel storage operating and maintenance expenses
incurred from October 1, 2003 to September 30, 2004 as
an Other Account Receivable.

In the three months ended September 30, 2004
as compared to the three months ended September 30, 2003,
the Quad Cities units operated at pre-Extended Power Uprate
(EPU) generation levels due to performance issues with
their steam dryers. Generation plans additional expenditures to
ensure safe and reliable operations at the EPU output levels by
mid-2005.

Depreciation and
Amortization.The increase in
depreciation and amortization expense for the three months ended
September 30, 2004 as compared to the same period in 2003
was primarily due to the establishment of an ARC asset for
retired nuclear units of $36 million associated with the
third quarter 2004 update of the nuclear decommissioning ARO.
This ARC was immediately impaired through depreciation expense
as this asset was associated with retired nuclear units that do
not have any remaining useful life. The remaining increase is
due to capital additions and the consolidation of Sithe, AmerGen
and Exelon Energy. These increases were partially offset by a
decrease in depreciation expense related to the Boston
Generating facilities, which were sold in May 2004.

Effective Income Tax
Rate.The effective income tax
rate was 38% for the three months ended September 30, 2004
compared to 40% for the same period in 2003. This decrease is
primarily attributable to the impairment charges recorded in
2003 related to Generations investment in Sithe which
resulted in a pre-tax loss. See Note 12 of the Combined
Notes to the Consolidated Financial Statements for further
discussion of the change in the effective income tax rate.



| |                                        
| | ---------------------------------------
| | Results of Operations 
    Enterprises

As previously described, effective
January 1, 2004, Exelon contributed its interest in Exelon
Energy Company to Generation. Exelon Energy Company was
previously reported as a part of the Enterprises

93



---



##### 



segment. For comparative discussion and analysis,
the results of Exelon Energy Company have been excluded from
Enterprises 2003 results of operations discussed below.


|                                                                                                |  |               |     |               |  |          |     |  |  |   |      |  
|----------------------------------------------------------------------------------------------- |  | ------------- | --- | ------------- |  | -------- | --- |  |  | - | ---- | -
|                                                                                                |  |               |     |              
|                                                                                                |  | Three Months  |     |              
|                                                                                                |  | Ended         |     |              
|                                                                                                |  | September 30, |     | Favorable    
|                                                                                                |  |               |     | (Unfavorable)
|                                                                                                |  | 2004          |     | 2003          |  | Variance
|                                                                                                |  |               |     |               |  |         
|Operating revenues                                                                              |  | $             | 15  |               |  | $        | 291 |  |  | $ | (276 | )
|Operating and maintenance expense                                                               |  |               | 19  |               |  |          | 257 |  |  |   | 238  |  
|Operating income (loss)                                                                         |  |               | (4  | )             |  |          | 29  |  |  |   | (33  | )
|Other income and deductions                                                                     |  |               | (13 | )             |  |          | 2   |  |  |   | (15  | )
|Income (loss) before income taxes and cumulative
    effect of a change in accounting principle |  |               | (17 | )             |  |          | 31  |  |  |   | (48  | )
|Income (loss) before cumulative effect of a
    change in accounting principle                  |  |               | (11 | )             |  |          | 19  |  |  |   | (30  | )
|Cumulative effect of a change in accounting
    principle                                       |  |               | (9  | )             |  |          |    |  |  |   | (9   | )
|Net income (loss)                                                                               |  |               | (20 | )             |  |          | 19  |  |  |   | (39  | )

Divestiture of Businesses and
Investments.Exelon is continuing
to execute its divestiture strategy for Enterprises.
Enterprises results for the three and nine months ended
September 30, 2004 compared to the three months and nine
ended September 30, 2003 were significantly affected by the
following transactions:

InfraSource, Inc.On
September 24, 2003, Enterprises sold the electric
construction and services, underground and telecom businesses of
InfraSource.

Exelon Services,
Inc.During 2004, Enterprises disposed
of substantially all of the operating businesses of Services,
including Exelon Solutions, most mechanical services businesses
and the Integrated Technology Group. Total expected proceeds and
the net gain on sale recorded during the three months ended
September 30, 2004 related to the disposition of these
Services businesses were $6 million and $1 million,
respectively. The gain was recorded in other income and
deductions on Exelons Consolidated Statements of Income
and Comprehensive Income. As of September 30, 2004,
Services had assets and liabilities of $66 million and
$14 million, respectively, which primarily represented the
corporate operations.

Exelon Thermal Holdings
Inc.On June 30, 2004,
Enterprises sold its Chicago business of Thermal for proceeds of
$134 million, subject to working capital adjustments.
Enterprises repaid $37 million of debt outstanding of the
Chicago thermal operations prior to closing, which resulted in
prepayment penalties of $9 million, which were recorded as
interest expense. A pre-tax gain of $45 million was
recorded in other income and deductions on Exelons
Consolidated Statements of Income and Comprehensive Income.

On September 29, 2004, Enterprises closed on
the sale of ETT Nevada, Inc., the holding company for its
investment in Aladdin, for a net cash outflow of
$1 million, subject to working capital adjustments. A
pre-tax loss of $3 million was recorded in other income and
deductions on Exelons Consolidated Statements of Income
and Comprehensive Income inclusive of the acquisition and sale
of Aladdins third-party debt associated with the
transaction.

PECO Telcove.On
June 30, 2004, Enterprises sold its investment in PECO
TelCove, a communications joint venture, along with certain
telecommunications assets, for proceeds of $49 million. A
pre-tax gain of $9 million was recorded in other income and
deductions on Exelons Consolidated Statements of Income
and Comprehensive Income. An impairment charge of
$5 million (before income taxes) related to the
telecommunications assets had been recorded in the fourth
quarter of 2003.

94



---



##### 



Operating
Revenues.The changes in
Enterprises operating revenues for the three months ended
September 30, 2004 compared to the same period in 2003
consisted of the following:

|                               |  |            |      |  
|------------------------------ |  | ---------- | ---- | -
|                               |  | Increase  
|                               |  | (Decrease)
|                               |  |           
|InfraSource businesses         |  | $          | (132 | )
|Services(a)                    |  |            | (97  | )
|F&M Holdings, LLC(b)           |  |            | (27  | )
|Other                          |  |            | (20  | )
|                               |  |            |      |  
|Decrease in operating revenues |  | $          | (276 | )
|                               |  |            |      |  



---



|    |  |                                                                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Primarily due to the sale of certain businesses.                                                                                                              
|   
|(b) |  | For the remaining businesses of F & M
    Holdings, LLC, operating revenues decreased as a result of the
    sale of certain businesses and wind-down efforts.

Operating and Maintenance
Expense.The changes in
Enterprises operating and maintenance expense for the
three months ended September 30, 2004 compared to the same
period in 2003 consisted of the following:

|                                              |  |            |      |  
|--------------------------------------------- |  | ---------- | ---- | -
|                                              |  | Increase  
|                                              |  | (Decrease)
|                                              |  |           
|InfraSource businesses                        |  | $          | (79  | )
|Services(a)                                   |  |            | (90  | )
|F & M Holdings, LLC(b)                        |  |            | (35  | )
|Thermal(a)                                    |  |            | (9   | )
|Other                                         |  |            | (25  | )
|                                              |  |            |      |  
|Decrease in operating and maintenance expense |  | $          | (238 | )
|                                              |  |            |      |  



---



|    |  |                                                                                                                                                                              
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Primarily due to the sale of businesses.                                                                                                                                     
|   
|(b) |  | For the remaining businesses of F & M
    Holdings, LLC, operating and maintenance expense decreased as a
    result of the sale of certain businesses and wind-down efforts.

Other Income and
Deductions.The decrease in other
income and deductions was primarily due to impairments of
investments recorded in 2004.

Effective Income Tax
Rate.The effective income tax
rate was 35% for the three months ended September 30, 2004
compared to 39% for the same period in 2003. The decrease in the
effective tax rate was primarily attributable to state tax
impact on the sale of investments at ECPH, LLC.

Cumulative Effect of a Change in Accounting
Principle.Enterprises adopted
EITF 03-16 on July 1, 2004, which required Enterprises
to account for certain of its limited liability partnerships
under the equity method of accounting. Enterprises recorded an
after-tax impairment charge of $9 million as a cumulative
effect of a change in accounting principle upon adoption of
EITF 03-16.

95



---



##### 





| |                                               
| | ----------------------------------------------
| | Results of Operations  Exelon
    Corporation



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Nine Months Ended September 30, 2004
    Compared To Nine Months Ended September 30, 2003

|                                                                                                            |  |                   |        |               |  |          |        |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | ------------- |  | -------- | ------ | - |  | - | ------ | -
|                                                                                                            |  |                   |        |              
|                                                                                                            |  | Nine Months Ended |        |              
|                                                                                                            |  | September 30,     |        | Favorable    
|                                                                                                            |  |                   |        | (Unfavorable)
|                                                                                                            |  | 2004              |        | 2003          |  | Variance
|                                                                                                            |  |                   |        |               |  |         
|Operating revenues                                                                                          |  | $                 | 11,137 |               |  | $        | 12,236 |   |  | $ | (1,099 | )
|Purchased power and fuel expense                                                                            |  |                   | 3,888  |               |  |          | 4,983  |   |  |   | 1,095  |  
|Impairment of Boston Generating, LLC long-lived
    assets                                                  |  |                   |       |               |  |          | 945    |   |  |   | 945    |  
|Operating and maintenance expense                                                                           |  |                   | 2,921  |               |  |          | 3,362  |   |  |   | 441    |  
|Depreciation and amortization expense                                                                       |  |                   | 980    |               |  |          | 842    |   |  |   | (138   | )
|Operating income                                                                                            |  |                   | 2,792  |               |  |          | 1,615  |   |  |   | 1,177  |  
|Other income and deductions                                                                                 |  |                   | (668   | )             |  |          | (835   | ) |  |   | 167    |  
|Income before income taxes, minority interest and
    cumulative effect of changes in accounting principles |  |                   | 2,124  |               |  |          | 780    |   |  |   | 1,344  |  
|Income before cumulative effect of changes in
    accounting principles                                     |  |                   | 1,478  |               |  |          | 519    |   |  |   | 959    |  
|Cumulative effect of changes in accounting
    principles                                                   |  |                   | 23     |               |  |          | 112    |   |  |   | (89    | )
|Net income                                                                                                  |  |                   | 1,501  |               |  |          | 631    |   |  |   | 870    |  
|Diluted earnings per share                                                                                  |  |                   | 2.25   |               |  |          | 0.96   |   |  |   | 1.29   |  

Operating
Revenues.Operating revenues
decreased for the nine months ended September 30, 2004 as
compared to the same period in 2003 primarily due to
Generations adoption of EITF 03-11 in the first
quarter of 2004, which changed the presentation of certain power
transactions and decreased operating revenues by
$724 million, and decreased revenues at Enterprises due to
the sale of the majority of its businesses since the third
quarter of 2003. The adoption of EITF 03-11 had no impact
on net income. Operating revenues were favorably affected by
Generations acquisition of the remaining 50% of AmerGen
and the consolidation of Sithe. See further discussion of
operating revenues by segment below.

Purchased Power and Fuel Expense.Purchased power and fuel expense
decreased during the nine months ended September 30, 2004
as compared to the same period in 2003 primarily due to
Generations adoption of EITF 03-11 during 2004 which
resulted in a decrease in purchased power expense and fuel
expense of $724 million. In addition, purchased power
decreased due to Generations acquisition of the remaining
50% of AmerGen in December 2003, which was only partially offset
by an increase in fuel expense, and the sale of Boston
Generating in the second quarter of 2004. Purchased power
represented 24% of Generations total supply for the nine
months ended September 30, 2004 compared to 37% for the
same period in 2003. See further discussion of purchased power
and fuel expense by segment below.

Impairment of Long-Lived Assets of Boston
Generating.Generation recorded a
$945 million charge (before income taxes) during the third
quarter of 2003 to impair the long-lived assets of Boston
Generating.

Operating and Maintenance
Expense.Operating and maintenance
expense decreased for the nine months ended September 30,
2004 as compared to the same period in 2003 primarily due to
decreased expenses at Enterprises due to the sale of the
majority of its businesses since the third quarter of 2003, a
decrease in severance and severance-related charges associated
with the Exelon Way and decreased expenses at Energy Delivery
due to a $41 million charge recorded in 2003 related to an
agreement with various Illinois retail market participants and
other interested parties, partially offset by increased expenses
at Generation due to the acquisition of the remaining 50% of
AmerGen. Operating and maintenance expense increased
$69 million due to investments made in the fourth quarter
of 2003 in synthetic fuel-producing facilities. See further
discussion of operating and maintenance expenses by segment
below.

Depreciation and Amortization
Expense.The increase in
depreciation and amortization expense is primarily due to
additional plant placed in service after the third quarter of
2003 at Energy Delivery and Generation, the recording and
subsequent impairment of an ARC asset at Generation in 2004 and
increased

96



---



##### 



amortization expense due to investments made in
the fourth quarter of 2003 in synthetic fuel-producing
facilities. The increase is also due to increased competitive
transition charge amortization at PECO.


Operating
Income.Exclusive of the changes
in operating revenues, purchased power and fuel expense,
operating and maintenance expense and depreciation and
amortization expense discussed above, the change in operating
income was primarily the result of increased taxes other than
income in 2004 as compared to 2003, primarily due to the
reversal of real estate tax accruals at PECO and Generation
during the third quarter of 2003.

Other Income and
Deductions.Other income and
deductions reflects debt retirement charges of $106 million
recorded at ComEd in 2004 associated with an accelerated
liability management plan, impairment charges of
$255 million (before income taxes) recorded during 2003
related to Generations investment in Sithe, an
$85 million gain (before income taxes) on the 2004 sale of
Boston Generating and a $36 million gain on the sale of
Thermal in 2004 (before income taxes and net of debt prepayment
penalties). Equity in earnings of unconsolidated affiliates
decreased by $179 million due to the acquisition of the
remaining 50% of AmerGen in December 2003, the deconsolidation
of certain financing trusts during 2003 and investments made in
the fourth quarter of 2003 in synthetic fuel-producing
facilities.

Effective Income Tax
Rate.Exelons effective
income tax rate decreased from 33% for the nine months ended
September 30, 2003 to 31% for the same period in 2004,
primarily due to investments made in synthetic fuel-producing
facilities during the fourth quarter of 2003. See Note 12
of the Combined Notes to the Consolidated Financial Statements
for further discussion of the change in the effective income tax
rate.

Cumulative Effect of Changes in Accounting
Principles.Net income for the
nine months ended September 30, 2004 reflects income of
$32 million, net of income taxes, related to the
consolidation of Sithe pursuant to FIN No. 46-R and a
charge of $9 million, net of income taxes, due to the
adoption of EITF 03-16 and the resulting impairment of
certain limited liability partnerships at Enterprises. Net
income for the nine months ended September 30, 2003
reflects income of $112 million, net of income taxes, for
the adoption of SFAS No. 143. See Note 2 of the
Combined Notes to Consolidated Financial Statements for further
information regarding the adoptions of FIN No. 46-R and
SFAS No. 143.



| |                                              
| | ---------------------------------------------
| | Results of Operations by Business
    Segment

The comparisons of operating results and other
statistical information for the nine months ended
September 30, 2004 and 2003 set forth below reflect
intercompany transactions, which are eliminated in Exelons
consolidated financial statements.

Effective January 1, 2004, Enterprises
competitive retail sales business, Exelon Energy Company, became
part of Generation. The information for the nine months ended
September 30, 2003 related to the Generation and
Enterprises segments discussed below has been adjusted to
reflect the transfer of Exelon Energy Company from the
Enterprises segment to the Generation segment. Exelon Energy
Companys results for the nine months ended
September 30, 2003 were as follows:

|                         |  |   |     |  
|------------------------ |  | - | --- | -
|Total revenues           |  | $ | 651 |  
|Intersegment revenues    |  |   | 4   |  
|Loss before income taxes |  |   | (20 | )
|Income tax benefit       |  |   | (8  | )
|Net loss                 |  |   | (12 | )

97



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##### 





| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | Income (Loss) Before Cumulative Effect of
    Change in Accounting Principle by Business Segment

|                |  |                   |       |               |  |          |      |   |  |   |     |  
|--------------- |  | ----------------- | ----- | ------------- |  | -------- | ---- | - |  | - | --- | -
|                |  |                   |       |              
|                |  | Nine Months Ended |       |              
|                |  | September 30,     |       | Favorable    
|                |  |                   |       | (Unfavorable)
|                |  | 2004              |       | 2003          |  | Variance
|                |  |                   |       |               |  |         
|Energy Delivery |  | $                 | 880   |               |  | $        | 920  |   |  | $ | (40 | )
|Generation      |  |                   | 567   |               |  |          | (351 | ) |  |   | 918 |  
|Enterprises     |  |                   |      |               |  |          | (50  | ) |  |   | 50  |  
|Corporate       |  |                   | 31    |               |  |          |     |   |  |   | 31  |  
|                |  |                   |       |               |  |          |      |   |  |   |     |  
|Total           |  | $                 | 1,478 |               |  | $        | 519  |   |  | $ | 959 |  
|                |  |                   |       |               |  |          |      |   |  |   |     |  



| |                                          
| | -----------------------------------------
| | Net Income (Loss) by Business
    Segment

|                |  |                   |       |               |  |          |      |   |  |   |     |  
|--------------- |  | ----------------- | ----- | ------------- |  | -------- | ---- | - |  | - | --- | -
|                |  |                   |       |              
|                |  | Nine Months Ended |       |              
|                |  | September 30,     |       | Favorable    
|                |  |                   |       | (Unfavorable)
|                |  | 2004              |       | 2003          |  | Variance
|                |  |                   |       |               |  |         
|Energy Delivery |  | $                 | 880   |               |  | $        | 925  |   |  | $ | (45 | )
|Generation      |  |                   | 599   |               |  |          | (243 | ) |  |   | 842 |  
|Enterprises     |  |                   | (9    | )             |  |          | (51  | ) |  |   | 42  |  
|Corporate       |  |                   | 31    |               |  |          |     |   |  |   | 31  |  
|                |  |                   |       |               |  |          |      |   |  |   |     |  
|Total           |  | $                 | 1,501 |               |  | $        | 631  |   |  | $ | 870 |  
|                |  |                   |       |               |  |          |      |   |  |   |     |  



| |                                            
| | -------------------------------------------
| | Results of Operations  Energy
    Delivery

|                                                                                         |  |                   |       |               |  |          |       |  |  |   |      |  
|---------------------------------------------------------------------------------------- |  | ----------------- | ----- | ------------- |  | -------- | ----- |  |  | - | ---- | -
|                                                                                         |  |                   |       |              
|                                                                                         |  | Nine Months Ended |       |              
|                                                                                         |  | September 30,     |       | Favorable    
|                                                                                         |  |                   |       | (Unfavorable)
|                                                                                         |  | 2004              |       | 2003          |  | Variance
|                                                                                         |  |                   |       |               |  |         
|Operating revenues                                                                       |  | $                 | 7,853 |               |  | $        | 7,850 |  |  | $ | 3    |  
|Purchased power and fuel expense                                                         |  |                   | 3,639 |               |  |          | 3,576 |  |  |   | (63  | )
|Operating and maintenance expense                                                        |  |                   | 1,056 |               |  |          | 1,234 |  |  |   | 178  |  
|Depreciation and amortization expense                                                    |  |                   | 704   |               |  |          | 657   |  |  |   | (47  | )
|Operating income                                                                         |  |                   | 2,054 |               |  |          | 2,025 |  |  |   | 29   |  
|Interest expense                                                                         |  |                   | 517   |               |  |          | 565   |  |  |   | 48   |  
|Other, net                                                                               |  |                   | (76   | )             |  |          | 48    |  |  |   | (124 | )
|Income before income taxes and cumulative effect
    of a change in accounting principle |  |                   | 1,426 |               |  |          | 1,478 |  |  |   | (52  | )
|Income before cumulative effect of a change in
    accounting principle                  |  |                   | 880   |               |  |          | 920   |  |  |   | (40  | )
|Net income                                                                               |  |                   | 880   |               |  |          | 925   |  |  |   | (45  | )

98



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##### 



Operating
Revenues.The changes in Energy
Deliverys operating revenues for the nine months ended
September 30, 2004 compared to the same period in 2003
consisted of the following:

|                                          |  |          |      |     |  |            |     |   |  |   |      |  
|----------------------------------------- |  | -------- | ---- | --- |  | ---------- | --- | - |  | - | ---- | -
|                                          |  |          |      |     |  | Total     
|                                          |  |          |      |     |  | Increase  
|                                          |  | Electric |      | Gas |  | (Decrease)
|                                          |  |          |      |     |  |           
|Volume                                    |  | $        | 272  |     |  | $          | (1  | ) |  | $ | 271  |  
|PJM transmission                          |  |          | 93   |     |  |            |    |   |  |   | 93   |  
|Rate changes and mix                      |  |          | (60  | )   |  |            | 89  |   |  |   | 29   |  
|Customer choice                           |  |          | (176 | )   |  |            |    |   |  |   | (176 | )
|Weather                                   |  |          | (174 | )   |  |            | (21 | ) |  |   | (195 | )
|Other effects                             |  |          | (27  | )   |  |            | 8   |   |  |   | (19  | )
|                                          |  |          |      |     |  |            |     |   |  |   |      |  
|(Decrease) increase in operating revenues |  | $        | (72  | )   |  | $          | 75  |   |  | $ | 3    |  
|                                          |  |          |      |     |  |            |     |   |  |   |      |  

Volume.Both
ComEds and PECOs electric revenues increased as a
result of higher delivery volume, exclusive of the effect of
weather and customer choice, due to an increased number of
customers and increased usage per customer, primarily
residential and large and small commercial and industrial
customers for ComEd and across all customer classes for PECO.

PJM Transmission.Energy Deliverys transmission revenues and purchased power
expense each increased by $106 million in the nine months
ended September 30, 2004 relative to 2003 due to
ComEds May 1, 2004 entry into PJM partially offset by
$13 million of lower transmission revenues and expenses at
PECO.

Rate Changes and
Mix.Starting in the June 2003 billing
cycle, the increased wholesale market price of electricity and
other adjustments to the energy component decreased the
collection of CTCs as compared to the respective prior year
period. As a result, ComEds CTC revenues decreased by
$131 million for the nine months ended September 30,
2004 as compared to the same period in 2003. This decrease was
partially offset by increased wholesale market prices which
increased energy revenue received under the ComEd PPO and by
increased average rates paid by small and large commercial and
industrial customers totaling $58 million. For the nine
months ended September 30, 2004 and September 30,
2003, ComEd collected approximately $131 million and
$262 million, respectively, of CTC revenue. As a result of
increasing mitigation factors, changes in energy prices and the
ability of certain customers to establish fixed, multi-year CTC
rates beginning in 2003, and increases in ComEds open
access transmission tariff rates (OATT) effective May 1,
2004, ComEd anticipates that this revenue source will decline to
approximately $180 million for 2004 and range from
$100 million to $180 million annually in 2005 and
2006. Under the current restructuring statute, no CTCs will be
collected after 2006.

Electric revenues increased $2 million at
PECO as a result of a $16 million increase related to a
scheduled phase out of merger-related rate reductions, offset by
a $14 million decrease reflecting a change in rate mix due
to changes in monthly usage patterns in all customer classes
during 2004 as compared to 2003.

Energy Deliverys gas revenues increased due
to increases in rates through PUC approved changes to the
purchased gas adjustment clause that became effective
March 1, 2003, June 1, 2003, December 1, 2003 and
March 1, 2004. The average purchased gas cost rate per
million cubic feet for the nine months ended September 30,
2004 was 38% higher than the rate for the same period in 2003.

Customer Choice.For
the nine months ended September 30, 2004 and 2003, 28% and
24%, respectively, of energy delivered to Energy Deliverys
retail customers was provided by an AES or under the ComEd PPO.
The decrease in electric retail revenues attributable to
customer choice included a decrease in revenues of
$113 million from customers in Illinois electing to
purchase energy from an AES or under the ComEd PPO and a
decrease in revenues of $63 million from customers in
Pennsylvania being assigned to or selecting an AES.

99



---



##### 



Weather.Energy
Deliverys electric revenues were negatively affected by
unfavorable weather conditions. Cooling degree-days in the ComEd
and PECO service territories were 12% lower and relatively
unchanged, respectively, for the nine months ended
September 30, 2004 as compared to the same period in 2003.
Heating degree-days were 8% lower in both the ComEd and PECO
service territories for the nine months ended September 30,
2004 as compared to the same period in 2003.

Energy Deliverys gas revenues were affected
by unfavorable weather conditions.

Purchased Power and Fuel
Expense.The changes in Energy
Deliverys purchased power and fuel expense for the nine
months ended September 30, 2004 compared to the same period
in 2003 consisted of the following:

|                                                            |  |          |      |     |  |            |     |   |  |   |      |  
|----------------------------------------------------------- |  | -------- | ---- | --- |  | ---------- | --- | - |  | - | ---- | -
|                                                            |  |          |      |     |  | Total     
|                                                            |  |          |      |     |  | Increase  
|                                                            |  | Electric |      | Gas |  | (Decrease)
|                                                            |  |          |      |     |  |           
|Volume                                                      |  | $        | 137  |     |  | $          | (5  | ) |  | $ | 132  |  
|PJM transmission                                            |  |          | 93   |     |  |            |    |   |  |   | 93   |  
|Prices                                                      |  |          | (4   | )   |  |            | 89  |   |  |   | 85   |  
|Customer choice                                             |  |          | (157 | )   |  |            |    |   |  |   | (157 | )
|Weather                                                     |  |          | (82  | )   |  |            | (14 | ) |  |   | (96  | )
|Other                                                       |  |          | (7   | )   |  |            | 13  |   |  |   | 6    |  
|                                                            |  |          |      |     |  |            |     |   |  |   |      |  
|(Decrease) increase in purchased power and fuel
    expense |  | $        | (20  | )   |  | $          | 83  |   |  | $ | 63   |  
|                                                            |  |          |      |     |  |            |     |   |  |   |      |  

Volume.ComEds
purchased power and fuel expense increased due to increases,
exclusive of the effect of weather and customer choice, in the
number of customers and average usage per customer, primarily
residential and large and small commercial and industrial
customers at ComEd. PECOs electric purchased power and
fuel expense increased as a result of higher delivery volume,
exclusive of the effect of weather and customer choice, due to
an increased number of customers and increased usage per
customer across all customer classes.

PJM Transmission.Energy Deliverys transmission revenues and purchased power
expense each increased by $106 million in the nine months
ended September 30, 2004 relative to 2003 due to
ComEds May 1, 2004 entry into PJM partially offset by
$13 million of lower transmission revenues and expenses at
PECO. See Operating Revenues above.

Prices.Energy
Deliverys purchased power expense remained relatively
unchanged. Fuel expense for gas increased due to higher gas
prices. See Operating Revenues above.

Customer Choice.An
increase in customer switching resulted in a reduction of
purchased power expense, primarily due to ComEds
non-residential customers electing to purchase energy from an
AES or under the ComEd PPO and PECOs residential and small
commercial and industrial customers selecting or being assigned
to purchase energy from an AES.

Weather.Energy
Deliverys purchased power and fuel expense decreased due
to unfavorable weather conditions.

100



---



##### 



Operating and Maintenance
Expense.The changes in operating
and maintenance expense for the nine months ended
September 30, 2004 compared to the same period in 2003
consisted of the following:

|                                                                                       |  |            |      |  
|-------------------------------------------------------------------------------------- |  | ---------- | ---- | -
|                                                                                       |  | Increase  
|                                                                                       |  | (Decrease)
|                                                                                       |  |           
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  | $          | (74  | )
|Charge recorded at ComEd in 2003(a)                                                    |  |            | (41  | )
|Decreased payroll expense due to fewer
    employees(b)                                |  |            | (33  | )
|Incremental storm costs                                                                |  |            | (25  | )
|Automated meter reading system implementation
    costs at PECO in 2003                |  |            | (16  | )
|Allowance for uncollectible accounts expense                                           |  |            | (15  | )
|FERC annual fees(c)                                                                    |  |            | (10  | )
|Environmental charges                                                                  |  |            | (6   | )
|Contractors                                                                            |  |            | (3   | )
|Employee fringe benefits (b, d)                                                        |  |            | (1   | )
|Higher corporate allocations(e)                                                        |  |            | 62   |  
|Tax Consultant fees(f)                                                                 |  |            | 5    |  
|Other                                                                                  |  |            | (21  | )
|                                                                                       |  |            |      |  
|Decrease in operating and maintenance expense                                          |  | $          | (178 | )
|                                                                                       |  |            |      |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In 2003, ComEd reached an agreement with various
    Illinois retail market participants and other interested parties.                                                                                                                                                                                                                                                                                                   
|   
|(b) |  | Energy Delivery has fewer employees as a result
    of The Exelon Way terminations.                                                                                                                                                                                                                                                                                                                                      
|   
|(c) |  | After joining PJM on May 1, 2004, ComEd is
    no longer charged annual fees by the FERC. PJM pays the annual
    FERC fees. This represents the reversal of annual FERC fees.                                                                                                                                                                                                                                           
|   
|(d) |  | During the second quarter of 2004, ComEd and PECO
    adopted the provisions of FSP FAS 106-2. Employee fringe
    benefits include a $8 million reduction in net periodic
    postretirement benefit cost due to the adoption of FSP
    FAS 106-2.                                                                                                                                                                     
|   
|(e) |  | Higher corporate allocations primarily result
    from higher corporate allocations and employee fringe benefits.
    Corporate governance allocations increased as a result of the
    2004 sale of certain Enterprises companies resulting in Energy
    Delivery comprising a greater percentage of Exelon and an
    SEC-mandated change to the methodology used to allocate
    Exelons corporate governance costs.
|   
|(f) |  | ComEd recorded a $5 million charge for
    contingent fees paid to a tax consultant (see Note 15 to
    the Combined Notes to Consolidated Financial Statements for more
    information).                                                                                                                                                                                                                               

Depreciation and Amortization
Expense.The increase in
depreciation and amortization expense was primarily due to
increased competitive transition charge amortization of
$26 million at PECO and increased depreciation of
$13 million due to capital additions across Energy Delivery.

Operating
Income.Operating income,
exclusive of the changes discussed above, decreased as a result
of increased taxes other than income of $42 million, which
reflects a $58 million increase at PECO offset by a
$16 million decrease at ComEd. The increase at PECO was
primarily attributable to $58 million related to the
reversal of real estate tax accruals during 2003 and
$12 million related to the reversal of a use tax accrual in
2003 resulting from an audit settlement, partially offset by
$5 million of lower capital stock tax. The decrease at
ComEd was primarily attributable to $6 million in 2003 for
additional use tax payments, a $4 million decrease in
payroll taxes as a result of a fewer number of employees, and
refunds of $8 million for Illinois Electricity Distribution
taxes in 2004 partially offset by refunds of $5 million for
Illinois Electricity Distribution taxes in 2003.

Interest
Expense.The reduction in interest
expense was primarily due to scheduled principal payments, debt
retirements and prepayments, and refinancings at lower rates.

101



---



##### 



Other, net.In 2004, Exelon initiated an accelerated liability management
plan at ComEd that resulted in the retirement of approximately
$768 million of long-term debt. Exelon recorded a charge of
$106 million associated with the retirement of debt under
the plan. The components of this charge included the following:
$63 million related to prepayment premiums;
$11 million related to net unamortized premiums, discounts
and debt issuance costs; $23 million of losses on
reacquired debt previously deferred as regulatory assets; and
$9 million related to settled cash-flow interest-rate swaps
previously deferred as regulatory assets. In 2003, ComEd
recorded income of $12 million resulting from the reduction
of a reserve accrual for a potential plant disallowance related
to ComEds delivery services rate case. In 2003, PECO
reversed an accrual for interest on Federal income taxes of
$14 million to reflect actual interest received.



| |                                                            
| | -----------------------------------------------------------
| | Energy Delivery Operating Statistics and
    Revenue Detail

Energy Deliverys electric sales statistics
and revenue detail were as follows:

|                                        |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |      |   
|--------------------------------------- | --------------------------- | ----------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ------ | ------ | - |  | ----- | ---- | --
|                                        |                             |                   |        |        |  |         
|                                        |                             | Nine Months Ended |        |        |  |         
|                                        |                             | September 30,     |        |        |  |         
|                                        |                             |                   |        |        |  |         
|Retail Deliveries  (in GWhs)           |                             | 2004              |        | 2003   |  | Variance |        | % Change
|                                        |                             |                   |        |        |  |          |        |         
|Full service(a)                         |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Residential                             |                             |                   | 28,162 |        |  |          | 28,969 |          |  |  | (807   | )      |   |  | (2.8  | )%  
|Small commercial & industrial           |                             |                   | 20,393 |        |  |          | 21,555 |          |  |  | (1,162 | )      |   |  | (5.4  | )%  
|Large commercial & industrial           |                             |                   | 15,539 |        |  |          | 15,896 |          |  |  | (357   | )      |   |  | (2.2  | )%  
|Public authorities & electric railroads |                             |                   | 4,339  |        |  |          | 4,710  |          |  |  | (371   | )      |   |  | (7.9  | )%  
|                                        |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                        | Total full service          |                   |        | 68,433 |  |          |        | 71,130   |  |  |        | (2,697 | ) |  |       | (3.8 | )%
|                                        |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|PPO (ComEd only)                        |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Small commercial & industrial           |                             |                   | 2,653  |        |  |          | 2,546  |          |  |  | 107    |        |   |  | 4.2   | %   
|Large commercial & industrial           |                             |                   | 2,784  |        |  |          | 3,646  |          |  |  | (862   | )      |   |  | (23.6 | )%  
|Public authorities & electric railroads |                             |                   | 1,574  |        |  |          | 1,497  |          |  |  | 77     |        |   |  | 5.1   | %   
|                                        |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                        |                             |                   | 7,011  |        |  |          | 7,689  |          |  |  | (678   | )      |   |  | (8.8  | )%  
|                                        |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Delivery only(b)                        |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Residential                             |                             |                   | 1,706  |        |  |          | 708    |          |  |  | 998    |        |   |  | 141.0 | %   
|Small commercial & industrial           |                             |                   | 6,707  |        |  |          | 5,371  |          |  |  | 1,336  |        |   |  | 24.9  | %   
|Large commercial & industrial           |                             |                   | 9,686  |        |  |          | 7,504  |          |  |  | 2,182  |        |   |  | 29.1  | %   
|Public authorities & electric railroads |                             |                   | 1,264  |        |  |          | 954    |          |  |  | 310    |        |   |  | 32.5  | %   
|                                        |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                        |                             |                   | 19,363 |        |  |          | 14,537 |          |  |  | 4,826  |        |   |  | 33.2  | %   
|                                        |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                        | Total PPO and delivery only |                   |        | 26,374 |  |          |        | 22,226   |  |  |        | 4,148  |   |  |       | 18.7 | % 
|                                        |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Total retail deliveries                 |                             |                   | 94,807 |        |  |          | 93,356 |          |  |  | 1,451  |        |   |  | 1.6   | %   
|                                        |                             |                   |        |        |  |          |        |          |  |  |        |        |   |  |       |     



---



|    |  |                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------
|(a) |  | Full service reflects deliveries to customers
    taking electric generation service under tariffed rates.
|   
|(b) |  | Delivery only service reflects customers
    receiving electric generation service from an AES.           

102



---



##### 



|                                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |      |   
|--------------------------------------- | -------------------------------------- | ----------------- | ----- | ----- |  | -------- | ----- | -------- |  | - | ---- | ---- | - |  | ----- | ---- | --
|                                        |                                        |                   |       |       |  |         
|                                        |                                        | Nine Months Ended |       |       |  |         
|                                        |                                        | September 30,     |       |       |  |         
|                                        |                                        |                   |       |       |  |         
|Electric Revenue                        |                                        | 2004              |       | 2003  |  | Variance |       | % Change
|                                        |                                        |                   |       |       |  |          |       |         
|Full service(a)                         |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Residential                             |                                        | $                 | 2,801 |       |  | $        | 2,900 |          |  | $ | (99  | )    |   |  | (3.4  | )%  
|Small commercial & industrial           |                                        |                   | 1,819 |       |  |          | 1,874 |          |  |   | (55  | )    |   |  | (2.9  | )%  
|Large commercial & industrial           |                                        |                   | 1,047 |       |  |          | 1,065 |          |  |   | (18  | )    |   |  | (1.7  | )%  
|Public authorities & electric railroads |                                        |                   | 284   |       |  |          | 309   |          |  |   | (25  | )    |   |  | (8.1  | )%  
|                                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        | Total full service                     |                   |       | 5,951 |  |          |       | 6,148    |  |   |      | (197 | ) |  |       | (3.2 | )%
|                                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|PPO (ComEd only)(b)                     |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Small commercial & industrial           |                                        |                   | 184   |       |  |          | 174   |          |  |   | 10   |      |   |  | 5.7   | %   
|Large commercial & industrial           |                                        |                   | 163   |       |  |          | 199   |          |  |   | (36  | )    |   |  | (18.1 | )%  
|Public authorities & electric railroads |                                        |                   | 87    |       |  |          | 81    |          |  |   | 6    |      |   |  | 7.4   | %   
|                                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        |                                        |                   | 434   |       |  |          | 454   |          |  |   | (20  | )    |   |  | (4.4  | )%  
|                                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Delivery only(c)                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Residential                             |                                        |                   | 131   |       |  |          | 52    |          |  |   | 79   |      |   |  | 151.9 | %   
|Small commercial & industrial           |                                        |                   | 169   |       |  |          | 160   |          |  |   | 9    |      |   |  | 5.6   | %   
|Large commercial & industrial           |                                        |                   | 140   |       |  |          | 149   |          |  |   | (9   | )    |   |  | (6.0  | )%  
|Public authorities & electric railroads |                                        |                   | 25    |       |  |          | 25    |          |  |   |     |      |   |  |      |     
|                                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        |                                        |                   | 465   |       |  |          | 386   |          |  |   | 79   |      |   |  | 20.5  | %   
|                                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        | Total PPO and delivery only            |                   |       | 899   |  |          |       | 840      |  |   |      | 59   |   |  |       | 7.0  | % 
|                                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Total electric retail revenues          |                                        |                   | 6,850 |       |  |          | 6,988 |          |  |   | (138 | )    |   |  | (2.0  | )%  
|                                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        | Wholesale and miscellaneous revenue(d) |                   |       | 480   |  |          |       | 414      |  |   |      | 66   |   |  |       | 15.9 | % 
|                                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Total electric revenue                  |                                        | $                 | 7,330 |       |  | $        | 7,402 |          |  | $ | (72  | )    |   |  | (1.0  | )%  
|                                        |                                        |                   |       |       |  |          |       |          |  |   |      |      |   |  |       |     



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Full service 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.                                                                                            
|   
|(b) |  | Revenue from customers choosing the ComEd PPO
    includes an energy charge at market rates, transmission and
    distribution charges and a CTC.                                                                                                                                                                                                                       
|   
|(c) |  | Delivery only reflects revenue from customers
    receiving electric generation service from an AES. Revenue from
    customers choosing an AES includes a distribution charge and a
    CTC. Prior to ComEds full integration into PJM on
    May 1, 2004, ComEds transmission charges received
    from an AES were included in wholesale and miscellaneous revenue.
|   
|(d) |  | Wholesale and miscellaneous revenues include
    transmission revenue (including revenue from PJM), sales to
    municipalities and other wholesale energy sales.                                                                                                                                                                                                       

Energy Deliverys gas sales statistics and
revenue detail were as follows:

|                                  |  |                   |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|--------------------------------- |  | ----------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ---- | --
|                                  |  |                   |        |      |  |         
|                                  |  | Nine Months Ended |        |      |  |         
|                                  |  | September 30,     |        |      |  |         
|                                  |  |                   |        |      |  |         
|Deliveries to customers (in mmcf) |  | 2004              |        | 2003 |  | Variance |        | % Change
|                                  |  |                   |        |      |  |          |        |         
|Retail sales                      |  |                   | 41,831 |      |  |          | 44,183 |          |  |  | (2,352 | ) |  |  | (5.3 | )%
|Transportation                    |  |                   | 19,709 |      |  |          | 19,954 |          |  |  | (245   | ) |  |  | (1.2 | )%
|                                  |  |                   |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|Total                             |  |                   | 61,540 |      |  |          | 64,137 |          |  |  | (2,597 | ) |  |  | (4.0 | )%
|                                  |  |                   |        |      |  |          |        |          |  |  |        |   |  |  |      |   

103



---



##### 



|                  |       |                   |     |      |  |          |     |          |  |   |    |    |  |  |       |       | 
|----------------- | ----- | ----------------- | --- | ---- |  | -------- | --- | -------- |  | - | -- | -- |  |  | ----- | ----- | 
|                  |       |                   |     |      |  |         
|                  |       | Nine Months Ended |     |      |  |         
|                  |       | September 30,     |     |      |  |         
|                  |       |                   |     |      |  |         
|Revenue           |       | 2004              |     | 2003 |  | Variance |     | % Change
|                  |       |                   |     |      |  |          |     |         
|Retail sales      |       | $                 | 485 |      |  | $        | 418 |          |  | $ | 67 |    |  |  | 16.0% |      
|Transportation    |       |                   | 13  |      |  |          | 14  |          |  |   | (1 | )  |  |  | (7.1  | )%   
|Resales and other |       |                   | 25  |      |  |          | 16  |          |  |   | 9  |    |  |  | 56.3% |      
|                  |       |                   |     |      |  |          |     |          |  |   |    |    |  |  |       |      
|                  | Total |                   | $   | 523  |  |          | $   | 448      |  |   | $  | 75 |  |  |       | 16.7% | 
|                  |       |                   |     |      |  |          |     |          |  |   |    |    |  |  |       |      



| |                                       
| | --------------------------------------
| | Results of Operations 
    Generation

As previously described, effective
January 1, 2004, Exelon contributed its interest in Exelon
Energy Company to Generation. Exelon Energy Company was
previously reported as a part of the Enterprises segment. For
comparative discussion and analysis, Exelon Energy
Companys results of operations have been included within
Generations results of operations as if this transfer had
occurred on January 1, 2003 within this segment analysis.

|                                                                                                                       |  |               |       |               |  |          |       |   |  |   |       |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----- | ------------- |  | -------- | ----- | - |  | - | ----- | -
|                                                                                                                       |  |               |       |              
|                                                                                                                       |  | Nine Months   |       |              
|                                                                                                                       |  | Ended         |       |              
|                                                                                                                       |  | September 30, |       | Favorable    
|                                                                                                                       |  |               |       | (Unfavorable)
|                                                                                                                       |  | 2004          |       | 2003          |  | Variance
|                                                                                                                       |  |               |       |               |  |         
|Operating revenues                                                                                                     |  | $             | 6,153 |               |  | $        | 6,797 |   |  | $ | (644  | )
|Purchased power and fuel expense                                                                                       |  |               | 3,252 |               |  |          | 4,535 |   |  |   | 1,283 |  
|Impairment of Boston Generating, LLC long-lived
    assets                                                             |  |               |      |               |  |          | 945   |   |  |   | 945   |  
|Operating and maintenance expense                                                                                      |  |               | 1,645 |               |  |          | 1,410 |   |  |   | (235  | )
|Depreciation and amortization                                                                                          |  |               | 218   |               |  |          | 142   |   |  |   | (76   | )
|Operating income (loss)                                                                                                |  |               | 901   |               |  |          | (353  | ) |  |   | 1,254 |  
|Income (loss) before income taxes, minority
    interest and cumulative effect of changes in accounting
    principles |  |               | 900   |               |  |          | (566  | ) |  |   | 1,466 |  
|Income (loss) before cumulative effect of changes
    in accounting principles                                         |  |               | 567   |               |  |          | (351  | ) |  |   | 918   |  
|Cumulative effect of changes in accounting
    principles                                                              |  |               | 32    |               |  |          | 108   |   |  |   | (76   | )
|Net income (loss)                                                                                                      |  |               | 599   |               |  |          | (243  | ) |  |   | 842   |  

Operating
Revenues.For the nine months
ended September 30, 2004 and 2003, Generations sales
were as follows:

|                                    |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|----------------------------------- |  | ------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ----- | --
|                                    |  |               |       |      |  |         
|                                    |  | Nine Months   |       |      |  |         
|                                    |  | Ended         |       |      |  |         
|                                    |  | September 30, |       |      |  |         
|                                    |  |               |       |      |  |         
|Revenue                             |  | 2004          |       | 2003 |  | Variance |       | % Change
|                                    |  |               |       |      |  |          |       |         
|Electric sales to affiliates        |  | $             | 2,924 |      |  | $        | 3,030 |          |  | $ | (106 | ) |  |  | (3.5  | )%
|Wholesale and retail electric sales |  |               | 2,501 |      |  |          | 2,908 |          |  |   | (407 | ) |  |  | (14.0 | )%
|                                    |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Total energy sales revenue          |  |               | 5,425 |      |  |          | 5,938 |          |  |   | (513 | ) |  |  | (8.6  | )%
|                                    |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Retail gas sales                    |  |               | 315   |      |  |          | 467   |          |  |   | (152 | ) |  |  | (32.5 | )%
|Trading portfolio                   |  |               | (2    | )    |  |          | (1    | )        |  |   | (1   | ) |  |  | 100.0 | % 
|Other revenue(a)                    |  |               | 415   |      |  |          | 393   |          |  |   | 22   |   |  |  | 5.6   | % 
|                                    |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Total revenue                       |  | $             | 6,153 |      |  | $        | 6,797 |          |  | $ | (644 | ) |  |  | (9.5  | )%
|                                    |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   



---



|    |  |                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------
|(a) |  | Includes sales related to tolling agreements,
    including Sithe in 2004, and fossil fuel sales.

n.m.  not meaningful

104



---



##### 



|                                    |  |                   |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|----------------------------------- |  | ----------------- | ------- | ---- |  | -------- | ------- | -------- |  |  | ------- | - |  |  | ----- | --
|                                    |  |                   |         |      |  |         
|                                    |  | Nine Months Ended |         |      |  |         
|                                    |  | September 30,     |         |      |  |         
|                                    |  |                   |         |      |  |         
|Sales (in GWhs)                     |  | 2004(a)           |         | 2003 |  | Variance |         | % Change
|                                    |  |                   |         |      |  |          |         |         
|Electric sales to affiliates        |  |                   | 83,637  |      |  |          | 86,242  |          |  |  | (2,605  | ) |  |  | (3.0  | )%
|Wholesale and retail electric sales |  |                   | 70,853  |      |  |          | 84,913  |          |  |  | (14,060 | ) |  |  | (16.6 | )%
|                                    |  |                   |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|Total sales                         |  |                   | 154,490 |      |  |          | 171,155 |          |  |  | (16,665 | ) |  |  | (9.7  | )%
|                                    |  |                   |         |      |  |          |         |          |  |  |         |   |  |  |       |   



---



|    |  |                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Sales in 2004 do not include 18,557 GWhs, which
    were netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11.

Trading volumes of 17,569 GWhs and 28,532 GWhs
for the nine months ended September 30, 2004 and 2003,
respectively, are not included in the table above. The decrease
in trading volume is a result of reduced proprietary trading
activity.

Generations average margin (operating
revenue, less purchased power and fuel expenses) and other
operating data for the nine months ended September 30, 2004
and 2003 were as follows:

|                                                             |                                         |               |       |       |  |          |       |       |  |  |       |      |   
|------------------------------------------------------------ | --------------------------------------- | ------------- | ----- | ----- |  | -------- | ----- | ----- |  |  | ----- | ---- | --
|                                                             |                                         |               |       |      
|                                                             |                                         | Nine Months   |       |      
|                                                             |                                         | Ended         |       |      
|                                                             |                                         | September 30, |       |      
|                                                             |                                         |               |       |      
|($/MWh)                                                      |                                         | 2004          |       | 2003  |  | % Change
|                                                             |                                         |               |       |       |  |         
|Average revenue                                              |                                         |               |       |       |  |          |       |       |  |  |       |     
|                                                             | Energy Delivery                         |               | $     | 34.96 |  |          | $     | 35.13 |  |  |       | (0.5 | )%
|                                                             | Market and retail electric sales        |               |       | 35.30 |  |          |       | 34.25 |  |  |       | 3.1  | % 
|                                                             | Total  excluding the trading portfolio |               |       | 35.12 |  |          |       | 34.69 |  |  |       | 1.2  | % 
|Average supply cost(a)  excluding the
    trading portfolio |                                         | $             | 21.05 |       |  | $        | 26.50 |       |  |  | (20.6 | )%  
|Average margin  excluding the trading
    portfolio         |                                         | $             | 14.07 |       |  | $        | 8.19  |       |  |  | 71.8  | %   



---



|    |  |                                                                                            
|--- |  | -------------------------------------------------------------------------------------------
|(a) |  | Average supply cost includes purchased power,
    fuel costs and PPAs with AmerGen in 2003.

Wholesale and Retail Electric
Sales.The changes in
Generations wholesale and retail electric sales for the
nine months ended September 30, 2004 compared to the same
period in 2003 consisted of the following:

|                                                |  |            |      |  
|----------------------------------------------- |  | ---------- | ---- | -
|                                                |  | Increase  
|                                                |  | (Decrease)
|                                                |  |           
|Effects of the adoption of EITF 03-11(a)        |  | $          | (715 | )
|Boston Generating                               |  |            | (159 | )
|AmerGen operations                              |  |            | 148  |  
|Other                                           |  |            | 319  |  
|                                                |  |            |      |  
|Decrease in wholesale and retail electric sales |  | $          | (407 | )
|                                                |  |            |      |  



---



|    |  |                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------
|(a) |  | Does not include $9 million of
    EITF 03-11 adjustments related to fuel sales that are
    included in other revenues.

The adoption of EITF 03-11 on
January 1, 2004 resulted in the netting of certain revenues
and the associated purchase power and fuel expense in 2004. The
sale of Boston Generating in May 2004 decreased wholesale and
retail sales, which was partially offset by the increase from
the acquisition of the remaining 50% of AmerGen in 2003.

The remaining increase in wholesale and retail
electric sales was primarily due to higher demand in the forward
wholesale market as a result of forward hedging and fuel prices.
Higher average market prices in the Midwest region were
primarily driven by higher coal prices, and in the Mid-Atlantic
region market prices were driven higher primarily by higher oil
and gas prices.

105



---



##### 



Electric Sales to
Affiliates.The decrease in revenue
from affiliates included $97 million in lower sales to
Energy Delivery. The lower sales to Energy Delivery were
primarily due to customers purchasing energy from an AES and
unfavorable weather conditions in the ComEd and PECO service
territories compared to the prior year.

Retail Gas Sales.Retail gas sales decreased $152 million as a result of the
wind down of Exelon Energys northeast business.

Other.Certain other
revenues increased for the nine months ended September 30,
2004 as compared to the same period in 2003 primarily due to the
consolidation of Sithes results of operations beginning
April 1, 2004.



| |                                     
| | ------------------------------------
| | Purchased Power and Fuel
    Expense

Generations supply source is summarized
below:

|                                     |  |                   |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|------------------------------------ |  | ----------------- | ------- | ---- |  | -------- | ------- | -------- |  |  | ------- | - |  |  | ----- | --
|                                     |  |                   |         |      |  |         
|                                     |  | Nine Months Ended |         |      |  |         
|                                     |  | September 30,     |         |      |  |         
|                                     |  |                   |         |      |  |         
|Supply Source (in GWhs)              |  | 2004              |         | 2003 |  | Variance |         | % Change
|                                     |  |                   |         |      |  |          |         |         
|Nuclear generation(a)                |  |                   | 102,968 |      |  |          | 89,102  |          |  |  | 13,866  |   |  |  | 15.6  | % 
|Purchases  non-trading portfolio(b) |  |                   | 37,158  |      |  |          | 64,012  |          |  |  | (26,854 | ) |  |  | (42.0 | )%
|Fossil and hydroelectric generation  |  |                   | 14,364  |      |  |          | 18,041  |          |  |  | (3,677  | ) |  |  | (20.4 | )%
|                                     |  |                   |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|Total supply                         |  |                   | 154,490 |      |  |          | 171,155 |          |  |  | (16,665 | ) |  |  | (9.7  | )%
|                                     |  |                   |         |      |  |          |         |          |  |  |         |   |  |  |       |   



---



|    |  |                                                                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes AmerGen in 2003. AmerGen generated
    14,912 GWhs during the nine months ended September 30, 2004.                                                                                                                           
|   
|(b) |  | 18,557 GWhs were netted with purchased power GWhs
    in 2004 as a result of the reclassification of certain hedging
    activities in accordance with EITF 03-11. Includes retail
    electric sales of Exelon Energy in both periods.

The changes in Generations purchased power
and fuel expense for the nine months ended September 30,
2004 compared to the same period in 2003 consisted of the
following:

|                                               |  |            |        |  
|---------------------------------------------- |  | ---------- | ------ | -
|                                               |  | Increase  
|                                               |  | (Decrease)
|                                               |  |           
|Effects of the adoption of EITF 03-11          |  | $          | (724   | )
|AmerGen                                        |  |            | (284   | )
|Midwest Generation                             |  |            | (110   | )
|Boston Generating                              |  |            | (103   | )
|Mark-to-market adjustments on hedging activity |  |            | (57    | )
|Price                                          |  |            | (31    | )
|Volume                                         |  |            | 181    |  
|Sithe                                          |  |            | 113    |  
|Other                                          |  |            | (268   | )
|                                               |  |            |        |  
|Decrease in purchased power and fuel expense   |  | $          | (1,283 | )
|                                               |  |            |        |  

Effects of the Adoption of
EITF 03-11.The adoption of
EITF 03-11 resulted in a decrease in purchased power and
fuel expense of $724 million.

AmerGen.As result
of Generations acquisition of the remaining 50% interest
in AmerGen in December 2003, purchased power decreased
$284 million, which had a significant impact on
Generations average supply cost decrease for the same
period. In prior periods, Generation reported energy purchased
from AmerGen as purchased power expense.

106



---



##### 



Midwest Generation.The volume of purchased power acquired from Midwest Generation
declined in 2004 as a result of Generation exercising its option
to reduce the capacity purchased from Midwest Generation, as
announced in 2003.

Boston Generating.The decrease in fuel and purchased power expense for Boston
Generating is due to the sale of the business in May of 2004.

Hedging Activity.Mark-to-market gains on hedging activities were $39 million
for the nine months ended September 30, 2004 compared to
losses of $18 million for the same period in 2003.

Price.The decrease
primarily reflects lower average fossil fuel costs of
$31 million during the nine months ended September 30,
2004 as compared to the same period in 2003.

Volume.Generation
experienced increased purchased power and fuel expense due to
increased market and retail electric sales throughout its
various sales regions. The increase in purchased power is
partially offset by decreased purchased power from Midwest
Generation (see Midwest Generation above for further
information).

Sithe.Under the
provisions of FIN No. 46-R, the operating results of Sithe
were included in Generations results of operations
beginning April 1, 2004. See Note 4 of the Combined
Notes to Consolidated Financial Statements for further
discussion of Sithe.

Other.Other
decreases in purchased power and fuel were primarily due to
$168 million of lower fuel expense due to the wind down of
Exelon Energys northeast business, $66 million in
lower transmission expense resulting from reduced inter-region
transmission as a result of ComEds integration into PJM in
the second quarter of 2004, and $16 million of nuclear fuel
amortization recorded in 2003 as a result of the replacement of
underperforming fuel at the Quad Cities Station.

Impairment of the Long-Lived Assets of
Boston Generating.In connection
with the decision to transition out of the ownership of Boston
Generating and the projects during the third quarter of 2003,
Generation recorded a long-lived asset impairment charge of
$945 million ($573 million net of income taxes) in the
third quarter of 2003. See Note 3 of the Combined Notes to
Consolidated Financial Statements for further discussion of the
sale of Generations ownership interest in Boston
Generating.

Operating and Maintenance
Expense.The changes in operating
and maintenance expense for the nine months ended
September 30, 2004 compared to the same period in 2003
consisted of the following:

|                                                                      |  |            |     |  
|--------------------------------------------------------------------- |  | ---------- | --- | -
|                                                                      |  | Increase  
|                                                                      |  | (Decrease)
|                                                                      |  |           
|AmerGen(a)                                                            |  | $          | 266 |  
|Sithe Energies, Inc.                                                  |  |            | 40  |  
|Refueling outage costs                                                |  |            | 28  |  
|Boston Generating                                                     |  |            | 14  |  
|Pension, payroll and benefit costs associated
    with The Exelon Way |  |            | (68 | )
|DOE settlement(b)                                                     |  |            | (52 | )
|Other                                                                 |  |            | 7   |  
|                                                                      |  |            |     |  
|Increase in operating and maintenance expense                         |  | $          | 235 |  
|                                                                      |  |            |     |  



---



|    |  |                                                                                                                                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes refueling outage expense of
    $24 million at AmerGen.                                                                                                                      
|   
|(b) |  | See Note 15 of the Combined Notes to
    Consolidated Financial Statements for further discussion of the
    spent nuclear fuel storage settlement agreement reached with the
    DOE.

The increase in operating and maintenance expense
was primarily due to the inclusion of AmerGen and Sithes
operating results in Generations consolidated results for
2004. This increase was partially offset with reductions in
payroll-related costs due to implementation of the programs
associated with The Exelon Way,

107



---



##### 



and the settlement with the DOE to reimburse
Generation for costs associated with storage of spent nuclear
fuel.


Nuclear fleet operating data and purchased power
costs data for the nine months ended September 30, 2004 and
2003 were as follows:

|                                                                     |  |               |       |      |  |   |       |  
|-------------------------------------------------------------------- |  | ------------- | ----- | ---- |  | - | ----- | -
|                                                                     |  |              
|                                                                     |  | Nine Months  
|                                                                     |  | Ended        
|                                                                     |  | September 30,
|                                                                     |  |              
|                                                                     |  | 2004          |       | 2003
|                                                                     |  |               |       |     
|Nuclear fleet capacity factor(a)                                     |  |               | 94.1  | %    |  |   | 94.5  | %
|Nuclear fleet production cost per MWh(a)                             |  | $             | 11.99 |      |  | $ | 12.16 |  
|Average purchased power cost for wholesale
    operations per MWh(b) |  | $             | 49.11 |      |  | $ | 45.42 |  



---



|    |  |                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes AmerGen and excludes Salem, which is
    operated by Public Service Enterprise Group Incorporated
    (PSE&G).
|   
|(b) |  | Includes PPAs with AmerGen in 2003.                                                                                    

Lower nuclear capacity factors were primarily due
to 51 additional planned refueling outage days, resulting in a
$34 million increase in planned outage costs in the nine
months ended September 30, 2004 as compared to the same
period in 2003. There were six planned outages during the nine
months ended September 30, 2004, compared to five planned
outages during the same period in 2003. The nine months ended
September 30, 2004 included 16 unplanned outages compared
to 20 unplanned outages during the same period in 2003.

The lower nuclear production costs were primarily
due to the spent fuel storage cost settlement agreement with the
DOE which resulted in the reimbursement of $40 million in
spent fuel storage costs incurred as operating and maintenance
expenses prior to September 30, 2003, and the recording of
$12 million of spent fuel storage operating and maintenance
expenses incurred from October 1, 2003 to
September 30, 2004 as an Other Account Receivable.

Nuclear capacity factors were also affected by
Quad Cities operating at lower than anticipated capacity levels.
The Quad Cities units have intermittently been operating at
pre-EPU generation levels due to performance issues with their
steam dryers. Generation plans additional expenditures to ensure
safe and reliable operations at the EPU output levels by
mid-2005.

Depreciation and Amortization.The increase in depreciation and
amortization expense for the nine months ended
September 30, 2004 as compared to the same period in 2003
was primarily due to the establishment of an ARC asset for
retired nuclear units of $36 million associated with the
third quarter 2004 update of the nuclear decommissioning ARO.
This ARC was immediately impaired through depreciation expense
as this asset was associated with retired nuclear units that do
not have any remaining useful life. The remaining increase was
due to capital additions and the consolidation of Sithe and
AmerGen. These increases were partially offset by a decrease in
depreciation expense related to the Boston Generating facilities
that were sold in May 2004.

Effective Income Tax
Rate.The effective income tax
rate was 38% for the nine months ended September 30, 2004
compared to 38% for the same period in 2003. See Note 12 of
the Combined Notes to the Consolidated Financial Statements for
further discussion of the change in the effective income tax
rate.

Cumulative Effect of Changes in Accounting
Principles.The cumulative effect
of changes in accounting principles recorded during the nine
months ended September 30, 2004 and 2003 included
$32 million, net of income taxes, recorded in 2004 related
to the consolidation of Sithe pursuant to FIN No. 46-R,
which resulted from the reversal of certain guarantees on behalf
of Sithe that had been recorded at Generation prior to
December 31, 2003, and income of $108 million, net of
income taxes, recorded in 2003 related to the adoption of
SFAS No. 143. See Note 2 of the Combined Notes to
Consolidated Financial Statements for further discussion of
these effects.

108



---



##### 





| |                                        
| | ---------------------------------------
| | Results of Operations 
    Enterprises

As previously described, effective
January 1, 2004, Exelon contributed its interest in Exelon
Energy Company to Generation. Exelon Energy Company was
previously reported as a part of the Enterprises segment. For
comparative discussion and analysis, the results of Exelon
Energy Company have been excluded from Enterprises 2003
results of operations discussed below.

|                                                                                                                               |  |               |     |               |  |          |     |   |  |   |      |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | --- | ------------- |  | -------- | --- | - |  | - | ---- | -
|                                                                                                                               |  |               |     |              
|                                                                                                                               |  | Nine Months   |     |              
|                                                                                                                               |  | Ended         |     |              
|                                                                                                                               |  | September 30, |     | Favorable    
|                                                                                                                               |  |               |     | (Unfavorable)
|                                                                                                                               |  | 2004          |     | 2003          |  | Variance
|                                                                                                                               |  |               |     |               |  |         
|Operating revenues                                                                                                             |  | $             | 148 |               |  | $        | 808 |   |  | $ | (660 | )
|Operating and maintenance expense                                                                                              |  |               | 189 |               |  |          | 822 |   |  |   | 633  |  
|Operating loss                                                                                                                 |  |               | (46 | )             |  |          | (42 | ) |  |   | (4   | )
|Other income and deductions                                                                                                    |  |               | 55  |               |  |          | (37 | ) |  |   | 92   |  
|Income (loss) from continuing operations before
    income taxes and cumulative effect of changes in accounting
    principles |  |               | 9   |               |  |          | (79 | ) |  |   | 88   |  
|Loss before cumulative effect of changes in
    accounting principles                                                          |  |               |    |               |  |          | (50 | ) |  |   | 50   |  
|Net income (loss)                                                                                                              |  |               | (9  | )             |  |          | (51 | ) |  |   | 42   |  

Divestiture of Businesses and
Investments.Exelon is continuing
to execute its divestiture strategy for Enterprises. See the
discussion of Enterprises results of operations for the
three months ended September 30, 2004 compared to the three
months ended September 30, 2003 for a description of
divestitures that affect the comparability of results between
periods.

Operating
Revenues.The changes in
Enterprises operating revenues for the nine months ended
September 30, 2004 compared to the same period in 2003
consisted of the following:

|                               |  |            |      |  
|------------------------------ |  | ---------- | ---- | -
|                               |  | Increase  
|                               |  | (Decrease)
|                               |  |           
|InfraSource businesses         |  | $          | (394 | )
|Services(a)                    |  |            | (169 | )
|F & M Holdings, LLC(b)         |  |            | (87  | )
|Other                          |  |            | (10  | )
|                               |  |            |      |  
|Decrease in operating revenues |  | $          | (660 | )
|                               |  |            |      |  



---



|    |  |                                                                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Primarily due to the sale of certain businesses.                                                                                                            
|   
|(b) |  | For the remaining businesses of F&M Holdings,
    LLC, operating revenues decreased as a result of the sale of
    certain businesses and wind-down efforts.

Operating and Maintenance
Expense.The changes in
Enterprises operating and maintenance expense for the nine
months ended September 30, 2004 compared to the same period
in 2003 consisted of the following:

|                                              |  |            |      |  
|--------------------------------------------- |  | ---------- | ---- | -
|                                              |  | Increase  
|                                              |  | (Decrease)
|                                              |  |           
|InfraSource businesses                        |  | $          | (418 | )
|Services(a)                                   |  |            | (146 | )
|F & M Holdings, LLC                           |  |            | (78  | )
|Other                                         |  |            | 9    |  
|                                              |  |            |      |  
|Decrease in operating and maintenance expense |  | $          | (633 | )
|                                              |  |            |      |  



---



|    |  |                                                                                                                                                                            
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Primarily due to the sale of certain businesses.                                                                                                                           
|   
|(b) |  | For the remaining businesses of F&M Holdings,
    LLC, operating and maintenance expense decreased as a result of
    the sale of certain businesses and wind-down efforts.

109



---



##### 



Other Income and
Deductions.The increase in other
income and deductions was primarily due to 2004 gains on the
sale of Thermal and Enterprises investment in PECO Telcove
of $54 million (before income taxes and net of debt
prepayment penalties) and income of $18 million recorded
during the second quarter of 2004 related to the collection of a
note receivable prior to its maturity. Other income and
deductions in 2003 included impairment charges of energy,
software and communications investments of $40 million.

Effective Income Tax
Rate.The effective income tax
rate was 100% for the nine months ended September 30, 2004
compared to 37% for the same period in 2003. The increase in the
effective tax rate was primarily attributable to the state tax
impact of the sale of certain Capital Partners investments and
the PECOTelcove transactions.

Liquidity and Capital Resources

Exelons businesses are capital intensive
and require considerable capital resources. These capital
resources are primarily provided by internally generated cash
flows from Energy Deliverys and Generations
operations. When necessary, Exelon obtains funds from external
sources in the capital markets and through bank borrowings.
Exelons access to external financing at reasonable terms
depends on Exelon and its subsidiaries credit ratings and
general business conditions, as well as that of the utility
industry in general. If these conditions deteriorate to where
Exelon no longer has access to the capital markets at reasonable
terms, Exelon has access to revolving credit facilities with
aggregate bank commitments of $1.5 billion that it
currently utilizes to support its commercial paper programs. See
the Credit Issues section of Liquidity and
Capital Resources for further discussion. Exelon primarily
uses its capital resources to fund capital requirements,
including construction, to retire debt, to pay common stock
dividends, to fund its pension obligations and to invest in new
and existing ventures. Future acquisitions that Exelon may
undertake may require external financing, which might include
issuing Exelon common stock.



| |                                         
| | ----------------------------------------
| | Cash Flows from Operating
    Activities

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 at fixed prices
and are

weighted toward the third quarter. Energy
Deliverys future cash flows will be affected by its
ability to achieve cost savings in operations and the impact of
the economy, weather, customer choice and future regulatory
proceedings on its revenues. Generations cash flows from
operating activities primarily result from the sale of electric
energy to wholesale customers, including Energy Delivery.
Generations future cash flows from operating activities
will be affected by future demand and market prices for energy
and its ability to continue to produce and supply power at
competitive costs.


Cash flows from operations have been and are
expected to continue to provide a reliable, steady source of
cash flow sufficient to meet operating and capital expenditures
requirements for the foreseeable future. Operating cash flows
after 2006 could be negatively affected by changes in the rate
regulatory environments of ComEd and PECO, although any effects
are not expected to hinder Exelons ability to fund its
business requirements.

Cash flows from operations for the nine months
ended September 30, 2004 and 2003 were $3,154 million
and $2,553 million, respectively. Changes in Exelons
cash flows from operations are generally consistent with changes
in its results of operations, and further adjusted by changes in
working capital in the normal course of business.

In addition to the items mentioned in
Results of Operations, the following items affected
Exelons operating cash flows for the nine months ended
September 30, 2004 and 2003:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | At September 30, 2004, Exelon was in a net
    Federal income tax receivable position as compared to a net
    Federal income tax payable position at September 30, 2003.
    Comparability of the cash flows for the two periods is affected
    significantly by this change in the Federal income tax position.
    The primary driver of the increase in cash from the changes in
    receivables during the nine months ended September 30, 2004
    was the Federal income tax provision of approximately
    $289 million and the

110



---



##### 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | receipt of a $150 million Federal income tax
    refund during 2004, completely offset by the payment of
    approximately $150 million of Federal income taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | In addition to the effects of the changes in
    Federal income taxes, cash flows from customer accounts
    receivables decreased $68 million and $18 million, net
    of uncollectible accounts written-off of $73 million and
    $83 million, respectively, during the nine months ended
    September 30, 2004 and 2003, respectively. The primary
    driver of the year-over-year change in customer receivables was
    the unfavorable weather in Energy Deliverys service
    territories in the current year.                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Natural gas inventories increased
    $15 million and deferred natural gas costs decreased
    $52 million during the nine months ended September 30,
    2004 resulting in a $37 million increase to operating cash
    flows. During 2003, an increase in natural gas inventories of
    $44 million and an increase in deferred natural gas costs
    of $33 million resulted in a $77 million decrease to
    operating cash flow. PECOs gas cost rates are subject to
    periodic adjustments by the PUC and are designed to recover from
    or refund to customers the difference between the actual cost of
    purchased gas and the amount included in rates. During 2004,
    PECO was recovering fuel revenues from customers in excess of
    gas costs being incurred. During 2003, PECO was incurring gas
    costs in excess of fuel revenues being recovered from customers.
|
| |  | An increase in required deposits for energy
    trading activity of $51 million resulted from Generation
    exceeding its negotiated credit positions with counterparties
    during the nine months ended September 30, 2003. During
    2004, required deposits for trading activity resulted in a
    $59 million net cash inflow.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Discretionary tax-deductible pension plan
    payments were $426 million for the nine months ended
    September 30, 2004 compared to $367 million for the
    same period in 2003. Exelon also contributed $8 million
    during 2004 to the pension plans needed to satisfy minimum
    funding requirements of the Employee Retirement Income Security
    Act. Additionally, $55 million and $50 million were
    contributed to the postretirement welfare benefit plans for the
    nine months ended September 30, 2004 and 2003,
    respectively. See Note 11 of the Combined Notes to
    Consolidated Financial Statements for further information
    regarding pension and postretirement benefits.                                                                                                                                                                               
|
| |  | During the third quarter of 2004, Exelon paid
    $63 million for call premiums on the retirement of ComEd
    debt. See Cash Flows from Financing Activities for
    further information regarding debt retirements pursuant to the
    accelerated liability management plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

Exelon, through its ComEd subsidiary, has taken
certain tax positions, which have been disclosed to the IRS, to
defer the tax gain on the 1999 sale of its fossil generating
assets. As of September 30, 2004, deferred tax liabilities
related to the fossil plant sale are reflected in Exelons
Consolidated Balance Sheets with the majority allocated to the
Consolidated Balance Sheets of ComEd and the remainder to the
Consolidated Balance Sheets of Generation. The 1999 income tax
liability deferred as a result of these transactions was
approximately $1.1 billion. Changes in IRS interpretations
of existing primary tax authority or challenges to ComEds
positions could have the impact of accelerating future income
tax payments and increasing interest expense related to the
deferred tax gain that becomes current. Any required payments
could be significant to the cash flows of Exelon. Exelons
management believes Exelons reserve for interest, which
has been established in the event that such positions are not
sustained, has been appropriately recorded in accordance with
SFAS No. 5, Accounting for Contingencies
(SFAS No. 5). However, the ultimate outcome of such
matters could result in unfavorable or favorable adjustments to
the results of operations, and such adjustments could be
material. Federal tax returns covering the period of the 1999
sale are currently under IRS audit. Final resolution of this
matter is not anticipated for several years.

111



---



##### 





| |                                         
| | ----------------------------------------
| | Cash Flows from Investing
    Activities

Cash flows used in investing activities for the
nine months ended September 30, 2004 and 2003 were
$1,178 million and $1,223 million, respectively. Cash
used in investing activities in 2004 compared to cash used in
investing activities in 2003 was primarily attributable to the
following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cash proceeds of $212 million, net of
    transaction costs and contingency payments on prior year
    dispositions, were received during the nine months ended
    September 30, 2004 from the sales of Thermal, substantially
    all of the operating components of Services and
    Enterprises investments in PECO TelCove and other equity
    method investments. Additionally, cash proceeds of
    $24 million were received during the nine months ended
    September 30, 2004 from the sale of certain businesses of
    Sithe. In September 2003, Exelon received approximately
    $175 million of cash proceeds from the sale of InfraSource.
|
| |  | Cash proceeds of $42 million were received
    from the sale of three gas turbines at Generation that were
    classified as assets held for sale at December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Capital expenditures decreased $114 million
    net of the settlement of litigation with the DOE of
    $20 million and liquidating damages of $92 million
    received in 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Net investments in nuclear decommissioning trust
    funds increased $39 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | On March 31, 2004, Exelon consolidated the
    assets and liabilities of Sithe under the provisions of FIN
    No. 46-R, which resulted in an increase in cash of
    $19 million. See Note 2 and Note 4 of the
    Combined Notes to Consolidated Financial Statements for further
    information regarding the FIN No. 46-R consolidation of
    Sithe.                                                                                                                                                                                                                                                                                                   
|
| |  | Early settlement on an acquisition note
    receivable from the 2003 disposition of InfraSource resulted in
    cash proceeds of $30 million during the nine months ended
    September 30, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Collection of a $20 million note receivable
    during 2004 related to the sale of certain businesses of Sithe
    during the fourth quarter of 2003 and the first quarter of 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

Capital expenditures by business segment for the
nine months ended September 30, 2004 and 2003 were as
follows:

|                           |  |               |       |      |  |   |       | 
|-------------------------- |  | ------------- | ----- | ---- |  | - | ----- | 
|                           |  |              
|                           |  | Nine Months  
|                           |  | Ended        
|                           |  | September 30,
|                           |  |              
|                           |  | 2004          |       | 2003
|                           |  |               |       |     
|Energy Delivery            |  | $             | 680   |      |  | $ | 728   | 
|Generation(a)              |  |               | 608   |      |  |   | 641   | 
|Enterprises                |  |               |      |      |  |   | 19    | 
|Corporate and other        |  |               | 7     |      |  |   | 21    | 
|                           |  |               |       |      |  |   |       | 
|Total capital expenditures |  | $             | 1,295 |      |  | $ | 1,409 | 
|                           |  |               |       |      |  |   |       | 



---



|    |  |                                                       
|--- |  | ------------------------------------------------------
|(a) |  | Net of liquidating damages of $92 million in
    2003.

Energy Deliverys capital expenditures for
the nine months ended September 30, 2004 reflected
continuing efforts to improve the reliability of its
transmission and distribution systems and capital additions to
support new business and customer growth. ComEd estimates that
it will spend up to approximately $690 million in total
capital expenditures for 2004. This represents an increase of
approximately $75 million more than had been previously
planned, primarily as a result of expansion of the ComEd
distribution system to support new business and customer growth.
However, Exelon is continuing to evaluate its total capital
spending requirements and potential mitigating opportunities.
Exelon anticipates that Energy Deliverys capital
expenditures will be funded by internally generated funds,
borrowings and the issuance of debt or preferred securities or
capital contributions from Exelon.

112



---



##### 



Generations capital expenditures for the
nine months ended September 30, 2004 reflected additions
and upgrades to existing facilities (including material
condition improvements during nuclear refueling outages) and
nuclear fuel. Capital expenditures were reduced by the
settlement agreement with the DOE which resulted in the
reimbursement of $12 million in spent fuel storage costs
incurred as capital expenses prior to September 30, 2003,
and the recording of $8 million of spent fuel storage
capital expenses incurred from October 1, 2003 to
September 30, 2004 within Accounts receivable, other.
Generations capital expenditures for the nine months ended
September 30, 2003 reflected the construction of the Mystic
8 and 9 and Fore River Boston Generating facilities. During
2003, Boston Generating received $92 million of liquidated
damages from Raytheon Company (Raytheon) as a result of Raytheon
not meeting the expected completion date and certain contractual
performance criteria in connection with Raytheons
construction of these generating facilities. Exelon anticipates
that Generations capital expenditures will be funded by
internally generated funds, Generations borrowings or
capital contributions from Exelon.



| |                                         
| | ----------------------------------------
| | Cash Flows from Financing
    Activities

Cash flows used in financing activities for the
nine months ended September 30, 2004 were
$1,885 million compared to $1,183 million for the same
period in 2003. The increase in cash used in financing
activities was primarily attributable to the retirement of
$768 million of long-term debt during the nine months ended
September 30, 2004 in accordance with an accelerated
liability management plan and the retirement of
$547 million of long-term debt due to financing affiliates.
During the nine months ended September 30, 2003, Exelon
issued debt (net of retirements during the period) and preferred
stock of approximately $33 million. See Note 9 of the
Combined Notes to Consolidated Financial Statements for further
information regarding debt issuances and retirements during the
nine months ended September 30, 2004. During the nine
months ended September 30, 2004, Exelon repaid
$1 million of commercial paper and received cash proceeds
of $31 million from the settlement of interest-rate swaps.
During the nine months ended September 30, 2003, Exelon
repaid $599 million of commercial paper and paid
$45 million to settle interest-rate swaps. Additionally,
Exelon purchased treasury shares totaling $75 million
during 2004 and received proceeds from employee stock plans of
$192 million and $139 million for the nine months
ended September 30, 2004 and 2003, respectively.

The cash dividend payments on common stock for
the nine months ended September 30, 2004 increased
$104 million over the nine months ended September 30,
2003, reflecting a 10% increase in the first quarter of 2004 and
an 11% increase in the third quarter of 2004. On July 27,
2004, the Exelon Board of Directors approved a policy of
targeting a dividend payout ratio of 50 to 60% of ongoing
earnings beginning in 2005. The actual dividend payout rate
depends on Exelon achieving its objectives, including meeting
planned cash flow targets and strengthening its balance sheet.
On October 19, 2004, the Exelon Board of Directors approved
an increased dividend of $0.40 per share, payable to
shareholders of record as of November 15, 2004. This
dividend increase is consistent with the dividend policy
approved in July 2004. The Board of Directors must approve the
dividends each quarter after review of Exelons financial
condition at the time.

From time to time and as market conditions
warrant, Exelon may engage in long-term debt repurchases via
tender offers, open market acquisitions or other viable options
to preserve the integrity of Exelons balance sheet. In the
third quarter of 2004, Exelon initiated an accelerated liability
management plan at ComEd that targets the elimination of
$1.2 billion of debt from ComEds balance sheet by the
end of 2004. Through September 30, 2004, ComEd had retired
approximately $768 million of debt under the plan and
intends to retire over $400 million of long-term debt in
the fourth quarter of 2004 to complete the accelerated liability
management plan.



| |              
| | -------------
| | Credit Issues

Exelon Credit
Facility.Exelon meets its short-term
liquidity requirements primarily through the issuance of
commercial paper by the Exelon corporate holding company (Exelon
Corporate) and by ComEd, PECO and Generation. At
December 31, 2003, Exelon Corporate, along with ComEd, PECO
and Generation, participated in a $750 million 364-day
unsecured revolving credit agreement and a $750 million
three-year unsecured revolving credit agreement with a group of
banks. On July 16, 2004, the $750 million

113



---



##### 



364-day facility was replaced with a
$1 billion five-year facility, and the $750 million
three-year facility was reduced to $500 million. Both
revolving credit agreements are used principally to support the
commercial paper programs at Exelon Corporate, ComEd, PECO and
Generation and to issue letters of credit. At September 30,
2004, Exelon Corporate, ComEd, PECO and Generation had the
following sublimits and available capacity under the credit
agreements and the indicated amounts of outstanding commercial
paper:


|                 |  |             |     |             |  |                  |     |  |  |   |     | 
|---------------- |  | ----------- | --- | ----------- |  | ---------------- | --- |  |  | - | --- | 
|                 |  | Bank        |     | Available   |  | Outstanding     
|Borrower         |  | Sublimit(a) |     | Capacity(b) |  | Commercial Paper
|                 |  |             |     |             |  |                 
|Exelon Corporate |  | $           | 700 |             |  | $                | 689 |  |  | $ | 325 | 
|ComEd            |  |             | 250 |             |  |                  | 224 |  |  |   |    | 
|PECO             |  |             | 100 |             |  |                  | 100 |  |  |   |    | 
|Generation       |  |             | 450 |             |  |                  | 271 |  |  |   |    | 



---



|    |  |                                                                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Sublimits under the credit agreements can change
    upon written notification to the bank group.                                                                                                                              
|   
|(b) |  | Available capacity represents primarily the bank
    sublimit net of outstanding letters of credit. The amount of
    commercial paper outstanding does not reduce the available
    capacity under the Exelon Credit Facility.

Interest rates on the advances under the credit
facility are based on either the London Interbank Offering Rate
(LIBOR) plus an adder based on the credit rating of the
borrower as well as the total outstanding amounts under the
agreement at the time of borrowing or prime. The maximum LIBOR
adder would be 132 basis points. For the nine months ended
September 30, 2004, the average interest rate on notes
payable was approximately 1.19%.

The credit agreements require Exelon Corporate,
ComEd, PECO and Generation to maintain a minimum cash from
operations to interest expense ratio for the twelve-month period
ended on the last day of any quarter. The ratios exclude
revenues and interest expenses attributable to securitization
debt, certain changes in working capital, distributions on
preferred securities of subsidiaries and, in the case of Exelon
Corporate and Generation, revenues from Exelon New England
Holding Company, LLC (Exelon New England) and Sithe and interest
on the debt of their project subsidiaries. Exelon Corporate is
measured at the Exelon consolidated level. The following table
summarizes the minimum thresholds reflected in the credit
agreements for the twelve-month period ended September 30,
2004:

|                           |  |                  |           |       |  |      |           |            |  |  |           |  |  |  |           | 
|-------------------------- |  | ---------------- | --------- | ----- |  | ---- | --------- | ---------- |  |  | --------- |  |  |  | --------- | 
|                           |  | Exelon Corporate |           | ComEd |  | PECO |           | Generation
|                           |  |                  |           |       |  |      |           |           
|Credit agreement threshold |  |                  | 2.65 to 1 |       |  |      | 2.25 to 1 |            |  |  | 2.25 to 1 |  |  |  | 3.25 to 1 | 

At September 30, 2004, each of Exelon
Corporate, ComEd, PECO and Generation were in compliance with
the foregoing thresholds.

Capital Structure.At September 30, 2004, the capital structures of Exelon,
ComEd, PECO and Generation consisted of the following:

|                                |  |              |    |          |  |         |    |            |  |  |    |   |  |  |    |  
|------------------------------- |  | ------------ | -- | -------- |  | ------- | -- | ---------- |  |  | -- | - |  |  | -- | -
|                                |  | Exelon       |    |          |  |         |    |           
|                                |  | Consolidated |    | ComEd(a) |  | PECO(a) |    | Generation
|                                |  |              |    |          |  |         |    |           
|Long-term debt                  |  |              | 35 | %        |  |         | 30 | %          |  |  | 22 | % |  |  | 42 | %
|Long-term debt to affiliates(b) |  |              | 23 |          |  |         | 15 |            |  |  | 59 |   |  |  |   |  
|Common equity                   |  |              | 40 |          |  |         | 55 |            |  |  | 18 |   |  |  |   |  
|Members equity                 |  |              |   |          |  |         |   |            |  |  |   |   |  |  | 57 |  
|Preferred securities            |  |              | 1  |          |  |         |   |            |  |  | 1  |   |  |  |   |  
|Notes payable                   |  |              | 1  |          |  |         |   |            |  |  |   |   |  |  |   |  
|Minority interest               |  |              |   |          |  |         |   |            |  |  |   |   |  |  | 1  |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | At September 30, 2004, ComEds capital
    structure, excluding the deduction from shareholders
    equity of the $156 million receivable from Exelon (which
    amount is deducted for GAAP purposes, as reflected in the table,
    but is excluded from the percentages in this footnote) to
    reflect amounts expected to be received by ComEd from Exelon to
    pay future taxes, consisted of 30% long-term debt, 14% long-term
    debt to affiliates and 56% common equity. Likewise, PECOs
    capital structure, excluding the deduction from
    shareholders equity of the $1.5 billion receivable

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|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | from Exelon, consisted of 34% common equity, 1%
    preferred securities and 65% long-term debt, including long-term
    debt to unconsolidated affiliates.                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(b) |  | Includes $6 billion, $2 billion and
    $4 billion owed to unconsolidated affiliates of Exelon,
    ComEd and PECO, respectively, that qualify as special purpose
    entities under FIN No. 46-R. These special purpose entities
    were created for the sole purpose of issuing debt obligations to
    securitize intangible transition property and CTCs of Energy
    Delivery or mandatorily redeemable preferred securities. See
    Note 2 of the Combined Notes to Consolidated Financial
    Statements for further information regarding FIN No. 46-R.

Boston Generating Project
Debt.Boston Generating had a
$1.25 billion credit facility (Boston Generating Credit
Facility), which was entered into primarily to finance the
development and construction of the Mystic 8 and 9 and Fore
River generating facilities. On May 25, 2004, Exelon and
Generation completed the sale, transfer and assignment of
ownership of Boston Generating to a special purpose entity owned
by the lenders under the Boston Generating Credit Facility.
Accordingly, the Boston Generating Credit Facility was
eliminated from the consolidated financial statements of Exelon
and Generation during the second quarter of 2004.

See Note 3 of the Combined Notes to
Consolidated Financial Statements for information regarding the
sale of Generations ownership interest in Boston
Generating to the lenders under the Boston Generating Credit
Facility.

Intercompany Money
Pool.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
Exelons corporate treasurer. ComEd and its subsidiary,
Commonwealth Edison of Indiana, Inc. (ComEd of Indiana), PECO,
Generation and BSC may participate in the money pool as lenders
and borrowers, and Exelon Corporate and Unicom Investment, Inc.,
a wholly owned subsidiary of Exelon, may participate as lenders.
Funding of, and borrowings from, the money pool are predicated
on whether the contributions and borrowings result in economic
benefits. Interest on borrowings is based on short-term market
rates of interest, or, if from an external source, specific
borrowing rates. Maximum amounts invested in and borrowed from
the money pool by participant during the nine months ended
September 30, 2004 are described in the following table in
addition to the net investment or borrowing as of
September 30, 2004:

|                   |  |          |     |          |  |                        |     |  |  |   |      |    
|------------------ |  | -------- | --- | -------- |  | ---------------------- | --- |  |  | - | ---- | ---
|                   |  | Maximum  |     | Maximum  |  | September 30, 2004    
|                   |  | Invested |     | Borrowed |  | Contributed (Borrowed)
|                   |  |          |     |          |  |                       
|ComEd              |  | $        | 487 |          |  | $                      | 17  |  |  | $ | (17  | )  
|ComEd of Indiana   |  |          | 21  |          |  |                        |    |  |  |   | 21   | (a)
|PECO               |  |          | 162 |          |  |                        | 36  |  |  |   | 26   |    
|Generation         |  |          | 17  |          |  |                        | 546 |  |  |   | 17   |    
|BSC                |  |          |    |          |  |                        | 197 |  |  |   | (125 | )  
|Unicom Investments |  |          | 160 |          |  |                        |    |  |  |   | 99   |    



---



|    |  |                                                                                                             
|--- |  | ------------------------------------------------------------------------------------------------------------
|(a) |  | The activity at ComEd of Indiana at
    September 30, 2004 was eliminated in the consolidation of
    ComEd.

Sithe Long-Term
Debt.At September 30, 2004,
$836 million of Sithes long-term debt, including
current maturities, was included in Exelon and Generations
Consolidated Balance Sheets. See Note 2 and Note 4 of
the Combined Notes to Consolidated Financial Statements for
information regarding the consolidation of Sithe and see
Note 9 of the Combined Notes to Consolidated Financial
Statements for information regarding Sithes long-term debt
and the annual maturities.

Security Ratings.Exelons access to the capital markets, including the
commercial paper market, and its financing costs in those
markets depend on the securities ratings of the entity that is
accessing the capital markets. On July 22, 2004,
Standard & Poors Ratings Services lowered its
rating on PECOs First Mortgage Bonds from A to A-. None of
the other securities ratings of Exelon, PECO or Exelons
other subsidiaries has changed from those set forth in the 2003
Form 10-K. None of Exelons borrowings is subject to
default or

115



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##### 



prepayment as a result of a downgrading of
securities although such a downgrading could increase fees and
interest charges under Exelons credit facilities.


Shelf Registration.As of September 30, 2004, Exelon, ComEd and PECO have
current effective shelf registration statements for the sale of
$2.0 billion, $555 million and $550 million,
respectively, of securities. The ability of Exelon, ComEd or
PECO to sell securities off its shelf registration statement or
to access the private placement markets will depend on a number
of factors at the time of the proposed sale, including other
required regulatory approvals, the current financial condition
of the company, its securities ratings and market conditions.

PUHCA Restrictions.On April 1, 2004, Exelon obtained an order from the SEC
under the Public Utilities Holding Company Act of 1935 (PUHCA)
authorizing, through April 15, 2007, financing
transactions, including the issuance of common stock, preferred
securities, equity-linked securities, long-term debt and
short-term debt in an aggregate amount not to exceed
$8.0 billion above the amount outstanding for Exelon
Corporate and Generation at December 31, 2003 with no
separate sublimit for short-term debt. The 2004 order replaced a
prior SEC order that expired on March 31, 2004 that had
authorized up to $4.0 billion of financing. No securities
have been issued under the above described limit. The prior
order also authorized Exelon to issue guarantees of up to
$4.5 billion outstanding at any one time. The 2004 order
gives Exelon an additional $1.5 billion of guaranty
authority. At September 30, 2004, Exelon had provided
$2.1 billion of guarantees pursuant to SEC authorization.
See Contractual Obligations and Off-Balance Sheet
Arrangements in this section for further discussion of
guarantees. The SEC order requires Exelon to maintain a ratio of
common equity to total capitalization (including securitization
debt) of not less than 30%. At September 30, 2004,
Exelons common equity ratio was 40%. Exelon expects that
it will maintain a common equity ratio of at least 30%.

Exelon is also limited by order of the SEC under
PUHCA to an aggregate investment of $4.0 billion in exempt
wholesale generators (EWGs) and foreign utility companies
(FUCOs). At September 30, 2004, Exelon had invested
$2.1 billion in EWGs, leaving $1.9 billion of
investment authority under the order. In its April 1, 2004
financing order, the SEC authorized Exelon to invest
$4 billion in EWGs and reserved jurisdiction over an
additional $3.0 billion in investments in EWGs.

Under applicable law, Exelon, ComEd, PECO and
Generation can pay dividends only from retained, undistributed
or current earnings. A significant loss recorded at ComEd, PECO
or Generation may limit the dividends that these companies can
distribute to Exelon. At September 30, 2004, Exelon had
retained earnings of $3.3 billion, including ComEds
retained earnings of $1,075 million (of which
$1,078 million had been appropriated for future dividend
payments), PECOs retained earnings of $639 million
and Generations undistributed earnings of
$1,031 million.



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Contractual Obligations, Commercial
    Commitments and Off-Balance Sheet Obligations

Contractual obligations represent cash
obligations that are considered to be firm commitments and
commercial commitments represent commitments triggered by future
events. Exelons, ComEds, PECOs and
Generations contractual obligations and commercial
commitments as of September 30, 2004 were materially
unchanged, other than in the normal course of business, from the
amounts set forth in the 2003 Form 10-K except for the
following:



| |   |                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Generation acquired a $50 million letter of
    credit to support the contractual obligations of Sithe and its
    subsidiaries and issued a $45 million of letter of credit
    for Power Team to cover collateral calls that had previously
    been met with cash collateral.
|
| |  | On September 29, 2004, Generation exercised
    its call option to acquire Reservoirs 50% interest in
    Sithe for $97 million. The closing of the call is subject
    to state and Federal regulatory approvals.                                                             
|
| |  | See Note 9 and Note 19 to the Combined
    Notes to Consolidated Financial Statements for discussion of
    material changes in the registrants respective debt from
    the amounts set forth in the 2003 Form 10-K.                                                          

116



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##### 






COMMONWEALTH EDISON COMPANY

General

ComEd operates in a single business segment and
its operations consist of the regulated sale of electricity and
distribution and transmission services in northern Illinois.

Executive Overview

Financial Results.ComEds net income for the three months ended
September 30, 2004 decreased 24% as compared to the same
period in 2003 primarily due to losses recorded due to the
extinguishment of debt in 2004.

ComEd experienced an overall decline in net
income of 9% during the nine months ended September 30,
2004. This decline primarily reflects lower collections of CTCs
and losses recorded due to the extinguishment of debt in 2004,
partially offset by lower operating and maintenance expense
compared to the corresponding period in 2003 in which ComEd
recorded charges associated with an agreement with various
Illinois retail market participants and other interested parties
and due to a decrease in severance and severance-related charges
associated with The Exelon Way in 2004.

The Exelon Way.See
Managements Discussion and Analysis of Financial
Condition and Results of Operations 
ComEd  Executive Summary in the 2003
Form 10-K for a discussion of ComEds implementation
of The Exelon Way.

Financing
Activities.In 2004, ComEd redeemed
and retired $768 million of outstanding debt pursuant to an
accelerated liability management plan and repaid
$30 million of other long-term debt. ComEd also made
scheduled payments of $261 million on its long-term debt to
ComEd Transitional Funding Trust. ComEd plans to retire over
$400 million of long-term debt in the fourth quarter of
2004 to complete the accelerated liability management plan.
ComEd met its capital resource commitments primarily with
internally generated cash, a return of investments in the
intercompany money pool and the repayment of intercompany
receivables. When necessary, ComEd obtains funds from external
sources, including the capital markets, the intercompany money
pool and through bank borrowings.

Regulatory Developments  PJM
Integration.On June 2, 2003,
ComEd began receiving electric transmission reservation services
from PJM and transferred control of ComEds Open Access
Same Time Information System to PJM. On April 27, 2004, the
FERC issued its order approving ComEds application to
complete its integration into PJM, subject to certain
stipulations, including a provision to hold certain utilities in
Michigan and Wisconsin harmless from the impacts of ComEd
joining PJM. ComEd agreed to these stipulations and fully
integrated into PJM on May 1, 2004. In October 2004, ComEd
has entered into settlement agreements with nearly all the
Michigan parties calling for a payment of approximately
$2 million by ComEd. The agreements have been filed with
the FERC and are awaiting approval. Settlement talks continue
between ComEd and the remaining Wisconsin parties.

PECO and ComEds membership in PJM supports
Exelons commitment to competitive wholesale electric
markets and will provide Exelon the benefits of more
transparent, liquid and competitive markets for the sale and
purchase of electric energy and capacity. Upon joining PJM,
ComEd began incurring administrative fees, which are expected to
approximate $30 million annually. ComEd believes such costs
will ultimately be partially offset by the benefits of full
access to a wholesale competitive marketplace and increased
revenue requirements, particularly after ComEds regulatory
transition period ends in 2006; however, changes in market
dynamics could affect the ultimate financial impact on ComEd.

Through and Out
Proceeding.ComEd currently recognizes
approximately $66 million of annual revenue from T&O
rates for energy flowing across ComEds transmission
system. On March 19, 2004, the FERC issued an order to
eliminate these rates effective May 1, 2004, which was
subsequently deferred until December 1, 2004. The T&O
rates are to be replaced by a new long-term transmission pricing
structure that will eliminate seams in the PJM and Midwest ISO
regions. Transmission owners in PJM, the Midwest ISO and other
parties filed various pricing proposals with the FERC on or
before October 1, 2004, with an effective

117



---



##### 



date of December 1, 2004. On October 1,
2004, ComEd participated in the filing of a Regional Pricing
Proposal which, if accepted by the FERC, could minimize
ComEds loss of T&O revenues. Depending on which
proposal is accepted by the FERC, or if the FERC creates a new
alternative, ComEds results of operations could be
negatively affected.


Rate Design
Proceeding.Additionally, certain PJM
transmission owners, including ComEd, are subject to a rate
design proceeding before the FERC. One or more filings will be
made in January 2005 to address, among other items, how costs
associated with new investments should be recovered. ComEd is
presently evaluating the extent to which it will participate in
this proceeding.

At this early stage, ComEd cannot predict the
outcome of either of the above proceedings; however, these
proceedings could lead to adverse impacts on the results of
operations of ComEd.

Delivery Services
Rates.On March 3, 2003, ComEd
entered into, and the ICC subsequently entered orders, which are
now final, that effectuated an agreement (Agreement) with
various Illinois retail market participants and other interested
parties that settled, among other things, delivery service rates
and the market value index proceeding and facilitates
competitive service declarations for large-load customers and an
extension of the PPA with Generation.

Competitive Service
Declaration.On November 14,
2002, the ICC allowed ComEd, by operation of law, to revise its
provider of last resort obligation to be the back-up energy
supplier at market-based rates for customers with energy demands
of at lease three megawatts. About 370 of ComEds largest
energy customers are affected, representing an aggregate supply
obligation or load of approximately 2,500 megawatts. These
customers accounted for 10% of ComEds 2003 MWh
deliveries. These customers will not have a right to take
bundled service after June 2006 or to come back to bundled rates
if they choose an alternative supplier prior to June 2006. The
parties to the March 2003 Agreement have committed, if specified
market conditions exist, not to oppose a process for achieving a
similar competitive declaration for customers having energy
demands of one to three megawatts. To date, ComEd has not
requested the competitive declaration for this second set of
customers but continues to evaluate its options.

On March 28, 2003, the ICC approved changes
to ComEds real-time pricing tariff, to be available to
customers who choose not to go to the competitive market to
procure their electric power and energy. An appeal to each of
the ICCs orders was filed. On March 24, 2004, the
Illinois Appellate Court issued its opinion affirming the
ICCs orders in both cases. The Court found that the ICC
properly allowed ComEds competitive declaration for
customers with loads of more than 3 MWs to go into effect
and that the ICCs order approving the hourly rate was
lawful.

Open Access Transmission
Tariff.On November 10, 2003, the
FERC issued an order allowing ComEd to put into effect, subject
to refund and hearing, new transmission rates designed to
reflect nearly $500 million of infrastructure investments
made since 1998. During the third quarter of 2004, a settlement
agreement was reached and approved by the FERC, on an interim
basis, which established new wholesale rates that became
effective May 1, 2004. The FERC has allowed the proposed
rates in the settlement agreement pending the final approval by
the FERC. However, because of the Illinois retail rate freeze
and the method for calculating CTCs, the increase is not
expected to have a significant effect on operating revenues
until after December 31, 2006.

Outlook for the Remainder of 2004 and
Beyond.ComEds outlook for the
remainder of 2004 is consistent with the discussion within
Managements Discussion and Analysis of Financial
Condition and Results of Operations 
ComEd  Executive Summary in the 2003
Form 10-K.

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##### 



Results of Operations



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Three Months Ended September 30, 2004
    Compared to Three Months Ended September 30, 2003

|                            |                                                                  |                                   |       |               |       |          |       |      |       |   |     |      |     |  
|--------------------------- | ---------------------------------------------------------------- | --------------------------------- | ----- | ------------- | ----- | -------- | ----- | ---- | ----- | - | --- | ---- | --- | -
|                            |                                                                  |                                   |       |              
|                            |                                                                  | Three Months                      |       |              
|                            |                                                                  | Ended                             |       |              
|                            |                                                                  | September 30,                     |       | Favorable    
|                            |                                                                  |                                   |       | (Unfavorable)
|                            |                                                                  | 2004                              |       | 2003          |       | Variance
|                            |                                                                  |                                   |       |               |       |         
|Operating revenues          |                                                                  | $                                 | 1,720 |               |       | $        | 1,737 |      |       | $ | (17 | )   
|Operating expenses          |                                                                  |                                   |       |               |       |          |       |      |       |   |     |     
|                            | Purchased power                                                  |                                   |       | 907           |       |          |       | 891  |       |   |     | (16  | )  
|                            | Operating and maintenance                                        |                                   |       | 231           |       |          |       | 299  |       |   |     | 68   |    
|                            | Depreciation and amortization                                    |                                   |       | 104           |       |          |       | 97   |       |   |     | (7   | )  
|                            | Taxes other than income                                          |                                   |       | 68            |       |          |       | 87   |       |   |     | 19   |    
|                            |                                                                  |                                   |       |               |       |          |       |      |       |   |     |     
|                            |                                                                  | Total operating expense           |       |               | 1,310 |          |       |      | 1,374 |   |     |      | 64  |  
|                            |                                                                  |                                   |       |               |       |          |       |      |       |   |     |     
|Operating income            |                                                                  |                                   | 410   |               |       |          | 363   |      |       |   | 47  |     
|                            |                                                                  |                                   |       |               |       |          |       |      |       |   |     |     
|Other income and deductions |                                                                  |                                   |       |               |       |          |       |      |       |   |     |     
|                            | Interest expense                                                 |                                   |       | (86           | )     |          |       | (107 | )     |   |     | 21   |    
|                            | Distributions on mandatorily redeemable preferred
    securities |                                   |       |              |       |          |       | (6   | )     |   |     | 6    |    
|                            | Equity in losses of unconsolidated affiliates                    |                                   |       | (4            | )     |          |       |     |       |   |     | (4   | )  
|                            | Net loss on extinguishment of long-term debt                     |                                   |       | (106          | )     |          |       |     |       |   |     | (106 | )  
|                            | Other, net                                                       |                                   |       | 5             |       |          |       | 15   |       |   |     | (10  | )  
|                            |                                                                  |                                   |       |               |       |          |       |      |       |   |     |     
|                            |                                                                  | Total other income and deductions |       |               | (191  | )        |       |      | (98   | ) |     |      | (93 | )
|                            |                                                                  |                                   |       |               |       |          |       |      |       |   |     |     
|Income before income taxes  |                                                                  |                                   | 219   |               |       |          | 265   |      |       |   | (46 | )   
|Income taxes                |                                                                  |                                   | 95    |               |       |          | 102   |      |       |   | 7   |     
|                            |                                                                  |                                   |       |               |       |          |       |      |       |   |     |     
|Net income                  |                                                                  | $                                 | 124   |               |       | $        | 163   |      |       | $ | (39 | )   
|                            |                                                                  |                                   |       |               |       |          |       |      |       |   |     |     

119



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##### 





| |                   
| | ------------------
| | Operating Revenues

ComEds electric sales statistics were as
follows:

|                                        |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |      |   
|--------------------------------------- | --------------------------- | ------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ---- | ------ | - |  | ----- | ---- | --
|                                        |                             |               |        |        |  |         
|                                        |                             | Three Months  |        |        |  |         
|                                        |                             | Ended         |        |        |  |         
|                                        |                             | September 30, |        |        |  |         
|                                        |                             |               |        |        |  |         
|Retail Deliveries  (in GWhs)           |                             | 2004          |        | 2003   |  | Variance |        | % Change
|                                        |                             |               |        |        |  |          |        |         
|Full service(a)                         |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |     
|Residential                             |                             |               | 7,434  |        |  |          | 8,197  |          |  |  | (763 | )      |   |  | (9.3  | )%  
|Small commercial & industrial           |                             |               | 5,309  |        |  |          | 5,749  |          |  |  | (440 | )      |   |  | (7.7  | )%  
|Large commercial & industrial           |                             |               | 1,498  |        |  |          | 1,539  |          |  |  | (41  | )      |   |  | (2.7  | )%  
|Public authorities & electric railroads |                             |               | 1,213  |        |  |          | 1,269  |          |  |  | (56  | )      |   |  | (4.4  | )%  
|                                        |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |     
|                                        | Total full service          |               |        | 15,454 |  |          |        | 16,754   |  |  |      | (1,300 | ) |  |       | (7.8 | )%
|                                        |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |     
|PPO                                     |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |     
|Small commercial & industrial           |                             |               | 1,053  |        |  |          | 884    |          |  |  | 169  |        |   |  | 19.1  | %   
|Large commercial & industrial           |                             |               | 1,160  |        |  |          | 896    |          |  |  | 264  |        |   |  | 29.5  | %   
|Public authorities & electric railroads |                             |               | 562    |        |  |          | 428    |          |  |  | 134  |        |   |  | 31.3  | %   
|                                        |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |     
|                                        |                             |               | 2,775  |        |  |          | 2,208  |          |  |  | 567  |        |   |  | 25.7  | %   
|                                        |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |     
|Delivery only(b)                        |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |     
|Small commercial & industrial           |                             |               | 1,874  |        |  |          | 1,721  |          |  |  | 153  |        |   |  | 8.9   | %   
|Large commercial & industrial           |                             |               | 3,086  |        |  |          | 2,934  |          |  |  | 152  |        |   |  | 5.2   | %   
|Public authorities & electric railroads |                             |               | 371    |        |  |          | 426    |          |  |  | (55  | )      |   |  | (12.9 | )%  
|                                        |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |     
|                                        |                             |               | 5,331  |        |  |          | 5,081  |          |  |  | 250  |        |   |  | 4.9   | %   
|                                        |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |     
|                                        | Total PPO and delivery only |               |        | 8,106  |  |          |        | 7,289    |  |  |      | 817    |   |  |       | 11.2 | % 
|                                        |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |     
|Total retail deliveries                 |                             |               | 23,560 |        |  |          | 24,043 |          |  |  | (483 | )      |   |  | (2.0  | )%  
|                                        |                             |               |        |        |  |          |        |          |  |  |      |        |   |  |       |     



---



|    |  |                                                                                                
|--- |  | -----------------------------------------------------------------------------------------------
|(a) |  | Full service reflects deliveries to customers
    taking electric service under tariffed rates.
|   
|(b) |  | Delivery only service reflects customers
    receiving electric generation service from an AES.

120



---



##### 



|                                        |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |      |   
|--------------------------------------- | ------------------ | ------------- | ----- | ----- |  | -------- | ----- | -------- |  | - | --- | --- | - |  | ---- | ---- | --
|                                        |                    |               |       |       |  |         
|                                        |                    | Three Months  |       |       |  |         
|                                        |                    | Ended         |       |       |  |         
|                                        |                    | September 30, |       |       |  |         
|                                        |                    |               |       |       |  |         
|Electric Revenue                        |                    | 2004          |       | 2003  |  | Variance |       | % Change
|                                        |                    |               |       |       |  |          |       |         
|Full service(a)                         |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     
|Residential                             |                    | $             | 699   |       |  | $        | 760   |          |  | $ | (61 | )   |   |  | (8.0 | )%  
|Small commercial & industrial           |                    |               | 463   |       |  |          | 487   |          |  |   | (24 | )   |   |  | (4.9 | )%  
|Large commercial & industrial           |                    |               | 76    |       |  |          | 82    |          |  |   | (6  | )   |   |  | (7.3 | )%  
|Public authorities & electric railroads |                    |               | 77    |       |  |          | 82    |          |  |   | (5  | )   |   |  | (6.1 | )%  
|                                        |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     
|                                        | Total full service |               |       | 1,315 |  |          |       | 1,411    |  |   |     | (96 | ) |  |      | (6.8 | )%
|                                        |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     
|PPO(b)                                  |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     
|Small commercial & industrial           |                    |               | 76    |       |  |          | 65    |          |  |   | 11  |     |   |  | 16.9 | %   
|Large commercial & industrial           |                    |               | 71    |       |  |          | 56    |          |  |   | 15  |     |   |  | 26.8 | %   
|Public authorities & electric railroads |                    |               | 33    |       |  |          | 26    |          |  |   | 7   |     |   |  | 26.9 | %   
|                                        |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     
|                                        |                    |               | 180   |       |  |          | 147   |          |  |   | 33  |     |   |  | 22.4 | %   
|                                        |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     
|Delivery only(c)                        |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     
|Small commercial & industrial           |                    |               | 35    |       |  |          | 34    |          |  |   | 1   |     |   |  | 2.9  | %   
|Large commercial & industrial           |                    |               | 41    |       |  |          | 41    |          |  |   |    |     |   |  |     |     
|Public authorities & electric railroads |                    |               | 8     |       |  |          | 8     |          |  |   |    |     |   |  |     |     
|                                        |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     
|                                        |                    |               | 84    |       |  |          | 83    |          |  |   | 1   |     |   |  | 1.2  | %   
|                                        |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     
|Total PPO and delivery only             |                    |               | 264   |       |  |          | 230   |          |  |   | 34  |     |   |  | 14.8 | %   
|                                        |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     
|Total electric retail revenues          |                    |               | 1,579 |       |  |          | 1,641 |          |  |   | (62 | )   |   |  | (3.8 | )%  
|Wholesale and miscellaneous revenue(d)  |                    |               | 141   |       |  |          | 96    |          |  |   | 45  |     |   |  | 46.9 | %   
|                                        |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     
|Total electric revenue                  |                    | $             | 1,720 |       |  | $        | 1,737 |          |  | $ | (17 | )   |   |  | (1.0 | )%  
|                                        |                    |               |       |       |  |          |       |          |  |   |     |     |   |  |      |     



---



|    |  |                                                                                                                                                                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Full service 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.                                                       
|   
|(b) |  | Revenue from customers choosing the ComEd PPO
    includes an energy charge at market rates, transmission and
    distribution charges and a CTC charge.                                                                                                                             
|   
|(c) |  | Delivery only revenue from customers choosing an
    AES includes a distribution charge and a CTC charge. Prior to
    ComEds full integration into PJM on May 1, 2004,
    ComEds transmission charges received from AES were
    included in wholesale and miscellaneous revenue.
|   
|(d) |  | Wholesale and miscellaneous revenues include
    transmission revenue (including revenue from PJM), sales to
    municipalities and other wholesale energy sales.                                                                                                                    

121



---



##### 



The changes in electric retail revenues for the
three months ended September 30, 2004, as compared to the
same period in 2003, are attributable to the following:

|                 |                                           |            |      |     |  
|---------------- | ----------------------------------------- | ---------- | ---- | --- | -
|                 |                                           | Increase  
|                 |                                           | (Decrease)
|                 |                                           |           
|Weather          |                                           | $          | (118 | )  
|Customer choice  |                                           |            | (6   | )  
|Volume           |                                           |            | 52   |    
|Rate changes     |                                           |            | 11   |    
|Other            |                                           |            | (1   | )  
|                 |                                           |            |      |    
|                 | Electric retail revenue                   |            |      | (62 | )
|                 |                                           |            |      |    
|PJM Transmission |                                           |            | 63   |    
|Other            |                                           |            | (18  | )  
|                 |                                           |            |      |    
|                 | Wholesale and miscellaneous revenue       |            |      | 45  |  
|                 |                                           |            |      |    
|                 | Total decrease in electric retail revenue |            | $    | (17 | )
|                 |                                           |            |      |    

Weather.The demand
for electricity is affected by weather conditions. Very warm
weather in summer months and very cold weather in other months
are referred to as favorable weather conditions
because these weather conditions result in increased sales of
electricity. Conversely, mild weather reduces demand. The
weather conditions for the three months ended September 30,
2004 were unfavorable compared to the same period in 2003.
Cooling degree-days decreased 27% for the three months ended
September 30, 2004 compared to the same period in 2003, and
were 30% lower than normal. Heating degree-days decreased 24%
for the three months ended September 30, 2004 compared to
the same period in 2003, and were 30% lower than normal.

Customer Choice.All
ComEd customers have the choice to purchase energy from an AES.
This choice generally does not affect the volume of deliveries,
but affects revenue collected from customers related to energy
supplied by ComEd. As of September 30, 2004, no AES has
approval from the ICC, and no electric utilities have chosen to
enter the ComEd residential market for the supply of electricity.

For the three months ended September 30,
2004, the energy provided by AESs was 5,331 GWhs, or 23%, as
compared to 5,081 GWhs, or 21%, for the same period in 2003.

The decrease in revenues reflects customers in
Illinois electing to purchase energy from an AES or the PPO. As
of September 30, 2004, the number of retail customers that
had elected to purchase energy from an AES or the ComEd PPO was
approximately 21,600 as compared to 20,000 as of the same period
in 2003, representing less than 1% of total customers in each
period. However, MWhs delivered to such customers increased from
approximately 7.3 million for the three months ended
September 30, 2003 to 8.1 million for three months
ended September 30, 2004, or from 30% to 34% of total
quarterly retail deliveries.

Volume.Revenues
from higher delivery volume, exclusive of weather, increased
$52 million due to an increased number of customers and
increased usage per customer, primarily residential and large
and small commercial and industrial.

Rate Changes.ComEds CTC is reset in the second quarter of each year to
reflect market price adjustments. ComEds CTC revenues
decreased $11 million for the three months ended
September 30, 2004 as compared to the same period in 2003.
This decrease was offset by increased wholesale market prices
which increased energy revenue received under the ComEd PPO and
by increased average rates paid by small and large commercial
and industrial customers totaling $11 million.

Increased average rates paid by residential
customers resulted in a $10 million increase. Although
residential rates are frozen through 2006, average residential
rates fluctuate due to the usage patterns of customers.

122



---



##### 



PJM Transmission.ComEds transmission revenues and purchased power expense
each increased by $63 million in the three months ended
September 30, 2004 relative to 2003 due to ComEds
May 1, 2004 entry into PJM. The increase relates to the
change in control of the transmission assets from ComEd to PJM
whereby ComEd receives revenues for its proportionate share of
the transmission revenues generated by PJM, but also pays PJM
for the use of its transmission assets. For 2004, ComEds
operating revenues are estimated to increase by approximately
$180 million, offset by a corresponding and equal increase
in purchased power expense. Starting in 2005, on an annual
basis, ComEds operating revenues and purchased power
expense are estimated to increase between $200 to
$250 million; however, there is no expected impact on
revenues net of purchased power expense.



| |                
| | ---------------
| | Purchased Power

The increase in purchased power expense was
primarily attributable to an increase of $28 million due to
higher volume offset by a $58 million decrease due to
unfavorable weather conditions, a $6 million decrease due
to the mix of average pricing related to ComEds PPA with
Generation, and a $2 million decrease as a result of
non-residential customers choosing to purchase energy from an
AES. ComEds operating revenues and purchased power expense
each increased by $63 million in the three months ended
September 30, 2004 relative to 2003 due to ComEds
May 1, 2004 entry into PJM. See Operating
Revenues above.



| |                          
| | -------------------------
| | Operating and Maintenance

The changes in operating and maintenance expense
for the three months ended September 30, 2004 compared to
the same period in 2003 consisted of the following:

|                                                                                       |  |            |     |  
|-------------------------------------------------------------------------------------- |  | ---------- | --- | -
|                                                                                       |  | Increase  
|                                                                                       |  | (Decrease)
|                                                                                       |  |           
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  | $          | (48 | )
|FERC annual fees(a)                                                                    |  |            | (11 | )
|Decreased payroll expense due to fewer
    employees(b)                                |  |            | (9  | )
|Decreased incremental storm costs                                                      |  |            | (8  | )
|Higher corporate allocations(c)                                                        |  |            | 11  |  
|Contractors                                                                            |  |            | 10  |  
|Other                                                                                  |  |            | (13 | )
|                                                                                       |  |            |     |  
|Decrease in operating and maintenance expense                                          |  | $          | (68 | )
|                                                                                       |  |            |     |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | After joining PJM on May 1, 2004, ComEd is
    no longer charged annual fees by the FERC. PJM pays the annual
    FERC fees. This represents the reversal of annual FERC fees.                                                                                                                                                                                                                                            
|   
|(b) |  | ComEd has fewer employees as a result of The
    Exelon Way terminations.                                                                                                                                                                                                                                                                                                                                                 
|   
|(c) |  | Higher corporate allocations primarily result
    from higher corporate governance allocations and employee fringe
    benefits. Corporate governance allocations increased as a result
    of the 2004 sale of certain Enterprises companies resulting in
    ComEd comprising a greater percentage of Exelon and an
    SEC-mandated change to the methodology used to allocate
    Exelons corporate governance costs.



| |                              
| | -----------------------------
| | Depreciation and Amortization

|                                          |  |               |     |          |  |            |    |  |  |   |   | 
|----------------------------------------- |  | ------------- | --- | -------- |  | ---------- | -- |  |  | - | - | 
|                                          |  |               |     |         
|                                          |  | Three Months  |     |         
|                                          |  | Ended         |     |         
|                                          |  | September 30, |     |         
|                                          |  |               |     | Increase
|                                          |  | 2004          |     | 2003     |  | (Decrease)
|                                          |  |               |     |          |  |           
|Depreciation expense                      |  | $             | 83  |          |  | $          | 77 |  |  | $ | 6 | 
|Recoverable transition costs amortization |  |               | 12  |          |  |            | 12 |  |  |   |  | 
|Other amortization expense                |  |               | 9   |          |  |            | 8  |  |  |   | 1 | 
|                                          |  |               |     |          |  |            |    |  |  |   |   | 
|Total depreciation and amortization       |  | $             | 104 |          |  | $          | 97 |  |  | $ | 7 | 
|                                          |  |               |     |          |  |            |    |  |  |   |   | 

123



---



##### 



The increase in depreciation expense is primarily
due to capital additions.

Recoverable transition costs amortization
remained constant in the three months ended September 30,
2004 compared to the same period in 2003. ComEd expects to fully
recover its remaining recoverable transition costs regulatory
asset balance of $97 million by 2006. 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 for three
months ended September 30, 2004 as compared to the same
period in 2003 as a result of $8 million in 2003 for
additional use tax payments and a 2004 refund of $8 million
for Illinois Electricity Distribution Taxes.



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Interest Expense and Distributions on
    Mandatorily Redeemable Preferred Securities

The aggregate of interest expense and
distributions on mandatorily redeemable preferred securities
decreased as a result of scheduled principal payments, debt
retirements and prepayments, and refinancings at lower rates.
Effective December 31, 2003, upon the adoption of FIN
No. 46-R, ComEd deconsolidated its financing trusts (see
Note 2 of the Combined Notes to Consolidated Financial
Statements). ComEd no longer records distributions on
mandatorily redeemable preferred securities but records interest
expense to affiliates related to ComEds obligations to the
financing trusts.



| |                                                             
| | ------------------------------------------------------------
| | Equity in Earnings (Losses) of
    Unconsolidated Affiliates

During the three months ended September 30,
2004, ComEd has $4 million of equity in net losses of
subsidiaries as a result of deconsolidating its financing trusts.



| |                                                 
| | ------------------------------------------------
| | Net Loss on Extinguishment of Long-Term
    Debt

In 2004, Exelon initiated an accelerated
liability management plan at ComEd that resulted in the
retirement of approximately $768 million of long-term debt,
of which $618 million was retired during the third quarter
of 2004. During the three months ended September 30, 2004,
ComEd recorded a charge of $106 million associated with the
retirement of debt under the plan. The components of this charge
included the following: $63 million related to prepayment
premiums; $11 million related to net unamortized premiums,
discounts and debt issuance costs; $23 million of losses on
reacquired debt previously deferred as regulatory assets; and
$9 million related to settled cash-flow interest-rate swaps
previously deferred as regulatory assets.



| |           
| | ----------
| | Other, Net

The change in Other, net is primarily related to
a $3 million gain on sale of investments in 2003 and
$1 million decrease in interest income on the long-term
receivable from Unicom Investments, Inc. as a result of a lower
principal balance.



| |             
| | ------------
| | Income Taxes

The effective income tax rate was 43% for the
three months ended September 30, 2004, compared to 39% for
the three months ended September 30, 2003. The increase in
the effective income tax rate was primarily attributable to
adjustments to prior period income taxes in connection with the
completion of the 2003 tax return. See Note 12 of the
Combined Notes to the Consolidated Financial Statements for
further discussion of the change in the effective income tax
rate.

124



---



##### 





| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Nine Months Ended September 30, 2004
    Compared to Nine Months Ended September 30, 2003

|                                                                                         |                                                                  |                                   |       |               |       |          |       |       |       |   |     |      |     |  
|---------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | --------------------------------- | ----- | ------------- | ----- | -------- | ----- | ----- | ----- | - | --- | ---- | --- | -
|                                                                                         |                                                                  |                                   |       |              
|                                                                                         |                                                                  | Nine Months                       |       |              
|                                                                                         |                                                                  | Ended                             |       |              
|                                                                                         |                                                                  | September 30,                     |       | Favorable    
|                                                                                         |                                                                  |                                   |       | (Unfavorable)
|                                                                                         |                                                                  | 2004                              |       | 2003          |       | Variance
|                                                                                         |                                                                  |                                   |       |               |       |         
|Operating revenues                                                                       |                                                                  | $                                 | 4,458 |               |       | $        | 4,522 |       |       | $ | (64 | )   
|Operating expenses                                                                       |                                                                  |                                   |       |               |       |          |       |       |       |   |     |     
|                                                                                         | Purchased power                                                  |                                   |       | 2,014         |       |          |       | 2,001 |       |   |     | (13  | )  
|                                                                                         | Operating and maintenance                                        |                                   |       | 669           |       |          |       | 781   |       |   |     | 112  |    
|                                                                                         | Depreciation and amortization                                    |                                   |       | 309           |       |          |       | 287   |       |   |     | (22  | )  
|                                                                                         | Taxes other than income                                          |                                   |       | 219           |       |          |       | 235   |       |   |     | 16   |    
|                                                                                         |                                                                  |                                   |       |               |       |          |       |       |       |   |     |     
|                                                                                         |                                                                  | Total operating expense           |       |               | 3,211 |          |       |       | 3,304 |   |     |      | 93  |  
|                                                                                         |                                                                  |                                   |       |               |       |          |       |       |       |   |     |     
|Operating income                                                                         |                                                                  |                                   | 1,247 |               |       |          | 1,218 |       |       |   | 29  |     
|                                                                                         |                                                                  |                                   |       |               |       |          |       |       |       |   |     |     
|Other income and deductions                                                              |                                                                  |                                   |       |               |       |          |       |       |       |   |     |     
|                                                                                         | Interest expense                                                 |                                   |       | (288          | )     |          |       | (322  | )     |   |     | 34   |    
|                                                                                         | Distributions on mandatorily redeemable preferred
    securities |                                   |       |              |       |          |       | (20   | )     |   |     | 20   |    
|                                                                                         | Equity in losses of unconsolidated affiliates                    |                                   |       | (13           | )     |          |       |      |       |   |     | (13  | )  
|                                                                                         | Net loss on extinguishment of long-term debt                     |                                   |       | (106          | )     |          |       |      |       |   |     | (106 | )  
|                                                                                         | Other, net                                                       |                                   |       | 22            |       |          |       | 48    |       |   |     | (26  | )  
|                                                                                         |                                                                  |                                   |       |               |       |          |       |       |       |   |     |     
|                                                                                         |                                                                  | Total other income and deductions |       |               | (385  | )        |       |       | (294  | ) |     |      | (91 | )
|                                                                                         |                                                                  |                                   |       |               |       |          |       |       |       |   |     |     
|Income before income taxes and cumulative
    effect of a change in accounting principle |                                                                  |                                   | 862   |               |       |          | 924   |       |       |   | (62 | )   
|Income taxes                                                                             |                                                                  |                                   | 351   |               |       |          | 365   |       |       |   | 14  |     
|                                                                                         |                                                                  |                                   |       |               |       |          |       |       |       |   |     |     
|Net income before cumulative effect of a
    change in accounting principle              |                                                                  |                                   | 511   |               |       |          | 559   |       |       |   | (48 | )   
|Cumulative effect of a change in accounting
    principle                                |                                                                  |                                   |      |               |       |          | 5     |       |       |   | (5  | )   
|                                                                                         |                                                                  |                                   |       |               |       |          |       |       |       |   |     |     
|Net income                                                                               |                                                                  | $                                 | 511   |               |       | $        | 564   |       |       | $ | (53 | )   
|                                                                                         |                                                                  |                                   |       |               |       |          |       |       |       |   |     |     

125



---



##### 





| |                   
| | ------------------
| | Operating Revenues

ComEds electric sales statistics were as
follows:

|                                        |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |      |   
|--------------------------------------- | --------------------------- | ------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ------ | ------ | - |  | ----- | ---- | --
|                                        |                             |               |        |        |  |         
|                                        |                             | Nine Months   |        |        |  |         
|                                        |                             | Ended         |        |        |  |         
|                                        |                             | September 30, |        |        |  |         
|                                        |                             |               |        |        |  |         
|Retail Deliveries  (in GWhs)           |                             | 2004          |        | 2003   |  | Variance |        | % Change
|                                        |                             |               |        |        |  |          |        |         
|Full service(a)                         |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Residential                             |                             |               | 20,240 |        |  |          | 20,246 |          |  |  | (6     | )      |   |  |      |     
|Small commercial & industrial           |                             |               | 15,233 |        |  |          | 16,490 |          |  |  | (1,257 | )      |   |  | (7.6  | )%  
|Large commercial & industrial           |                             |               | 4,269  |        |  |          | 4,706  |          |  |  | (437   | )      |   |  | (9.3  | )%  
|Public authorities & electric railroads |                             |               | 3,653  |        |  |          | 4,018  |          |  |  | (365   | )      |   |  | (9.1  | )%  
|                                        |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                        | Total full service          |               |        | 43,395 |  |          |        | 45,460   |  |  |        | (2,065 | ) |  |       | (4.5 | )%
|                                        |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|PPO                                     |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Small commercial & industrial           |                             |               | 2,653  |        |  |          | 2,546  |          |  |  | 107    |        |   |  | 4.2   | %   
|Large commercial & industrial           |                             |               | 2,784  |        |  |          | 3,646  |          |  |  | (862   | )      |   |  | (23.6 | )%  
|Public authorities & electric railroads |                             |               | 1,574  |        |  |          | 1,497  |          |  |  | 77     |        |   |  | 5.1   | %   
|                                        |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                        |                             |               | 7,011  |        |  |          | 7,689  |          |  |  | (678   | )      |   |  | (8.8  | )%  
|                                        |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Delivery only(b)                        |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Small commercial & industrial           |                             |               | 5,406  |        |  |          | 4,327  |          |  |  | 1,079  |        |   |  | 24.9  | %   
|Large commercial & industrial           |                             |               | 9,117  |        |  |          | 6,894  |          |  |  | 2,223  |        |   |  | 32.2  | %   
|Public authorities & electric railroads |                             |               | 1,264  |        |  |          | 954    |          |  |  | 310    |        |   |  | 32.5  | %   
|                                        |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                        |                             |               | 15,787 |        |  |          | 12,175 |          |  |  | 3,612  |        |   |  | 29.7  | %   
|                                        |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|                                        | Total PPO and delivery only |               |        | 22,798 |  |          |        | 19,864   |  |  |        | 2,934  |   |  |       | 14.8 | % 
|                                        |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     
|Total retail deliveries                 |                             |               | 66,193 |        |  |          | 65,324 |          |  |  | 869    |        |   |  | 1.3   | %   
|                                        |                             |               |        |        |  |          |        |          |  |  |        |        |   |  |       |     



---



|    |  |                                                                                                
|--- |  | -----------------------------------------------------------------------------------------------
|(a) |  | Full service reflects deliveries to customers
    taking electric service under tariffed rates.
|   
|(b) |  | Delivery only service reflects customers
    receiving electric generation service from an AES.

126



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##### 



|                                        |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |      |   
|--------------------------------------- | ------------------ | ------------- | ----- | ----- |  | -------- | ----- | -------- |  | - | ---- | ---- | - |  | ----- | ---- | --
|                                        |                    |               |       |       |  |         
|                                        |                    | Nine Months   |       |       |  |         
|                                        |                    | Ended         |       |       |  |         
|                                        |                    | September 30, |       |       |  |         
|                                        |                    |               |       |       |  |         
|Electric Revenue                        |                    | 2004          |       | 2003  |  | Variance |       | % Change
|                                        |                    |               |       |       |  |          |       |         
|Full service(a)                         |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Residential                             |                    | $             | 1,780 |       |  | $        | 1,778 |          |  | $ | 2    |      |   |  | 0.1   | %   
|Small commercial & industrial           |                    |               | 1,232 |       |  |          | 1,289 |          |  |   | (57  | )    |   |  | (4.4  | )%  
|Large commercial & industrial           |                    |               | 207   |       |  |          | 240   |          |  |   | (33  | )    |   |  | (13.8 | )%  
|Public authorities & electric railroads |                    |               | 224   |       |  |          | 247   |          |  |   | (23  | )    |   |  | (9.3  | )%  
|                                        |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        | Total full service |               |       | 3,443 |  |          |       | 3,554    |  |   |      | (111 | ) |  |       | (3.1 | )%
|                                        |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|PPO(b)                                  |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Small commercial & industrial           |                    |               | 184   |       |  |          | 174   |          |  |   | 10   |      |   |  | 5.7   | %   
|Large commercial & industrial           |                    |               | 163   |       |  |          | 199   |          |  |   | (36  | )    |   |  | (18.1 | )%  
|Public authorities & electric railroads |                    |               | 87    |       |  |          | 81    |          |  |   | 6    |      |   |  | 7.4   | %   
|                                        |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        |                    |               | 434   |       |  |          | 454   |          |  |   | (20  | )    |   |  | (4.4  | )%  
|                                        |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Delivery only(c)                        |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Small commercial & industrial           |                    |               | 102   |       |  |          | 106   |          |  |   | (4   | )    |   |  | (3.8  | )%  
|Large commercial & industrial           |                    |               | 125   |       |  |          | 133   |          |  |   | (8   | )    |   |  | (6.0  | )%  
|Public authorities & electric railroads |                    |               | 25    |       |  |          | 25    |          |  |   |     |      |   |  |      |     
|                                        |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|                                        |                    |               | 252   |       |  |          | 264   |          |  |   | (12  | )    |   |  | (4.5  | )%  
|                                        |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Total PPO and delivery only             |                    |               | 686   |       |  |          | 718   |          |  |   | (32  | )    |   |  | (4.5  | )%  
|                                        |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Total electric retail revenues          |                    |               | 4,129 |       |  |          | 4,272 |          |  |   | (143 | )    |   |  | (3.3  | )%  
|Wholesale and miscellaneous revenue(d)  |                    |               | 329   |       |  |          | 250   |          |  |   | 79   |      |   |  | 31.6  | %   
|                                        |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     
|Total electric revenue                  |                    | $             | 4,458 |       |  | $        | 4,522 |          |  | $ | (64  | )    |   |  | (1.4  | )%  
|                                        |                    |               |       |       |  |          |       |          |  |   |      |      |   |  |       |     



---



|    |  |                                                                                                                                                                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Full service 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.                                                       
|   
|(b) |  | Revenue from customers choosing the ComEd PPO
    includes an energy charge at market rates, transmission and
    distribution charges and a CTC charge.                                                                                                                             
|   
|(c) |  | Delivery only revenue from customers choosing an
    AES includes a distribution charge and a CTC charge. Prior to
    ComEds full integration into PJM on May 1, 2004,
    ComEds transmission charges received from AES were
    included in wholesale and miscellaneous revenue.
|   
|(d) |  | Wholesale and miscellaneous revenues include
    transmission revenue (including revenue from PJM), sales to
    municipalities and other wholesale energy sales.                                                                                                                    

127



---



##### 



The changes in electric retail revenues for the
nine months ended September 30, 2004, as compared to the
same period in 2003, are attributable to the following:

|                 |                                           |            |      |      |  
|---------------- | ----------------------------------------- | ---------- | ---- | ---- | -
|                 |                                           | Increase  
|                 |                                           | (Decrease)
|                 |                                           |           
|Customer choice  |                                           | $          | (113 | )   
|Weather          |                                           |            | (112 | )   
|Rate changes     |                                           |            | (62  | )   
|Volume           |                                           |            | 144  |     
|                 |                                           |            |      |     
|                 | Electric retail revenue                   |            | $    | (143 | )
|                 |                                           |            |      |     
|PJM Transmission |                                           |            | 106  |     
|Other            |                                           |            | (27  | )   
|                 |                                           |            |      |     
|                 | Wholesale and miscellaneous revenue       |            |      | 79   |  
|                 |                                           |            |      |     
|                 | Total decrease in electric retail revenue |            | $    | (64  | )
|                 |                                           |            |      |     

Customer Choice.As
noted, all ComEd customers have the choice to purchase energy
from an AES. This choice generally does not affect the volume of
deliveries, but affects revenue collected from customers related
to energy supplied by ComEd.

For the nine months ended September 30,
2004, the energy provided by AESs was 15,787 GWhs, or 24%, as
compared to 12,175 GWhs, or 19%, for the same period in 2003.

The decrease in revenues reflects customers in
Illinois electing to purchase energy from an AES or the PPO. As
of September 30, 2004, the number of retail customers that
had elected to purchase energy from an AES or the ComEd PPO was
approximately 21,600 as compared to 20,000 as of
September 30, 2003, representing less than 1% of total
customers in each period. However, MWhs delivered to such
customers increased from approximately 19.9 million for the
nine months ended September 30, 2003 to approximately
22.8 million for nine months ended September 30, 2004,
or from 30% to 34% of total year-to-date retail deliveries.

Weather.The weather
conditions for the nine months ended September 30, 2004
were unfavorable compared to the same period in 2003. Cooling
degree-days decreased 12% for the nine months ended
September 30, 2004 compared to the same period in 2003 and
were 26% lower than normal. Heating degree-days decreased 8% for
the nine months ended September 30, 2004 compared to the
same period in 2003, and were 5% lower than normal.

Rate Changes.Starting in the June 2003 billing cycle, the increased wholesale
market price of electricity and other adjustments to the energy
component, decreases the collection of CTCs as compared to the
respective prior year period. ComEds CTC revenues
decreased by $131 million for the nine months ended
September 30, 2004 as compared to the same period in 2003.
This decrease was partially offset by increased wholesale market
prices which increased energy revenue received under the ComEd
PPO and by increased average rates paid by small and large
commercial and industrial customers totaling $58 million.
For the nine months ended September 30, 2004 and
September 30, 2003, ComEd collected approximately
$131 million and $262 million, respectively, of CTC
revenue. As a result of increasing mitigation factors, changes
in energy prices and the ability of certain customers to
establish fixed, multi-year CTC rates beginning in 2003, and
increases in ComEds OATT effective May 1, 2004, ComEd
anticipates that this revenue source will decline to
approximately $180 million for 2004 and range from
$100 million to $180 million annually in 2005 and
2006. Under the current restructuring statute, no CTCs will be
collected after 2006.

Volume.ComEds
electric revenues increased as a result of higher delivery
volume, exclusive of the effect of weather and customer choice,
due to an increased number of customers and increased usage per
customer, primarily residential and large and small commercial
and industrial.

128



---



##### 



PJM Transmission.ComEds transmission revenues and purchased power expense
each increased by $106 million in the nine months ended
September 30, 2004 relative to 2003 due to ComEds
May 1, 2004 entry into PJM.



| |                
| | ---------------
| | Purchased Power

The increase in purchased power expense was
primarily attributable to an increase of $78 million due to
higher volume offset by a $94 million decrease as a result
of customers choosing to purchase energy from an AES, a
$56 million decrease due to unfavorable weather conditions,
and a $14 million decrease due to the mix of average
pricing related to ComEds PPA with Generation.
ComEds transmission revenues and purchased power expense
each increased by $106 million in the nine months ended
September 30, 2004 relative to 2003 due to ComEds
May 1, 2004 entry into PJM. See Operating
Revenues above.



| |                          
| | -------------------------
| | Operating and Maintenance

The changes in operating and maintenance expense
for the nine months ended September 30, 2004 compared to
the same period in 2003 consisted of the following:

|                                                                                       |  |            |      |  
|-------------------------------------------------------------------------------------- |  | ---------- | ---- | -
|                                                                                       |  | Increase  
|                                                                                       |  | (Decrease)
|                                                                                       |  |           
|Charge recorded at ComEd in 2003(a)                                                    |  | $          | (41  | )
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  |            | (39  | )
|Decreased payroll expense due to fewer
    employees(b)                                |  |            | (19  | )
|FERC annual fees(c)                                                                    |  |            | (10  | )
|Incremental storm costs                                                                |  |            | (8   | )
|Environmental charges                                                                  |  |            | (6   | )
|Allowance for uncollectible accounts expense                                           |  |            | (6   | )
|Contractors                                                                            |  |            | (4   | )
|Injuries and damages claim charges                                                     |  |            | (4   | )
|Employee fringe benefits(d)                                                            |  |            | (1   | )
|Higher corporate allocations(e)                                                        |  |            | 34   |  
|Tax consultant fees(f)                                                                 |  |            | 5    |  
|Other                                                                                  |  |            | (13  | )
|                                                                                       |  |            |      |  
|Decrease in operating and maintenance expense                                          |  | $          | (112 | )
|                                                                                       |  |            |      |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In 2003, ComEd reached an agreement with various
    Illinois retail market participants and other interested parties.                                                                                                                                                                                                                                                                                                    
|   
|(b) |  | ComEd has fewer employees as a result of The
    Exelon Way terminations.                                                                                                                                                                                                                                                                                                                                                 
|   
|(c) |  | After joining PJM on May 1, 2004, ComEd is
    no longer charged annual fees by the FERC. PJM pays the annual
    FERC fees. This represents the reversal of annual FERC fees.                                                                                                                                                                                                                                            
|   
|(d) |  | During the second quarter of 2004, ComEd adopted
    the provisions of FSP FAS 106-2. Employee fringe benefits
    include a $5 million reduction in net periodic
    postretirement benefit cost due to the adoption of FSP
    FAS 106-2.                                                                                                                                                                               
|   
|(e) |  | Higher corporate allocations primarily result
    from higher corporate governance allocations and employee fringe
    benefits. Corporate governance allocations increased as a result
    of the 2004 sale of certain Enterprises companies resulting in
    ComEd comprising a greater percentage of Exelon and an
    SEC-mandated change to the methodology used to allocate
    Exelons corporate governance costs.
|   
|(f) |  | ComEd recorded a $5 million charge for
    contingent fees paid to a tax consultant (see Note 15 to
    the Combined Notes to Consolidated Financial Statements for more
    information).                                                                                                                                                                                                                                

129



---



##### 





| |                              
| | -----------------------------
| | Depreciation and Amortization

|                                          |  |               |     |          |  |            |     |  |  |   |    | 
|----------------------------------------- |  | ------------- | --- | -------- |  | ---------- | --- |  |  | - | -- | 
|                                          |  |               |     |         
|                                          |  | Nine Months   |     |         
|                                          |  | Ended         |     |         
|                                          |  | September 30, |     |         
|                                          |  |               |     | Increase
|                                          |  | 2004          |     | 2003     |  | (Decrease)
|                                          |  |               |     |          |  |           
|Depreciation expense                      |  | $             | 245 |          |  | $          | 229 |  |  | $ | 16 | 
|Recoverable transition costs amortization |  |               | 35  |          |  |            | 34  |  |  |   | 1  | 
|Other amortization expense                |  |               | 29  |          |  |            | 24  |  |  |   | 5  | 
|                                          |  |               |     |          |  |            |     |  |  |   |    | 
|Total depreciation and amortization       |  | $             | 309 |          |  | $          | 287 |  |  | $ | 22 | 
|                                          |  |               |     |          |  |            |     |  |  |   |    | 

The increase in depreciation expense is primarily
due to capital additions.

Recoverable transition costs amortization
remained constant in the nine months ended September 30,
2004 compared to the same period in 2003. ComEd expects to fully
recover its remaining recoverable transition costs regulatory
asset balance of $97 million by 2006. 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 for nine months
ended September 30, 2004 as compared to the same period in
2003 as a result of $6 million in 2003 for additional use
tax payments, a $4 million decrease in payroll taxes as a
result of a fewer number of employees and a refund of
$8 million for Illinois Electricity Distribution taxes in
2004 partially offset by a refund of $5 million for the
Illinois Electricity Distribution taxes in 2003.



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Interest Expense and Distributions on
    Mandatorily Redeemable Preferred Securities

The aggregate of interest expense and
distributions on mandatorily redeemable preferred securities
decreased as a result of scheduled principal payments, debt
retirements and prepayments, and refinancings at lower rates.
Effective December 31, 2003, upon the adoption of FIN
No. 46-R, ComEd deconsolidated its financing trusts (see
Note 2 of the Combined Notes to Consolidated Financial
Statements). ComEd no longer records distributions on
mandatorily redeemable preferred securities, but records
interest expense to affiliates related to ComEds
obligations to the financing trusts. This decrease was offset by
$4 million of less allowance for funds used during
construction (AFUDC) debt recorded during the nine months
ended September 30, 2004 as a result of lower construction
work in process balances.



| |                                                             
| | ------------------------------------------------------------
| | Equity in Earnings (Losses) of
    Unconsolidated Affiliates

During the nine months ended September 30,
2004, ComEd has $13 million of equity in net losses of
subsidiaries as a result of deconsolidating its financing trusts.



| |                                                 
| | ------------------------------------------------
| | Net Loss on Extinguishment of Long-Term
    Debt

In 2004, Exelon initiated an accelerated
liability management plan at ComEd that resulted in the
retirement of approximately $768 million of long-term debt.
During the nine months ended September 30, 2004, ComEd
recorded a charge of $106 million associated with the
retirement of debt under the plan. The components of this charge
included the following: $63 million related to prepayment
premiums; $11 million related to net unamortized premiums,
discounts and debt issuance costs; $23 million of losses on
reacquired debt previously deferred as regulatory assets; and
$9 million related to settled cash-flow interest-rate swaps
previously deferred as regulatory assets.



| |           
| | ----------
| | Other, Net

The change in Other, net is primarily related to
the reversal of a $12 million reserve for potential plant
disallowance in 2003 as a result of the Agreement (see
Operating and Maintenance above), a reduction in

130



---



##### 



AFUDC equity of $5 million during 2004 as a
result of lower construction work in process balances and a
$4 million decrease in interest income on the long-term
receivable from Unicom Investments, Inc. as a result of a lower
principal balance.




| |             
| | ------------
| | Income Taxes

The effective income tax rate was 41% for the
nine months ended September 30, 2004, compared to 40% for
the nine months ended September 30, 2003. The increase in
the effective tax rate is primarily attributable to adjustments
to prior period income taxes in connection with the completion
of the 2003 tax return and the adoption of FSP FAS 106-2.
See Note 12 of the Combined Notes to the Consolidated
Financial Statements for further discussion of the change in the
effective income tax rate.



| |                                                          
| | ---------------------------------------------------------
| | Cumulative Effect of a Change in Accounting
    Principle

On January 1, 2003, ComEd adopted
SFAS No. 143, resulting in income of $5 million.

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,
participation in the intercompany money pool or capital
contributions from Exelon. ComEds access to external
financing at reasonable terms is dependent on its credit ratings
and general business conditions, as well as that of the utility
industry in general. If these conditions deteriorate to where
ComEd no longer has access to the capital markets at reasonable
terms, ComEd has access to a revolving credit facility that
ComEd currently utilizes to support its commercial paper
program. See the Credit Issues section of
Liquidity and Capital Resources for further
discussion. Capital resources are used primarily to fund
ComEds capital requirements, including construction,
retirement of debt, the payment of dividends and contributions
to Exelons pension plans.



| |                                         
| | ----------------------------------------
| | Cash Flows from Operating
    Activities

ComEds cash flows from operating activities
primarily results from sales of electricity to a stable and
diverse base of retail customers at fixed prices. ComEds
future cash flows will be affected by its ability to achieve
operating cost reductions and the impact of the economy, weather
and customer choice on its revenues. Cash flows from operations
have been and are expected to continue to provide a reliable,
steady source of cash flow sufficient to meet operating and
capital expenditures requirements. Operating cash flows after
2006 could be negatively affected by changes in ComEds
rate regulatory environment, although any effects are not
expected to hinder ComEds ability to fund its business
requirements.

Cash flows from operations for the nine months
ended September 30, 2004 and 2003 were $867 million
and $636 million, respectively. Changes in ComEds
cash flows from operations are generally consistent with changes
in its results of operations, as further adjusted by changes in
working capital in the normal course of business.

In addition to the items mentioned in
Results of Operations, ComEds operating cash
flows for the nine months ended September 30, 2004 and 2003
were affected by the following items:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During 2003, ComEd made additional payments to
    Generation for amounts owed under the PPA. At September 30,
    2004 and December 31, 2003, ComEd had accrued payments due
    to Generation under the PPA of $188 million and
    $171 million, respectively. At September 30, 2003 and
    December 31, 2002, ComEd had accrued payments due to
    Generation under the PPA of $162 million and
    $339 million, respectively.
|
| |  | ComEd participates in Exelons deferred
    benefit pension plans. Discretionary contributions by ComEd to
    the plans were $216 million for the nine months ended
    September 30, 2004 compared to $174 million for the
    same period in 2003. See Note 11 of the Combined Notes to
    Consolidated Financial Statements for further information
    regarding pension and postretirement benefits.                          

131



---



##### 





| |   |                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the third quarter of 2004, ComEd paid
    $63 million for call premiums on the retirement of debt.
    See Cash Flows from Financing Activities for further
    information regarding debt retirements pursuant to the
    accelerated liability management plan.

ComEd has taken certain tax positions, which have
been disclosed to the IRS, to defer the tax gain on the 1999
sale of its fossil generating assets. As of September 30,
2004, the majority of the deferred tax liabilities related to
the fossil plant sale are reflected in ComEds Consolidated
Balance Sheets with the remainder having been allocated to the
Consolidated Balance Sheets of Generation in connection with
Exelons 2001 corporate restructuring. The total 1999
income tax liability deferred as a result of these transactions
was approximately $1.1 billion. Changes in IRS
interpretations of existing primary tax authority or challenges
to ComEds positions could have the impact of accelerating
future income tax payments and increasing interest expense
related to the deferred tax gain that becomes current. Any
required payments could be significant to the cash flows of
ComEd. ComEds management believes ComEds reserve for
interest, which has been established in the event that such
positions are not sustained, has been appropriately recorded in
accordance with SFAS No. 5. However, the ultimate
outcome of such matters could result in additional unfavorable
or favorable adjustments to the results of operations, and such
adjustments could be material. Federal tax returns covering the
period of the 1999 sale are currently under IRS audit. Final
resolution of this matter is not anticipated for several years.



| |                                         
| | ----------------------------------------
| | Cash Flows from Investing
    Activities

Cash flows provided by investing activities were
$355 million for the nine months ended September 30,
2004 compared to cash flows used in investing activities of
$467 million for the same period in 2003. The change in
cash flows from investing activities was primarily attributable
to $552 million of net proceeds from an investment in and
borrowings from the Exelon intercompany money pool, an increase
of $223 million in receipts from Unicom Investments, Inc.
related to an intercompany note payable and $37 million of
net changes in restricted cash. ComEds investing
activities for the nine months ended September 30, 2004
were funded primarily through operating activities.

ComEds capital expenditures for the nine
months ended September 30, 2004 and 2003 were
$518 million and $537 million, respectively. ComEd
estimates that it will spend up to approximately
$690 million in total capital expenditures for 2004. This
represents an increase of approximately $75 million more
than had been previously planned, primarily as a result of
expansion of the ComEd distribution system to support new
business and customer growth. Although not anticipated, ComEd
believes it could obtain any needed financing through
borrowings, the issuance of debt or 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.



| |                                         
| | ----------------------------------------
| | Cash Flows from Financing
    Activities

Cash flows used in financing activities for the
nine months ended September 30, 2004 were
$1,240 million as compared to cash flows used in financing
activities of $63 million in 2003. The increase in cash
flows used in financing activities is primarily attributable to
the net retirement of long-term debt of $1,059 million in
2004, inclusive of the debt retired as part of the liability
management plan discussed below, and net proceeds of long-term
debt and preferred securities of $288 million in 2003.
During the nine months ended September 30, 2003, ComEd also
repaid $71 million of commercial paper and paid
$45 million to settle interest-rate swaps. During the nine
months ended September 30, 2004, ComEd received
$26 million from the settlement of interest-rate swaps and
$17 million from borrowings from the Exelon intercompany
money pool. Additionally, ComEd paid $320 million in
dividends to Exelon during the nine months ended
September 30, 2004 compared to $305 million in
dividends during the same period in 2003.

From time to time and as market conditions
warrant, ComEd may engage in long-term debt repurchases via
tender offers, open market acquisitions or other viable options
to preserve the integrity of ComEds balance sheet. In the
third quarter of 2004, Exelon initiated an accelerated liability
management plan at ComEd that targets the elimination of
$1.2 billion of debt from ComEds balance sheet by the
end of 2004. Through

132



---



##### 



September 30, 2004, ComEd had retired
approximately $768 million of debt under the plan and
anticipates reaching the targeted retirement levels by the end
of 2004.




| |              
| | -------------
| | Credit Issues

Exelon Credit
Facility.ComEd meets its short-term
liquidity requirements primarily through the issuance of
commercial paper and borrowings from Exelons intercompany
money pool. At December 31, 2003, ComEd, along with Exelon
Corporate, PECO and Generation, participated in a
$750 million 364-day unsecured revolving credit agreement
and a $750 million three-year unsecured revolving credit
agreement with a group of banks. On July 16, 2004, the
$750 million 364-day facility was replaced with a
$1 billion five-year facility and the $750 million
three-year facility was reduced to $500 million. These
credit agreements, and ComEds participation therein, are
described above under Credit Issues  Exelon
Credit Facility in Exelon Corporation 
Liquidity and Capital Resources.

Capital Structure.ComEds capital structure at September 30, 2004 is
described above under Credit Issues  Capital
Structure in Exelon Corporation 
Liquidity and Capital Resources.

Intercompany Money
Pool.A description of the
intercompany money pool, and ComEds participation therein,
is set forth above under Credit Issues 
Intercompany Money Pool in Exelon
Corporation  Liquidity and Capital Resources.
During the nine months ended September 30, 2004, ComEd
earned $2.4 million, net in interest on its investments and
borrowings in the intercompany money pool.

Security Ratings.See Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and
Capital Resources in the 2003 Form 10-K for a
discussion of ComEds security ratings.

Shelf Registration.As of September 30, 2004, ComEd has a current effective
shelf registration statement for the sale of $555 million
of securities. ComEds ability to sell securities off its
shelf registration statement or to access the private placement
markets will depend on a number of factors at the time of the
proposed sale, including other required regulatory approvals,
ComEds current financial condition, its securities ratings
and market conditions.

Fund Transfer
Restrictions.At September 30,
2004, ComEd had retained earnings of $1,075 million, of
which $1,078 million had been appropriated for future
dividend payments. See Liquidity and Capital
Resources  Credit Issues  Fund Transfer
Restrictions under Managements Discussion and
Analysis of Financial Condition and Results of
Operations  ComEd in the 2003 Form 10-K
for information regarding restrictions under Federal and
Illinois law and under the agreements governing ComEd
Financing II and III regarding dividend payments by
ComEd. ComEd is precluded from lending or extending credit or
indemnity to Exelon.



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Contractual Obligations, Commercial
    Commitments and Off-Balance Sheet Obligations

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, 2004 were materially
unchanged, other than in the normal course of business, from the
amounts set forth in the 2003 Form 10-K except for the
following:



| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | See Note 9 and Note 19 to the Combined
    Notes to Consolidated Financial Statements for discussion of
    material changes in ComEds debt from the amounts set forth
    in the 2003 Form 10-K.

133



---



##### 






PECO ENERGY COMPANY

General

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

Executive Overview

Financial Results.PECOs net income decreased 1% for the three months ended
September 30, 2004 as compared to the same period in 2003.
Operating income, while reflecting various changes in revenues
and operating expenses, was unchanged between periods.

PECOs net income increased 2% for the nine
months ended September 30, 2004 as compared to the same
period in 2003 and reflects higher other income. Operating
income, while reflecting various changes in revenues and
operating expenses, was unchanged between periods.

The Exelon Way.See
Managements Discussion and Analysis of Financial
Condition and Results of Operations  PECO 
Executive Summary in the 2003 Form 10-K for a
discussion of PECOs implementation of The Exelon Way.

Financing
Activities.During the nine months
ended September 30, 2004, PECO refinanced $75 million
of First and Refunding Mortgage Bonds and made scheduled
repayments of $286 million on its long-term debt to PECO
Energy Transition Trust. PECO met its capital resource
commitments primarily with internally generated cash. When
necessary, PECO obtains funds from external sources, including
the capital markets, the intercompany money pool, and through
bank borrowings.

Regulatory Developments  Through
and Out Proceeding.PECO currently
recognizes approximately $4 million of annual revenue from
T&O rates for energy flowing across PECOs transmission
system. On March 19, 2004, the FERC issued an order to
eliminate these rates effective May 1, 2004, which was
subsequently deferred until December 1, 2004. The T&O
rates are to be replaced by a new long-term transmission pricing
structure that will eliminate seams in the PJM and Midwest ISO
regions. Transmission owners in PJM, the Midwest ISO and other
parties filed various pricing proposals with the FERC on or
before October 1, 2004, with an effective date of
December 1, 2004. On October 1, 2004, PECO along with
other transmission owners in PJM, participated in the filing of
a Regional Pricing Proposal, which if accepted by the FERC,
could minimize PECOs loss of T&O revenues. Depending
upon which proposal is accepted by the FERC, or if FERC creates
a new alternative, PECOs results of operation could be
negatively affected.

Rate Design
Proceeding.Additionally, certain PJM
transmission owners, including PECO, are subject to a rate
design proceeding before the FERC. One or more filings will be
made in January 2005 to address, among other items, how costs
associated with new investments should be recovered. PECO is
presently evaluating the extent to which it will participate in
this proceeding.

At this early stage, PECO cannot predict the
outcome of either of the above proceedings; however, these
proceedings could lead to adverse impacts on the results of
operations of PECO.

Outlook for the Remainder of 2004 and
Beyond.PECOs outlook for the
remainder of 2004 is consistent with the discussion within
Managements Discussion and Analysis of Financial
Condition and Results of Operations  PECO 
Executive Summary in the 2003 Form 10-K.

134



---



##### 



Results of Operations



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Three Months Ended September 30, 2004
    Compared to Three Months Ended September 30, 2003

|                            |                                                                  |                                   |       |               |     |          |       |     |     |   |     |     |    | 
|--------------------------- | ---------------------------------------------------------------- | --------------------------------- | ----- | ------------- | --- | -------- | ----- | --- | --- | - | --- | --- | -- | 
|                            |                                                                  |                                   |       |              
|                            |                                                                  | Three Months                      |       |              
|                            |                                                                  | Ended                             |       |              
|                            |                                                                  | September 30,                     |       | Favorable    
|                            |                                                                  |                                   |       | (Unfavorable)
|                            |                                                                  | 2004                              |       | 2003          |     | Variance
|                            |                                                                  |                                   |       |               |     |         
|Operating revenues          |                                                                  | $                                 | 1,124 |               |     | $        | 1,149 |     |     | $ | (25 | )  
|Operating expenses          |                                                                  |                                   |       |               |     |          |       |     |     |   |     |    
|                            | Purchased power                                                  |                                   |       | 458           |     |          |       | 482 |     |   |     | 24  |   
|                            | Fuel                                                             |                                   |       | 35            |     |          |       | 28  |     |   |     | (7  | ) 
|                            | Operating and maintenance                                        |                                   |       | 122           |     |          |       | 192 |     |   |     | 70  |   
|                            | Depreciation and amortization                                    |                                   |       | 144           |     |          |       | 134 |     |   |     | (10 | ) 
|                            | Taxes other than income                                          |                                   |       | 64            |     |          |       | 12  |     |   |     | (52 | ) 
|                            |                                                                  |                                   |       |               |     |          |       |     |     |   |     |    
|                            |                                                                  | Total operating expenses          |       |               | 823 |          |       |     | 848 |   |     |     | 25 | 
|                            |                                                                  |                                   |       |               |     |          |       |     |     |   |     |    
|Operating income            |                                                                  |                                   | 301   |               |     |          | 301   |     |     |   |    |    
|Other income and deductions |                                                                  |                                   |       |               |     |          |       |     |     |   |     |    
|                            | Interest expense                                                 |                                   |       | (76           | )   |          |       | (75 | )   |   |     | (1  | ) 
|                            | Distributions on mandatorily redeemable preferred
    securities |                                   |       |              |     |          |       | (1  | )   |   |     | 1   |   
|                            | Equity in losses of unconsolidated affiliates                    |                                   |       | (6            | )   |          |       |    |     |   |     | (6  | ) 
|                            | Other, net                                                       |                                   |       | 3             |     |          |       | (10 | )   |   |     | 13  |   
|                            |                                                                  |                                   |       |               |     |          |       |     |     |   |     |    
|                            |                                                                  | Total other income and deductions |       |               | (79 | )        |       |     | (86 | ) |     |     | 7  | 
|                            |                                                                  |                                   |       |               |     |          |       |     |     |   |     |    
|Income before income taxes  |                                                                  |                                   | 222   |               |     |          | 215   |     |     |   | 7   |    
|Income taxes                |                                                                  |                                   | 83    |               |     |          | 74    |     |     |   | (9  | )  
|                            |                                                                  |                                   |       |               |     |          |       |     |     |   |     |    
|Net income                  |                                                                  |                                   | 139   |               |     |          | 141   |     |     |   | (2  | )  
|Preferred stock dividends   |                                                                  |                                   | (1    | )             |     |          | (1    | )   |     |   |    |    
|                            |                                                                  |                                   |       |               |     |          |       |     |     |   |     |    
|Net income on common stock  |                                                                  | $                                 | 138   |               |     | $        | 140   |     |     | $ | (2  | )  
|                            |                                                                  |                                   |       |               |     |          |       |     |     |   |     |    

135



---



##### 





| |                  
| | -----------------
| | Operating Revenue

PECOs electric sales statistics were as
follows:

|                                               |                     |               |        |       |  |          |        |          |  |  |      |      |   |  |       |      |   
|---------------------------------------------- | ------------------- | ------------- | ------ | ----- |  | -------- | ------ | -------- |  |  | ---- | ---- | - |  | ----- | ---- | --
|                                               |                     |               |        |       |  |         
|                                               |                     | Three Months  |        |       |  |         
|                                               |                     | Ended         |        |       |  |         
|                                               |                     | September 30, |        |       |  |         
|                                               |                     |               |        |       |  |         
|Retail Deliveries  (in GWhs)                  |                     | 2004          |        | 2003  |  | Variance |        | % Change
|                                               |                     |               |        |       |  |          |        |         
|Full service(a)                                |                     |               |        |       |  |          |        |          |  |  |      |      |   |  |       |     
|Residential                                    |                     |               | 2,906  |       |  |          | 3,333  |          |  |  | (427 | )    |   |  | (12.8 | )%  
|Small commercial & industrial                  |                     |               | 1,790  |       |  |          | 1,753  |          |  |  | 37   |      |   |  | 2.1   | %   
|Large commercial & industrial                  |                     |               | 3,949  |       |  |          | 4,013  |          |  |  | (64  | )    |   |  | (1.6  | )%  
|Public authorities & electric railroads        |                     |               | 234    |       |  |          | 217    |          |  |  | 17   |      |   |  | 7.8   | %   
|                                               |                     |               |        |       |  |          |        |          |  |  |      |      |   |  |       |     
|                                               | Total full service  |               |        | 8,879 |  |          |        | 9,316    |  |  |      | (437 | ) |  |       | (4.7 | )%
|                                               |                     |               |        |       |  |          |        |          |  |  |      |      |   |  |       |     
|Delivery only(b)                               |                     |               |        |       |  |          |        |          |  |  |      |      |   |  |       |     
|Residential                                    |                     |               | 636    |       |  |          | 258    |          |  |  | 378  |      |   |  | 146.5 | %   
|Small commercial & industrial                  |                     |               | 444    |       |  |          | 520    |          |  |  | (76  | )    |   |  | (14.6 | )%  
|Large commercial & industrial                  |                     |               | 229    |       |  |          | 208    |          |  |  | 21   |      |   |  | 10.1  | %   
|Public authorities & electric
    railroads(c) |                     |               |       |       |  |          |       |          |  |  |     |      |   |  |      |     
|                                               |                     |               |        |       |  |          |        |          |  |  |      |      |   |  |       |     
|                                               | Total delivery only |               |        | 1,309 |  |          |        | 986      |  |  |      | 323  |   |  |       | 32.8 | % 
|                                               |                     |               |        |       |  |          |        |          |  |  |      |      |   |  |       |     
|Total retail deliveries                        |                     |               | 10,188 |       |  |          | 10,302 |          |  |  | (114 | )    |   |  | (1.1  | )%  
|                                               |                     |               |        |       |  |          |        |          |  |  |      |      |   |  |       |     



---



|    |  |                                                                                                                    
|--- |  | -------------------------------------------------------------------------------------------------------------------
|(a) |  | Full service reflects deliveries to customers
    taking electric service under tariffed rates.                    
|   
|(b) |  | Delivery only service reflects customers
    receiving electric generation service from an AES.                    
|   
|(c) |  | PECOs delivery only sales to Public
    Authorities and Electric Railroads were less than one GWh per
    quarter.

|                                               |                     |               |       |      |  |          |       |          |  |   |     |     |   |  |       |      |   
|---------------------------------------------- | ------------------- | ------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | --- | --- | - |  | ----- | ---- | --
|                                               |                     |               |       |      |  |         
|                                               |                     | Three Months  |       |      |  |         
|                                               |                     | Ended         |       |      |  |         
|                                               |                     | September 30, |       |      |  |         
|                                               |                     |               |       |      |  |         
|Electric Revenue                               |                     | 2004          |       | 2003 |  | Variance |       | % Change
|                                               |                     |               |       |      |  |          |       |         
|Full service(a)                                |                     |               |       |      |  |          |       |          |  |   |     |     |   |  |       |     
|Residential                                    |                     | $             | 409   |      |  | $        | 466   |          |  | $ | (57 | )   |   |  | (12.2 | )%  
|Small commercial & industrial                  |                     |               | 213   |      |  |          | 211   |          |  |   | 2   |     |   |  | 0.9   | %   
|Large commercial & industrial                  |                     |               | 290   |      |  |          | 292   |          |  |   | (2  | )   |   |  | (0.7  | )%  
|Public authorities & electric railroads        |                     |               | 20    |      |  |          | 19    |          |  |   | 1   |     |   |  | 5.3   | %   
|                                               |                     |               |       |      |  |          |       |          |  |   |     |     |   |  |       |     
|                                               | Total full service  |               |       | 932  |  |          |       | 988      |  |   |     | (56 | ) |  |       | (5.7 | )%
|                                               |                     |               |       |      |  |          |       |          |  |   |     |     |   |  |       |     
|Delivery only(b)                               |                     |               |       |      |  |          |       |          |  |   |     |     |   |  |       |     
|Residential                                    |                     |               | 50    |      |  |          | 20    |          |  |   | 30  |     |   |  | 150.0 | %   
|Small commercial & industrial                  |                     |               | 24    |      |  |          | 28    |          |  |   | (4  | )   |   |  | (14.3 | )%  
|Large commercial & industrial                  |                     |               | 6     |      |  |          | 5     |          |  |   | 1   |     |   |  | 20.0  | %   
|Public authorities & electric
    railroads(c) |                     |               |      |      |  |          |      |          |  |   |    |     |   |  |      |     
|                                               |                     |               |       |      |  |          |       |          |  |   |     |     |   |  |       |     
|                                               | Total delivery only |               |       | 80   |  |          |       | 53       |  |   |     | 27  |   |  |       | 50.9 | % 
|                                               |                     |               |       |      |  |          |       |          |  |   |     |     |   |  |       |     
|Total electric retail revenues                 |                     |               | 1,012 |      |  |          | 1,041 |          |  |   | (29 | )   |   |  | (2.8  | )%  
|Wholesale and miscellaneous revenue(d)         |                     |               | 52    |      |  |          | 55    |          |  |   | (3  | )   |   |  | (5.5  | )%  
|                                               |                     |               |       |      |  |          |       |          |  |   |     |     |   |  |       |     
|Total electric revenue                         |                     | $             | 1,064 |      |  | $        | 1,096 |          |  | $ | (32 | )   |   |  | (2.9  | )%  
|                                               |                     |               |       |      |  |          |       |          |  |   |     |     |   |  |       |     



---



|    |  |                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Full service revenue reflects revenue from
    customers taking electric service under tariffed rates, which
    includes the cost of energy, the delivery cost of the
    transmission and the distribution of the energy and a CTC charge.

136



---



##### 





|    |  |                                                                                                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Delivery only revenue reflects revenue from
    customers receiving generation from an AES, which includes a
    distribution charge and a CTC charge.
|   
|(c) |  | PECOs delivery only sales to Public
    Authorities and Electric Railroads were less than
    $1 million per quarter.                                
|   
|(d) |  | Wholesale and miscellaneous revenues include
    transmission revenue from PJM and other wholesale energy sales.                                      

The changes in electric retail revenues for the
three months ended September 30, 2004, as compared to the
same period in 2003, were as follows:

|                                    |  |            |     |  
|----------------------------------- |  | ---------- | --- | -
|                                    |  | Increase  
|                                    |  | (Decrease)
|                                    |  |           
|Weather                             |  | $          | (70 | )
|Customer choice                     |  |            | (21 | )
|Rate mix                            |  |            | (7  | )
|Volume                              |  |            | 62  |  
|Rate change                         |  |            | 7   |  
|                                    |  |            |     |  
|Decrease in electric retail revenue |  | $          | (29 | )
|                                    |  |            |     |  

Weather.The demand
for electricity is affected by weather conditions. Very warm
weather in summer months and very cold weather in other months
are referred to as favorable weather conditions
because these weather conditions result in increased sales of
electricity. Conversely, mild weather reduces demand. The
weather impact was unfavorable compared to the prior year.
Cooling degree-days decreased 16% and heating degree-days
decreased 8%.

Customer Choice.All
PECO customers may choose to purchase energy from an AES. This
choice does not affect kWh deliveries, but reduces revenue
collected from customers because they are not obtaining
generation supply from PECO.

For the three months ended September 30,
2004, the energy provided by AESs was 1,309 GWhs, or 13%, as
compared to 986 GWhs, or 10%, for the three months ended
September 30, 2003. As of September 30, 2004, the
number of customers served by AESs was 281,600, or 18%, as
compared to 120,300 or 8%, as of September 30, 2003. The
increases in both energy provided by AESs and the number of
customers served by AESs were due to the assignment of
residential customers to AESs in December 2003, as required by
the PUC and PECOs final electric restructuring order.

Rate Mix.The
decrease in revenues from rate mix was due to changes in monthly
usage patterns in all customer classes.

Volume.Exclusive of
the effect of weather conditions and customer choice, higher
delivery volume related primarily to an increased number of
customers and increased usage by all customer classes.

Rate change.Revenues increased $7 million due to a scheduled phase-out
of merger-related rate reductions. In connection with the
PUCs approval of the merger of PECO and Unicom Corporation
into Exelon in 2000, PECO entered into a settlement agreement
with intervening parties and agreed to $200 million in
aggregate rate reductions for all customers over the period
January 1, 2002 through December 31, 2005.
Consequently, rates were reduced from the levels that otherwise
would have been in effect pursuant to the PUC approved
restructuring settlement by $60 million annually until
January 1, 2004 when the reduction decreased to
$40 million annually, which will be in effect through
December 31, 2005.

Electric wholesale and miscellaneous revenue
includes PECOs proportionate share of the transmission
revenues generated by PJMs control of the PJM network
transmission assets, including PECOs. Additionally, PECO
pays PJM for its use of these transmission assets, and this
expense is recorded in purchased power.

137



---



##### 



PECOs gas sales statistics for the three
months ended September 30, 2004 as compared to the same
period in 2003 were as follows:

|                                  |  |               |        |      |  |          |       |          |  |  |     |  |  |  |      |  
|--------------------------------- |  | ------------- | ------ | ---- |  | -------- | ----- | -------- |  |  | --- |  |  |  | ---- | -
|                                  |  |               |        |      |  |         
|                                  |  | Three Months  |        |      |  |         
|                                  |  | Ended         |        |      |  |         
|                                  |  | September 30, |        |      |  |         
|                                  |  |               |        |      |  |         
|Deliveries to customers (in mmcf) |  | 2004          |        | 2003 |  | Variance |       | % Change
|                                  |  |               |        |      |  |          |       |         
|Retail sales                      |  |               | 3,866  |      |  |          | 3,498 |          |  |  | 368 |  |  |  | 10.5 | %
|Transportation                    |  |               | 6,167  |      |  |          | 6,012 |          |  |  | 155 |  |  |  | 2.6  | %
|                                  |  |               |        |      |  |          |       |          |  |  |     |  |  |  |      |  
|Total                             |  |               | 10,033 |      |  |          | 9,510 |          |  |  | 523 |  |  |  | 5.5  | %
|                                  |  |               |        |      |  |          |       |          |  |  |     |  |  |  |      |  

|                  |  |               |     |      |  |          |     |          |  |  |     |   |  |  |       |   
|----------------- |  | ------------- | --- | ---- |  | -------- | --- | -------- |  |  | --- | - |  |  | ----- | --
|                  |  |               |     |      |  |         
|                  |  | Three Months  |     |      |  |         
|                  |  | Ended         |     |      |  |         
|                  |  | September 30, |     |      |  |         
|                  |  |               |     |      |  |         
|Revenue           |  | 2004          |     | 2003 |  | Variance |     | % Change
|                  |  |               |     |      |  |          |     |         
|Retail sales      |  |               | $55 |      |  |          | $47 |          |  |  | $ 8 |   |  |  | 17.0  | % 
|Transportation    |  |               | 4   |      |  |          | 4   |          |  |  |    |   |  |  |      |   
|Resales and other |  |               | 1   |      |  |          | 2   |          |  |  | (1  | ) |  |  | (50.0 | )%
|                  |  |               |     |      |  |          |     |          |  |  |     |   |  |  |       |   
|Total             |  |               | $60 |      |  |          | $53 |          |  |  | $ 7 |   |  |  | 13.2  | % 
|                  |  |               |     |      |  |          |     |          |  |  |     |   |  |  |       |   

The change in gas retail revenue for the three
months ended September 30, 2004 as compared to the same
period in 2003, was due to increases in rates through
PUC-approved changes to the purchased gas adjustment clause that
became effective March 1, 2004. The average rate per mmcf
for the three months ended September 30, 2004 was 22%
higher than the rate for the same period in 2003. PECOs
gas cost rates are subject to periodic adjustments by the PUC
and are designed to recover from or refund to customers the
difference between the actual cost of purchased gas and the
amount included in rates. PECO anticipates that its purchased
gas cost rates will be reduced effective December 1, 2004
in connection with a settlement approved by the PUC in September
2004. This decrease will have no impact on PECOs operating
income.



| |                
| | ---------------
| | Purchased Power

The decrease in purchased power expense was
primarily attributable to $29 million related to lower
sales due to unfavorable weather conditions and $21 million
from customers in Pennsylvania assigned to or selecting an AES,
partially offset by $28 million of increased sales
exclusive of the effect of weather conditions.



| |     
| | ----
| | Fuel

The increase in fuel expense was attributable to
higher gas costs.



| |                          
| | -------------------------
| | Operating and Maintenance

The changes in operating and maintenance expense
for the three months ended September 30, 2004 compared to
the same period in 2003 consisted of the following:

|                                                                                       |  |            |     |  
|-------------------------------------------------------------------------------------- |  | ---------- | --- | -
|                                                                                       |  | Increase  
|                                                                                       |  | (Decrease)
|                                                                                       |  |           
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  | $          | (45 | )
|Decreased incremental storm costs                                                      |  |            | (15 | )
|Automated meter reading system implementation
    costs in 2003                        |  |            | (13 | )
|Allowance for uncollectible accounts expense                                           |  |            | (7  | )
|Decreased payroll expense due to fewer
    employees(a)                                |  |            | (3  | )
|Higher corporate allocations(b)                                                        |  |            | 9   |  
|Employee fringe benefits(c)                                                            |  |            | 4   |  
|                                                                                       |  |            |     |  
|Decrease in operating and maintenance expense                                          |  | $          | (70 | )
|                                                                                       |  |            |     |  

138



---



##### 





---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | PECO has fewer employees as a result of The
    Exelon Way.                                                                                                                                                                                                                                                                                                                                                              
|   
|(b) |  | Higher corporate allocations primarily result
    from higher corporate governance allocations and employee fringe
    benefits. Corporate governance allocations increased as a result
    of the 2004 sale of certain Enterprises companies resulting in
    PECO comprising a greater percentage of Exelon and an
    SEC-mandated change to the methodology used to allocate
    Exelons corporate governance costs.
|   
|(c) |  | During the second quarter of 2004, PECO adopted
    the provisions of FSP FAS 106-2. Employee fringe benefits
    include a $1 million reduction in net periodic
    postretirement benefit cost due to the adoption of FSP
    FAS 106-2.                                                                                                                                                                               



| |                              
| | -----------------------------
| | Depreciation and Amortization

|                                           |  |               |     |          |  |            |     |  |  |   |    |  
|------------------------------------------ |  | ------------- | --- | -------- |  | ---------- | --- |  |  | - | -- | -
|                                           |  |               |     |         
|                                           |  | Three Months  |     |         
|                                           |  | Ended         |     |         
|                                           |  | September 30, |     |         
|                                           |  |               |     | Increase
|                                           |  | 2004          |     | 2003     |  | (Decrease)
|                                           |  |               |     |          |  |           
|Competitive transition charge amortization |  | $             | 108 |          |  | $          | 96  |  |  | $ | 12 |  
|Depreciation expense                       |  |               | 32  |          |  |            | 33  |  |  |   | (1 | )
|Other amortization expense                 |  |               | 4   |          |  |            | 5   |  |  |   | (1 | )
|                                           |  |               |     |          |  |            |     |  |  |   |    |  
|Total depreciation and amortization        |  | $             | 144 |          |  | $          | 134 |  |  | $ | 10 |  
|                                           |  |               |     |          |  |            |     |  |  |   |    |  

The additional amortization of the CTC is in
accordance with PECOs settlement under the Pennsylvania
Competition Act.



| |                        
| | -----------------------
| | Taxes Other Than Income

The increase in taxes other than income was
primarily attributable to $58 million related to the
reversal of real estate tax accruals during 2003.



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Interest Expense and Distributions on
    Mandatorily Redeemable Preferred Securities

The aggregate of interest expense and
distributions on mandatorily redeemable preferred securities was
unchanged and reflected decreased expense due to lower
outstanding debt and refinancings at lower rates offset by a
reversal in 2003 of accrued interest expense on Federal income
taxes of $8 million to reflect actual interest paid.
Effective December 31, 2003, with the adoption of FIN
No. 46-R, PECO deconsolidated its financing trusts (see
Note 2 of the Combined Notes to Consolidated Financial
Statements). PECO no longer records distributions on mandatorily
redeemable preferred securities of subsidiaries but records
interest expense to affiliates related to PECOs
obligations to the financing trusts.



| |                                                  
| | -------------------------------------------------
| | Equity in Losses of Unconsolidated
    Affiliates

PECO had $6 million of equity in net losses
of subsidiaries as a result of deconsolidating its subsidiary
financing trusts.



| |           
| | ----------
| | Other, Net

The increase was primarily attributable to a
reversal in 2003 of accrued interest on Federal income taxes of
$14 million to reflect actual interest received.



| |             
| | ------------
| | Income Taxes

The effective tax rate was 37% for the three
months ended September 30, 2004 as compared to 35% for the
same period in 2003. The increase in the effective tax rate was
primarily attributable to adjustments to prior period income
taxes in connection with the completion of the 2003 tax return.
See Note 12 of the Combined Notes to the Consolidated
Financial Statements for further discussion of the change in the
effective income tax rate.

139



---



##### 



Results of Operations



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Nine Months Ended September 30, 2004
    Compared to Nine Months Ended September 30, 2003

|                            |                                                                  |                                   |       |               |       |          |       |       |       |   |    |     |     |  
|--------------------------- | ---------------------------------------------------------------- | --------------------------------- | ----- | ------------- | ----- | -------- | ----- | ----- | ----- | - | -- | --- | --- | -
|                            |                                                                  |                                   |       |              
|                            |                                                                  | Nine Months                       |       |              
|                            |                                                                  | Ended                             |       |              
|                            |                                                                  | September 30,                     |       | Favorable    
|                            |                                                                  |                                   |       | (Unfavorable)
|                            |                                                                  | 2004                              |       | 2003          |       | Variance
|                            |                                                                  |                                   |       |               |       |         
|Operating revenues          |                                                                  | $                                 | 3,395 |               |       | $        | 3,328 |       |       | $ | 67 |    
|Operating expenses          |                                                                  |                                   |       |               |       |          |       |       |       |   |    |    
|                            | Purchased power                                                  |                                   |       | 1,257         |       |          |       | 1,290 |       |   |    | 33  |    
|                            | Fuel                                                             |                                   |       | 368           |       |          |       | 285   |       |   |    | (83 | )  
|                            | Operating and maintenance                                        |                                   |       | 387           |       |          |       | 453   |       |   |    | 66  |    
|                            | Depreciation and amortization                                    |                                   |       | 395           |       |          |       | 370   |       |   |    | (25 | )  
|                            | Taxes other than income                                          |                                   |       | 181           |       |          |       | 123   |       |   |    | (58 | )  
|                            |                                                                  |                                   |       |               |       |          |       |       |       |   |    |    
|                            |                                                                  | Total operating expenses          |       |               | 2,588 |          |       |       | 2,521 |   |    |     | (67 | )
|                            |                                                                  |                                   |       |               |       |          |       |       |       |   |    |    
|Operating income            |                                                                  |                                   | 807   |               |       |          | 807   |       |       |   |   |    
|                            |                                                                  |                                   |       |               |       |          |       |       |       |   |    |    
|Other income and deductions |                                                                  |                                   |       |               |       |          |       |       |       |   |    |    
|                            | Interest expense                                                 |                                   |       | (229          | )     |          |       | (243  | )     |   |    | 14  |    
|                            | Distributions on mandatorily redeemable preferred
    securities |                                   |       |              |       |          |       | (6    | )     |   |    | 6   |    
|                            | Equity in losses of unconsolidated affiliates                    |                                   |       | (19           | )     |          |       |      |       |   |    | (19 | )  
|                            | Other, net                                                       |                                   |       | 8             |       |          |       |      |       |   |    | 8   |    
|                            |                                                                  |                                   |       |               |       |          |       |       |       |   |    |    
|                            |                                                                  | Total other income and deductions |       |               | (240  | )        |       |       | (249  | ) |    |     | 9   |  
|                            |                                                                  |                                   |       |               |       |          |       |       |       |   |    |    
|Income before income taxes  |                                                                  |                                   | 567   |               |       |          | 558   |       |       |   | 9  |    
|Income taxes                |                                                                  |                                   | 195   |               |       |          | 193   |       |       |   | (2 | )  
|                            |                                                                  |                                   |       |               |       |          |       |       |       |   |    |    
|Net income                  |                                                                  |                                   | 372   |               |       |          | 365   |       |       |   | 7  |    
|Preferred stock dividends   |                                                                  |                                   | (3    | )             |       |          | (4    | )     |       |   | 1  |    
|                            |                                                                  |                                   |       |               |       |          |       |       |       |   |    |    
|Net income on common stock  |                                                                  | $                                 | 369   |               |       | $        | 361   |       |       | $ | 8  |    
|                            |                                                                  |                                   |       |               |       |          |       |       |       |   |    |    

140



---



##### 





| |                  
| | -----------------
| | Operating Revenue

PECOs electric sales statistics were as
follows:

|                                               |                     |               |        |        |  |          |        |          |  |  |      |       |   |  |       |      |   
|---------------------------------------------- | ------------------- | ------------- | ------ | ------ |  | -------- | ------ | -------- |  |  | ---- | ----- | - |  | ----- | ---- | --
|                                               |                     |               |        |        |  |         
|                                               |                     | Nine Months   |        |        |  |         
|                                               |                     | Ended         |        |        |  |         
|                                               |                     | September 30, |        |        |  |         
|                                               |                     |               |        |        |  |         
|Retail Deliveries  (in GWhs)                  |                     | 2004          |        | 2003   |  | Variance |        | % Change
|                                               |                     |               |        |        |  |          |        |         
|Full service(a)                                |                     |               |        |        |  |          |        |          |  |  |      |       |   |  |       |     
|Residential                                    |                     |               | 7,922  |        |  |          | 8,723  |          |  |  | (801 | )     |   |  | (9.2  | )%  
|Small commercial & industrial                  |                     |               | 5,160  |        |  |          | 5,065  |          |  |  | 95   |       |   |  | 1.9   | %   
|Large commercial & industrial                  |                     |               | 11,270 |        |  |          | 11,190 |          |  |  | 80   |       |   |  | 0.7   | %   
|Public authorities & electric railroads        |                     |               | 686    |        |  |          | 692    |          |  |  | (6   | )     |   |  | (0.9  | )%  
|                                               |                     |               |        |        |  |          |        |          |  |  |      |       |   |  |       |     
|                                               | Total full service  |               |        | 25,038 |  |          |        | 25,670   |  |  |      | (632  | ) |  |       | (2.5 | )%
|                                               |                     |               |        |        |  |          |        |          |  |  |      |       |   |  |       |     
|Delivery only(b)                               |                     |               |        |        |  |          |        |          |  |  |      |       |   |  |       |     
|Residential                                    |                     |               | 1,706  |        |  |          | 708    |          |  |  | 998  |       |   |  | 141.0 | %   
|Small commercial & industrial                  |                     |               | 1,301  |        |  |          | 1,044  |          |  |  | 257  |       |   |  | 24.6  | %   
|Large commercial & industrial                  |                     |               | 569    |        |  |          | 610    |          |  |  | (41  | )     |   |  | (6.7  | )%  
|Public authorities & electric
    railroads(c) |                     |               |       |        |  |          |       |          |  |  |     |       |   |  |      |     
|                                               |                     |               |        |        |  |          |        |          |  |  |      |       |   |  |       |     
|                                               | Total delivery only |               |        | 3,576  |  |          |        | 2,362    |  |  |      | 1,214 |   |  |       | 51.4 | % 
|                                               |                     |               |        |        |  |          |        |          |  |  |      |       |   |  |       |     
|Total retail deliveries                        |                     |               | 28,614 |        |  |          | 28,032 |          |  |  | 582  |       |   |  | 2.1   | %   
|                                               |                     |               |        |        |  |          |        |          |  |  |      |       |   |  |       |     



---



|    |  |                                                                                                                    
|--- |  | -------------------------------------------------------------------------------------------------------------------
|(a) |  | Full service reflects deliveries to customers
    taking electric service under tariffed rates.                    
|   
|(b) |  | Delivery only service reflects customers
    receiving electric generation service from an AES.                    
|   
|(c) |  | PECOs delivery only sales to Public
    Authorities and Electric Railroads were less than one GWh per
    quarter.

|                                               |                     |               |       |       |  |          |       |          |  |   |      |     |   |  |       |      |   
|---------------------------------------------- | ------------------- | ------------- | ----- | ----- |  | -------- | ----- | -------- |  | - | ---- | --- | - |  | ----- | ---- | --
|                                               |                     |               |       |       |  |         
|                                               |                     | Nine Months   |       |       |  |         
|                                               |                     | Ended         |       |       |  |         
|                                               |                     | September 30, |       |       |  |         
|                                               |                     |               |       |       |  |         
|Electric Revenue                               |                     | 2004          |       | 2003  |  | Variance |       | % Change
|                                               |                     |               |       |       |  |          |       |         
|Full service(a)                                |                     |               |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|Residential                                    |                     | $             | 1,021 |       |  | $        | 1,122 |          |  | $ | (101 | )   |   |  | (9.0  | )%  
|Small commercial & industrial                  |                     |               | 587   |       |  |          | 585   |          |  |   | 2    |     |   |  | 0.3   | %   
|Large commercial & industrial                  |                     |               | 840   |       |  |          | 825   |          |  |   | 15   |     |   |  | 1.8   | %   
|Public authorities & electric railroads        |                     |               | 60    |       |  |          | 62    |          |  |   | (2   | )   |   |  | (3.2  | )%  
|                                               |                     |               |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|                                               | Total full service  |               |       | 2,508 |  |          |       | 2,594    |  |   |      | (86 | ) |  |       | (3.3 | )%
|                                               |                     |               |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|Delivery only(b)                               |                     |               |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|Residential                                    |                     |               | 131   |       |  |          | 52    |          |  |   | 79   |     |   |  | 151.9 | %   
|Small commercial & industrial                  |                     |               | 67    |       |  |          | 54    |          |  |   | 13   |     |   |  | 24.1  | %   
|Large commercial & industrial                  |                     |               | 15    |       |  |          | 16    |          |  |   | (1   | )   |   |  | (6.3  | )%  
|Public authorities & electric
    railroads(c) |                     |               |      |       |  |          |      |          |  |   |     |     |   |  |      |     
|                                               |                     |               |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|                                               | Total delivery only |               |       | 213   |  |          |       | 122      |  |   |      | 91  |   |  |       | 74.6 | % 
|                                               |                     |               |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|Total electric retail revenues                 |                     |               | 2,721 |       |  |          | 2,716 |          |  |   | 5    |     |   |  | 0.2   | %   
|Wholesale and miscellaneous revenue(d)         |                     |               | 151   |       |  |          | 164   |          |  |   | (13  | )   |   |  | (7.9  | )%  
|                                               |                     |               |       |       |  |          |       |          |  |   |      |     |   |  |       |     
|Total electric revenue                         |                     | $             | 2,872 |       |  | $        | 2,880 |          |  | $ | (8   | )   |   |  | (0.3  | )%  
|                                               |                     |               |       |       |  |          |       |          |  |   |      |     |   |  |       |     



---



|    |  |                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Full service revenue reflects revenue from
    customers taking electric service under tariffed rates, which
    includes the cost of energy, the delivery cost of the
    transmission and the distribution of the energy and a CTC charge.

141



---



##### 





|    |  |                                                                                                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Delivery only revenue reflects revenue from
    customers receiving generation from an AES, which includes a
    distribution charge and a CTC charge.
|   
|(c) |  | PECOs delivery only sales to Public
    Authorities and Electric Railroads were less than
    $1 million per quarter.                                
|   
|(d) |  | Wholesale and miscellaneous revenues include
    transmission revenue from PJM and other wholesale energy sales.                                      

The changes in electric retail revenues for the
nine months ended September 30, 2004, as compared to the
same period in 2003, were as follows:

|                                    |  |            |     |  
|----------------------------------- |  | ---------- | --- | -
|                                    |  | Increase  
|                                    |  | (Decrease)
|                                    |  |           
|Volume                              |  | $          | 128 |  
|Rate change                         |  |            | 16  |  
|Weather                             |  |            | (62 | )
|Customer choice                     |  |            | (63 | )
|Rate mix                            |  |            | (14 | )
|                                    |  |            |     |  
|Increase in electric retail revenue |  | $          | 5   |  
|                                    |  |            |     |  

Volume.Exclusive of
the effect of weather conditions and customer choice, higher
delivery volume related primarily to an increased number of
customers and increased usage by all customer classes.

Rate change.Revenues increased $16 million due to a scheduled phase-out
of merger-related rate reductions.

Weather.The weather
impact was unfavorable compared to the prior year. Heating
degree-days decreased 8% and cooling degree-days remained
relatively unchanged

Customer Choice.As
noted, all PECO customers may choose to purchase energy from an
AES. This choice does not affect kWh deliveries, but reduces
revenue collected from customers because they are not obtaining
generation supply from PECO.

For the nine months ended September 30,
2004, the energy provided by AESs was 3,576 GWhs, or 12%, as
compared to 2,362 GWhs, or 8%, for the nine months ended
September 30, 2003. As of September 30, 2004, the
number of customers served by AESs was 281,600, or 18%, as
compared to 120,300, or 8%, as of September 30, 2003. The
increases in both the energy provided by AESs and the number of
customers served by AESs were due to the assignment of small
commercial and industrial customers and residential customers to
AESs in May and December 2003, respectively, as required by the
PUC and PECOs final electric restructuring order.

Rate Mix.The
decrease in revenues from rate mix was due to changes in monthly
usage patterns in all customer classes during the nine months
ended September 30, 2004 as compared to the same period in
2003.

Electric wholesale and miscellaneous revenue
includes PECOs proportionate share of the transmission
revenues generated by PJMs control of the PJM network
transmission assets, including PECOs. Additionally, PECO
pays PJM for its use of these transmission assets, and this
expense is recorded in purchased power. Electric wholesale and
miscellaneous revenue decreased $13 million due to lower
PJM transmission revenue.

PECOs gas sales statistics for the nine
months ended September 30, 2004 as compared to the same
period in 2003 were as follows:

|                                  |  |               |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|--------------------------------- |  | ------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ---- | --
|                                  |  |               |        |      |  |         
|                                  |  | Nine Months   |        |      |  |         
|                                  |  | Ended         |        |      |  |         
|                                  |  | September 30, |        |      |  |         
|                                  |  |               |        |      |  |         
|Deliveries to customers (in mmcf) |  | 2004          |        | 2003 |  | Variance |        | % Change
|                                  |  |               |        |      |  |          |        |         
|Retail sales                      |  |               | 41,831 |      |  |          | 44,183 |          |  |  | (2,352 | ) |  |  | (5.3 | )%
|Transportation                    |  |               | 19,709 |      |  |          | 19,954 |          |  |  | (245   | ) |  |  | (1.2 | )%
|                                  |  |               |        |      |  |          |        |          |  |  |        |   |  |  |      |   
|Total                             |  |               | 61,540 |      |  |          | 64,137 |          |  |  | (2,597 | ) |  |  | (4.0 | )%
|                                  |  |               |        |      |  |          |        |          |  |  |        |   |  |  |      |   

142



---



##### 



|                  |  |               |     |      |  |          |     |          |  |   |    |   |  |  |      |   
|----------------- |  | ------------- | --- | ---- |  | -------- | --- | -------- |  | - | -- | - |  |  | ---- | --
|                  |  |               |     |      |  |         
|                  |  | Nine Months   |     |      |  |         
|                  |  | September 30, |     |      |  |         
|                  |  |               |     |      |  |         
|Revenue           |  | 2004          |     | 2003 |  | Variance |     | % Change
|                  |  |               |     |      |  |          |     |         
|Retail sales      |  | $             | 485 |      |  | $        | 418 |          |  | $ | 67 |   |  |  | 16.0 | % 
|Transportation    |  |               | 13  |      |  |          | 14  |          |  |   | (1 | ) |  |  | (7.1 | )%
|Resales and other |  |               | 25  |      |  |          | 16  |          |  |   | 9  |   |  |  | 56.3 | % 
|                  |  |               |     |      |  |          |     |          |  |   |    |   |  |  |      |   
|Total             |  | $             | 523 |      |  | $        | 448 |          |  | $ | 75 |   |  |  | 16.7 | % 
|                  |  |               |     |      |  |          |     |          |  |   |    |   |  |  |      |   

The changes in gas retail revenue for the nine
months ended September 30, 2004 as compared to the same
period in 2003, were as follows:

|                                |  |            |     |  
|------------------------------- |  | ---------- | --- | -
|                                |  | Increase  
|                                |  | (Decrease)
|                                |  |           
|Rate changes                    |  | $          | 89  |  
|Weather                         |  |            | (21 | )
|Volume                          |  |            | (1  | )
|                                |  |            |     |  
|Increase in gas retail revenues |  | $          | 67  |  
|                                |  |            |     |  

Rate Changes.The
favorable variance in rates was attributable to increases in
rates through PUC-approved changes to the purchased gas
adjustment clause that became effective March 1, 2003,
June 1, 2003, December 1, 2003, and March 1,
2004. The average rate per mmcf for the nine months ended
September 30, 2004 was 38% higher than the rate for the
same period in 2003.

Weather.The weather
conditions were unfavorable compared to the prior year. Heating
degree-days decreased 8% compared to the same period in 2003.

Volume.Exclusive of
the effect of weather conditions, revenues were lower in the
nine months ended September 30, 2004 compared to the same
period in 2003 due primarily to decreased sales in the
residential and small commercial and industrial classes.

Resales and other revenue increased
$9 million primarily due to increased off-system sales.



| |                
| | ---------------
| | Purchased Power

The decrease in purchased power expense was
attributable to $63 million from customers in Pennsylvania
assigned to or selecting an AES, a $26 million decrease
associated with lower sales due to unfavorable weather
conditions and a $13 million decrease in PJM transmission
expense, partially offset by an increase of $59 million
related to increased sales exclusive of weather conditions and
$10 million of higher prices.



| |     
| | ----
| | Fuel

The increase in fuel expense was primarily
attributable to $89 million of higher gas costs and
$13 million related to increased off-system sales,
partially offset by a $14 million decrease associated with
lower sales due to unfavorable weather conditions.

143



---



##### 





| |                          
| | -------------------------
| | Operating and Maintenance

The changes in operating and maintenance expense
for the nine months ended September 30, 2004 compared to
the same period in 2003 consisted of the following:

|                                                                                       |  |            |     |  
|-------------------------------------------------------------------------------------- |  | ---------- | --- | -
|                                                                                       |  | Increase  
|                                                                                       |  | (Decrease)
|                                                                                       |  |           
|Severance, pension and postretirement benefit
    costs associated with The Exelon Way |  | $          | (35 | )
|Decreased incremental storm costs                                                      |  |            | (17 | )
|Automated meter reading system implementation
    costs in 2003                        |  |            | (16 | )
|Decreased payroll expense due to fewer
    employees(a)                                |  |            | (14 | )
|Allowance for uncollectible accounts expense                                           |  |            | (9  | )
|Higher corporate allocations(b)                                                        |  |            | 28  |  
|Other                                                                                  |  |            | (3  | )
|                                                                                       |  |            |     |  
|Decrease in operating and maintenance expense                                          |  | $          | (66 | )
|                                                                                       |  |            |     |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | PECO has fewer employees as a result of The
    Exelon Way terminations                                                                                                                                                                                                                                                                                                                                                  
|   
|(b) |  | Higher corporate allocations primarily result
    from higher corporate governance allocations and employee fringe
    benefits. Corporate governance allocations increased as a result
    of the 2004 sale of certain Enterprises companies resulting in
    PECO comprising a greater percentage of Exelon and an
    SEC-mandated change to the methodology used to allocate
    Exelons corporate governance costs.



| |                              
| | -----------------------------
| | Depreciation and Amortization

|                                           |  |               |     |          |  |            |     |  |  |   |    |  
|------------------------------------------ |  | ------------- | --- | -------- |  | ---------- | --- |  |  | - | -- | -
|                                           |  |               |     |         
|                                           |  | Nine Months   |     |         
|                                           |  | Ended         |     |         
|                                           |  | September 30, |     |         
|                                           |  |               |     | Increase
|                                           |  | 2004          |     | 2003     |  | (Decrease)
|                                           |  |               |     |          |  |           
|Competitive transition charge amortization |  | $             | 282 |          |  | $          | 256 |  |  | $ | 26 |  
|Depreciation expense                       |  |               | 96  |          |  |            | 99  |  |  |   | (3 | )
|Other amortization expense                 |  |               | 17  |          |  |            | 15  |  |  |   | 2  |  
|                                           |  |               |     |          |  |            |     |  |  |   |    |  
|Total depreciation and amortization        |  | $             | 395 |          |  | $          | 370 |  |  | $ | 25 |  
|                                           |  |               |     |          |  |            |     |  |  |   |    |  

The additional amortization of the CTC is in
accordance with PECOs settlement under the Pennsylvania
Competition Act.



| |                        
| | -----------------------
| | Taxes Other Than Income

The increase in taxes other than income was
primarily attributable to $58 million related to the
reversal of real estate tax accruals during 2003 and
$12 million related to the reversal of a use tax accrual in
2003 resulting from an audit settlement, partially offset by
$5 million of lower capital stock tax.



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Interest Expense and Distributions on
    Mandatorily Redeemable Preferred Securities

The aggregate of interest expense and
distributions on mandatorily redeemable preferred securities
decreased primarily due to lower outstanding debt and
refinancings at lower rates, partially offset by a reversal in
2003 of accrued interest expense on Federal income taxes of
$8 million to reflect actual interest paid. Effective
December 31, 2003, with the adoption of FIN No. 46-R,
PECO deconsolidated its financing trusts (see Note 2 of the
Combined Notes to Consolidated Financial Statements). PECO no
longer records distributions on mandatorily redeemable preferred
securities of subsidiaries but records interest expense to
affiliates related to PECOs obligations to the financing
trusts.

144



---



##### 





| |                                                  
| | -------------------------------------------------
| | Equity in Losses of Unconsolidated
    Affiliates

In 2004, PECO had $19 million of equity in
net losses of subsidiaries as a result of deconsolidating its
subsidiary financing trusts.



| |           
| | ----------
| | Other, Net

The increase was primarily attributable to a
reversal in 2003 of accrued interest on Federal income taxes of
$14 million to reflect actual interest received, partially
offset by a $5 million decrease in interest income.



| |             
| | ------------
| | Income Taxes

The effective tax rate was 34% for the nine
months ended September 30, 2004 as compared to 35% for the
same period in 2003. See Note 12 of the Combined Notes to
the Consolidated Financial Statements for further discussion of
the change in the effective income tax rate.

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,
participation in the intercompany money pool or capital
contributions from Exelon. PECOs access to external
financing at reasonable terms is dependent on its credit ratings
and general business conditions, as well as that of the utility
industry in general. If these conditions deteriorate to where
PECO no longer has access to the capital markets at reasonable
terms, PECO has access to a revolving credit facility that PECO
currently utilizes to support its commercial paper program. See
the Credit Issues section of Liquidity and
Capital Resources for further discussion. Capital
resources are used primarily to fund PECOs capital
requirements, including construction, retirement of debt, the
payment of dividends and contributions to Exelons pension
plans.



| |                                         
| | ----------------------------------------
| | Cash Flows from Operating
    Activities

PECOs cash flows from operating activities
primarily result from sales of electricity and gas to a stable
and diverse base of retail customers at fixed prices.
PECOs future cash flows will be affected by its ability to
achieve operating cost reductions and the impact of the economy
and weather on its revenues. Cash flows from operations have
been and are expected to continue to provide a reliable, steady
source of cash flow sufficient to meet operating and capital
expenditures requirements for the foreseeable future.

Cash flows from operations for the nine months
ended September 30, 2004 and 2003 were $790 million
and $757 million, respectively. Changes in PECOs cash
flows from operations are generally consistent with changes in
its results of operations, as further adjusted by changes in
working capital in the normal course of business.

In addition to the items mentioned in
Results of Operations, PECOs operating cash
flows for the nine months ended September 30, 2004 and 2003
were affected by the following items:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Deferred natural gas costs decreased
    $52 million during the nine months ended September 30,
    2004 resulting in an increase to operating cash flows. During
    2003, an increase in deferred natural gas costs of
    $33 million resulted in a decrease to operating cash flows.
    PECOs gas cost rates are subject to periodic adjustments
    by the PUC that are designed to recover from or refund to
    customers the difference between the actual cost of purchased
    gas and the amount included in rates. During 2004, PECO was
    recovering fuel revenues from customers in excess of gas costs
    being incurred. During 2003, PECO was incurring gas costs in
    excess of fuel revenues being recovered from customers.
|
| |  | PECO participates in Exelons defined
    benefit pension plans. Discretionary contributions by PECO to
    the plans were $8 million during the nine months ended
    September 30, 2004 compared to $18 million for the
    same period in 2003. See Note 11 of the Combined Notes to
    Consolidated Financial Statements for further information
    regarding pension and postretirement benefits.                                                                                                                                                                                                                                                                                                                                              

145



---



##### 





| |                                         
| | ----------------------------------------
| | Cash Flows from Investing
    Activities

Cash flows used in investing activities for the
nine months ended September 30, 2004 and 2003 were
$186 million and $61 million, respectively. The
$125 million increase in cash used in investing activities
was primarily attributable to a change in restricted cash which
provided cash flows of $132 million in 2003 and a
$26 million investment in the Exelon intercompany money
pool in 2004, partially offset by lower construction
expenditures of $29 million in 2004. The change in
restricted cash is the result of deconsolidating the PECO Energy
Transition Trust in December 2003 in accordance with the
adoption of FIN No. 46R. PECOs investing activities
during the nine months ended September 30, 2004 were funded
by operating activities.

PECOs projected capital expenditures for
2004 are $223 million. Approximately 60% of the budgeted
2004 expenditures is for additions to or upgrades of existing
facilities, including reliability improvements. The remainder of
the capital expenditures support customer and load growth. 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, 2004 were $503 million
compared to $677 million for the same period in 2003. The
decrease in cash flows used in financing activities was
primarily due to a decrease in the retirement of preferred
securities of $100 million and an increase in contributions
received from Exelon of $89 million, partially offset by an
increase in net retirements of long-term debt of
$130 million. Additionally, PECO paid dividends of
$279 million and $248 million during the nine months
ended September 30, 2004 and 2003, respectively, of which
$276 million and $244 million, respectively, were
common dividends paid to Exelon.

From time to time and as market conditions
warrant, PECO may engage in long-term debt repurchases via
tender offers, open market acquisitions or other viable options
to preserve the integrity of PECOs balance sheet.



| |              
| | -------------
| | Credit Issues

Exelon Credit
Facility.PECO mfeets its short-term
liquidity requirements primarily through the issuance of
commercial paper and borrowings from Exelons intercompany
money pool. At December 31, 2003, PECO participated, along
with Exelon Corporate, ComEd and Generation, in a
$750 million 364-day unsecured revolving credit agreement
and a $750 million three-year unsecured revolving credit
agreement with a group of banks. On July 16, 2004, the
$750 million 364-day facility was replaced with a
$1 billion five-year facility and the $750 million
three-year facility was reduced to $500 million. These
credit agreements, and PECOs participation therein, are
described above under Credit Issues  Exelon
Credit Facility in Exelon Corporation 
Liquidity and Capital Resources.

Capital Structure.PECOs capital structure at September 30, 2004 is
described above under Credit Issues  Capital
Structure in Exelon Corporation 
Liquidity and Capital Resources.

Intercompany Money Pool.A description of the intercompany
money pool, and PECOs participation therein, is set forth
above under Credit Issues  Intercompany Money
Pool in Exelon Corporation  Liquidity and
Capital Resources. During the nine months ended
September 30, 2004, PECO earned less than $1 million
in interest from its investments in the intercompany money pool.

Security Ratings.PECOs access to the capital markets, including the
commercial paper market, and its financing costs in those
markets depend on the securities ratings of the entity that is
accessing the capital markets. On July 22, 2004,
Standard & Poors Ratings Services lowered its
rating on PECOs First Mortgage Bonds from A to A-. None of
PECOs other securities ratings has changed from those set
forth in the 2003 Form 10-K. None of PECOs borrowings
is subject to default or prepayment as a result of a downgrading
of securities although such a downgrading could increase fees
and interest charges under Exelons credit facilities.

146



---



##### 



Shelf Registration.As of September 30, 2004, PECO has a current effective
shelf registration statement for the sale of $550 million
of securities. PECOs ability to sell securities off its
shelf registration statement or to access the private placement
markets will depend on a number of factors at the time of the
proposed sale, including other required regulatory approvals,
PECOs current financial condition, its securities ratings
and market conditions.

Fund Transfer
Restrictions.At September 30,
2004, PECO had retained earnings of $639 million. See
Liquidity and Capital Resources  Credit Issues
Fund Transfer Restrictions under
Managements Discussion and Analysis of Financial
Condition and Results of Operations  PECO in
the 2003 Form 10-K for information regarding fund transfer
restrictions.



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Contractual Obligations, Commercial
    Commitments and Off-Balance Sheet Obligations

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, 2004 were materially
unchanged, other than in the normal course of business, from the
amounts set forth in the 2003 Form 10-K except for the
following:



| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | See Note 9 and 19 to the Combined Notes to
    Consolidated Financial Statements for discussion of material
    changes in PECOs debt from the amounts set forth in the
    2003 Form 10-K.

147



---



##### 






EXELON GENERATION COMPANY, LLC

General

Generation operates as a single segment and
consists of owned and contracted for electric generating
facilities, energy marketing operations, a 50% interest in EXRES
SHC, Inc., the holding company of Sithe and its subsidiaries
and, effective January 1, 2004, the competitive retail
sales business of Exelon Energy Company.

Effective January 1, 2004, Enterprises
competitive retail sales business, Exelon Energy Company, became
part of Generation and has been reflected in Generations
results of operations from that day forward. Generations
results of operations have not been adjusted to reflect Exelon
Energy Company as a part of Generation for 2003. Exelon Energy
Companys results for the three and nine months ended
September 30, 2003 were as follows:

|                                  |  |               |     |               |  |   |     |  
|--------------------------------- |  | ------------- | --- | ------------- |  | - | --- | -
|                                  |  | Three Months  |     | Nine Months  
|                                  |  | Ended         |     | Ended        
|                                  |  | September 30, |     | September 30,
|                                  |  | 2003          |     | 2003         
|                                  |  |               |     |              
|Total revenues                    |  | $             | 146 |               |  | $ | 651 |  
|Intersegment revenues             |  |               |    |               |  |   | 4   |  
|Income (loss) before income taxes |  |               | (5  | )             |  |   | (20 | )
|Income taxes (benefit)            |  |               | (2  | )             |  |   | (8  | )
|Net income (loss)                 |  |               | (3  | )             |  |   | (12 | )

Executive Overview

Financial Results.Generation reported net income of $319 million in the three
months ended September 30, 2004 as compared to a net loss
of $428 million for the same period in 2003, due primarily
to the impairment charge of $573 million, net of income
taxes, related to the long-lived assets of Boston Generating and
a $36 million, net of income taxes, impairment charge
related to Generations investment in Sithe, both taken in
the third quarter of 2003. Generation reported net income of
$567 million as compared to a net loss of $339 million
for the nine months ended September 30, 2004 as compared to
the same period in 2003. This increase was primarily
attributable to the impairment charges related to Boston
Generating and Sithe in 2003, a gain of $52 million, net of
income taxes, recorded on the sale of Boston Generating,
partially offset by operating net losses of $28 million,
net of income taxes, for Boston Generating incurred during the
first five months of 2004, $85 million of net income
attributable to the incremental results of AmerGen, Exelon
Energy and Sithe and $32 million of net income for the
cumulative effect of a change in accounting principle.
Generation also experienced improved results due to increased
realized margins as a result of its successful forward hedging
strategy and increased market prices.

The Exelon Way.See
Managements Discussion and Analysis of Financial
Condition and Results of Operations 
Generation  Executive Summary in the 2003
Form 10-K for a discussion of Generations
implementation of The Exelon Way.

Investment Strategy.On May 25, 2004, Generation completed the sale, transfer
and assignment of ownership of its indirect wholly owned
subsidiary Boston Generating, which owns the companies that own
the Mystic 4-7, Mystic 8 and 9 and Fore River generating
facilities, to a special purpose entity owned by the lenders
under Boston Generatings $1.25 billion credit
facility. The resulting pre-tax gain of $85 million
($52 million after-tax) was recorded within Exelons
Consolidated Statements of Income and Comprehensive Income
during the second quarter of 2004. On September 1, 2004,
Generation completed the transfer of plant operations and power
marketing activities of Boston Generating to an entity
designated by the lenders.

On September 29, 2004, Generation exercised
its call option to acquire Reservoirs 50% interest in
Sithe for $97 million. Generations intent is to fully
divest its interest in Sithe, and Generation is actively
pursuing opportunities to dispose of Sithe. Generation believes
that exercising its call option will provide it with greater
certainty of a timely exit from Sithe on favorable terms and
conditions.

148



---



##### 



In connection with the consolidation of Sithe on
March 31, 2004, Generation recorded assets held for sale
related to Sithes investments in certain hydroelectric
facilities. During the nine months ended September 30,
2004, Sithe completed the sale of certain of its gas,
hydroelectric, and the Australian businesses, which represented
$160 million and $143 million of assets and
liabilities held for sale, respectively, at March 31, 2004,
which resulted in a gain on the sale of these businesses of
$6 million.

Financing
Activities.On September 30,
2004, Generation had $17 million invested in the Exelon
money pool. Also, Generation increased its distributions to
Exelon by approximately $64 million during the first nine
months of 2004 compared to the same period in the prior year.
Generation met its capital resource commitments primarily with
internally generated cash. When necessary, Generation obtains
funds from external sources, including the capital markets, the
intercompany money pool and through bank borrowings.

Operations.Generations nuclear fleet achieved a 94.1% capacity factor
during the nine months ended September 30, 2004 compared to
94.5% during the same period in 2003, primarily as a result of
an increased number of planned outages in 2004 as compared to
2003. As discussed above, Generation transferred plant
operations and power marketing activities of Boston Generating
to a special purpose entity designated by the lenders of the
Boston Generating credit facility on September 1, 2004.

Outlook for the Remainder of 2004 and
Beyond.Generations outlook for
the remainder of 2004 is consistent with the discussion within
Managements Discussion and Analysis of Financial
Condition and Results of Operations 
Generation  Executive Summary in the 2003
Form 10-K.

Results of Operations



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Three Months Ended September 30, 2004
    Compared to Three Months Ended September 30, 2003

|                                  |                                                              |                                   |       |           |       |               |       |       |       |   |       |     |       |  
|--------------------------------- | ------------------------------------------------------------ | --------------------------------- | ----- | --------- | ----- | ------------- | ----- | ----- | ----- | - | ----- | --- | ----- | -
|                                  |                                                              |                                   |       |          
|                                  |                                                              | Three Months                      |       |          
|                                  |                                                              | Ended                             |       |          
|                                  |                                                              | September 30,                     |       |          
|                                  |                                                              |                                   |       | Favorable
|                                  |                                                              | 2004                              |       | 2003      |       | (Unfavorable)
|                                  |                                                              |                                   |       |           |       |              
|Operating revenues                |                                                              | $                                 | 2,253 |           |       | $             | 2,537 |       |       | $ | (284  | )  
|Operating expenses                |                                                              |                                   |       |           |       |               |       |       |       |   |       |    
|                                  | Purchased power                                              |                                   |       | 743       |       |               |       | 1,240 |       |   |       | 497 |      
|                                  | Fuel                                                         |                                   |       | 379       |       |               |       | 449   |       |   |       | 70  |      
|                                  | Impairment of Boston Generating long-lived assets            |                                   |       |          |       |               |       | 945   |       |   |       | 945 |      
|                                  | Operating and maintenance                                    |                                   |       | 432       |       |               |       | 507   |       |   |       | 75  |      
|                                  | Depreciation and amortization                                |                                   |       | 95        |       |               |       | 51    |       |   |       | (44 | )    
|                                  | Taxes other than income                                      |                                   |       | 42        |       |               |       | 28    |       |   |       | (14 | )    
|                                  |                                                              |                                   |       |           |       |               |       |       |       |   |       |    
|                                  |                                                              | Total operating expenses          |       |           | 1,691 |               |       |       | 3,220 |   |       |     | 1,529 |  
|                                  |                                                              |                                   |       |           |       |               |       |       |       |   |       |    
|Operating income (loss)           |                                                              |                                   | 562   |           |       |               | (683  | )     |       |   | 1,245 |    
|                                  |                                                              |                                   |       |           |       |               |       |       |       |   |       |    
|Other income and deductions       |                                                              |                                   |       |           |       |               |       |       |       |   |       |    
|                                  | Interest expense                                             |                                   |       | (45       | )     |               |       | (25   | )     |   |       | (20 | )    
|                                  | Equity in earnings (losses) of unconsolidated
    affiliates |                                   |       | (5        | )     |               |       | 53    |       |   |       | (58 | )    
|                                  | Other, net                                                   |                                   |       | 5         |       |               |       | (53   | )     |   |       | 58  |      
|                                  |                                                              |                                   |       |           |       |               |       |       |       |   |       |    
|                                  |                                                              | Total other income and deductions |       |           | (45   | )             |       |       | (25   | ) |       |     | (20   | )
|                                  |                                                              |                                   |       |           |       |               |       |       |       |   |       |    
|Income (loss) before income taxes |                                                              |                                   | 517   |           |       |               | (708  | )     |       |   | 1,225 |    
|Income taxes                      |                                                              |                                   | 198   |           |       |               | (280  | )     |       |   | (478  | )  
|                                  |                                                              |                                   |       |           |       |               |       |       |       |   |       |    
|Net income (loss)                 |                                                              | $                                 | 319   |           |       | $             | (428  | )     |       | $ | 747   |    
|                                  |                                                              |                                   |       |           |       |               |       |       |       |   |       |    

149



---



##### 





| |                   
| | ------------------
| | Operating Revenues

For the three months ended September 30,
2004 and 2003, Generations sales were as follows:

|                                       |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|-------------------------------------- |  | ------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ----- | --
|                                       |  |               |       |      |  |         
|                                       |  | Three Months  |       |      |  |         
|                                       |  | Ended         |       |      |  |         
|                                       |  | September 30, |       |      |  |         
|                                       |  |               |       |      |  |         
|Revenue                                |  | 2004          |       | 2003 |  | Variance |       | % Change
|                                       |  |               |       |      |  |          |       |         
|Electric sales to affiliates(a)        |  | $             | 1,218 |      |  | $        | 1,339 |          |  | $ | (121 | ) |  |  | (9.0  | )%
|Wholesale and retail electric sales(b) |  |               | 759   |      |  |          | 1,080 |          |  |   | (321 | ) |  |  | (29.7 | )%
|                                       |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Total electric energy sales revenue    |  |               | 1,977 |      |  |          | 2,419 |          |  |   | (442 | ) |  |  | (18.3 | )%
|                                       |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Retail gas sales                       |  |               | 55    |      |  |          |      |          |  |   | 55   |   |  |  | n.m.  |   
|Trading portfolio                      |  |               | 1     |      |  |          | 1     |          |  |   |     |   |  |  |      |   
|Other revenue(c)                       |  |               | 220   |      |  |          | 117   |          |  |   | 103  |   |  |  | 88.0% |   
|                                       |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Total revenue                          |  | $             | 2,253 |      |  | $        | 2,537 |          |  | $ | (284 | ) |  |  | (11.2 | )%
|                                       |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   



---



|    |  |                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail electric sales.
|   
|(b) |  | Includes retail electric sales of Exelon Energy
    Company in 2004.                                                                                                          
|   
|(c) |  | Includes sales related to tolling agreements,
    including Sithe in 2004, and fossil fuel sales.                                                                             

n.m.  not meaningful

|                                       |  |                    |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|-------------------------------------- |  | ------------------ | ------ | ---- |  | -------- | ------ | -------- |  |  | ------ | - |  |  | ----- | --
|                                       |  |                    |        |      |  |         
|                                       |  | Three Months Ended |        |      |  |         
|                                       |  | September 30,      |        |      |  |         
|                                       |  |                    |        |      |  |         
|Sales (in GWhs)                        |  | 2004(c)            |        | 2003 |  | Variance |        | % Change
|                                       |  |                    |        |      |  |          |        |         
|Electric sales to affiliates(a)        |  |                    | 30,040 |      |  |          | 32,237 |          |  |  | (2,197 | ) |  |  | (6.8  | )%
|Wholesale and retail electric sales(b) |  |                    | 21,894 |      |  |          | 29,613 |          |  |  | (7,719 | ) |  |  | (26.1 | )%
|                                       |  |                    |        |      |  |          |        |          |  |  |        |   |  |  |       |   
|Total sales                            |  |                    | 51,934 |      |  |          | 61,850 |          |  |  | (9,916 | ) |  |  | (16.0 | )%
|                                       |  |                    |        |      |  |          |        |          |  |  |        |   |  |  |       |   



---



|    |  |                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail electric sales.                   
|   
|(b) |  | Includes retail electric sales of Exelon Energy
    Company in 2004.                                                                                                                             
|   
|(c) |  | Sales in 2004 do not include 6,919 GWhs, which
    were netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11.

Trading volumes of 7,132 GWhs and 11,086 GWhs for
the three months ended September 30, 2004 and 2003,
respectively, are not included in the table above. The decrease
in trading volume is a result of reduced proprietary trading
activity.

Generations average margin (operating
revenue, less purchased power and fuel expenses) and other
operating data for the three months ended September 30,
2004 and 2003 are as follows:

|                                                             |                                         |               |       |       |  |          |       |       |  |  |       |      |   
|------------------------------------------------------------ | --------------------------------------- | ------------- | ----- | ----- |  | -------- | ----- | ----- |  |  | ----- | ---- | --
|                                                             |                                         |               |       |      
|                                                             |                                         | Three Months  |       |      
|                                                             |                                         | Ended         |       |      
|                                                             |                                         | September 30, |       |      
|                                                             |                                         |               |       |      
|($/MWh)                                                      |                                         | 2004          |       | 2003  |  | % Change
|                                                             |                                         |               |       |       |  |         
|Average revenue                                              |                                         |               |       |       |  |          |       |       |  |  |       |     
|                                                             | Electric sales to affiliates(a)         |               | $     | 40.55 |  |          | $     | 41.54 |  |  |       | (2.4 | )%
|                                                             | Wholesale and retail electric sales(b)  |               |       | 34.67 |  |          |       | 36.47 |  |  |       | (4.9 | )%
|                                                             | Total  excluding the trading portfolio |               |       | 38.07 |  |          |       | 39.11 |  |  |       | (2.7 | )%
|                                                            
|Average supply cost(c)  excluding the
    trading portfolio |                                         | $             | 21.60 |       |  | $        | 27.31 |       |  |  | (20.9 | )%  
|                                                            
|Average margin  excluding the trading
    portfolio         |                                         | $             | 16.47 |       |  | $        | 11.80 |       |  |  | 39.6  | %   

150



---



##### 





---



|    |  |                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail electric sales.
|   
|(b) |  | Includes retail electric sales of Exelon Energy
    Company in 2004.                                                                                                          
|   
|(c) |  | Average supply cost includes purchased power,
    fuel costs, and PPAs with AmerGen in 2003.                                                                                  

Wholesale and Retail Electric
Sales.The changes in
Generations wholesale and retail electric sales for the
three months ended September 30, 2004 compared to the same
period in 2003 consisted of the following:

|                                                |  |            |      |  
|----------------------------------------------- |  | ---------- | ---- | -
|                                                |  | Increase  
|                                                |  | (Decrease)
|                                                |  |           
|Effects of EITF 03-11 adoption                  |  | $          | (272 | )
|Boston Generating                               |  |            | (213 | )
|Exelon Energy Company and AmerGen operations    |  |            | 143  |  
|Other                                           |  |            | 21   |  
|                                                |  |            |      |  
|Decrease in wholesale and retail electric sales |  | $          | (321 | )
|                                                |  |            |      |  

As previously described, the adoption of
EITF 03-11 on January 1, 2004 resulted in the netting
of certain revenues and the associated purchase power and fuel
expense in 2004. The sale of Boston Generating in May 2004
decreased wholesale and retail sales, which was partially offset
by the increase from the acquisition of the remaining 50% of
AmerGen in 2003 and the transfer of Exelon Energy to Generation
as of January 1, 2004.

The increase in other wholesale and retail
electric sales was primarily due to higher demand in the forward
wholesale market as a result of forward hedging and fuel prices,
and higher average market prices driven by coal prices in the
Midwest and higher oil and gas prices in the Mid-Atlantic region
contributed to higher revenues.

Electric Sales to
Affiliates.The decrease in revenue
from sales to affiliates included $69 million in lower
sales to Energy Delivery. The lower sales to Energy Delivery
were primarily due to customers purchasing energy from
alternative electric suppliers and unfavorable weather
conditions in the ComEd and PECO service territories compared to
the prior year.

Additionally, due to the transfer of Exelon
Energy Company to Generation effective January 1, 2004,
sales to Exelon Energy Company are no longer reported as
affiliate revenue by Generation. Revenue from sales to Exelon
Energy Company for the three months ended September 30,
2003 was $51 million.

Retail Gas Sales.Retail gas sales increased $55 million as a result of the
transfer of Exelon Energy Company to Generation as of
January 1, 2004.

Other.Certain other
revenues increased for the three months ended September 30,
2004 as compared to the same period in 2003, primarily due to
the consolidation of Sithes results of operations
beginning April 1, 2004 and higher fuel sales.



| |                         
| | ------------------------
| | Purchased Power and Fuel

Generations supply source is summarized
below:

|                                       |  |               |        |      |  |          |        |          |  |  |         |   |  |  |       |   
|-------------------------------------- |  | ------------- | ------ | ---- |  | -------- | ------ | -------- |  |  | ------- | - |  |  | ----- | --
|                                       |  |               |        |      |  |         
|                                       |  | Three Months  |        |      |  |         
|                                       |  | Ended         |        |      |  |         
|                                       |  | September 30, |        |      |  |         
|                                       |  |               |        |      |  |         
|Supply Source (in GWhs)                |  | 2004          |        | 2003 |  | Variance |        | % Change
|                                       |  |               |        |      |  |          |        |         
|Nuclear generation(a)                  |  |               | 35,303 |      |  |          | 30,152 |          |  |  | 5,151   |   |  |  | 17.1  | % 
|Purchases  non-trading portfolio(b)   |  |               | 13,563 |      |  |          | 24,062 |          |  |  | (10,499 | ) |  |  | (43.6 | )%
|Fossil and hydroelectric generation(c) |  |               | 3,068  |      |  |          | 7,636  |          |  |  | (4,568  | ) |  |  | (59.8 | )%
|                                       |  |               |        |      |  |          |        |          |  |  |         |   |  |  |       |   
|Total supply                           |  |               | 51,934 |      |  |          | 61,850 |          |  |  | (9,916  | ) |  |  | (16.0 | )%
|                                       |  |               |        |      |  |          |        |          |  |  |         |   |  |  |       |   



---



|    |  |                                                                                                              
|--- |  | -------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes AmerGen for 2003. AmerGen generated
    5,151 GWhs during the three months ended September 30, 2004.

151



---



##### 





|    |  |                                                                                                                                                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | 6,919 GWhs of purchased power were netted with
    sales in 2004 as a result of the reclassification of certain
    hedging activities in accordance with EITF 03-11. Includes
    PPAs with AmerGen, which represented 3,725 GWhs in 2003.
|   
|(c) |  | Generation associated with the Boston Generating
    units represented 3,750 GWhs during the three months ended
    September 30, 2003.                                                                                                    

The changes in Generations purchased power
and fuel expense for the three months ended September 30,
2004 compared to the same period in 2003 consisted of the
following:

|                                               |  |            |      |  
|---------------------------------------------- |  | ---------- | ---- | -
|                                               |  | Increase  
|                                               |  | (Decrease)
|                                               |  |           
|Effects of the adoption of EITF 03-11          |  | $          | (272 | )
|Boston Generating                              |  |            | (178 | )
|Mark-to-market adjustments on hedging activity |  |            | (78  | )
|Midwest Generation                             |  |            | (62  | )
|AmerGen and Exelon Energy Company              |  |            | (59  | )
|Sithe                                          |  |            | 52   |  
|Volume                                         |  |            | 17   |  
|Price                                          |  |            | 42   |  
|Other                                          |  |            | (29  | )
|                                               |  |            |      |  
|Decrease in purchased power and fuel expense   |  | $          | (567 | )
|                                               |  |            |      |  

Adoption of
EITF 03-11.The adoption of
EITF 03-11 resulted in a decrease in purchased power and
fuel expense of $272 million.

Boston Generating.The decrease in fuel and purchased power expense for Boston
Generating is due to the sale of the business in May 2004.

Hedging Activity.Mark-to-market gains on hedging activities were $57 million
for the three months ended September 30, 2004 compared to
losses of $21 million for the same period of 2003.

Midwest Generation.The volume of purchased power acquired from Midwest Generation
declined in 2004 as a result of Generation exercising its option
to reduce the capacity purchased from Midwest Generation.

AmerGen and Exelon Energy
Company.As result of
Generations acquisition of the remaining 50% interest in
AmerGen in December 2003, and the transfer of Exelon Energy to
Generation in 2004, purchased power decreased $124 million,
net of fuel expense, which had a significant impact on
Generations average supply cost decrease for the same
period. In prior periods, Generation reported energy purchased
from AmerGen as purchased power expense. Due to the transfer of
Exelon Energy Company to Generation effective January 1,
2004, and the purchase of AmerGen, fuel expense increased
$65 million as fuel purchases made by Exelon Energy Company
and AmerGens nuclear fuel amortization did not previously
affect Generations purchased power and fuel expense.

Sithe.Under the
provisions of FIN No. 46-R, the operating results of Sithe
were included in Generations results of operations
beginning April 1, 2004. See Note 4 of the Combined
Notes to Consolidated Financial Statements for further
discussion of Sithe.

Volume.Generation
experienced increases in purchased power and fuel expense due to
increased market and retail electric sales throughout its
various sales regions. The increase in purchased power was
partially offset by decreased purchased power from Midwest
Generation (see Midwest Generation above for further
information).

Price.The increase
reflects higher market energy prices due to higher natural gas,
oil and coal prices.

152



---



##### 



Other.Other
decreases in purchased power and fuel expense were primarily due
to $20 million of lower transmission expense resulting from
reduced inter-region transmission charges, primarily associated
with ComEds integration into PJM during the second quarter
of 2004.



| |                                                             
| | ------------------------------------------------------------
| | Impairment of the Long Lived Assets of
    Boston Generating

In connection with the decision to transition out
of the ownership of Boston Generating and the projects during
the third quarter of 2003, Generation recorded a long-lived
asset impairment charge of $945 million ($573 million
net of income taxes). See Note 3 of the Combined Notes to
Consolidated Financial Statements for further discussion of the
sale of Generations ownership interest in Boston
Generating.



| |                          
| | -------------------------
| | Operating and Maintenance

The changes in operating and maintenance expense
for the three months ended September 30, 2004 compared to
the same period in 2003 consisted of the following:

|                                                                                 |  |            |     |  
|-------------------------------------------------------------------------------- |  | ---------- | --- | -
|                                                                                 |  | Increase  
|                                                                                 |  | (Decrease)
|                                                                                 |  |           
|Pension, payroll and benefit costs, primarily
    associated with The Exelon Way |  | $          | (51 | )
|DOE settlement(a)                                                                |  |            | (52 | )
|Boston Generating                                                                |  |            | (21 | )
|AmerGen and Exelon Energy Company                                                |  |            | 80  |  
|Sithe                                                                            |  |            | 18  |  
|Other                                                                            |  |            | (49 | )
|                                                                                 |  |            |     |  
|Decrease in operating and maintenance expense                                    |  | $          | (75 | )
|                                                                                 |  |            |     |  



---



|    |  |                                                                                                                                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | See Note 15 of the Combined Notes to
    Consolidated Financial Statements for further discussion of the
    spent nuclear fuel storage settlement agreement reached with the
    DOE.

The decrease in operating and maintenance expense
was primarily due to reductions in payroll-related costs
associated with the implementation of the programs associated
with The Exelon Way, the offset to operating and maintenance
expense resulting from the settlement with the DOE to reimburse
Generation for costs associated with storage of spent nuclear
fuel, the sale of Boston Generating in May 2004, and a
$36 million reduction in the contractual obligation
Generation has to ComEd related to decommissioning obligations.
Generation is required to refund ComEd the amount of
decommissioning trust fund assets in excess of the ARO, if any,
at the completion of the decommissioning of the former ComEd
nuclear units. In the third quarter of 2004, Generation updated
the ARO for the former ComEd plants and was required to impair
an asset established during this process (see Depreciation and
Amortization discussion below). The obligation to ComEd was
reduced as a result of this impairment charge and as such,
operating expense was reduced by an equal amount. These
decreases in operating and maintenance expense were partially
offset by the inclusion of AmerGen, Exelon Energy Company and
Sithes operating results in Generations consolidated
results for 2004.

Nuclear fleet operating data and purchased power
costs data for the three months ended September 30, 2004
and 2003 were as follows:

|                                                                     |  |               |       |      |  |   |       |  
|-------------------------------------------------------------------- |  | ------------- | ----- | ---- |  | - | ----- | -
|                                                                     |  |              
|                                                                     |  | Three Months 
|                                                                     |  | Ended        
|                                                                     |  | September 30,
|                                                                     |  |              
|                                                                     |  | 2004          |       | 2003
|                                                                     |  |               |       |     
|Nuclear fleet capacity factor(a)                                     |  |               | 95.8  | %    |  |   | 95.3  | %
|Nuclear fleet production cost per MWh(a)                             |  | $             | 10.92 |      |  | $ | 11.69 |  
|Average purchased power cost for wholesale
    operations per MWh(b) |  | $             | 54.78 |      |  | $ | 51.53 |  

153



---



##### 





---



|    |  |                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes AmerGen and excludes Salem, which is
    operated by Public Service Enterprise Group Incorporated
    (PSE&G).
|   
|(b) |  | Includes PPAs with AmerGen in 2003.                                                                                    

Higher nuclear capacity factors were primarily
due to four fewer planned refueling outage days. The four fewer
outage days resulted in a $12 million decrease in planned
outage costs for the three months ended September 30, 2004
as compared to the same period in 2003. There was one planned
outage during the three months ended September 30, 2004,
compared to two planned outages during the same period in 2003.
The three months ended September 30, 2004 included four
unplanned outages, compared to nine unplanned outages during the
same period in 2003.

Lower nuclear production costs were primarily due
to the spent fuel storage cost settlement agreement with the DOE
which resulted in the reimbursement of $40 million in spent
fuel storage costs incurred as operating and maintenance
expenses prior to September 30, 2003, and the recording of
$12 million of spent fuel storage operating and maintenance
expenses incurred from October 1, 2003 to
September 30, 2004 within accounts receivable, other.

In the three months ended September 30, 2004
as compared to the three months ended September 30, 2003,
the Quad Cities units operated at pre-EPU generation levels due
to performance issues with their steam dryers. Generation plans
additional expenditures to ensure safe and reliable operations
at the EPU output levels by mid-2005.



| |                              
| | -----------------------------
| | Depreciation and Amortization

The increase in depreciation and amortization
expense for the three months ended September 30, 2004 as
compared to the same period in 2003 was primarily due to the
establishment of the ARC asset for retired nuclear units of
$36 million associated with the third quarter 2004 update
of the nuclear decommissioning ARO. This ARC was immediately
impaired through depreciation expense as this asset was
associated with retired nuclear units that do not have any
remaining useful life. The remaining increase is due to capital
additions and the consolidation of Sithe, AmerGen and Exelon
Energy. These increases were partially offset by a decrease in
depreciation expense related to the Boston Generating
facilities, which were sold in May 2004.



| |                 
| | ----------------
| | Interest Expense

The increase in interest expense was primarily
related to the additional interest expense incurred from the
consolidation of Sithe, the purchase of British Energys
interest in AmerGen, and the issuance of $500 million of
Senior Notes in December 2003. This increase is partially offset
by the reduction in expense related to the sale of Boston
Generating, and its associated construction loan.



| |                                                             
| | ------------------------------------------------------------
| | Equity in Earnings (Losses) of
    Unconsolidated Affiliates

The decrease in equity in earnings of
unconsolidated affiliates was primarily due to a
$47 million decrease resulting from Generations
consolidation of AmerGen in 2004 following the purchase of
British Energys 50% interest in AmerGen in December 2003
and the consolidation of Sithe in 2004. Equity in earnings of
unconsolidated affiliates in 2004 represents equity earnings
from Sithes 49.5% investment in TEG. See Note 3 of
the Combined Notes to Consolidated Financial Statements for
further discussion of Generations purchase of British
Energys 50% interest in AmerGen.



| |           
| | ----------
| | Other, Net

The increase in other income for the three months
ended September 30, 2004 as compared to the same period in
the prior year was primarily due to the $55 million
impairment charge for Generations investment in Sithe
recorded during the third quarter of 2003.

154



---



##### 





| |                          
| | -------------------------
| | Effective Income Tax Rate

The effective income tax rate was 38% for the
three months ended September 30, 2004 compared to 40% for
the same period in 2003. This decrease was primarily
attributable to the impairment charges recorded in 2003 related
to Generations investment in Sithe that resulted in a
pre-tax loss. See Note 12 of the Combined Notes to the
Consolidated Financial Statements for further discussion of the
change in the effective income tax rate.

Results of Operations



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Nine Months Ended September 30, 2004
    Compared to Nine Months Ended September 30, 2003

|                                                                                                                       |                                                              |                                   |       |           |       |               |       |       |       |   |       |       |       | 
|---------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | --------------------------------- | ----- | --------- | ----- | ------------- | ----- | ----- | ----- | - | ----- | ----- | ----- | 
|                                                                                                                       |                                                              |                                   |       |          
|                                                                                                                       |                                                              | Nine Months                       |       |          
|                                                                                                                       |                                                              | Ended                             |       |          
|                                                                                                                       |                                                              | September 30,                     |       |          
|                                                                                                                       |                                                              |                                   |       | Favorable
|                                                                                                                       |                                                              | 2004                              |       | 2003      |       | (Unfavorable)
|                                                                                                                       |                                                              |                                   |       |           |       |              
|Operating revenues                                                                                                     |                                                              | $                                 | 6,153 |           |       | $             | 6,301 |       |       | $ | (148  | )    
|Operating expenses                                                                                                     |                                                              |                                   |       |           |       |               |       |       |       |   |       |      
|                                                                                                                       | Purchased power                                              |                                   |       | 1,825     |       |               |       | 2,881 |       |   |       | 1,056 |      
|                                                                                                                       | Fuel                                                         |                                   |       | 1,427     |       |               |       | 1,156 |       |   |       | (271  | )    
|                                                                                                                       | Impairment of Boston Generating                              |                                   |       |          |       |               |       | 945   |       |   |       | 945   |      
|                                                                                                                       | Operating and maintenance                                    |                                   |       | 1,645     |       |               |       | 1,397 |       |   |       | (248  | )    
|                                                                                                                       | Depreciation and amortization                                |                                   |       | 218       |       |               |       | 142   |       |   |       | (76   | )    
|                                                                                                                       | Taxes other than income                                      |                                   |       | 137       |       |               |       | 115   |       |   |       | (22   | )    
|                                                                                                                       |                                                              |                                   |       |           |       |               |       |       |       |   |       |      
|                                                                                                                       |                                                              | Total operating expenses          |       |           | 5,252 |               |       |       | 6,636 |   |       |       | 1,384 | 
|                                                                                                                       |                                                              |                                   |       |           |       |               |       |       |       |   |       |      
|Operating income                                                                                                       |                                                              |                                   | 901   |           |       |               | (335  | )     |       |   | 1,236 |      
|                                                                                                                       |                                                              |                                   |       |           |       |               |       |       |       |   |       |      
|Other income and deductions                                                                                            |                                                              |                                   |       |           |       |               |       |       |       |   |       |      
|                                                                                                                       | Interest expense                                             |                                   |       | (123      | )     |               |       | (63   | )     |   |       | (60   | )    
|                                                                                                                       | Equity in earnings (losses) of unconsolidated
    affiliates |                                   |       | (7        | )     |               |       | 90    |       |   |       | (97   | )    
|                                                                                                                       | Other, net                                                   |                                   |       | 129       |       |               |       | (238  | )     |   |       | 367   |      
|                                                                                                                       |                                                              |                                   |       |           |       |               |       |       |       |   |       |      
|                                                                                                                       |                                                              | Total other income and deductions |       |           | (1    | )             |       |       | (211  | ) |       |       | 210   | 
|                                                                                                                       |                                                              |                                   |       |           |       |               |       |       |       |   |       |      
|Income (loss) before income taxes, minority
    interest and cumulative effect of changes in accounting
    principles |                                                              |                                   | 900   |           |       |               | (546  | )     |       |   | 1,446 |      
|Income taxes                                                                                                           |                                                              |                                   | 343   |           |       |               | (209  | )     |       |   | (552  | )    
|                                                                                                                       |                                                              |                                   |       |           |       |               |       |       |       |   |       |      
|Income (loss) before minority interest and
    cumulative effect of changes in accounting principles                   |                                                              |                                   | 557   |           |       |               | (337  | )     |       |   | 894   |      
|Minority interest                                                                                                      |                                                              |                                   | 10    |           |       |               | (2    | )     |       |   | 12    |      
|                                                                                                                       |                                                              |                                   |       |           |       |               |       |       |       |   |       |      
|Income (loss) before cumulative effect of
    changes in accounting principles                                         |                                                              |                                   | 567   |           |       |               | (339  | )     |       |   | 906   |      
|Cumulative effect of changes in accounting
    principles                                                              |                                                              |                                   | 32    |           |       |               | 108   |       |       |   | (76   | )    
|                                                                                                                       |                                                              |                                   |       |           |       |               |       |       |       |   |       |      
|Net income (loss)                                                                                                      |                                                              | $                                 | 599   |           |       | $             | (231  | )     |       | $ | 830   |      
|                                                                                                                       |                                                              |                                   |       |           |       |               |       |       |       |   |       |      

155



---



##### 





| |                   
| | ------------------
| | Operating Revenues

For the nine months ended September 30, 2004
and 2003, Generations sales were as follows:

|                                       |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|-------------------------------------- |  | ------------- | ----- | ---- |  | -------- | ----- | -------- |  | - | ---- | - |  |  | ----- | --
|                                       |  |               |       |      |  |         
|                                       |  | Nine Months   |       |      |  |         
|                                       |  | Ended         |       |      |  |         
|                                       |  | September 30, |       |      |  |         
|                                       |  |               |       |      |  |         
|Revenue                                |  | 2004          |       | 2003 |  | Variance |       | % Change
|                                       |  |               |       |      |  |          |       |         
|Electric sales to affiliates(a)        |  | $             | 2,924 |      |  | $        | 3,185 |          |  | $ | (261 | ) |  |  | (8.2  | )%
|Wholesale and retail electric sales(b) |  |               | 2,501 |      |  |          | 2,725 |          |  |   | (224 | ) |  |  | (8.2  | )%
|                                       |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Total electric energy sales revenue    |  |               | 5,425 |      |  |          | 5,910 |          |  |   | (485 | ) |  |  | (8.2  | )%
|                                       |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Retail gas sales                       |  |               | 315   |      |  |          |      |          |  |   | 315  |   |  |  | n.m.  |   
|Trading portfolio                      |  |               | (2    | )    |  |          | (1    | )        |  |   | (1   | ) |  |  | 100.0 | % 
|Other revenue(c)                       |  |               | 415   |      |  |          | 392   |          |  |   | 23   |   |  |  | 5.9   | % 
|                                       |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   
|Total revenue                          |  | $             | 6,153 |      |  | $        | 6,301 |          |  | $ | (148 | ) |  |  | (2.3  | )%
|                                       |  |               |       |      |  |          |       |          |  |   |      |   |  |  |       |   



---



|    |  |                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail electric sales.
|   
|(b) |  | Includes retail electric sales of Exelon Energy
    Company in 2004.                                                                                                          
|   
|(c) |  | Includes sales related to tolling agreements,
    including Sithe in 2004, and fossil fuel sales.                                                                             

n.m.  not meaningful

|                                       |  |               |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|-------------------------------------- |  | ------------- | ------- | ---- |  | -------- | ------- | -------- |  |  | ------- | - |  |  | ----- | --
|                                       |  |               |         |      |  |         
|                                       |  | Nine Months   |         |      |  |         
|                                       |  | Ended         |         |      |  |         
|                                       |  | September 30, |         |      |  |         
|                                       |  |               |         |      |  |         
|Sales (in GWhs)                        |  | 2004          |         | 2003 |  | Variance |         | % Change
|                                       |  |               |         |      |  |          |         |         
|Electric sales to affiliates(a)        |  |               | 83,637  |      |  |          | 89,700  |          |  |  | (6,063  | ) |  |  | (6.8  | )%
|Wholesale and retail electric sales(b) |  |               | 70,853  |      |  |          | 80,877  |          |  |  | (10,024 | ) |  |  | (12.4 | )%
|                                       |  |               |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|Total sales                            |  |               | 154,490 |      |  |          | 170,577 |          |  |  | (16,087 | ) |  |  | (9.4  | )%
|                                       |  |               |         |      |  |          |         |          |  |  |         |   |  |  |       |   



---



|    |  |                                                                                                                                                                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail electric sales.                                                                                        
|   
|(b) |  | Sales in 2004 do not include 18,557 GWhs which
    were netted with purchased power GWhs as a result of the
    reclassification of certain hedging activities in accordance
    with EITF 03-11. Includes retail electric sales of Exelon
    Energy Company in 2004.

Trading volumes of 17,569 GWhs and 28,532 GWhs
for the nine months ended September 30, 2004 and 2003,
respectively, are not included in the table above. The decrease
in trading volume is a result of reduced proprietary trading
activity.

Generations average margin (operating
revenue, less purchased power and fuel expense) and other
operating data for the nine months ended September 30, 2004
and 2003 are as follows:

|                                                             |                                         |               |       |       |  |          |       |       |  |  |       |      |   
|------------------------------------------------------------ | --------------------------------------- | ------------- | ----- | ----- |  | -------- | ----- | ----- |  |  | ----- | ---- | --
|                                                             |                                         |               |       |      
|                                                             |                                         | Nine Months   |       |      
|                                                             |                                         | Ended         |       |      
|                                                             |                                         | September 30, |       |      
|                                                             |                                         |               |       |      
|($/MWh)                                                      |                                         | 2004          |       | 2003  |  | % Change
|                                                             |                                         |               |       |       |  |         
|Average revenue                                              |                                         |               |       |       |  |          |       |       |  |  |       |     
|                                                             | Electric sales to affiliates(a)         |               | $     | 34.96 |  |          | $     | 35.51 |  |  |       | (1.5 | )%
|                                                             | Wholesale and retail electric sales(b)  |               |       | 35.30 |  |          |       | 33.69 |  |  |       | 4.8  | % 
|                                                             | Total  excluding the trading portfolio |               |       | 35.12 |  |          |       | 34.65 |  |  |       | 1.4  | % 
|Average supply cost(c)  excluding the
    trading portfolio |                                         | $             | 21.05 |       |  | $        | 23.67 |       |  |  | (11.1 | )%  
|Average margin  excluding the trading
    portfolio         |                                         | $             | 14.07 |       |  | $        | 10.98 |       |  |  | 28.1  | %   

156



---



##### 





---



|    |  |                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes sales to Exelon Energy Company during
    2003. As of January 1, 2004, Exelon Energy Company became
    part of Generation and is presented as retail electric sales.
|   
|(b) |  | Includes retail electric sales of Exelon Energy
    Company in 2004.                                                                                                          
|   
|(c) |  | Average supply cost includes purchased power,
    fuel costs, and PPAs with AmerGen in 2003.                                                                                  

Wholesale and Retail Electric
Sales.The changes in
Generations wholesale and retail electric sales for the
nine months ended September 30, 2004 compared to the same
period in 2003, consisted of the following:

|                                                |  |            |      |  
|----------------------------------------------- |  | ---------- | ---- | -
|                                                |  | Increase  
|                                                |  | (Decrease)
|                                                |  |           
|Effects of EITF 03-11 adoption(a)               |  | $          | (715 | )
|Boston Generating                               |  |            | (159 | )
|Exelon Energy Company and AmerGen operations    |  |            | 325  |  
|Other                                           |  |            | 325  |  
|                                                |  |            |      |  
|Decrease in wholesale and retail electric sales |  | $          | (224 | )
|                                                |  |            |      |  



---



|    |  |                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------
|(a) |  | Does not include $9 million of
    EITF 03-11 adjustments related to fuel sales that are
    included in other revenues.

As previously described, the adoption of
EITF 03-11 on January 1, 2004 resulted in the netting
of certain revenues and the associated purchase power and fuel
expense in 2004. The sale of Boston Generating in May 2004
decreased wholesale and retail sales, which was partially offset
by the increase from the acquisition of the remaining 50% of
AmerGen in 2003 and the transfer of Exelon Energy to Generation
as of January 1, 2004.

The increase in other wholesale and retail
electric sales was primarily due to higher demand in the forward
wholesale market as a result of forward hedging and fuel prices.
Higher average market prices in the Midwest region were
primarily driven higher by higher coal prices, while the
Mid-Atlantic region market prices were driven primarily by
higher oil and gas prices.

Electric Sales to
Affiliates.Revenue from sales to
affiliates decreased primarily as a result of Exelon Energy
Companys assets and operations being transferred to
Generation effective January 1, 2004. Sales to Exelon
Energy Company are no longer reported as affiliate revenue by
Generation. Revenue from sales to Exelon Energy Company for the
nine months ended September 30, 2003 was $159 million.

The decrease in revenue from sales to affiliates
included $108 million in lower sales to Energy Delivery.
The lower sales to Energy Delivery were primarily due to
customers purchasing energy from an AES and unfavorable weather
conditions in the ComEd and PECO service territories compared to
the prior year.

Retail Gas Sales.Retail gas sales increased $315 million as a result of the
transfer of Exelon Energy Company to Generation as of
January 1, 2004.

Other.Certain other
revenues increased for the nine months ended September 30,
2004 as compared to the same period in 2003, primarily due to
the consolidation of Sithes results of operations
beginning April 1, 2004.



| |                         
| | ------------------------
| | Purchased Power and Fuel

Generations supply source is summarized
below:

|                                     |  |               |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|------------------------------------ |  | ------------- | ------- | ---- |  | -------- | ------- | -------- |  |  | ------- | - |  |  | ----- | --
|                                     |  |               |         |      |  |         
|                                     |  | Nine Months   |         |      |  |         
|                                     |  | Ended         |         |      |  |         
|                                     |  | September 30, |         |      |  |         
|                                     |  |               |         |      |  |         
|Supply Source (in GWhs)              |  | 2004          |         | 2003 |  | Variance |         | % Change
|                                     |  |               |         |      |  |          |         |         
|Nuclear generation(a)                |  |               | 102,968 |      |  |          | 89,101  |          |  |  | 13,867  |   |  |  | 15.6  | % 
|Purchases  non-trading portfolio(b) |  |               | 37,158  |      |  |          | 63,435  |          |  |  | (26,277 | ) |  |  | (41.4 | )%
|Fossil and hydroelectric generation  |  |               | 14,364  |      |  |          | 18,041  |          |  |  | (3,677  | ) |  |  | (20.4 | )%
|                                     |  |               |         |      |  |          |         |          |  |  |         |   |  |  |       |   
|Total supply                         |  |               | 154,490 |      |  |          | 170,577 |          |  |  | (16,087 | ) |  |  | (9.4  | )%
|                                     |  |               |         |      |  |          |         |          |  |  |         |   |  |  |       |   

157



---



##### 





---



|    |  |                                                                                                                                                                                                                                         
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Excludes AmerGen for 2003. AmerGen generated
    14,912 GWhs during the nine months ended September 30, 2004.                                                                                                                           
|   
|(b) |  | 18,557 GWhs were netted with purchased power GWhs
    in 2004 as a result of the reclassification of certain hedging
    activities in accordance with EITF 03-11. Includes PPAs
    with AmerGen, which represented 9,944 GWhs in 2003.

The changes in Generations purchased power
and fuel expense for the nine months ended September 30,
2004 compared to the same period in 2003 consisted of the
following:

|                                               |  |            |      |  
|---------------------------------------------- |  | ---------- | ---- | -
|                                               |  | Increase  
|                                               |  | (Decrease)
|                                               |  |           
|Effects of the adoption of EITF 03-11          |  | $          | (724 | )
|Midwest Generation                             |  |            | (110 | )
|Boston Generating                              |  |            | (103 | )
|Mark-to-market adjustments on hedging activity |  |            | (57  | )
|Price                                          |  |            | (31  | )
|Volume                                         |  |            | 181  |  
|Sithe                                          |  |            | 113  |  
|AmerGen and Exelon Energy Company              |  |            | 43   |  
|Other                                          |  |            | (97  | )
|                                               |  |            |      |  
|Decrease in purchased power and fuel expense   |  | $          | (785 | )
|                                               |  |            |      |  

Adoption of
EITF 03-11.The adoption of
EITF 03-11 resulted in a decrease in purchased power and
fuel expense of $724 million.

Midwest Generation.The volume of purchased power acquired from Midwest Generation
declined in 2004 as a result of Generation exercising its option
to reduce the capacity purchased from Midwest Generation, as
announced in 2003.

Boston Generating.The decrease in fuel and purchased power expense for Boston
Generating is due primarily to the disposition of Boston
Generating in May 2004.

Hedging Activity.Mark-to-market gains on hedging activities were $39 million
for the nine months ended September 30, 2004 compared to
losses of $18 million for the same period in 2003.

Price.The decrease
primarily reflects lower average fossil fuel costs of
$31 million during the nine months ended September 30,
2004 as compared to the same period in 2003. Natural gas, oil
and coal prices all decreased during this period.

Volume.Generation
experienced increases in purchased power and fuel expense due to
increased market and retail electric sales throughout its
various sales regions.

Sithe.Under the
provisions of FIN No. 46-R, the operating results of Sithe
were included in Generations results of operations
beginning April 1, 2004. See Note 4 of the Combined
Notes to Consolidated Financial Statements for further
discussion of Sithe.

AmerGen and Exelon Energy
Company.As result of
Generations acquisition of the remaining 50% interest in
AmerGen in December 2003, purchased power decreased $284
million, net of fuel expense, which had a significant impact on
Generations average supply cost decrease for the same
period. In prior periods, Generation reported energy purchased
from AmerGen as purchased power expense. Due to the transfer of
Exelon Energy Company to Generation effective January 1,
2004, fuel expense increased $326 million as fuel purchases
made by Exelon Energy Company did not previously affect
Generations purchased power and fuel expense.

Other.Other
decreases in purchased power and fuel were primarily due to
$66 million in lower transmission expense resulting from
reduced inter-region transmission as a result of ComEds
integration into PJM in the second quarter of 2004, and
$16 million of additional nuclear fuel amortization
recorded in 2003 as a result of the replacement of
underperforming fuel at the Quad Cities Station.

158



---



##### 





| |                                                             
| | ------------------------------------------------------------
| | Impairment of the Long-Lived Assets of
    Boston Generating

In connection with the decision to transition out
of the ownership of Boston Generating and the projects during
the third quarter of 2003, Generation recorded a long-lived
asset impairment charge of $945 million ($573 million
net of income taxes). See Note 3 of the Combined Notes to
Consolidated Financial Statements for further discussion of the
sale of Generations ownership interest in Boston
Generating.



| |                          
| | -------------------------
| | Operating and Maintenance

The changes in operating and maintenance expense
for the nine months ended September 30, 2004 compared to
the same period in 2003 consisted of the following:

|                                                                      |  |            |     |  
|--------------------------------------------------------------------- |  | ---------- | --- | -
|                                                                      |  | Increase  
|                                                                      |  | (Decrease)
|                                                                      |  |           
|AmerGen and Exelon Energy Company(a)                                  |  | $          | 277 |  
|Sithe                                                                 |  |            | 40  |  
|Refueling outage costs                                                |  |            | 28  |  
|Boston Generating                                                     |  |            | 14  |  
|Pension, payroll and benefit costs associated
    with The Exelon Way |  |            | (68 | )
|DOE Settlement(b)                                                     |  |            | (52 | )
|Other                                                                 |  |            | 9   |  
|                                                                      |  |            |     |  
|Increase in operating and maintenance expense                         |  | $          | 248 |  
|                                                                      |  |            |     |  



---



|    |  |                                                                                                                                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Includes refueling outage expense of
    $24 million at AmerGen.                                                                                                                      
|   
|(b) |  | See Note 15 of the Combined Notes to
    Consolidated Financial Statements for further discussion of the
    spent nuclear fuel storage settlement agreement reached with the
    DOE.

The increase in operating and maintenance expense
was primarily due to the inclusion of AmerGen, Exelon Energy
Company, and Sithes operating results in Generations
consolidated results for 2004. This increase was partially
offset with reductions in payroll-related costs due to
implementation of the programs associated with The Exelon Way,
and the settlement with the DOE to reimburse Generation for
costs associated with storage of spent nuclear fuel.

Nuclear fleet operating data and purchased power
costs data for the nine months ended September 30, 2004 and
2003 were as follows:

|                                                                     |  |               |       |      |  |   |       |  
|-------------------------------------------------------------------- |  | ------------- | ----- | ---- |  | - | ----- | -
|                                                                     |  |              
|                                                                     |  | Nine Months  
|                                                                     |  | Ended        
|                                                                     |  | September 30,
|                                                                     |  |              
|                                                                     |  | 2004          |       | 2003
|                                                                     |  |               |       |     
|Nuclear fleet capacity factor(a)                                     |  |               | 94.1  | %    |  |   | 94.5  | %
|Nuclear fleet production cost per MWh(a)                             |  | $             | 11.99 |      |  | $ | 12.16 |  
|Average purchased power cost for wholesale
    operations per MWh(b) |  | $             | 49.11 |      |  | $ | 45.42 |  



---



|    |  |                                                                     
|--- |  | --------------------------------------------------------------------
|(a) |  | Includes AmerGen and excludes Salem, which is
    operated by PSE&G.
|   
|(b) |  | Includes PPAs with AmerGen in 2003.                                 

Lower nuclear capacity factors were primarily due
to 51 additional planned refueling outage days, resulting in a
$34 million increase in planned outage costs in the nine
months ended September 30, 2004 as compared to the same
period in 2003. There were six planned outages during the nine
months ended September 30, 2004, compared to five planned
outages during the same period in 2003. The nine months ended
September 30, 2004 included 16 unplanned outages compared
to 20 unplanned outages during the same period in 2003. Nuclear
capacity factors were also affected by Quad Cities operating at
lower than anticipated capacity levels.

159



---



##### 



The lower nuclear production cost is primarily
due to the spent fuel storage cost settlement agreement with the
DOE which resulted in the reimbursement of $40 million in
spent fuel storage costs incurred as operating and maintenance
expenses prior to September 30, 2003, and the recording of
$12 million of spent fuel storage operating and maintenance
expenses incurred from October 1, 2003 to
September 30, 2004 within accounts receivable, other.

The Quad Cities units have intermittently been
operating at pre-EPU generation levels due to performance issues
with their steam dryers. Generation plans additional
expenditures to ensure safe and reliable operations at the EPU
output levels by mid-2005.



| |                              
| | -----------------------------
| | Depreciation and Amortization

The increase in depreciation and amortization
expense for the nine months ended September 30, 2004 as
compared to the same period in 2003 was primarily due to the
establishment of the ARC asset for retired nuclear units of
$36 million associated with the third quarter 2004 update
of the nuclear decommissioning ARO. This ARC was immediately
impaired through depreciation expense as this asset was
associated with retired nuclear units that do not have any
remaining useful life. The remaining increase is due to capital
additions and the consolidation of Sithe, AmerGen and Exelon
Energy. These increases were partially offset by a decrease in
depreciation expense related to the Boston Generating
facilities, which were sold in May 2004.



| |                 
| | ----------------
| | Interest Expense

The increase in interest expense was primarily
due to the issuance of $500 million of Senior Notes in
December 2003 and additional interest expense incurred as a
result of the consolidation of Sithe. This increase is partially
offset by the reduction in expense related to the sale of Boston
Generating, and its associated construction loan.



| |                                                             
| | ------------------------------------------------------------
| | Equity in Earnings (Losses) of
    Unconsolidated Affiliates

The decrease in equity in earnings of
unconsolidated affiliates was primarily due to an
$84 million decrease resulting from Generations
consolidation of AmerGen in 2004 following the purchase of
British Energys 50% interest in AmerGen in December 2003
and the consolidation of Sithe in 2004. Equity in earnings of
unconsolidated affiliates in 2004 represents Sithes equity
earnings related to its 49.5% investment in TEG and the equity
earnings of Sithe prior to the consolidation. See Note 3 of
the Combined Notes to Consolidated Financial Statements for
further discussion of Generations purchase of British
Energys 50% interest in AmerGen.



| |           
| | ----------
| | Other, Net

The increase in other income for the nine months
ended September 30, 2004 as compared to the same period in
the prior year was primarily due to the $85 million gain
($52 million, net of taxes) on the disposal of Boston
Generating recorded in 2004, versus a $255 million
impairment charge related to the Generations investment in
Sithe Energies recorded in 2003.



| |                          
| | -------------------------
| | Effective Income Tax Rate

The effective income tax rate was 38% for the
nine months ended September 30, 2004 and 2003. See
Note 12 of the Combined Notes to the Consolidated Financial
Statements for further discussion of the effective income tax
rate.



| |                                                          
| | ---------------------------------------------------------
| | Cumulative Effect of Changes in Accounting
    Principles

Net income for the nine months ended
September 30, 2004 reflects income of $32 million, net
of income taxes, related to the consolidation of Sithe pursuant
to FIN No. 46-R which resulted from the reversal of certain
guarantees on behalf of Sithe that had been recorded at
Generation prior to December 31, 2003, while

160



---



##### 



net income for the nine months ended
September 30, 2003 reflects income of $108 million,
net of income taxes, for the adoption of SFAS No. 143.
See Note 2 of the Combined Notes to Consolidated Financial
Statements for further information regarding the adoptions of
FIN No. 46-R and SFAS No. 143.


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 financing, including the issuance of commercial paper,
participation in the intercompany money pool or capital
contributions from Exelon. Generations access to external
financing at reasonable terms is dependent on its credit ratings
and general business conditions, as well as that of the utility
industry in general. If these conditions deteriorate to where
Generation no longer has access to the capital markets at
reasonable terms, Generation has access to a revolving credit
facility. See the Credit Issues section of
Liquidity and Capital Resources for further
discussion. Capital resources are used primarily to fund
Generations capital requirements, including construction,
retirement of debt, the payment of distributions to Exelon,
contributions to Exelons pension plans and investments in
new and existing ventures. Future acquisitions could require
external financing or borrowings or capital contributions from
Exelon.



| |                                         
| | ----------------------------------------
| | Cash Flows from Operating
    Activities

Generations cash flows from operating
activities primarily result from the sale of electric energy to
wholesale customers, including Generations affiliated
companies. Generations future cash flows from operating
activities will be affected by future demand and market prices
for energy and its ability to continue to produce and supply
power at competitive costs. Cash flows from operations have been
and are expected to continue to provide a reliable, steady
source of cash flows, sufficient to meet operating and capital
expenditures requirements for the foreseeable future.

Cash flows from operations for the nine months
ended September 30, 2004 and 2003 were $1,508 million
and $1,141 million, respectively. Changes in
Generations cash flows from operations are generally
consistent with changes in its results of operations, as further
adjusted by changes in working capital in the normal course of
business and non-cash charges.

In addition to the items mentioned in
Results of Operations, Generations operating
cash flows for the nine months ended September 30, 2004 and
2003 were affected by the following items:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Receivables from Exelon Delivery under the PPA
    increased $57 million for the nine months ended
    September 30, 2004, compared to a decrease of
    $178 million during the same period in 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Net cash received for collateral for power
    marketing activities for the nine months ended
    September 30, 2004 was $59 million, compared to
    $51 million paid during the same period in 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | At September 30, 2004, Generation was in a
    net income tax receivable position compared to a net income tax
    payable position at September 30, 2003. Comparability of
    the cash flows for the two periods is affected significantly by
    this change in the income tax position. The primary driver of
    the increase in cash from the changes in receivables during the
    nine months ended September 30, 2004 was the income tax
    provision of approximately $185 million and the receipt of
    a $160 million income tax refund during the third quarter
    of 2004, partially offset by the payment of approximately
    $64 million for income taxes.
|
| |  | Generation participates in Exelons defined
    benefit pension plans. Discretionary contributions to the plans
    were $171 million for the nine months ended
    September 30, 2004 compared to $147 million for the
    same period in 2003. Generation also contributed $8 million
    to the pension plan to satisfy ERISA minimum funding
    requirements. See Note 11 of the Combined Notes to
    Consolidated Financial Statements for further information
    regarding pension and postretirement benefits.                                                                                                                                                      

161



---



##### 





| |                                         
| | ----------------------------------------
| | Cash Flows from Investing
    Activities

Cash flows used in investing activities were
$732 million and $797 million for the nine months
ended September 30, 2004 and 2003, respectively.
Generations capital expenditures for the nine months ended
September 30, 2004 and 2003 were $608 million and
$641 million, respectively. Generations capital
expenditures represent additions and upgrades to existing
facilities (including material condition improvements during
nuclear refueling outages) and nuclear fuel. Capital
expenditures for the nine months ended September 30, 2004
and 2003 are stated net of the settlement of litigation with the
DOE of $20 million and net of proceeds from liquidated
damages of $92 million, respectively. Generation estimates
that it will spend approximately $941 million in total
capital expenditures in 2004. Generation anticipates that
nuclear refueling outages will increase from eight in 2003 to
nine in 2004. Generations capital expenditures are
expected to be funded by internally generated funds.

Cash flows from other investing activities in
2004 were primarily attributable to the following:



| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Proceeds from the sale of three gas turbines of
    $42 million.                                                                                                            
|
| |  | Collection of a $20 million note receivable
    related to the sale of certain businesses of Sithe during the
    fourth quarter of 2003 and the first quarter of 2004.     
|
| |  | During the second and third quarters of 2004,
    Sithe received $24 million of cash proceeds from the
    disposition of businesses previously classified as held for sale.



| |                                         
| | ----------------------------------------
| | Cash Flows from Financing
    Activities

Cash flows used in financing activities were
$664 million and $299 million for the nine months
ended September 30, 2004 and 2003, respectively. The
increase in cash flows used in financing activities was
primarily a result of a net repayment of intercompany borrowings
of $445 million during the nine months ended
September 30, 2004, compared to a $178 million net
repayment of intercompany borrowings during the same period in
2003, a $54 million increase in distributions to Exelon
during the nine months ended September 30, 2004 as compared
to the same period in 2003, an increase in the repayment of long
term debt of $25 million during the nine months ended
September 30, 2004 as compared to the same period in 2003,
and the partial repayment of the acquisition note payable to
Sithe of $27 million during the nine months ended
September 30, 2004.

From time to time and as market conditions
warrant, Generation may engage in long-term debt repurchases via
tender offers, open market acquisitions or other viable options
to preserve the integrity of Generations balance sheet.



| |              
| | -------------
| | Credit Issues

Exelon Credit
Facility.Generation meets its
short-term liquidity requirements primarily through the issuance
of commercial paper and intercompany borrowings from
Exelons intercompany money pool. At December 31,
2003, Generation participated, along with Exelon Corporate,
ComEd and PECO, in a $750 million 364-day unsecured
revolving credit agreement and a $750 million three-year
unsecured revolving credit agreement with a group of banks. On
July 16, 2004, the $750 million 364-day facility was
replaced with a $1 billion five-year facility and the
$750 million three-year facility was reduced to
$500 million. These credit agreements, and
Generations participation therein, are described above
under Credit Issues  Exelon Credit
Facility in Exelon Corporation  Liquidity
and Capital Resources.

Capital Structure.Generations capital structure at September 30, 2004
is described above under Credit Issues  Capital
Structure in Exelon Corporation 
Liquidity and Capital Resources.

Intercompany Money
Pool.A description of the
intercompany money pool, and Generations participation
therein, is set forth above under Credit
Issues  Intercompany Money Pool in Exelon
Corporation  Liquidity and Capital Resources.
For the nine months ended September 30, 2004, Generation
paid $2 million in interest to the money pool.

162



---



##### 



Sithe Long-Term
Debt.A description of the Sithe
long-term debt consolidated as a result of the adoption of FIN
No. 46-R is set forth above under Credit
Issues  Sithe Long-Term Debt in Exelon
Corporation  Liquidity and Capital Resources.

Security Ratings.See Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and
Capital Resources in the 2003 Form 10-K for a
discussion of Generations security ratings.

Fund Transfer
Restrictions.At September 30,
2004, Generation had undistributed earnings of
$1,031 million. See Liquidity and Capital
Resources  Credit Issues  Fund Transfer
Restrictions under Managements Discussion and
Analysis of Financial Condition and Results of
Operations  Generation in the 2003
Form 10-K for information regarding fund transfer
restrictions.



| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Contractual Obligations, Commercial
    Commitments and Off-Balance Sheet Obligations

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, 2004 were materially
unchanged, other than in the normal course of business, from the
amounts set forth in the 2003 Form 10-K except for the
following:



| |   |                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In connection with the transfer of Exelon Energy
    Company to Generation effective January 1, 2004, Generation
    acquired $162 million in energy marketing contract
    guarantees.                                                                                         
|
| |  | Generation acquired a $50 million letter of
    credit to support the contractual obligations of Sithe and its
    subsidiaries and issued a $45 million of letter of credit
    for Power Team to cover collateral calls that had previously
    been met with cash collateral.
|
| |  | On September 29, 2004, Generation exercised
    its call option to acquire Reservoirs 50% interest in
    Sithe for $97 million. The closing of the call is subject
    to state and Federal regulatory approvals.                                                             






|        |                                                              
|------- | -------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosure About
    Market Risk

Exelon is exposed to market risks associated with
commodity prices, credit, interest rates and equity prices. The
inherent risk in market-sensitive instruments and positions is
the potential loss arising from adverse changes in commodity
prices, counterparty credit, interest rates and equity security
prices. Exelons Risk Management Committee (RMC) sets
forth risk management policy and objectives and establishes
procedures for risk assessment, control and valuation,
counterparty credit approval, and the monitoring and reporting
of derivative activity and risk exposures. The RMC is chaired by
the chief risk officer and includes the chief financial officer,
general counsel, treasurer, vice president of corporate
planning, vice president of strategy, vice president of audit
services and officers from each of the business units. The RMC
reports to the Exelon Board of Directors on the scope of
Exelons derivative and risk management activities.

Commodity Price Risk



| |           
| | ----------
| | Generation

Commodity price risk is associated with market
price movements resulting from excess or insufficient
generation, changes in fuel costs, market liquidity and other
factors. Trading activities and non-trading marketing activities
include the purchase and sale of electric capacity, energy and
fossil fuels, including oil, gas, coal, and emission allowances.
The availability and prices of energy and energy-related
commodities are subject to fluctuations due to factors such as
weather, governmental environmental policies, changes in supply
and demand, state and Federal regulatory policies and other
events.



| |                                             
| | --------------------------------------------
| | Normal Operations and Hedging
    Activities

Electricity available from Generations
owned or contracted generation supply in excess of its
obligations to customers, including Energy Deliverys
retail load, is sold into the wholesale markets. To reduce price
risk caused by market fluctuations, Generation enters into
physical contracts as well as derivative contracts,

163



---



##### 



including forwards, futures, swaps, and options,
with approved counterparties to hedge its anticipated exposures.
Generation has an estimated 93% hedge ratio in 2004 for its
energy marketing portfolio. This hedge ratio represents the
percentage of Generations forecasted aggregate annual
generation supply that is committed to firm sales, including
sales to Energy Delivery to serve its retail load. Energy
Deliverys retail load assumptions are based on forecasted
average demand. The hedge ratio is not fixed and will vary from
time to time depending upon market conditions, demand, energy
market option volatility and actual loads. During peak periods,
the amount hedged declines to meet Generations commitment
to Energy Delivery. Market price risk exposure is the risk of a
change in the value of unhedged positions. Absent any
opportunistic efforts to mitigate market price exposure, the
estimated market price exposure for Generations
non-trading portfolio associated with a 10% reduction in the
annual average around-the-clock market price of electricity is
approximately a $6 million decrease in net income for the
remainder of 2004. This sensitivity assumes a 93% hedge ratio
and that price changes occur evenly throughout the year and
across all markets. The sensitivity also assumes a static
portfolio. Generation expects to actively manage its portfolio
to mitigate market price exposure. Actual results could differ
depending on the specific timing of, and markets affected by,
price changes, as well as future changes in Generations
portfolio.




| |                               
| | ------------------------------
| | Proprietary Trading Activities

Generation uses financial contracts for
proprietary trading purposes. Proprietary trading includes all
contracts entered into purely to profit from market price
changes as opposed to hedging an exposure. These activities are
accounted for on a mark-to-market basis. The proprietary trading
activities are a complement to Generations energy
marketing portfolio but represent a very small portion of its
overall energy marketing activities. For example, the limit on
open positions in electricity for any forward month represents
less than one percent of Generations owned and contracted
supply of electricity. Generation expects this level of
proprietary trading activity to continue in the future. The
results of the trading portfolio for the nine months ended
September 30, 2004 was a loss of $1 million (before
taxes) which included a $1 million unrealized
mark-to-market loss. The daily Value-at-Risk (VaR) on
proprietary trading activity averaged $200,000 of exposure over
the last 18 months. Because of the diminutive nature of the
proprietary trading portfolio in comparison to Generations
total gross margin of $2,901 million, Generation has not
segregated proprietary trading activity in the following tables.
The trading portfolio is subject to a risk management policy
that includes stringent risk management limits, including
volume, stop-loss and VaR limits to manage exposure to market
risk. Additionally, the Exelon risk management group and
Exelons RMC monitor the financial risks of the power
marketing activities.

Generations energy contracts are accounted
for under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities
(SFAS No. 133). Most non-trading contracts qualify for
the normal purchases and normal sales exemption to
SFAS No. 133 discussed in Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Critical Accounting Policies and
Estimates in Exelons 2003 Form 10-K. Those that
do not are recorded as assets or liabilities on the balance
sheet at fair value. Changes in the fair value of qualifying
hedge contracts are recorded in Other Comprehensive Income
(OCI), and gains and losses are recognized in earnings when the
underlying transaction occurs. Changes in the fair value of
derivative contracts that do not meet hedge criteria under
SFAS No. 133 and the ineffective portion of hedge
contracts are recognized in current earnings.

The following detailed presentation of the
trading and marketing activities of Generation is included to
address the recommended disclosures by the energy
industrys Committee of Chief Risk Officers (CCRO).

The following table provides detail on changes in
Generations mark-to-market net asset or liability balance
sheet position from January 1, 2004 to September 30,
2004. It indicates the drivers behind changes in the balance
sheet amounts. This table incorporates the mark-to-market
activities that are immediately recorded in earnings as well as
the settlements from OCI to earnings and changes in fair value
for the hedging

164



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##### 



activities that are recorded in Accumulated Other
Comprehensive Income on the September 30, 2004 Consolidated
Balance Sheet.


|                                                                                         |  |   |      |  
|---------------------------------------------------------------------------------------- |  | - | ---- | -
|(In millions)                                                                            |  |  
|                                                                                         |  |  
|Total mark-to-market energy contract net assets
    (liabilities) at January 1, 2004     |  | $ | (216 | )
|Total change in fair value during 2004 of
    contracts recorded in earnings             |  |   | 210  |  
|Reclassification to realized at settlement of
    contracts recorded in earnings         |  |   | (193 | )
|Reclassification to realized at settlement from
    OCI                                  |  |   | 367  |  
|Effective portion of changes in fair
    value  recorded in OCI                         |  |   | (536 | )
|Purchase/sale/disposal of existing contracts or
    portfolios subject to mark-to-market |  |   | 147  |  
|                                                                                         |  |   |      |  
|Total mark-to-market energy contract net assets
    (liabilities) at September 30, 2004  |  | $ | (221 | )
|                                                                                         |  |   |      |  

The following table details the balance sheet
classification of the mark-to-market energy contract net assets
(liabilities) recorded as of September 30, 2004 and
December 31, 2003:

|                                                                  |                                                  |               |      |              |   |   |      |      |  
|----------------------------------------------------------------- | ------------------------------------------------ | ------------- | ---- | ------------ | - | - | ---- | ---- | -
|                                                                  |                                                  | September 30, |      | December 31,
|(In millions)                                                     |                                                  | 2004          |      | 2003        
|                                                                  |                                                  |               |      |             
|Current assets                                                    |                                                  | $             | 403  |              |   | $ | 322  |     
|Noncurrent assets                                                 |                                                  |               | 422  |              |   |   | 100  |     
|                                                                  |                                                  |               |      |              |   |   |      |     
|                                                                  | Total mark-to-market energy contract assets      |               |      | 825          |   |   |      | 422  |  
|                                                                  |                                                  |               |      |              |   |   |      |     
|Current liabilities(a)                                            |                                                  |               | (655 | )            |   |   | (505 | )   
|Noncurrent liabilities                                            |                                                  |               | (391 | )            |   |   | (133 | )   
|                                                                  |                                                  |               |      |              |   |   |      |     
|                                                                  | Total mark-to-market energy contract liabilities |               |      | (1,046       | ) |   |      | (638 | )
|                                                                  |                                                  |               |      |              |   |   |      |     
|Total mark-to-market energy contract net assets
    (liabilities) |                                                  | $             | (221 | )            |   | $ | (216 | )   
|                                                                  |                                                  |               |      |              |   |   |      |     



---



|    |  |                                                                                                                                                                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Mark-to-market energy contract liabilities at
    December 31, 2003 do not reflect a $76 million
    interest-rate swap which was included in current mark-to-market
    derivative liabilities within Generations Consolidated
    Balance Sheet.

The majority of Generations contracts are
non-exchange-traded contracts valued using prices provided by
external sources, primarily 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 vary by commodity, region and product. The remainder
of the assets represents 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. The fair values in each category reflect the
level of forward prices and volatility factors as of
September 30, 2004 and may change as a result of changes in
these factors. Management uses its best estimates to determine
the fair value of commodity and derivative contracts it holds or
sells. These estimates consider various factors including
closing exchange and over-the-counter price quotations, time
value, volatility factors and credit exposure. It is possible,
however, that future market prices could vary from those used in
recording assets and liabilities from energy marketing and
trading activities and such variations could be material.

165



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##### 



The following table, which presents maturity and
source of fair value of mark-to-market energy contract net
liabilities, provides two fundamental pieces of information.
First, the table provides the source of fair value used in
determining the carrying amount of Generations total
mark-to-market asset or liability. Second, the table provides
the maturity, by year, of Generations net
assets/liabilities, giving an indication of when the
mark-to-market amounts will settle and either generate or
require cash.

|                                                                |                                                  |                   |   |          |     |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |      |      |  
|--------------------------------------------------------------- | ------------------------------------------------ | ----------------- | - | -------- | --- | ---------- | - | ---- | ---- | ------ | - | ----- | --- | - | - | -- | -- | - | - | -- | -- |  | - | ---- | ---- | -
|                                                                |                                                  |                   |   |         
|                                                                |                                                  | Maturities within |   |         
|                                                                |                                                  |                   |   |         
|                                                                |                                                  |                   |   | 2008 and |     | Total Fair
|                                                                |                                                  | 2004              |   | 2005     |     | 2006       |   | 2007 |      | Beyond |   | Value
|(In millions)                                                   |                                                  |                   |   |          |     |            |   |      |      |        |   |      
|Normal operations, qualifying cash-flow hedge
    contracts(a): |                                                  |                   |   |          |     |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                | Actively quoted prices                           |                   | $ | 3        |     |            | $ | 6    |      |        | $ |      |     |   | $ |   |    |   | $ |   |    |  | $ | 9    |     
|                                                                | Prices provided by other external sources        |                   |   | (83      | )   |            |   | (242 | )    |        |   | (32   | )   |   |   | (8 | )  |   |   |   |    |  |   | (365 | )   
|                                                                |                                                  |                   |   |          |     |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                |                                                  | Total             |   | $        | (80 | )          |   | $    | (236 | )      |   | $     | (32 | ) |   | $  | (8 | ) |   | $  |   |  |   | $    | (356 | )
|                                                                |                                                  |                   |   |          |     |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|Normal operations, other derivative
    contracts(b):           |                                                  |                   |   |          |     |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                | Actively quoted prices                           |                   | $ | 19       |     |            | $ | 35   |      |        | $ | (2    | )   |   | $ |   |    |   | $ |   |    |  | $ | 52   |     
|                                                                | Prices provided by other external sources        |                   |   | (14      | )   |            |   | 15   |      |        |   | 5     |     |   |   |   |    |   |   |   |    |  |   | 6    |     
|                                                                | Prices based on model or other valuation methods |                   |   | 5        |     |            |   | (21  | )    |        |   | 14    |     |   |   | 11 |    |   |   | 68 |    |  |   | 77   |     
|                                                                |                                                  |                   |   |          |     |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     
|                                                                |                                                  | Total             |   | $        | 10  |            |   | $    | 29   |        |   | $     | 17  |   |   | $  | 11 |   |   | $  | 68 |  |   | $    | 135  |  
|                                                                |                                                  |                   |   |          |     |            |   |      |      |        |   |       |     |   |   |    |    |   |   |    |    |  |   |     



---



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

166



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##### 



The table below provides details of effective
cash-flow hedges under SFAS No. 133 included in the
balance sheet as of September 30, 2004. The table gives an
indication of the magnitude of SFAS No. 133 hedges
Generation has in place; however, since under
SFAS No. 133 not all hedges are recorded in OCI, the
table does not provide an all-encompassing picture of
Generations hedges. The table also includes a roll-forward
of accumulated other comprehensive income related to cash-flow
hedges for the nine months ended September 30, 2004,
providing insight into the drivers of the changes (new hedges
entered into during the period and changes in the value of
existing hedges). Information related to energy merchant
activities is presented separately from interest-rate hedging
activities.

|                                                          |  |                                           |      |               |  |           |     |   |  |   |      |  
|--------------------------------------------------------- |  | ----------------------------------------- | ---- | ------------- |  | --------- | --- | - |  | - | ---- | -
|                                                          |  |                                          
|                                                          |  | Total Cash-Flow Hedge Other Comprehensive
|                                                          |  | Income Activity, Net of Income Tax       
|                                                          |  |                                          
|                                                          |  | Normal                                    |      | Interest Rate |  | Total    
|                                                          |  | Operations and                            |      | and Other     |  | Cash Flow
|(In millions)                                             |  | Hedging Activities                        |      | Hedges(a)     |  | Hedges   
|                                                          |  |                                           |      |               |  |          
|Accumulated OCI derivative loss at
    January 1, 2004    |  | $                                         | (133 | )             |  | $         | (13 | ) |  | $ | (146 | )
|Changes in fair value                                     |  |                                           | (311 | )             |  |           |    |   |  |   | (311 | )
|Reclassifications from OCI to net income                  |  |                                           | 226  |               |  |           | 12  |   |  |   | 238  |  
|Exelon Energy Company opening balance                     |  |                                           | 2    |               |  |           |    |   |  |   | 2    |  
|Sithe                                                     |  |                                           |     |               |  |           | (7  | ) |  |   | (7   | )
|                                                          |  |                                           |      |               |  |           |     |   |  |   |      |  
|Accumulated OCI derivative loss at
    September 30, 2004 |  | $                                         | (216 | )             |  | $         | (8  | ) |  | $ | (224 | )
|                                                          |  |                                           |      |               |  |           |     |   |  |   |      |  



---



|    |  |                                             
|--- |  | --------------------------------------------
|(a) |  | Includes interest rate hedges at Generation.

Credit Risk



| |           
| | ----------
| | Generation

Generation has credit risk associated with
counterparty performance on energy contracts which includes, but
is not limited to, the risk of financial default or slow
payment. Generation manages counterparty credit risk through
established policies, including counterparty credit limits, and
in some cases, requiring deposits or letters of credit to be
posted by certain counterparties. Generations counterparty
credit limits are based on a scoring model that considers a
variety of factors, including leverage, liquidity,
profitability, credit ratings and risk management capabilities.
Generation has entered into payment netting agreements or
enabling agreements that allow for payment netting with the
majority of its large counterparties, which reduces
Generations exposure to counterparty risk by providing for
the offset of amounts payable to the counterparty against
amounts receivable from the counterparty. The credit department
monitors current and forward credit exposure to counterparties
and their affiliates, both on an individual and an aggregate
basis.

167



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##### 



The following tables provide information on
Generations wholesale credit exposure, net of collateral,
as of September 30, 2004. The tables further delineate that
exposure by the credit rating of the counterparties and provide
guidance on the concentration of credit risk to individual
counterparties and an indication of the maturity of
Generations credit risk by credit rating of its
counterparties. The figures in the tables below do not include
sales to Generations affiliates or exposure through
Independent System Operators, which are discussed below.

|                                   |                                          |               |     |            |  |          |    |                  |  |                  |     |    |  |  |   |   |  |   |     |   | 
|---------------------------------- | ---------------------------------------- | ------------- | --- | ---------- |  | -------- | -- | ---------------- |  | ---------------- | --- | -- |  |  | - | - |  | - | --- | - | 
|                                   |                                          | Total         |     |            |  |          |    | Number Of        |  | Net Exposure Of 
|                                   |                                          | Exposure      |     |            |  |          |    | Counterparties   |  | Counterparties  
|Rating(a) (In millions, except for |                                          | Before Credit |     | Credit     |  | Net      |    | Greater than 10% |  | Greater than 10%
|counterparties)                    |                                          | Collateral    |     | Collateral |  | Exposure |    | of Net Exposure  |  | of Net Exposure 
|                                   |                                          |               |     |            |  |          |    |                  |  |                 
|Investment grade                   |                                          | $             | 199 |            |  | $        | 28 |                  |  | $                | 171 |    |  |  | 2 |   |  | $ | 72  |  
|Non-investment grade               |                                          |               | 73  |            |  |          | 2  |                  |  |                  | 71  |    |  |  | 1 |   |  |   | 48  |  
|No external ratings                |                                          |               |     |            |  |          |    |                  |  |                  |     |    |  |  |   |   |  |   |     |  
|                                   | Internally rated  investment grade      |               |     | 12         |  |          |    |                 |  |                  |     | 12 |  |  |   |  |  |   |     |  | 
|                                   | Internally rated  non- investment grade |               |     | 3          |  |          |    |                 |  |                  |     | 3  |  |  |   |  |  |   |     |  | 
|                                   |                                          |               |     |            |  |          |    |                  |  |                  |     |    |  |  |   |   |  |   |     |  
|Total                              |                                          | $             | 287 |            |  | $        | 30 |                  |  | $                | 257 |    |  |  | 3 |   |  | $ | 120 |  
|                                   |                                          |               |     |            |  |          |    |                  |  |                  |     |    |  |  |   |   |  |   |     |  



---



|    |  |                                                                                       
|--- |  | --------------------------------------------------------------------------------------
|(a) |  | Table does not include credit risk associated
    with Generations retail operations.

|                        |                                         |                                  |     |           |  |                |    |               |  |   |   |   |  |   |     |    | 
|----------------------- | --------------------------------------- | -------------------------------- | --- | --------- |  | -------------- | -- | ------------- |  | - | - | - |  | - | --- | -- | 
|                        |                                         |                                 
|                        |                                         | Maturity of Credit Risk Exposure
|                        |                                         |                                 
|                        |                                         |                                  |     | Exposure  |  | Total Exposure
|                        |                                         | Less than                        |     |           |  | Greater than   |    | Before Credit
|Rating(a) (In millions) |                                         | 2 Years                          |     | 2-5 Years |  | 5 Years        |    | Collateral   
|                        |                                         |                                  |     |           |  |                |    |              
|Investment grade        |                                         | $                                | 192 |           |  | $              | 6  |               |  | $ | 1 |   |  | $ | 199 |   
|Non-investment grade    |                                         |                                  | 68  |           |  |                | 5  |               |  |   |  |   |  |   | 73  |   
|No external ratings     |                                         |                                  |     |           |  |                |    |               |  |   |   |   |  |   |     |   
|                        | Internally rated  investment grade     |                                  |     | 12        |  |                |    |              |  |   |   |  |  |   |     | 12 | 
|                        | Internally rated  non-investment grade |                                  |     | 3         |  |                |    |              |  |   |   |  |  |   |     | 3  | 
|                        |                                         |                                  |     |           |  |                |    |               |  |   |   |   |  |   |     |   
|Total                   |                                         | $                                | 275 |           |  | $              | 11 |               |  | $ | 1 |   |  | $ | 287 |   
|                        |                                         |                                  |     |           |  |                |    |               |  |   |   |   |  |   |     |   



---



|    |  |                                                                                       
|--- |  | --------------------------------------------------------------------------------------
|(a) |  | Table does not include credit risk associated
    with Generations retail operations.

Dynegy.Generation
is counterparty to Dynegy, Inc. (Dynegy) in various energy
transactions. The credit ratings of Dynegy are below investment
grade. As of September 30, 2004, Generation has credit risk
associated with Dynegy through Generations investment in
Sithe. Sithe is a 100% owner of the Independence generating
station, a 1,028-MW gas-fired facility that has an energy-only
long-term tolling agreement with Dynegy, with a related
financial swap arrangement. As of March 31, 2004,
Generation consolidated the assets and liabilities of Sithe in
accordance with the provisions of FIN No. 46-R. As a
result, Generation has recorded an asset of $127 million on
its Consolidated Balance Sheets related to the fair market value
of the financial swap agreement with Dynegy that is
marked-to-market under the terms of SFAS No. 133,
Accounting for Derivatives and Hedging Activities.
If Dynegy were unable to fulfill the terms of the financial swap
agreement, Generation would be required to impair the related
asset. Exelon estimates, as a 50% owner of Sithe, that the
impairment would result in an after-tax reduction of its net
income of approximately $23 million. See Note 4 of the
Combined Notes to Consolidated Financial Statements for
information regarding Generations exercise of a call
option to acquire the remaining 50% of Sithe.

In addition to the asset impairment, if Dynegy
were unable to fulfill its obligations under the financial swap
agreement and the tolling agreement, Generation would likely
incur an impairment of the intangible asset associated with the
Independence plant tolling agreement. Depending upon the timing
of Dynegys failure to fulfill its obligations and the
outcome of any restructuring initiatives, Generation could
realize an after-tax charge of up to $50 million. In the
event of a sale of Generations investment in Sithe to a
third party,

168



---



##### 



proceeds from the sale could be negatively
affected by up to $84 million, which would represent an
after-tax loss of up to $50 million.


Generation had previously disclosed that the
future economic value of AmerGens purchased power
arrangement with Illinois Power Company (Illinois Power), a
subsidiary of Dynegy, could be affected by events related to
Dynegys financial condition. On September 30, 2004,
Dynegy sold Illinois Power to a third party, which has reduced
Generations credit risk associated with Dynegy.

Collateral.As part
of the normal course of business, Generation routinely enters
into physical or financially settled contracts for the purchase
and sale of capacity, energy, fuels and emissions allowances.
These contracts either contain express provisions or otherwise
permit Generation and its counterparties to demand adequate
assurance of future performance when there are reasonable
grounds for doing so. In accordance with the contracts and
applicable law, if Generation is downgraded by a credit rating
agency, especially if such downgrade is to a level below
investment grade, it is possible that a counterparty would
attempt to rely on such a downgrade as a basis for making a
demand for adequate assurance of future performance. Depending
on Generations net position with a counterparty, the
demand could be for the posting of collateral. In the absence of
express contractual provisions that specify the collateral that
must be provided, the obligation to supply the collateral
requested will be a function of the facts and circumstances of
Generations situation at the time of the demand. If
Generation can reasonably claim that it is willing and
financially able to perform its obligations, it may be possible
to successfully argue that no collateral should be posted or
that only an amount equal to two or three months of future
payments should be sufficient.

ISOs.Generation
participates in the following established, real-time energy
markets, which are administered by ISOs: PJM, ISO New England,
New York ISO, Midwest ISO, Inc., Southwest Power Pool, Inc. and
Texas, which is administered by the Electric Reliability Council
of Texas. In these areas, power is traded through bilateral
agreements between buyers and sellers and on the spot markets
that are operated by the ISOs. In areas where there is no spot
market, electricity is purchased and sold solely through
bilateral agreements. For sales into the spot markets
administered by the ISOs, each ISO maintains financial assurance
policies that are established and enforced by those
administrators. The credit policies of the ISOs may under
certain circumstances require that losses arising from the
default of one member on spot market transactions be shared by
the remaining participants. Non-performance or non-payment by a
major counterparty could result in a material adverse impact on
Generations financial condition, results of operations or
net cash flows.

Interest Rate Risk



| |       
| | ------
| | Exelon

As of September 30, 2004, a hypothetical 10%
increase in the interest rates associated with variable-rate
debt would not have a material impact on Exelons pre-tax
earnings.

In September 2004, Exelon entered into
forward-starting interest-rate swaps in the aggregate amount of
$160 million to lock in interest rate levels in
anticipation of a future financing. The debt issuance that swaps
are hedging was considered probable as of September 30,
2004; therefore, Exelon accounted for the swaps as cash-flow
hedges. At September 30, 2004, the swaps had an aggregate
fair market value of less than $1 million based on the
present value difference between the contract and market rates
at September 30, 2004. If these derivative instruments had
been terminated at September 30, 2004, this estimated fair
value represents the amount that would be paid by the
counterparties to Exelon.

The aggregate fair value of these interest-rate
swaps that would have resulted from a hypothetical 50 basis
point decrease in the spot yield at September 30, 2004 is
estimated to be $6 million in the counterparties
favor. If the derivative instruments had been terminated at
September 30, 2004, this estimated fair value represents
the amount Exelon would pay the counterparties.

The aggregate fair value of these interest-rate
swaps that would have resulted from a hypothetical 50 basis
point increase in the spot yield at September 30, 2004 is
estimated to be $7 million in Exelons favor. If the
derivative instrument had been terminated at September 30,
2004, this estimated fair value represents the amount the
counterparties would pay Exelon.

169



---



##### 





| |      
| | -----
| | ComEd

As of September 30, 2004, a hypothetical 10%
increase in the interest rates associated with variable-rate
debt would not have a material impact on ComEds pre-tax
earnings.

ComEd uses a combination of fixed-rate and
variable-rate debt to reduce interest rate exposure.
Interest-rate swaps may be used to adjust exposure when deemed
appropriate based upon market conditions. ComEd also utilizes
forward-starting interest-rate swaps and treasury rate locks to
lock in interest rate levels in anticipation of future
financing. These strategies are employed to achieve a lower cost
of capital. At September 30, 2004, ComEd did not have any
interest-rate swaps designated as cash-flow hedges.

In 2004, ComEd entered into fixed-to-floating
interest-rate swaps in order to maintain its targeted percentage
of variable-rate debt associated with fixed-rate debt issuances
in the aggregate amount of $240 million. At
September 30, 2004, these interest-rate swaps, designated
as fair-value hedges, had an aggregate fair market value of
$9 million based on the present value difference between
the contract and market rates at September 30, 2004. If
these derivative instruments had been terminated at
September 30, 2004, this estimated fair value represents
the amount that would 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 decrease in the spot
yield at September 30, 2004 is estimated to be
$16 million in ComEds favor. If the derivative
instrument had been terminated at September 30, 2004, this
estimated fair value represents the amount the counterparties
would pay 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, 2004 is estimated to be
$1 million in ComEds favor. If the derivative
instrument had been terminated at September 30, 2004, this
estimated fair value represents the amount the counterparties
would pay ComEd.

In April 2004, ComEd settled certain
interest-rate swaps designated as fair-value hedges in the
aggregate amount of $485 million for total proceeds of
approximately $32 million, which included the
$26 million settlement amount and $6 million of
accrued interest. The $26 million settlement amount will be
amortized as a reduction to interest expense over the remaining
life of the related debt.



| |     
| | ----
| | PECO

As of September 30, 2004, a hypothetical 10%
increase in the interest rates associated with variable-rate
debt would not have a material impact on PECOs pre-tax
earnings.

In March 2004, PECO entered into a
forward-starting interest-rate swap in the aggregate amount of
$75 million to lock in interest rate levels in anticipation
of a future financing. The debt issuance that this swap was
hedging was considered probable in March 2004 and closed in
April 2004; therefore, PECO accounted for this interest-rate
swap transaction as a hedge. In April 2004, PECO settled this
interest-rate swap designated as a cash-flow hedge for net
proceeds of approximately $5 million. The proceeds were
recorded in other comprehensive income and are being amortized
over the life of the debt issuance.



| |           
| | ----------
| | Generation

Generation uses a combination of fixed-rate and
variable-rate debt to reduce interest rate exposure. Generation
also uses interest-rate swaps when deemed appropriate to adjust
exposure based upon market conditions. These strategies are
employed to achieve a lower cost of capital. As of
September 30, 2004, a hypothetical 10% increase in the
interest rates associated with variable-rate debt would not have
a material impact on Generations pre-tax earnings.

170



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##### 



Equity Price Risk



| |           
| | ----------
| | Generation

Generation maintains trust funds, as required by
the Nuclear Regulatory Commission, to fund certain costs of
decommissioning its nuclear plants. As of September 30,
2004, decommissioning trust funds are reflected at fair value on
Generations Consolidated Balance Sheets. The mix of
securities in the trust funds is designed to provide returns to
be used to fund decommissioning and to compensate for
inflationary increases in decommissioning costs. However, the
equity securities in the trust funds are exposed to price
fluctuations in equity markets, and the value of fixed-rate,
fixed-income securities are exposed to changes in interest
rates. Generation actively monitors the investment performance
of the trust funds and periodically reviews asset allocation in
accordance with Generations nuclear decommissioning trust
fund investment policy. A hypothetical 10% increase in interest
rates and decrease in equity prices would result in a
$297 million reduction in the fair value of the trust
assets.






|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

During the third quarter of 2004, each
registrants management, including its principal executive
officer and principal financial officer, evaluated that
registrants disclosure controls and procedures related to
the recording, processing, summarizing and reporting of
information in that registrants periodic reports that it
files with the SEC. These disclosure controls and procedures
have been designed by each registrant to ensure that
(a) material information relating to that registrant,
including its consolidated subsidiaries, is made known to that
registrants management, including its principal executive
officer and principal financial officer, by other employees of
that registrant 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. Due to the inherent limitations
of control systems, not all misstatements may be detected. These
inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Additionally, controls could
be circumvented by the individual acts of some persons or by
collusion of two or more people. Each registrants controls
and procedures can only provide reasonable, not absolute,
assurance that the above objectives have been met. A
registrants access and ability to apply its disclosure
controls and procedures to unconsolidated entities and entities
that are consolidated under FIN No. 46-R may be more
limited than is the case for majority-owned subsidiaries.

Accordingly, as of September 30, 2004, the
principal executive officer and principal financial officer of
each registrant concluded that such registrants disclosure
controls and procedures were effective to accomplish their
objectives. Each registrant continually strives to improve its
disclosure controls and procedures to enhance the quality of its
financial reporting and to maintain dynamic systems that change
as conditions warrant. During the three months ended
September 30, 2004, Exelon completed the implementation of
an information technology system that supports the computation
and tracking of deferred income tax balances. Exelons
management believes this system implementation constitutes a
material change in internal control over financial reporting.

Section 404 of the Sarbanes-Oxley Act of
2002 (Section 404) requires Exelon to include a
report regarding the effectiveness of its internal control over
financial reporting, beginning with its Annual Report on
Form 10-K for the year ending December 31, 2004. That
report is to include an assessment by Exelons management
of the effectiveness of its internal control over financial
reporting as of the end of the fiscal year along with an
attestation report from Exelons independent auditors
regarding that assessment. Accordingly, Exelon has undertaken a
comprehensive effort to assess its system of internal controls
over financial reporting. Using internal resources and external
consulting assistance, Exelon has reviewed its internal controls
over financial reporting to assess their adequacy and, as
necessary, to address identified issues or inadequacies. That
review has shown that, while most controls function
appropriately, some areas require additional work and
improvement. Although Exelon has not yet completed its
assessment of its overall system of internal control,
Exelons management does not believe that any of the
identified areas constitute a material weakness.
Exelon expects that these areas will be appropriately addressed
by year-end 2004 and anticipates that they will

171



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##### 



not affect managements year-end assessment
of the effectiveness of Exelons internal controls over
financial reporting.





PART II  OTHER
INFORMATION






|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings

ComEd

See Retail Rate Law within the
litigation section of Note 15 of the Combined Notes to
Consolidated Financial Statements for a discussion of legal
proceeding developments.

Generation

See Raytheon and Mitsubishi
Litigation and Oyster Creek within the
litigation section of Note 15 of the Combined Notes to
Consolidated Financial Statements and Cotter Corporation
Litigation of Note 19 of the Combined Notes to
Consolidated Financial Statements for a discussion of legal
proceeding developments.






|        |                                                                
|------- | ---------------------------------------------------------------
|Item 2. | Unregistered Sales of Equity Securities and
    Use of Proceeds




(e) Exelon

The attached table gives information on a monthly
basis regarding purchases made by Exelon of its common stock.
All share and per-share amounts included in the table below have
been adjusted to reflect the stock split.

|                                 |  |              |       |                |  |                     |       |                  |  |  |   |  |  |  |    |  
|-------------------------------- |  | ------------ | ----- | -------------- |  | ------------------- | ----- | ---------------- |  |  | - |  |  |  | -- | -
|                                 |  |              |       |                |  |                     |       | Maximum Number  
|                                 |  |              |       |                |  |                     |       | (or Approximate 
|                                 |  |              |       |                |  | Total Number of     |       | Dollar Value) of
|                                 |  |              |       |                |  | Shares Purchased    |       | Shares that May 
|                                 |  | Total Number |       |                |  | As Part of Publicly |       | Yet Be Purchased
|                                 |  | of Shares    |       | Average Price  |  | Announced Plans     |       | Under the Plans 
|Period                           |  | Purchased(a) |       | Paid per Share |  | or Programs(b)      |       | or Programs     
|                                 |  |              |       |                |  |                     |       |                 
|July 1  July 31, 2004           |  |              | 1,863 |                |  | $                   | 32.84 |                  |  |  |  |  |  |  | (b | )
|August 1  August 31, 2004       |  |              | 1,571 |                |  |                     | 33.49 |                  |  |  |  |  |  |  | (b | )
|September 1  September 30, 2004 |  |              |      |                |  |                     |      |                  |  |  |  |  |  |  | (b | )
|                                 |  |              |       |                |  |                     |       |                  |  |  |   |  |  |  |    |  
|Total                            |  |              | 3,434 |                |  |                     | 33.14 |                  |  |  |  |  |  |  | (b | )
|                                 |  |              |       |                |  |                     |       |                  |  |  |   |  |  |  |    |  



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Shares other than those purchased as a part of a
    publicly announced plan primarily represent restricted shares
    surrendered by employees to satisfy tax obligations arising upon
    the vesting of restricted shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(b) |  | In April 2004, Exelons Board of Directors
    approved a discretionary share repurchase program that allows
    Exelon to repurchase shares of its common stock on a periodic
    basis in the open market. The share repurchase program is
    intended to mitigate, in part, the dilutive effect of shares
    issued under Exelons employee stock option plan and
    Exelons Employee Stock Purchase Plan (ESPP). The aggregate
    shares of common stock repurchased pursuant to the program
    cannot exceed the economic benefit received after
    January 1, 2004 due to stock option exercises and share
    purchases pursuant to Exelons ESPP. The economic benefit
    consists of direct cash proceeds from purchases of stock and tax
    benefits associated with exercises of stock options. The share
    repurchase program has no specified limit and no specified
    termination date.

172



---



##### 





|        |                  
|------- | -----------------
|Item 5. | Other Information

(a) ComEd, PECO and Generation



| |                          
| | -------------------------
| | Regulatory Issues (ComEd)

See Note 7 of the Combined Notes to
Consolidated Financial Statements and ComEds
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Executive
Overview for a discussion of regulatory developments.



| |                       
| | ----------------------
| | Labor Relations (PECO)

As previously reported in the 2003
Form 10-K, on August 15, 2002, the International
Brotherhood of Electrical Workers (IBEW) filed a petition
with the National Labor Relations Board (NLRB) to conduct a
unionization vote of certain of PECOs employees. On
May 21, 2003, the PECO union election was held and a
majority of PECO workers voted against union representation. The
results of the election were not certified due to pending
challenges and objections. On March 22, 2004, the IBEW
withdrew its objections to the May 21, 2003 election, and
asked the NLRB to allow for a new election at PECO. On
April 22, 2004, the NLRB granted IBEWs request. A new
election was held on July 21, 2004 that resulted in union
representation for 1,100 employees in the Philadelphia service
territory. PECO and IBEW Local 614 have not yet begun
negotiations for an initial agreement.



| |                                                      
| | -----------------------------------------------------
| | Jointly Owned Electric Utility Plant
    (Generation)

On January 28, 2004, the NRC issued a letter
requesting Public Service Enterprise Group (PSEG) to
conduct a review of its Salem facility, of which Generation owns
42.59%, to assess the workplace environment for raising and
addressing safety issues. PSEG responded to the letter on
February 28, 2004, and had independent assessments of the
work environment at the facility performed. Assessment results
were provided to the NRC in May. The assessments concluded that
Salem was safe for continued operation, but also identified
issues that needed to be addressed. At an NRC public meeting on
June 16, 2004, PSEG outlined its action plans to address
these issues, which focus on a safety conscious work
environment, the corrective action program, and work management.
A letter documenting these plans and commitments was sent to the
NRC on June 25, 2004. PSEG will provide the NRC a report of
its progress and discuss the progress of its actions to resolve
identified issues at public meetings on December 2, 2004
and in 2005. PSEG will publish metrics to demonstrate
performance commencing in the fourth quarter of 2004.

In June 2001, the New Jersey Department of
Environmental Protection (NJDEP) issued a renewed National
Pollutant Discharge Elimination System permit for Salem,
expiring in July 2006, allowing for the continued operation
of Salem with its existing cooling water system. An application
for renewal of that permit, including a demonstration of
compliance with the requirements of the recently published
Federal Water Pollution Control Act Section 316(b)
regulations, must be submitted to NJDEP by February 2, 2006
unless the agency grants additional time to collect information
to comply with the new regulations. NJDEP advised PSEG in a
letter dated July 12, 2004 that it strongly recommends
reducing cooling water intake flow commensurate with
closed-cycle cooling as a compliance option for Salem. PSEG has
not made a determination regarding how it will demonstrate
compliance with the Section 316(b) regulations. If
application of the Section 316(b) regulations requires the
retrofitting of Salems cooling water intake structure to
reduce cooling water intake flow commensurate with closed-cycle
cooling, the retrofit would result in material costs of
compliance to the owners of the facility.

173



---



##### 





|        |         
|------- | --------
|Item 6. | Exhibits

(a) Exhibits:

|      |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2-1   |  |  |  | Amended and Restated Agreement and Plan of Merger
    dated as of October 20, 2000, among PECO Energy Company,
    Exelon Corporation and Unicom Corporation
    (File No. 1-01401, PECO Energy Company Form 10-Q
    for the quarter ended September 30, 2000, Exhibit 2-1).                                                                                                                                                                                                   
|3-1   |  |  |  | Articles of Incorporation of Exelon Corporation
    (Registration Statement No. 333-37082, Form S-4,
    Exhibit 3-1).                                                                                                                                                                                                                                                                                                                                                          
|3-1-1 |  |  |  | Amendment to Articles of Incorporation for Exelon
    Corporation effective as of April 19, 2004
    (File No. 1-16169, Form 10-Q for the quarter
    ended June 30, 2004, Exhibit 3-1).                                                                                                                                                                                                                                                                                        
|3-2   |  |  |  | Amended and Restated Bylaws of Exelon
    Corporation, adopted January 27, 2004
    (File No. 1-16169, 2003 Form 10-K,
    Exhibit 3-2).                                                                                                                                                                                                                                                                                                                                        
|3-3   |  |  |  | Amended and Restated Articles of Incorporation of
    PECO Energy Company (File No. 1-01401, 2000
    Form 10-K, Exhibit 3-3).                                                                                                                                                                                                                                                                                                                                                  
|3-4   |  |  |  | Bylaws of PECO Energy Company, adopted
    February 26, 1990 and amended January 26, 1998
    (File No. 1-01401, 1997 Form 10-K,
    Exhibit 3-2).                                                                                                                                                                                                                                                                                                                              
|3-5   |  |  |  | Restated Articles of Incorporation of
    Commonwealth Edison Company effective February 20, 1985,
    including Statements of Resolution Establishing Series, relating
    to the establishment of three new series of Commonwealth Edison
    Company preference stock known as the $9.00 Cumulative
    Preference Stock, the $6.875 Cumulative Preference
    Stock and the $2.425 Cumulative Preference
    Stock (File No. 1-1839, 1994 Form 10-K,
    Exhibit 3-2).
|3-6   |  |  |  | Bylaws of Commonwealth Edison Company, effective
    September 2, 1998, as amended through October 20, 2000
    (File No. 1-1839, 2000 Form 10-K,
    Exhibit 3-6).                                                                                                                                                                                                                                                                                                             
|3-7   |  |  |  | Certificate of Formation of Exelon Generation
    Company, LLC (Registration Statement No. 333-85496,
    Form S-4, Exhibit 3-1).                                                                                                                                                                                                                                                                                                                                               
|3-8   |  |  |  | First Amended and Restated Operating Agreement of
    Exelon Generation Company, LLC executed as of January 1,
    2001 (File No. 333-85496, 2003 Form 10-K,
    Exhibit 3-8).                                                                                                                                                                                                                                                                                                  
|4-1   |  |  |  | First and Refunding Mortgage dated May 1,
    1923 between The Counties Gas and Electric Company (predecessor
    to PECO Energy Company) and Fidelity Trust Company, Trustee
    (First Union National Bank, successor), (Registration
    No. 2-2281, Exhibit B-1).                                                                                                                                                                                                           
|4-1-1 |  |  |  | Supplemental Indentures to PECO Energy
    Companys First and Refunding Mortgage:                                                                                                                                                                                                                                                                                                                                                                                              

|                  |  |                                   |  |             |         | 
|----------------- |  | --------------------------------- |  | ----------- | ------- | 
|Dated as of       |  | File Reference                    |  | Exhibit No.
|                  |  |                                   |  |            
|May 1, 1927       |  | 2-2881                            |  |             | B-1(c)  | 
|March 1, 1937     |  | 2-2881                            |  |             | B-1(g)  | 
|December 1, 1941  |  | 2-4863                            |  |             | B-1(h)  | 
|November 1, 1944  |  | 2-5472                            |  |             | B-1(i)  | 
|December 1, 1946  |  | 2-6821                            |  |             | 7-1(j)  | 
|September 1, 1957 |  | 2-13562                           |  |             | 2(b)-17 | 
|May 1, 1958       |  | 2-14020                           |  |             | 2(b)-18 | 
|March 1, 1968     |  | 2-34051                           |  |             | 2(b)-24 | 
|March 1, 1981     |  | 2-72802                           |  |             | 4-46    | 
|March 1, 1981     |  | 2-72802                           |  |             | 4-47    | 
|December 1, 1984  |  | 1-01401, 1984 Form 10-K           |  |             | 4-2(b)  | 
|April 1, 1991     |  | 1-01401, 1991 Form 10-K           |  |             | 4(e)-76 | 
|December 1, 1991  |  | 1-01401, 1991 Form 10-K           |  |             | 4(e)-77 | 
|June 1, 1992      |  | 1-01401, June 30, 1992 Form 10-Q  |  |             | 4(e)-81 | 
|March 1, 1993     |  | 1-01401, 1992 Form 10-K           |  |             | 4(e)-86 | 
|May 1, 1993       |  | 1-01401, March 31, 1993 Form 10-Q |  |             | 4(e)-88 | 
|May 1, 1993       |  | 1-01401, March 31, 1993 Form 10-Q |  |             | 4(e)-89 | 

174



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##### 



|                   |  |                                         |  |             |         | 
|------------------ |  | --------------------------------------- |  | ----------- | ------- | 
|Dated as of        |  | File Reference                          |  | Exhibit No.
|                   |  |                                         |  |            
|August 15, 1993    |  | 1-01401, Form 8-A dated August 19, 1993 |  |             | 4(e)-92 | 
|May 1, 1995        |  | 1-01401, Form 8-K dated May 24, 1995    |  |             | 4(e)-96 | 
|September 15, 2002 |  | 1-01401, September 30, 2002 Form 10-Q   |  |             | 4-1     | 
|October 1, 2002    |  | 1-01401, September 30, 2002 Form 10-Q   |  |             | 4-2 4.1 | 
|April 15, 2003     |  | 0-16844, March 31, 2003 Form 10-Q       |  |             |         | 
|April 15, 2004     |  |                                         |  |             |         | 

|      |  |   |  |                                                                                                                                                                                                                                                                                                                       
|----- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4-2   |  |  |  | Exelon Corporation Dividend Reinvestment and
    Stock Purchase Plan (Registration Statement No. 333-84446,
    Form S-3, Prospectus).                                                                                                                                                                                
|4-3   |  |  |  | Mortgage of Commonwealth Edison Company to
    Illinois Merchants Trust Company, Trustee (BNY Midwest Trust
    Company, as current successor Trustee), dated July 1, 1923,
    as supplemented and amended by Supplemental Indenture thereto
    dated August 1, 1944. (File No. 2-60201,
    Form S-7, Exhibit 2-1).
|4-3-1 |  |  |  | Supplemental Indentures to aforementioned
    Commonwealth Edison Mortgage.                                                                                                                                                                                                                                           

|                   |  |                |                        |             |  |  |      | 
|------------------ |  | -------------- | ---------------------- | ----------- |  |  | ---- | 
|Dated as of        |  | File Reference |                        | Exhibit No.
|                   |  |                |                        |            
|August 1, 1946     |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|April 1, 1953      |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|March 31, 1967     |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|April 1,1967       |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|February 28, 1969  |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|May 29, 1970       |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|June 1, 1971       |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|April 1, 1972      |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|May 31, 1972       |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|June 15, 1973      |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|May 31, 1974       |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|June 13, 1975      |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|May 28, 1976       |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|June 3, 1977       |  |                | 2-60201, Form S-7      |             |  |  | 2-1  | 
|May 17, 1978       |  |                | 2-99665, Form S-3      |             |  |  | 4-3  | 
|August 31, 1978    |  |                | 2-99665, Form S-3      |             |  |  | 4-3  | 
|June 18, 1979      |  |                | 2-99665, Form S-3      |             |  |  | 4-3  | 
|June 20, 1980      |  |                | 2-99665, Form S-3      |             |  |  | 4-3  | 
|April 16, 1981     |  |                | 2-99665, Form S-3      |             |  |  | 4-3  | 
|April 30, 1982     |  |                | 2-99665, Form S-3      |             |  |  | 4-3  | 
|April 15, 1983     |  |                | 2-99665, Form S-3      |             |  |  | 4-3  | 
|April 13, 1984     |  |                | 2-99665, Form S-3      |             |  |  | 4-3  | 
|April 15, 1985     |  |                | 2-99665, Form S-3      |             |  |  | 4-3  | 
|April 15, 1986     |  |                | 33-6879, Form S-3      |             |  |  | 4-9  | 
|June 15, 1990      |  |                | 33-38232, Form S-3     |             |  |  | 4-12 | 
|October 1, 1991    |  |                | 33-40018, Form S-3     |             |  |  | 4-13 | 
|October 15, 1991   |  |                | 33-40018, Form S-3     |             |  |  | 4-14 | 
|May 15, 1992       |  |                | 33-48542, Form S-3     |             |  |  | 4-14 | 
|September 15, 1992 |  |                | 33-53766, Form S-3     |             |  |  | 4-14 | 
|February 1, 1993   |  |                | 1-1839, 1992 Form 10-K |             |  |  | 4-14 | 

175



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##### 



|                 |  |                |                                                    |             |  |  |       | 
|---------------- |  | -------------- | -------------------------------------------------- | ----------- |  |  | ----- | 
|Dated as of      |  | File Reference |                                                    | Exhibit No.
|                 |  |                |                                                    |            
|April 1, 1993    |  |                | 33-64028, Form S-3                                 |             |  |  | 4-12  | 
|April 15, 1993   |  |                | 33-64028, Form S-3                                 |             |  |  | 4-13  | 
|June 15, 1993    |  |                | 1-1839, Form 8-K dated May 21, 1993                |             |  |  | 4-1   | 
|July 15, 1993    |  |                | 1-1839, Form 10-Q for quarter ended June 30, 1993. |             |  |  | 4-1   | 
|January 15, 1994 |  |                | 1-1839, 1993 Form 10-K                             |             |  |  | 4-15  | 
|December 1, 1994 |  |                | 1-1839, 1994 Form 10-K                             |             |  |  | 4-16  | 
|June 1, 1996     |  |                | 1-1839, 1996 Form 10-K                             |             |  |  | 4-16  | 
|March 1, 2002    |  |                | 1-1839, 2001 Form 10-K                             |             |  |  | 4-4-1 | 
|May 20, 2002     |  |                | 1-1839, 2001 Form 10-K                             |             |  |  | 4-4-1 | 
|June 1, 2002     |  |                | 1-1839, 2001 Form 10-K                             |             |  |  | 4-4-1 | 
|October 7, 2002  |  |                | 1-1839, 2001 Form 10-K                             |             |  |  | 4-4-1 | 
|January 13, 2003 |  |                | 1-1839, Form 8-K dated January 22, 2003            |             |  |  | 4-4   | 
|March 14, 2003   |  |                | 1-1839, Form 8-K dated April 7, 2003               |             |  |  | 4-4   | 
|August 13, 2003  |  |                | 1-1839, Form 8-K dated August 25, 2003             |             |  |  | 4-4   | 

|      |  |   |  |                                                                                                                                                                                                                                                                                 
|----- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4-3-2 |  |  |  | Instrument of Resignation, Appointment and
    Acceptance dated as of February 20, 2002, under the
    provisions of the Mortgage dated July 1, 1923, and
    Indentures Supplemental thereto, regarding corporate trustee
    (File No. 1-1839, 2001 Form 10-K, Exhibit 4-4-2).
|4-3-3 |  |  |  | Instrument dated as of January 31, 1996,
    under the provisions of the Mortgage dated July 1, 1923 and
    Indentures Supplemental thereto, regarding individual trustee
    (File No. 1-1839, 1995 Form 10-K, Exhibit 4-29).                                                 
|4-4   |  |  |  | Indenture dated as of September 1, 1987
    between Commonwealth Edison Company and Citibank, N.A., Trustee
    relating to Notes (File No. 1-1839, Form S-3,
    Exhibit 4-13).                                                                                                
|4-4-1 |  |  |  | Supplemental Indentures to aforementioned
    Indenture.                                                                                                                                                                                                                        

|                  |  |                |                        |             |  |  |       | 
|----------------- |  | -------------- | ---------------------- | ----------- |  |  | ----- | 
|Dated as of       |  | File Reference |                        | Exhibit No.
|                  |  |                |                        |            
|September 1, 1987 |  |                | 33-32929, Form S-3     |             |  |  | 4-16  | 
|January 1, 1997   |  |                | 1-1839, 1999 Form 10-K |             |  |  | 4-21  | 
|September 1, 2000 |  |                | 1-1839, 2000 Form 10-K |             |  |  | 4-7-3 | 

|    |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4-5 |  |  |  | Indenture dated June 1, 2001 between
    Generation and First Union National Bank (now Wachovia Bank,
    National Association) (Registration Statement
    No. 333-85496, Form S-4, Exhibit 4.1).                                                                                                                                                                                                                                                      
|4-6 |  |  |  | Indenture dated December 19, 2003 between
    Generation and Wachovia Bank, National Association (File
    No. 333-85496, 2003 Form 10-K, Exhibit 4-6).                                                                                                                                                                                                                                                                                                 
|4-7 |  |  |  | Indenture to Subordinated Debt Securities dated
    as of June 24, 2003 between PECO Energy Company, as Issuer,
    and Wachovia Bank National Association, as Trustee (File
    No. 0-16844, PECO Energy Company Form 10-Q for the
    quarter ended June 30, 2003, Exhibit 4.1).                                                                                                                                                                      
|4-8 |  |  |  | Preferred Securities Guarantee Agreement between
    PECO Energy Company, as Guarantor, and Wachovia Trust Company,
    National Association, as Trustee, dated as of June 24, 2003
    (File No. 0-16844, PECO Energy Company Form 10-Q for
    the quarter ended June 30, 2003, Exhibit 4.2).                                                                                                                                                         
|4-9 |  |  |  | PECO Energy Capital Trust IV Amended and
    Restated Declaration of Trust among PECO Energy Company, as
    Sponsor, Wachovia Trust Company, National Association, as
    Delaware Trustee and Property Trustee, and J. Barry Mitchell,
    George R. Shicora and Charles S. Walls as Administrative
    Trustees dated as of June 24, 2003 (File No. 0-16844,
    PECO Energy Company Form 10-Q for the quarter ended
    June 30, 2003, Exhibit 4.3).

176



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##### 



Certifications Pursuant to Rule 13a-14(a)
and 15d-14(a) of the Securities and Exchange Act of 1934 as to
the Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2004 filed by the following officers
for the following companies:

|     |  |   |  |                                                                  
|---- |  | - |  | -----------------------------------------------------------------
|31-1 |  |  |  | Filed by John W. Rowe for Exelon Corporation                     
|31-2 |  |  |  | Filed by Robert S. Shapard for Exelon Corporation                
|31-3 |  |  |  | Filed by John L. Skolds for Commonwealth Edison
    Company      
|31-4 |  |  |  | Filed by J. Barry Mitchell for Commonwealth
    Edison Company   
|31-5 |  |  |  | Filed by John L. Skolds for PECO Energy Company                  
|31-6 |  |  |  | Filed by J. Barry Mitchell for PECO Energy Company               
|31-7 |  |  |  | Filed by John F. Young for Exelon Generation
    Company, LLC    
|31-8 |  |  |  | Filed by J. Barry Mitchell for Exelon Generation
    Company, LLC

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,
2004 filed by the following officers for the following companies:

|     |  |   |  |                                                                  
|---- |  | - |  | -----------------------------------------------------------------
|32-1 |  |  |  | Filed by John W. Rowe for Exelon Corporation                     
|32-2 |  |  |  | Filed by Robert S. Shapard for Exelon Corporation                
|32-3 |  |  |  | Filed by John L. Skolds for Commonwealth Edison
    Company      
|32-4 |  |  |  | Filed by J. Barry Mitchell for Commonwealth
    Edison Company   
|32-5 |  |  |  | Filed by John L. Skolds for PECO Energy Company                  
|32-6 |  |  |  | Filed by J. Barry Mitchell for PECO Energy Company               
|32-7 |  |  |  | Filed by John F. Young for Exelon Generation
    Company, LLC    
|32-8 |  |  |  | Filed by J. Barry Mitchell for Exelon Generation
    Company, LLC

177



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##### 



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. ROWEJohn W. Rowe
    Chairman and Chief Executive Officer
    (Principal Executive Officer)                     |  | /s/ ROBERT S. SHAPARDRobert S. Shapard
    Executive Vice President and Chief
    Financial Officer
    (Principal Financial Officer)
|                                                                                                                           
|/s/ MATTHEW F. HILZINGERMatthew F. Hilzinger
    Vice President and Corporate Controller
    (Principal Accounting Officer) |  |                                                                                                                                      

October 27, 2004

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/ JOHN L. SKOLDSJohn L. Skolds
    President, Exelon Energy Delivery
    (Principal Executive Officer)                            |  | /s/ J. BARRY MITCHELLJ. Barry Mitchell
    Senior Vice President, Treasurer and Chief Financial Officer
    (Principal Financial Officer)
|                                                                                                                                   
|/s/ MATTHEW F. HILZINGERMatthew F. Hilzinger
    Vice President and Corporate Controller, Exelon
    (Principal Accounting Officer) |  | /s/ FRANK M. CLARKFrank M. Clark
    President, ComEd                                                                                    

October 27, 2004

178



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##### 



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/ JOHN L. SKOLDSJohn L. Skolds
    President, Exelon Energy Delivery
    (Principal Executive Officer)                            |  | /s/ J. BARRY MITCHELL
    J. Barry Mitchell
    Senior Vice President, Treasurer and Chief Financial Officer
    (Principal Financial Officer)
|                                                                                                                                   
|/s/ MATTHEW F. HILZINGERMatthew F. Hilzinger
    Vice President and Corporate Controller, Exelon
    (Principal Accounting Officer) |  | /s/ DENIS P. OBRIEN
    Denis P. OBrien
    President, PECO                                                                                 

October 27, 2004

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/ JOHN F. YOUNGJohn F. Young
    President
    (Principal Executive Officer)                        |  | /s/ J. BARRY MITCHELL
    J. Barry Mitchell
    Senior Vice President, Treasurer and Chief Financial Officer
    (Principal Financial Officer)
|                                                                                                     
|/s/ JON D. VEURINKJon D. Veurink
    Vice President and Controller
    (Principal Accounting Officer) |  |                                                                                                                                               

October 27, 2004

179